Notes to Chapter Two
Chapter Two Recognition and Enforcement of Foreign Arbitral Awards
【Learning Objectives】
By the end of this Chapter and the relevant readings,you should be able to:
☆ Understand the definition of international commercial arbitration
☆ Comprehend the distinction between recognition and enforcement
☆ State the place of recognition and enforcement
☆ Summarize the important articles of the New York Convention
☆ Understand the Chinese domestic legislation and judicial practice on recognition and enforcement of foreign awards
【Key Conceptions or Terms】
recognition,enforcement,foreign awards,the New York Convention
【Case Study】
A contract for sale of skins made between A,a Chinese buyer,and X,a Russian seller who was domiciled in China,provided for arbitration in Moscow.A dispute having arisen as to the quality of the skins,A proceeded to arbitration and appointed an arbitrator,but X,failed to do so because of improper notice.The arbitrator appointed by A proceeded with arbitration in the absence of X and made an award in favor of A.Later,A requested the competent Chinese court to recognize and enforce the award.The request was rejected by the Chinese court by relying on Article 5 of the New York Convention.
1.An Introduction to International Commercial Arbitration
1.1 Overview
Arbitration is a private system of adjudication.Parties who arbitrate have decided to resolve their disputes outside of any judicial system.1 In most instances,arbitration involves a final and binding decision,producing an award that is enforceable in a national court.The decision makers,i.e.,the arbitrators,usually one or three,are generally chosen directly or indirectly by the parties.Parties also decide whether the arbitration will be administrated by an arbitral institution or will be ad hoc,which means no institution is involved.The rules that apply are the rules of the arbitral institution,or other rules chosen by the parties.In addition to choosing the arbitrators and the rules,parties can choose the place of arbitration and the language of arbitration.
Arbitration thus gives the parties substantial autonomy and control over the process that will be used to resolve their disputes.This is particularly important in international commercial arbitration insofar as parties do not want to subject to the jurisdiction of the other party’s court system.Each party fears the other party’s “home court advantage.”2 Arbitration offers a more neutral forum,where each side believes it will have a fair hearing.Moreover,the flexibility of being able to tailor the dispute resolution process to the needs of the parties,and the opportunity to select arbitrators who are knowledgeable in the subject matter of the dispute,make arbitration particularly attractive.Today,international commercial arbitration has become the norm for dispute resolution in most international business transactions.
1.2 The Meaning of “International” and “Commercial”
1.2.1 The Meaning of “International”
The term “international” is used to mark the difference between arbitrations which are purely domestic and those which in some way transcend national boundaries and so are international.
The distinction is of importance in practice.Among the countries which have a developed law of arbitration it is generally recognized that more freedom may be allowed in an international arbitration than is commonly allowed in a domestic arbitration.Moreover,some legal systems have special rules for international arbitration,3 which is a further reason for distinguishing between an arbitration which is international and one which is not.Then,what makes arbitration an international one? What are the criteria employed for such a classification?
From the perspective of comparative law,there are two main criteria used,either alone or in conjunction,in defining the term “international” in the context of an international commercial arbitration.And what merits mentioning is that the criterion used in China is different from those used in international arena which boasts its own characteristics.
The first criterion involves analyzing the nature of the dispute,so that an arbitration is treated as international if it involves the interests of international trade.4 This criterion is found simply in French law.5 The International Chamber of Commerce (ICC),which established its Court of Arbitration in Paris in 1923,also adopted the nature of the dispute as its criterion for deciding whether or not an arbitration was an international arbitration under its Rules.6
The second criterion involves focusing attention on the parties; their nationality or habitual residence,or,if the party is a corporate entity,the seat of its central control and management.It is an approach that was adopted,for example,in the European Convention on International Commercial Arbitration of 1961,English Arbitration Act of 1979 and Swiss Private International Law Act of 1989.7 On this criterion,to take a simple example,an arbitration between a British national and a Chinese national would be an international arbitration.
It is worth of noticing that though “international commercial arbitration” is a term widely accepted and frequently used by Chinese scholars,it has been rarely,if any,used by Chinese legislation and judicial practice.Instead,“foreign economic and trade arbitration” is preferable for Chinese legislators and judges.Nevertheless,under the scholarship of Chinese private international law,there is no need to distinguish “foreign” from “international”,insofar as these two terms have the same meaning.[1]
It is further submitted that both “foreign” and “international” should be interpreted broadly and that once one of the three elements of a legal relationship has contact with foreign jurisdiction,it should be classified as “foreign” or “international” legal relationship.This open approach is called “three-element-test.” Pursuant to this approach,international or foreign arbitrations may arise in the following situations: (1) one party or both parties involved is/are foreigners (or foreign enterprises or organizations); (2) the property in dispute is located in a foreign country; (3) the creation,variation or termination of civil legal relationship occurred in a foreign country; (4) the place of arbitration is located in a foreign jurisdiction; (5) the arbitrations that involve Hong Kong,Macao,or Taiwan are deemed as foreign or international arbitration.
1.2.2 The Meaning of “Commercial”
It is accepted practice to speak of international commercial arbitration,rather than simply of international arbitration.[2]The qualification of commercial is used in the civil law countries,which distinguishes the commercial relations from civil relations in a narrow sense.This distinction is important in the civil law as regards to arbitration,since in many countries only disputes arising out of commercial matters may be submitted to arbitration.Thus it would be permissible to hold an arbitration between two merchants over a commercial contract which they had made in the course of their business but not,for example,in respect of an agreement for the separation of property made on the divorce.
Recognizing the fact that in some countries arbitration is only permissible in respect of commercial matters,most international conventions on arbitration,the New York Convention in particular,emphasize that they are applicable “only to differences arising out of legal relationships,whether contractual or not,which are considered as commercial under the national law of the State making such declaration.”8 This is the so-called commercial reservation.
This further highlights the importance to know whether the legal relationship of the arbitration was a commercial relationship or not.The question will arise if it comes necessary to seek recognition or enforcement of a foreign arbitral award in a state which has adhered to the New York Convention,but which has entered the commercial reservation.It will then be necessary to look closely at the law of the state concerned to see what definition it adopts of the term “commercial.”9
Internationally,the approach is to interpret the term “commercial” as widely as possible.Although problems have occasionally arisen because courts of particular countries have adopted a narrow definition of commercial,the general approach of courts of many nations,including China,is to define commercial so as to embrace all types of trade or business transactions.The UNCITRAL Model Law on International Commercial Arbitration,as a typical example,does not define the word but states:[3]
The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature,whether contractual or not.Relationships of a commercial nature include,but are not limited to,the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air,sea,rail or road.
Like the Model Law,China adopts an open-ended definition of “commercial” which is reflected in “The Notice on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to Which This Country Has Become Party” issued by the Supreme People’s Court,as its Article 2 provides as follows:10
As per the commercial reservation declaration made by this country when becoming party of the said convention,the said convention is only applicable in this country to disputes on contractual and non-contractual commercial legal relationships according to the laws of this country.The so-called “contractual and non-contractual commercial legal relationships” concretely refers to the relationships of economic rights and obligations on contracts,rights invading or in light of pertinent legal provisions,such as disputes concerning sales of goods,lease of property,projects contracting,processing work,technology transfer,joint venture,natural resources prospecting and exploiting,insurance,credit,labor services,agent,counseling services,sea,civil aviation,railway and highway passenger-cargo transportations,and product liability,environmental pollution,marine accident and ownership and so on,but excluding disputes between foreign investors and the governments of host countries.
From the above provision,it can be concluded that Chinese official interpretation of “commercial” is very similar to the interpretation of the Model Law; as a matter of fact,the former is even more expansive than the latter in some respects.
2.Basic Theory of Recognition and Enforcement of Foreign Awards
2.1 Distinction between Recognition and Enforcement
For the purposes of recognition and enforcement,one has to distinguish recognition from enforcement.In most cases,the two terms are used as if they are always inextricably linked.For example,the New York Convention speaks of “recognition and enforcement” of foreign awards.Generally,when an award is enforced it is also recognized.The terms are distinct,however.An award may be recognized,without being enforced; but if it is enforced,then it is necessarily recognized by the court which orders its enforcement.As a consequence a distinction may be made between recognition and enforcement.
Recognition is on its own a defensive process.It arises when a court is asked to grant a remedy in respect of a dispute which has been the subject of previous arbitral proceedings.The party in whose favor the award was made will claim that the dispute has already been determined,and to prove this will seek to produce the award to the court and ask the court to recognize it as valid and binding upon the parties in respect of the issues with which it dealt.The award may have disposed of all of the issues raised in the new court proceedings,and so put an end to these new proceedings as res judicata; that is to say,as matters in issue between the parties which have already been decided.If it does not dispose of all of the issues raised in the new proceedings,but only of some of them,it will need to be recognized for the purpose of issue estoppel,so as to prevent the issues with which the award deals from being raised again.11
The use of recognition on its own may be illustrated by taking the example of a Chinese company which is sued by a foreign supplier for goods sold and delivered,but allegedly not paid for.Suppose that the dispute between the Chinese company and the foreign supplier has already been submitted to arbitration; and that an award has been made,in which the foreign supplier’s claim was dismissed.In those circumstances,the Chinese company would ask the foreign court to recognize the award as valid defence to the foreign supplier’s claim.If the court is prepared to do this,the claim will be dismissed.In this example,the legal force and the effect of the foreign award have been recognized,but the award itself will not be enforced.
By contrast,where a court is asked to enforce an award,it is asked not merely to recognize the legal force and the effect of the award,but also to ensure that the award is implemented by using such legal sanctions as are available.Enforcement,therefore,goes a step further than recognition.A court which is prepared to grant enforcement of an award will do so because it recognizes the award as validly made and bringing upon the parties to it and,therefore,suitable for enforcement.In this context,the terms “recognition” and “enforcement” do run together,one is a necessary part of the other.
As the example illustrated above,the purpose of recognition on its own is to act as a shield.Recognition is used to block any attempt,in fresh proceedings,to raise the issues which have been decided in the arbitration granting the award.In contrast,enforcement is normally a judicial process which either follows or simultaneously recognizes and gives effect to the mandate of the award.Enforcement,thus,functions as a sword in that the successful party requests the assistance of the court to enforce the award by exercising its power and applying legal sanctions should the other party fail or refuse to comply voluntarily.The type of sanctions available will vary from country to country and may include seizure of the award debtor’s property,freezing of bank accounts or even custodial sentences in extreme cases.12
2.2 Place of Recognition and Enforcement
An application for recognition or enforcement of an award is always made outside the arbitral process.In other words,it is made to a court in the place or places in which recognition and enforcement is sought.Once it has given its award,the task of an arbitral tribunal is usually concluded.Neither the arbitral tribunal nor any arbitral institution under whose auspices it may be operating,is directly concerned to ensure recognition and enforcement of its award.[4]
The recognition and enforcement of awards is a matter for the courts which,cloaked with the judicial authority of the state,possess considerable powers of coercion.The extent of these powers,and the extent to which the courts are prepared to use them,varies from country to country.However,because of the effect of international conventions,the New York Convention in particular,there is considerable uniformity of national laws governing the recognition and enforcement of foreign awards.
2.2.1 Forum Shopping
Enforcement of an award is usually directed at the defaulting party’s assets.If these assets are situated in more than one country,the party seeking enforcement of the award may have a choice of country in which to proceed; as it sometimes expressed,the party may be able to go “forum shopping.”13
Legal proceedings of some kind are necessary to obtain title to a defaulting party’s assets or their proceeds of sale.Such legal proceedings must usually be taken in the state or states in which the property or other assets of the losing party are located.It would not be useful,for instance,to obtain an order in the Chinese courts for seizure and sale of the defaulting party’s goods and chattels in China if no such property exists.Nor would it be useful to secure an order for the attachment of the defaulting party’s bank accounts in China,if these accounts turn out to be overthrown.
The need to locate the place or places in which a defaulting party has assets is not unique to international commercial arbitration.In purely domestic proceedings,it may also be necessary to locate the defaulting party’s assets in order to enforce a court’s judgment or an arbitral tribunal’s award.However,in a domestic dispute,the assets of the losing party are generally situated within the country in which the proceedings take place,since this is normally the country of that party’s habitual residence or the place of business.In international commercial arbitration,the contrary is likely to be the case.The place of arbitration will often have been chosen by the parties,just because,inter alia,it is a place with which they have no connection.That is to say,the place of arbitration will have been chosen as a neutral forum.Within such a setting,it would be a matter of chance if the defaulting party happens to have assets situated in this neutral country.This is why it is so important that international awards should be recognizable and enforceable internationally,and not merely in the country in which they are made; moreover,unlike the place of arbitration,the place of recognition and enforcement will usually not be chosen by the parties.It will depend on the country or countries in which the defaulting party’s assets are located.Only on the occasion that the defaulting party’s assets are situated in more than one country,can the other party choose a place among these countries in which the award is sought to be recognized and enforced.
2.2.2 Choice of Place of Recognition and Enforcement
When the successful party in an arbitration is seeking to enforce the award,the first step is to determine in which country or countries enforcement is to be sought.To reach this decision,it will be necessary,as stated above,to locate the country or countries where the losing party has assets available to meet the award.This may require some investigative work.If inquiries suggest that assets are only likely to be available in one country,the party seeking enforcement of the award will have no choice.For better or worse,he will have to seek enforcement in that state.Where there is a choice,the party seeking enforcement will be able to proceed in one or more places as seems appropriate.
One of the factors to be taken into consideration in selecting a forum for the enforcement of an award is the extent to which the prospective forum is linked to the place in which the award was made—whether by the New York Convention or by some other relevant international conventions.Another factor is the attitude of the local courts to requests for recognition and enforcement of foreign awards—and,notably,whether their outlook is likely to be internationalist or parochial.An additional factor,relevant if enforcement is being sought against a country or a government agency,is the attitude which the prospective forum adopts on the question of state immunity.[5]
2.3 Consequences of Refusal of Recognition and Enforcement
Although the enforceability of awards worldwide is considered one of the primary advantages of arbitration compared with litigation,it does happen that foreign awards are refused to be recognized and enforced.The immediate consequence of a refusal to enforce an award is the winning party fails to obtain what he has expected; i.e.,seizure of the loser’s assets in the place where enforcement was sought.This will be a discouraging result for the party seeking enforcement,but the award survives.14 To lose an enforcement action is much less damaging than to have the award challenged successfully in the courts of the country where the arbitration took place.
The party seeking enforcement is free to try elsewhere.He still has a valid award who may be able to seek enforcement in another country where the losing party has assets.As a matter of fact,much depends on the reason for which enforcement was refused.If,for instance,enforcement was refused for ordre public reasons in one country,it may be possible to find another country where the same considerations do not apply; as previously discussed,considerations of ordre public tend to differ from one country to another.However,if the enforcement was refused because of failure by the arbitral tribunal to give the losing party an opportunity to present his case,it would be impossible to enforce the award anywhere,insofar as such misconduct of the arbitration will probably not be countenanced by the courts of any enforcement state.15 Under such a circumstance,the party seeking enforcement will probably have no option but to start a new arbitration,assuming that there is no problem of time limit or other bars to preclude this.
3.The Regime for the Recognition and Enforcement of Foreign Awards in China
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;
(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.(https://www.daowen.com)
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
Exercises
1.Prepare answers to the following questions using paragraph form.
(1) What is “international commercial” arbitration? Compared with litigation,what are the advantages of “international commercial” arbitration?
(2) What are the distinctions between recognition and enforcement?
(3) What is New York Convention? Summarize China’s domestic rules to implement the Convention.
2.Multiple Choice
(1) Arbitration ( )
A.is a public system of adjudication.
B.is administrated by arbitrator(s) appointed by courts.
C.is a more efficient means to settle disputes than litigation.
D.is rare in international business transactions.
(2) Which of the following statements is not correct? ( )
A.Under the Civil Procedure Law,the 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.
B.Under Chinese scholarship,there is no need to distinguish “foreign” from “international” in the context of international commercial arbitration.
C.China adopts an open-ended definition of “commercial.”
D.The New York Convention is the backbone of China’s legal system for recognition and enforcement of foreign arbitral awards.
(3) The New York Convention ( )
A.has been proved to be a failed international treaty.
B.does not provide an accurate definition of “award.”
C.provides that an award shall have universal effect without any limitations.
D.has ninety-six contracting parties till 2010.
3.Case Analysis
A,an English company,and X,a Chinese company,entered into a reinsurance contract containing an agreement to arbitrate in London Court of International Arbitration (LCIA).The reinsurance contract was void according to English law because it was not embodied in a stamped policy.A dispute arose,and A submitted the dispute to LCIA,but X refused to do so who argued that as the contract,including the arbitration clause was void,LCIA was not competent to hear the dispute.In accordance with the agreement to arbitrate,the arbitration panel was established at the request of A.The arbitrators made an award in favor of A which is valid by English law.Later,A wanted the award to be recognized and enforced in China.
In this case,did LCIA have jurisdiction over the dispute? Do you believe the award would be recognized and enforced in China? If you were A’s lawyer,what would you do in order to have the award recognized and enforced?
Notes to Chapter Two
1.MARGARET L.MOSES,THE PRINCIPLES AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 1 (2008).
2.H.SMIT,V.PECHOTA,INTERNATIONAL COMMERCIAL ARBITRATION AND THE COURTS 46 (4th ed.,2004).
3.See.e.g.,France,England and the U.S.Detailed information,see Park,Duty and Discretion in International Arbitration,93 AM.J.INT’L 805 (1999).
4.GUOJI SIFA [PRIVATE INTERNATIONAL LAW] 597 (Huang Jin ed.,2nd ed.,2004).
5.French Code of Civil Procedure,art.1492.
6.ALAN REDFERN,MARTIN HUNTER AND MURRY SMITH,LAW AND PRACTICE OF INTERNATIONAL ARBITRATION 15 (1991).
7.JULIAN D.M.LEW QC,LOUKAS A.MISTELIS,STEFAN M.KROLL,COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION 59-60 (2003).
8.THE CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS (hereinafter referred to as the New York Convention),art.I.3 (1958).
9.ALAN REDFERN,MARTIN HUNTER AND MURRY SMITH,LAW AND PRACTICE OF INTERNATIONAL ARBITRATION 21 (1991).
10.Zuigao Renmin Fayuan Guanyu Zhixing Woguo Jiaru de Chengren ji Zhixing Waiguo Zhongcaicaijue Gongyue de Tongzhi [Supreme People’s Court,The Notice on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to Which This Country Has Become Party],Zuigao Renmin Fayuan Gongbao [Bulletin of Supreme People’s Court] No.5 (1987) (PRC).
11.ALAN REDFERN,MARTIN HUNTER AND MURRY SMITH,LAW AND PRACTICE OF INTERNATIONAL ARBITRATION 448 (1991).
12.H.SMIT,V.PECHOTA,INTERNATIONAL COMMERCIAL ARBITRATION AND THE COURTS 691 (4th ed.,2004).
13.ALAN REDFERN,MARTIN HUNTER AND MURRY SMITH,LAW AND PRACTICE OF INTERNATIONAL ARBITRATION 450 (1991).
14.Id.,at 453.
15.See New York Convention Art.V 1(b).
16.Zhonghua Renmin Gongheguo Minshi Susongfa [Civil Procedure Law] arts.283 (1991,revised in 2017) (PRC).
17.Wetter,The Present Status of the International Court of Arbitration in the ICC: An Appraisal 1 AM.REV.INT’L Arb.91 (1990).
18.Mustill,Aribtration: History and Background,6 J.INT’L.ARB.43,49 (1989).
19.The New York Convention,art.I.
20.Id.,art.III.
21.Ibid.
22.Id.,art.II (1).
23.Id.,art.II (3).
24.H.SMIT,V.PECHOTA,INTERNATIONAL COMMERCIAL ARBITRATION AND THE COURTS 699 (4th ed.,2004).
25.Kroll,Recognition and Enforcement of Foreign Awards in Germany,5 INT ALR 160,164 (2002).
26.The New York Convention,art.I (1).
27.Ibid.
28.Id.,at art.III.
29.Id.,at art.IV.
30.MARGARET L.MOSES,THE PRINCIPLES AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 208 (2008).
31.The New York Convention,art.V.
32.Michael Kerr,Concord and Conflict in International Arbitration,ARB.INT.121,128,(1997).
33.Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui Guanyu Woguo Jiaru Chengren ji Zhixing Waiguo Zhongcai Caijue Gongyue de Jueding [Decision of the Standing Committee of the National Peoples’ Congress with Respect to China’s Accession to the Convention on the Recognition and Enforcement of Foreign Awards] (adopted December 2,1986),ZHONGHUA RENMIN GONGHEGUO QUANGUO RENMIN DAIBIAO DAHUI CHANGWU WEIYUANHUI GONGBAO [BULLETIN OF THE STANDING COMMITTEE OF THE NATIONAL PEOPLES’ CONGRESS] 560 (1986)(PRC).
34.SONG HANG,SHANGSHI ZHONGCAICAIJUE DE CHENGREN YU ZHIXING [RECOGNITION AND ENFORCEMENT OF COMMERCIAL ARBITRAL AWARDS] 245 (2000).
35.Zuigao Renmin Fayuan Guanyu Renminfayuan Chuli yu Shewai Zhongcai ji Waiguo zhongcai Shixiang Xiangguan Wenti de Tongzhi [The Supreme People’s Court Notice on Certain Questions Regarding People’s Courts’ Handling Arbitration with Foreign Elements and Foreign Arbitration] art 1 (1995).
36.Qingjiang Kong & Mingfei Hu,The Chinese Practice of Private International Law,3 MELBOURNE J.OF INT’L L.434 (2002).
37.Zhonghua Renmin Gongheguo Minshi Susongfa [Civil Procedure Law] art.215 (1991,revised in 2017) (PRC).
38.Zhonghua Renmin Gongheguo Minshi Susongfa [Civil Procedure Law] art.239 (1991,revised in 2017) (PRC).
【注释】
[1]Nevertheless,the international or domestic character of commercial arbitration is not to be confused with the domestic or foreign character of awards for which different regimes for their enforcement exist.
[2]Historically,the unqualified term “international arbitration” has been used for public international law arbitration with the participation of one or more states.
[3]This paragraph appears as a footnote to Art.1(1) of the Model Law.
[4]Even if they are concerned,they would lack the necessary powers to compel a recalcitrant party to implement the award; the most that could be done would be to exert moral pressure.
[5]For instance,China still adheres to the absolute state immunity doctrine.
[6]Zuigao Renmin Fayuan Guanyu Zhixing Woguo Jiaru de Chengren ji Zhixing Waiguo Zhongcaicaijue Gongyue de Tongzhi [Supreme People’s Court,The Notice on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to Which This Country Has Become Party],Zuigao Renmin Fayuan Gongbao [Bulletin of Supreme People’s Court] No.5 (1987) (PRC).The Notice provides that the Convention shall not apply to awards rendered before April 22,1987,the date the Convention went into effect.
[7]See also the paragraphs on the meaning of “commercial,” supra.