Enforcement of Foreign Arbitral Awards and Court Intervention in the People's Republic of ChinaI. IntroductionIN THE course of international commercial transactions, it is not unusual to have disputes where businessmen are from every corner of the world, with different cultural backgrounds and legal systems. Due to the universal enforceability of arbitral award arbitration, as an alternative to traditional litigation, is popularly adopted by businessmen to resolve their disputes.With the marked increase in the volume of trade and the dramatic flow of foreign capital into the Chinese market, it is not surprising that in recent years there has been a corresponding growth in the number of disputes between Chinese and foreign entities. Besides friendly negotiation and conciliation, Chinese law and business practices have provided a supportive role for the use of arbitration in resolving Chinese-foreign business disputes. The enforcement of a foreign arbitral award in mainland China is an integrated part of the hierarchy of Chinese arbitration.II. Legal Framework(a) Legal Framework for Chinese ArbitrationThe legal framework within which Chinese arbitration is conducted consists of the following:1. The laws adopted by the National People's Congress of the PRC or its Standing Committee, the most important of which include the PRC Arbitration Act 1995,1the PRC Civil Procedural Law 19912and the PRC Contract Law 1999.32. Judicial interpretations issued by the PRC Supreme People's Court. According to Chinese law, the Court is vested with the power to issue interpretations on questions concerning the specific application of laws and regulations in judicial proceedings. Such judicial interpretations have legally binding force and play an important role in law enforcement in China. The PRC Arbitration Act 1995 and the PRC Civil Procedural Law 1991 must always be read in conjunction with the PRC Supreme People's Court official judicial interpretations. Since the enactment of the PRC Arbitration Act, the PRC Supreme People's Court has issued more than 30 instances of judicial interpretations in connection with arbitration.3. International treaties. China acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) on 2 December 1986 and the Convention became effective in China on 22 April 1987. In addition, China ratified the Washington Convention on 7 January 1992 and, as a result, the arbitration procedures of the International Centre for the Settlement of Investment Disputes (ICSID) are available for the resolution of disputes between foreign investors and the Chinese government.(b) Legal Framework for Enforcement of Foreign Arbitral AwardsSo far as the regime for enforcement of an arbitral award in China is concerned, a three-pronged mechanism exists: one for domestic arbitration awards, another for foreign-related arbitration awards where at least one party is foreign and a third for foreign arbitral awards which were made in foreign countries. The enforcement of foreign awards falls under the regulation of Article 269 of the PRC Civil Procedural Law 1991, the New York Convention and other treaties to which China has acceded, as well as the corresponding judicial interpretations issued by the PRC Supreme People's Court.The above-mentioned judicial interpretations in connection with enforcement of foreign arbitral awards most importantly include the following:1. Notice of the Supreme People's Court on the Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to which China has acceded (the Notice on the New York Convention) of 10 April 1987.2. Notice of the Supreme People's Court on Several Questions Concerning the People's Court's Handling of the Issues in Relation to Foreign-related Arbitration and Foreign Arbitration, numbered FaFa [1995] No. 18 (Notice 18/1995) of 28 August 1995.3. Regulation of the Supreme People's Court on Questions Concerning the Fee Charges and Time-limit for Examination in Relation to the Recognition and Enforcement of Foreign Arbitral Awards, numbered FaShi [1998] No. 28 (Regulation 28/1998) of 14 November 1998.4. Regulation of the Supreme People's Court on Several Issues Concerning the Jurisdiction over Foreign-related Civil and Commercial Actions, numbered FaShi [2002] No. 5 (Regulation 5/2002) of 25 February 2002. The Regulation entered into effect as from 1 March 2002.III. Procedural Aspects(a) Time Limit for the Action for EnforcementFor enforcement of an arbitral award, the time limits for commencement of such actions are essential. According to the Notice on the New York Convention and the PRC Civil Procedural Law 1991, where either party is a natural person, application for enforcement of a foreign arbitral award must be made within one year. Where both parties are legal persons, an application for enforcement must be made within six months. The time limits begin to run from the last day of the periods specified in the award for voluntary performance. A party who did not make the application within the time limits above-mentioned will be deemed to have waived his rights to apply for enforcement.4After accepting the application for enforcement, if the People's Court with which the application is sought decides to recognize and enforce the foreign arbitral award, it must make the decision within two months of the date of accepting the application and, in the absence of exceptional circumstances, the award will be enforced within six months after the above decision is made. If the Court decides not to recognize and enforce the award, it must report the case to the PRC Supreme People's Court within two months of the date of accepting the application in accordance with the provisions of Notice 18/1995.5(b) The Appropriate CourtAccording to the Notice on the New York Convention, applications for recognition and enforcement of a foreign arbitral award must be filed with the Intermediate People's Court in the following localities:61. if the respondent is a natural person, the place of his registered domicile or where he actually resides;2. if the respondent is a legal entity, the place where its principal business office is located; or3. if the respondent has no registered domicile, place of residence or principal business office, but has property situated within the territory of China, the place where that property is situated.Article 269 of the PRC Civil Procedural Law 1991 further stipulates that the party seeking recognition and enforcement of a foreign arbitral award within the territory of the PRC must apply directly to the Intermediate People's Court in the place where the party against whom enforcement is sought has either his legal domicile or property.In accordance with Regulation 5/2002, the number of courts which may deal with foreign-related civil and commercial cases including enforcement of foreign-related arbitral awards and foreign arbitral awards has been dramatically reduced and jurisdiction is thus further centralized.In the past, all Intermediate People's Courts were authorized to exercise jurisdiction as courts of first instance over major foreign-related cases. High People's Courts had jurisdiction as courts of first instance over foreign-related cases with significant impact in the areas over which they exercise jurisdiction. Basic-level People's Courts (the lowest courts in China) also took cognizance of foreign-related cases which were not deemed to be of a major nature.However, under Regulation 5/2002, only the following courts may exercise jurisdiction as courts of first instance over foreign-related civil and commercial cases:71. the People's Courts in the Economic and Technical Development Zones approved by the PRC State Council;2. the Intermediate People's Courts in the capital cities of the provinces, autonomous regions or municipalities directly under the Central Government;3. the Intermediate People's Courts in the special economic zones or cities directly under state planning;4. other Intermediate People's Courts designated by the Supreme People's Court;5. High People's Courts.The territorial boundary of the jurisdiction of the Intermediate People's Courts set out above is determined by the High People's Courts in the place where the Intermediate People's Courts are located. If a party is not satisfied with a decision or ruling made by the People's Court in an Economic and Technical Zone approved by the State Council (a basic-level court), he may appeal to the Intermediate People's Court where the zone is located.8Regulation 5/2002 is one of the important initiatives taken by the Chinese Supreme People's Court in recent years in its drive to eliminate local protectionism and enhance the certainty and uniformity of administration of justice in China.In light of the Notice on the New York Convention and Article 269 of the PRC Civil Procedural Law 1991, as well as Regulation 5/2002, the Intermediate People's Courts which have jurisdiction over recognition and enforcement of foreign arbitral awards should be those in the capital cities of the provinces, autonomous regions or municipalities directly under the Central Government, or those in the special economic zones or cities directly under state planning, where the party against whom enforcement is sought either has his legal domicile or property.(c) The CostsWhere the application forrecognitionof a foreign arbitral award is accepted by the People's Court, the party seeking recognition must pay an advance fee of RMB 500 (about US$ 60).9Where the application forrecognition and enforcementof a foreign arbitral award is accepted by the People's Court, it will charge enforcement fees in advance in proportion to the amounts in respect of which enforcement is sued, or in proportion to the subject matter of the case, in accordance with Measures of the Supreme People's Court on the Collection of Litigation Fees by the People's Court. If the People's Court decides finally only to recognize but not to enforce the award, the amount remaining after deducting the above-mentioned recognition fees of RMB 500 will be returned to the applicant.10The People's Court accepting the application forrecognition and enforcementof a foreign arbitral award must not collect therecognition feeandenforcement feeseparately. The payer of the advance fee will be decided in accordance with Measures of the Supreme People's Court on the Collection of Litigation Fees by the People's Court.1l(d) The Pre-reporting System on Recognition and Enforcement RefusalsIn order to strictly implement the PRC Arbitration Act 1995, the PRC Civil Procedural Law 1991 and the relevant international conventions to which China has acceded, as mentioned above, on 28 August 1995 the Supreme People's Court issued the official document Notice 18/1995, paragraph 2 of which reads:For all those cases raised by a party to the People's Court for Enforcement of the arbitral award rendered by a foreign-related arbitration institution in China, or for recognition and enforcement of the arbitral award made by a foreign arbitration institution, if the People's Court believes that the arbitral award of China's foreign-related arbitration institution complies with one of the circumstances provided by Article 260 of the Civil Procedure Law, or that the foreign arbitral award applied for recognition and enforcement is not in conformity with the provisions in the international conventions to which China has acceded or does not comply with the principle of reciprocity, before ruling not to enforce or to refuse the recognition and enforcement, it must report to the High People's Court in its own area of jurisdiction for review; and if the High People's Court agrees to the non-enforcement or refusal for recognition and enforcement, it shall report its review opinion to the Supreme People's Court. Only after receiving reply from the Supreme People's Court, could a ruling for non-enforcement or refusal for recognition and enforcement be made.12By issuing Notice 18/1995, the PRC has established an internal control mechanism by which enforcement actions involving both international awards and foreign awards are effectively monitored. Any People's Court seeking to refuse enforcement of an international award or a foreign award must first obtain approval from the superior People's Court in the same jurisdiction. Any superior court which decides to uphold a lower court's refusal to enforce an international arbitral award or a foreign arbitral award must, in turn, report its decision to the Supreme People's Court prior to finalizing the decision to refuse enforcement. Notice 18/1995 is therefore an important supplement to the PRC Arbitration Act 1995 and the PRC Civil Procedural Law 1991.IV Enforcement in China(a) Enforcement Pursuant to Domestic LawIn light of the Notice on the New York Convention and Article 269 of the PRC Civil Procedural Law 1991 as well as Regulation 5/2002, the party seeking recognition and enforcement of a foreign arbitral award within the territory of the PRC must apply directly to the Intermediate People's Court in the place where the party against whom enforcement is sought either has his legal domicile or property. In the absence of an applicable international treaty or other agreement, the court must decide on the application for enforcement in accordance with the principle of reciprocity.Thus, where no applicable international treaty or other multilateral or bilateral agreements exist, the recognition and enforcement of a foreign award in China will be conducted on the basis of the principle of reciprocity. At the same time, the social and public interest ground for refusal of enforcement of foreign awards will apply.(b) Enforcement under the New York Convention(i) GenerallyBy virtue of Article 269 of the PRC Civil Procedural Law 1991, where an applicable treaty or agreement exists between the PRC and the country where the award was made, the enforcement of the award will be dealt with pursuant to such treaty or agreement.As pointed out above, the most important treaty to which China has acceded is the New York Convention, under which enforcement of foreign awards is available in China. In addition, China also ratified the Washington Convention on 7 January 1993, and the Convention came into force on 6 February 1993. The Washington Convention has established an independent regime for enforcement of its awards.(ii) Implementation of the New York ConventionThe New York Convention was acceded to by China on 2 December 1986 and entered into effect on 22 April 1987. On 10 April 1987, just prior to the coming into force of the Convention, the Supreme People's Court issued the official document Notice on the New York Convention. The Notice has the effect of implementing legislation and provides the basis for implementation of the Convention in China.According to the Notice on the New York Convention, China's accession to the Convention is subject to the reciprocity and the commercial reservations. Accordingly, China will apply the Convention only with respect to arbitral awards made within the territory of other Contracting States of the Convention and also only to disputes arising out of defined legal relations which are considered to be commercial relations of a contractual and non-contractual nature under Chinese law.13Upon receipt of an application for recognition and enforcement of a foreign arbitral award, the competent People's Court will review the award. If there are no grounds for refusal to enforce the award under Article V(l) or (2) of the New York Convention, the court must recognize the effect of the award and enforce it in accordance with the execution provisions of the PRC Civil Procedural Law 1991. Where the respondent (the party against which the enforcement is sought)furnishes evidence and provesthat one or more grounds for refusal under Article V(l) of the Convention exist or the competent courton its own motion holdsthat the award is affected by one of the grounds for refusal under Article V(2) of the Convention, the application for recognition and enforcement must be dismissed and enforcement of the award will be refused.14The Convention will be applied only to awards made within the territory of another Contracting State after the New York Convention became applicable to China.15By directly referring to the text of the New York Convention, China has adopted the regime for enforcement of foreign awards envisaged by the Convention. So long as no grounds for refusal of enforcement of a foreign award listed in Article V(1) and (2) of the Convention exist, the award should not be denied enforcement. The Notice on the New York Convention was specifically issued to fill the gaps in Chinese law. Here it should also be specifically noted that according to the Notice, the enforcement of a foreign awardshall(the corresponding wording adopted in the Convention is may) be rejected, provided the existence of the grounds for refusal in the Convention can be proven by the respondent. The Notice has set aside the discretion that the enforcing judge may, under the Convention, still grant the enforcement, disregarding minor irregularities relating to the award arising from arbitral proceedings.(c) Application by Chinese Courts of the Relevant Grounds for Refusal(i) Invalidity of the arbitration agreementThe New York Convention deals with two actions concerning international commercial arbitration: one for the enforcement of arbitration agreements and the other for the enforcement of arbitral awards. Where the arbitration agreement falls within the scope of the Convention and a Contracting State is seized of an action for enforcement of such agreement, the state shall, at the request of one of the parties, refer the parties to arbitration unless it finds that the said agreement is null and void, inoperative or incapable of being performed.16Simultaneously, the invalidity of the arbitration agreement is also one of the grounds for refusal of enforcement.17However, the question of under which law an arbitration agreement is considered to be null and void must depend on the law applicable to the agreement. Such applicable law is specifically provided by the uniform conflict rules contained in Article V(l)(a) of the Convention,i.e. the parties may subject the agreement to the law of their own choice, and, failing such choice, the arbitration agreement will be governed by the law of the country where the award will be or was made. Such uniform conflict of laws rules should be deemed to prevail over any other conflict rules, in particular those of the forum, for determining the law applicable to the arbitration agreement.18Some cases have indicated that the Chinese courts' interpretation of Article V(l)(a) of the Convention is inconsistent. In the caseRevpower Ltd. v.Shanghai Far East Aerial Technology Import and Export Corp.,19the Shanghai Intermediate People's Court wrongly used Chinese law to determine the validity of the arbitration agreement between the parties instead of the applicable Swedish law. In another case,S & H Foodstuff Trading GmbH (Germany)v.Xiamen Lianfa Import & Export Corp. (China),20the Xiamen Intermediate People's Court correctly interpreted the validity of the arbitral clause on the basis of the applicable German law.(ii) Irregularity in arbitral procedureAs far as the law applicable to the arbitral procedure and the composition of the arbitral tribunal is concerned, Article V(l)(d) of the New York Convention contains the same uniform conflict of laws rules as those of Article V(l)(a),i.e. the governing law is the law agreed upon by the parties, or failing such agreement, is the law of the country in which the arbitration took place. In practice, the law applicable to the arbitral proceedings and the composition of the arbitral tribunal is almost always the law of the country where the arbitration took place unless otherwise agreed by the parties.On 25 April 1995 and 10 July 1997, the Dalian Maritime Court, in the decisions of bothNautilus Transport and Trading Co. Ltd (HK)v.China Jilin Province International Economic and Trade Development Corp. (China)21andDalian Ocean Transportation Co. (China)v.Tekso Pte (Singapore),22held that the arbitral clause concluded by the parties in their charterparty was legally valid, the arbitral proceedings were in accordance withthe law, and the application of the plaintiff for enforcement of the award made in London was not contrary to the social and public interest of the PRC. Therefore, according to Article 269 of the CCPL 1991, the court recognized the award.In both cases the court held that the arbitral proceedings were in accordance withthe law(that is, no irregularity in arbitral proceedings). Although the court did not specify which law the term the law meant, presumably it purported to indicate English law (applicable law under the two cases) rather than Chinese law.(iii) Public policyPublic policy,23referred to as ordre public in civil law countries, has been adopted by all national laws and almost every international convention as a ground for the refusal of enforcement. However, even now there is no uniform definition of public policy generally accepted by the international community. In fact, the norm of public policy is deeply affected by the judicial practice of the state, and it evolves and develops constantly with a judge's specific interpretation in each case. Thus, public policy is relative. What constitutes a violation of it largely revolves around the facts and is to be decided on anad hocbasis.It is submitted that public policy covers fundamental principles of law and justice in substantive as well as procedural aspects.24Public policy can be claimed either by a substantive approach or a procedural approach, or both. In the case of non-arbitrability of the subject matter, the former applies. The latter means that some material rules of procedure have not been observed, such as that the party did not receive notice of the formation of the tribunal or of the arbitral procedure, a violation of due process.In the field of international commercial arbitration, international public policy has been separated as distinct from domestic public policy and accepted worldwide:According to this distinction, what is considered to pertain to public policy in domestic cases does not necessarily pertain to public policy in international cases, meaning that the number of matters considered to fall under public policy in international cases is smaller than in domestic cases. This distinction is justified by the differing purposes of domestic and international relations.25Most national arbitration laws, as a rule, do not make such a distinction. However, the French Code of Civil Procedure 1981, in its section dealing with international arbitration, clearly refers to international public policy. Only if the arbitral award rendered abroad or in international arbitration26is manifestly contrary to international public policy will it be refused recognition and enforcement in France.27In practice, this tendency is reflected with regard to violations of fundamental principles of procedure. Courts in a country where the law requires an uneven number of arbitrators or a reasoned award may nevertheless enforce an award rendered in a country where arbitration by an even number of arbitrators is permitted or where no reasons are required.28Notwithstanding that the Chinese courts have not explained the concept of international public policy, they have accepted the concept in their judicial decisions by granting leave for enforcement ofad hocarbitration awards made by two-member arbitral tribunals in London, in 1990 and 1997 respectively. The Guangzhou Maritime Court, in the caseGuangdong Ocean Shipping Co. (China)v.Marships of Connecticut Co. Ltd (USA),29in 1990 granted its leave for enforcement of anad hocarbitration award made by a two-member arbitral tribunal in London.Ad hocarbitration has never arisen in China. According to Articles 16 and 18 of the PRC Arbitration Act 1995, having no designated arbitration commission in the arbitration agreement is sufficient to invalidate the agreement unless the parties reach a supplementary agreement to that effect. As such, anad hocarbitration agreement is void, which means thatad hocarbitration is excluded in China. In accordance with China's arbitration practice and legislation, an arbitral tribunal must be composed of either three arbitrators or one arbitrator. However, by recognizing and enforcing the foreignad hocarbitral award made by an even-numbered arbitration tribunal as early as 1990, Chinese courts have, at least in the context of enforcement of foreign awards, accepted and confirmed the concept of international public policy. This was also justified by the court decision in the above-mentioned caseDalian Ocean Transportation Co. (China)v.Tekso Pte (Singapore)in which, on 10 July 1997, the Dalian Maritime Court elected to recognize anotherad hocarbitral award rendered by a two-arbitrator tribunal in London on 30 September 1996. In its court decision, the Court clearly held that the application for enforcement of the award was not contrary to the social and public interest of the PRC.The point worth emphasizing here is that, up to now, no application for enforcement of foreign arbitral awards has been refused because of violation of the social and public interest of the PRC.V What Remains to be Resolved?(a) Judicial Personnel: Lack of Proper Understanding of Standard Arbitration PracticeIn China as a whole, lack of a basic knowledge regarding arbitration among some local judicial personnel the standard practices of arbitration as well as the New York Convention is a general phenomenon. Some local judges still have little understanding of how the Convention works and the uniform judicial interpretation of its provisions accepted by courts worldwide. It is still necessary to organize relevant judicial personnel to earnestly and systematically study the New York Convention and international practices regarding enforcement of arbitral awards, and duly and conscientiously to implement it.(b) Local Protectionism: the Main Obstacle to the EnforcementLocal protectionism is a common problem the courts of most countries must face in the enforcement proceedings of foreign arbitral awards. It also exists in China. At one time, local protectionism constituted a serious impediment to the enforcement of arbitral awards30and caused some enforcement proceedings of foreign awards to be unduly delayed. So-called nationalist or regionalist sentiment still lurks in some regional courts which sympathize with the national or local entities that most often appear before them, denying enforcement.Although local protectionism cannot be overcome overnight, efforts have been undertaken by the Chinese judicial authorities to offset or ameliorate the negative effect of the local protectionism rooted in the courts. Alongside the establishment of the pre-reporting system and implementation of other judicial interpretations issued by the PRC Supreme People's Court, the barriers which may result in foreign awards being unduly refused enforcement have been effectively controlled. The situation is very much better than before.VI. Concluding RemarksIn order to meet rapid development in the field of international commercial arbitration, the PRC not only ratified the New York Convention as early as 1987 but also, by issuing the corresponding judicial interpretations, further established the corresponding mechanism for implementing the Convention so as to ensure that foreign arbitral awards can be recognized and enforced smoothly in China. Nowadays the present enforcement mechanism works well in general. It may be said that the current Chinese enforcement mechanism can guarantee that foreign arbitral awards will be recognized and enforced effectively and smoothly in China, because China possesses a solid legal basis for enforcement as well as very strong supportive court intervention.

After the delivery of an award will the courts intervene?The court may set aside an award or refuse recognition or enforcement only on the grounds of: Incapacity of the parties; Invalidity of the arbitration agreement; Lack of proper notice or denial of a partys right to present his case; Lack of jurisdiction of the tribunal; Defective composition of the tribunal; The subject matter of the dispute being incapable of settlement by arbitration under the law of Cyprus; The award being contrary to the public order of the Republic of Cyprus;Failing such grounds, the award is binding on the parties and cannot be the subject of an appeal. The power to set aside an award which can only be exercised on the basis of one or more of the above grounds is distinctive from the general power of appeal (whether for error of law or otherwise) which simply does not exist in International Arbitrations carried out