Interpretation on Several Issues Concerning the Application of the «PRC Arbitration Law»

(Promulgated by the Supreme People's Court on August 23 2006 and effective as of September 8 2006.)

SPC Interpretation [2006] No.7

Pursuant to such laws as the PRC Arbitration Law and the PRC Civil Procedure Law, we provide the following interpretation on several issues concerning the application of the law in arbitration related cases tried by people's courts:

Article 1: Arbitration agreements in “another written form” as specified in Article 16 of the Arbitration Law shall include agreements requesting arbitration reached in such forms as contracts, correspondence and electronic data messages (including telegrams, telexes, facsimiles, electronic data exchange and electronic mails), etc.

Article 2: If the parties have broadly agreed that arbitrable matters are contract disputes, all disputes arising based on the formation, validity, amendment, transfer, performance, liability for breach, interpretation, termination, etc. of a contract may be held to be arbitrable matters.

Article 3: If the name of the arbitration institution specified in an arbitration agreement is inaccurate but the specific arbitration institution can be determined, the selection of the arbitration institution shall be held to have been made.

Article 4: If the arbitration agreement only specifies the arbitration rules that are to apply in the event of a dispute, it shall be deemed not to have specified an arbitration institution, unless the parties reach a supplementary agreement or the arbitration institution can be determined in accordance with the specified arbitration rules.

Article 5: If the arbitration agreement specifies two or more arbitration institutions, the parties may agree to select one among them and apply to it for arbitration. If the parties fail to reach a consensus on selecting the arbitration institution, the arbitration agreement shall be invalid.

Article 6: If an arbitration agreement specifies that arbitration shall be brought before the arbitration institution of a certain place and such place has only one arbitration institution, such arbitration institution shall be deemed the specified arbitration institution. If such place has two or more arbitration institutions, the parties may agree to select one among them and apply to it for arbitration. If the parties fail to reach a consensus on selecting the arbitration institution, the arbitration agreement shall be invalid.

Article 7: If the parties specify that, in the event of a dispute, they may either apply to an arbitration institution for arbitration or institute a legal action in a people's court, the arbitration agreement shall be invalid, unless one party applies to the arbitration institution for arbitration and the other party fails to challenge such application by the deadline specified in the second paragraph of Article 20 of the Arbitration Law.

Article 8: If a party, after entering into an arbitration agreement, is merged or divided, such arbitration agreement shall bind the successor to such party's rights and obligations.

If a party dies after his/her entry into an arbitration agreement, such arbitration agreement shall bind the heir who succeeds to his/her rights and obligations in the arbitrable matters.

The circumstances specified in the preceding two paragraphs shall not apply if the parties, at the time of entering into the arbitration agreement, agreed otherwise.

Article 9: If claims and/or debts are transferred in whole or in part, an arbitration agreement shall be binding on the transferee, unless otherwise provided by the parties, or if at the time of acquiring the claims and/or debts the transferee expressly objects to, or is an unaware of the existence of, a separate arbitration agreement.

Article 10: If a contract does not enter into effect or is rescinded after being formed, the first paragraph of Article 19 of the Arbitration Law shall apply in the determination of the validity of the arbitration agreement.

If the parties, at the time of entering into a contract, reach an arbitration agreement on disputes, the failure to form the contract shall not affect the validity of the arbitration agreement.

Article 11: If a contract specifies that the valid arbitration terms of another contract or document shall apply in the event of a dispute, and a contractual dispute arises, the parties shall apply for arbitration in accordance with such arbitration terms.

If the relevant international treaty applicable to a foreign-related contract contains arbitration provisions and a contractual dispute arises, the parties shall apply for arbitration in accordance with the arbitration provisions of such international treaty.

Article 12: In a case where a party wishes to apply to a people's court to confirm the validity of an arbitration agreement, the Intermediate people's court of the place where the arbitration institution specified in the arbitration agreement is located shall have jurisdiction. If the arbitration institution specified in the arbitration agreement is unclear, the Intermediate people's court of the place where the arbitration agreement was executed or of the place where the respondent is domiciled shall have jurisdiction.

In a case where an application is made for confirmation of the validity of a foreign-related arbitration agreement, the Intermediate people's court of the place where the arbitration institution specified in the arbitration agreement is located, the arbitration agreement was executed, or the applicant or the respondent is domiciled shall have jurisdiction.

In a case involving the validity of an arbitration agreement in a maritime dispute, the maritime court of the place where the arbitration institution specified in the arbitration agreement is located, the arbitration agreement was executed, or the applicant or the respondent is domiciled shall have jurisdiction. If none of the foregoing locations has a maritime court, the most proximate maritime court shall have jurisdiction.

Article 13: Pursuant to the second paragraph of Article 20 of the Arbitration Law, if a party fails to challenge the validity of the arbitration agreement before the first hearing of the arbitration tribunal but later applies to the people's court to confirm the arbitration agreement as being invalid, the people's court shall reject such application.

If a party, after the arbitration institution has rendered a decision on the validity of the arbitration agreement, applies to the people's court for confirmation of the validity of the arbitration agreement or for revocation of the decision rendered by the arbitration institution, the people's court shall reject such application.

Article 14: The “first hearing” specified in Article 26 of the Arbitration Law means the first hearing organized by the people's court after the expiration of the period for pleadings, and excludes the various activities during pre-trial proceedings.

Article 15: When the people's court tries a case for the confirmation of the validity of an arbitration agreement, it shall organize a collegiate bench to conduct a review and question the concerned parties.

Article 16: In an examination of the validity of a foreign-related arbitration agreement, the law agreed upon by the parties shall govern. If the parties failed to specify the governing law, but specified the place of arbitration, the law of the place of arbitration shall govern. If the parties failed to specify the governing law and the place of arbitration, or if the place of arbitration is unclearly specified, the law of the place where the court is located shall govern.

Article 17: If a party applies to vacate the arbitration award on grounds other than those specified in Article 58 of the Arbitration Law or Article 260 of the Civil Procedure Law, the people's court shall reject the application.

Article 18: The phrase “there was no arbitration agreement” specified in Item (1) of the first paragraph of Article 58 of the Arbitration Law means that the parties failed to reach an arbitration agreement. If an arbitration agreement is found to be invalid or is vacated, it shall be deemed that there was no arbitration agreement.

Article 19: If a party applies to vacate the arbitration award on the grounds that the matters decided in the award exceed the scope of the arbitration agreement and, after examination, the same is found to be true, the people's court shall vacate that part of the arbitration award that exceeds the scope of the arbitration agreement. However, if that part of the arbitration award that exceeds the scope of the arbitration agreement is not severable from the other matters decided in the award, the people's court shall vacate the arbitration award.

Article 20: The phrase “was not in conformity with statutory procedure” specified in Article 58 of the Arbitration Law means that the violation of the arbitration procedure specified in the Arbitration Law or the arbitration rules selected by the parties could affect the rendering of a correct award in the case.

Article 21: If a case in which a party has applied for the vacating of a domestic arbitration award is characterized by either of the following circumstances, the people's court may, in accordance with Article 61 of the Arbitration Law, notify the arbitration tribunal to arbitrate the case de novo within a specific period of time:

(1) the evidence on which the arbitration award was based was fabricated; or

(2) the other party concealed evidence that would have been sufficient to affect the rendering of an impartial award.

The people's court shall state in the notice the specific grounds why it is requesting that the arbitration be conducted de novo.

Article 22: If the arbitration tribunal commences to conduct the arbitration de novo within the time limit specified by the people's court, the people's court shall rule to terminate the vacation procedure. If the arbitration tribunal fails to commence to conduct the arbitration de novo within the specified time limit, the people's court shall rule to resume the vacation procedure.

Article 23: If a party is dissatisfied with the award in an arbitration conducted de novo, it may apply to the people's court to vacate the award in accordance with Article 58 of the Arbitration Law within six months from the date of service of such award.

Article 24: In a case where a party applies to have the arbitration award vacated, the people's court shall organize a collegiate bench to try the case and question the concerned parties.

Article 25: If a party applies for enforcement of an arbitration award after the people's court has accepted the other party's application to have the same arbitration award vacated, the people's court that accepted the application for enforcement shall stay the enforcement after its acceptance of the application.

Article 26: If a party applies to the people's court to have the arbitration award vacated and if, after the same is rejected, it raises, during the enforcement procedure, a defence against the enforcement on the same grounds, the people's court shall reject such defence.

Article 27: If, during the arbitration procedure, a party fails to challenge the validity of the arbitration agreement, but, after the rendering of the arbitration award, requests that it be vacated or raises a defence against enforcement on the grounds that the arbitration agreement is invalid, the people's court shall reject the same.

If a party challenges the validity of the arbitration agreement during the arbitration procedure, requests, after the rendering of the arbitration award, that it be vacated or raises a defence against enforcement on the same grounds, and, after examination, such grounds are found to comply with
Article 58 of the Arbitration Law or Article 217 or 260 of the Civil Procedure Law, the people's court shall uphold such request or defence.

Article 28: If a party petitions against the enforcement of an arbitration mediation agreement or of an arbitration award rendered on the basis of a settlement agreement between the parties, the people's court shall reject such petition.

Article 29: In a case where a party has applied for the enforcement of the arbitration award, the Intermediate people's court of the place where the person against whom a judgement is being executed is domiciled or of the place where the property against which enforcement is to be carried out is located shall have jurisdiction.

Article 30: As genuinely required in the trial of a case involving the vacation or enforcement of an arbitration award, the people's court may request the arbitration institution to provide an explanation or request that it provide the arbitration case file for consultation.

The people's court may forward the rulings that it renders in the course of handling an arbitration related case to the relevant arbitration institution.

Article 31: The Interpretation shall be effective as of the date of promulgation.

If the event of an inconsistency between judicial interpretations previously issued by this Court and the Interpretation, the Interpretation shall prevail.