China: Different Types Of Arbitral Awards Under Chinese Law (Part II)

Last Updated: 5 February 2018
Article by John Liu and Minli Tang

Under Chinese law, the application for setting aside, recognition, and enforcement of different types of arbitral awards is governed by different legal provisions.

In our previous article "Different Types of Arbitral Awards under Chinese Law (Part I)", we have explained that the recognition and enforcement (including setting aside or refusing enforcement of an arbitral award) of different types of arbitral awards is governed by different legal provisions under Chinese law. And we have focused on the definition of domestic arbitral awards, non-domestic arbitral awards and foreign arbitral awards under the Convention on the Recognition and Enforcement of Foreign Arbitration Awards (hereinafter New York Convention). This article, as a follow-up, will further illustrate the definition of the foreign arbitral awards, domestic arbitral awards, and foreign-related arbitral awards under Chinese law.

 Foreign arbitral awards, domestic arbitral awards, foreign-related arbitral awards under Chinese law

Civil Procedure Law of China (hereinafter CPL) sets up three distinct legal regimes for the enforcement of different types of arbitral awards. The classification is made based on the arbitration institutions which issue the awards: arbitration institutions established pursuant to the law (domestic arbitration institutions, article 237 of CPL), foreign-related arbitration institutions of China[1] (article 273/274 of CPL), and foreign arbitration institutions (article 283 of CPL). Therefore, CPL divides arbitral awards into three types: arbitral awards made by domestic arbitration institutions, arbitral awards made by foreign-related arbitration institutions of China, and arbitral awards made by foreign arbitration institutions. 

This classification is based on the institutions which render the award. However, in conjunction with chapter 7 ("special regulations for foreign-related arbitration") of the Arbitration Law of China (hereinafter Arbitration Law) and the Circular of Supreme People's Court on Implementing Convention on the Recognition and Enforcement of Foreign Arbitral Awards Entered by China (hereinafter Supreme Court Circular of New York Convention), it can be inferred that, in real practicing and application, the classification is not mechanically based on the institution types, but more likely based on the case merits--- whether the arbitral award is a foreign award, domestic award, or foreign-related arbitral award.

Foreign arbitral awards

China is the Contracting State of New York Convention and has made the reciprocity reservation and the commercial reservation. To understand the general definition of foreign arbitral awards, please refer to the analysis of New York Convention in our previous article "Different Types of Arbitral Awards under Chinese Law (Part I)".

It is worth noting that according to Supreme Court Circular of New York Convention which confirms that China has made reciprocity reservation under the convention, China will only apply New York Convention to the arbitral awards made in the territory of another Contracting State. However, in our previous article Different Types of Arbitral Awards under Chinese Law (Part I), it was pointed out that there is no uniform understanding as whether the reciprocity reservation excludes the application of New York Convention to non-domestic awards or not. Under current Chinese law, no leading authority has clarified this problem, however, there are some situations that Chinese courts treated arbitral awards made by foreign arbitration institutions within Chinese territory as a non-domestic arbitral award under New York Convention. These awards have been recognized and enforced pursuant to New York Convention as foreign arbitral awards. (See DUFERCO S.A. v. Ningbo Arts & Crafts Import & Export Co., Ltd. [2] In that case, Ningbo intermediate People's Court affirmed that the arbitral award made in Beijing by International Chamber of Commerce International Court of Arbitration shall be treated as a non-domestic arbitral award under New York Convention, thus the award shall be recognized and enforced pursuant to New York Convention.)

In addition, article 283 of CPL provides that where an arbitral award made by a foreign arbitration institution requires recognition and enforcement by Chinese courts, the applicant shall submit the application directly to an intermediate People's Court at the domicile of the party under enforcement or at the locality of the properties to be enforced. The People's Court shall handle the matter pursuant to the international treaty concluded or participated by China or in accordance with the principle of reciprocity.

Based on abovementioned provisions and cases, it can be inferred that, under Chinese law, the "non-domestic" standard is also applied to distinguish foreign arbitral awards.

Domestic arbitral awards

It is for sure that arbitral awards made against purely domestic cases within Chinese territory by Chinese arbitration institutions (including Chinese foreign-related arbitration institutions) are domestic arbitral awards.

As for cases involve "non-domestic" factors (such as using foreign arbitration institutions and foreign law as the applicable law), though both guidelines from international leading institutions[3] and Chinese law tend to treat the awards as foreign arbitral awards, there is no final conclusion yet. This also brings uncertainty (such as what kind of issues can be regarded as non-domestic factors) in practice and parties should pay special attention to this kind of grey area.

Foreign-related arbitral awards

Article 65 in Chapter 7 "special regulations for foreign arbitration" of the Arbitration Law provides that "the provisions of this Chapter shall apply to arbitrations of disputes arising from foreign economic cooperation and trade, transportation and maritime matters." Therefore, cases with foreign-related factors shall be foreign-related arbitrations.

Article 1 of the Interpretation of Foreign-related Civil Relations I provides the definition of the foreign-related civil relation:

  1. Where a party concerned or both parties concerned is/are (a) foreign citizen(s), (a) foreign legal person(s) or any other organizations, or (a) stateless person(s);
  2. Where the habitual residence of a party concerned or both parties concerned is located outside the territory of China;
  3. Where the subject matter is located outside the territory of China;
  4. Where the legal facts that trigger, change or terminate the civil relation take place outside the territory of China; or
  5. Any other circumstances that can be determined as foreign-related civil relations.

Foreign-related arbitral awards and foreign arbitral awards may overlap with each other. For example, when both parties agree to submit the foreign-related case to ad hoc arbitration or institutional arbitration outside China, according to international practice, the nationality of awards shall be determined by the seat of the arbitration[4] as the geographical standard shall prevail. Therefore, the award shall be treated as a foreign arbitral award in China.

 Conclusion

Under Chinese law, the application of recognition and enforcement, setting aside and refusing enforcement of different types of arbitral awards shall pursuant to different legal provisions. Therefore, before making a relevant application in China, one has to clarify the type of the arbitral award, then submits the application in accordance with different legal provisions. Special attention should be paid to those cases which are in grey areas under the current legal framework or involve overlapping factors. Under the premise that prudent legal research has been made to find out all relevant legistrations and precedents, one should set up a tactical strategy based on case merits in order to gain a desirable result.  

To get more information of enforcement, please stay tuned for our follow-up article.

Footnotes

1 In accordance with article 66 of the Arbitration Law, the foreign-related arbitration institution is the one which "set up by the China Chamber of International Commerce". Before December 2015, there were only two foreign-related arbitration institutions in China, namely China International Economic and Trade Arbitration Commission (CIETAC) and China Maritime Arbitration Commission (CMAC). On December 29 2015, China Council for the Promotion of International Trade (aka China Chamber of International Commerce) set up the "Arbitration Center across the Strait". There is no official announcement on whether this center is a foreign-related arbitration institution in accordance with article 66 or not.

2 See DUFERCO S.A. v. Ningbo Arts & Crafts Import & Export Co., Ltd. / (2008) Yong Zhong Jian Zi No. 4 ((2008)甬仲监字第 4号), see http://newyorkconvention1958.org/index.php?lvl=notice_display&id=585.

3 See UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and ICCA's Guide to the Interpretation of the 1958 New York Convention: A Handbook for Judges.

4 In the international arbitration, the seat of the arbitration and the venue of the arbitration are two different concepts. The seat is significant as it determines the procedural law applying to the arbitration; which courts have jurisdiction over the case; and the nationality of arbitral awards. The venue is merely a geographical location where the hearing takes place. In practice, the seat and the venue are often different. Usually, although both parties make an agreement on the seat, they can choose a different location that is convenient for both parties as the venue for hearing. When determining the nationality of the award, one should consider the seat rather the venue of the arbitration.

This article was previously published with Lexology, 11th July 2017

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.

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