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Arbitration Agreements under the New York Convention and China’s Judicial Practice

According to Article 5, Paragraph 1 (a) of the New York Convention, when there is no valid arbitration agreement under Article 2 of the New York Convention, the requested court may, upon the application of the parties, refuse to recognize and enforce the foreign arbitral award. Specifically, this provision can be divided into two situations. The first is the issue of the capacity of the parties to the arbitration agreement stipulated in Article 2 of the New York Convention. Since the New York Convention does not provide for the applicable law for determining the capacity of parties, member States should have legislative in this regard. In determining the capacity of the parties, China adopts the principle of individualism. For example, in the “Reply of the Supreme People’s Court to the Request for Instructions in the Case of Glencore Limited’s Application for Recognition and Enforcement of the London Metal Exchange Arbitration Award”, it is stated that the personal law should be applied to the determination of the parties’ capacity for conduct. The second is the situation where the arbitration agreement is invalid. In response, the New York Convention stipulates the applicable law for determining the invalidity of an arbitration agreement, that is, the law agreed upon by both parties shall prevail, followed by the law of the place of arbitration. In addition, in China’s judicial practice, if there is no arbitration agreement between the parties as stipulated in Article 2 of the New York Convention, the court can also refuse recognition and enforcement in accordance with Article 5, Paragraph 1 (a) of the New York Convention. In the 2013 “Reply of the Supreme People’s Court on the Application for Instructions for Recognition and Enforcement of Foreign Arbitral Awards by the Applicant Rielma Food Co., Ltd. and the Respondent Zhanjiang Guanya Food Co., Ltd.”, the Supreme People’s Court held that the Respondent should bear the burden of proof that there was no arbitration agreement.
In the “Reply of the Supreme People’s Court to the Request for Instructions from the High People’s Court of Shandong Province in the Case of Fengdao Corporation and Shandong Changyi Kunfu Textile Co., Ltd. Applying for Recognition and Enforcement of Foreign Arbitral Awards,” the Supreme People’s Court held that in the absence of an agreement on the applicable law between the parties, the validity of the arbitration agreement in the case should be determined in accordance with the law of the place where the award was made, rather than in accordance with the laws of China. In the “Reply of the Supreme People’s Court to the Request for Instructions from the High People’s Court of Shandong Province for the Application for Recognition and Enforcement of the Arbitration Award of the International Cotton Association by ECOM AGROINDUSTRIAL ASIA PTE LTD”, the Supreme People’s Court held that whether the parties involved had signed an arbitration agreement was a matter of fact and should be determined by the people’s court that accepted the case after hearing it, “If it is possible to confirm the fact that no arbitration agreement has been signed between the parties involved, recognition and enforcement of the arbitration award in the case shall be refused in accordance with the relevant provisions of the New York Convention.”
The review power provided by the New York Convention and China’s judicial practice. Article 5 of the New York Convention provides for the circumstances in which the court of the place of recognition and enforcement may refuse to recognize and enforce foreign arbitral awards, and distinguishes between the circumstances in which the court may review on application and ex officio. The five situations specified in Article 5, paragraph 1, of the New York Convention can only be reviewed by the court upon the application of the party concerned; Under the circumstances specified in paragraph 2 of Article 5, the court may, on its own initiative, conduct an examination on its own initiative.
As the Supreme People’s Court has established a “level by level reporting” system for cases that intend to refuse recognition and enforcement of foreign arbitral awards, there are no cases where the court has voluntarily initiated the review of Article 5, paragraph 1, of the New York Convention and refused to recognize and enforce foreign arbitral awards. For example, in two cases approved by the Supreme People’s Court, the trial court took the initiative to conduct the relevant review of Article 5, paragraph 1, of the New York Convention and proposed to refuse to recognize and enforce relevant foreign arbitral awards on the grounds of “excessive adjudication”. In its reply to its request, the Supreme People’s Court explicitly corrected the conduct of the trial court in actively reviewing Article 5, paragraph 1, of the New York Convention. The Supreme People’s Court stated: “The People’s Court must examine whether there is a denial of recognition and enforcement of an arbitral award in accordance with Article 5, paragraph 1, of the New York Convention at the request of the parties. If the parties do not request it, the People’s Court will not examine it… Your court has ex officio examined and proposed not to recognize and enforce the award in accordance with Article 5, paragraph 1, of the New York Convention, lacking corresponding legal basis.”
The content of the “Reply to the Request for Instructions on Non Implementation of the Arbitration Award No. 18295/CYK of the International Chamber of Commerce” issued by the Supreme People’s Court in 2016 is particularly noteworthy. In the request for instructions, both the Jiangsu Provincial High People’s Court and the Taizhou Intermediate People’s Court held that the “New York Convention shall apply to the case where the applicant Wicor applied for recognition and enforcement of the International Chamber of Commerce Arbitration Court’s Arbitration Award No. 18295/CYK”, “Although the place of arbitration of the arbitration award in question is in Hong Kong, the arbitration institution that made the arbitration award is the Arbitration Court of the International Chamber of Commerce, so the arbitration award should be considered as a French arbitration award. France and China are both parties to the New York Convention, so the recognition and enforcement of the arbitration award should be governed by the New York Convention.” However, the Supreme People’s Court explicitly changed this view in the reply mentioned at the beginning of this paragraph. The Supreme People’s Court believes that the arbitration award in question was made in the Hong Kong Special Administrative Region, and therefore the “Notice of the Supreme People’s Court on Relevant Issues Concerning the Enforcement of Hong Kong Arbitration Awards in the Mainland” should be applied instead of applying the “New York Convention” to review the award.

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