Views: 96 Author: Carly Zhou Publish Time: 2025-08-29 Origin: Site
Counsel Carly Zhou was entrusted by the Respondent won in international arbitration, reducing the Respondent’s payment obligation by millions. The arbitral language is English. Thedisputed case was arbitrated by CIETAC, which settled an Exclusive Agency Agreement dispute between one company incorporated in Middle East country and one Chinese auto electronic company. Finally, the tribunal dismisses all the claims.
The Claimant firmly believed that they would fully win this arbitration . That’s why they submitted an application for property preservation to an intermediate people's court through CIETAC. During arbitration, we persuaded the arbitrator to prevent the Claimant from preservation successfully. The cash flow which kept the normal production and operation of the Respondent thereby was ensured. When the client entrusted the counsel from the Co-effort law firm, they only expect the second claim for the high interest would be rejected. But all the claims are dismissed. It is beyond the client’s expectation. Counsel of the Respondent applying international arbitration rules and professional skills in this case achieves the best result. Based on this, she is highly appreciated and trusted by the client.
The parties entered into the Exclusive Agency Agreement in August 2014. The contract stipulates that the Claimant is authorized promotion sales of the products manufactured by the Respondent in the Middle East country. The Respondent shall pay commissions. During the agreement, only one shipment was shipped, but the Consignee did not pick up the goods. The goods were actually confiscated and auctioned by the customs in the country, causing severe economic damage to the Respondent.
The Claimant and Company A which was affiliated with the Respondent concluded a Meeting Minutes. The Respondent’s existing shareholders overlapped partly with those in Company A. Nevertheless, the Meeting Minutes was signed and stamped by Company A, stipulating that the Claimant promotes sales of the products produced by the company and the Respondent shall pay the commissions.
Company A did not pay the commissions. The Claimant submitted an application to the CIETAC based on the Exclusive Agency Agreement signed in 2014, asserting that Company A was apparent agent and the Respondent is obliged to not only pay the commissions, interest, liquidated damages, arbitration fee and preservation fee but also ship the goods for the second time, as it says quality of the previous one was defective.
At hearing, both parties agreed that the applicable law shall be Chinese law.
The Claimant, on the basis of the submitted evidence, found that the letterheads were abbreviations of the Respondent’s name. And the trademark attached with the evidence was registered under the Respondent instead of Company A. Apart from that, the domain name used in the contact emails was redirected to the Respondent’s official website. One of the attendees in the Meeting Minutes was the General Manager of the Respondent and signed on the Meeting Minutes. The General Manager of the Respondent and the legal representative of Company A was the same person. One of the original shareholders of Company A which was incorporated in 2016 was the Respondent and it withdrew capital in 2022.
In summary, the Claimant asserted that the right appearance formed by the evidence was enough for it to believe there existed apparent agency between the Respondent and Company A, so the legal consequences shall be borne by the Respondent.
The Respondent held the view that due to the principle of Privity of Contract, the Respondent was improper party under arbitral claims. The Claimant constituted mistake of fact and law. The contract counterparty on which the commissions claimed were basedwas Company A instead of the Respondent. All the evidence submitted by the Claimant, which lacked relevance was generated in the transactions with Company A and was irrelevant to the Respondent which did not participate in the transactions. The Claimant intended to shift the obligation and liability to the Respondent.
The seller in the trading documents involving proforma invoices and commercial invoices which were submitted by the Claimant was Company A instead of the Respondent. The payment was received by Company A. The shipper on the bill of lading are Company A. So the beneficiary of all the transaction are Company A.The Claimant merely worked as an agent who promotes and sales the goods from Company A. The buyer was a third-party company in the Middle East. The Claimant had no rights to claim for shipment. The sales contracts were concluded by Company A, so pursuant to the principle of Privity of Contract, these contracts were not binding on the Respondent. It had no shipment obligation. The Respondent requested the arbitral tribunal to dismiss all the claims and stop taking preservation measures.
Tribunal further analyzed the relationship between two parties. Firstly, the Claimant submitted application for arbitration based on the Arbitration Clause in the Agency Agreement signed in 2014, but the seal of Company A was affixed to the evidence. Seal is an important form of expression of true intent for the company, so the transactions involved were not the Respondent’s business activity. The Claimant did not provide any evidence proving the transaction between the Respondent and itself. It is clear that Company A was the party to the disputed transactions, but it was not the party of the Exclusive Agency Agreement and the Arbitration clause. The dispute therebyarising from the “Meeting Minutes” fell out of the scope of the Arbitration clause.
Secondly, there existed no apparent agency. Pursuant to the Article 172 of the Chinese Civil Code about the apparent agency, for any act of agency continuously performed by a person without authority, beyond the scope of his or her authority or after his or her authority has expired, such act of agency is valid if the other party has reasons to believe that the person has authority. The critical evidence here included proforma invoices, commercial invoices, receipt of payment and bills of lading. The buyers, consignees and the shippers on the bills of lading were Company A instead of the Respondent, notwithstanding it was attached with the abbreviation and trademark of the Respondent. According to the seal affixed to the trading documents submitted by the Claimant itself, it should have known that Company A, as the counterparty to the transactions, was beneficiary and entity to pay the commissions.
Lastly, though the Respondent and Company A were affiliated, pursuant to Chinese Company Law, there existed no statutory circumstances to pierce the corporate veil. Especially when the Exclusive Agency Agreement was concluded in 2014, Company A, which was actually established in 2016, was not even incorporated. Company A was not the contractual party under the Exclusive Agency Agreement signed in 2014, so the Arbitration clause was not binding on Company A that was not even incorporated at that time.
The arbitral language is English not only during court hearing but also when drafting documents. According to the CIETAC Annual Reports, CIETAC arbitrated 5237 cases in 2023, among which there were 93 cases where the arbitral language was English or bilingual(English and Chinese). And it accepted 6013 cases in 2024, among which 106 cases applied English or bilingual language. This case is one of the cases in 2025 applying English as arbitral language.
The nature of arbitration is a type of contract in that both parties agree to settle the dispute by arbitration. Party Autonomy should be respected. China is the largest trade in goods manufactured by itself, especially goods in export, More and more Chinese company tend to be involved in international arbitration. If the arbitral language as agreed previously is English, the tribunal and both parties shall abide by it and shall not attempt to change it casually. During arbitration, the Claimant failed to change arbitral language from English to Chinese.
The Claimant’s burden of proof which lies with the one who makes the claims is crucial, it shall present evidence focusing on the request . The evidence ought to have relevance. Furthermore, the parties shall act in good faith, which means they shall not conceal the critical evidence. In present case, another Exclusive Agency Agreement was signed by the Claimant and Company A in 2019, where the Arbitration clause said that the dispute shall be settled in Shanghai court. However, the Claimant refused to submit it even though the Respondent requested it repeatedly to do so.
The Respondent predicted that the Claimant might constitute wrongful preservation if the arbitration claims were not supported by tribunal. The Respondent frequently informed the tribunal that the Claimant might be liable for infringement damages if the preservation was wrong. Especially at this point, the respondent would face extremely tough like cash flow if property was wrongly preserved. After the hearing, the counsel advised the case manager to persuade the arbitrator to stop preservation.
Though tremendous pressure was put on the entrusted Counsel of the Respondent, the outcome of the arbitration exceeds its expectations since tribunal dismissed all claims . The key to winning international arbitration is the preparation enough before and after hearing, especially in writing persuasive defense statements and closing arguments.
