China’s Top Court Publishes Its First Annual Report on Judicial Review of Arbitration-Related Cases

On 23 December 2020, the Supreme People’s Court (“SPC”) of China released its bilingual 2019 Annual Report on Judicial Review of Arbitration Cases in China (the “Report”). It is the very first report issued by the SPC summarising the courts’ approach for judicial review of arbitration-related cases.

The Report aims to promote the SPC’s efforts over the course of last year in standardising judicial review approach in dealing with arbitration-related matters. In particular, it includes the SPC’s summary of its approach for judicial review of arbitration-related matters in 2019, such as on issues of validity of arbitration agreements, enforcement or revocation of domestic arbitral awards, as well as recognition and enforcement of offshore arbitral awards. Whilst the full content of the Report itself has not been made available online at the time of our blog, we set out below the key highlights based on the press release and information provided at the press conference of the SPC.

The SPC “reporting system”

The SPC “reporting system” applies to enforcement of arbitral awards in Mainland China.[i] Under the reporting system, lower courts are authorised to confirm validity of arbitration agreements, and order enforcement of onshore and offshore awards (or a Mainland Chinese foreign-related award). However, if a lower court is minded to deny validity of an arbitration agreement or to refuse enforcement of an arbitral award, it must refer the case to a higher court to confirm the decision.

For domestic awards, the higher court will conduct the final review without involving the SPC unless where (1) the parties are from different provinces in Mainland China; or (2) the refusal to enforce the award is based on an “infringement of public policy”.

For foreign-related arbitration cases, the higher court must refer the matter to the SPC for a final decision if it agrees that enforcement should be refused.

In 2018, the reporting system was further supplemented by the establishment of the First and Second International Commercial Courts.[ii] These courts are empowered to hear revocation and enforcement cases of foreign-related arbitral awards with disputed amounts exceeding RMB300 million or awards of significance released by five arbitration institutions.[iii]

According to the statistics provided by the SPC at the press conference, PRC courts heard a total of 11,029 cases concerning revocation of arbitral awards in 2019, only 5.8% of which the courts decided to set aside or partially set aside arbitral awards. Among the 201 cases reviewed by the SPC in 2019, 32% of lower courts’ decisions were overruled.

Recognition and enforcement of offshore arbitral awards

Recognition and enforcement of offshore arbitral awards in China is governed by the New York Convention as well as the Civil Procedure Law of China.

The SPC mentioned during the press conference that in 2019, a total of 32 applications were made to recognise and enforce offshore arbitral awards in China, among which 20 applications were successful and 1 application was denied because the award exceeded the scope of the arbitration agreement. The other applications were either withdrawn by the parties or dismissed due to lack of jurisdiction.

Interim injunctions in support of arbitration

The Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (the “Arrangement”) came into effect on 1 October 2019. Parties to Hong Kong-seated arbitrations administered by an eligible arbitration institution in Hong Kong have the right to apply for interim measures from Mainland Chinese courts.

According to the SPC, between 1 October 2019 and 31 October 2020, 32 applications for interim measures have been granted by Mainland Chinese courts in relation to Hong Kong arbitration, among which 29 cases concern property preservation measures, two cases concern evidence preservation and one case concerns action preservation.

Pro-arbitration principles in judicial review

SPC mentioned at the press conference that the Report summarises the criteria and principles that Mainland Chinese courts should take into account in their judicial review of arbitration-related cases.

Six general principles are emphasised:

  • Courts shall respect parties’ agreement to arbitrate and interpret the arbitration agreements/clauses in favour of validity;
  • The grounds for setting aside arbitral awards shall be strictly limited to those provided by law;
  • Arbitration awards are in principle final and binding and the judicial review of arbitral awards shall only be limited to the extent of necessity;
  • The public policy defence shall be interpreted stringently to avoid being abused;
  • Courts shall accurately identify foreign governing laws, recognise and enforce foreign arbitral awards accordingly to law and create an “arbitration friendly” judicial environment; and
  • Courts shall recognise and enforce Hong Kong, Macau and Taiwan arbitral awards according to law, and assist in interim measures in aid of Hong Kong arbitral proceedings in Mainland China.

According to the SPC, the Report also addresses recent development in arbitration practice, such as the formation of Belt and Road Mechanism for Resolution of International Commercial Disputes[iv] and China Pilot Free Trade Zone Arbitration Mechanism[v].

 

[i]           See the Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review (Fa Shi [2017] No.21).

[ii]          See Article 2 of Provisions of the Supreme People’s Court on Several Issues Regarding the Establishment of International Commercial Court (Fa Shi [2018] No.11).

[iii]         The five arbitration institutions are members of “One-stop” Diversified Settlement Mechanism for International Commercial Disputes in China, including China International Economic and Trade Arbitration Commission, Shanghai International Economic and Trade Arbitration Commission, Shenzhen Court of International Arbitration, Beijing Arbitration Commission, and China Maritime Arbitration Commission.

[iv]         Opinions of the Supreme People’s Court on the Provision of Judicial Services and Guarantee by People’s Courts for the Belt and Road Initiative (Fa Fa [2019] No.29) (Chinese text only).

[v]          Opinions of Supreme People’s Court on the Provision of Judicial Services and Guarantee by People’s Courts for the Construction of China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area (Fa Fa [2019] No. 31).

 

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CLAIMANT FAILS TO RECOVER THE COSTS OF ITS APPLICATION TO REMOVE AN ARBITRATOR, WHERE THE ARBITRATOR HAD RESIGNED BEFORE THE TRIAL IN THE ENGLISH HIGH COURT

In a recent decision (available on an anonymised basis here), the English High Court (the “Court”) considered a claimant (“C”)’s claim for its costs of an application under section 24 (“s24”) of the Arbitration Act 1996 (the “Arbitration Act”) for the removal of an arbitrator (“X”) from LCIA arbitration proceedings (the “LCIA Arbitration”). X had already resigned and C’s claim for costs remained the only issue to be determined by the Court. The decision is of interest for its focus on a rarely invoked provision of the Arbitration Act, and the unusual circumstances surrounding the claim for costs.

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Court Support For Arbitration In South Africa: Knowing Where You Stand

In December 2017, South Africa brought into law its first piece of legislation dedicated to international arbitration, the aptly named International Arbitration Act of 2017 (the New Act).

The New Act

The New Act incorporates the provisions of the UNCITRAL Model Law and further aligns the country’s national law with the New York Convention. The legislation has been welcomed as a necessary step for South Africa to become the continent’s leading arbitral hub. Rather interestingly, in an effort to stimulate the growth of ADR, parties can also now choose to refer their disputes to conciliation using the UNCITRAL Conciliation Rules.

But the New Act does not stop at mere adoption of the UNCITRAL texts and modernisation of the old regime.  Ambitious refinements to the Model Law (which is incorporated as Schedule 1 to the New Act), seek to advance certain matters into what many may regard as relatively unchartered waters. One such ambitious development relates to court ordered interim measures.

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SIAC emergency arbitrator awards – a speedier route to interim relief before the Indian Courts?

The Singapore International Arbitration Centre (the SIAC) introduced emergency arbitrator provisions in its arbitration rules in July 2010 and has had 34 applications filed before it to date where parties have asked for an emergency arbitrator to be appointed. The SIAC further reports that 9 out of the 34 emergency arbitrator applications have involved Indian parties (5 where the Indian party was the respondent and 4 where Indian parties were both the claimant and the respondent).

An emergency arbitrator is typically approached by parties where the Tribunal has not been constituted and a party may require urgent interim relief including, amongst others, orders for preservation of properties, freezing accounts, orders against the dissipation of assets etc. Seeking relief from an emergency arbitrator is increasingly been chosen as an alternative to seeking injunctive relief from the courts (in support of the arbitration). According to statistics released by the SIAC, the average time taken by an emergency arbitrator to pass an award after having heard the parties ranges from 8-10 days, with the shortest period being 2 days to pass an award.

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ICJ orders provisional measures in proceedings between East Timor and Australia

The International Court of Justice (ICJ) has handed down its decision in respect of provisional measures sought by East Timor in a pending case before the Court. The principal claim relates to documents and data seized by the Australian Security Intelligence Organisation (ASIO) from the office of an Australian lawyer representing East Timor in an upcoming arbitration with Australia.¹

At least some of the materials seized relate to a pending arbitration between East Timor and Australia concerning allegations by East Timor that Australia engaged in spying during negotiations to sign the 2006 Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS). In that arbitration, East Timor contends that Australian espionage invalidates CMATS, a $40 billion gas and oil treaty, as the treaty was not negotiated in good faith.

The Court has ordered that Australia:

  • ensure that the content of the seized material is not used to the disadvantage of East Timor before the principal claim is determined;
  • keep the seized materials and any copies thereof under seal; and
  • not interfere in any way in communications between East Timor and its legal advisors in relation to the CMATS arbitration.

However, the Court did not order that Australia deliver the seized materials into the custody of the ICJ or deliver to East Timor and the ICJ a list of the materials seized in the raid that have been disclosed to any person and a list of those to whom the materials had been disclosed, as requested in East Timor’s request for provisional measures.

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JCAA introduces a new set of arbitration rules

The Japan Commercial Arbitration Association (JCAA) has introduced an amended version of its Commercial Arbitration Rules (the New Rules). The New Rules, which contain comprehensive amendments, came into force on 1 February 2014, following a consultation period. They will apply to all arbitrations initiated on or after that date. The changes are intended by the JCAA to update the rules in line with recent trends in the amendment of arbitration rules (such as the 2010 Amendments to the UNCITRAL Arbitration Rules). The changes largely achieve this aim, addressing current issues in international arbitration such as multi-party arbitration, emergency arbitrators and interim relief.

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Singapore Court of Appeal sets aside injunction against Maldivian state-owned company in airport dispute

The Singapore Court of Appeal has set aside an interim injunction granted by the High Court against a Maldivian state-owned corporation (“MACL“), by which MACL had been restrained from interfering with the operation of the Maldives airport by the relevant concession holder (“GMIAL“), a joint venture entity partly owned by the India-based infrastructure group, GMR. (A copy of the decision can be found here).

In deciding the injunction application, the Court of Appeal had to consider the question of whether it had the power to grant an injunction – in light of the fact that MACL was a state-owned corporation; and whether the circumstances of the case justified grant of an injunction.

The Court of Appeal rejected MACL’s claim to state immunity and found that it had jurisdiction to grant an injunction. In reaching this conclusion, the Court of Appeal laid particular emphasis on the fact that MACL had waived any right it may have had to sovereign immunity and that in any event the transaction with GMIAL was purely contractual and commercial in nature and therefore no sovereign immunity was available.

However, in the exercise of its discretion, it found that GMIAL had not demonstrated that the balance of convenience lay in favour of an injunction. The substantive dispute was referred to arbitration.

The decision has been met with some disappointment inside India by those who see it as lessening Singapore’s attraction as an arbitral seat.  This appears to be an unfair reading.  The ultimate decision of the Singapore Court of Appeal involved a balancing of the competing interests of the parties, coupled with recognition of the limits of the court’s powers in purporting to restrain actions in a foreign jurisdiction.  The Court also concluded that it would be possible, albeit not easy, for expert evidence to be used to assess the monetary value of any harm caused to GMIAL; in other words, monetary damages would be an adequate remedy if GMIAL succeeded on its arbitration claim. 

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U&M Mining Zambia Ltd v Konkola Copper Mines plc: Court of the seat does not have exclusive jurisdiction to grant interim measures in support of arbitration

In the recent case of U&M Mining Zambia Ltd v Konkola Copper Mines plc [2013] EWHC 260 (Comm), the court examined the question of whether English courts have exclusive jurisdiction to grant interim measures in support of an arbitration seated in England pending the appointment of the tribunal. Although it did not have to decide the point, the court found that, whilst English courts would have primary jurisdiction to hear applications in support of arbitral proceedings, parties may nevertheless seek interim relief or conservatory measures from other national courts where, for practical reasons, the application can only sensibly be made there.

Pending the formation of the arbitral tribunal, parties to an English-seated arbitration may wish to consider whether they may be able to get more effective interim relief in courts other than those of the seat.

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