Article

Facts: The Former Agriculture Cooperative Central Commission was established on Aug. 15, 1961. However, on Jul. 1, 2000, the New Agriculture Cooperative Central Commission was set up, and it inherit the Former Agriculture Cooperative Central Commission’s rights and obligations. On Aug. 22, 2006, the New Agriculture Cooperative Central Commission sued the defendant to pay the overdue interests under #210, #212#9178, #9181, #3047, #4079, #0124, #9161, #9162 L/C. On Mar. 1, 2012, the New Agriculture Cooperative Central Commission experienced a spin-off, the plaintiff was established. The plaintiff inherited the rights and obligations on L/C from the New Agriculture Cooperative Central Commission.

Oct. 8, 1997 and Oct. 31, 1997, Sichuan Mount Emei Import and Export Corp. signed No. SH971030 and No. SH971032 Purchase Agreement with Xinhu Trading Company, paid by L/C. Based on the 5 agreements, the defendant issued #3047, #210, #212, #9178, #9181 L/C, the expiry date for the payment was between the end of 1997 and the beginning of 1998. For the #210 and #212 L/C, the plaintiff presented origin documents to prove it had negotiated these 2 L/Cs while for the #3047, #9178, #9181 L/C the plaintiff presented the hard copy documents.

Between Sep. and Oct., 1997, Sichuan Euro-Asian Economy And Trade Corporation signed 4 purchase agreements with Xinhu Trading Company. Based on the 4 agreements, the defendant issued #0124, #4079, #9161 and #9162 L/C, the expiry date for the payment was between the end of 1997 and the beginning of 1998. For all these L/Cs, the plaintiff presented the hard copies of document to show it had negotiated the L/Cs. But #4079, #0124, #9162, it showed the Xinhu Trading Company received money from NEGO.

On Apr. 16, 1998, based on Sichuan Mount Emei Import and Export Corp.’s pre-litigation preservation application, the court issued a preliminary injunction to stop the defendant to pay the money under the L/Cs that the defendant had issued for Sichuan Mount Emei Import and Export Corp. That injunction expired on Sep. 24, 1998.

On Nov. 18, 1998, based on Sichuan Euro-Asian Economy and Trade Corporation’s pre-litigation preservation application, Sichuan Higher People’s Court issued a preliminary injunction to stop the payment under #0124, ##4079, #9161 and #9162 for US$ 9,867,591.83. On the same day, based on Sichuan Mount Emei Import and Export Corp.’s pre-litigation preservation application, Sichuan Higher People’s Court issued a preliminary injunction to stop the payment under #3047, #212, #9181, #9178 and #210 for US$ 8,474,322.59.

On Dec. 4, 1998, Sichuan Mount Emei Import and Export Corp. and Sichuan Euro-Asian Economy and Trade Corporation, together, sued Xinhu Trading Company was fraud in L/C.

And on Sep. 28, 2004, the Supreme Court affirmed the plaintiff was entitled to get paid under the #210 and #212 L/C.

On Dec. 14, 2004, the Sichuan Higher People’s Court approved Sichuan Euro-Asian Economy And Trade Corporation withdrew its claim.

Legal Analysis:

Legal Issues:

  1. Was the plaintiff suitable party?
  2. Was the Plaintiff’s claim for the interest of the L/C beyond the statute of limitations?
  3. Was the Plaintiff a negotiating bank?

Legal Rules:

Art. 193, Notice of the Supreme People's Court on Issuing the Opinions on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People's Republic of China (For Trial Implementation): When the applicable law is a foreign law, the Court shall affirm when the law is : 1. is submitted by parties; 2. is provided by a central office that has a Judicial Assistance Agreement with China; 3. is provided by Embassy of China to that certain country; 4. is provided by Consulate of that country in China; 5. is provided by the Chinese or foreign expert. If the court still cannot affirm by using those 5 ways, mentioned before, Chinese law shall be applied.

Art.135, General Principles of the Civil Law of the People’s Republic of China, except as otherwise stipulated by law, the limitation of action regarding applications to a people ‘s court for protection of civil rights shall be two years.

Art.10(b)(II),UCP 500, Negotiation means the giving of value for Draft(s) and/or documents by the bank authorized to negotiate. Mere examination of the documents without giving of value does not constitute a negotiation.

Disposition: The Court affirmed the plaintiff is suitable, and convicted the defendant to pay the plaintiff the interest of U.S.$155,774.4561 under the No. 220LC9710212 L/C and pay the plaintiff the interest of U.S.$84,340.06232 under the No. 220LC9710210 L/C, and pay the plaintiff the interest of U.S.$80,649.05807 under the No. 220LC9710210 L/C.

Holding & Rationale:

  1. According to the Art. 193, Notice of the Supreme People's Court on Issuing the Opinions on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People's Republic of China (For Trial Implementation), the plaintiff submitted a legal opinion from Dae Shik Kwon and Won Seok Choi, (both Kwon and Choi are Korean attorneys). Attached to the legal opinion, the plaintiff also summited Korean Agriculture Cooperative law, and Korean Commercial Law. According to those Korean laws, Nonghyup Bank legally inherit the New Agriculture Cooperative Central Commission’s rights and assets on L/C. Since the New Agriculture Cooperative Central Commission inherit its rights and obligations from the Former Agriculture Cooperative Central Commission. Thus, Nonghyup Bank is the suitable plaintiff.

  1. Therefore, the rights and liabilities on the relevant L/Cs between the plaintiff and the defendant remained uncertain until the Supreme Court made a final judgement on Sep. 28, 2004, and Sichuan Higher People’s Court approved Sichuan Euro-Asian Economy and Trade Corporation withdrawing its claimant.

    Thus, the statute of limitations of the claim for the interests under the relevant L/C begins on Sep. 29, 2004 and Dec. 15, 2004. Since the plaintiff filed the suit on Aug. 22, 2006, the plaintiff’s claim was within the 2-year statute of limitations.

  1. The 9 relevant L/Cs are Freely Negotiable L/C. Therefore, any bank can be a negotiating bank. However, the plaintiff shall prove it paid the relevant consideration to become a negotiating bank.

    For the #210, #212#9178, #9181 L/C, the Supreme Court only affirmed the plaintiff was the negotiating bank under #210, #212.

    For the #3047, #4079, #0124, #9161, #9162 L/C, the evidences that the plaintiff provided were hard copies, the plaintiff never present the original ones, neither did it explain the reason.

    Further, except for the #3047 L/C, the plaintiff only showed they paid the money to Jin Qinggao’s personal bank account. Even though the plaintiff claimed Jin was the legal representative of the beneficiary, it failed to show Jin had the right to collect the money. And the evidence for #3047, #4079, #0124, #9162 L/C showed it was NEGO that paid the beneficiary rather than the plaintiff.

    Therefore, the plaintiff was not the negotiating bank for #9178, #9181, #3047, #4079, #0124, #9161, #9162 L/C.

    In sum, the defendant shall pay the plaintiff the interest of #210 L/C (max US$ 155,774.4561) and #212 L/C (max US$ 84,340.06232).
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