On 13 December 2016, the Nanjing Intermediate People’s Court of Jiangsu Province (the Nanjing Court) handed down a landmark decision, Ennead Architects International LLP v Fuli Nanjing Dichan Kaifa Youxian Gongsi, allowing enforcement of an arbitral award made by the Hong Kong Arbitration Center of China International Economic and Trade Arbitration Commission (CIETAC HK). As far as we are aware, this is the first time a CIETAC HK arbitral award has been enforced by the PRC Courts since CIETAC HK was established in 2012.
This case concerned a contractual dispute between an architectural firm as the Applicant and a PRC property developer as the Respondent in relation to two design contracts (the Contracts). The Applicant commenced arbitral proceedings in CIETAC HK to recover the outstanding fees for its design services and the interest overdue under the Contracts. In November 2015, CIETAC HK rendered a decision in the Applicant’s favour and ordered the Respondent to repay the service fees and overdue interest, as well as the arbitration fees.
The Respondent fully repaid the service fees, but the interest remained unpaid. The Applicant therefore applied to the Nanjing Court to enforce the arbitral award regarding the repayment of interest. Interestingly, the Respondent submitted to the Nanjing Court that it did not oppose the arbitral award and frankly admitted that it had failed to repay the interest.
Decision of the Nanjing Court
The Nanjing Court relied on Articles 1 and 7 of the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR (the Arrangement) to enforce the arbitral award regarding the repayment of interest.
Article 1 of the Arrangement states that, “Where a party fails to comply with an arbitral award, whether made in the Mainland or in the HKSAR, the other party may apply to the relevant court in the place where the party against whom the application is filed is domiciled or in the place where the property of the said party is situated to enforce the award”.
Article 7 sets out the situations where the court may refuse to enforce the award, including that:-
- the arbitration agreement was not valid;
- the respondent in the arbitration was not given proper notice of the appointment of arbitrator or was unable to present its case;
- the award deals with or contains matters outside the scope of the submission to arbitration;
- the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement or with the law;
- the award was not yet binding or has been set aside or suspended;
- the dispute is incapable of being settled by arbitration under the law of the place of enforcement; or
- the enforcement of the award would be against the public interests of the place of enforcement.
In this case, the Nanjing Court did slightly touch on ground (g) above and commented that the enforcement of the arbitral award in the Mainland would not be contrary to the public interests of the Mainland. However, it did not elaborate on what is meant by “public interests”.
This case is indeed a straightforward one where the Respondent did not challenge the validity of the award nor dispute that it had defaulted in the repayment of interest. This may be part of the reason why the Nanjing Court had no difficulty in enforcing the CIETAC HK award. In any event, this decision has put beyond doubt the fact that an award rendered by CIETAC HK is regarded as a Hong Kong award enforceable pursuant to the Arrangement, which should be encouraging for those parties who would like to arbitrate in CIETAC HK.