Q : Pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards – the New York Convention – what kinds of foreign arbitration awards do China’s courts recognise and enforce? How does one determine whether the convention applies to a particular award?
A: China acceded to the New York Convention in 1987, and in the same year the Supreme People’s Court issued a notice on implementing the convention (Fa Jing Fa  No. 5). In accordance with the notice, foreign arbitration awards recognised by China pursuant to the convention are limited to those rendered in respect of commercial dispute cases (excluding disputes between foreign investors and host countries). They are also limited to arbitration awards rendered in the territory of foreign countries that are signatories to the convention.
A determination as to whether the convention applies to an arbitration award depends on whether the nationality of the award itself belongs to a country that is a signatory to the convention. The nationality of an arbitration award is determined based on the place of arbitration, not the place where the arbitration institution is located. If the nationality of an award for which enforcement is applied is not that of a country that is a signatory to the convention, a PRC court will conduct its examination and render its decision on whether or not to grant recognition and enforcement, based on the principle of reciprocity.
Q: To which courts should applications for recognition and enforcement be made? By when should an application be submitted? What documents need to be submitted? How does a PRC court charge for an application for the recognition and enforcement of a foreign arbitration award?
A: If the judgment debtor is a natural person, the application should be submitted to the intermediate people’s court (IPC) of the place where he or she has a registered permanent residence, or where he or she is actually resident; or if the judgment debtor is a legal person, it should be submitted to the IPC of the location of the main office. If the judgment debtor does not have a domicile, residence or main office in China, but has property in China, it should be submitted to the IPC of the place where his or her, or its property is located. The application should be submitted within two years after the entry into effect of the award.
The court should also be an IPC that has the authority to accept foreign-related civil and commercial dispute cases. As to the documents to be submitted, in addition to the usual application for enforcement, identity document of the applicant and the power of attorney of the agent, the documents should include the original, or a duly certified copy, of the arbitration award and the arbitration agreement.
The fees charged by a court are divided into: 1) the fee for the application for recognition (RMB500, or US$80); and 2) the enforcement fee, the amount of which is calculated based on the amount applied for enforcement. The two parts of the fees are paid together in advance when applying for recognition and enforcement to the court. Ultimately, the enforcement fee is borne by the judgment debtor. If the court ultimately renders a ruling denying recognition and enforcement, it will refund the enforcement fee only.
Q: Within what length of time should the court render its ruling and complete enforcement after receipt of the party’s application? If the court renders a ruling denying recognition and enforcement, is it possible to appeal, or to apply for retrial?
A: If the court decides to grant recognition and enforcement, it shall render a written ruling within two months; or if it decides to deny, it shall submit within that period a request for instructions to the Supreme People’s Court via the Higher People’s Court of the place where it is located, and it may not render a ruling until the Supreme People’s Court issues an official reply. If the court decides to grant recognition and enforcement, enforcement is to be completed within six months after the court renders its ruling.
Neither an appeal nor an application for a retrial may be made in relation to a ruling denying recognition and enforcement rendered by a court. However, the applicant for enforcement may apply separately for recognition and enforcement of the arbitration award in another country that is a signatory to the New York Convention.
Q: What are the usual grounds for a PRC court to deny recognition and enforcement of a foreign arbitration award?
A: The basis for such refusal is found in section 1 and 2 of article V of the New York Convention, which may be summarised as follows:
- the arbitration agreement is invalid;
- the party concerned was not given proper notification in the arbitration procedure, or was otherwise unable to present his or her case;
- matters dealt with in the arbitration award go beyond the scope of the arbitration agreement;
- the composition of the arbitration tribunal or the arbitration procedure was not in accordance with the arbitration agreement, or in the absence of such an agreement, was not in accordance with the law of the country where the arbitration took place;
- the award has not become binding, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made;
- the PRC court finds that the matters dealt with in the award are not capable of settlement by arbitration under China laws; or
- the PRC court finds that recognition or enforcement of the arbitration award would be contrary to China’s public policy.
Q: How can one draft an arbitration agreement in such a way as to reduce the risk that a PRC court will find it invalid, and consequently refuse to recognise and enforce it?
A: The Arbitration Law specifies that a valid arbitration agreement is required to contain the intent of the parties to seek arbitration, the matters to be arbitrated and the arbitration commission selected. The author recommends that the foregoing provision of the Arbitration Law needs to be taken into consideration when drafting the arbitration agreement so as to reduce, to the greatest extent possible, the uncertainties in the course of applying for recognition and enforcement of an arbitration award in future.
Dong Xiao is a partner at AnJie Law Firm
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