The Supreme People's Court (SPC) has confirmed that 'ad hoc' arbitral awards made in Hong Kong are enforceable in mainland China.

Background

'Ad hoc' arbitration is arbitration proceedings which do not involve an arbitration institution or commission. This can be compared with 'institutional arbitration' where the rules of an institution (such as CIETAC or the ICC) govern the arbitration.

PRC law does not permit 'ad hoc' arbitration. An award from an 'ad hoc' arbitration which has the seat of the arbitration in the Mainland will not be enforceable in the Mainland. Instead, all arbitrations in the Mainland must be governed by the rules of an arbitration institution or commission.

Generally, Chinese courts are required to enforce awards from foreign 'ad hoc' arbitrations in accordance with the New York Convention or, in the case of awards made in Hong Kong, the "Memorandum of Understanding on the Arrangement concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region" (the "Arrangement").

Given that PRC law does not permit 'ad hoc' arbitration, there has been some doubt as to whether ad hoc' arbitral awards made in Hong Kong would be covered by the Arrangement, and therefore enforceable in the Mainland.

Clarification By SPC

On 25 October 2007, the SPC confirmed that 'ad hoc' arbitral awards made in Hong Kong are enforceable in the Mainland. This clarification was in response to a query from the Secretary of Justice for the HKSAR. The effect of the clarification is that Chinese courts can enforce or refuse to enforce such awards on the grounds set out in the Arrangement.

Implications Of The Clarification

The clarification that 'ad hoc' arbitral awards made in Hong Kong are enforceable in the Mainland provides further certainty for parties wishing to use arbitration in Hong Kong as the basis for resolving disputes. This will ensure that Hong Kong remains a potentially attractive venue for conducting foreign arbitrations where one party is based in the Mainland, regardless of whether 'ad hoc' or 'institutional' arbitration is used.

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