Cases of Chinese Courts Applying the Principle of "Preferential Application of International Treaties" in International Trade Dispute Cases

Sources of Cases on "Preferential Application of International Treaties"

The Supreme People's Court of China has announced more than ten typical foreign - related civil and commercial cases applying international treaties. Among them, an international goods sales contract dispute case (Case No.: (2022) Jing 04 Min Chu 294) concluded by the Fourth Intermediate People's Court of Beijing on May 16, 2023, is worthy of study. This case is a typical example of implementing the legal principle of "preferential application of international treaties" before the promulgation and implementation of the "Interpretation of Fa Shi [2023] No. 15".

Cases of Chinese Courts Applying the Principle of "Preferential Application of International Treaties" in International Trade Dispute Cases

Background of the Case on "Preferential Application of International Treaties"

In this case, the plaintiff is a company with its place of business in the United States, and the defendant is a company with its place of business in Beijing, China. Both parties are engaged in international goods trade. They signed an international goods sales contract for medical protective gloves on January 21, 2021.

During the performance of the contract, the plaintiff (the buyer) claimed that the goods provided by the defendant (the seller) seriously did not meet the quality agreement of medical protective gloves, and the serious delay in supply caused serious damage to the plaintiff's expected profit from reselling the goods to downstream purchasers at a price difference. Therefore, the plaintiff sued, requesting the court to confirm the invalidity of the contract between the plaintiff and the defendant, order the defendant to return the payment for goods, pay interest, and compensate for losses.

Court's Trial on "Preferential Application of International Treaties"

After the Chinese court held a hearing on this case, the defendant did not participate in the trial from beginning to end and did not submit a written defense statement. The plaintiff submitted complete evidence materials to the court to prove its litigation claims, which were finally verified by the court and all its litigation requests were supported.

The court held that since the plaintiff's place of business is in the United States and the defendant's place of business is in China, the dispute arising from the international goods sales contract concluded between them belongs to a foreign - related civil and commercial dispute case.

Both China and the United States are contracting states of the international treaty - the United Nations Convention on Contracts for the International Sale of Goods (hereinafter referred to as the "CISG"). There are no inapplicable circumstances stipulated in the CISG in this case, and neither the plaintiff nor the defendant has excluded the application of the convention. Therefore, the provisions of the CISG (except for the provisions on which China has declared reservations) shall be automatically applied in this case.

Regarding the plaintiff's request for the court to confirm the invalidity of the contract, based on the contract agreement and the CISG, the court determined that the plaintiff had the right to declare the contract invalid and send a notice of declaring the contract invalid. According to the "post - box rule" form of effectiveness stipulated in the CISG, the plaintiff had declared the contract invalid on the day when it sent a lawyer's letter of terminating the contract to the defendant.

Regarding whether it constitutes a fundamental breach of contract and damages, based on the basic facts of the case and the specific provisions of the CISG, the court determined that the defendant's behavior constituted a fundamental breach of contract against the plaintiff. The plaintiff had the right to require the defendant to pay interest and compensate for its losses. Finally, all the plaintiff's litigation requests were supported.

Conclusion

This classic case allows for a relatively objective judgment on the legal effect of Chinese courts representing the country in applying international treaties and implementing the legal principle of "preferential application of international treaties".

First, in the process of preferentially applying international treaties, the Chinese court that tried this case could accurately apply the international treaties concluded by China.

Second, in the process of preferentially applying international treaties, the Chinese court that tried this case was familiar with the contents and boundaries of both domestic laws and international conventions. It could achieve a seamless connection between the application of international treaties and domestic laws, and unify foreign - related rule of law and domestic rule of law.

Special Tips

When an international goods sales contract dispute case occurs with a Chinese supplier, to protect your legitimate interests, the following tips are provided:

First, the plaintiff hired a professional foreign - related lawyer, was well - prepared for the lawsuit, and actively safeguarded its legitimate rights and interests.

As an international trade company in the United States, when the plaintiff realized during the performance of the contract with the defendant in China that the defendant had or was about to fundamentally breach the contract, with the help of a professional foreign - related lawyer, it sent two lawyer's letters to the defendant successively. One lawyer's letter was of a nature of urging the delivery of goods, and the other was of a nature of terminating the contract. Both were submitted to the court as key evidence in the plaintiff's lawsuit for verification and finally played different roles. The lawyer's letter of a nature of terminating the contract finally achieved the purpose of terminating the contract upon being sent, as confirmed by the court.

Second, the defendant gave up the litigation rights of responding to the lawsuit and making a defense, and was absent from the trial, so its legitimate rights and interests could not be guaranteed.

During the trial of this international goods sales contract dispute case, the court had ensured the litigation rights of both the plaintiff and the defendant. The court summoned the defendant by public notice of the subpoena, but the defendant did not appear in court to participate in the trial without justifiable reasons and voluntarily gave up the litigation rights of responding to the lawsuit and making a defense. The court finally concluded the case in the absence of the defendant. Although the true reason why the defendant gave up responding to the lawsuit and making a defense is unknown, it is necessary to remind that such behavior will lead to the inability to guarantee its legitimate rights and interests.