Improper service poses risk for enforcement of awards

Improper service in arbitration proceedings has been commonly relied upon as a ground by PRC courts to set aside or refuse enforcement of arbitral awards made in China or overseas. What is less clear is when service is considered improper. PRC laws do not shed any light on the question. The rules of many arbitration institutions, although containing provisions on service, are not intended to address every situation that may arise in practice. As such, the answer rests completely within the discretion of the Chinese courts. An empirical analysis of PRC court decisions is thus necessary and important. This article reports the authors’ findings and discusses how a party can mitigate the risk of improper service.

From the authors’ research of publicly available cases spanning 14 years, from 2002 to 2015, we found 111 Chinese awards (both domestic and foreign-related) and 14 foreign awards of which enforcement was challenged on the ground of improper service. Among the 111 Chinese awards, 17 were set aside or denied enforcement by the court, accounting for a 15.3% success rate of the challenges on service in arbitration proceedings. Out of the 14 foreign awards, five (35%) were not enforced by the court. The statistics are astonishing, taking into account the PRC courts’ overall good track record of enforcing arbitral awards in the past 10 years.

Shen Peng is a special counsel with the dispute resolution group at Baker & McKenzie, focusing on China-related commercial litigation and arbitration. Cui Hailin is an associate with the same group