Case Brief

In 2005, Korea DW Pharmaceuticals Co., Ltd. (hereinafter referred to as "DW Pharmaceuticals"), Beijing QF Pharmaceutical Technology Co., Ltd. (hereinafter referred to as "QF Co."), and Hong Kong QR International Co., Ltd. (hereinafter referred to as “QR Co.") cooperated on selling drugs produced by DW Pharmaceuticals in China.

During the cooperation period, QF Co., DW Pharmaceuticals, and QR Co. agreed that QR Co. would handle the cargo shipping procedures and make the corresponding payments to DW Pharmaceuticals on QF Co.’s behalf. However, after QF Co. paid about USD 4.2 million to DW Pharmaceuticals on February 28, 2018, as of today, there are still unpaid payments for three kinds of drugs worth about USD 10.68 million. DW Pharmaceuticals had repeatedly asked QF Co. to return the "Imported Drugs Registration Certificate" and make those payments, but QF Co. failed to fulfill its obligations.

The four defendants, including QF Co., raised objection to jurisdiction during the submission of their defenses. It claimed that the "Sales Agreement" and "Exclusive Purchase Agreement" on which the sales of the drugs WLS and TA were based had stipulated an arbitration clause, that is, “the law of Singapore shall be applied to conduct arbitration and review validity”. Regarding the payment for drug NLD, the actual buyer was QR Co. which was registered in Hong Kong and had no representative office in mainland China. Furthermore, the actual fulfillment of the order took place in Haikou, China. Therefore, the Fourth Intermediate People's Court of Beijing Municipality did not have jurisdiction.

Handling Process

After accepting the entrustment of Korea DW Pharmaceuticals Co., Ltd., we fully listened to the client’s statements on the facts of the case and systematically analyzed and evaluated all the evidence of both the plaintiff and the defendants. We believed that this case was a rare and complex international jurisdiction objection case involving South Korea, Hong Kong, and Singapore. The focus of the dispute in this case was whether there was a valid arbitration clause and the authenticity, legality, and relevance of the agreements.

In the process of representing the plaintiff in handling this case, we did not follow the usual line of thinking used in handling international jurisdiction objection cases. Instead, based on our determination of the focus of the dispute, we conducted our analysis and defense from the perspectives of the validity of the arbitration clause as well as the authenticity, relevance, and legality of the evidence submitted by the other party.

Firstly, we raised that in the “Exclusive Purchase Agreement” provided by QF Co., the party who had signed the agreement was DW Chemicals, not DW Pharmaceuticals. Although QF Co. issued a "Certificate of Factual Relationship", it could be seen after investigation that DW Pharmaceuticals and DW Chemicals were two different independent legal entities. According to the principle of relativity of contracts, this agreement was not relevant to this case.

The "Sales Agreement" submitted by QF Co. was not stamped with the valid seal of the legal representative of DW Pharmaceuticals, and there were significant differences between the signature in this Agreement and other signatures in the same period. Furthermore, according to the Certificate issued by the Korean business registration authority, it could be seen that there was no such legal representative. Based on the above evidence, it could be proved that the "Sales Agreement" was falsely signed, that is, the Agreement did not have authenticity and legality. In addition, DW Pharmaceuticals had sent a letter of cancellation and informed that follow-up transactions would be carried out in accordance with the new agreement, in which there was no arbitration clause. Therefore, not only did the "Sales Agreement" not have authenticity and legality, but its arbitration clause also had no binding effect on DW Pharmaceuticals.

Secondly, regarding the "arbitration clause" in the above Agreement, we claim that according to Article 16 of the Arbitration Law of the People's Republic of China, arbitration agreements shall contain the following contents: (1) an indication of the intention to request arbitration; (2) arbitrable issues; (3) a selected arbitration committee. It could be seen that although the "arbitration clause" in the above Agreement stipulated that arbitration shall be conducted under the Singapore law, it did not stipulate a clear arbitration venue or arbitration institution. Therefore, the arbitration clause was invalid. In addition, in accordance with the "principle of competence-competence" of the International Court of Arbitration for arbitration jurisdiction confirmation, the arbitration clause should at least contain a clear (or vague) agreement on the "selection of arbitration institution". Therefore, the "arbitration clause" submitted by the defendants was not enforceable and fell within the situations stipulated by the provision of Article 215 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China: “The arbitration clause is untenable, invalid... The content is unclear and cannot be enforced”.

Case Result

In the end, the Fourth Intermediate People's Court of Beijing Municipality and the Higher People's Court of Beijing Municipality successively accepted our attorneys' opinions and determined that the evidence submitted by the four defendants, including QF Co. did not have legality, authenticity, and relevance. In addition, the arbitration clause stipulated in the Agreement was unclear, untenable, and impossible to enforce. Their rulings rejected QF Co.’s application for jurisdiction objection.

（Lead Lawyers: Matthew King）