The Regime for the Recognition and Enforcement o...
In recent years,the prospect of enforcing in China a foreign arbitral award has become more viable.China’s participation in relevant international treaties and conventions,and its recent promulgation of domestic laws designed to facilitate the enforcement of foreign arbitral awards,mark great strides toward easing the task of enforcing foreign arbitral awards in China.
The New York Convention constitutes the backbone of China’s legal system for recognition and enforcement of foreign arbitral awards.Article 283 of the Civil Procedure Law states that “if an award made by a foreign arbitration institution requires the recognition and enforcement by a People’s Court of China,it shall deal with the matter in accordance with the relevant provisions of the international treaties concluded or acceded to by China or on the principle of reciprocity.”16 Therefore,the regime for the recognition and enforcement of foreign arbitral awards in China shall be mainly divided into three aspects: firstly,the recognition and enforcement of arbitral awards made in a foreign country which is also a party to the New York Convention shall be governed by this Convention; secondly,the recognition and enforcement of arbitral awards made in a foreign country which concludes a bilateral convention with China shall be governed by this convention; thirdly,if no convention is applicable,the recognition and enforcement should be in accordance with the principle of reciprocity.
Since the New York Convention constitutes the predominant arbitration recognition and enforcement regime both for China and for the international community,the following section will focus primarily on the Convention and the procedures through which the Convention has been implemented in China.
3.1 The New York Convention in China
One might assume that a foreign country would be more willing to recognize and enforce a court judgment of another country than an award made by private arbitrators whose authority is derived from an agreement of the parties.However,the reality is just the reverse.In practice it is far easier to enforce an arbitration award than a foreign judgment.This is due to the uniqueness of the New York Convention and its dual rationale to make the enforcement of foreign awards simpler and harmonize the national rules on enforcement.In contrast,there is no comparable international instrument on the enforcement of foreign judgments.
The New York Convention is one of the most widely accepted international conventions which has received praise as the “pillar on which the edifice of international arbitration rests”17 and also for being “the most effective instance of international legislation in the history of commercial law.”18 The number of the party countries to the New York Convention has increased dramatically within the past thirty years.By March 1,2021,168 countries are parties to the New York Convention; consequently,the number of parties seeking enforcement under its terms has also increased.
3.1.1 An Overview of the Convention
(1) The Convention’s Basic Provisions
The New York Convention itself is a relatively short document.The general scope and purpose of the Convention are set out in articles I and III.Article I states that the Convention applies to the “recognition and enforcement of arbitral awards made in a State other than the State where the recognition and enforcement of such awards are sought.”19 Article III,which provides the essential mandate of the Convention,states that “[E]ach Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon,under the conditions laid down in the following articles.”20 This article further provides that the conditions and fees for recognition and enforcement shall not “substantially more onerous” than those imposed for recognition and enforcement of domestic awards.21
Additionally,although the primary subject of the Convention is the recognition and enforcement of arbitral awards,Article II provides that each contracting state shall recognize an agreement to arbitrate if it concerns “a subject matter capable of settlement by arbitration.”22 The agreement must be in writing,and courts in the contracting state are required to refer the parties to arbitration upon the request of the parties,unless it “finds the said agreement is null and void,inoperative or incapable of being performed.”23
(2) Meaning of Foreign Awards
The New York Convention relates only to awards but offers no definition of an award.Only decisions of a tribunal which determines finally a specific issue and have res judicata effect may be jurisdictional decision and will normally be final decisions.24 Arbitrato irrituale decisions as well as price appraisals and expert determinations cannot be enforced as awards.Procedural or other orders rendered by a tribunal although binding are not enforceable under the New York Convention unless they can be functionally characterized as awards.25 The New York Convention does not specially refer to interim awards or orders which are left to be determined by national laws.
The Convention employs two criteria to determine whether awards are considered “foreign.” This characterization may be the result of a territorial criterion or a functional criterion.
The territorial criterion is codified in the first sentence of Article I (1) of the New York Convention according to which the Convention applies to “…awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought,and arising out of differences between persons,whether physical or legal.”26 It is irrelevant whether the subject matter of the arbitration is international,or the law applied is a foreign one,or what nationality the parties are.The location of the arbitration is the dominant criterion.This is a predictable and certain way of establishing the scope of the Convention.
The last sentence of Article I (1),qualifies the functional criterion.It states that the Convention will also apply to “…awards not considered as domestic awards in the State where their recognition and enforcement are sought.”27 This sentence affords the contracting states a great deal of autonomy to broaden the scope of application of the Convention.Although this functional criterion may be criticized as less certain,it has the advantage of allowing ratifying states discretion to decide which awards may be enforced under the Convention,in addition to awards rendered outside their territory or jurisdiction.
(3) Procedures to enforce awards
Procedures for enforcing an award will vary by jurisdiction,because a contracting state will enforce an award in accordance with its own rules of practice.28 It cannot,however,as mentioned above,impose any higher fees or any more onerous conditions on the process than would be applicable in enforcing a domestic award.The only specific requirements imposed by the Convention are that the party applying for recognition and enforcement must provide the court with the authenticated original award or a certified copy,and the original arbitration agreement or a certified copy.
In addition,if the award or the agreement is not in the same language used in the enforcing jurisdiction,the party must provide a certified translation of the document.29 Otherwise,the procedures are determined by each jurisdiction,but are frequently similar to the procedures used to enforce court judgments within that jurisdiction.
(4) Grounds to Refuse Enforcement
To support enforcement of awards,the New York Convention provides only a limited number of defences to enforcement,and these defences are narrowly construed.30 They are also considered exhaustive,meaning that they are the only grounds on which non-enforcement can be based.There are five kinds of defences found in Article V (1) and two additional defences in Article V (2).In brief,those defences are:31
(1) A party to the arbitration agreement was,under the law applicable to him,under some incapacity or the arbitration agreement was not valid under its governing law;
(2) A party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings,or was otherwise unable to present its case;(https://www.daowen.com)
(3) The award deals with an issue not contemplated by or not falling within the terms of the submission to arbitration,or contains matters beyond the scope of the arbitration (subject to the provision that an award which contains decisions on such matters may be enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those matters not so submitted);
(4) The composition of the arbitral authority was not in accordance with the agreement of the parties or,failing such agreement,with the law of the place where the hearing took place (the “lex loci arbitri”);
(5) The award has not yet become binding upon the parties,or has been set aside or suspended by a competent authority,either in the country where the arbitration took place,or pursuant to the law of the arbitration agreement;
(6) The subject matter of the award was not capable of resolution by arbitration; or
(7) Enforcement would be contrary to “public policy.”
The most important characteristic to the defences is that they are not based on the merits.Under the New York Convention,a court cannot refuse enforcement of an award because the arbitration got it wrong,either on the facts or the law.Rather,the permitted defenses focus on the integrity of the process,including fairness to the parties and a reasonable opportunity to be heard.In general,an arbitration that has been conducted by competent,experienced arbitrators is unlikely to produce an award that is unenforceable.In fact,it has been estimated that voluntary compliance combined with court enforcement results in 98% of international arbitration awards being paid or otherwise carried out.32
3.1.2 China’s Accession to and Implementation of the Convention
On December 2,1986,the 18th Session of the Sixth Standing Committee of the Tenth National People’s Congress adopted a decision,stating that China would accede to the New York Convention.33 Acceptance was conditioned on the two reservations,namely,that China would apply the Convention only on the basis of reciprocity and that accession would apply only to commercial disputes as defined under the Chinese law.
What’s more,in order to facilitate the implementation of the Convention,the Supreme People’s Court issued “the Notice on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to Which This Country Has Become Party” (hereinafter referred to as “the Notice”) to higher and intermediate level courts and certain specified courts,which provides clarification of a number of important issues concerning the implementation of the Convention.[6]
The Notice states that where the Convention and China’s Civil Procedure Law contain different provisions,the Convention shall govern.The Notice,however,does not discuss the effects of a conflict between the Convention and other laws.The maxim of statutory construction “exprsssio unius personae est exclusion alterius” (the expression of one thing means the exclusion of all others) might be applied in interpreting this clause to mean that provisions of the Convention would not govern where they conflict with another Chinese law.Yet,there has been no indication that Chinese authorities will interpret this provision in this manner.
The Notice reiterates China’s reciprocity reservation to the Convention,stating that “China shall apply the Convention to arbitral awards made in the territory of other contracting states.” Thus,the reciprocity reservation refers to reciprocity in terms of the situs of the arbitration,not to the opposing party’s state.
Again,the Notice states that China shall apply the Convention only to disputes arising out of contractual and non-contractual commercial legal relationships.Such relationships specifically refer to economic rights and obligations based on in contract,tort,or statutory law.The Notice goes on to provide a list of examples of commercial transactions giving rise to such rights and obligations.The list,although not exclusive,covers a broad range of topics.[7]
The Notice provides that parties seeking to enforce foreign arbitral awards must apply to intermediate level People’s Courts.A court will have jurisdiction over a dispute: (1) where a party resides or possesses a household registration,in case of enforcement sought against a natural person; (2) where a legal person has its main administrative office,in case of enforcement sought against a legal person; and (3) where a natural or legal person’s property is situated,in cases of enforcement sought against a party with no residence,household registration,or main administrative office in China but who owns property in China.
The Notice states that in order for a court to enforce a foreign arbitral award,it must receive an application to do so.A court then determines whether any of the exceptions to enforcement provided in the Convention are present.If not,the court should enforce the award in accordance with the Civil Procedure Law.
After its accession to the New York Convention,China has recognized and enforced some foreign arbitral awards.However,many are still in suspension and await determination.34 This is partly due to judicial inefficiency of Chinese People’s Courts,partly to local protectionism.In view of this,the Supreme People’s Court in 1995 issued a notice authorizing the institution of a reporting system that aims to solve the problems arising from the recognition and enforcement of foreign arbitral awards.35
According to this Notice,where a party submits an application for enforcement of a foreign arbitral award,the People’s Court concerned shall report the application to its supervising Higher People’s Court for re-examination if it finds the award not in conformity with the conventions to which China is a party or with the principle of reciprocity.If the Higher People’s Court agrees with the reporting People’s Court,and refuses to recognize and enforce the award,the Higher People’s Court shall report to the Supreme People’s Court for re-examination; it may not refuse to enforce a foreign arbitral award until receiving a reply from the Supreme People’s Court.This reporting system undoubtedly endows the Supreme People’s Court with the final say over whether to decline the recognition and enforcement of foreign arbitral awards,ruling out the possibility of local courts declining such requests at will.This system also facilitates the implementation of the New York Convention.36
3.2 Chinese Domestic Law on Recognition and Enforcement of Foreign Awards
With regard to the recognition and enforcement of arbitral awards of non-members of New York Convention,parties concerned may request enforcement by a competent People’s Court.The People’s Court may deal with the request in accordance with the agreement on judicial assistance between China and the countries of the parties,or according to the principle of reciprocity.
In this respect,Article 283 of the CPL provides a similar procedure to that for the recognition and enforcement of foreign judgments.A major difference,however,is that the parties to the arbitration may initiate the process only by submitting the petition directly to the intermediate People’s Court of the place where the award debtor resides or property is located (enforcement by petition),as this Article provides as follows:
If an award made by a foreign arbitral institution requires the recognition and enforcement by a People’s Court of the People’s Republic of China,the party concerned shall directly apply to the intermediate People’s Court of the place where the party subjected to enforcement domiciles or where his property is located.The People’s Court shall deal with the matter in accordance with the international treaties concluded or acceded to by the People’s Republic of China or with the principle of reciprocity.
Another issue that is worth noticing is that the revised Civil Procedure Law in 2007 provides a new time limit on both court judgment enforcement and arbitral award enforcement.For submission of an application for enforcement,the revised Civil Procedure Law of 2007 provides a two-year time limit.37
Comparing with the provision in the former Civil Procedure Law of 1991,which reads “[T]he time limit for the submission of an application for enforcement shall be one year,if both or one of the parties are citizens; it shall be six months if both parties are legal persons or other organizations.” The time limit for enforcement stipulated in the revised Civil Procedure Law of 2007 is obviously longer than before and more favorable to a creditor.The time limit prescribed shall be calculated from the last day of the period of performance specified by the arbitral award,or after the award has been served when the award is silent on the period of performance.The revision of Civil Procedure Law in 2012 reaffirms the time limit for enforcement stipulated in the revised Civil Procedure Law of 2017.38