On 21 July 2017, the Beijing No. 4 Intermediate People’s Court enforced a Hong Kong award in favour of Stonewall Resources Limited (Stonewall), an Australian listed gold mining company. The HKIAC award is related to breach by Shandong Qixing Iron Tower Co., Ltd. (Qixing) of a share sale agreement governed by Australian law whereby Qixing had undertaken to purchase South African mining assets from Stonewall. Notably, the disputed award was enforced in Beijing less than a year after being issued by the Hong Kong tribunal; and Stonewall is reported to have benefitted from third party funding, as a result of which its costs were reimbursed in return for 45% of the award.
The enforcement of Stonewall’s award may be of particular interest to Australian investors. China is Australia’s largest trading partner in terms of both imports and exports. Australia is China’s sixth largest trading partner, its fifth biggest supplier of imports and its tenth biggest customer for exports. Twenty-five per cent of Australia’s manufactured imports come from China; 13% of its exports are thermal coal to China (see the article here). We are seeing Australian clients increasingly include arbitration agreements naming Hong Kong or Singapore as the seat of arbitration in relation to both inbound and outbound investment.
Foreign arbitral awards are frequently enforced in the PRC, with the PRC courts increasingly taking a sensible and pragmatic approach to attempts to resist enforcement. One recent study identified 98 publicly available applications to enforce arbitral awards in the PRC between 1994 and 2015 (although not all applications, particularly older applications, are public). The number of applications has increased particularly over the last five years, during which 78 applications for enforcement were made, of which 86% were successful. Awards issued by the HKIAC, ICC and SIAC appear to have similar success rates. These statistics are broadly indicative of a well-functioning system in which the enforcement court provides an important check on the integrity of the award whilst recognizing that parties are choosing minimal court interference when they select arbitration.
Hong Kong is a popular neutral venue for China-related commercial arbitrations, and HKIAC has the largest caseload involving Chinese parties among all international arbitral institutions. The enforcement of the Stonewall award sits alongside the recent enforcement in the PRC for the first time of a CIETAC Hong Kong award (see our previous blogpost here). Awards made in Hong Kong are enforceable in the PRC under the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and Hong Kong, which essentially replicates Article V of the New York Convention and requires recognition and enforcement of Hong Kong awards in the Mainland subject to the same very narrow exceptions as are set out in the New York Convention.
Singapore is another popular venue for China-related commercial arbitrations, and in particular those involving Australian parties. Awards rendered in Singapore are enforceable in Mainland China pursuant to the New York Convention.