Thursday, 24 April 2014

Greece safe harbor for CIETAC awards

In yet another 2012 decision, the Thessaloniki 1st Instance Court granted enforceability to a Chinese arbitral award rendered by the China International Economic and Trade Arbitration Commission (CIETAC). This is the first reported decision on the recognition and enforcement of a Chinese arbitral award in Greece [Case Nr. 22340/2012, Business & Company Law 2012, p. 1184 et seq.]. 

The facts: The parties concluded an international sales agreement in 2008. It was agreed that the Chinese company would sell pistachios to the Greek company. Pursuant to Art. 14 of the contract, the parties decided to submit any dispute before the CIETAC. The products were sent from Qingdao, Shandong, China, to Thessaloniki, Greece; however, the buyer did not proceed to any payment. Upon that the seller initiated arbitration proceedings in accordance with the clause of the contract. The Chinese company sought damages consisting of: 71.089,20 $ for the unpaid price; 52.772,67 $ for damages; 4.669,41 $ for interests; 298 $ for bank expenses; 40.000 RMB for lawyer’s fees, and 44.536 RMB for the costs of the proceedings. The CIETAC summoned the buyer with registered letter the following: The documents instituting the arbitration proceedings; the appointment of the panel, and the date of the hearing. All documents above were received by the buyer. The CIETAC applied the CISG and Incoterms 2000 for resolving the dispute. Mid November 2009 the award was rendered in default of the buyer, who was notified of the award in a similar fashion 5 days later. 

The ruling: The Chinese company requested that the arbitral award be recognized and enforced pursuant to the 1958 New York Convention on the recognition and enforcement of arbitral awards. Both countries are signatories of the Convention. Art. 26 of the 1994 bilateral treaty on judicial assistance in civil and criminal matters refers to the NYC with respect to arbitral awards rendered in the territory of the countries.

The Greek company challenged the award on the basis of the following grounds: 

a)      No arbitration agreement was concluded between the parties.

b)    Notice by post was not proper, so as to be informed on the particulars of the proceedings.

c)    No Greek translation of the documents served was attached, and the time available was not sufficient for the Greek company to arrange for its defense.

d)    The recognition and enforcement of the award violated domestic public policy rules.

The Thessaloniki 1st Instance court answered as follows:

a) It has been proven by the contract signed between the parties that an arbitration clause in favor of CIETAC was stipulated under Art. 14.

b) Service by courier has actually reached the Greek company’s premises, as evidenced by the acknowledgements of receipt by the buyer. The 1965 Hague Service Convention is not applicable in the course of arbitration proceedings. Service of process issues are regulated by the New York Convention, in conjunction with Article 68 of CIETAC Arbitration Rules.

c) For the same reason the court dismissed the language ground raised by the Greek company.

d) No violation of Greek public policy has been proven; fair hearing was granted, and due notice has been given to the buyer, who chose not to participate in the proceedings.

Comments: There are two key points in this decision. 

a.      The first is evident: The court clearly and thoroughly rejected any chance of applying the Hague Service Convention. It is the first time that a Greek court explicitly dismisses the argument. At the same time, I couldn’t find more than one reported decision globally, dealing with the same matter [Bezirksgericht Zürich, XXIX Y.B. Com. Arb. 819 (2004), referred by Wolff (ed.), New York Convention – Commentary [2012], p. 294, note 357]. If there are more, comments are more than welcome.

b.      The second point has not been considered by the court, most probably because it was not raised by the Greek company. In particular, the CIETAC award rendered “damages” in the altitude of 52.772,67 $, i.e. nearly 75 % of the actual claim [71.089,20 $]. As reported in a previous posting, a penalty for non-performance is not per se contrary to Greek public policy; still, Greek courts are obliged to estimate whether the amount is to be considered as excessive according to domestic public policy standards. This has been decided back in 1999 by the Supreme Court’s full bench [Supreme Court (Full Bench) 17/1999], and it is still the predominant rule with respect to foreign punitive damages. Failure to proceed to the test leads to reversal [Supreme Court 1260/2002]. 

    In conclusion, the decision is a landmark case for future attempts to enforce Chinese awards in Greece. Bringing forward the Service Convention will not help Greek debtors. However, the latter might have a chance to mitigate the loss, if they invoke the public policy ground for refusal with respect to the excessive nature of damages rendered by the foreign arbitral tribunal.