From entanglement to breakthrough, from dilemma to triumph
----Analysis of typical case of property preservation before foreign-related arbitration
By Lawyer Enfu Zang of Liaoning Sincerus Law Firm
entanglement and dilemma (dispute background)
In 2016, Dalian Company A exported clothing to Spanish company S. The payment method is: 10% prepayment before wire transfer (T/T), and the remaining 90% of the payment is D/P. After Company A shipped the garments to the Spanish port of destination designated by Spanish company S, the Spanish company S was unable to pay for the goods due to shortage of funds, and the payment was about $160,000. The backlog of goods has been in the port of destination in Spain for more than three months. Company A is worried that the goods will be punishable confiscated by the customs for a long time in the destination port, and the money and goods will be at risk to be lost, Despite Company A prompting the Spanish company S to pay for the delivery many times, the Spanish company S did not responded positively. Although Company A holds the bill of lading, the cost of returning the goods is high, and the price of resale is low. If it is returned or resold, there would also be a heavy loss. In the process of communication, Company A learned that the Spanish company S company's capital chain was broken, and it also owed money to other ten suppliers in China, similar to the situation of Company A. In addition, the Spanish company S had an office in Nanjing. Spanish S company gave feedback that it had real estate in Nanjing and was ready to sell it out to deal with the debts owed in arrears. The parties have an arbitration clause in the contract for the sale of the goods involved, that was, the arbitration by the China International Economic and Trade Arbitration Commission.
Company A resorted to Lawyer Enfu Zang of Liaoning Sincerus Law Firm and asked him how to recover the money as soon as possible. The company had previously entrusted an Italian lawyer in a dispute with an Italian client to have filed a lawsuit in Italy and spent the case acceptance fee and attorney's fee. However, the relevant judgment of the case was not available for the execution due to the defendant had no property can be implemented according to the Italian lawyer's feedback. In the current dispute, although the Spanish company S mentioned that it had real estate in Nanjing and was ready to sell the property to pay off the debt, the following key points were still unclear: First, was there in Nanjing really the property of the Spanish company S? If so, was it purchased in the name of its Nanjing office? Or purchased in the name of the Spanish company S, or purchased in the name of a shareholder of the Spanish company S? Did the Nanjing office of the Spanish company S has an official registration, or was it an informal temporary office without a business registration? Was the sale price of the property in Nanjing enough to repay the money of 11 domestic suppliers? Or could we take measures to seal up the property before other suppliers? The core concerns of Company A were as following:
1. Whether to apply for arbitration depends on whether the enforcement of arbitration is certain, that is, is it sure that the payment will be recovered through arbitration?
2. If the property preservation of arbitration is carried out, can it be ensured that the effective property is seized?
legal analysis
1. Because the arbitration clause is included in the international trade contract involved in the case, the dispute shall be settled by applying to the China International Economic and Trade Arbitration Commission for arbitration.
2. From the facts introduced by Company A, the foreign Spanish company S is in a state of default, and Company A should have no problem in applying for arbitration to win the case. The key to recover the payment after the arbitration depends on whether the property preservation can be successfully carried out before or during the arbitration, that is to say whether the full executable property can be seized in the preservation.
3. The Arbitration Law of the People's Republic of China only stipulates the property preservation procedure in arbitration. There is no provision for property preservation before arbitration. The court used to not accept property preservation prior to arbitration before the implementation of the new civil law of P.R.C. It is gratifying that the newly revised Civil Procedure Law of the People's Republic of China, which came into effect on August 31, 2012, provides for property preservation before arbitration: its article 101 provides: when the interested parties are in urgent need of circumstances and if not apply for preservation immediately will cause irreparable damage to the legal rights and interests, the concerned party may apply for preservation measures before the lawsuit or application for arbitration to the people's court where the property to be preserved is located, the respondent's domicile of the case has jurisdiction. The applicant shall provide a guarantee. If no guarantee is provided, the application shall be rejected. After the people's court accepts the application, it must make a ruling within forty-eight hours; if it decides to take preservative measures, it shall immediately begin execution. If the applicant fails to file a lawsuit or apply for arbitration within 30 days after the people's court takes the preservation measures, the people's court shall cancel the preservation.
Article 272 stipulates that if a party applies for preservation, the foreign-related arbitration institution of the People's Republic of China shall submit the application of the party to the intermediate people's court at the place where the respondent resides or where the property is located.
4. Article 152 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China, (which was implemented on February 4, 2015) stipulates that: the People's Court shall be in accordance with article 100 and article 101 of the Civil Procedure Law to take pre-litigation preservation and litigation preservation measures, order the interested parties or the concerned parties to provide guarantees, and shall notify them in writing. If the interested party applies for pre-litigation preservation, it shall provide a guarantee. Where the application for pre-litigation property preservation is submitted, a guarantee equivalent to the amount of the request for preservation shall be provided at the same time; if the circumstances are special, the people's court may, at its discretion to decide the detail guarantee amount. If the application for pre-litigation behavior is submitted, the amount of the guarantee shall be determined by the people's court according to the specific circumstances of the case.
Based on the above-mentioned legal analysis and telephone consultation with the China International Economic and Trade Arbitration Commission (hereinafter referred to as CIETAC), Lawyer Enfu Zang had clarified the strategy to handle this dispute that before applying for arbitration, they could apply for the property preservation in the Nanjing Intermediate People's Court where the property is located, then apply to the CIETAC within 30 days after the preservation. The question now is: Does the foreign Spanish company S Nanjing have property? What is the property? Who is the owner of the property?
The detailed actual process
1. After investigation, the Nanjing office of Spain S Company has offfical registration, and the exact name of its official registration is “Spain S Company Nanjing Office”. The Spanish company S has two houses in Nanjing. One house is registered under the name of “S company” and the other house is registered under the name “Spanish S company”.
2. Based on the above-mentioned information, Lawyer Enfu Zang, as the agent formally entrusted by Company A formally applied to the Nanjing Intermediate People's Court on December 19, 2016 for property preservation of the Spanish S company's house in Nanjing. The application for preservation amount is RMB1.1 million yuan. The legal representative of the applicant company A provided his own house with a value of more than RMB1.6 million yuan located in Dalian as a security guarantee, and provided the relative property ownership right certificate, purchase contract, purchase invoice, account book, marriage certificate, and the identity card of both husband and wife. A letter of guarantee was signed by both the legal representative and his wife.
3. In view of the sufficient amount of guarantees provided by the legal representative of Company A, the Nanjing Intermediate People's Court accepted the case on the day the applicant filed the application for preservation, and made a civil ruling on property preservation. The property preservation of the building with a building area of 168.22 square meters was carried out, and it was the first seal on the property.
4. On December 28, 2017, Lawyer Enfu Zang represented A Company applied for arbitration to CIETAC, requesting Spanish company S to pay the purchase price of 153,220.24 USD and the interest from August 25, 2016 to the date of payment of the payment. And bear the costs of arbitration, property preservation before arbitration, etc.
5. After the Spanish company S learned that its house in Nanjing was preserved by Company A, through repeated negotiations, the two parties reached a settlement agreement: If the Spanish company S can pay the principal amount of USD153,220.24 to Company A before January 31, 2017, Company A, as a concession, is willing to abandon the arbitration request for interest, arbitration fees and arbitration preservation fees, and apply for revocation of the arbitration application to release the property preservation.
The final result
1.On January 25, 2017, the Spanish company S remitted the payment of the principal amount USD153,220.24 to the company A and notified Company A of the remittance by e-mail, requesting Company A to apply for the court to lift the property preservation of its house as soon as possible after receiving the payment.
2 .After Company A confirmed that it had received the payment of the principal amount of USD153,220.24 from the Spanish company S, Lawyer Enfu Zang appointed by Agent A drafted the “Application for Withdrawal of Arbitration and Cancellation of Arbitration claim” and mailed to CIETAC after the application being sealed by Company A on February 3, 2017. Lawyer Enfu Zang and then wrote the "Application for cancelation of Pre-arbitration Property Preservation" and mailed it to the Nanjing Intermediate People's Court after the application being confirmed by the company A. After that, the Nanjing Intermediate People's Court made a ruling to cancel the seal on the house of Company S and The house of the legal representative of Company A which was used for guarantee. So far, the case was successfully closed.
Lawyer's advice
1. The key points to property preservation before foreign-related arbitration is to accurately investigate and acquire the information of the foreign party’s property in China, and to ensure that the application documents are accurately prepared according to the applicable laws and regulations, and to provide sufficient guaranty assets to ensure that the judge can quickly file a case and take precautions measures as soon as possible.
2. In the case that foreign party has arrears from a number of domestic suppliers, although it has property in the China, the property may not enough to pay off all the debt. In this case, the quicker, the better, how to take precautionary measures before other creditors is crucial to safeguard the interests of the client.
3. The Chinese name registered on the property ownership to be applied for preservation shall be consistent with the name of the respondent in the application for pre-arbitration preservation property, and there shall be no discrepancies, otherwise the progress of the case will be affected. In this case, as for the two houses of the Spanish company S in Nanjing, one house is registered under the name of “S company”, and the other house is registered under the name “Spanish S company”. In order to resolve the inconsistency of the debtor's name Chinese translation, the lawyer's method is to directly list the name of the foreign party in its foreign language in the respondent's application, and then add the brackets to indicate that the Chinese translation, so that the foreign language translation inconsistency which may hinder the preservation of its property is properly solved.
In summary, the case has properly settled the trade disputes from the entangled state of the client's concerns about the uncertainty of arbitration and its enforcement, and finally recovered the money for the client in a timely way. To achieve this result, the successful pre-arbitration property preservation played a key role.