Journal of International Arbitration
Law & Business
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Dr. Michael J. Moser
Guide to Authors
Notes and Current Developments Editor
Dominique Hascher
Assistant Editor
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The Editor will be pleased to consider contributions provided they are not, or have been, submitted for publications elsewhere. The following is a brief guide concerning the submission of articles which may be of assistance to authors.
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Dominique Brown-Berset Professor Dr. Bernard Hanotiau Michael Hwang S.C. Professor Dr. Gabrielle Kaufmann-Kohler Dr. Wolfgang Kühn Toby Landau Q.C. Ramon Mullerat Dr. Horacio A. Grigera Naón Lucy Reed Samir A. Saleh Audley Sheppard Abby Cohen Smutny Dorothy Udeme Ufot V.V. Veeder Q.C.
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Journal of International Arbitration 28(4): 343–353, 2011. © 2011 Kluwer Law International. Printed in The Netherlands.
Prospects of Foreign Arbitration Institutions Administering Arbitration in China Fan Kun* Journal of International Arbitration
There has been much concern recently as to whether foreign arbitration institutions may administer arbitrations with the seat in mainland China. This article makes a legal analysis of the potential problems arising in this matter, demonstrates the judicial attitudes towards enforcing awards rendered in mainland China but administered by foreign arbitration institutions, and further analyzes the legal obstacles in the enforcement of such awards. Kluwer 0255-8106 Law 2011 28 4International
I.
Introduction
With the involvement of foreign in-house counsel for Chinese enterprises, and the increased legal knowledge and experience of Chinese legal counsel with respect to international arbitration, more and more Chinese companies are selecting foreign arbitration institutions in their arbitration clauses, such as the International Court of Arbitration of the International Chamber of Commerce (“ICC Court”), for the resolution of potential disputes. According to ICC statistics, in 2006, China (including Hong Kong) was for the first time the most frequently represented nationality among parties in ICC arbitrations from South and East Asia. In 2009, there were thirty-three parties from mainland China and fifteen parties from Hong Kong involved in newly submitted ICC arbitration cases, accounting for 16.9% of the parties from South and East Asia. That is more than double the number of Chinese parties ten years ago.1 Under the ICC Rules of Arbitration of 1998 (“ICC Rules”), parties are free to agree upon the seat of arbitration; where the parties fail to do so, the seat will be fixed by the ICC Court.2 In fact, ICC arbitration is conducted in different jurisdictions all over the world. A total of 101 different cities in fifty-three countries were selected as the seat of arbitration in 2009.3 However, for a variety of reasons, ICC arbitration is rarely selected in mainland China-seated arbitration,4 the second-largest recipient of foreign direct investment and the third-largest trading nation.
* Assistant Professor, Faculty of Law, Chinese University of Hong Kong; Senior Consultant, Arbitration Asia; Ph.D., summa cum laude, University of Geneva, Switzerland; Member of the Chartered Institute of Arbitrators. 1 ICC 2009 Statistical Report, 21 ICC Bull. (No. 1, 2010). 2 ICC Rules, art. 14(1). 3 2009 Statistical Report, supra note 1. 4 Unless specifically defined, reference to China (People’s Republic of China, PRC) in this article does not include Hong Kong, Macao, and Taiwan, as they are considered as “foreign” jurisdiction for the purposes of the Chinese Arbitration Law.
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This article discusses the prospects of foreign arbitration institutions administering arbitrations in China, taking the ICC Court as an example. The author first makes a legal analysis of the potential problems of ICC arbitration clauses designating the seat of arbitration in China. The author further demonstrates the judicial attitudes towards the recognition and enforcement of ICC awards rendered in China. Lastly, the article analyzes the legal obstacles in enforcing ICC awards rendered in China. The discussions in this article will not cover the situation where the ICC award is rendered with the seat of arbitration outside China (including Hong Kong, Macao, and Taiwan), as those are treated as foreign awards, and are readily enforceable in China under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed in New York on June 10, 1958 (“New York Convention”).5 II. Relevant Provisions Under the Chinese Law Although there is nothing in Chinese law which prohibits institutional arbitration administered by foreign institutions in general, there has been much concern about foreign institutions conducting arbitration in China. This arises from the interpretation of certain provisions of the Chinese Arbitration Law (“Arbitration Law”).6 Article 16 of the Arbitration Law stipulates that: An arbitration agreement shall contain the following particulars: (i) an expression of intention to apply for arbitration; (ii) a description of the matters subject to arbitration; and (iii) a designated arbitration commission.7
Article 18 of the Arbitration Law further provides that: If an arbitration agreement contains no or unclear provisions concerning the matters for arbitration or the arbitration commission, the party may reach a supplementary agreement. If no such supplementary agreement can be reached, the arbitration agreement shall be void.
Reading together Articles 16 and 18 of the Arbitration Law, the designation of an arbitration institution actually constitutes a compulsory requirement for the validity of an arbitration agreement under the Arbitration Law. Such provisions require more than the parties’ consent to arbitrate, which makes arbitration agreements very susceptible to invalidation by the Chinese courts.8 Some commentators suggest that Articles 16 and 18 of the Arbitration Law amount to a de facto “Great Wall” preventing foreign arbitration institutions from operating in China, as a result of the protectionist and restrictive way these provisions have been interpreted and handled by the different People’s Courts.9 5 Convention on the Recognition and Enforcement of Foreign Arbitral Award, June 10, 1958, 330 U.N.T.S. 3, 21 U.S.T. 2517, T.I.A.S. No. 6997. 6 Arbitration Law of the People’s Republic of China, promulgated by the Standing Committee of the National People’s Congress on August 31, 1994, and effective from September 1, 1995 [hereinafter “Arbitration Law”]. 7 The terms “arbitration commission” here refers to the commonly used term “arbitration institution.” 8 Chi Manjiao, Is the Chinese Arbitration Act Truly Arbitration-Friendly: Determining the Validity of Arbitration Agreement Under Chinese Law, 4 Asian Int’l Arb. J. 115 (2008). 9 Tao Jingzhou & Clarisse von Wunschheim, Article 16 and 18 of the PRC Arbitration Law: The Great Wall of China for Foreign Arbitration Institutions, 23 Arb. Int’l 309 (2007).
prospects of foreign arbitration institutions administering arbitration 345 III. Potential Problems of ICC Arbitration Clauses in China The requirement of designation of an arbitration institution under the Arbitration Law may give rise to two potential issues with respect to the ICC Court administering arbitration in China. A. Whether a clause selecting the ICC Rules without specifying the ICC Court as the arbitral institution is valid The first issue relates to the drafting of arbitration clauses themselves, in other words, whether a clause which selects the ICC Rules, without specifically designating the ICC Court as the arbitration institution, is valid. The standard arbitration clause recommended by the ICC to all parties wishing to obtain recourse to ICC arbitration is as follows: All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.
The above model clause, as many of the model clauses of international arbitral institutions, does not contain a specific reference to the arbitration institution, and therefore, may risk falling short of the requirements of Article 16 of the Arbitration Law. Such clause may be declared null and void by Chinese courts. To avert this risk, the ICC suggested in January 2005 that: It would be prudent for parties wishing to have an ICC arbitration in mainland China to include in their arbitration clause an explicit reference to the ICC Court of Arbitration, so as to avoid the risk of having the standard ICC clause declared null and void for lack of a sufficiently explicit reference to the arbitration institution of their choice.10
To this end, the Chinese version of the ICC Model Clause was amended as follows: All disputes arising out of or in connection with the present contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce and shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.11
This issue was later clarified by the Supreme People’s Court (SPC) in 2006, in its Interpretation on Certain Issues Relating to the Application of the Arbitration Law of the People’s Republic of China (“SPC Interpretation 2006”).12 Pursuant to the SPC Interpretation 2006, the lack of an express stipulation of an arbitration institution does not automatically invalidate an arbitration clause if the arbitration institution can be ascertained
10
See ICC website . Id. (emphasis added). The SPC Interpretation 2006 was passed by the 1375th Session of the Judicial Committee of the SPC on December 26, 2005, and came into effect on September 8, 2006. 11 12
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pursuant to the rules.13 In this regard, the ICC Rules contain ample reference to the administration of arbitrations by the ICC Court. Indeed, the Preface of the ICC Rules clearly sets out that “[t]he rules contained in this booklet are for use only in proceedings administered by the ICC International Court of Arbitration. No other institution can administer an arbitration under the ICC Rules.” Accordingly, by selecting the ICC Rules, it is sufficient to ascertain that the ICC Court is chosen by the parties as the arbitration institution. B.
Whether the designation of the ICC Court as the arbitration institution satisfies Article 16 of the Arbitration Law
A more problematic issue is whether a foreign arbitration institution such as the ICC Court qualifies as a “designated arbitration institution” within the meaning of Article 16 of the Arbitration Law. With respect to arbitration institutions, Article 10 of the Arbitration Law provides that: [A]rbitration institutions may be established in municipalities directly under the central government and in municipalities that are the seats of the People’s Governments of provinces and autonomous regions. They may also be established in other municipalities with districts, according to need. Arbitration institutions shall not be established at each level of the administrative divisions … The establishment of an arbitration institution shall be registered with the administrative department of justice of the relevant province, autonomous region or municipality directly under the central government.
A restrictive interpretation is to read Article 16 together with Article 10 of the Arbitration Law. In this sense, foreign arbitration institutions would not appear to qualify as “arbitration institutions” within the definition of Article 10 of the Arbitration Law. Accordingly, Article 16 may be interpreted as requiring the designation of a Chinese arbitration institution. A more liberal view is that Article 10 of the Arbitration Law does not purport to set out the definition of the term “arbitration institution” as it is used in Article 16 and other provisions of the Arbitration Law. This view considers that the requirement in Article 16 of the Arbitration Law for the specification of an “arbitration institution” is only intended to prohibit ad hoc arbitrations, but not arbitrations administered by foreign arbitration institutions. In this context, a few PRC officials have made remarks regarding foreign-administered arbitrations in China. In November 2003, Judge Zhang Fuqi of the SPC indicated that China’s accession to the World Trade Organization had opened the arbitration services industry to contracting states; thus, he concluded that foreign arbitration institutions were no longer restricted by Chinese law from conducting arbitrations in the PRC.14 In May 2004, at the International Council of Commercial Arbitration (ICCA) conference in Beijing, Wang Shengchang, former Secretary General of the CIETAC, also addressed the 13 14
at 50.
SPC Interpretation 2006, supra note 12, art. 3. Cited in David Livdahl & Qin Xiaodan, ICC Arbitration Administered in China, Asian Disp. Rev., April 2006,
prospects of foreign arbitration institutions administering arbitration 347 question whether foreign arbitration institutions may designate China as the seat of arbitration, and he concluded that the terminology “arbitration institution” in Article 16 of the Arbitration Law should be “interpreted broadly to include any arbitration institution.”15 The SPC has not issued any clarifications on this matter. The controversies in the interpretation of the above provisions have caused great concern in practice when a foreign arbitration institution is chosen with the seat of arbitration in mainland China. IV. Judicial Attitudes on the Recognition and Enforcement of ICC Awards Rendered in China In the absence of any guidance from the SPC, awards rendered by arbitral tribunals constituted in accordance with the ICC Rules with their seat in China run the risk that they may be refused enforcement in China. A study of case law illustrates that the Chinese courts have taken divergent views on this matter. In a case between a Chinese party and a Swiss party in 1995, the arbitration clause provided that “any disputes arising from or in connection with the present contract shall be finally settled in accordance with the ICC Rules of Conciliation and Arbitration. The seat of arbitration should be London.” The Haikou Intermediate People’s Court (IPC) held that the arbitration clause was invalid under Chinese law because, first, the parties had failed to nominate an arbitration body to administer the arbitration and, secondly, the ICC Rules were not necessarily solely utilized by the ICC International Court of Arbitration. Consequently, the arbitration clause was considered “ambiguous” and pursuant to Article 18 of the Arbitration Law, an ambiguous arbitration clause is invalid.16 In contrast, in Taiwan Fuyuan v. Xiamen Weiguo Wood,17 the Xiamen IPC held that an arbitration clause which provided that “dispute: amicably settled through negotiation or as per arbitration by the International Chamber of Commerce” was valid. In its reasoning, the court held that since the ICC Court was the sole arbitration body implementing the ICC Rules, the parties had, through their arbitration clause, expressed their intention to have the arbitration administered by the ICC Court under the ICC Rules. The most “famous” case is the SPC’s ruling in Züblin.18 In this case, the SPC had been asked by the Jiangsu IPC under the Report System19 (“Report System”) to rule on 15 Wang Shengchang, speech made at the 17th ICCA Conference, Beijing, May 2004, cited in David Wagoner, A Breath of Fresh Air in Chinese Dispute Resolution, 24 A.S.A. Bull. 29 (2006). 16 Unreported, cited in Wang Shengchang, The Pratical Application of Multilateral Conventions Experience with Bilateral Treaties Enforcement of Foreign Arbitral Awards in the People’s Republic of China, in ICCA Congress Series No. 9, 483– 84 (Albert Jan van den Berg ed., 1999). 17 Taiwan Fuyuan Enterprise Co. v. Xiamen Weiguo Wood Manufacturing Co. (Xiamen IPC, 1997), reproduced in Selected Cases of the SPC (No. 2, 1997). 18 Züblin Int’l GmbH v. Wuxi Woco-Tongyong Rubber Engineering Co. Ltd. [2003] Min Si Ta Zi No. 23 (SPC, July 8, 2004), reproduced in Wan Exiang, 9 Guide on Foreign-Related Commercial and Maritime Trials 36–40 (2004). 19 The Report System was established by the SPC according to the Notice of the SPC on Matters Concerning the People’s Courts’ Handling of Foreign-Related Arbitrations and Foreign Arbitrations, issued by the SPC on and effective from August 28, 1995. Under the Report System, where an IPC considers that a foreign-related award or a foreign award ought to be denied enforcement, it must report its finding to the Higher People’s Court (HPC) before issuing a decision. In turn, should the HPC concur with an IPC, it must submit an approval advice to the SPC. The IPC may not refuse enforcement until the SPC issues a determination. The Report System also applies where the IPC considers that the arbitration agreement is invalid or incapable of being enforced.
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the validity of an arbitration clause which provided that “Arbitration: ICC Rules, Shanghai shall apply.” On July 8, 2004, the SPC held the clause to be invalid on the grounds that it failed to designate an arbitration institution in accordance with Article 16 of the Arbitration Law.20 The matter experienced further complications when the court was asked to address the issue of enforceability of an arbitral award rendered based on such arbitration clause. While the issue of the validity of the arbitration agreement was still pending, the arbitral tribunal constituted in accordance with the ICC Rules had proceeded with the arbitration proceedings and issued an arbitral award in favor of Züblin (the award was dated March 30, 2004). When Züblin subsequently applied to the Wuxi IPC in August 2004 for the enforcement of the award, Woco resisted enforcement on the basis that the SPC had found the arbitration agreement to be invalid. In July 2006, almost two years after the application for enforcement, the Wuxi IPC denied the recognition and enforcement of the award. It reasoned as follows: (1) As the arbitral award was made by the Court of Arbitration of the ICC, and confirmed by the seal of its Secretariat, it ought to be regarded as a “non-domestic award.” (2) Since Article I(1) of the New York Convention provides that the Convention “shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought,” the Convention would apply in determining the enforceability of this award. (3) Nevertheless, as the arbitration clause had been held by the SPC to be invalid, the award should be refused recognition and enforcement in accordance with Article V(1) of the New York Convention.21 The SPC’s ruling on the validity of the arbitration agreement had further impact in subsequent enforcement proceedings before the German courts. Indeed, before the Wuxi IPC made its ruling on enforcement, on May 18, 2006, Züblin applied to the Berlin Court of Appeal for a writ of execution of the arbitral award, that is, a motion to declare the arbitral award executable in accordance with sections 1060(1), 1061, and 1062 of the German Code of Civil Procedure. However, the Berlin Court of Appeal held that, since the Chinese courts had already dismissed the application for the determination of the validity of the arbitration clause, the application for registration should be rejected in consequence, as the Chinese court decision had to be recognized in Germany.22 The SPC’s ruling in Züblin casts further doubts on the legality of ICC administered arbitration in China. Nevertheless, the SPC based its ruling on the grounds that the 20
Züblin Int’l GmbH, supra note 18. [2004] Xi Min San Zhong Zi No. 1 (Wuxi IPC ruling, July 19, 2006), cited in Friven Yeoh & Yu Fu, The People’s Courts and Arbitration: A Snapshot of Recent Judicial Attitudes on Arbitrability and Enforcement, 24 J. Int’l Arb. 648 (2007); Nadia Darwazeh & Friven Yeoh, Recognition and Enforcement of Awards Under the New York Convention: China and Hong Kong Perspectives, 25 J. Int’l Arb. 837, 841– 42 (2008). 22 For more discussions of the proceedings before the German court, see Götz-sebastian Hök, Chinese Arbitration Requirements: A Trap for FIDIC-ICC Arbitration? 25 Int’l Constr. L. J. 190 – 97 (2008). 21
prospects of foreign arbitration institutions administering arbitration 349 clause, as a matter of interpretation, did not properly specify an arbitral institution in accordance with the Arbitration Law, but did not expressly hold that a foreign arbitration institution cannot administer cases seated in China. Indeed, the Züblin decision was distinguished in Xiamen Xiangyu v. Swiss Mechel in late 2004. The Xiamen IPC ruled that an arbitration clause providing that “[a]ll disputes would be finally settled under the Rules of Arbitration of the ICC by one or more arbitrators to be appointed in accordance with the said rules, available via iccwbo.org. Seat of arbitration shall be Beijing, China” was valid under Chinese law. In support of its conclusion, the following reasons were given: (1) It could be inferred from the arbitration clause, without further input or explanation by the parties, that the only arbitration institution to have jurisdiction over the case is the ICC. (2) According to widely accepted international arbitration theory and to the prevailing theory in China, if the parties agree that the rules of a certain arbitration institution shall govern a proceeding, and if the parties do not name another institution, then the institution whose rules govern should have jurisdiction over the case. (3) The intention of the parties was to submit the dispute to the ICC International Court of Arbitration.23 In a more recent decision in 2009, the Ningbo IPC recognized and enforced an ICC award seated in Beijing. In that case, the arbitration clause provided that “[a]ll disputes in connection with this Contract or the execution thereof shall be settled by friendly negotiation. If no settlement can be reached, the case in dispute shall then be submitted to the Arbitration of the International Chamber of Commerce in China, in accordance with the United Nations Convention on the International Sales of Goods.” In a ruling dated April 22, 2009, the Ningbo IPC dismissed the challenge to the validity of the arbitration agreement, on the ground that it was not made in a timely manner according to Article 13 of the SPC Interpretation 2006.24 On the issue of enforcement, the court ruled that the ICC award made in China shall be considered as a “non-domestic award” under Article I of the New York Convention. Accordingly, the Ningbo IPC decided to recognize and enforce the award because no grounds for refusing to enforce an award set forth in the New York Convention existed.25 Such a decision reflects a positive trend in opening up the market for arbitration in China to foreign arbitration institutions. However, this ruling only reflects the view of
23 China Xiamen Xiangyu Co., Ltd. v. Swiss Mechel Trading A.G. [2004] Xia Min Ren Zi 81 (Xiamen IPC, 2004), unreported, case summary in Chinese available at . 24 SPC Interpretation 2006, supra note 12, art. 13, provides that where a party has not objected to the validity of an arbitration agreement before the first hearings, but the party subsequently applies to the People’s Court to challenge the validity of the arbitration agreement, the People’s Court shall not accept the application. 25 Duferco S.A. v. Ningbo Arts & Crafts Imp. and Exp. Co. [2008] Yong Zhong Jian Zi No. 4 (Ningbo IPC, April 22, 2009).
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that particular court, and it is not clear at this stage whether other IPCs will take a similar view to enforce an ICC award rendered in China.26 V. Legal Obstacles in Recognizing the ICC Arbitral Awards Rendered in China A closer look at this matter reveals that the legal obstacles to the administration of arbitration in China by foreign arbitration institutions are the lack of understanding of the concept of the seat of arbitration and the lack of a legal mechanism to enforce awards rendered in China administered by a foreign arbitration institution. A. Concept of the seat of arbitration First, the concept of “seat of arbitration” is not fully recognized by the legislation and judicial practice in China. Pursuant to Article 20(1) of the UNCITRAL Model Law on International Commercial Arbitration of 198527 (with amendments in 2006) (“Model Law”), the parties are free to select the seat of arbitration. The choice of the place or seat of arbitration is one of the key issues in drafting an arbitration agreement, because it bears the following legal consequences: (i) it may influence which law governs the arbitration; (ii) it has a bearing on the issue which courts can exercise supervisory and supportive powers in relation to the arbitration; and (iii) the seat of arbitration determines the nationality of the award which is relevant for the ultimate enforcement of the award.28 It is important to note that the seat of arbitration is generally understood as a legal connection, rather than a physical or geographical location. The New York Convention relates the concept to “the law of the country where the arbitration took place,”29 and as synonymous with “the law of the country where the award is made.”30 It thus makes the clear territorial link between the seat of arbitration and the law governing that arbitration, the lex arbitri. The Model Law also attaches legal consequences to the seat of arbitration, which determines (i) the applicability of the Model Law,31 and (ii) the place of origin of the award for enforcement purposes.32 Article 31(3) of the Model Law provides that “[t]he award shall state its date and the place of arbitration as determined in accordance with article 20(1). The award shall be deemed to have been made at that place.” The effect of the deeming provision is to emphasize that the final making of the award constitutes a 26 According to the Report System, a lower court’s decision to enforce a foreign award is not required to report its decision to the SPC. 27 UNCITRAL Model law on International Commercial Arbitration, U.N. Doc. A/40/17, Annex I adopted by the United Nations Commission on International Trade (UNCITRAL) on June 21, 1985. 28 See Julian Lew et al., Comparative International Commercial Arbitration paras. 8-24 (2003). 29 New York Convention, art.V(1)(d). 30 Id. art.V(1)(a) and (e). 31 Model Law, art. 1(2). 32 Id. art. 31(3) provides that the award shall state the place of arbitration and shall be deemed to have been made at that place.
prospects of foreign arbitration institutions administering arbitration 351 legal act, which in practice does not necessarily coincide with one factual event. For the same reason that the arbitral proceedings need not be carried out at the place designated as the legal “seat of arbitration,” the making of the award may be completed through deliberations held at various places, by telephone or correspondence. In addition, the award does not have to be signed by the arbitrators physically gathering at the same place.33 The legal nature of the seat of arbitration is also recognized in most major arbitration rules. These rules confirm the parties’ freedom to choose the place of arbitration and the possibility to hold meetings and hearings elsewhere.34 B.
Lack of understanding on the seat of arbitration and lack of legal mechanism for the enforcement of awards rendered in China administered by foreign arbitration institutions
In China, however, the concept of the seat of arbitration is not defined in the Arbitration Law. The Arbitration Law does not deal explicitly with arbitral awards issued in China pursuant to an arbitration administered by a foreign arbitration institution. Nor is it dealt with in the Civil Procedure Law. According to the Civil Procedure Law 2007, the awards were classified based on the nature of arbitration institution, rather than the seat of arbitration.35 One positive step is the definition of the seat of arbitration under the CIETAC Arbitration Rules of 2005 (“CIETAC Rules 2005”), which provides that “the arbitral award shall be deemed as being made at the place of arbitration.”36 It further recognizes the parties’ freedom to choose the place of arbitration and distinguishes the concept of the seat of arbitration from the place of oral hearing.37 However, this institutional rule, being contractual in nature, has yet to cause the legislative or judicial attitude to change on this issue. In judicial practice, the location of the arbitration institution, rather than the seat of arbitration, is considered relevant in determining the nationality of the arbitral award.38 The lack of understanding of the concept of the seat of arbitration raises difficulties for the enforcement of an award rendered in China within the administration of a foreign arbitration institution. Under the Arbitration Law, awards rendered in China may either be considered domestic awards or foreign-related awards, depending on whether or not a “foreign element” is present. The fact that the award is rendered by a foreign arbitration 33 Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International Commercial Arbitration as amended in 2006, para. 40. 34 For instance, ICC Rules, art. 14; London Court of International Arbitration Rules, art. 16; AAA International Dispute Resolution Procedures Rules, art. 13; Singapore Arbitration Rules, art. 18; Rules of Arbitration and Conciliation of the International Arbitral Centre of the Federal Economic Chamber, Vienna, art. 1(3); Rules of the Netherlands Arbitration Institute, art. 22. 35 Civil Procedure Law, arts. 213, 258, 267. 36 CIETAC Rules 2005, art. 31. 37 Id. art. 32. 38 Judge Exiang Wan, vice president of the SPC, speech at the 50th anniversary of the New York Convention in 2008.
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institution does not constitute a foreign element. Following the classification of the Arbitration Law, an ICC award rendered in China seems to fall within the category of domestic arbitration, unless (i) one or both of the parties is a foreign national or a stateless person, or a company or organization domiciled in a foreign country; (ii) the legal facts establishing, changing, or terminating the civil law relationship between the parties occur in a foreign country; or (iii) the subject of the dispute is situated in a foreign country.39 This is, however, inconsistent with the classification under the Civil Procedure Law. Pursuant to the Civil Procedure Law, arbitral awards are divided into three categories: (i) “an award made by an arbitration institution established according to the Chinese law”;40 (ii) “an award made by the foreign-related arbitration institution of the PRC”;41 and (iii) “an award made by a foreign arbitration institution.”42 According to this classification, an ICC award rendered in China falls within the third category “an award made by a foreign arbitration institution.” Recognition and enforcement of such award is pursuant to Article 267 of the Civil Procedure Law 2007, which provides that: [I]f an award made by a foreign arbitration institution needs the recognition and enforcement of a people’s court of the PRC, the party shall directly apply to the intermediate people’s court located in the place where the party subject to the enforcement has its domicile or where its property is located. The people’s court shall deal with the matter according to the relevant provisions of the international treaties concluded or acceded to by the PRC or on the principle of reciprocity. (emphasis added)
On December 2, 1986, China acceded to the New York Convention, which governs: (i) arbitral awards made in the territory of a state other than the state where the recognition and enforcement of such awards are sought; and (ii) arbitral awards not considered domestic in the state where their recognition and enforcement are sought. China’s accession to the New York Convention is subject to the “reciprocity” reservation, which means that the Convention will only be applicable to the awards made “within the territory of another contracting state” (emphasis added). Accordingly, for the enforcement of an ICC award rendered in China, the New York Convention is not applicable. Due to the inconsistencies in the classification of the awards, the Wuxi IPC in Züblin and the Ningbo IPC in Duferco considered the respective ICC awards rendered in China as a “non-domestic award” and applied the New York Convention to enforce them. However, the courts have not attempted to reconcile such definition with China’s reciprocity reservation. C. Policy considerations Apart from the legal obstacles caused by the defects of legislation, a deeper reason is the Chinese government’s policy dilemma between protecting Chinese arbitration institutions, on the one hand, and attracting foreign investment, on the other. Opening 39 SPC Opinions Concerning Implementation of the Civil Procedure Law of the PRC, art. 304, Fa Shi (92) No. 22, adopted by the Judicial Committee of the SPC on July 14, 1992. 40 Civil Procedure Law, art. 213. 41 Id. art. 258. 42 Id. art. 267.
prospects of foreign arbitration institutions administering arbitration 353 the door to foreign arbitration institutions will certainly increase competition for Chinese arbitration institutions, but the nature of the competition will indeed be a strong incentive to improve the arbitration services rendered by domestic arbitration institutions. As Robert Briner, former Chairman of the ICC Court, pointed out, “a narrow and restrictive interpretation of relevant provisions of the Arbitration Law would essentially run contrary to China’s own interest.”43 Under the current regime, parties wishing to choose arbitration administered by foreign arbitration institutions would have no other safe choice than to designate the seat of arbitration outside China, which may cause unnecessary inconvenience and increase the costs of arbitration. This clearly cannot be in the interests of the development of arbitration in China. VI. Conclusion To conclude, there is a growing need for the ICC Court and other foreign arbitration institutions to administer arbitration in China. When the Arbitration Law and the Civil Procedure Law were drafted in the 1990s, arbitrations were conducted predominately by Chinese arbitration institutions and the drafters of the law had not predicted the possibility of foreign arbitration institutions administering arbitration in China. Unfortunately, the Civil Procedure Law revised in 2007 failed to take into account the recent developments. As the legal regime currently stands, whether arbitral awards rendered in China administered by the ICC Court or other foreign arbitration institutions can be enforced in China remains unclear. The lack of clarification in the legislation has caused inconsistencies in judicial decisions. Further clarifications in the law and judicial interpretations regarding the status of foreign arbitration institutions in China is urged, in order to remove the remaining doubts and to promote China as an attractive seat of arbitration in the international community.
43 Robert Briner, Arbitration in China Seen from the Viewpoint of the International Court of Arbitration of the International Chamber of Commerce, in ICCA Congress Series No. 12, 25 (Albert Jan van den Berg ed., 2005).
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General Editor
Dr. Michael J. Moser
Notes and Current Developments Editor
Dominique Hascher
Guide to Authors
Assistant Editor
Friven Yeoh
The Editor will be pleased to consider contributions provided they are not, or have been, submitted for publications elsewhere. The following is a brief guide concerning the submission of articles which may be of assistance to authors.
Dominique Brown-Berset Professor Dr. BernardHanotiau Michael Hwang S.C. Professor Dr. Gabrielle Kaufmann-Kohler Dr. Wolfgang Kühn Toby Landau Q.C. Ramon Mullerat Dr. Horacio A. Grigera Naón Lucy Reed Samir A. Saleh Audley Sheppard Abby Cohen Smutny Dorothy Udeme Ufot V.V. Veeder Q.C.
Advisory Board
All correspondence should be addressed to: Dr. Michael J. Moser Journal of International Arbitration c/o Hong Kong International Arbitration Centre 38th Floor, Two Exchange Square, 8 Connaught Place, Hong Kong S.A.R., China Tel: +852 3512 2398, Fax: +852 2877 0884, Email:
[email protected] For subscription queries please see copyright page overleaf. © Kluwer Law International All rights reserved ISSN 0255-8106
Mode of citation: 28 J.Int.Arb. 4
1. Articles must be presented in their final form, in English. They should be double spaced with wide margins for ease of editing. Please provide the text in Microsoft Word or Word Perfect, and deliver to the General Editor at
[email protected] 2. Special attention should be given to quotations, footnotes and references which should be accurate, complete and in accordance with the Journal style sheet, which is available online at www.kluwerlawonline.com/JournalofInternationalArbitration. 3. Tables should be self-explanatory and their content should not be repeated in the text. Do not tabulate unnecessarily. Keep column headings as brief as possible and avoid descriptive matter in narrow columns. 4. Please ensure a brief biographical note giving details of the professional/academic status of the author(s) is provided. 5. Due to strict production schedules it is not possible to amend texts after acceptance or send proofs to authors for correction. 6. The submission of a text indicates that the author consents, in the event of publication, to the automatic transfer of all copyrights to the publisher of the Journal of International Arbitration.
