Article

Facts:

On Nov. 30, 2015, the Appellee I sued the Appellee II for import and export agency contract dispute to the Higher People’s Court of Tianjin, demanding that the Appellee II should pay RMB 225,409,184.58 and corresponding interest, and requested the Appellant to bear joint liability with the Appellee II. The case was still in progress.

On Dec.5, 2016, the Appellee brought an action against the Appellee I, requesting that the Court banned the Appellee I from paying RMB 225,409,184.58 and corresponding interest under the L/G.

Legal Analysis:

Legal Issue(s): Was the L/G dispute independent from the underlying contract dispute?

Legal Rule(s):

Item 2, Para. 1, Art. 170,Civil Procedure Law of the People’s Republic of China:

If the facts were wrongly ascertained or the application of law was incorrect in the original judgment, the said judgment shall be amended according to the law.

Art.171, Civil Procedure Law of the People’s Republic of China:

The people's court of second instance shall decide in the form of written orders all cases of appeal against the written orders made by the people's court of first instance.

Para. 2, Art. 21, Provisions of the Supreme People’s Court on Several Issues Concerning the Trialof Disputes over Independent Guarantees:

The People's Court of the domicile of the Issuer of the IndependentGuarantee, under which the payment is requested to be suspended, and/orof the defendant’s domicile, shall have jurisdiction over the IndependentGuarantee fraud dispute, unless the parties agree in writing that suchdispute should be submitted to jurisdiction of any other court or forarbitration. Any party’s claim for court jurisdiction or arbitration as aresult of application of the dispute resolution clause stipulated inunderlying transaction or the Independent Guarantee shall not besupported by the People’s Court.

Disposition – for each legal issue: The Court affirmed that L/G dispute was independent from the underlying contract dispute, so the People’s Court of first instance should hear the case.

Holding & Reasoning for each issue According to the Appellant’s claim and the evidence provided, the case was a L/G dispute. The L/G was independent from the underlying contract for the reason that once the L/G went into effect, the rights and obligations between the issuer and the beneficiary would be subject to the contents of the L/G instead of the underlying contract.

The L/G fraud litigation brought by the Appellant was independent from import and export agency contract litigation brought by the Appellee I in the Higher People’s Court of Tianjin. Those two lawsuits were different in cause of action, parties, claims, legal application, etc.

According to the Para. 2, Art. 21, Provisions of the Supreme People’s Court on Several Issues Concerning the Trialof Disputes over Independent Guarantees, as the domicile of the Appellant, the People’s Court of first instance had jurisdiction over the case.

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