Acourt in Ningbo, Zhejiang province, has granted enforcement of an International Chamber of Commerce (ICC) arbitration award that was made in China. The decision, made in April by the Ningbo Intermediate Court, appears to be the first reported instance of the enforcement in China of an award made by a foreign arbitral institution conducting an arbitration in China.
According to www.legaldaily.com.cn, the case concerned ICC award 14006/MS/JB/JEM. The claimant commenced ICC arbitration against a Chinese company for the breach of a sale and purchase contract. The contract provided that disputes would be submitted to the arbitration commission of the ICC in Beijing; the ICC duly appointed an arbitrator from Singapore to hear the case. The respondent objected to this appointment on the grounds that the contract provided for arbitration by the China International Economic and Trade Arbitration Commission (CIETAC) instead of the ICC. The objection was unsuccessful, and in Beijing on 21 September 2007 the arbitrator granted an award of US$234,568.23 in favour of the claimant.
The claimant then applied to the Ningbo Intermediate Court for recognition and enforcement of the award. One of the objections raised by the respondent was that the conduct of an ICC arbitration in China violates PRC law.
The PRC Arbitration Law provides, in effect, that arbitration in China is to be conducted by a PRC “arbitration commission” (such as CIETAC). This has been widely interpreted to mean that arbitration agreements designating a foreign arbitration institution (such as the ICC) to conduct arbitration within China are invalid. While this has not prevented foreign institutions (including the ICC) from conducting arbitration in China, it has long been unclear whether the PRC courts would recognize and enforce an award made by such an institution in the PRC.
The court in Ningbo apparently dismissed such concerns, recognizing and enforcing the award under Article I(1) of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). It apparently relied on the second limb of Article I(1), which recognizes that the New York Convention applies to “arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought”.
According to John Choong, a senior associate at Freshfields Bruckhaus Deringer in Hong Kong, while the first limb of Article I(1) applies territorial criteria to the applicability of the New York Convention, the second limb is far less widely relied upon, and has caused confusion in the past. Specifically, there is room for debate over whether the reference to “not considered as [a] domestic award” was properly applied in the present case. “While the decision of the Ningbo Intermediate Court does suggest a willingness to enforce such awards, it remains to be seen whether a similar view will be taken by other PRC courts and in particular, the Supreme People’s Court,” said Choong. “Until then, it would be prudent for foreign parties to remain cautious about agreeing to arbitration in China before a foreign arbitral institution.”