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© 2006 by the American Bar Association. Reproduced from The International Litigation Quarterly, Volume 21, No. 3 (Spring/Summer 2006) pp. 3-7. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Contracts for the International Sale of Goods in China

Allison E. Butler [1]

  1. Introduction: The Slow Commercialization of China
  2. Commercial History of China
    1. Roots of Trade
    2. Emergence of New Commercial Era
  3. CISG: A General Background
  4. Adoption of the CISG in China
  5. Arbitration in China and the CIETAC
  6. A Case Study: A Trend Toward Adherence to the CISG?
  7. Conclusion -- Continued Modernization?

I. INTRODUCTION: THE SLOW COMMERCIALIZATION OF CHINA

The United Nations Convention on Contracts for the International Sale of Goods (CISG) has been regarded as significant advancement for international commercial law.[2] On September 30, 1981, the People's Republic of China (China) signed the CISG and deposited its instrument of ratification on December 11, 1986, which became effective January 1, 1988.[3] On December 11, 1986, the United States ratified the CISG.[4] As the U.S. is a main trading partner of China and also a Contracting State of the CISG, the significance of recent developments within the Chinese judicial system are relevant to a practitioner representing clients desiring to do or actually doing business in China. Moreover, China's increasing role in world trade in general warrants recognition of China's significance by any practitioner representing entities worldwide.[5]

Chinese history reveals that it experienced a period of great trading power in the Third and Fourth Century B.C., which prominence subsequently waned due in part to its isolationism as well as its failure to adopt a comprehensive commercial code. Subsequently, China's market economy failed to dominate during the period between the collapse of the Qing Dynasty in 1911 and the birth of the People's Republic of China in 1949. After the Chinese Revolution, the centrally planned economy was highly controlled by the Chinese government; however, following the death of Chairman Mao Zedong in 1976, China commenced a new commercial era. The Chinese Government made a conscious effort to enact commercial laws to prepare the country for its new commercial policy. Subsequently, rulings issued by the China International Economic and Trade Arbitration Commission (CIETAC), also known as the Court of Arbitration of China Chamber of International Commerce commencing October 1, 2000,[6] are similar to other countries that have adopted the CISG.[7] However, recent rulings issued by the CIETAC after China's adoption of a New Contract Law reflect a trend that contracts that specifically set forth the obligations of the parties will be adhered to by the CIETAC. Hence, careful drafting of a contract is key to safeguarding the interests of a client when conducting business in China.

II. COMMERCIAL HISTORY OF CHINA

A. Roots of Trade

China was engaged in trade since the Fourth and Third Century BC.[8] The "Silk Road" referred to the trade route from China to central Asia, the Middle East, and [page 1] Europe including Ancient Rome.[9] Despite China's significant world trade presence, the country lacked a system of commercial or merchant law. Legislation as to commercial law or trade in general was scarce,[10] although laws did exist that dealt with regulations such as taxation and jurisdiction.[11]

During the Ming Dynasty, Chinese citizens were prohibited from sailing overseas and from selling a number of goods to foreign merchants.[12] However, after the Opium Wars (1840-1842), China adopted a number of commercial codes that were based on the German and Japanese models of law [13] China adopted the General Rules of Merchants that contained nine provisions that established general rules applicable to merchants in 1903.[14] Despite the adoption of the Code, China's market economy failed to dominate during the period between the collapse of the Qing dynasty in 1911 and the birth of the People's Republic of China in 1949.

B. Emergence of New Commercial Era

After the death of Chairman Mao Zedong in 1976, the new leaders of China sought to commence and advocate social and economic reform with an "open door" policy towards other nations without forsaking their centrally planned government structure. This led to the "Four Modernizations" of industry, agriculture, science, and military defense.

With respect to modernizing industry, it became necessary to reform the past economic regime. "Notably, the centrally planned economy that existed prior to Chairman Mao was predominantly controlled by the government. As such, the majority, if not all, of the Chinese legal system had to be eliminated. Therefore, one of China's main tasks was the enactment of a series of laws: The General Principles of the Civil Law (GPCL); the Economic Contract Law (ECL),[15] the Foreign Economic Contract Law (FECL)[16] and the Technology Contract Law (TCL).[17] The latter three subsequently were superseded by the Contract Law of the Peoples Republic of China (the Contract Law),[18] which was enacted on October 1, 1999. However, it should be noted that the ECL, FECL and the TCL each governed separate contractual situations. Hence, the adoption of the Contract Law ended three separate contract laws in China in different fields. The CISG was ratified and adopted to govern international contracts for the sale of goods between parties in China and other Contracting States of the CISG."[19] The GPCL serves as a civil code as it regulates the basic principles governing civil and commercial transactions. Article 142 paragraphs 2 and 3 of the GPCL, respectively provides:

(2) If any international treaty concluded or acceded to by the People's Republic of China contains provisions differing from those in the civil laws of the People's Republic of China, the provisions of the international treaty shall apply, unless the provisions are ones on which the People's Republic of China has announced reservations.

(3) International practice may be applied to matters for which neither the law of the People's Republic of China nor any international treaty concluded or acceded to by the People's Republic of China has any provisions.

There is no such provision in the current Contract Law. Consequently, there is currently scholarly debate in China as to whether the GPCL acts as a federal supremacy clause overriding the Contract Law enabling application of the CISG.[20] Application of Chinese law however may be subject to the viewpoint of the arbitrator based on the discretionary language located within the GPLC.[2l] Therefore, it would be prudent for an attorney representing a client during negotiations to clarify the applicable law and additional terms. This point is further discussed infra.

III. CISG: A GENERAL BACKGROUND [22]

After World War I, the need to unify an international commercial code was recognized during the League of Nations and subsequently at the 1964 Hague Convention.[23] The latter being unsuccessful in world acceptance ultimately led to the formation of the CISG. The CISG is an international commercial code, similar to the Uniform Commercial Code of the United States, but consists of civil and common-law concepts and applies in the absence of contractual terms. Hence, the CISG will serve as "gap filler" to the extent that the parties failed to address a specific term(s).[24]

The CISG is divided into four parts. Part I sets forth its application. In general, the CISG applies if the parties come from Contracting States or by operation of private law. Since the U.S. and China have filed a reservation pursuant to Article 95 with regard to Article 1(1)(b), the CISG only applies if the parties come from a Contracting State of the CISG and have [page 3] not expressly opted out.[25] In application, this means that if a U.S. and Chinese company enter into a contract and do not expressly "opt out" of the CISG, the CISG governs the contract to the extent that terms and obligations are not established in the contract. Additionally, the contract must cover the sale of goods (versus substantial services and certain excluded matters).[26] Moreover, Article 7 provides good faith and uniformity of application, which enables counsel to rely, not only on domestic case law, but rulings rendered by foreign courts.[27]

Part II of the CISG sets forth the requirements as to the formation of a contract. A common-law trained attorney should observe that, under the CISG, there is no need for consideration and a contract can be proven by any means (thereby eliminating the parole evidence and the statue of frauds rules).[28] However, China has filed a reservation under Article 96; therefore, all contracts must be evidenced in writing.

Part III of the CISG sets forth the obligations, rights, and remedies of the parties.[29] This section introduces the civil law tradition of Nachfrist Notice and the remedy of avoidance, which work in conjunction. The Nachfrist principle is a concept borrowed from German domestic law and the French procedure of mise en demeure [30] and can also be found in international "Restatements" of the law, such as the PECL and UNIDROIT Principles. A Nachfrist notice is mandated under the CISG in order for a buyer or seller to exercise the remedy of avoidance of a contract. "Avoidance" under the CISG implies an early end to the contract and comprises national concepts of rescission as well as termination or cancellation without court intervention.[31]

Part IV sets forth the various reservations that a Contracting State may elect to file with the Secretary-General of the United Nations.[32]

Similar to the UCC, there are exceptions to the general rules and counsel is encouraged to review the various provisions of the CISG. More importantly, however, the CISG permits autonomy of the parties, which is achieved through Article 6 as well as Articles 8 and 9. In particular, these provisions provide that the terms of the agreement supersede the CISG and further permit evidence of the parties' conduct and trade usage -- a useful tool for an attorney either defending or advocating a contract action. As will be illustrated infra, the rulings rendered by the CIETAC within the last five years reflect a tendency to facilitate these rules absent express agreement between the parties.

IV. ADOPTION OF THE CISG IN CHINA

The Chinese government and its judicial bodies have been aware of the importance and the potential influence of the CISG ever since 1987.[33] Before the CISG came into force, the then-Ministry of Foreign Trade and Economic Cooperation (the predecessor of the Ministry of Commerce, MOFTEC) issued a notice on January 22, 1987,[34] requesting relevant governmental agencies and companies to make preparation for the forthcoming CISG's entry into force in relation to China, including, but not limited to, complying with the CISG, studying it, modifying and completing the standard contracts then in use, and keeping abreast of the developments of the number of the Contracting States of the CISG.

On December 4, 1987, the then-MOFTEC further circulated a notice on certain issues meriting attention regarding implementation of the CISG,[35] which were shortly endorsed by the Supreme People's Court.[36] These earlier preparations have resulted in the CIETAC rendering numerous decisions involving the CISG, which may differ substantially to other tribunals worldwide.[37] Based on the uniformity and international character of the CISG, this has significant consequences and warrants notice of practitioners engaging in commercial transactions throughout the world and in China.

V. ARBITRATION IN CHINA AND THE CIETAC

The CIETAC is a permanent international commercial arbitration institution that resolves, by means of arbitration, contractual or non-contractual, economic and trade disputes.[38] The Arbitration Commission, formerly called the Foreign Trade Arbitration Commission, was set up in April 1956 within the China Council for the Promotion of International Trade in accordance with the Decision of May 6, 1954, by the former Government Administration council.[39] The Provisional Rules of the Arbitration Procedure were formulated by the China Council for the Promotion of International Trade during this time period.[40]

The Arbitration Act of the People's Republic of China (CAA) was enacted on August 13, 1994. The CAA embodies many of the principles of modern arbitration and also clarifies the basic principles of Chinese arbitration.[41] [page 4]

Prior to 1994, all international arbitration was submitted to the CIETAC and the China Maritime Arbitration Commission. While the enactment of the CAA has opened the doors to other arbitration institutions, the CIETAC remains the leading arbitration institution in China.[42] The CIETAC is located in Beijing and has sub-commissions in Shenzhen and Shanghai.

The majority of the Chinese arbitral awards that involve the CISG are decided by the CIETAC and are binding on the parties.[43] As such, their rulings serve as a significant gauge of what a practitioner should review prior to representing clients in transactional matters as well as in an arbitral hearing. Moreover, reliance and submission to arbitration may militate in favor of securing a more neutral forum as the foreign practitioner still must be conscious that they are transacting business within a socialist market state.[44] Notably, the rules of the CIETAC permit appointment of foreign arbitrators as well as for arbitration abroad.

VI. A CASE STUDY: A TREND TOWARD ADHERENCE TO THE CISG?

There have been numerous articles analyzing the legal system of China as well as rulings of the CIETAC involving the CISG in China.[45] These articles often express concerns of the application of domestic law instead of the CISG, particularly when the facts clearly show that the CISG governed an issue or general discussion of application therein.

Through a case study, it is evident that there have been numerous CISG cases and rulings rendered throughout the world, including the U.S., in which tribunal fails to adhere to the CISG. Notably, for purposes of this China discussion, the database of Pace University provides 124 cases of translated cases regarding the CISG rendered by the CIETAC, 113 of which are pre-2000.[46]

The focus of this article is on the remaining 11 cases, based in part on China's adoption of a New Contract law and elimination of its three special contract laws. It is the author's opinion that cases rendered prior to China's Contract Law often resulted in domestic application due to the various contractual law in effect. CIETAC rulings rendered since 2000 reveal an adherence to the CISG with reference to domestic law in procedural and other matters not governed by the CISG, which is accepted under the CISG.[47]

While the author is aware that a sampling of 11 cases is not an adequate number to draw a full scale analytical conclusion, it is a sufficient number to reflect a trend of how the CIETAC applies the CISG.[48] Whether these rulings are a result of the enactment of the new Contract Law or a result of contract drafting, it can be assumed that the latter is very significant, absent further rulings by the CIETAC regarding the CISG. Thus, it is important for a practitioner to draft a commercial contract carefully when engaging in business in China.

An overview proclivity of the rulings issued by the CIETAC within the last five years reveals a focus on the contractual terms. An issue of nonconformity as to the product results in examination of the contractual specifications.[49] Notably, unlike some other court rulings, there is little case law analysis or scholarly debate on these cases.[50] Discussion of preconditions, for example in the event of a fundamental breach, often does not invoke an in-depth analysis of the concept or whether Nachfrist notice is mandated.[51]

In contrast, the CIETAC's rulings focus on the agreement reached between the parties (or if one even exists) and whether the other party performed an obligation without further discussion.[52] Although legal analysis is rare, the CIETAC does employ Article 6 of the CISG (party autonomy) and Article 8 and 9, by concentrating on the parties' intent and refers to the CISG for guidance as to terms or application.[53]

The incorporation of INCOTERMS also appears to playa significant role within the rulings of the CIETAC. INCOTERMS constitute a common and universal international trade language, resulting from international commercial practice. It is easily understood by the parties involved, is voluntarily accepted by them, and determines the scope of the clauses of international sales contracts via acronyms and abbreviations.[54] The use of INCOTERMS has been incorporated into the CISG due to their common and accepted usage within international trade.[55] As such, inclusion of INCOTERMS also has been pivotal in CIETAC rulings. In one ruling, the use of INCOTERMS was used to negate a seller's argument of contract modification.[56] The CIETAC ruled that a Swedish buyer could not argue that a Chinese seller's modifications of the clauses regarding the age of the ship and payment of the freight materially modified an offer because the FOB [page 5] inclusion in the contract negated this argument.[57] The CIETAC has further employed INCOTERMS by utilizing them as a means to determine a prevailing price for port costs.[58]

VII. CONCLUSION -- CONTINUED MODERNIZATION?

The rulings issued by the CIETAC reveal that defining the terms and obligations of a contract play an essential role in the event of contract dispute. There is no doubt that the first and foremost document that will control the outcome of the arbitration is the contract itself. This is consistent with the purpose of the CISG and with general contractual principles. For this reason alone, counsel should not neglect to define the terms of the contract. In the event of arbitration, submission of evidence appears to be the second most valuable consideration by the CIETAC. It is only in the absence of defining terms that the CIETAC will apply the CISG. Notably, the rulings issued by the CIETAC since 2000 consistently have applied the CISG in relevant areas thereby diminishing the perception that domestic law will supersede the CISG in all Chinese disputes. [page 6]


FOOTNOTES

1. Ms. Butler is a private practitioner in California and Florida. She is a nationally and internationally published author on various commercial issues. Her recent publication, A practitioners Guide to the CISG, (Kluwer International), is set for release May 2006.

2. The CISG was finalized and approved at a diplomatic conference in Vienna in 1980 and is also referred to as the "Vienna Convention," "UN Sales Convention," "Convention," "UN Commercial Law," or "International Sales Law."

3. See <http://www.cisg.law.pace.edu/cisg/countries/cntries-China.html>. China has declared, in accordance with Articles 12 and 96 of the CISG, that any provision of Article 11, Article 29 or Part II of the CISG that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than in writing, would nor apply when any parry had his place of business in its territory. It also has made an Article 95 declaration, which means it would not be bound by paragraph (l)(b)of Article 1. Also, effective 1 July 1997, Hong Kong became a "Special Administrative Region" of the People's Republic of China. An instrument flied by the Government of China with the Secretary-General of the United Nations on June 6, 1997, refers to Hong Kong as a Special Administrative Region that "will enjoy a high degree of autonomy." However, prior treaty obligations of this region and until a filing is made by China, the courts of China and Hong Kong are unlikely to regard the CISG as in effect in the Hong Kong Special Administrative Region. Courts of other jurisdictions may, however, rule otherwise for Hong Kong and for Macao. See Ulrich Schroerer, The Status of Hong Kong and Macao under the United Nations Convention on Contracts for the International Sale of Goods, <http://www.schroeter.li/pdf/Schroeter_16_Pace_Intl_L_Rev_2004_307.pdf>.

4. United Nations Convention on Contracts for the International Sale of Goods, opened for signature April 11, 1980, S. Treaty Doc. No.9, 98th Cong., 1st Sess. 22 (1983), 19 I.L.M. 671, reprinted at 15 U.S.C. app. 52 (1997). The CISG became effective on January 1, 1988. The United States has declared in accordance with Article 95, which means it will not be bound by paragraph (l)(b) of Article 1. Therefore, application of the CISG is made when both parties come from Contracting States, i.e., a signatory country.

5. Chinas exports and imports of merchandise ranked the fourth and third, respectively, in the world in 2003. Chinas share in the world for total merchandise in exports and imports in 2003 were 5.8 percent and 5.3 percent, respectively. Notably, China became the largest merchandise trader in Asia, and the third largest exporter and importer in world merchandise trade in 2004. See WTO, <http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Language=E&Country=CN>.

6. The CIETAC is a permanent international commercial arbitration institution that independently and impartially resolves, by means of arbitration, contractual or non-contractual, international economic and trade disputes.

7. Early case law interpreting the CISG reveals mixed rulings under the CISG. This may be due, in part, to courts' unfamiliarity with the CISG, adherence to domestic application of a CISG concept, or other factors.

8. See Jacques Gernet, A History of Chinese Civilization, translated by Foster, Cambridge University Press, Cambridge, 1982, 73, 130.

9. C.G. Simkin, The Traditional Trade of Asia, Oxford University Press, London, 1968, 34; see also, Edward Harper Parker, China Her History Diplomacy and Commerce From the Earliest Times to the Present Day, 2d ed., John Murray, London, 1917, 50-1.

10. Some scholars note that the tack of law was due in part to Confucianism, which placed merchants at the lowest class of the social hierarchy. Confucianism despised merchants and regarded the merchants as selfish, always placing profit-making first. See, Shi Zhonglian, The Dual Economic Function of Confucianism, available at http://www.crvp.org/book/series03/iii-14/chapter_i.htm.

11. See e.g., Tang Code, which existed between 581 and 960 A.D., is the earliest example of trade regulation in China. Evidence also exists of bills of exchange during this time period. Chang, et.al., A History of Chinese Legal System (Zhongkuo Fa Zhi Shi), Sichuan Social Science Academy Press, Chengdu, 1987, in Chinese, 62-79.

12. Id. at 226.

13. Id. at 244.

14. Id.

15. The ECL was the first contract law in China. It was enacted four years prior to the GPCL, and effectively set in motion the free-market trend in China. The ECL was subsequently amended to provide broader scope in 1993.

16. The FECL, enacted in 1985, applied to contracts between Chinese enterprises (or other economic organizations), foreign enterprises, and individuals, except for international transportation contracts. Chinese individuals were expressly excluded.

17. The TCL, which consisted of 7 chapters and 55 provisions, was enacted by the NPC in 1987 and later implemented in 1989. The law gave Chinese legal persons and individuals the capacity to enter into technology contracts; however, the TCL did not apply to agreements involving a foreign party.

18. The Contract Law as the uniform contract law was adopted by the second meeting of the Ninth National People's Congress on March 15, 1999, and superseded the LECFI, the Economic Contract Law of the People's Republic of China and the Law of the People's Republic of China on Technology Contracts as of October 1, 1999, thus ending the situation that there were three contract taws in China in different fields.

19. See Allison E Butler, A Practitioners Guide to the CISG (Kluwer release date Summer 2006).

20. Some researchers such as Mr. He Xiaoyong and Mr. Liu Yongxiang hold that Article 142 acts as one; however, others such Mr. Chen Hanfeng, ML Zhou Weiguo, and M. Jiang Hao, and ML Wu Dong hold otherwise. ML Dong noted that those in disfavor of supremacy find that the provisions of Article 142 itself are nor strong enough to conclude that conventions may override domestic civil laws. Communication with Wu Dong, December 29, 2005.

21. It is encouraging that parries seek to use China's arbitration system such as the CIETAC and other arbitration institutions. Most observers agree that Chinese courts are not up to international standards. For instance, most judges have minimal or no legal training and observers have stated those poorly trained court officials are susceptible to corruption and regional protectionism. See The China Team, Dispute Avoidance & Dispute Resolution in China, <http://www.ita.doc.gov/exportamerica/TechnicalAdvice/ta_ChinaDispute.pdf#search='Chinapercent20CIETACpercent20rulings. As one scholar has noted, "The feudal element of Chinese history is still in existence. Rule of man and not the Rule of Law still can be found, especially in the court system, where only recently appointments were made from legally trained people. See Bruno Zeller, The CISG and China: Dialog Deutschalnd-Schwriz VII, Faculte de droit, Universite de Geneve (1999) 7-22, <http://www.cisg.law.pace.edu/cisg/biblio/zeller.html>.

22. Butler, supra note 8.

23. Historically, the origin of the CISG can be traced back to earlier trade laws. However, for purposes of this article discussion will begin at post World War I. For further historical development of commercial law, see Butler, supra note 8.

24. Butler, supra note 8.

25. For illustration of this point, see BP Oil Int'l Ltd v. Empma Estateal Petrokos de Ecuador, 332 F. 3d 333 (S.D. Texas 2003) (laws of Ecuador insufficient to exclude CISG application); Asante Techs., Inc. v. PMC-Sierra, Inc., 164 F. Supp. 2d 1142, 1150 (N.D. Cal. 2001) (laws of British Columbia, without more, evince a clear intent to Opt out of CISG); Ajax 1001 Works, Inc. v. Can-Eng Manu. Ltd, 2003 WL 223187, 2003 U.S. Dist LEXIS 1306, at 8 (N.D. Ill. Jan. 30, 2003) (laws of the Province of Ontario, Canada did not exclude the CISG); St. Paul Guardian Ins. v. Neuromed Med Sys. & Support, 2002 WL 465312, at 2, 2002 U.S. Dist. LEXIS 5096, at .8 (S.D.N.Y. Mar. 26, 2002) (choice-of-law provision applying German law mandated application of CISG).

26. See generally, Articles 2 (sales excluded); Article 3 (services v. goods), Article 4 (validity and title issues not covered), and Article 5 (death or personal injury excluded).

27. Article 7 provides the following:

(1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.

28. See Article II.

29. See Buyer's Obligations and Rights (Articles 53-65, Articles 45-52, respectively); Seller's Obligations and Rights (Articles 30-44 and Articles 61-65, respectively); Damages (Articles 74-88).

30. See Bruno Zeller in Buyer's notice fixing additional final period for performance: Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Articles 47 and 49(1)(b) CISG (2001), available at <http://www.cisg.law.pace.edu/cisg/text/peclcomp47.html>.

31. Drafting this particular provision required the drafters to adopt such neutral language upon which they could reach an agreement. Ste Michael J. Bonell, Interpretation of the Convention, in Commentary on the International Sales Law.

32. See Articles 89-101.

33. See Dong Wu, CIETAC's Practice on the CISG, Nordic Journal of Commercial Law (February 2005), <http://www.cisg.law.pace.edu/cisg/biblio/wu.html>.

34. Notice on Making preparation for Enforcing the CISG ([87] Waijingmaofazi No.2) (Guanyu zuohao zhixing xiaoshou hetong gongyue zhunbei gongzuo de rongzhi -- in Chinese), issued by MOFTEC.

35. Notice on Certain Problems to be Noticed when Enforcing the CISG (Guanyu zhixing lianheguo guoji huowu xiaoshou hetong gongyue ying zhuyi de jige wenti -- in Chinese), issued by MOFTEC.

36. Notice of Forwarding the Certain Problems to be Noticed when Enforcing the CISG of MOFTEC (Fa [jing]fa [1987] No.34) (Zhuanfa duiwai jingji maoyibu guanyu zhixing lianheguo guoji huowu xiaoshou hetong gongyue ying zhuyi de jige wenti de tongzhi -- in Chinese), issued by the Supreme People's Court.

37. See the Chinese cases involving the CISG reported at the online CISG database of Pace Law School, at <http://www.cisg.law.pace.edu/cisg/text/casecit.html#china>.

38. See generally CIETAC, <http://www.cietac.org.cn/english/introduction/intro_1.htm>.

39. Id

40. Id

41. See Li Hu, Introduction to Commercial Arbitration in China, <http://www.softic.or.jp/symposium/open_materials/11th/en/LiHu.pdf>

42. Id; See also supra note 37.

43. But See CIETAC arbitration proceeding, May 10, 2005 (Hat case) [G20010386], <http://cisgw3.law.pace.edu/cases/050510c1.html> (U.S. company liable for $205,280.77 in addition to $12,109.73 in interest and an arbitration fee of $73,973.00). Subsequently, the Chinese company sought enforcement in the U.S., but was denied enforcement based on several challenges. Guang Dong Light Headgear Factory Co. Ltd. v. ACI International Inc., 2005 WL 1118130 (D. Kan. 2005); 2005 U.S. Dist. LEXIS 8810.

44. The CIETAC with its flexibility as to appointment of foreign arbitrators and its mandate of neutrality provides an impartial forum. In contrast, China's court system may subject parties to local bias. See Zeller, supra note 23, noting "litigation [in contrast to arbitration] in China is not always impartial. Those who are well-connected can influence Outcomes or processes." Therefore, resort to the CIETAC may provide a more secure balanced forum. See a/so generally supra note 23. But See Jerome A. Cohen, Tim. to Fix Chinas Arbitration, Jan/Feb 2005, <http://www.feer.com/articles1/2005/0501/free/p031.html>.

45. See Zeller, supra note 23; Wu, supra note 33; Chen, supra note 17; Cheng L.I Rosett A., Contract with a Chinese face: Socially Embedded Factors in the Transformation from Hierarchy to Market, 1978-189 of Chinese Law 5 (1991) 124: Selected Works of China Int'l Economic & Trade Arbitration Common Awards (1963-1988) updated to 1993, Sweet and Maxwell (Hong Kong/London 1995), No.75. pp. 309-316; See Bruce Boyd, Adrift In Foreign Wonderland:. How A Poorly Drafted International Arbitration Clause Can Get You In Trouble, <http://www.gordonrees.com/pubs/bus_nl_0904_04.cfm>.

46. There are other cases regarding the CISG decided by the CIETAC; however, only this amount has been translated into English.

47. See Article 7(2) which states the following:

(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based on, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. See also China March 7, 2002 CIETAC Arbitration proceeding (Lube oil case), <http://cisgw3.law.pace.edu/cases/020307c1.html>. (agency issues).

48. The author notes that selection of case law is based on the date a ruling was issued and therefore inclusion of case law prior to 2000 may be included.

49. China January 7, 2000 CIETAC Arbitration proceeding (Cysteine case), <http://cisgw3.law.pace.edu/cases/000107c1.html>; China January 19, 2000 CIETAC Arbitration proceeding (Steel cylinder case), <http://cisgw3.law.pace.edu/cases/000119c1.html>.

50. The author acknowledges that consideration of these issues may have occurred but there is no express reference to these factors within the context of the rulings.

51. China January 31,2000 CIETAC Arbitration proceeding (Clothes case), <http://cisgw3.law.pace.edu/cases/000131c1.html>.

52. China February 1,2000 CIETAC Arbitration proceeding (Silicon and manganese alloy case), <http://cisgw3.law.pace.edu/cases/000201c1.html> (failure of both parries to perform has resulted in dismissal of all claims); China July 27, 2000 CIETAC Arbitration proceeding (Steel scraps case), available at <http://cisgw3.law.pace.edu/cases/000727c1.html> (failure of parry to adhere to prior ruling of CIETAC with additional damages added).

53. But see China February 11, 2000 CIETAC Arbitration proceeding (Silicon metal case), available <http://cisgw3.law.pace.edu/cases/000211c1.html> (using good faith under Article 7 to provide explanation for delay in buyer's issuance of letter of credit).

54. Spain June 7, 2003 Appellate Court Valencia (Cherubino Valsangiacomo, SA v. American Juice Import, Inc.) , available at <http://cisgw3.law.pace.edu/cases/030607s4.html>.

55. St. Paul Guardian Ins. Co. v. Neuromed Med Sys. & Support, GmbH, 2002 WL 465312, at *2, 2002 U.S. Dist. LEXIS 5096, at *9-*10 (S.D.N.Y. Mar. 26, 2002); see also BP Oil Int'l v. Empresa Estatal Petroleos de Ecuador, 332 F.3d 333 (5th Cir. Tex. 2003); Russia: December 25, 1996, High Arbitration Court (or Presidium of Supreme Arbitration Court) of the Russian Federation: Information Letter 10, <http://cisgw3.law.pace.edu/cases/961225r1.html>; Russia September 17, 2001, Arbitration proceeding 16/1999, <http://cisgw3.law.pace.edu/cases/010917r1.html>. See also Ralph Folsom, et. al., International Business Transactions 12 (2d ed. 2001), at 72 ("INCOTERMS could be made an implicit term of the contract as part of international custom. Courts in France and Germany have done so, and both treaties and the UNCITRAL Secretariat describe INCOTERMS as a widely-observed usage for commercial terms").

56. China June 10, 2002, CIETAC Arbitration Proceeding (Rapeseed dregs case), <http://cisgw3.law.pace.edu/cases/020610c1.html>.

57. Id.

58. China Feb. 11, 2000, CIETAC Arbitration proceeding (Silicon metal case), <http://cisgw3.law.pace.edu/cases/000211c1.html>.


Pace Law School Institute of International Commercial Law - Last updated September 11, 2006
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