BAC Newsletter Issue 18
 
 
   
   
   
   
Comprehensive News
Regional Observation
Current Issue Focus
Guided Reading on Selected International Commerce Arbitration Cases
Seminar Info
 
 
Guided Reading on Selected International Commerce Arbitration Cases
 
 

On the same day, Wahaha and Danone reached a settlement and SCC issued a confidential arbitration decision in favor of Danone
On 30 September 2009, Wahaha Group and Danone reached an amicable settlement on the same day the Stockholm Chamber of Commerce (SCC) quietly issued a confidential “partial arbitration award” in favor of Danone, as the Swedish arbitration tribunal found that Zong Qinghou, the founder of Wahaha, had breached confidentiality and non-competition agreements with Danone. The 294-page decision by the three-member tribunal panel provides the first detailed account of how the relationship between the partners in China unraveled. In the annals of international investment, SCC Arbitration V (061/2007) will be remembered as a case study in how not to do business in China.
http://www.chinadaily.com.cn/china/2009-10/05/content_8763937.htm
See also http://www.ftchinese.com/story/001029618/en
See also http://www.ftchinese.com/story/001029626?page=1

The end of the “Pepsi Arbitration”
On 18 October 2009 during the 10th Western China International Economy & Trade Fair, the opening of the newest bottling plant in Pepsi Greater China, Chengdu Pepsi Beverage Co. Ltd. in West China, marked the end of the six-year “Pepsi Arbitration Storm”. In 1993, Sichuan Province Yun Lu Development Industrial Co., originally a state-owned enterprise under Sichuan Province Bureau of Radio and Television, and PepsiCo Investment (China) Co. Ltd., a wholly owned subsidiary of PepsiCo, Inc. (PepsiCo), entered into a Cooperative Joint Venture Contract to establish Sichuan Pepsi-Cola Beverage Company Ltd.(Sichuan Pepsi). From 1997 to 2003, the increase of tax profit of the company was over 33%. Among all the Pepsi-Cola and Coca-cola coexistent cities (ie. factories of both brands coexist in the same area) around the world, Sichuan Pepsi was one of the few companies where the market share of Pepsi-Cola was greater than Coca-Cola. In August 2002, PepsiCo filed arbitration before the Stockholm Chamber of Commerce (SCC) against Sichuan Pepsi, seeking orders to terminate the cooperation, due to the disputes over the price increase of the concentrates, market segmentation and other issues. The tribunal ruled in favor of PepsiCo to terminate the Trademark License Contract and the Concentrate Supply Agreement in January 2005. Later on, in response to Pepsi’s application for enforcement of the award, Chengdu Intermediate People’s Court refused recognition and enforcement of the award on the basis that the failure of PepsiCo to comply with the pre-arbitral consultation requirements under the arbitration clause fell within the Article V (1)(d) of New York Convention. Pursuant to the Reporting Up Notice, this decision had been approved by the Supreme People’s Court.
http://www.ccarb.org/news_detail.php?VID=16331 
See also Nadia Darwazeh and Friven Yeoh, ‘Recognition and Enforcement of Awards under the New York Convention--China and Hong Kong Perspectives’ (2008) 25 Journal of International Arbitration 842

US Court refused enforcement of an arbitral award issued by Qingdao Arbitration Commission on the ground of language use
September 16, 2009, United States District Court for the District of Oregon issued its ruling, denying the enforceability of the arbitral award handed down by Qingdao Arbitration Commission(QAC) in Qingdao Free Trade Zone Genius Int’l Trading Co. (claimant) vs. P and S International, Inc. (defendant).

In response to the claimant’s application for enforcement of the QAC award, the defendant argued that, QAC had not provided them with a translation of Notification of Arbitration in English, and all the documents QAC mailed, except for QAC Arbitration Rules and the Panel of Arbitrators, are in Chinese. The two principals of the defendant did not understand Chinese therefore they did not identify the documents as materials of a pending action. This resulted in the deprivation of opportunity for the defendant to be heard in the arbitration proceedings. Given the fact that the defendant did not receive due process, they moved for summary judgment in their favor, asserting that the arbitration award is unenforceable.

The claimant responded that: 1) Both parties agreed in the sales contract to settle any dispute through the QAC; 2) the sales contract also stated that an arbitration would be conducted according to the QAC's Rules of Arbitration; 3) the defendant received an English copy of the QAC Arbitration Rules and an English copy of the list of arbitrators; 4) Rule 67 of the QAC Arbitration Rules states that "Chinese language is the working language of the Arbitration Commission"; 5) the defendant was aware of a dispute with the claimant; and 6) the defendant had a prior and ongoing legal dispute in QAC with Company B. The claimant asserted that the above-mentioned circumstances show that: 1) the contract stated that an arbitration would be conducted according to QAC’s Arbitration Rules so that by signing the contract the defendant accepted Chinese as working language during arbitration; 2) the defendant was aware that the claimant would submit a claim to QAC; 3) the defendant had experience of engaging in arbitration in QAC. Therefore, upon receipt of arbitration documents, the defandent received notice reasonably calculated to reasonably calculated the arbitration proceeding had been commenced. The Notification of Arbitration sent out by QAC was in accordance with due process standards and it was a valid notice.

The court held that: the circumstances that the claimant presented do not generate an inference that the defendant had actual knowledge that the claimant had commenced an arbitration proceeding to take place on a particular date in a particular place. Nor does the contract contain a provision under which the defendant agreed to service of process in Chinese. The English documents (ie. QAC Arbitration Rules and Panel of Arbitrators) do not state that cognizance has been taken of a case, and do not name both parties, the amount involved in the dispute, and do not provide a date from which the time lines set out in Article 13 of QAC Arbitration Rules may be calculated. The Chinese document (ie. Notification of Arbitration) did contain the above-mentioned information; however, it had not enclosed an English translation therefore the defendant was unable to know when the proceedings were commenced. Hence, the court concluded that the documents and circumstances of the case do not demonstrate that the defendant had received notice reasonably calculated, under all the circumstances, to apprise them of the pendency of the arbitration and afford them an opportunity to be heard. In conclusion, the Court refused enforcement of the QAC arbitral award in accordance with Art V(1)(b) of New York Convention.

Qingdao Free Trade Zone Genius Int'l Trading Co.,Ltd. v P and S International, Inc., 08-1292 85949 (District court of Oregon, 2009)

See also http://www.ccarb.org/news_detail.php?VID=17689

 

 
 
 
 
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