1. Respondent pay the outstanding debt in the amount of USD $164,900.04 along with all accumulated interests; and
2. Respondent pay for the Arbitration Fee, the legal fees and other expenses incurred by Petitioner in its pursuit for the outstanding indebtedness.
A. Debt Principal in the Request for Arbitration
a. Upon audit of its books, Petitioner revealed one payment in the amount of USD $27,816.12 dated October 8, 2000, which appeared to be a payment made by Respondent to Petitioner and should be deducted from the Debt Principal stated in the Request for Arbitration. In addition, Petitioner recalled a negotiated discount of USD $1,720 for the third shipment that, although without any evidence, Petitioner agrees to be deducted from the Debt Principal listed in the Request for Arbitration. In addition, Petitioner made a minor mistake in its calculation of shipment prices for shipments in 2000, which shall amount to USD $182,732.32 instead of USD $182,731.72, so the difference of USD $0.6 shall be credited to the Debt Principal. Therefore, the total Debt Principal claimed by Petitioner for Arbitration shall be $164,900.04-$27,816.12-$1,720+$0.60 = USD $135,364.52.
b. The amount of debt claimed by Petitioner in its Request for Arbitration is different from what was claimed in previous Attorney Letter, which stated the debt as USD $155,918.44. This discrepancy is caused by repeated minor deductions made by Respondent in its payments, which totaled to USD $1,083.20 and should be credited to the Debt Principal. In addition, Respondent raised quality issue against the fifth shipment with an invoice price of USD $20,131.68 and claimed compensation of USD $22,000, but Petitioner only agreed to pay USD $19,768.80. Since there was no agreement on this claim, in order to avoid further dispute, Petitioner accepted the USD $22,000 claim in the Request for Arbitration and thereof deducted the amount from the Debt Principal. Based on the above, the calculation on Debt Principal shall be: $155,918.44 + $1,083.20 -$21,637.12=$135,364.52. This amount is consistent with the foregoing debt claimed by Petitioner. In addition, Respondent did not raise any opposition to the amount of debt except for the issue of quality with the fifth shipment.
B. Interest Calculation Formula
a. The Commencement and Ending of Interest Period
Pursuant to the terms of payment provision of the Contract which provides that payments shall be made within sixty (60) days after the shipments are received, if interest calculation is separately based on each individual shipment, the calculation would become complicated on a monthly basis for the years 1999 and 2000. In order to evidence good faith in negotiation and for convenience of calculation, Petitioner hereby agrees that the commencement of interest period is to be set on January 1, 2001 and the ending of interest period on July 1, 2003, which means the interest aggregation shall be calculated for the period of thirty (30) months (two and half [2.5] years),
b. Currency of Debt Principal and Interest Rate
If the interest calculation on Debt Principal is in U.S. Dollar and the interest applies the Foreign Exchange Loan Rate, the total interest loss to be claimed by Petitioner would be much more significant. Based on good faith, Petitioner hereby agrees that the calculation of Debt Principal shall be in RMB, for the equivalent of USD $135,364.52 based on the exchange rate published by the People’s Bank of China on July 16, 2003 (100:826.47), and the interest rate shall be the Annual Rate for "1-3 Year Long and Mid Term Loan Rate" published by the People’s Bank of China in 1999, which is 5.94%. According to the above agreements, the total debt shall be RMB ¥ 166,133.94 (135,364.52 X 8,2647 X 2.5 X 5.94%=RMB¥ 166,133.94).
C. Legal Fees and Expenses
For the purpose of pursuing payments owed by Respondent and applying for arbitration, Petitioner has incurred the following expenses:
a. Mediation fee in the amount of RMB ¥ 2,500 paid to International Chamber of Commerce, Hebei Branch to pursue the payments owed by Respondent; and
b. Attorney fees RMB ¥ 60,000 plus transportation fee RMB ¥ 2,065.80 (including transportation in Beijing, traveling and accommodation fees);
In summary, the Debt Principal claimed by Petitioner in the Request for Arbitration shall be USD$ 135,364.52, with interest of RMB¥ 166,133.94 and legal fee and other expenses in the amount of RMB¥64,565.80. In addition, the arbitration fee shall also be solely paid by Respondent.
D. Supplemental Post-hearing Opinion
A. Petitioner is a Sino-Foreign Joint Venture established by Handan Hengli Industrial Co. Ltd. and the Respondent. According to the Foreign-Invested Enterprise Approval Certificate of Petitioner, the foreign investor of Petitioner, namely Respondent, is ELKO (USA), INC.
B. According to the Joint Venture Contract, Respondent is responsible for the 100% exportation of Petitioner's products as the sole buyer. In fact, all toys manufactured by Petitioner were supplied to Respondent for sales overseas. It was Respondent’s request to use the name "DJ Toys, Inc." as the recipient on some Bills of Lading in order to simplify the customs clearance, and the de facto recipient of shipments was Respondent, This business relationship could be evidenced by other correspondence between Petitioner and Respondent. Petitioner used to forward the original Bills of Lading to Respondent via bank or mail. In addition, during the course of meditation when the Legal Department of International Chamber of Commerce, Hebei Branch asked Respondent to pay the debt owed to Petitioner, Respondent made a written reply on April 8, 2002, which did not deny the acceptance of the shipments from Petitioner. Therefore, Petitioner hereby claims that since Petitioner had completed the loading of shipments and had mailed the original Bill of Lading to Respondent, Petitioner had fulfilled its obligations under the Contract. Therefore the Respondent was obliged to make full payment to Petitioner within sixty (60) days after receiving each shipment.
Respondent did not raise any opposition or disagreement to the requests and statement of facts made by Petitioner in connection with this case.
1. Petitioner and Respondent have agreed in Section 5 of the Contract in question: "Party A and Party B shall cooperate in good faith. In the event of any dispute in the course of trade, both parties shall settle through (a) negotiation and consultation; (b) arbitration by arbitral authorities in the People's Republic of China", After the execution of the Contract, a dispute arose between the parties; and during the negotiation ensued, Attorney SUN, Baoguo of the Legal Department of International Chamber of Commerce, Hebei Branch, wrote to Respondent on behalf of Petitioner on April 4,2002, stating that "The dispute can be settled with good faith by the following two methods: A. both parties may make compromises and reach an effective Settlement Agreement,...; B. according to the arbitration clause in the Contract, the dispute may be arbitrated by the China International Economic and Trade Arbitration Commission", Respondent responded to Attorney SUN, Baoguo on April 8,2002, stating that: "...I am in receipt of your fax. As to this dispute, I have no desire to prolong it, instead I plan to settle it in the following way; 1) list the losses suffered on our side...; 2) accept the suggestion made by Attorney SUN that we continue to negotiate, if the negotiation fails, turn the matter to lawyers." Based on the above, it is clear that both parties have reached an agreement which clearly states the intent on both to request arbitration, the subject matter to be arbitrated and the arbitration body to be chosen for such proceeding. Therefore, it is in accordance with Section 16 of the Arbitration Law of the People’s Republic of China, which provides "An arbitration agreement shall have the following contents: (1) an expressed intent to request arbitration; (2) items for arbitration; and (3) the chosen arbitration commission", therefore it constitutes a complete arbitration agreement and CIETAC, which was lawfully chosen by both parties to settle the dispute, shall form an arbitral tribunal to conduct hearing and provide award on the case at bar.
2. Petitioner claims that Respondent failed to pay Petitioner USD$64,957.72 for business transactions conducted during the end of 1998 to the end of 1999, and provided certain evidences including the Contract in question and earlier correspondences between the two parties and the letter sent by the Legal Department of China International Chamber of Commerce, Hebei Branch for the purpose of requesting payment. After reviewing the Contract submitted, this tribunal noted in the Contract tire following clause:
"Up to the end of 1999, Party B ("Petitioner of this Arbitration - note by this tribunal") had been conducting business with Party A ("Respondent of this Arbitration - note by this tribunal"), and had owed Party A payments in the amount of approximately $60,000. In order to secure its cash flow and provide necessary cash supply for its future manufacturing, Party B promises that the outstanding payments shall be fully paid to Party A via installments during the period from February to July 2000."
This tribunal also noted that Respondent did not raise any opposition to the claim of debt by Petitioner in its exchange of correspondence during the entire course of negotiation as well as during the proceeding of this arbitration. Based on the above, this tribunal accepts as true the statement made by Petitioner of Respondent owning Petitioner shipment payments in the amount of $64,957.72 from the end of 1998 to the end of 1999.
3.Petitioner claims that after execution of the Contract, Petitioner continued to ship nine (9) shipments of toys, with an invoice amount of USD $182,732.32, between February 2000 to November 2000 to DJ TOYS, Inc. at the request of Respondent, Petitioner further provided correspondences with Respondent, Bills of Lading, Customs Registration Forms and Exchange Certificates of Export Commodity to evidence its fulfillment of all obligations under the Contract, It is this tribunal’s view that Petitioner has provided adequate evidence to prove that Petitioner did ship nine (9) shipments to the recipient designated by Respondent during the period of February 2002 to July 2002. It is also noted by this tribunal that Respondent did not raise any opposition to Petitioner’s claim of Respondent’s receiving the nine (9) shipments during the course of negotiation and the proceeding of the arbitration, despite of the fact that Respondent complained about the delay of shipment, defect in quality and damage caused to Respondent thereof in its correspondence with Petitioner. Given the fact that Respondent did not submit any formal answer or counterclaims during the proceeding of this arbitration, neither did Respondent provide any evidence therefor, this tribunal will not make examination or award on those claims. Based on existing written material, this tribunal determines that by making nine (9) shipments to the recipient designated by Respondent, Petitioner had completed delivery of such shipments to Respondent. Since Petitioner had fulfilled its obligation under the Contract, Respondent shall be obliged to make payments to Petitioner for the nine (9) shipments as provided in the Contract with a total of USD $182,372.32.
4. Petitioner acknowledges that after execution of the Contract, Respondent had made eight payments to Petitioner with a total of USD $110,605.52, for which Petitioner also provided evidence. This tribunal hereby determines that Petitioner’s statement of the above payments made by Respondent has been established to be true.
Respondent was obliged to pay Petitioner a total amount of USD $247,690.04, out of which the Respondent had paid USD $110,605.52. Taking into consideration of the discount in the amount of USD $1,720 agreed by Petitioner, Respondent still owes Petitioner USD$ 135,364.52.
5. Based on foregoing, this tribunal supports Petitioner’s request for an outstanding debt in the amount of USD$ 135,364.52 to be paid by Respondent. This tribunal also ¿supports Petitioner’s reasonable request for interest at the rate of 5.95% per annum starting from January 1,2001 to July 1,2003, after having the USD$ 135,364.52 converted into the currency of RMB at the rate of 100:826.47. Respondent did not raise opposition to this claim for interest hereof. This tribunal supports Petitioner’s claim for interest loss in the amount of RMB ¥166,133.94.
As to the request of Petitioner to have Respondent pay for the mediation fee of ¥2,500, this tribunal rejects this request for lack of evidence.
The Petitioner also requests to have Respondent pay for the legal fees and transportation expense in connection with this arbitration, which sum up to RMB ¥ 62,065.80. Pursuant to Section 59 of the Arbitration Rules "The arbitration tribunal has the power to rule in the arbitral award that the losing party shall pay the winning party as compensation a portion of the expenses reasonably incurred by the winning party in dealing with the case. The amount of such compensation shall not in any case exceed 10% of the total amount awarded to the winning party", this tribunal supports the request of Petitioner hereof.
6. The arbitration fee shall be solely borne by Respondent.
1. Respondent shall pay Petitioner the outstanding payment in the amount of USD$135,364.52 and the incurred interest of this debt converted into RMB at the exchange rate of 100:826.47 compounded at the annual rate of 5.94% for the period of January 1, 2001 to July 1,2003, which totals to the amount of RMB¥ 166,133.94;
2. Respondent shall pay Petitioner legal fees and transportation expenses in the amount of RMB ¥62,065.80;
3. The request of Petitioner for reimbursement by Respondent for its mediation fee in the amount of RMB¥2,500 is rejected;
4. Respondent shall solely bear the arbitration fee in the amount of RMB ¥54,217. Given the fact that Petitioner has paid in full the arbitration fee to CIETAC, Respondent shall reimburse Petitioner RMB¥54,217 for the prepaid arbitration fee.
5. The above payments payable by Respondent to Petitioner shall be made within thirty (30) days after the issuance of this arbitral award.
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