Court clarifies enforcement of Hong Kong arbitral awards
March 11, 2010 | BY
clpstaff &clp articles &China's highest court has issued a document clarifying which Hong Kong arbitral awards are enforceable on the mainland and bringing more certainty to…
China's highest court has issued a document clarifying which Hong Kong arbitral awards are enforceable on the mainland and bringing more certainty to those using the International Court of Arbitration of the International Chamber of Commerce (ICC) and other foreign institutions.
The Supreme People's Court (SPC) Circular on Issues Relevant to the Enforcement of Hong Kong Arbitral Awards in the Mainland (关于香港仲裁裁决在内地执行的有关问题的通知) was issued on January 5 2010. It apparently comes as a response to questions from lower courts regarding the enforcement of ad hoc arbitral awards made in Hong Kong, as well as those made in Hong Kong by foreign institutions such as the ICC.
“The Circular is a positive development,” said Allen & Overy senior associate Frances van Eupen. “Parties can be assured that arbitral awards rendered in Hong Kong (whether ad hoc or under the auspices of an institution) will be enforceable in mainland China, with the only grounds for refusing enforcement mirroring those contained in the New York Convention.”
Reciprocal enforcement of arbitral awards is governed by a 2000 agreement between the two regions (the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region), as well as by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention. The 2000 Arrangement means that arbitral awards made on the mainland under the PRC Arbitration Law (中华人民共和国仲裁法) by recognised bodies will be enforced in Hong Kong. Likewise, awards made in Hong Kong under the Arbitration Ordinance will be enforced by mainland courts.
Despite some clarification by the SPC in 2007, there was continued uncertainty about how foreign awards made in Hong Kong are handled.
“It remained a matter of debate whether the basis for the enforcement of awards issued by foreign arbitral institutions such as the ICC in Hong Kong was the Arrangement or the [New York Convention],” said van Eupen.
With the publication of the latest Circular, this matter has been cleared up: the SPC has made it clear that it is the Arrangement which forms the legal basis for enforcement.
Despite progress made in the Arrangement, the nationality of an award remains an issue for debate. Earlier SPC statements have indicated that the PRC courts recognise the place of arbitration as an important factor when determining whether it can enforce an arbitration agreement. Although the Circular does seem to hint, by references to the ICC in Hong Kong, that the seat of arbitration is more important than the institution's home country, its lack of detail and explanation means that any inferences drawn can be little more than speculation.
“On the face of the Circular itself, it is difficult to conclude that the SPC has now adopted a new approach under which the 'nationality' of arbitral awards will automatically follow the seat of arbitration rather than the place where the arbitration institution is established,” said van Eupen. “It therefore remains unclear whether, for example, an ICC award rendered in mainland China would be classified as a Chinese award or a foreign award.”
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