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The Higher Court then held that: (1) based on article 243 of the 1991 Civil Procedure Law of the PRC, this court had jurisdiction over this case, and (2) the Hong Kong Branch’s challenge of jurisdiction over this case was not established. This court rejected the challenge in accordance with article 38 of the 1991 Civil Procedure Law of the PRC.
IV.A.2. A Brief Analysis
This case involves two issues: one is how to classify legal relationship and the other is how to ascertain grounds for jurisdiction.
As to the relationship of this case, the classification of the Higher Court is correct. It is generally accepted that there are three pieces of contractual relationship during the operation of documentary credit: (1) contract of sales between buyer and seller, (2) agreement of application and warranty between buyer (applicant) and the issuing bank, and (3) relationship of credit between the issuing bank and the beneficiary. Every contract is independent and controls the respective relationships of the parties. Therefore, there was relationship of contract of credit between Hong Kong Branch as the issuing bank and Dockyard as the beneficiary.
As to the jurisdiction grounds of this case, the holding of the Higher Court was lawful but unreasonable. Facing any case involved foreign matters, the court not only takes convenience of jurisdiction into account but also pays respect to enforcement of the judgment. As far as the connection elements, e.g., the parties, the subject matter, and the legal facts, those of Hong Kong exceed those of Mainland China in both quantity and quality. Consequently, it is more reasonable and convenient that this case should have been within the jurisdiction of the court of Hong Kong.
IV.B. Hong Kong Ruinan Ltd. v. Shanxi New and Big Steel Co., Ltd.
IV.B.1. A Brief Introduction
Appellant (plaintiff of the origin trial), Hong Kong Ruinan Ltd. (hereinafter referred to as “Ruinan Ltd.”), took exception to the civil judgment ((2000)-Jing-Minyi-Chuzi-No.12) rendered by the Shanxi Higher People’s Court on a dispute over obligation, against appellee (defendant of the origin trial), Shanxi New and Big Steel Co. Ltd. (hereinafter referred to as “Steel Co.”), and lodged an appeal with the Supreme People’s Court.
In the first trial, the Shanxi Higher People’s Court held that this case should be in the jurisdiction of arbitration in accordance with the arbitration clause of the loan agreement. On this ground, this court decided to reject plaintiff’s litigation.
The appellant alleged: (1) article 1 of the trial judgment was wrong and should be annulled by the court; (2). that the trial court rejected the appellant’s litigation, depriving the appellant of its relevant procedural rights in fact; and (3) the agreement of payment in this case could be an independent document of obligation, and the case should apply to “the special rules on civil procedure involved foreign elements” of the 1991 Civil Procedure Law of the PRC.
The appellee argued: (1) that the trial court had no jurisdiction over this dispute was the appellee’s point of view since the original trial; (2) the agreement of payment on which the appellant lodged the litigation was void; (3) the statements of the appellant conflicted with each other; and (4) the confirmation of legal facts and the application of law were all correct in the original judgment.
After the second trial, the Supreme Court held that: this case was a dispute over obligation. Although Steel Co. claimed that the agreement of payment presented by Ruinan Co. was bogus and void, it had no evidence to prove it. Therefore, this court did not back up Steel Co.’s claim. The agreement of payment stipulated that: if the parties produced any dispute during the enforcement of the agreement, any party had the right to bring litigation in a Chinese court. According to this stipulation, the parties expressly excluded the arbitration approach to resolve a dispute over performance of agreement of payment. On the other hand, the trial court, Shanxi Higher People’s Court, was the court of the place of domicile of the defendant, Steel Co., and it was therefore required to take up this case. Based on article 22(2), 38 and 141 of the 1991 Civil Procedure Law, this court adjudged as follows: (1) it reversed the original civil judgment ((2000)-Jing-Minyi-Chuzi-No.12); and (2) this case had to be tried by the Shanxi Higher People’s Court.
IV.B.2. A Brief Analysis
The key issue of this case is how to deal with conflicts between clauses designating jurisdiction of court and clauses designating jurisdiction by arbitration.
In the original trial, the Shanxi Higher People’s Court held that the arbitration clause was executory and that the case must therefore be in the jurisdiction of arbitration. The Supreme People’s Court, on the other hand, held that the arbitration clause was non-executory and that the court could take up the case in the second trial. Why did these different judgments occur?
It is generally accepted that if the arbitration clause is concluded by the parties lawfully, it may create the effect of excluding any jurisdiction over the relevant dispute by court. Besides which, the arbitration clause is independent, and it remains available during arbitration limitation unless a later express agreement abolishes it. As to this case, the stipulation in the agreement of payment which not only included jurisdiction over any dispute and interpretation of the loan but also included the method of dispute resolution, i.e. litigation, excluded the probability that the dispute over performance of agreement of payment could be resolved by way of arbitration. Therefore, the judgment of the Supreme People’s Court was correct.
IV.C. Jiangsu Light Industry Product Import & Export (Group) Co. Ltd. v. Jiangsu International Round-the-World Shipping Inc. and Brilliant International Corp. U.S.A
IV.C.a. A Brief Introduction
The plaintiff, Jiangsu Light Industry Product Import & Export (Group) Co. Ltd. (hereinafter referred to as “Jiangsu Co.”) brought a case before the Wuhan Maritime Court of China (hereinafter referred to as “Maritime Court”), on July 30, 1999, regarding a dispute over a contract of cargo shipping at sea with the defendants, Jiangsu International Round-the-World Shipping Inc. (Shipping Inc.) and Brilliant International Corp. U.S.A (hereinafter referred to as “Brilliant Corp.”).
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