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Annual Observation Report (2020)

By Carrie J.Sun

Ever since China’s introduction of its “Go Global” strategy and the “Belt & Road” initiative, the overseas business activities of Chinese enterprises have expanded rapidly, resulting in increased cross-border issues and, thus, their corresponding legal disputes.To mediate the interests of the parties involved in foreign transactions, enhance the credibility of the Chinese judicial system and establish a stable, transparent, and fair business environment under the rule of law, there are several mattersthat need to be paid more attentions, including but not limited to the regulations and procedures of recognition and enforcement of overseas judgments and arbitral awards required for the Chinese judicial system, the success rates of recognizing and enforcing overseas judgments and arbitral awards, the legal rationale behind, especially for those non-recognition cases, and the current general Chinese judiciary’s attitude towards this field.Accordingly, the development of recognition and enforcement of overseas judgments and arbitral awards in Mainland China and its corresponding legal matters are not only of interest to the Chinese parties but also foreign commercial parties and overseas courts and/or arbitration institutions. Given that there are clear differences between the Chinese judicial system and other judiciaries, it becomes necessary to understand the decisions, reasoning, and perspectives behind Chinese judicial authorities in order to provide guidance for overseas judiciaries and legal institutions, and parties involved in cross-border transactions and disputes.


Annual Observation Report (2020): Legal Practice in Recognition and Enforcement of Overseas Judgments and Arbitral Awards in Mainland China


At the end of the Year 2020, our team was honored to accept the invitation of the Institute of Law, Chinese Academy of Social Sciences to draft the “Recognition and Enforcement of Overseas Judgments and Arbitral Awards inMainland China (2020)” for the Blue Book on the Rule of Law (2021), which has been released and published in May 2021 based on our team’s insights throughout 2020.And for this “Annual Observation Report (2020): Legal Practice in Recognition and Enforcement of Overseas Judgments and Arbitral Awards in Mainland China” (“Report”), we examine 8 cases from the Year 2020 and provide further insights on this field, summarized from “Recognition and Enforcement of Overseas Judgments and Arbitral Awards in Mainland China (2020)”.


I. Annual Overview (2020)

We have researched and found 37 cases related to recognition and enforcement of overseas judgments and arbitral awards in Mainland China (excluding cases of recognition and enforcement of matrimonial and family judgments, cases that have been recognized in 2019 or before but separately entered into the enforcement procedure in 2020, cases of withdrawal of application for recognition and enforcement, and etc.) in 2020 via public resource channels such as China Judgments Online, Wolters Kluwer, and etc. Among these 37 cases, 28 cases involving overseas judgments and arbitral awards have been successfully recognized and enforced in Mainland China (accounting for 75.67%), while the other 9 cases failed to be successfully recognized in Mainland China (accounting for 24.33%) (Please see the following Chart).


Annual Observation Report (2020): Legal Practice in Recognition and Enforcement of Overseas Judgments and Arbitral Awards in Mainland China



Among those successfully recognized and enforced:

i. 2.7% of them concerned foreign judgments

ii. 32.43% of them concerned the judgments rendered by Hong Kong, Macao, and Taiwan courts

iii. 29.73% of them concerned foreign arbitral awards

iv. 10.81% of them concerned the arbitral awards seated in Hong Kong, Macao, and Taiwan

II. Typical Cases


II. Typical Cases


1. Brentwood Case


[Keywords: ICC; seat of arbitration; foreign-related arbitral award]

On August 6, 2020, the Guangdong Dongguan Intermediate People’s Court (“Court”) decided that the arbitral award made by the Hong Kong branch of the International Chamber of Commerce (“ICC”) and conducted in Guangzhou should not be treated as a foreign arbitral award subject to the recognition and enforcement procedure through the New York Convention but instead as a Chinese foreign-related arbitral award subject to Chinese laws, meaning the arbitral award creditor could apply to the court for enforcement directly without the need of applying for recognition as an overseas arbitral award. This was one of the most groundbreaking cases in 2020, or perhaps even in China’s entire legal history, as it demonstrated the Chinese attitude has been promoting Mainland China as an attractive seat in the international arbitration domain by gradually opening the market to foreign arbitration institutions. 


See more at:

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=bded4e3c31b94ae8b42fac2500a68cc4


2. Bigtomisulo Case


[Keywords: reciprocity]

On April 2, 2020, after the Shandong Qingdao Intermediate People’s Court recognized and enforced a civil judgment made by a South Korean court in 2019, the Shanghai No.1 Intermediate People’s Court held to recognize and enforce another civil judgment issued by a South Korean court in Mainland China on the basis of the reciprocity principle.


See more at: 

https://zhuanlan.zhihu.com/p/141686644;

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=32b21c9ce39f456ba527abb500a1f47d


3. Emphor Case


[Keywords: unclaimed interest; beyond the scope of the submission to arbitration; arbitral tribunal’s discretion]

On June 17, 2020, the Guangzhou Maritime Court of PRC (“Court”) decided to recognize and enforce the arbitral award issued by the Singapore Chamber of Maritime Arbitration (SCMA) (“Award”). The Respondent argued that the arbitral tribunal had decided the unclaimed interest not requested by the Claimant in the statement of claims, making it beyond the scope of the submission to arbitration. The Court reviewed the reasoning of the Award and decided that the arbitral tribunal was entitled to award the interest calculated on the principal amount adjudicated in the arbitral award if it deemed appropriate, at the arbitral tribunal’s discretion pursuant to the arbitration rules of the SCMA applied in the Case. The Case wasrelated to a dispute arising out of a vessel construction contract between a company registered in the United Arab Emirates and a Chinese company.


See more at:

https://zhuanlan.zhihu.com/p/265341931;

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=20a904a198c44fe484b7ac2f00a430c6


4. Yao Wenzhong Case


[Keywords: Gambling; Macau; Public Policy]

On August 20, 2020, the Zhejiang Jinhua Intermediate People’s Court (“Court”) refused to recognize and enforce the judgment (“Judgment”) rendered by the Macau Primary Court on December 14, 2016, on the grounds that the Applicant did not prove the Respondent had been duly and lawfully summoned by the Macau Primary Court in accordance with Article 11 and Article 12.2 of the Arrangement between the Mainland and the Macao Special Administrative Region on the Mutual Recognition and Enforcement of Civil and Commercial Judgments. Moreover, the Respondent argued that the Judgment related to gambling should not be recognized and enforced for violating the public policy of Mainland China. However, the Court did not make any decision or present any attitude towards the aforementioned claim, which left a vacancy to be filled in recognition and enforcement of gamblingrelated judgment (verdict) practice in Mainland China. The Case concerned a dispute arising out of a loan agreement related to gambling between a Macau citizen and a Chinese 

citizen.


See more at: 

https://zhuanlan.zhihu.com/p/269738691;

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=a4f1607966dc4306ad67ac55009f0965


5. Myanmar Judgment Case


[Keywords: the original copy of the judgment; the certified error-free duplicate copy of the judgment]

On June 2, 2020, the Hunan Chenzhou Intermediate People’s Court (“Court”) refused to recognize and enforce the civil judgment issued by the Wa State Court of Myanmar and the mediation settlement among the parties for the Applicant failed to provide the original copy of the judgment which had come into effect, nor a certified errorfree duplicate copy. According to Article 543 of theInterpretations of Civil Procedural Law, an applicant applying to a People’s Court for recognition and enforcement of a judgment or ruling of a foreign court,which has come into effect, shall submit a petition form, and attach the original copy of the judgment or ruling of the foreign court which has come into effect, or a certified error-free duplicate copy and Chinese translation thereof. The Case concerned a dispute regarding mining equity among several Chinese citizens.


See more at:

https://zhuanlan.zhihu.com/p/157501571;

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=c2a6129357364788ab90abd70184ecd6


6. Shanghai Bestway Case


[Keywords: determine the validity of the arbitration clauses in PRC court; suspension of the arbitration proceedings in LMAA; proper notice of the appointment of the arbitration proceedings; public policy]

On July 1, 2020, the Zhejiang Jiaxing Intermediate People’s Court (“Court”) decided to recognize and enforce the arbitral awards rendered by the London Maritime Arbitrators Association (LMAA). The Respondent argued that the arbitration proceedings should have been suspended when the Shanghai Maritime Court of PRC was requested to determine the validity of the arbitration clauses. The Respondent further argued that the arbitral tribunal continued the proceedings and impaired the jurisdiction of the court in Mainland China, thereby violating the public policy of the PRC according to Article V of the New York Convention. The Court rejected the above argument and held that since it was the Respondent who did not raise any objection to the validity of the arbitration clauses before the arbitral tribunal within the proper time period given by the arbitral tribunal, the Respondent should be regarded as having been given proper notice of the arbitration proceedings and the opportunity to present its case. The Case was related to a dispute of a vessel construction contract between two Chinese enterprises.


See more at: 

https://zhuanlan.zhihu.com/p/260464211; 

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=a2c08946923b47f586f9ac0800ac3b09

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=a8820f14f53d4128b78aac0800ac3b20


7. Octaformsy Case


[Keywords: estimated value of the dispute]

On November 24, 2020, the Zhejiang Huzhou Intermediate People’s Court (“Court”) decided to recognize and enforce the arbitral award rendered by the British Columbia International Commercial Arbitration Centre (“BCIAC”). The Respondent argued that the arbitration claim was not specified during the whole arbitration procedure, which was not in accordance with the arbitration agreement and the rules agreed upon by the Parties. However, the Court refused the argument by ascertaining Article 17.3 of the BCIAC Arbitration Rules, which states that “the general nature of the claim and an estimate of the value of the dispute, if any”, emphasizing that the wording “if any” meant the arbitration rules themselves did not require the Claimant to provide the exact amount of the arbitration claim, which was different from requiring the exact value of the dispute upon the application for arbitration under the arbitration rules of China International Economic and Trade Arbitration Commission (CIETAC) and Beijing Arbitration Center (BAC) in Mainland China. The Case was related to a dispute arising out of a purchasing contract between one Canadian company and one Chinese enterprise.


See more at: 

https://zhuanlan.zhihu.com/p/339430114;

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=406ab578ccde430c9487ac87009fcff3


8. Zhang Silun Case


[Keywords: one country, two systems; Republic of China; character defamation]

On May 29, 2020, the Shanghai No.2 Intermediate People’s Court (“Court”) held to recognize and enforce the judgment (“Judgment”) issued by the Taiwan Taipei District Court in accordance with Article 1, Article 15, Article 16, and Article 18 of the Provisions of the Supreme People’s Court on Recognition and Enforcement of Civil Judgments Issued by Courts in Taiwan. The Respondent argued that the wording, “Republic of China”, which was used for dating the Judgment, was against the “one country, two systems” policy. The Court rejected the claim. The Case concerned a tort dispute related to the character defamation between a Taiwan citizen and a Chinese citizen.


See more at: 

https://zhuanlan.zhihu.com/p/339423254;

https://law.wkinfo.com.cn/judgmentdocuments/detail/MjAzMjQ4MDk0NTc%3D?searchId=ec4763670e9d4ea0937bb7ef181f6d94&index=1&q=%EF

%BC%882020%EF%BC%89%E6%B2%AA02%E8%AE%A4%E5%8F%B01%E5%8F%B7&module=


III. Further Outlook

Our observations of China’s judicial development in foreign disputes throughout 2020 indicate that there are still existseveral matters are of concern: (i) the recognition and enforcement of overseas mediation settlements recognized by overseas courts and arbitral institutions; (ii) the opportunities and challenges of the recognition and enforcement of gambling-related judgments and/or arbitral awards rendered by the judicial and/or arbitration institutions of Macau and other legalized gambling jurisdictions in Mainland China; (iii) whether translation fees and notary certification fees incurred in the recognition and enforcement procedure shall be borne by the respondent; (iv) the promotion of the reciprocity principle and gradual expansion of the scope of international judicial assistance in further practice.We will continue to focus on, observe and update new developments of the recognition and enforcement of overseas judgments and arbitral awards in Mainland China in 2021.