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杜越:英文版 | 近20年194个案例!大数据分析我国法院对外国仲裁裁决的承认和执行情况

发布日期:2020-08-21
杜  越

北京德和衡(上海)律师事务所合伙人



Recognition and Enforcement of Foreign Arbitral Awards by Chinese Courts——

Big Data Analysis based on 194 Cases in the Past 20 Years



Introduction


As we all know, an effective ruling with no enforcement power is a piece of waste paper, which means that the winner may take nothing. In the process of international trade and investment, one of the most important reasons for the wide recognition of international arbitration is that foreign arbitration awards are more enforceable than foreign court decisions. From the “going global” strategy to the “One Belt One Road” initiative, with the continuous expansion of the overseas blueprints of Chinese enterprises, the rise of commercial dispute resolution is inevitable. For both Chinese and foreign parties, it is rather important to carry out practical analysis on the recognition and enforcement of foreign arbitral awards by Chinese courts.


This article adopts the method of big data analysis, and has searched 194 cases of applications for recognition and enforcement of foreign arbitral awards accepted by Chinese courts in the past 20 years. In order to study and summarize the reasons invoked by Chinese courts for refusing the recognition and enforcement of foreign arbitral awards, this article then analyzes 38 cases where the foreign arbitral awards were ruled not to be recognized and enforced in China. In addition, this article also provides reasonable suggestions for both Chinese and foreign parties on recognition and enforcement of foreign arbitral awards through Chinese court to protect their commercial interests.



I.Legal Basis for Chinese Courts for Refusing Recognition and Enforcement of Foreign Arbitral Awards



A.New York Convention and its Article 5


The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter referred to as the “New York Convention”), which aims to develop international economics and trade, promote commercial dispute resolution and encourage the recognition and enforcement of arbitral awards worldwide, was signed and approved at the United Nations International Commercial Arbitration Conference held in New York on June 10, 1958. As countries continue to join, as of July 2020, the number of parties to the New York Convention has reached 164, which has increasingly demonstrated the influence of the New York Convention on countries and its vigorous vitality in the field of international commercial arbitration.


China joined the New York Convention on January 22, 1987. In order to ensure the implementation of the Convention in China, the Supreme Court of the People's Republic of China promulgated theNotice of the Supreme People's Court on the Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards on April 10, 1987. According to the notice, regarding the recognition and enforcement of arbitral awards made in the territory of another contracting State, China applies the Convention in accordance with the declaration of reciprocal reservations made when China joined the New York Convention. If there is inconsistence between the New York Convention and the Civil Procedural Law of the People’s Republic of China, the provisions of the Convention shall prevail. This part of the content has also been confirmed in Article 260 of the Civil Procedural Law of the People’s Republic of China (2017 Revised), which clarifies the principle of priority application of international treaties, meaning that if there is inconsistence between the international conventions that China has concluded or joined and the Civil Procedural Law of the People’s Republic of China, the provisions of the international convention shall apply, except for the provisions that China has declared reservations. Therefore, regarding the recognition and enforcement of foreign arbitration awards made in the territory of another contracting State to the New York Convention, the provisions of the New York Convention shall apply.


According to Article 3 of the Notice of the Supreme People's Court on the Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the applicant who is entitled to apply for recognition and enforcement of a foreign arbitral award to a Chinese court shall be a party to the arbitration award, and the court with jurisdiction shall be an Intermediate People's Court with connection to the place of residence or property of the person subject to enforcement, which is also confirmed in Article 283 of the Civil Procedural Law of the People’s Republic of China (2017 Revised).


Article 5 of the New York Convention sets out the reasons for refusing recognition and enforcement of foreign arbitral awards. From the restrictive expression of “only if” in Article 5, Paragraphs 1 and 2 of Article 5 of the New York Convention exhaustively enumerates seven circumstances under which recognition and enforcement of foreign arbitral awards may be refused, that is, the court shall not refuse to recognize and enforce foreign arbitration awards for reasons other than listed in Article 5. Besides, the five types of grounds in the first paragraph must be initiated by one party’s request, while the two types of grounds in the second paragraph could be reviewed by court at its own initiative. Therefore, to some extent the court of the contracting State is granted relatively great power of active review by the second paragraph of Article 5.


According to Article 3 of the Notice of the Supreme People's Court on the Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, upon receipt of applications for recognition and enforcement of foreign arbitral awards, Chinese courts shall review the application in comply with Paragraphs 1 and 2 of Article 5 of the New York Convention, which is also confirmed by the principle of priority application of international treaties in Article 260 of the Civil Procedural Law of the People’s Republic of China (2017 Revised).


Besides, Article 2 of the Notice of the Supreme People’s Court on the Handling of Issues Concerning Foreign-related Arbitration and Foreign Arbitration by People’ Courts in 1995 also provides that, if the Intermediate People’s Court intends to decide not to recognize and enforce the award, it must report to the Higher People's Court of the ruling district for review, and if the Higher People’s Court agrees not to recognize and enforce, the Supreme People’s Court shall review the decision. Only after receiving the reply from the Supreme People’s Court, the court shall decide not to implement or refuse to recognize and enforce the arbitral award. Such provision actually elevates the power to refusing recognition and enforcement of foreign arbitral awards to the Supreme People’s Court, which unifies local courts’ understanding and practice of the New York Convention through the reply of the Supreme People’s Court, to the largest extent respecting and encouraging the recognition and enforcement of foreign arbitral awards in China.




B.Mainland and Hong Kong, Macau Mutual Enforcement of Arbitral Awards


On July 1, 1997, upon resuming the exercise of sovereignty over Hong Kong, the Government of China immediately notified the Secretary-General of the New York Convention that the Convention shall apply to the Hong Kong Special Administrative Region in accordance with the statement made by the China when acceding to the Convention. On July 19, 2005, the Government of China declared again that the New York Convention also applies to the Macau Special Administrative Region in accordance with the statement made by the China when acceding to the Convention.


In order to promote the mutual recognition and enforcement efficiency of arbitral awards between Hong Kong, Macau and Mainland China, relevant judicial interpretations have been signed between Hong Kong, Macau and Mainland China respectively. Hong Kong and Mainland specially formulated and passed theArrangements of the Supreme People's Court on the Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (hereinafter referred to as the “Mainland-Hong Kong Arrangement”) in 1999, while Macau and Mainland specially formulated and passed the Arrangements of the Supreme People's Court on Mutual Recognition and Enforcement of Arbitral Awards Made in the Mainland and Macau Special Administrative Region (hereinafter referred to as the “Mainland-Macau Arrangement”) in 2007. There exists highly similarity among Article 7 of the Mainland-Hong Kong Arrangement, Article 7 of the Mainland-Macau Arrangement, and Article 5 of the New York Convention, except for the public interest reservation clause. Article 5.2 (b) of the New York Convention is stated as “be contrary to the public policy of that country”, Article 7, paragraph 3 of the Mainland-Hong Kong Arrangement is expressed as “be contrary to the public interests of the Mainland”, while Article 7, paragraph 3 of the Mainland-Macau Arrangement is expressed as “be contrary to the fundamental legal principles and public interests of the Mainland”.




C.Recognition of Taiwan Arbitral Awards by Chinese Courts


Regarding the mutual recognition and enforcement of arbitral awards between the Mainland China and Taiwan, no arrangements by judicial organs similar to which between Hong Kong, Macau and Mainland have been reached. With regard to the recognition and enforcement of Taiwan arbitral awards by the courts of Mainland, the latest regulations are the Regulations of the Supreme People's Court on Recognition and Enforcement of Taiwan Arbitral Awardspromulgated on June 2, 2015, meaning that the previousRegulations of the Supreme People’s Court Concerning Recognition by People’s Courts of Civil Judgments of Taiwan Courts promulgated on January 15, 1998, and the Supplementary Regulations Concerning Recognition by People’s Courts of Civil Judgments of Taiwan Courts adopted by the Judicial Committee of the Supreme People’s Court on March 30, 2009 would no longer apply to the recognition and enforcement of Taiwan arbitral awards in Mainland.


Article 14 of the Regulations of the Supreme People's Court on Recognition and Enforcement of Taiwan Arbitral Awards in 2015 lists seven types of grounds for Mainland courts not to recognize Taiwan arbitral awards, which is on the whole the same as Article 5 of the New York Convention. However, the public policy reservation clause in Article 14, Paragraph 2 of the Regulations of the Supreme People's Court on Recognition and Enforcement of Taiwan Arbitral Awards is expressed as “be contrary to the One China principle and other fundamental principles or public interests”, which wears relatively strong politics.




II.Rejection of Recognition and Enforcement of Foreign Arbitral Awards by Chinese Courts under Big Data 



The author adopts “arbitral award”, “recognition”, “enforcement” and “Article 5 of the New York Convention” as keywords, and conducts research in databases such as Wolters Kluwer, Peking University Magic Treasure, and China Judgment Document Net. Since 2001, there have been 194 cases regarding applications for the recognition and enforcement of foreign arbitral awards in Chinese courts, among which, except for 38 foreign arbitral awards which were ruled not to be recognized and enforced by Chinese courts, more than 80% of foreign arbitral awards have been actively recognized by Chinese courts.


In order to fully analyze the reasons for Chinese courts refusing the recognition and enforcement of foreign arbitral awards, besides cases where Chinese courts refused to recognize and enforce foreign arbitral awards under Article 5 of the New York Convention, 3 cases regarding non-enforcement of Hong Kong arbitral awards under Article 7 of the Mainland-Hong Kong Arrangement are also included in this article.


Through statistics on the judgement time, recognition and enforcement status of 194 cases (see Figure 1): From 2001 to 2015, Chinese courts accepted a total of 90 cases of applications for recognition and enforcement of foreign arbitral awards, of which 30 cases were ruled not recognize and enforce. From 2016 to the present, in less than five years, the number of cases accepted by Chinese courts for recognition and enforcement of foreign arbitral awards has reached 104, which has exceeded the number of related cases accepted by Chinese courts in the previous 15 years, and only 8 cases were refused to be recognized and enforced, meaning that the recognition and enforcement rate has reached up to 92.3%.


Figure 1: the Recognition and Enforcement of Foreign Arbitral Awards by Chinese Courts from 2001 to Present 



It can be seen that with the rapid development of foreign trade and investment of Chinese enterprises, the number of arbitration awards caused by commercial disputes is also increasing, which has led to a large number of cases regarding applications for recognition and enforcement of foreign arbitral awards in China. Meanwhile, with the significant rise in the number of applications, the recognition and enforcement rate ruled by Chinese courts has also increased substantively compared to the past.


Through statistics on the reasons cited in 38 cases where Chinese courts refused recognition and enforcement of foreign arbitral awards in accordance with Article 5 of the New York Convention from 2001 to the present (Figure 2): The most common reason is “no valid arbitration agreement” in Article 5.1 (a) of the New York Convention, and a total of 12 cases cited this reason; “deciding beyond the scope” under Article 5.1 (c) and “composition or procedure of the arbitration discrepancy” under Article 5.1 (d) are also frequently cited, and each appeared in the conclusions of 10 cases; “party not given proper notice” under Article 5.1 (b) was cited in 7 cases; “matter not capable of settlement by arbitration” under Article 5.2 (a) and “Public policy reservation” under Article 5.2 (b) are less frequently cited, only 1 and 3 cases respectively invoked relevant reason; in Chinese judicial practice so far, Chinese courts have not refused the recognition and enforcement of foreign arbitral award for “award not binding” reason under Article 5.1 (e).


Figure 2: Distribution of Reasons Cited by Chinese Courts for Refusing Recognition and Enforcement of Foreign Arbitral Awards under Article 5 of the New York Convention



The following section of this article will analyze the seven grounds for not recognizing and enforcing foreign arbitral awards under Article 5 of the New York Convention in Chinese judicial practice in detail.




III.Analysis of Seven Reasons for Rejection of Recognition and Enforcement of Foreign Arbitral Awards under Big Data



A.No Valid Arbitration Agreement


According to Article 5.1 (a) of the New York Convention, under two circumstances shall the recognition and enforcement of the foreign arbitral awards be refused, that is, the parties are under incapacity or the arbitration agreement is invalid. Owing to the fact that the direct result of the incapacity of the parties is usually to be the invalidity of the arbitration agreement, thus Article 5.1 (a) of the New York Convention is usually summarized as the inexistence of valid arbitration agreement in practice.


Under Article 5.1 (a) of the New York Convention, the governing law for reviewing the validity of the arbitration agreement shall firstly be the law agreed by both parties. However, as arbitration agreements often exist in the form of clauses as part of the main contract in practice, it is uncommon for the parties to separately agree on the governing law regarding the validity of the arbitration clause. Under the circumstance that the parties have not agreed on the governing law for the arbitration agreement, there exist two mainstream views in practice, namely, applying the substantive law or the law of the seat of arbitration. The substantive law is the law applicable for solving the substantive issues of the main contract, which reflects the mutual consent of both parties. In the absence of agreement on the governing law for the arbitration agreement, it is considered to be the parties’ implicit intention to have the substantive law also binding the arbitration agreement in a number of cases. [1] However, based on the principle of independence and separability, the validity of the arbitration agreement and its governing law are independent of the main contract. Article 5.1 (a) of the New York Convention thus adopts the view of the law of the seat of arbitration, which clearly stipulates that the arbitration agreement shall be reviewed “under the law of the country where the award was made” if there is no “indication” to the governing law of the arbitration agreement between the parties.


Except for the situation where the arbitration agreement is ruled invalid, if the parties fail to reach a consensus on the arbitration agreement, the court may also invoke Article 5.1 (a) of the New York Convention to refuse the recognition and enforcement. In theSingapore Yideman Asian Co Pte Ltd v. Wuxi Huaxin Cocoa Food Corp [2] case, although the Supreme People's Court did not expressly invoke Article 5.1 (a) of the New York Convention in the reply, it pointed out that “reaching consensus on dispute resolution through arbitration” is “the premise for the independent validity of the arbitration clause or arbitration agreement”. Such reason was also applied in the subsequent Allenberg Cotton Co Ltd v. Jiangsu Nijiaxiang Group Co Ltd [3] case, in which the court held that “the conclusion of the arbitration agreement is the premise of the validity of the arbitration agreement”, while “the mutual intention on having dispute resolved through arbitration between the parties is the premise of the conclusion of the arbitration agreement”. Although the court pointed out that the failure to conclude arbitration agreement does not conform to the arbitral condition under Article 2 of the New York Convention, the court could only invoke Article 5 of the Convention to refuse recognition and enforcement of foreign arbitral awards. Therefore, in the case at hand, the Court decided not to recognize and enforce the arbitral award made by International Cotton Association in accordance with Article 5.1 (a) of the New York Convention. It is worth noting that, among the 12 cases that Chinese court refused to recognize and enforce under Article 5.1 (a) of the New York Convention, there are 7 cases in which the failure to reach arbitration agreements were resulted from the unauthorized agency or fraudulent conduct of relevant personnel.





B.Party Not Given Proper Notice


Article 5.1 (b) of the New York Convention has often been invoked by Chinese courts to refuse recognition of foreign arbitral awards. As a due process clause, Article 5.1 (b) is an important provision to protect the parties' fair defense rights.


Whether the parties have been properly notified is a very practical issue, which generally include arbitration, appointment of arbitrators, composition of arbitration tribunals, hearings, close of evidence, and service of arbitral awards. Article 5.1 (b) of the New York Convention does not designate the issuer of the notice. In civil law countries, notices are mostly issued by arbitration commissions or arbitral tribunals, while in common law countries, notices are often issued by the arbitration claimant to the respondent. In practice, China does not of course deny foreign courts' service methods, but adopts the “effective” standard to review whether the parties have been given proper notice. Cosmos Marine Managements S.A. v. Tianjin Kaiqiang Trading Ltd. [4] case refers to an arbitration award made by a London arbitrator. According to Article 14.4 of the 1996 English Arbitration Act, if the arbitrator needs to be appointed by the parties, the notice of arbitration procedure and the appointment of the arbitrator may be served by one party to the other party. However, the claimant Cosmos Marine Managements S.A. failed to provide the confirmation of receipt of the email by Tianjin Kaiqiang Trading Ltd., or other evidence that Tianjin Kaiqiang Trading Ltd. has received the email, thus failed to prove that the respondent has been given proper notice of the appointment of arbitrators and arbitration procedures, and was refused recognition and enforcement of the arbitral award as a result.In addition to failing to provide evidence that the respondent has been properly notified when the claimant is the subject of the notification, the arbitration commission or arbitration tribunal may also have omissions as the subject of the notification. For instance, in the Aiduoladuo (Mongolia) Co. Ltd. v. Zhejiang Zhancheng Construction Group Co. Ltd. [5] case, the Mongolian National Arbitration Court failed to deliver the express mail including “resolution procedures and arbitration hearing date” to Zhejiang Zhancheng Construction Group Co. Ltd., resulting in its failure to present the case, thus the Chinese court finally ruled not to recognize and execute the arbitral award.


In addition, there is another circumstance worth noting in practice, that is, if there are changes in the notified matters, whether additional notice is required. Among the 7 cases in which Chinese courts cited Article 5.1 (b) of the New York Convention to refuse recognition and enforcement, there exist relevant facts in 3 cases. In the Hong Kong Dongfeng Shipping Co., Ltd. v. Shenyang Sinotrans Group Corp [6] case, the claimant Hong Kong Dongfeng Shipping Co., Ltd. failed to provide written evidence of noticing the respondent regarding the additional appointment of arbitrators, the court thus ruled not to recognize and enforce. Therefore, if changes in circumstances or facts lead to changes in the composition of arbitral tribunal, hearing date and so on, the arbitration documents that have been properly notified will be invalid. In order to protect the other party’s right to present the case, the arbitral tribunal or one party shall serve separately, otherwise it would be regarded as violation of due process.




C.Deciding Beyond the Scope


“Party autonomy” is the core and cornerstone of the entire international commercial arbitration system.[7] In international commercial arbitration, the power of arbitrators directly and exclusively comes from the parties, whether from the arbitration agreement or request. Therefore, in accordance with Article 5.1 (c) of the New York Convention, the court will determine whether the foreign arbitral tribunal “decide beyond the scope” from two aspects, namely, the terms of the arbitration agreement and the scope of the submission to arbitration. Among the 10 cases where Article 5.1 (c) of the New York Convention was applied, except for 2 cases that the tribunal decided exceeding the arbitration request submitted by the applicant, the remaining cases were ruled refusing recognition and enforcement for deciding beyond the scope of the arbitration agreement.


As far as the arbitration request submitted by the applicant is concerned, based on the principle of “minimum judicial intervention”, unless the arbitral award is clearly beyond the scope of submission to arbitration, the court would generally not interfere with the recognition and enforcement of a foreign arbitral award on the grounds of exceeding the arbitration request. [8] In Chenco Chemical Engineering and Consulting GMBH v. Duofluoroduo Chemical Co. Ltd [9] case, the arbitration submitted by Chenco to International Commercial Arbitration Court is to request Duofluoroduo to stop using “unauthorized” Chenco technology and to pay liquidated damages arising from the use of “unauthorized” technology. However, Item (414) of the Final Award of the International Commercial Arbitration Court stated that “as long as the company continues to use Chenco technology”, it shall pay monthly fine, and Item (415) ruled that “Duofluoroduo shall not use Chenco technology” until it has paid off the payment under Item (414). The content of the above arbitral award did not emphasize “unauthorized” Chenco technology, which included not only unauthorized technology but also authorized technology, obviously exceeding the arbitration request submitted by Chenco. Therefore, the court ruled that the part of the award exceeding the arbitration request shall not be recognized and enforced.


As far as the scope of the arbitration agreement is concerned, in practice, the parties generally adopt all-inclusive expressions such as “disputes arising from this contract” or “all disputes related to this contract”. As long as the parties do not specifically agree on which disputes could or could not be submitted to arbitration, the arbitral tribunal would generally adopt the widest possible interpretation method for the extension of the arbitration agreement, to expand the application of its own jurisdiction. Normally, the court would also respect the jurisdiction of the arbitral tribunal. [10] Therefore, the refusal of recognition and enforcement on the grounds of deciding beyond the scope is often not because the court rules that the arbitral award is beyond the scope of the arbitration agreement, but because in the presence of multiple parties, there exists no effective arbitration among some of the parties. 


Among the 10 cases which were ruled as deciding beyond the scope in China, 80% of the cases can be summed up as: the party not bound by the arbitration agreement involved in the case were listed as the arbitration respondent and ruled to bear responsibility. Among them, 7 cases involved three or more applicants or respondents, 3 arbitral awards involved the joint venture company established by the claimants or the respondents, and in 1 case the non-party was ruled to assume the responsibility of guarantee [11]. In Jess Smith & Sons Cotton. LLC v. Wuxi Natural Textile Industry Co. Ltd et al. [12] case, Jess Smith Company and Natural Textile Company signed the PME-10032 cotton sales contract. This contract has undergone five revisions, and the buyer’s name was originally Natural Textile Company. In the fourth revision on May 11, 2012, the buyer’s name was changed to Green Fiber Company, and both Natural Textile Company and Green Fiber Company as the parties to the contract bear joint and several liabilities, but there existed neither signature and seal of Natural Textile Company nor of Green Fiber Company in this contract. After Jess Smith Company filed an arbitration application to the International Cotton Association for Contract PME-10032, the International Cotton Association ruled that Natural Textile Company and Green Fiber Company as the buyer shall jointly pay the seller Jess Smith Company corresponding expenses. The Chinese court held that, first of all, Natural Textile Company and Green Fiber Company are two companies with independent legal personality, even taking into consideration the fact that their legal representatives and vice presidents overlap, and that Green Fiber Company issues the credit for the order of Natural Textile Company, they could not be proved to be actually the same enterprise; secondly, there was no signature of Green Fiber Company in the contract where Green Fiber Company was stated as the buyer on May 11, 2011, thus this contract could not be regarded as established. Therefore, under the situation that there was no effective contract between Jess Smith Company and Green Fiber Company, there was no effective arbitration agreement or arbitration clause between the two parties.


In addition, the application of Article 5.1 (c) of the New York Convention also involves the issue of whether the arbitral award is separable, which means that if the part of arbitral award beyond the scope of the arbitration agreement or the arbitration request submitted by the applicant cannot be separated from that is not, the whole award would be refused recognition and enforcement. Therefore, under the circumstance that there is no effective arbitration agreement between some of the parties in cases involving more than three parties, Chinese court would cite Article 5.1 (c) of the New York Convention on the grounds of “deciding beyond the scope”, rather than Article 5.1 (a) on the ground of “no valid arbitration agreement” to refuse recognition and enforcement, so as to ensure the recognition and enforcement of the part of award that the arbitral tribunal can decide under the condition that the arbitral award is separable, showing respect for foreign arbitral award to the largest extent. [13] In practice, naturally there are cases in which the whole arbitral award is not recognized and enforced due to deciding beyond the scope and inseparable arbitration matters. Still in Jess Smith & Sons Cotton. LLC v. Wuxi Natural Textile Industry Co. Ltd et al. [14] case, the arbitral tribunal ruled that Natural Textile Company and Green Fiber Company shall bear joint and several liability, namely, the tribunal failed to distinguish the responsibilities of the two companies. Therefore, the court was also unable to distinguish between the part of award decided by the tribunal, thus ruled not to recognize and enforce the whole award. Therefore, if the arbitral tribunal does not distinguish the distribution of responsibilities among multiple respondents in the award, it is not uncommon that the whole award is refused recognition and enforcement once there exists “deciding beyond the scope”.




D.Composition or procedure of the arbitration discrepancy


In practice, the composition or procedure of the arbitration not conforming to the arbitration agreement or the law of the seat of arbitration under Article 5.1 (d) of the New York Convention is often cited by Chinese courts as the ground for refusing recognition and enforcement. Noble Resources International Pte. Ltd. v. Shanghai Xintai International Trade Co. Ltd.[15] case is the latest practice in Chinese court applying Article 5.1 (d) of the New York Convention to refuse recognition and enforcement of foreign arbitral award.


In this case, Article 16.1 of the arbitration clause between Noble Company and Xintai Company clearly stated that “disputes and claims shall be submitted to Singapore for arbitration in accordance with the effective Arbitration Rules of SIAC, with the arbitration tribunal composed of three (3) arbitrators. composition". Although SIAC applies the “expedited procedure” in accordance with the request of Noble Company, its Arbitration Rules (the 5th edition of 2013) does not exclude the parties from applying the “expedited procedure” while obtaining three arbitrators in accordance with the arbitration clause. Therefore, under the circumstance that the arbitration clause stipulated the composition of the arbitration tribunal of three arbitrators and that Xintai Company was expressly opposed to sole arbitrator, SIAC still decided to adopt the composition of sole arbitrator under Article 5.2 of its Arbitration Rules (the 5th edition of 2013), which violated the arbitration clause between the parties, constituting the situation that the composition or procedure of the arbitration does not conform to the arbitration agreement or the law of the seat of arbitration under Article 5.1 (d) of the New York Convention.


In addition, the court in the case also clearly stated that “party autonomy is the cornerstone of the operation of the arbitration system, and the composition of the arbitral tribunal forms one of the basic procedural rules of arbitration.” Therefore, whether when arbitral institutions exercise their power to determine the composition or procedure of the arbitration, or when Chinese courts review the recognition and enforcement of foreign arbitral awards, they should explain and apply the arbitration rules based on fully respecting the part autonomy.




E.Award Not Binding


Although there have been cases in which the respondent has requested the Chinese court to refuse recognition and enforcement of foreign arbitral awards based on Article 5.1 (e) of the New York Convention, there has not yet been Chinese judicial practice that refuses to recognize and enforce foreign arbitral awards on this ground. 


In Water Solutions (Hong Kong) Limited v. Hongbo Home Appliances (Shenzhen) Co. Ltd. [16] case, after comprehensively analyzing factors such as the possibility of supporting the respondent’s application for withdrawal by the US court, whether the respondent could provide evidence to prove that its application for withdrawal would be supported, and so on based on the facts of the case, the Chinese court finally ruled recognition and enforcement of the arbitral award, reflecting both the flexible application of discretion and the promotion of foreign arbitral award enforcement efficiency by Chinese court.




F.Matter not capable of settlement by arbitration


According to Article 5.2 (a) of the New York Convention, if the subject matter of the dispute is not capable of settlement by arbitration under Chinese law, the Chinese court may refuse to recognize and enforce the arbitral award. So far, there exists only one case that the Chinese court refused to recognize and enforce foreign arbitral award on this ground.


The Supreme People’s Court pointed out in the (2009) Min Sita Zi No. 33 Reply [17] that, in the case at hand, claimant Wu Chunying as the legal heir of her deceased husband, claimed her contract rights to the Mongolian Arbitration Tribunal in accordance with the arbitration clause in the contract involved. If the arbitral award did not involve inheritance matters, it could be recognized and enforced. However, the main content of the arbitral award was to confirm Wu Chunying's legal heir status and the resultant investment property right, rather than dealing with commercial disputes of the company such as continued operation or cancellation. Since Article 3 of the Arbitration Law of the People's Republic of China stipulates that inheritance matter is not capable of settlement by arbitration, the Chinese court refused the recognition and enforcement of the arbitral award at hand in accordance with Article 5.2 (a) of the New York Convention.




G.Public Policy Reservation


The meaning, scope and specific content of “public policy” are not clearly stipulated in Article 5.2 (b) of the New York Convention. For this reason, such public policy reservation clause gives the courts of various contracting States discretion and serves as a "safety valve" for reviewing whether to recognize and enforce foreign arbitral awards, which also explains why the New York Convention is widely accepted by countries around the world. [18] However, due to the vagueness and controversy of “public policy” itself, it often raises the concern regarding expansive interpretation for nationalism or national interests. Although Article 5.2 (b) of the New York Convention clearly defines public policy as “the public policy of that country”, more and more countries have positioned it as “international public policy” and limited its scope of application strictly in recent years.[19]


In correspondence with the international trend of restrictive interpretation and  application of Article 5.2 (b) of the New York Convention, although it is often cited by the parties as the reason for non-recognition and enforcement, China has always maintained cautious regarding public policy reservation clause. Among the 38 cases where Chinese courts refused to recognize and enforce foreign arbitral awards, only 3 cases were due to public policy reservation reason.


Chinese courts usually adopt negative expressions for not applying public policy reservation clause, for instance, “violation of Chinese mandatory legal provisions does not necessarily lead to violation of Chinese public policy” [20], “whether the substantive outcome of the arbitration is fair and reasonable cannot be regarded as the standard for determining whether the recognition and enforcement of arbitral award violates Chinese public policy” [21], and the violation of the “management provisions in the mandatory norms of administrative regulations” of China does not constitute violation of public interests [22].


In the 3 cases where Chinese courts revoked public policy reservation clause for refusing recognition and enforcement, the basic fact is that the foreign arbitral award conflicted with the effective ruling or judgment made by the Chinese court. TakingWicor Holding AG v. Taizhou Hope Investment Co. Ltd. [23] case as an example, under the situation where the arbitration clause involved had been ruled invalid by Jiangsu Higher People's Court due another dispute, the International Commercial Arbitration Court made the arbitral award on the premise that the arbitration clause involved was valid. Therefore, the Chinese court held that “enforcement of the arbitral award in Mainland would conflict with the effective ruling of the people's court, violating the public interest of Mainland”, and ruled that the arbitral award involved shall not be enforced in accordance with Article 7, paragraph 3 of the Mainland-Hong Kong Arrangement.




IV.Conclusion



Through the analysis of 194 cases of application for recognition and enforcement of foreign arbitral awards accepted by Chinese courts in the past 20 years, especially the 38 cases where the recognition and enforcement of foreign arbitral awards were refused, it could be concluded that the reasons Chinese courts cited to refuse recognition and enforcement often come from Article 5.1 (a), (c), (d) and (b) of the New York Convention, the most common of which is “no valid arbitration agreement”, followed by "deciding beyond the scope” and “composition or procedures of the arbitration discrepancy”, and then “party not given proper notice”. The remaining three reasons, namely, “award not binding” under Article 5.1 (e), “matter not capable of settlement by arbitration” under Article 5.2 (a) and “public policy reservation” under Article 5.2 (b) were rarely cited, which invoke relatively small risk.


In order to guarantee the efficiency of recognition and enforcement of foreign arbitral awards in China, the parties involved in Chinese-foreign trade and investment need to minimize the risk of being denied recognition and enforcement in two stages.


First of all, in the stage of contract conclusion, as far as the main contract is concerned, the parties ought to confirm matters such as the identity of the negotiator of the commercial contract, the scope of authorization, the completeness of the signature and so on. Only by paying due attention to relevant details, could the risk of invalidity of the main contract and the resultant invalidity of the arbitration agreement be minimized. With respect to the arbitration agreement, the parties could clearly agree on matters including the seat of arbitration, arbitration rules, the governing law of the arbitration agreement, the composition of the arbitral tribunal and so on. On the premise that the parties have reasonable anticipation of relevant rules and laws, they could fully express their opinions and establish such claims during the conclusion of the arbitration agreement, which also provides reliable basis for the composition and procedure of arbitration in accordance with party autonomy in the event of arbitration. 


Secondly, during the arbitration proceedings, for one thing, Chinese-foreign trade and investment always involve multiple transaction parties and joint venture companies established between the parties. In the case that the relevant arbitration agreement does not bind all parties of the transaction, once arbitration occurs, it is very easy to produce “deciding beyond the scope” problem. In particular, if the arbitral tribunal does not distinguish the distribution of responsibilities among multiple respondents in the award, the result is often that the whole award is refused to be recognized and enforced. Therefore, the parties to the arbitration should clarify whether there is a valid arbitration agreement between the parties and the scope of the arbitration agreement. 


For another, as for the due process clause, if the claimant is determined to be the subject of notification in accordance with the arbitration rules, the claimant shall confirm that the respondent has been properly notified and preserve relevant evidence, in order to prevent the respondent from opposing the recognition and enforcement of the arbitral award for unable to present his case. Moreover, once there is a change in the arbitration matter, one party or the arbitration tribunal needs to notify separately to guarantee the right to present of the other party.


In international trade and investment disputes, for claimants in international arbitration, they may not be able to obtain damages simply by winning the arbitration, while the enforcement of award is the ultimate goal. Only by grasping the details that may resulting in the seven circumstances under Article 5 of the New York Convention in the two stages of contract conclusion and arbitration, can the parties better prevent the legal risks of international commercial arbitration and safeguard their own commercial interests.





Thanks to team intern Gong Zheng for contributing to this article





注释:

[1]Gary B. Born, International Commercial Arbitration (Second Edition), Kluwer Law International 2014, “Chapter 5: Formation, Validity and Legality of International Arbitration Agreements”, pp. 636-942. 

[2]Singapore Yideman Asian Co (Asia) Pte Ltd v. Wuxi Huaxin Cocoa Food Corp, Supreme People’s Court, China, (2001) Min Si Ta Zi No. 43.

[3]Allenberg Cotton Co Ltd v. Jiangsu Nijiaxiang Group Co Ltd, Wuxi Intermediate People's Court of Jiangsu Province, China, (2013) Xi Shang Wai Zhong Shen Zi No. 009.

[4]Cosmos Marine Managements S.A. v. Tianjin Kaiqiang Trading Ltd., Supreme People’s Court, China, (2006) Min Si Ta Zi No. 34.

[5]Aiduoladuo (Mongolia) Co. Ltd. v. Zhejiang Zhancheng Construction Group Co. Ltd., Shaoxing Intermediate People's Court of Zhejiang Province, China, (2009) Shao Zhe Min Que Zi No. 1.

[6]Hong Kong Dongfeng Shipping Co., Ltd. v. Shenyang Sinotrans Group Corp, Supreme People’s Court, China, (2006) Min Si Ta Zi No. 12.

[7]丁立柏,王峥:《论国际商事仲裁制度中的意思自治原则》,载《重庆大学学报(社会科学版)》2006年第1期,第82页。

[8]狄建庆,姚强:《国际商事仲裁裁决“超裁”的司法认定——对申请承认及执行外国仲裁裁决纠纷案的评析》,载《天津法学》2016年第3期,第101页。

[9]Chenco Chemical Engineering and Consulting GMBH v. Duofluoroduo Chemical Co. Ltd, Xinxiang Intermediate People's Court of Henan Province, China, (2015)Xin Zhong Min San Chu Zi No. 53.

[10]狄建庆,姚强:《国际商事仲裁裁决“超裁”的司法认定——对申请承认及执行外国仲裁裁决纠纷案的评析》,载《天津法学》2016年第3期,第101页。

[11]Spliethoff's Bevrachtingskantoor B. V.  v. Shandong (China) Electronics Import and Export Corp et al., Supreme People’s Court, China, (2015) Min Si Ta Zi No. 48.

[12]Jess Smith & Sons Cotton. LLC v. Wuxi Natural Textile Industry Co. Ltd et al., Wuxi Intermediate People's Court of Jiangsu Province, China, (2013) Xi Shang Wai Zhong Shen Zi No. 007.

[13]王好:《外国仲裁裁决司法审查中“超裁”认定的实证分析》,载《法律适用》2019年第4期,第118页。

[14]Jess Smith & Sons Cotton. LLC v. Wuxi Natural Textile Industry Co. Ltd et al., Wuxi Intermediate People's Court of Jiangsu Province, China, (2013) Xi Shang Wai Zhong Shen Zi No. 007.

[15]Noble Resources International Pte. Ltd. v. Shanghai Xintai International Trade Co. Ltd., the First Intermediate People's Court of Shanghai, China, (2016) Hu 01 Xie Wai Ren No. 1.

[16]Water Solutions (Hong Kong) Limited v. Hongbo Home Appliances (Shenzhen) Co. Ltd., Shenzhen Intermediate People's Court of Guandong Province, China, (2018) Yue 03 Zhi No. 1815.

[17]Reply of the Supreme People's Court to the request for instructions on the non-recognition and enforcement of the arbitration award of the Mongolian National Arbitration Tribunal, Supreme People’s Court, China, (2009) Min Si Ta Zi No. 33.

[18]邹挺谦:《公共政政策在国际商事仲裁裁决承认与执行中的运用》,载《人民法治》2019年第14期,第89页。

[19]Id.

[20]ED&F Mans (Hong Kong) Co., Ltd. v. China Sugar & Liquor Group Corp, Supreme People’s Court, China, (2003) Min Si Ta Zi No. 3.

[21]Reply of the Supreme People's Court to the request for instructions from GRD Minproc Ltd.'s application for recognition and enforcement of the Arbitral Award of Stockholm Chamber of Commerce (Sweden), Supreme People’s Court, China, (2008) Min Si Ta Zi No. 48.

[22]Tianrui Hotel Investment Co. Ltd. v. Hangzhou E-House Hotel Management Co. Ltd., Supreme People’s Court, China, (2010) Min Si Ta Zi No. 18.

[23]Wicor Holding AG v. Taizhou Hope Investment Co. Ltd., Supreme People’s Court, China, (2016) Min Si Ta Zi No. 8.



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作者简介

Du Yue

Member of Shanghai Law Association International Trade Business Research Committee,Partner of Deheng Law Group, and Deputy Director of DHH Shanghai Office

Du Yue is the Master of International Economic Law graduated from the Chinese University of Hong Kong and both the extramural supervisor of the Chinese University of Hong Kong. She has actively worked in a famous U.S. consulting company, dealing with International Trade Compliance, International Commercial Arbitration, International Trade and Finance.


As a partner, Du Yue has served many multi-national enterprises, including Fresenius Medical Care, AkzoNobel, Glencore, NOV, Lenovo, Magna, ON Semiconductor, SMC, Starwood, Angang Group, etc. She also has wide experience in International Arbitration in famous International Arbitration Institutions, including ICC Court of Arbitration, SIAC, HKIAC, CIETAC, SHIAC, SCIA, etc. Besides, she has published the book “International Commercial Arbitration Practice” in China Legal Publishing House, and has achieved many prizes from the law firm and favorable comments from the clients.


E-mail:duyue@deheng.com

Mobile:13681774509


质控人简介

金  耀

高级合伙人

国际贸易业务中心副总监、国际贸易专业委员会主任

邮箱:jinyao@deheng.com


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