PRC COURT CONFIRMS JURISDICTION TO RECOGNIZE AND ENFORCE A FOREIGN ARBITRAL AWARD AGAINST A BVI COMPANY

Can a foreign arbitral award be recognized and enforced in the PRC against a foreign company not incorporated there? In the recent case of Amarante vs Intermarine[1], the Tianjin Higher People’s Court confirmed the Tianjin Maritime Court’s decision to recognize and enforce a foreign arbitral award against a BVI company, by finding that the BVI company is domiciled in the PRC through having a principal place of business in Beijing.

The Facts

In August 2013, Amarante Shipping Pte Ltd (Amarante), a company incorporated in Singapore, entered into a time charter with Intermarine Shipping Co Ltd (Intermarine), a company incorporated in the BVI. Subsequently, disputes arose between the parties. Pursuant to the agreement between them, Amarante commenced an ad hoc arbitration in London against Intermarine and obtained a favourable award (the Award).

In March 2019, Amarante commenced proceedings at the Tianjin Maritime Court (the Court) for the recognition and enforcement of the Award against Intermarine. During the pleadings stage, Intermarine raised a challenge to the jurisdiction of the Court on the basis that Intermarine is domiciled in the BVI and does not have any property in the PRC. In response, Amarante counter-argued that the Court has jurisdiction over Intermarine because, among other things, Intermarine is domiciled in the PRC by virtue of having a principal place of business in Beijing.

The Law and the Issue before the Court

Under Article 283 of the PRC Civil Procedure Law, an application for the recognition and enforcement of a foreign arbitral award by the PRC courts should be made to the intermediate court where the respondent is domiciled, or where the respondent’s property is located.

Pursuant to Article 87 of the “Provisions of the Supreme People’s Court on the Scope of Cases to Be Accepted by Maritime Courts (2016)”, an application to recognize and enforce a foreign maritime arbitral award is within the jurisdiction of the maritime court. In this connection, the Tianjin Maritime Court’s geographical jurisdiction extends to cover Beijing.

The key issue before the Court in this case is whether Intermarine is “domiciled” in Beijing for the purpose of Article 283 of the PRC Civil Procedure Law in order for the PRC courts to have jurisdiction, as contended by Amarante.

According to Article 3 of the “Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China” (“Civil Procedure Law Interpretation”), the “domicile of a legal person” means the place where its principal place of business is located; if the location of a legal person’s principal place of business cannot be determined, the place of incorporation or registration of the legal person shall be its domicile.

The Court’s ruling

In finding that Intermarine’s principal place of business is in Beijing, the Court considered the following facts:

  1. The sole shareholder and sole director of Intermarine (who is a PRC citizen) is also the legal representative of Intermarine Haida Maritime Consulting Co. Ltd., a company incorporated in Chaoyang district, Beijing (Intermarine Beijing);
  2. Intermarine used the address of Intermarine Beijing when making payment to Amarante under the time charter;
  3. Intermarine used the corporate email address of Intermarine Beijing (xxx@intermarineship.com) when corresponding with Amarante, including correspondence for the issuance of the delivery guarantee;
  4. A signboard with Intermarine’s full corporate name was hung on the entrance of Intermarine Beijing’s office in Beijing; and
  5. As witnessed by a notary public, a staff member at Intermarine Beijing’s office accepted the notice of arbitration served by Amarante for Intermarine (although that staff refused to sign receipt of the notice of arbitration), and Intermarine subsequently took part in that arbitration.

The Court went on to find that, because Intermarine has its principal place of business in Beijing, it is domiciled in Beijing and therefore the Court has jurisdiction over the application. The Court then dismissed Intermarine’s jurisdictional challenge and, in related court proceedings, proceeded to recognize and enforce the Award against Intermarine.

Intermarine appealed the Court’s ruling to the Higher People’s Court of Tianjin Municipality (Higher Court). The Higher Court upheld the Court’s decision on 31 December 2019.

Comment

While cases relating to the PRC court’s jurisdiction over applications for the recognition and enforcement of foreign arbitral award against companies incorporated outside the PRC will always need to be considered on a case-by-case basis, the Tianjin Court’s ruling does at least suggest that the PRC courts may be increasingly prepared to assume jurisdiction over an offshore company which it might otherwise not have jurisdiction over for enforcement purposes, by seeking to find that the company nevertheless maintains its principal place of business, including through its affiliates incorporated in the PRC and conducting business from the PRC, rather than declining jurisdiction merely on the basis that the company is incorporated outside the PRC. Factors such as whether an offshore company is owned or controlled by a PRC citizen/company are now much more likely to be relevant.

[1] (2019) Jin 72 Xie Wai Ren 1

 

For more information, please contact Michelle Li, Partner, Tianyu Ma, Associate, or your usual Herbert Smith Freehills contact.

Michelle Li
Michelle Li
Partner
+86 21 2322 2162
Tianyu Ma
Tianyu Ma
Associate
+86 10 6535 5040

STATE COUNCIL OF CHINA ANNOUNCED GROUND-BREAKING POLICY TO ALLOW FOREIGN ARBITRATION INSTITUTIONS TO SET UP BUSINESSES IN SHANGHAI FREE TRADE ZONE TO ADMINISTER CASES IN MAINLAND CHINA

On 6 August 2019, the State Council of China published the “General Planning of the New Area of ​​the China (Shanghai) Pilot Free Trade Zone Program” (“General Planning“).  Under Article 4 of the General Planning,  reputable overseas arbitration and dispute resolution institutions will be allowed to “set up business organisations in the new area [of the China (Shanghai Pilot Free Trade Zone)] and conduct arbitration businesses in relation to civil and commercial disputes arising in the areas of international commerce, maritime affairs, investment, etc.” and the relevant bodies will “support and assure the application and enforcement of interim measures by Chinese and foreign parties before and during the arbitration proceedings, such as asset preservation, evidence preservation and action preservation.”

Continue reading