The Supreme People’s Court of the People’s Republic of China announced the Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Cases by People’s Courts to Enforce Arbitration Awards (the “Provisions”) on 23 February 2018. They took effect on 1 March 2018. The provisions are applicable where the applicant applies to a People’s Court for enforcing an arbitration award or arbitration-mediation award (the “award”) that was made by a Chinese mainland arbitral institution under the PRC Arbitration Law.
1. Jurisdiction of the court
Previously in cases of enforcing awards, only the Intermediate People’s Courts had jurisdiction. Now, the Provisions allow the Intermediate People’s Courts to designate their jurisdiction to the Basic People’s Courts in certain circumstances.
However, this does not mean that the applicant can choose between the Basic People’s Courts and the Intermediate People’s Courts, or raise an objection to such a designation of jurisdiction.
2. Impossibility in performing an award
The provisions list specific circumstances where the content of performance of the award is not clear, including uncertainty over: the subjects, the amount of the award, or the specific performance. If the uncertainty still cannot be cleared after a correction and explanation from the arbitral institution, the court may refuse to enforce the whole or part of the award.
3. Defences to enforcement
For the first time, the Provisions allow a third party to raise a defence to enforcement. The third party needs to prove that the enforcement applicant is malicious or using “bogus” arbitration to damage its interests. In addition, the third party must raise this claim prior to the enforcement being completed, and within 30 days of when they know, or should have known, that the court is starting to enforce the relevant property. In practice, to ensure that they know of the potential arbitration process as soon as possible, the third party should add disclosure clauses into its contracts.
For a defendant, the time limits to raise a defence to enforcement are shortened to 15 days of receiving the notice.
4. Application to set aside an award
In practice, to delay enforcement, defendants usually use a strategy: first, raise an application for setting aside; then if the court dismisses it, raise an application against enforcement. The Supreme People’s Court wants to restrict this delay strategy, so it prescribes in the Provisions that if defendants want to raise these two kinds of applications, they have to raise them together (i.e. raise one before the other is dismissed).
Under the Provisions, the delay strategy will be weakened. If the defendant raises an application to set aside an award after the court dismisses its application against enforcement, the court will dismiss the setting aside application automatically, and vice versa. For defendants, this is no longer a good option. A better option is to raise the two kinds of applications together. In that case, the court will review the setting aside application first, and then the application against enforcement. Both applications have a chance of success.
The Provisions are an important set of regulations, which set the stage for the improved enforcement of arbitration awards. Enforcement is often the most difficult part of an entire arbitration based legal dispute. Depending on the outcome of the Provisions’ application in practice, foreign businesses may in the future be further inclined to agree on arbitration in China with Chinese counterparts, instead of insisting on foreign arbitration.