Property preservation in arbitral award
In order to ensure the effective implementation of the arbitral award, the parties apply to the maritime court for preservation before or during the arbitration, and request to seal up or freeze other property, such as bank deposits, real estate, etc., except ships, cargo on board, fuel oil for ships, and materials for ships.
For the preservation of arbitration property, China’s current law distinguishes between domestic arbitration and overseas arbitration, maritime claim preservation, and non maritime claim property preservation, making different provisions. The Maritime Litigation Special Procedure Law has broken the limitations of the Civil Procedure Law in the issue of arbitration property preservation. So, can the provisions of the Maritime Litigation Special Procedure Law regarding the exemption of maritime claims from arbitration agreements be further extended to all areas of arbitration property preservation?
The parties choosing arbitration to resolve disputes means, on the one hand, excluding the jurisdiction of the court, including the jurisdiction of property preservation before litigation, unless relevant procedural laws specifically arrange for property preservation before arbitration, such as the provision in Article 14 of China’s Maritime Procedure Law that maritime claims for preservation are not bound by arbitration agreements, and the modification of Article 93 of the Civil Procedure Law by Article 101 of the new Civil Procedure Law. On the other hand, the place of arbitration, arbitration institution, and arbitration procedure are stipulated in the arbitration agreement or arbitration clause.
From the perspective of dispute resolution options, there are two completely different international approaches to arbitration property preservation. One approach is to delegate property protection authority to the arbitral tribunal that accepts arbitration cases; Another approach, on the contrary, holds that property preservation is a mandatory judicial act that can only be ordered and enforced by courts representing the country in exercising judicial power. China belongs to the latter, and if the parties apply for property preservation in arbitration, the arbitration institution may refer it to the court for enforcement.
However, in China, property preservation is a mandatory judicial act, and whether, how, and how to apply for arbitration property preservation is regulated by Chinese law, and does not apply to the laws of other countries or regions where arbitration takes place. Since the parties have chosen arbitration to resolve the dispute, they can only apply for property preservation in accordance with the legal provisions of the location of the preserved property. Procedural law has a public law nature and is mandatory. Property preservation has a significant impact on the interests of the respondent. China’s Civil Procedure Law or the Maritime Procedure Law do not grant the parties the procedural right to apply for non maritime property preservation before or during overseas arbitration. Therefore, the provision in Article 14 of the Maritime Procedure Law that maritime preservation is not bound by arbitration agreements between the parties cannot be changed, Expanding to property preservation other than ships, cargo on board, marine fuel, and marine materials.
The Maritime Litigation Special Procedure Law has made special provisions on the preservation procedures for ships, cargo on board, fuel and materials on board, which are different from the Civil Procedure Law and are not bound by arbitration agreements between the parties. Its rationality lies in: firstly, the ship has the characteristics of fluidity and internationality, and if not preserved in a timely manner, it is likely to miss the opportunity, leading to the complete failure of the effective arbitration award execution; Secondly, if the respondent fails to provide guarantees and is not suitable for storage after the preservation of the ship, cargo, fuel, and materials, they may be auctioned in advance at the request of the parties during the litigation or arbitration process, retaining the auction price. Other movable or immovable property does not have such characteristics, and generally speaking, property can only be disposed of during the execution stage, while in litigation or arbitration, control states such as freezing and sealing can only be maintained.
Therefore, compared to the four types of property, namely ships, cargo on board ships, fuel oil and materials on board ships, the urgency of non maritime property preservation has been greatly reduced. Since the parties choose to arbitrate and resolve disputes in other countries or regions, it means that they have an expectation of transaction risks, and there is no need for Chinese courts to act on their behalf. The process of overseas arbitration may be time-consuming, and Chinese laws and relevant judicial interpretation have provisions on the preservation period of all kinds of property. Allowing overseas arbitration to adopt non maritime property preservation measures in China is not in line with the purpose of ensuring the execution of this case, and is also likely to fall into the dilemma of repeated renewal, wasting judicial resources.
Both the Civil Procedure Law and the Arbitration Law of China stipulate that in domestic arbitration and foreign arbitration by domestic arbitration institutions, if a party applies for property preservation, the arbitration institution shall transfer the application to the court where the property is located, which excludes the right of the party to directly apply for property preservation to the court in arbitration. The parties agree that overseas arbitration can only apply for property preservation to Chinese courts in the following two situations: firstly, applying for maritime claim preservation based on the special provisions of the Maritime Procedure Law; The second is to apply for property preservation based on arrangements for mutual recognition and enforcement of arbitration awards between mainland China and Macau. The current procedural law and other bilateral or multilateral judicial assistance treaties do not grant the parties to overseas arbitration disputes the procedural right to apply for non maritime property preservation to Chinese courts before or during arbitration. If allowed, it is not only inconsistent with the judicial mandatory characteristics of China’s property preservation system, but also contradicts China’s judicial sovereignty.
Until the Supreme People’s Court provides a response, the case may be temporarily rejected. Therefore, from the perspective of dispute management and jurisdiction, Chinese courts do not have jurisdiction over non maritime property preservation applications in overseas arbitration cases before or during arbitration, and should also refuse jurisdiction. It can be seen that, on the premise that the Civil Procedure Law does not give the overseas arbitration parties the right to apply for non maritime property preservation, the maritime court takes preservation measures against bank deposits, matured creditor’s rights, real estate, etc. located in China according to the parties’ application, which lacks the procedural law basis.