How to determine jurisdiction over enforcement of an international arbitration award, and the statute of limitation for making an enforcement petition?

  1. Case Background

Company A is a foreign manufacturer, and Company B is a local Chinese company.  Company B procured equipment from Company A, and due to quality defects in the equipment, the parties submitted to arbitration under the auspices of the China International Economic and Trade Arbitration Commission. An arbitral award was issued to the effect that:

The parties cease performing the remainder of the purchase contract; Company A shall collect the defective equipment it delivered to Company B and refund the purchase price, indemnify Company B against expenses incurred for repair of the defective equipment, and refund the deposit for undelivered equipment; and the payments and refunds be made within 30 days of the date of the award.

After the arbitral award came into effect, Company A did not make the above payments and refunds within the period for performance under the arbitral award. Company B made three separate attempts to petition the court in the home country (a signatory to the New York Convention) of Company A to recognize and enforce the above mentioned arbitral award. However, the petitions were respectively denied by the said court on the ground that the translations of the arbitral award submitted by Company B do not meet the requirement that “the translation shall be certified by an official or sworn translator or by a diplomatic or consular agent” under Article IV of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”).

Three years after the arbitral award became effective, Company B found that Company A had a batch of equipment on display at a trade fair in China, and on the date of the discovery, Company B immediately petitioned the competent court in China to enforce the arbitral award, and the court accepted the petition on the same day and attached and detained Company A’s equipment on display.  

  1. Can Company B petition a Chinese court to enforce the arbitral award against Company A’s equipment on display at a trade fair in China?

Under relevant provisions of the PRC Civil Procedural Law, if a party is issued an unfavorable arbitral award in a foreign-related arbitration by a Chinese arbitration commission, and it fails to perform the award, the other party may make an enforcement petition to the intermediate people’s court at the place where the property of the respondent is located. PRC laws do not rule out jurisdiction of Chinese court where the enforced party has enforceable property within China, and there is no provision in the New York Convention precluding such jurisdiction. Furthermore, on the basis of national sovereignty, Chinese courts should also have the power to review and enforce arbitral award rendered by a Chinese arbitration commission. In practice, Chinese courts are willing to exercise jurisdiction over such cases. Therefore, the intermediate people’s court at the place of the enforceable property has jurisdiction over the case, and Company B can make an enforcement petition to the intermediate people’s court at the place of Company A’s equipment on display at a trade fair in China.

  1. When does the clock for making an enforcement petition in a foreign related arbitration starts to tick?

Notwithstanding that a Chinese court has jurisdiction to enforce an arbitral award in a foreign-related arbitration, if the obligor is not within China, it is difficult for the obligee to determine, within the period for performance of the arbitral award in a foreign-related arbitration case, whether there are enforceable properties within China. Therefore, only when a party petitioning for enforcement finds enforceable properties within China, can a Chinese court’s jurisdiction to enforce an arbitral award materialize, the enforcing court identified, and the PRC Civil Procedural Law applied to determine the statute of limitation for making an enforcement petition. In connection with enforcement of an arbitral award in a foreign-related arbitration where neither the obligor nor its properties are located in China, if the obligee finds enforceable property of the obligor within China only after expiry of the period for performance under the arbitral award, the statute of limitation for making an enforcement petition starts from the day on which the obligee finds enforceable property of obligor in China.