A Taiwan-related award made by China International Economic and Trade Arbitration Commission was recognized by Taiwan court

Recently, the Taipei District Court of Taiwan (hereinafter referred to as “Taipei District Court”) made an adjudication of upholding an arbitral award made by China International Economic and Trade Arbitration Commission (CIETAC) in its trial named [2021] China CIETAC Jing(Hu) Cai Zi No.0024.

Both parties in this case are legal persons from Taiwan. Four Applicants【The four applicants are Shinkong Insurance Co., Ltd., Taiwan Products Insurance Co., Ltd., Fubon Products Insurance Co., Ltd. and Cathay Century Insurance Co., Ltd.】subrogated against Guangda Company through Insurance Agreement and submitted arbitration to CIETAC Shanghai Sub-Commission, requesting the Respondent Zhengyang Express Co., Ltd. (hereinafter referred to as “Zhengyang Company”) to pay compensations for damages of the goods, attorneys' fee, arbitration fee and other expenses. After losing the arbitration, Zhengyang Company applied to Beijing No. 4 Intermediate People's Court(hereinafter referred to as “Beijing No.4 Intermediate Court”) for revocation of the arbitration award, which was then rejected for reasons of there existed no valid and lawful arbitration agreement between the parties and the arbitration award was over-awarded. Beijing No.4 Intermediate Court rejected the application on the grounds that Zhengyang Company had not challenged the validity of the arbitration agreement during the arbitration proceedings and that the goods involved in the case were within the scope of the arbitration. Four Applicants then applied to Taipei District Court for recognition of the arbitral award, while Zhenyang Company(as Respondent) argued against recognition and enforcement based on the above-mentioned reasons. Taipei District Court cited the analysis of Beijing No.4 Intermediate Court and rejected the respondent's application, ruling to recognize the CIETAC arbitral award.

Court Of Arbitration For Sports will set up two temporary arbitration offices in China

On January 18, 2022, the Court of Arbitration for Sport (CAS) will open two temporary offices in China to provide rapid and high quality dispute resolution services immediately before and during the Olympic Winter Games Beijing 2022 (the “Games”). In particular, CAS Ad Hoc Division will resolve any legal disputes submitted to it during the Games within a timeframe compatible with the competition schedule. CAS Anti-Doping Division is the first-instance decision making authority for any potential doping matters arising during the Games that are referred to it by the International Testing Agency (ITA) in accordance with the International Olympic Committee (IOC) Anti-doping Rules. The above services provided by CAS Ad Hoc Division and CAS Anti-Doping Division are free of charge during their operation.

According to statistics, CAS has established a total of 13 ad hoc arbitral bodies during the Olympic Games and resolved more than 140 disputes since Atlanta Olympic Games in 1996. CAS also formed two arbitral tribunals for sports arbitration at Tokyo 2020 Olympic Games (hereinafter referred to as “Tokyo Games”). A total of 15 cases were registered by the Tokyo Interim Arbitral Tribunal (AHD) during the Tokyo Games, of which 9 arbitration results and 1 order were published, 6 cases related to eligibility disputes, 3 cases related to competition results disputes and 1 case related to anti-doping. 

The Model Text of International Engineering Subcontracting Contract has been officially issued, building effective connection with CIETAC as well as its Construction Project Dispute Review Rules

On January 11, 2022, the China International Contractors Association released the Model Text of International Engineering Subcontracting Contracts in Beijing (hereinafter referred to as the “Model Text”), aiming to guide and regulate the relationship among Chinese-funded enterprises in contracting and subcontracting and establish industry standards. The Model Text includes five model texts, namely, the Conditions of Construction Subcontract (applicable to Unit Price Subcontract), the Conditions of Construction Subcontract (applicable to Lump Sum Subcontract), the Conditions of Installation Subcontract, the Conditions of Design Subcontract and the Conditions of Purchase Contract. The preparation of the Model Text has followed the eight golden principles including equality between the general contractor and the subcontractor, balancing the rights, obligations and risks of the general contractor and the subcontractor, and compliance with the international practice that the general contractor shall transmit the risks of the subcontracted project to the subcontractor.

The Model Text stipulates CIETAC as the dispute resolution institution. At the same time, the Model Text and CIETAC's dispute review rules are effectively linked, compatible and complementary to each other, and can enable the dispute review to play a more active role in the prevention and early resolution of disputes. As the first arbitral institution established by the Government Administration Council of the Central People's Government, CIETAC commits to continue providing impartial, efficient and competitive arbitration services, and to ensure the stability and development of Chinese construction enterprises’ foreign business.

High Court of Hong Kong Special Administrative Region:

The Parties have abused arbitration procedures and the court refuse to enforce mainland arbitral award

Case Description:

Xinfeng Company (the “Company”) was incorporated at Hong Kong in 1989, the shareholders of the Company are ST and NI (The majority shareholder and director of NI is DL) with equal shares. ST and DL are Company’s directors.

At the end of 2016, ST and DL had disagreements over the management of the Company. In April 2017, ST signed a marble sales agreement (hereinafter referred to as “Sales Agreement”) with Zhanwei Company in the name of the Company, involving a total price of CNY 220 million. Subsequently, Zhanwei Company initiated an arbitration proceeding against the Company at Zhanjiang Arbitration Commission on the ground of the Company's breach of agreement (hereinafter referred to as the “Arbitration Proceeding”). In May 2017, Zhanjiang Arbitration Commission issued an arbitral award in the case, ruling that the Company should pay Zhanwei Company CNY 59 million and related arbitration fees (hereinafter referred to as the “Arbitration Award”). After obtaining the Arbitral Award, Zhanwei Company filed an application for enforcement at the high court of Hong Kong Administrative Region (hereinafter referred to as the “Court”) and also filed a winding-up petition against the Company. During the hearing, DL applied to the Court to refuse to enforce the Arbitral Award.

Court’s View:

Firstly, on the question of the validity of the Sales Agreement, the mere fact that ST was a director of the Company did not prove that he had any actual, implied or apparent authority to sign the agreement on behalf of the Company. Based on the business transactions between the Company and Zhanwei Company and the actual operation of the two companies, the Court is not convinced that there is a course of dealings between the two companies in this case, therefore it did not show that ST had any implied authority to sign contracts on behalf of the Company. At the same time, there was no factual basis in this case to suggest that there had been any board resolution or any express statement of authority by any person with actual authority to act on behalf of the Company in relation to ST's authority. Accordingly, ST did not have any apparent authority to sign contracts on behalf of the Company.

Secondly, judging from the execution date of the Sales Agreement, the unusual terms of the Sales Agreement, the relevant facts after the execution and the facts leading to the arbitral award, this was actually a sham carefully planned by Zhanwei Company and ST to enable them to obtain the property of the Company.

Thirdly, on the premise that ST had no authority to execute the Sales Agreement on behalf of the Company, the Court found that the arbitration agreement in question was not made by the Company, i.e. the Company was not a party to the arbitration agreement.

Fourthly, the Company was not properly notified or informed of the Arbitration Proceeding and it was not able to present the fact of the case in the Arbitration Proceeding.

Fifthly, in view of the specific facts and relevant evidence in this case, the enforcement of the Arbitration Award would really “shock to the conscience of the Court”. ST, with the assistance of Zhanwei Company has abused the arbitration procedures and the arbitral award in this case. Allowing the enforcement of the Arbitration Award would undoubtedly violate the public policy of Hong Kong.

Lastly, during the enforcement application process in this case, the statements made by the relevant parties to the Court were misleading, and obviously there was a major problem of unfaithful disclosure, therefore, the relevant enforcement order must be revoked.

The Court refused to enforce the Arbitration Award on the grounds that the agreement at issue was invalid, the Company did not receive proper notice of the arbitration proceedings, failed to present arguments, and violated public policy.

Deyang Intermediate Court:

The arbitration agreement is not the expression of Claimant's true intention

Legal basis：

Article 4 of the Arbitration Law of the People's Republic of China:

Where the disputing parties choose arbitration as a method for dispute resolution, both parties shall reach an arbitration agreement on a mutually voluntary basis. Where there is no arbitration agreement and only one party applies for arbitration, the arbitration commission shall not deal with the case.

Article 16：

An arbitration agreement shall include arbitration clauses stipulated in a contract and any other written agreement for arbitration concluded before or following the occurrence of a dispute.

An arbitration agreement shall include the following contents:

(1) the expression of an application for arbitration;

(2) arbitration items; and

(3) The chosen arbitration commission.

Case Description：

On January 17, 2018, the applicant Sichuan Chuanjiao Luqiao Co., Ltd.(the “Company”) won the bid of a national highway project. In August 2021, the Company received a notice from the Chengdu Arbitration Commission that Xiaoliang Hu filed an arbitration against it on July 28, 2021, requiring a project price of over CNY 1 million and the interest accrued on the overdue payment. The arbitration agreement based on which Hu Xiaoliang initiated the arbitration of this case was the Protection Project Labor Subcontract (hereinafter referred to as the “Contract”) signed by and between Liangcai Diao, who was a third party to the case, in the name of the Project’s Department.

The Company believed that the Contract was not signed by itself and the actual signatory,  Liangcai Diao, had not obtained authorization from the Company. Therefore, the Contract and the arbitration agreement terms contained therein were not the true intention of the Company. It shall be confirmed that no contract was concluded between the Company and Xiaoliang Hu , and the arbitration clause in the Contract provided by Xiaoliang Hu was invalid.

Court’s View:

Liangcai Diao conducted an unauthorized agency behavior. It was not the Company but Liangcai Diao who finally signed the Contract, and he did not show the power of attorney on behalf of or entrusted by the Company. Therefore, Liangcai Diao's act in the name of the project department of the Company was an unauthorized agency behavior. When signing the contract, there were no facts and reasons to make Xiaoliang Hu believe that Liangcai Diao had the right to act as an agent of the Company. Xiaoliang Hu neither examined and verified the identity of Liangcai Diao and whether he had the power of agency nor required the company to seal the contract. He didn’t ask the Company to confirm or ratify the Contract during the performance of the Contract, either. Liangcai Diao should obviously find faults in himself.

In summary, as Liangca iDiao's act did not comply with the constitutive elements of apparent agency stipulated in Article 172 of the Civil Code of the PRC and did not constitute apparent agency, it could not be ascertained that the Contract was entered into by the Company and Xiaoliang Hu. Therefore, the Contract and the arbitration agreement contained therein were not the true intention of the Company. The court held that, the application of the Company for confirming the invalidity of the arbitration agreement concluded by Liangcai Diao and Xiaoliang Hu against the Company shall be supported.

In accordance with Articles 16 and 20 of the Arbitration Law of the People's Republic of China, the court ruled as follows: to affirm that the arbitration agreement as agreed in the Contract signed by Liangcai Diao and Xiaoliang Hu(the respondent), was null and void.

This Newsletter is produced by ZLWD International Business Committee and for your reference only.

Editorial Board: Wei LIN  Philip DUAN  Ellen WANG 

 Lingling GUO  Yuming LI  Ning NING  Jingya MAO

All Information published in this Newsletter is from open source.

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