Bauhinia Corp. v. China National Machinery & Equipment Import & Export Corp.

819 F.2d 247 (1987)

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Bauhinia Corp. v. China National Machinery & Equipment Import & Export Corp.

United States Court of Appeals for the Ninth Circuit
819 F.2d 247 (1987)

Facts

In 1981 and 1982, China National Machinery Equipment Import and Export Corporation (CMEC) (defendant) and Bauhinia Corp. (Bauhinia) (plaintiff) entered a contract for the purchase of nails. The contract contained a clause providing that “[if] arbitration is necessary and is to be held in Peking,” the parties would submit the dispute to the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade (CCPIT) under the Provisional Rules of Procedure of the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade. The clause also contained language providing that if “arbitration is to take place at [BLANK]” the parties would appoint arbitrators to form an arbitration committee with a third, neutral arbitrator. A dispute subsequently arose when CMEC failed to deliver the nails. CMEC claimed an edict from the government of the People’s Republic of China (PRC) prevented its performance. When Bauhinia filed suit in the district court for the Eastern District of California for CMEC’s failure to perform under the contract, CMEC filed a motion to compel arbitration. The district court granted the motion to compel arbitration but also ordered the parties to submit the matter to arbitration in the Eastern District of California before the American Arbitration Association (AAA). The district court noted that the founder of Bauhinia, Ms. Tsang, fled the PRC in 1974 and that compelling arbitration in the PRC could place her in danger. The district court also found that the CCPIT would not provide a speedy, thorough, informal, neutral decision-making process, consistent with the parties’ intent in seeking arbitration. CMEC appealed the district court order designating the AAA rather than the CCPIT as the arbitration tribunal, arguing the district court erred in overriding the contract terms naming the CCPIT as the arbitrator.

Rule of Law

Issue

Holding and Reasoning (Tang, J.)

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