English Court Reviews The 'Fraud Unravels All' Principle In Enforcement Of CIETAC Arbitration Award, April 2017

In Sinocore International Co. Ltd. v RBRG Trading (UK) Limited1, HFW, acting for Sinocore International Co. Ltd (the Seller), successfully argued that a foreign arbitral award should be enforceable in England notwithstanding the allegations made by RBRG Trading (UK) Limited (the Buyer) that the relevant transaction had been 'tainted' by fraud and was therefore unenforceable on the grounds of public policy.

The case reinforces the important principle that the public interest in the finality of arbitration awards, particularly an international award as in the present case determined as a matter of a foreign law "clearly and distinctly outweighs any broad objection on the grounds that the transaction was 'tainted' by fraud".

Background

The Seller agreed to sell 1450m/t of cold rolled steel coils to the Buyer (the Sale Contract) at a price of US$870 m/t. Pursuant to the Sale Contract, the Buyer was to open an irrevocable letter of credit (on UCP600 basis) for the purchase price.

A letter of credit was issued by Rabobank Nederland (Rabobank) on 22 April 2010, which stipulated the latest date of shipment as 31 July 2010 (the Letter of Credit). However, on 12 June 2010 and, crucially, without the agreement of the Buyer, the Seller then instructed Rabobank to issue an amendment to the Letter of Credit, amending the shipment period to read "20 to 30 July 2010".

The coils were loaded on 5 and 6 July 2010 and bills of lading were issued showing the same dates. On 7 July 2010 the vessel departed the load port and the Seller sent an advice to the Buyer, recording that the bills of lading were dated 6 July 2010.

On 22 July 2010, the Seller sought payment from Rabobank under the revised Letter of Credit, by presenting bills of lading bearing the dates 20 and 21 July 2010. As shipment had taken place on 5 and 6 July 2010, it is plain, and Sinocore accepts, that those bills were incorrectly dated so that documents could be presented to Rabobank which, on their face, evidenced shipment within the period required by the purported amendment to the Letter of Credit referred to above.

On 26 July 2010, the Buyer successfully petitioned the Court of Amsterdam to grant an injunction restraining Rabobank from making payment to the Seller. The Seller then terminated the Sale Contract and sold the coils to another buyer at a price below that agreed with the Buyer.

The Chinese arbitration proceedings

In accordance with the Sale Contract's law and jurisdiction clause...