Conciliation plays an important role in Chinese arbitration proceedings. Under Article 51 of the PRC Arbitration Law, an arbitral tribunal may issue a conciliation statement according to the settlement agreement reached by the parties in an arbitration. Such conciliation statement shall have the same legal effect as an arbitral award does, which means it would be enforced by PRC Court if a party fails to perform accordingly.

Although prescribed as having the “same legal effect of an arbitral award” under the law, a conciliation statement does have some distinctions. In particular, according to Article 28 of the Interpretation on Application of the PRC Arbitration Law promulgated by the Supreme People’s Court (SPC), after a conciliation statement is issued by the arbitral tribunal, unlike an arbitral award, a party may not apply to the Court for refusing enforcement of the same.

However, when it comes to the question that whether a conciliation statement could be set aside, PRC Courts’ practice indicates different views.

The first view is that a conciliation statement, due to its “same legal effect of an arbitral award”, could be set aside under prescribed circumstances for setting aside an arbitral award under PRC law. For example, in a SPC’s judicial reply issued in 2010 (see “Reply on the application for setting aside of the Shenzhen Arbitration Commission [2007] Shen Zhong Tiaozi No. 20-1 Supplementary Conciliation Statement (2010) Min Sitazi No. 45), the SPC confirmed that a conciliation statement issued by the Shenzhen Arbitration Commission should be set aside given the fact that there were prescribed circumstance for setting aside an arbitral award.

Same view is shared by several other PRC Courts. For example, in the case of Wengniuteqi Qianchang v. Sichuan Zhongcheng (2017) Nei 04 Minte No.19, the Intermediate People's Court of Chifeng city states that an applicant may apply to a Court for setting aside a conciliation statement on the basis, inter alia, that “conciliation statement and arbitral award have the same legal effect” therefore judicial review on conciliation statement and that on arbitral award should follow the same rules under the law.

It is worth noting that the SPC’s judicial reply which confirms that a conciliation statement could be set aside was issued in response to a question raised in a foreign-related arbitration. As a result, several other Chinese Courts, when reviewing such issue raised in domestic arbitration cases, take the view that a party does not have legal grounds to apply for setting aside a conciliation statement because PRC law only allows setting aside arbitral award, not conciliation statement. For example, in a recent decision issued by the No.4 Intermediate People’s Court in the case of Li Liandong vs. Shen Yi (2018) Jing 04 Minte No.541, the Court rejected a party’s application for setting aside a conciliation statement issued by Beijing Arbitration Commission, on the grounds, inter alia, that the PRC Arbitration Law does not stipulate that a party could apply for setting aside a conciliation statement.

In light of the above, parties in PRC domestic arbitration proceedings (including, inter alia, those between wholly foreign-owned enterprises and Chinese companies) should pay more attention on the agreement reached in conciliation proceedings, and consider the potential risks that the conciliation statement issued subsequent to the settlement cannot be set aside even if there are prescribed circumstances for setting aside an arbitral award such as procedural irregularities.