What are the formal requirements for an enforceable arbitration agreement?
An effective arbitration agreement shall include the following elements:
- in writing, no matter stipulated in a contract or provided in a separate agreement;
- the expression of the parties’ intention to submit for arbitration;
- the matters to be arbitrated; and
- the arbitration commission selected by the parties.
In addition, an arbitration agreement shall be invalid if any of the circumstances occur:
- matters agreed upon for arbitration are beyond the scope of arbitration prescribed by law;
- an arbitration agreement concluded by persons without or with limited capacity for civil acts; and
- one party forces the other party to sign an arbitration agreement by means of duress.
Does the domestic law contain substantive requirements for the procedure to be followed?
Under the Arbitration Law of China, Chapter IV, titled Arbitration Procedure, provides the rules on the following procedural matters:
- application and acceptance (conditions should be met by the parties applying for arbitration, documents to be submitted, etc);
- composition of the arbitral tribunal (number of arbitrators, appointment and removal of arbitrators, etc); and
- hearing and arbitral awards (evidence rules, experts, evidence preservation, conciliation).
When and in what form must the award be delivered?
The Arbitration Law does not mandatorily set forth a time limit within which the award must be rendered. It leaves the relevant arbitration rules formulated by the arbitration institutions to deal with this matter.
According to article 54 of Arbitration Law, an award shall be delivered in writing with the following information set forth therein:
- the claims for arbitration;
- the facts of the disputes;
- the grounds upon which an award is given;
- the results of the judgment;
- the allocation of the arbitration fees; and
- the date of the award.
If the parties agree not to include in the award the facts of the dispute and the grounds on which the award is based, such matters may be omitted in the award. In addition, the award shall be signed by the arbitrators and sealed by the arbitration institution. The arbitrator who disagrees with the award has a choice to sign or not to sign on the award.Appeal
On what grounds can an award be appealed to the court?
Under Chinese Arbitration Law, an award is final and binding once it is rendered, which cannot be appealed. However, a party may request the intermedia people’s court where the arbitration institution is domiciled to set aside an award under the grounds set forth by law.
Depending on the nature of the award, the grounds based upon which the award is set aside or refused for enforcement vary.
For a domestic arbitral award without foreign-related elements, a court may rule to set aside or to refuse to enforce it if a party can furnish evidence to prove that there exists any of the following circumstances:
- there is no arbitration agreement between the parties;
- matters decided in the award exceed the scope of the arbitration agreement or are not under the jurisdiction of the arbitration institution;
- the composition of the arbitral tribunal or the arbitration procedure is contrary to the legal procedure;
- the evidence on which the award is based is falsified;
- the other party has concealed evidence that is sufficient to affect the impartiality of the award; or
- the arbitrators have demanded or accepted bribes, commit illegalities for personal gains or perverted the law in making the arbitral award.
For a domestic arbitral award with foreign-related elements, a court may set aside or refuse to enforce it if a party can furnish evidence to prove that any of the following circumstances exist:
- the parties have neither stipulated an arbitration clause in their contract nor subsequently reached a written arbitration agreement;
- the party against whom the application of setting aside or enforcement is sought was not requested to appoint an arbitrator or take part in the arbitration proceedings or the person was unable to state his or her opinions for reasons for which he or she is not responsible;
- the composition of the arbitration tribunal or the arbitration procedure was not in conformity with the rules of arbitration;
- matters decided in the award exceed the scope of the arbitration agreement or are beyond the jurisdiction of the arbitration institution; or
- if the people’s court determines that the enforcement of the award would be against public interest.
For a foreign arbitration award, a court cannot set it aside but may refuse to enforce it under the grounds set out in Article V of the New York Convention.
In addition, if an arbitration has any of the following circumstances, resulting in failure of enforcement, the court may make a ruling of rejecting the application for enforcement:
- the subject of rights and obligations are not clear;
- the specific amount of payment is not clear or the calculation method is not clear, resulting in the specific amount not being figured out;
- the particular thing to be delivered is not clear or cannot be determined; or
- the standard, target and scope of performance of action are not clear.
Besides which, if the arbitration award determines continuation of the performance of the contract, but does not specify such specific contents as the rights and obligations that are to be continued to be performed, the specific method of performance and the deadline, etc, resulting in the failure of enforcement, the court may also make a ruling of rejecting the application for enforcement.Enforcement
What procedures exist for enforcement of foreign and domestic awards?
If an award is not complied with, the applicant may apply to the intermediate people’s court where the respondent is domiciled or where the respondent’s property is located (or the basic-level people’s court appointed) to enforce it.
If the respondent applies to the competent court to set aside the arbitral award at the same time that the applicant has applied for enforcement, the enforcement proceedings will be suspended. If the court rules to vacate the arbitral award, the enforcement proceedings will be terminated. If the court rejects the application to set aside the award, the enforcement will resume.
The time limit to apply for enforcement is two years from either the:
- last day of the performance period specified in the arbitral award;
- last day of each performance period if the arbitral award requests performance in instalments; or
- effective date of the arbitral award if the award does not specify a period for performance.
In the past six months of the time period available to apply for enforcement, if an application for enforcement cannot be filed because of a force majeure event or other obstacles, the calculation of the time limit will be suspended and will resume after the suspension causes are eliminated.
If the parties reach a settlement, or one party requests the performance of the award or agrees to perform the award, the time limit for applying for enforcement will be started again.
The proposed ruling of any intermediate people’s court or any specialised people’s court after review not to enforce or set aside the domestic arbitral award shall be reported to the Higher People’s Court within its jurisdiction for review; the final ruling shall be made based on the opinions given by the Higher People’s Court after it has reviewed the proposed ruling.
Foreign awards (including awards made in Hong Kong, Macau and Taiwan)
China is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the 1958 New York Convention).
Separate arrangements with Hong Kong and Macao (which is treated as a different jurisdiction for the purposes of arbitration) were entered into in 2000 and 2007 respectively, which both adopt the same general principles as the New York Convention (ie, Arrangement Concerning Reciprocal Recognition Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region, and Arrangement Concerning Reciprocal Recognition Enforcement of Arbitral Awards between the Mainland and the Macau Special Administrative Region).
The Supreme Court has issued a judicial interpretation about the recognition and enforcement of arbitral awards made in Taiwan.
The non-enforcement of foreign arbitral awards and the setting aside or non-enforcement of domestic arbitral awards with foreign-related elements are both subject to a reporting mechanism established by the Supreme People’s Court (SPC) in 1995. According to the reporting mechanism, if there is a proposed ruling by any intermediate people’s court or any specialised people’s court not to recognise and enforce a foreign arbitral award or setting aside or not to enforce a domestic award with foreign-related elements, such proposed ruling shall be reported to the Higher People’s Court within its jurisdiction for review; if the Higher People’s Court intends to agree with the proposed ruling after review, it shall report the ruling to the SPC for final review. The final ruling shall be made based on and following the review opinion given by the SPC. As of December 2017, the SPC has unified and applied the same reporting mechanism to domestic arbitral awards without foreign-related elements, which means that setting aside or non-enforcement of a purely domestic award shall be finally decided by SPC.