How to Affirm the Effective of Arbitration Award

Author of article: Lawyers of Shandong Win & Win Co. Law Firm

When an applicant applies for recognition and enforcement of a foreign arbitral award to a Chinese court. The respondent will put forward a lot of defense reasons and ask the court not to recognize and enforce the arbitral award made by the foreign arbitration institution. This will lead to the applicant spending a lot of time on the arbitration, possibly it can not be implemented. Among the numerous defenses of the respondent, the invalidity of the arbitration article agreed by both parties is a common one. When the name of the arbitration organization agreed in the arbitration agreement is different from the organization actually making the arbitration award. In this article, we will conduct a research based on the application of the New York Convention, Chinese law and combine with cases.

1.The foreign arbitration institution is a contracting state or region of the New York Convention
The New York Convention on the recognition and enforcement of foreign arbitral awards, also known as the New York Convention. The Convention deals with the recognition of foreign arbitral awards and the enforcement of arbitration clauses. China acceded to the New York Convention in 1986. Article 5, paragraph 1, of the New York Convention states “Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:”. This explains that only under the circumstances stipulated in Article 5 of the convention can a contracting state refuse the recognition and enforcement of Arbitral Awards of other contracting states.
When dealing with the case of applying for recognition and enforcement of foreign arbitral awards, the court should first determine whether the country where the arbitration institution making the arbitral award is located is a contracting state of the New York Convention. If it is a contracting state of the New York Convention, it should first apply the New York Convention. Combined with many cases and the views of the court, it can be seen that when applying the New York Convention, as long as there is no refusal to recognize and enforce the provisions of Article 5 of the New York Convention, then the foreign arbitral awards should be recognized and enforced.
If the name of the arbitration organization agreed in the arbitration agreement is different from that of organization actually making the arbitration award, it is in accordance with the provisions of Article 5 (1) (a) of the New York Convention：“The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made;”
The above-mentioned provisions indicate that in the case of recognition and enforcement of foreign arbitral awards, when the name of the institution that issued the arbitral award is different from that of the agreed arbitration institution, whether it can be recognized and enforced in China depends on the applicable law stipulated in the arbitration agreement, or when there is no applicable law stipulated in the arbitration agreement, it should be determined according to the law of the place where the arbitration institution is located. If the name of the arbitration institution is different from that stipulated in the arbitration agreement, whether according to the arbitration agreement or the law of the place where the arbitration institution is located, it is impossible to refuse to recognize and enforce the foreign arbitral award.

2.The arbitration agreement has agreed on the application of foreign law or the application of foreign law because the absence of such agreement
In the case of ZhongQingSanlian International Trade Co., Ltd. applying for confirmation of the validity of the arbitration agreement [(2017) Jing 04 minte No. 25]. ZhongQingSanlian International Trade Co., Ltd. and Tata company (Hong Kong) signed the sales contract involved in the case. Article 17 of the sales contract reads: “all disputes arising from the execution of or in connection with this contract shall be settled by both parties through friendly negotiation. If no settlement can be reached through negotiation, the case shall be submitted to the Singapore International Trade Arbitration Commission for arbitration in accordance with the arbitration rules of the United States. The arbitration award is final and binding on both parties. “. After that, Tata applied to Singapore International Arbitration Center for arbitration. The Singapore International Arbitration Center issued a notice of confirmation to both parties. After that, ZhongQingSanlian International Trade Co., Ltd. applied to Beijing Fourth intermediate people’s court for confirmation of the invalidity of the arbitration agreement. After accepting the case, the court held that although the Singapore International Trade Arbitration Commission is not the specific name of any arbitration institution in Singapore in terms of expression, and it is impossible to identify the arbitration institution precisely due to the wrong name agreed, it can be concluded that the parties have clearly indicated their intention to choose arbitration according to the content of the agreement, and it can be presumed that the parties have recognized the Singapore law Arbitration within the framework of law. According to the established Singapore law, an arbitration agreement containing non-existent or ambiguous arbitration institutions can also be valid and supported as long as the expression of the parties’ intention to arbitrate is clear in the arbitration agreement .

According to Article 14 of the Provisions of The Supreme People’s Court On Several Issues Concerning The Trial of Arbitration Judicial Review Cases, it stipulated that “when the people’s court determines the applicable law to confirm the validity of the foreign-related arbitration agreement in accordance with the provisions of Article 18 of the Law of The People’s Republic of China On The Application of Law On Foreign-Related Civil Relations, when the parties did not choose the applicable law and should apply the law of the place where the arbitration institution is located. If the application of the law will make different determinations on the validity of the arbitration agreement, the people’s court shall apply the law confirming the validity of the arbitration agreement. ” When the law is applied have different opinions on the validity of the arbitration agreement, the law that makes the arbitration agreement effective should be chosen as the applicable law, which reflects the principle that the court supports the validity of the arbitration agreement in the application for recognition and enforcement of foreign arbitral awards. If the arbitration agreement cannot be clearly determined as invalid according to the applicable law stipulated in the arbitration award agreement or the law of the place of arbitration, then it can not be the reason for refusing to recognize and enforce the foreign arbitral award when the name of the arbitration institution is different from that of the arbitration institution.

3.Application of Chinese law

(1) Situations where Chinese law should apply
In practice, the parties in many foreign-related arbitration agreements have no agreement on the applicable law of the arbitration agreement, and usually only agree on the arbitration institutions and arbitration rules. According to the New York Convention, only when it is clearly agreed that the applicable law of the arbitration agreement is Chinese law, can the validity of the arbitration agreement be confirmed under the framework of Chinese law. However, it is very rare to agree on the application of Chinese law in foreign arbitral awards. If the name of the institution making the arbitral award is different from that of the agreed arbitration institution in the case of recognition and enforcement of foreign arbitral award, only when the applicable law in the foreign-related arbitration agreement is applicable to Chinese law, the court should determine whether the foreign arbitral award can be recognized and enforced in accordance with Chinese law.
Article 18 of the Law of The People’s Republic of China On The Application of Law On Foreign Related Civil Relations stipulates that “the parties may choose by agreement the law applicable to the arbitration agreement. If the parties have no choice, the law of the place where the arbitration institution is located or the law of the place of arbitration shall apply. “This provision is basically the same as that of the New York Convention. At the same time, according to Article 3 of the Interpretation of The Supreme People’s Court On Several Issues Concerning The Application of The Arbitration Law of The People’s Republic of China: “if the name of the arbitration institution agreed in the arbitration agreement is not accurate, but the specific arbitration institution can be determined, the arbitration institution shall be deemed to have been selected.”. Article 6: “if the arbitration agreement stipulates that arbitration shall be conducted by an arbitration institution in a certain place and there is only one arbitration institution in that place, the arbitration institution shall be deemed as the agreed arbitration institution.”
In the reply of the Supreme People’s Court on the request for instructions on the validity of the arbitration clause ([2005] MinSiTaZi No. 50), “both the Chinese and English versions of the contract signed by Aier building materials (Tianjin) Co., Ltd. (hereinafter referred to as Aier company) and German Martha Group Co., Ltd. (hereinafter referred to as German Martha company) have agreed on the arbitration clause and clearly agreed that the Chinese version shall prevail. The validity of the arbitration clause shall be determined according to the arbitration clause in the Chinese version of the contract. The Chinese text of the contract stipulates: “all disputes arising from the execution of this contract shall be settled by both parties through friendly negotiation. If no settlement can be reached through negotiation, the dispute shall be settled by arbitration. The arbitration shall be conducted by the China or Tianjin Foreign Trade Promotion Commission in accordance with the current arbitration rules. The award of the Arbitration Commission shall be final and binding on both parties and shall be implemented by both parties. The arbitration fee shall be borne by the losing party. ” The parties have not agreed on the applicable law to determine the validity of the arbitration clause, but have agreed that the place of arbitration is Beijing or Tianjin, China. Therefore, the validity of the arbitration clause should be determined according to the law of the place of arbitration, that is, the law of China. The arbitration clause expresses the intention that the disputes related to the contract shall be submitted to arbitration for settlement, and it is agreed that the arbitration shall be conducted by “China or Tianjin Foreign Trade Promotion Commission”. Since “Tianjin Council for the promotion of international trade” does not exist, and when the parties agree to arbitrate by the “China Council for the promotion of international trade”, it can be considered that the parties choose “China or Tianjin Foreign Trade Promotion Commission” for arbitration Therefore, it should be considered that the arbitration clause conforms to the provisions of China’s arbitration law and is an effective arbitration clause. The contract disputes between Aier company and German Martha company should be settled by arbitration, and the people’s court does not have jurisdiction. “
Although there is no agreement on foreign arbitration and applicable law in the above-mentioned cases, when the place of arbitration is China and the Chinese law is applicable, it shows the law and judicatory ground of the court when the agreed name of the arbitration institution is not accurate under the Chinese legal framework. (2) Situations where Chinese law should not apply.
When examining the validity of the foreign-related arbitration agreement, the Chinese court first determines which country or region’s law should be applied to determine the validity of the arbitration agreement according to China’s conflict rules, and then determines whether the arbitration agreement is valid or invalid. According to the provisions of Article 18 of the Law of The People’s Republic of China On The Application of Law On Foreign Related Civil Relations and Article 14 of The Interpretation of The Supreme People’s Court On Several Issues Concerning The Application 0f The Law of The People’s Republic of China On The Application of Law On Foreign Related Civil Relations (I), the determination of the validity of the arbitration agreement selected by the parties shall be applied first. Article 16 of The Interpretation of The Supreme People’s Court On Several Issues Concerning The Application of The Arbitration Law of The People’s Republic of China stipulates that “the law agreed by the parties shall apply to the effectiveness review of the foreign-related arbitration agreement; if the parties have not agreed on the applicable law but have agreed on the place of arbitration, the law of the place of arbitration shall apply; there is no applicable law, nor the place of arbitration or the agreement of the place of arbitration. If it is unclear, the law of the place of the court shall apply. ” According to the above provisions, the Chinese court may apply the law of the place of the court, that is, the provisions of the Chinese law, when determining the validity of the foreign-related arbitration agreement. However, this is not consistent with Article 5, paragraph 1 (a) of the New York Convention that the law for determining the validity of the arbitration agreement shall be the law chosen by the parties to the arbitration or the law of the place of arbitration. In the case of “Castel Company applying to Zhongshan Intermediate People’s Court of Guangdong Province for recognition and enforcement of Australian arbitration award”, TCL Company, the respondent, applied to Zhongshan Intermediate People’s Court for confirming the validity of the arbitration agreement. As the parties in this case did not clearly agree on the applicable law for the determination of the arbitration agreement, nor did they clearly agree on the place and organization of arbitration, Zhongshan Intermediate People’s Court, after consulting the Supreme People’s Court by Guangdong Higher People’s Court, held that the arbitration agreement was invalid. However, Castel applied to Zhongshan Intermediate People’s Court for recognition and enforcement of the arbitral award after it made an arbitration award in Australia. Zhongshan Intermediate People’s Court consulted to the Supreme People’s Court by Guangdong Higher People’s court, and the Supreme People’s Court replied: “the arbitration award involved in the case was made on December 23, 2010 and January 27, 2011, while the Chinese court’s ruling on the invalidity of the arbitration clause was made on December 20, 2011. The time of making the arbitral award is obviously earlier than the effective time of the ruling of the Chinese court. In addition, TCL did not raise an objection to the invalidity of the arbitration clause in the arbitration procedure, but filed a counterclaim to the arbitration tribunal. The arbitration tribunal determined the validity and jurisdiction of the arbitration clause according to the law and arbitration rules of the place of arbitration, and there was no violation of China’s judicial sovereignty… In conclusion, if the arbitration award involved in the case does not exist in Article 5 of the New York Convention, the people’s court shall make an order to recognize and enforce. In this case, under the circumstances that the Supreme Court has determined that the arbitration agreement is invalid according to the Chinese law, the Supreme Court replied the arbitration award should be recognized and enforced after confirming that the award made by the foreign arbitration tribunal did not violate the law of the place of arbitration and infringes the judicial sovereignty of China.
Article 16 of the Interpretation of The Supreme People’s Court On Several Issues Concerning The Application of The Arbitration Law of The People’s Republic of China is applicable to the case that the parties to the arbitration have not submitted the dispute to a foreign arbitration institution. If the name of the arbitration institution is not accurate, it may be deemed that the agreement is not clear and the arbitration agreement is invalid by the court. In other words, Article 16 of The Interpretation only applies to the court’s determination of the validity of the “foreign-related arbitration agreement” according to the Chinese law, and when the foreign arbitration institution considers the arbitration agreement to be valid and makes an arbitration award, the court shall recognize the validity of the arbitration agreement. Therefore, if foreign arbitration institutions can find out the applicable law or make an arbitration award based on the law of the place of arbitration, the parties have applied to the court for the recognition and enforcement of the arbitration award. Even if the arbitration agreement has been found invalid by the court, the court should review it again. If it does not violate the “public policy” of China, then it should not make an arbitration award not be recognized and enforced when the name of the arbitration institution is different from that of the arbitration institution.

4. Summary
In the case of recognition and enforcement of foreign arbitral awards, when the name of the arbitration institution is different from that of the agreed arbitration institution, the law applicable to the arbitration shall be determined according to the provisions of the New York Convention first, and then whether the arbitration award should be recognized and enforced shall be determined according to the provisions of foreign laws or Chinese laws.
From the content of the New York Convention, the recognition and enforcement of foreign arbitration cases in China, and the provisions of China’s law and judicial interpretation. Relaxing the requirements on the validity of arbitration agreement and making it effective as far as possible will not only help to respect the original intention of the parties to choose arbitration as a way to solve disputes, but also promote and support the development of arbitration and create a good legal environment for international commercial arbitration. But at the same time, there are many imperfections in the review system of foreign arbitral awards. The Notice On The People’s Court’s Handling Issues Related To Foreign-Related Arbitration And Foreign Arbitration Matters made only the Supreme People’s court have the right to decide not to recognize and enforce foreign-related arbitration awards. According to this notice, if a Chinese court considers that an arbitral award should not to be enforced, it must report it to the Supreme People’s court. Only when the Supreme People’s court also considers that it should not be recognized and enforced, can it rule to refuse to recognize and enforce the foreign arbitral award. This violates the provisions of Chinese law on the trial level system, and does not give equal opportunities to both parties.

Reference

1 Li Dongmei: The Remedy of Judicial Review On “Problematic Foreign Arbitration Agreement” 2019-08-26
https://www.chinacourt.org/article/detail/2019/08/id/4397851.shtml

2 Gao Xiaoli: Positive Practice Of Recognition And Enforcement Of Foreign Arbitral Awards By Chinese Courts 2018-4-2 http://www.chinaruslaw.com/CN/LawsuitArbitrate/003/201842155111_144191.htm