Business law

On May 17, 2013, Nanjing Changli Bees Product Co., Ltd. (hereinafter referred to as “Changli Bees”) as seller and Svensk Honungsf?r?dling AB (hereinafter referred to as “Svensk”) as buyer signed a honey sales contract numbered NJRS13001 in English language, with its dispute resolution clause stating: "in case of disputes governed by Swedish law and that disputes should be settled by Expedited Arbitration in Sweden." In addition, the contract stipulated corresponding quality standards: “The other parameters for honey comply with Europe's 2001/112/EC of 20 December 2001, and there is no American foulbrood, nosema species, varroasis, etc.”

During the performance of the contract, a dispute arose between the parties over the quality of honey. On February 23, 2015, Svensk applied for arbitration to the Arbitration Institute of the Stockholm Chamber of Commerce in Sweden regarding the contract involved in this case, against Changli Bees as respondent, claiming compensation from Changli Bees. On December 18, 2015, the Arbitration Institute of the Stockholm Chamber of Commerce made the arbitral award (SCCF2015/023), dismissing the application of Svensk, on the grounds of its lack of jurisdiction.

On March 22, 2016, Svensk applied again for ad hoc arbitration in Sweden regarding the contract involved in this case against Changli Bees as the respondent. During the arbitral examination period, the ad hoc arbitration tribunal and the Stockholm District Court mailed corresponding materials to Changli Bees and its legal representative, but as of May 4, 2017, the ad hoc arbitration tribunal had received no statements from Changli Bees except its two e-mails stating that the contract contained no arbitration clause, and was not governed by Swedish laws. The ad hoc arbitration tribunal later received a written opinion submitted by counsel for Changli Bees on challenging the jurisdiction of the arbitration tribunal and delaying the submission of the statement of defense. On March 5 and 6, 2018, the ad hoc arbitration tribunal arranged for the parties to be heard. During the hearing, counsel for Changli Bees ceased to challenge the jurisdiction of the arbitration tribunal, and Zhao Shangsheng, the legal representative of Changli Bees, did not raise the challenge either. On June 9, 2018, the ad hoc arbitration tribunal, in accordance with the Swedish Arbitration Act, made an arbitral award (1) that Changli Bees was in breach of the contract, and should pay Svensk 286,230 U.S. dollars with interest; and (2) that Changli Bees should pay Svensk 781,614 kr and 1,021,718.45 Hong Kong dollars in compensation.

On November 22, 2018, Svensk applied to the Intermediate People's Court of Nanjing City, Jiangsu Province for recognition and enforcement of the above arbitral award.

During the examination by the court, both parties stated that the arbitration clause of the contract should be interpreted in accordance with Swedish laws. Svensk stated that the dispute resolution clause meant in Chinese: "Disputes, if any, shall be governed by Swedish laws and resolved by expedited arbitration in Sweden." Changli Bees stated that the above clause meant in Chinese: “For disputes governed by Swedish laws, they shall be resolved by expedited arbitration in Sweden.”

Judgment

The Intermediate People's Court of Nanjing, Jiangsu Province entered a Civil Ruling (No. 8 [2018], Foreign Decision Recognition Assistance, 01, Jiangsu) on July 15, 2019, recognizing and enforcing the arbitral award which the ad hoc arbitration tribunal composed of Peter Thorp, Sture Larsson, and Nils Eliasson made on June 9, 2018, with respect to the contract (NJRS13001) between Svensk and Changli Bees.

Judgment's Reasoning

The effective court judgment held the following: Based on the ascertained and determined facts, the arbitral award involved in this case made by the ad hoc arbitration tribunal composed of Peter Thorp, Sture Larsson, and Nils Eliasson neither fell under the circumstances under which recognition and enforcement should be refused as specified in Article 5 (1) (b), (c), and (d) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, nor violated the reservations formulated by China when it acceded to the Convention, nor fell under circumstances under which disputes could not be resolved by arbitration because of a violation of China's public policy or a controversy, and the award should thus be recognized and enforced.

Whether the proceedings resulting in the award in the ad hoc arbitration were inconsistent with the arbitration agreement. The dispute was a matter of the parties' understanding of the dispute resolution clause of the contract: “in case of disputes governed by Swedish law and that disputes should be settled by Expedited Arbitration in Sweden.” Based on the parties' expressions of the Chinese meaning of the clause, they, though without objection to resolution of disputes by expedited arbitration in Sweden, disputed over whether the expedited arbitration might be conducted by means of ad hoc arbitration. Expedited arbitration is more efficient, easier, and more economical than ordinary arbitration, and its essence is to simplify arbitration proceedings, shorten arbitration time, and reduce arbitration fees, among others, thereby allowing the disputes between the parties to be resolved in a more efficient and economical manner. Compared with permanent arbitration institutions, ad hoc arbitration tribunals also have the characteristics of efficiency, easiness, and economy. Specifically in this case, the parties agreed to resolve their disputes by expedited arbitration, which however did not preclude ad hoc arbitration, and the parties did not challenge the ad hoc arbitration during arbitration hearings. Therefore, the ad hoc arbitration tribunal's making an award was in line with the agreement of both parties. Resolution of the dispute involved in this case by the ad hoc arbitration tribunal should be deemed not to be inconsistent with the arbitration agreement.