China: The "Golden Landmark Case" – A New Dawn For Enforcement Of Foreign Arbitral Awards In China?

Siemens International Trading (Shanghai) Co., Ltd vs. Shanghai Golden Landmark Co., Ltd (2013) Hu Yi Zhong Min Ren (Wai Zhong) Zi No. 2 (27 November 2015) (Shanghai No.1 Intermediate People's Court).

In a recent case in the Intermediate People's Court of Shanghai, the Court decided to recognise and enforce a foreign arbitration award in China, even though the arbitration took place in Singapore between two PRC-incorporated companies. This represents a break from past decisions, and has interesting implications for foreign parties operating in the PRC through PRC entities.

The factual background

The dispute concerned a sale and purchase contract entered into between two PRC entities. Both of the entities were wholly foreign owned enterprises (categorized under PRC law as "WFOEs").

The contract was governed by PRC law, but provided for any disputes to be resolved in Singapore, before the Singapore International Arbitration Centre (SIAC). A dispute arose between the parties, and in 2007 the Buyer commenced arbitration in Singapore against the Seller.

The Seller challenged the tribunal's jurisdiction, arguing that PRC law did not permit disputes without a "foreign element" to be arbitrated outside of the PRC. The tribunal rejected the Seller's challenge. The Seller accordingly submitted to arbitration and filed a counterclaim against the Buyer.

In its decision, the tribunal rejected the Buyer's claims, and issued an award in favour of the Seller. However, the Buyer failed to satisfy the entire award, and in June 2013 the Seller commenced proceedings in Shanghai for the recognition and enforcement of the award.

The Buyer challenged the application on the basis that the dispute had no "foreign element" (both parties were PRC registered entities and the contract was part performed in China). The Buyer argued that because PRC law does not allow for non-"foreign-related" disputes to be arbitrated outside the PRC, the award could not be upheld.

The legal background

Under PRC law, the general rule is that "domestic" disputes can only be arbitrated in the PRC, whereas "foreign-related" disputes may be arbitrated either within or outside the PRC. This means that for domestic disputes, the arbitration must be seated in China and subject to the rules of a Chinese arbitral institution. Awards seated in a jurisdiction outside the PRC which relate to a "domestic" dispute may not be recognised and enforced in the PRC.

PRC law has previously drawn a clear distinction between "foreign-related" disputes and "domestic" disputes. The law provides that a "foreign element" in a case will arise in any of the following circumstances[1]:

  • At least one party to the underlying legal relationship is a foreign national, foreign legal entity, or other organisation or individual without nationality;
  • The usual residence of one or both parties to the underlying legal relationship is in the territory of a foreign state;
  • The subject matter of the dispute is located outside of the PRC;
  • The legal facts establishing, altering or terminating the parties' relationship occurred outside of the PRC; or
  • Any other circumstances whereby the legal relationship can be regarded as "foreign-related".

The definition of what constitutes a "foreign-related" dispute appears at first glance to be quite broad. However, in practice, the main test has been whether or not any of the parties to the dispute are foreign parties. If they are then the dispute will be considered to be "foreign-related". In addition, PRC-incorporated foreign-invested entities ("FIEs") and WFOEs are considered to be "domestic" entities.

The result is that foreign parties who conduct business in the PRC using FIEs or WFOEs have often been obliged to arbitrate their disputes in the PRC.

The decision

On 27 November 2015, the Shanghai No.1 Intermediate People's Court ruled that the dispute was "foreign-related", and it recognised and enforced the award.

The court acknowledged both parties were incorporated in the PRC and the relevant equipment had been delivered in the PRC and was being held in the PRC. These factors all indicated that this was a "domestic" dispute.

However, the court then considered the final limb of the test – i.e. whether there were any other circumstances that might cause the legal relationship to be regarded as "foreign-related".

The court held that there were, as the parties were both WFOEs, and they had both been incorporated in the Shanghai Waigaoqiao Bonded Zone, which formed part of the China (Shanghai) Pilot Free Trade Zone ("Shanghai FTZ"). The court held that this differentiated them from ordinary domestic companies, because the source of their registered capital, their ultimate ownership interests, and their business decision-making were all closely connected with foreign investors. The court further held that because the objective of the Shanghai FTZ had been to facilitate foreign investment, particular emphasis should be placed on these factors when considering whether or not they constituted a "foreign element".

In addition, the Seller had procured the goods in question from abroad and had then stored the goods under bond (no tariff duties were due) in the Shanghai FTZ before transferring them out of the tariff-free zone and delivering them to the Buyer. The court held that this aspect of the contract's performance bore the features of an international sale of goods, as opposed to an ordinary domestic sale of goods.

The court held that these factors constituted "other circumstances", and they were sufficient for the legal relationship between the parties to be categorised as "foreign-related". The arbitration agreement was therefore valid and the court proceeded to recognise and enforce the award.

This decision goes beyond earlier PRC court decisions, which have held that purely "domestic" disputes, including those involving FIEs and WFOEs, should not be arbitrated outside the PRC.

It is also the first known PRC court decision that has shed light on what "other circumstances" might mean, when determining if a contract is "foreign-related".

The implications

A number of significant implications arise out of this decision. First, it suggests a willingness by the PRC courts to construe the term "foreign-related" relatively broadly, and to permit PRC entities to arbitrate their disputes outside of the PRC, where there are various "foreign elements" in play.

Secondly, it differentiates between the status of companies formed inside free trade zones such as the Shanghai FTZ and companies incorporated on the mainland.

Thirdly, it tends to indicate a more "enforcement friendly" approach to foreign awards.

The decision will therefore be of interest to foreign companies who do business in China through a free zone registered entity and who wish to have foreign arbitration as the dispute resolution mechanism in their contracts.

However, precisely because this decision appears to be the first to shed light on what "other circumstances" might mean, it should be treated with caution at this stage. It is unclear if the decision would have been endorsed by the Supreme People's Court, had it reached that stage, or if the same reasoning will be followed in the future by other PRC courts. There were also some unusual facts in the case which may have persuaded the court to enforce the award.


[1] Article 1 of the Interpretation on Certain Issues Concerning the Application of the Law of the People's Republic of China on the Application of Laws to Foreign-Related Civil Relations (issued by the SPC and which came into force on 7 January 2013)

The "Golden Landmark Case" – A New Dawn For Enforcement Of Foreign Arbitral Awards In China?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.