The Enforceability of Arbitral Awards of In China

China is now Australia’s largest trading partner. One of the major impediments to confidence in doing business with China can be the perceived lack of enforceability of commercial agreements in China. It is certainly true that there have been significant problems in the past with the enforceability of arbitral awards in China owing to corruption and the ability to raise objections to the making of the arbitral award in the first place. However, China’s legal system continues to develop at the pace of the rest of the country to the extent that the enforceability of an arbitral award can now be considered to be reasonably reliable, even when assessed by international organisations. International commercial arbitration offers an avenue for the enforcement of the terms of a commercial agreement with China.

Recognition and Enforcement of Arbitral Awards in China

The grounds for refusing enforcement of foreign-related awards are set out in Article 258 of the CPL, and are very similar to those for refusing enforcement of a foreign award under the New York Convention. Refusing enforcement of an award on the ground that it would be against public policy rarely occurs. An application for enforcement must be supported by the award, a copy of the contract containing the arbitration clause and a written application for recognition and enforcement as well as the applicant’s incorporation documents and power of attorney. Any foreign language originals must be translated into Chinese, notarised and legalised by agencies recognised by the Chinese courts.

It is possible to challenge a foreign arbitral award in China, but the grounds are very limited they are from Article 258 of the Arbitration statute and are based on there not being an arbitration clause, the responding party could not participate in the appointment of the arbitrator, there was no notice or the respondent was not able to be present. If an inconsistency with the application of the arbitral rules can be found, or the party seeking invalidation can show that the elements in dispute are not in the scope of the arbitration agreement or the jurisdiction of the arbitral institution.

Article 59 of the Arbitration Law requires any application to set aside an arbitral award to be made within six months after receipt of the award. Notably, Article 25 of the SPC Interpretation makes it clear that a pending application to set aside will suspend the enforcement proceedings. It is not possible to obtain leave to enforce in such circumstances.