Enforcement of foreign maritime arbitral awards in China

THE People's Republic of China acceded to the International Convention on Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) on December 2, 1986. The convention then entered into force in China on April 22, 1987. When declaring its accession, China also made the so?called 'reciprocity reservation', making the New York Convention only applicable by the Chinese courts to foreign awards made in other contracting states of the convention.

In addition, China also made the 'commercial reservation'. It was made clear that differences arising out of legal relationships, whether contractual or not, which are considered as commercial under Chinese law shall specifically mean "the relationship of economic rights and obligations by reason of contracts, tort or provisions of law, for instance, sale of goods, lease of property, construction projects, processing business, transfer of technology, equity joint venture, contractual joint venture, exploration and development of natural resources, insurance, loans, labour, agency, counselling services, carriage of passengers and goods by sea, by civil aviation, by railway and road, and products liability, environmental pollution, marine accidents and disputes over ownership and so on, but not including disputes between foreign investors and the Amphitryon government". Thus, it seems wide enough to cover all kinds of normal maritime and commercial disputes.

It is important to mention that, before the handover of Hong Kong to China, the convention was applied by the Chinese courts in cases of recognition and enforcement of arbitral awards made in Hong Kong. Unfortunately, the legal status of the awards made in the Hong Kong Special Administrative Region (Hong Kong SAR) in China is now somewhat confusing.

It was reported that an arrangement concerning mutual enforcement of arbitral awards between the mainland and Hong Kong SAR was made at the end of June 1999. It is understood that the effect of this arrangement is that the principles enshrined in the New York Convention will effectively apply as between the mainland and Hong Kong SAR. Hopefully, this problem will be resolved in the near future.

The competent authority referred to in the New York Convention shall mean, in China, the people's courts of intermediate level. In other words, any application for recognition and enforcement of arbitral awards made in other contracting states of the convention shall be filed with a Chinese court of intermediate level, rather than the Supreme Court, which is the court of the highest level in China, or any high court which is the court of a provincial area directly under the central government or any district court, which is the court of the lowest level in China.

Furthermore, on August 28, 1995, the Supreme Court made public a judicial circular which stated that, when a party applies to a people's court for recognition and enforcement of a foreign arbitral award, if the court is of the view that the arbitral award applied for recognition and enforcement is not in accordance with the international convention acceded to by China, before the court decides to refuse recognition and enforcement of that award, the case must be referred to the provincial high court having jurisdiction for further examination. If the high court also agrees to refuse recognition and enforcement of that award, the high court should report its opinion to the Supreme Court. No decision to refuse recognition and enforcement should be made before approval is obtained from the Supreme Court.

Thus, in light of this, although the courts of intermediate level in China are the competent authority, as referred to in the convention, they do not have an absolute power to make a decision to refuse recognition and enforcement of an arbitral award made in other contracting states of the convention. As to which intermediate court shall have jurisdiction over an application for recognition and enforcement of a foreign arbitral award, it is provided for by Article 269 of the Civil Procedure Law 1991 that, "If an award made by foreign arbitral organ requires the recognition and enforcement by a people's court of the People's Republic of China, the party concerned shall directly apply to the intermediate people's court of the place where the party subjected to enforcement has his domicile or where his property is located. The people's court shall deal with the matter in accordance with the international treaties concluded or acceded to by the People's Republic of China or with the principle of reciprocity".

It is therefore clear that the intermediate court of the place where the party subjected to enforcement has his domicile, or where his property is located, shall have jurisdiction over the application.

As to the recognition and enforcement of foreign maritime arbitral awards, there are ten maritime courts in China, all of intermediate level. In addition, it is declared by the Supreme Court that maritime cases, including recognition and enforcement of foreign maritime arbitral awards, are under the jurisdiction of the maritime courts. Any application for recognition and enforcement of any maritime arbitral award must be filed with one of these ten courts.

"Unfortunately, the legal status of the awards made in the Hong Kong Special Administrative Region (Hong Kong SAR) in China is now somewhat confusing".

As to the time limitation during which an application for recognition and enforcement of a foreign arbitral award must be filed with the relevant competent authority, absent which the right of application for recognition and enforcement shall be time-barred, the New York Convention is silent.

On the other hand, the convention does not contain any provision which deprives the contracting states of the right to prescribe such a time limitation in their national law. After China declared its accession to the convention, the Supreme Court stated, in Paragraph 5 of Circular of the Supreme People's Court on Implementing the Convention on Recognition and Enforcement of Foreign Arbitral Awards (April 10, 1987), that, "The arbitral awards applied for recognition and enforcement by the courts in China shall be limited only to those arbitral awards made in the territory of another contracting state after the New York Convention 1958 entered into force in China. The application shall be made within the time limit for submission of an application for execution provided for by Article 169 of the Civil Procedure Law (for Trial Implementation)".

Although the Civil Procedure Law (for Trail Implementation) has been replaced by the new Civil Procedure Law 1991, the latter still contains a similar article dealing with the time limit for submission of an application for execution, namely Article 219. It is understood (and it is also the prevailing practice in China) that application for recognition and enforcement of arbitral awards shall be subject to the time limit as provided for by this article, which reads, "The time limit for the submission of an application for execution shall be one year if both or one of the parties are citizens; it shall be six months if both parties are legal persons or other organisations".

This article further provides that, "The above?mentioned time limit shall be calculated from the last day of the period of performance specified by the legal document. If the legal document specifies performance in stages, the time limit shall be calculated from the last day of the period specified for each stage of performance". It goes without saying that the right of application for enforcement of arbitration awards will be time-barred under Chinese law, if the application is not filed within the time limit as provided for by Chinese law.

Since China is a contracting state of the New York Convention, it is China's international obligation to implement the convention in China. This requires that each contracting state shall recognise arbitral awards as binding and shall enforce them under the conditions laid down in the convention, and no more onerous conditions or higher fees or changes shall be imposed substantially on the recognition or enforcement of arbitral awards to which the convention applies than those that are imposed on the recognition or enforcement of domestic arbitral awards. It is made clear by law that in case the provisions of Chinese law differ from those of the convention, the provisions of the convention shall prevail.

In addition, for the purpose of unifying the diverse attitudes and approaches adopted by the courts in different parts of China towards the recognition and enforcement of foreign arbitral awards and domestic awards with foreign elements, on August 28, 1995, the Supreme Court made public a judicial circular which helps ensure that the New York Convention could be fully and properly implemented in China.