Viewpoint | Reflections on how to advocate good faith acquisition in a bill of lading delivery dispute where arbitration and litigation intersect
Published:
2024-03-19
At present, the difficulty of risk prevention and control of supply chain enterprises is how to effectively protect the property rights of goods in circulation. For a variety of reasons, even if a bill of lading is held without defects, it often does not have the effect that supply chain enterprises imagine to prove that they have a right in rem in goods without defects.
At present, the difficulty of risk prevention and control of supply chain enterprises is how to effectively protect the property rights of goods in circulation. Due to the circulation characteristics of goods, the warehouse management of actually controlling goods is often not allowed under objective conditions, especially for bulk goods of various kinds, such as grain, beef and mutton, iron ore, petroleum coke, etc. Due to the limited manpower and material resources, supply chain enterprises cannot guarantee to know the actual situation of goods at all times, so on the basis of limited actual cargo control capacity, particular importance is attached to ensuring that the cargo documents held, such as the original bill of lading, are free from legal defects. Contrary to one's wishes, even if the bill of lading is flawless, it often does not have the effect that supply chain enterprises imagine is sufficient to prove that it has a right in rem in the goods without defects.
The main reasons for this are: first, after the bill of lading and the goods have been circulated many times in a short period of time, the supply chain enterprises have no way to judge whether there are legal facts that have no right to dispose of them. Second, the bill of lading itself is not sufficient to prove that the holder enjoys the goods without dispute.
With regard to the legal nature of the bill of lading, the Civil Judgment No. 126 of the Supreme People's Court (2015) clearly states that the bill of lading has the dual attributes of a certificate of claim and a document of title, but it does not mean that whoever holds the bill of lading will of course have ownership of the goods under the single item. For the holder of the bill of lading, whether and what type of property right it can acquire depends on the contractual agreement between the parties. Obviously, the effect of the bill of lading in rem will be bound by the provisions of the contract.
In practice, supply chain companies are often trapped in the self-perceived right-free goods being sued for preservation by the forehand. For example, the forehand and the direct backhand of the application for preservation agreed: "After delivery, if the backhand fails to pay the purchase price in full within 90 days, the right to the goods shall still belong to the forehand, and the dispute settlement shall be governed by an arbitration commission." After receiving the goods, although the goods were not paid in full within 90 days, the goods and the goods were transferred downstream and transferred to the supply chain enterprise after multiple hands. At this time, the forehand of the payment dispute filed for arbitration and applied for preservation, and the intermediate people's court where the port is located, in accordance with the arbitration commission to assist in the execution of the application to preserve the goods involved in accordance with the law. After the case, the supply chain enterprise advocated good faith acquisition and filed a preservation objection, but the probability was rejected. The supply chain company believes that the contract dispute between the forehand has nothing to do with it, but the result of the lawsuit is not satisfactory. With regard to the system of bona fide acquisition, Article 341 of the Civil Code stipulates that if a person without the right of disposition transfers a real or movable property to a transferee, the owner shall have the right to recover it; unless otherwise provided by law, the transferee acquires ownership of the real or movable property under the following circumstances: (1) the transferee is in good faith when transferring the real or movable property; the (II) transfers it at a reasonable price; the immovable or movable property transferred by the (III) shall be registered in accordance with the provisions of the law, and the immovable or movable property that is not required to be registered has been delivered to the transferee. Where the transferee acquires ownership of the immovable or movable property in accordance with the provisions of the preceding paragraph, the original owner shall have the right to claim damages from the person without the right of disposition. If the parties acquire other real rights in good faith, the provisions of the preceding two paragraphs shall apply by reference. As far as the transaction between the supply chain enterprise and its direct forehand is concerned, if it conforms to the provisions of Article 341 of the Civil Code, then the supply chain enterprise does have the basis for claiming bona fide acquisition, but the enterprise ignores the application of the procedure for claiming bona fide acquisition, because it has not chosen a reasonable and effective relief path, so it has not achieved the desired litigation effect.
This is a typical case where arbitration and litigation intersect, and supply chain companies just ignore this. The supply chain enterprise is in a very disadvantageous position in such cases. First of all, in the preservation stage, the people's court is the assisting enforcement organ of the arbitration preservation application. As long as there is no error in the legal procedure, the court implementing the preservation often does not examine the substantive rights dispute but submits it to the Arbitration Commission for ruling, that is, it is difficult to obtain the support of the preservation court by claiming good faith acquisition in the preservation procedure. Secondly, according to the contract of payment and transfer of goods rights signed between the predecessors of the supply chain enterprises, the probability that the Arbitration Commission will not have the right to dispose of and return the goods is very high, and in the arbitration, the supply chain enterprise is an outsider, can participate in the arbitration as a third party with an independent claim? The Arbitration Law does not clearly stipulate, but according to the arbitration rules, arbitration is the result of the joint choice of both parties. The supply chain enterprise is not the subject of negotiation, so the request for good faith acquisition by an independent third party is likely to be rejected by the arbitration committee. Finally, after the arbitration award takes effect, if there is no procedural error, even if the supply chain enterprise applies for enforcement objection on the grounds of good faith acquisition, it is highly likely to be rejected by the court.
Faced with such a dilemma, it is suggested that the claim of right should be used as the basis for claiming good faith acquisition, so as to achieve the purpose of protecting the right to goods. The supply chain enterprise shall, in accordance with the contract with the direct forehand and the fact of delivery of the goods, file a lawsuit with the people's court with jurisdiction to confirm that the goods in question belong to all of its rights and apply for preservation in a timely manner to prevent the risk of the goods being transferred and waiting for execution. Thereafter, an enforcement objection is filed with the Arbitration Commission or the enforcement court of the arbitral award claiming good faith acquisition, based on the effective judgment of the affirmative action, in order to exclude the procedural disadvantage in such cross-cutting cases. Even if it is still not possible to join or terminate the arbitration proceedings, it is at least possible to file an objection to the enforcement court for substantive review on sufficient grounds in the proceedings for the enforcement of the award. In the face of the different decisions of the effective arbitral award and the effective court judgment on the ownership of the same subject matter, the enforcement court shall conduct a substantive review and issue a ruling. If an execution objection lawsuit occurs as a result, and the supply chain enterprise is not satisfied with the judgment document of the execution objection, the supply chain enterprise may appeal to the higher people's court that made the judgment document. Request a decision on whether the grounds for obtaining the right to goods in good faith are valid, so as to make full use of the proceedings to protect their legitimate rights and interests.
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