Applicable procedural law for setting aside of arbitral awards
4. Is there a time limit for applying for the setting aside of an arbitral award?
China
Currently, applications to set aside an award must be made within six months of the applicant’s receipt of the award (Arbitration Law, Article 59).
Under Article 78 of the Proposed Revision of the Arbitration Law (released by the Ministry of Justice on 30 July 2021 for public consultation), the time limit for an application to set aside an arbitral award has been shortened from six months to three months from the date of receipt of the award.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
5. What kind of arbitral decision can be set aside in your jurisdiction? What are the criteria to distinguish between arbitral awards and procedural orders in your jurisdiction? Can courts set aside partial or interim awards?
China
Courts may only set aside awards rendered with final effect on substantive issues in the dispute (which may be entitled as a final award, a partial award or an interlocutory award). While arbitral awards mainly deal with the merits of arbitration, procedural orders and notices cover procedural arrangements and decisions from arbitral institutions and tribunals. Parties to an arbitration cannot apply to set aside the tribunal’s decisions or provisional measures regarding procedural issues.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
6. Which court has jurisdiction over an application for the setting aside of an arbitral award? Is there a specific court or chamber in place with specific sets of rules applicable to international arbitral awards?
China
The intermediate people’s court at the place of the arbitration institution has jurisdiction over applications to set aside arbitral awards (Arbitration Law, Article 58).
The concept of a seat of arbitration is expressly recognised by the Proposed Revision of the Arbitration Law. Article 77 of the Proposed Revision provides that the intermediate people’s court of the seat of arbitration has jurisdiction over applications to set aside arbitral awards.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
7. What documentation is required when applying for the setting aside of an arbitral award?
China
Parties are usually required to submit the following documents when applying to a Chinese court to set aside an arbitral award:
- an original copy of the application to set aside the arbitral award, with copies corresponding to the number of respondents, and one additional copy to the court. The application to set aside the arbitral award shall state basic information about the applicants and the respondents, the claims, and the facts and reasons on which the claim is based, with supporting exhibits attached;
- a set of the applicant’s identity documents. If the parties are to be represented by their legal counsel, a set of authorisation documents must also be provided. If the applicant is an overseas entity, the identity materials and the power of attorney are subject to notarisation and authentication;
- a set of identity documents pertaining to the respondents. These are not subject to notarisation and authentication;
- a copy of the arbitral award. The original copy shall also be taken and be subject to verification when filing the case; and
- a copy of proof of the effectiveness of the arbitral award. Parties can apply to the arbitration institution to provide this proof.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
8. If the required documentation is drafted in a language other than the official language of your jurisdiction, is it necessary to submit a translation with the application for the setting aside of an arbitral award? If yes, in what form must the translation be?
China
All documents submitted to Chinese courts in a language other than Chinese must be accompanied by a Chinese translation. No mandatory certification requirements exist for Chinese language translators and interpreters in this regard; however, in practice, parties seeking to set aside an award tend to select translators and interpreters who are recommended by the higher people’s courts in designated directories when the parties request international judicial assistance. Selecting a verified translator may ensure the effectiveness of the translation.
In addition, documents submitted to the court must be accompanied by a full translation rather than an abstract or excerpt. Full translations can also prevent challenges from the courts or the opposing party.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
9. What are the other practical requirements relating to the setting aside of an arbitral award? Are there any limitations on the language and length of the submissions and of the documentation filed by the parties?
China
Applicants must pay a case acceptance fee charged according to the ‘Calculation standards for non-property cases’, pursuant to the ‘Reply of the Supreme People’s Court to Several Specific Issues concerning the Trial of Cases Involving the Application of Parties to Vacate Arbitration Awards’ (Fa Shi [1998] No. 16). As further clarified by various higher people’s courts, the acceptance fee for setting aside an award is usually 400 yuan.
Documents submitted to the court must be in Chinese or accompanied by a Chinese translation.
Applications are not subject to length limitations. In practice, however, submitting lengthy documents (e.g., longer than 10 pages) is generally discouraged.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
10. What are the different steps of the proceedings?
China
Courts handle applications for setting aside arbitral awards in accordance with the following procedures: (1) the applicant submits to the court an application for setting aside the arbitral award (with exhibits and other documentation as required); (2) the case registration branch of the court reviews the documentation and decides whether to register the case; and (3) the reviewing branch of the court forms a collegiate bench.
After steps 2 and 3, the court generally serves to the respondent or the respondents the case acceptance notice, the notice for the constitution of the collegiate bench, and the application for setting aside the case and its exhibits.
The respondent may submit a written defence and exhibits but is not obliged to.
If there is no jurisdictional challenge, the collegiate bench will notify the parties of the time for inquiries, which is similar to an oral hearing. The name of the setting-aside procedure differs merely to distinguish it from a case trial procedure.
In most cases, the court holds only one ‘inquiry’. The basic procedure is as follows:
- the applicant states its claims and reasons;
- the respondent states its defences;
- the applicant presents its evidence, and the respondent examines the evidence;
- the respondent presents its evidence (if any), and the applicant examines the evidence;
- the parties have an in-court debate; and
- the parties present final statements.
The court will usually issue a ruling on the application several days after the inquiry.
Reporting system
Chinese courts have adopted a pro-arbitration stance by establishing a reporting system for the judicial review of arbitration to secure the effectiveness of arbitral awards. The latest legal authorities for the reporting system are the Provisions of the Supreme People’s Court on Issues Concerning the Reporting and Examination of Cases Involving the Judicial Review of Arbitration (effective as of 1 January 2018 and revised in 2021).
Specifically, in the setting-aside procedure, if the court decides to reject an application for setting aside an arbitral award, it will render a ruling within two months of the date of acceptance of the application. This ruling is final and not subject to appeal.
If the court is inclined to set aside the arbitral award, it will follow the following reporting procedures to a higher-level court, even to the Supreme People’s Court, for final approval:
- If the case involves foreign, Hong Kong, Macau or Taiwan elements, the intermediate people’s court will report to the higher people’s court:
- If the higher people’s court disagrees with setting aside the award, the intermediate court will render a ruling to dismiss the applicant’s application.
- If the higher people’s court agrees with the setting-aside application, it will further report to the Supreme People’s Court. The intermediate people’s court can issue a ruling to set aside the award only after obtaining the Supreme People’s Court’s approval.
- If the case involves no foreign, Hong Kong, Macau or Taiwan elements, the court’s setting-aside opinion can be reported only to the higher people’s court for a final opinion and then filed to the Supreme People’s Court to put on record; however, if the ground to set aside the award constitutes a ‘violation of social and public interests’, the higher people’s court must report the case to the Supreme People’s Court for a final decision.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
11. May an arbitral award be recognised or enforced pending the setting-aside proceedings in your jurisdiction? Do setting-aside proceedings have suspensive effect? If not, which court has jurisdiction over an application to stay the enforcement of the award pending the setting-aside proceedings, what are the different steps of the proceedings, and what are the criteria to be met?
China
In terms of domestic arbitral awards, setting-aside proceedings have a suspensive effect in the competent Chinese court. If one party applies for enforcement of an award while another applies to set aside the award, the court handling enforcement will suspend the proceeding (Arbitration Law, Article 64).
Should an enforcement proceeding be suspended, the court would cease levying assets unless the applicant for enforcement posts valid and adequate security for the enforcement application. The enforcement proceeding will be either terminated if the award is set aside or resumed if the award is not set aside.
In terms of foreign arbitral awards, if one party applies to a Chinese court for recognition and enforcement of a foreign arbitral award while the opposing party applies for the cancellation of the award in a foreign court, the Chinese court has the discretion to decide whether to suspend the recognition and enforcement proceedings, according to Article VI of the New York Convention and Article 83 of the Notice of the Supreme People’s Court on Promulgation of the Minutes of the Second National Work Conference for Foreign-related Commercial and Maritime Trials.
In practice, the courts have granted suspensions in several cases, such as the Yu 01 Wai Xie Ren No. 6 (2017) decision by the Intermediate People’s Court of Zhengzhou; however, some courts have also refused to grant suspensions in their decisions, such as the Yue 03 Min Chu No. 366 (2016) decision by the Intermediate People’s Court of Shenzhen and the Hu 01 Xie Wai Ren No. 5(1) (2019) decision by the First Intermediate People’s Court of Shanghai.
Since there is no clear legislative or judicial guidance on this issue, there are no clear criteria or standards for assessing whether to grant setting-aside applications; the decisions will be at the judges’ discretion.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
12. What are the grounds on which an arbitral award may be set aside?
China
Domestic arbitral awards with foreign elements and those without foreign elements are treated differently.
Pursuant to Article 58 of the Arbitration Law, the grounds to set aside a domestic arbitral award without foreign elements are as follows:
- there is no arbitration agreement between the parties;
- the matters of the award are beyond the extent of the arbitration agreement or not under the jurisdiction of the arbitration commission;
- 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;
- the arbitrator has demanded or accepted bribes, committed a corrupt act or perverted the course of justice in making the arbitral award; or
- the award is contrary to social and public interests.
According to Article 70 of the Arbitration Law and Article 281 of the Civil Procedure Law, the grounds to set aside a domestic arbitral award with foreign elements are as follows:
- the parties have neither included an arbitration clause in their contract nor subsequently reached a written arbitration agreement;
- the person against whom the application is made 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 did not conform with the rules of arbitration; or
- matters decided in the award exceed the scope of the arbitration agreement or are beyond the arbitral authority of the arbitration institution.
The Proposed Revision of the Arbitration Law provides a unified legal basis for setting aside arbitral awards with and without foreign elements. According to Article 77 of the Proposed Revision, the grounds for setting aside an arbitral award, regardless of whether a foreign element is involved, are as follows:
- there was no arbitration agreement, or the arbitration agreement is invalid;
- the award contains decisions on matters beyond the scope of the arbitration agreement or the scope of arbitrable matters specified in the Arbitration Law;
- the respondent was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was unable to present his or her case for other reasons for which he or she is not responsible;
- the composition of the arbitral tribunal or the arbitration procedure was not in accordance with a legal procedure or the parties’ agreement, seriously infringing parties’ rights;
- the award was obtained through fraudulent conduct, including malicious collusion and falsification of evidence;
- an arbitrator extorted or accepted bribes, engaged in malpractice for personal gain or perverted the course of justice during the arbitral proceedings; or
- the award is in conflict with the public interest.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
13. When assessing the grounds for setting aside, may the judge conduct a full review and reconsider factual or legal findings from the arbitral tribunal in the award? Is the judge bound by the tribunal’s findings? If not, what degree of deference will the judge give to the tribunal’s findings?
China
Since only procedural issues will be considered in setting-aside applications, judges usually defer to the tribunal’s finding of the facts and the legal reasoning without reviewing the tribunal’s decision on the merits. In principle, judges are bound by the facts and legal reasoning from the tribunal and will limit the scope of review of an arbitral award to procedural issues; however, the courts will sometimes reconsider the factual or legal findings of the arbitral tribunal if there is a valid cause of action under the Arbitration Law or the Civil Procedure Law.
For example, if the applicant claims that the evidence concealed by the other party is sufficient to affect the impartiality of the award under Article 58 of the Arbitration Law, a court might engage in reviews of the substantive issues; however, Article 77 of the Proposed Revision of the Arbitration Law provides that ‘concealed evidence that will sufficiently affect the impartiality of the award’ is no longer a valid cause of action for setting aside an arbitral award, which further limits the power of a court to review the substantive issues of an arbitral award.
If the applicant claims that the arbitral award might violate public policy, the court will also reconsider the merits of an award. The public policy violation is applicable as a cause of action when the arbitral award contravenes the law, the basic jurisprudential principles of Chinese law or fundamental socioeconomic principles.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
14. Is it possible for an applicant in setting-aside proceedings to be considered to have waived its right to invoke a particular ground for setting aside? Under what conditions?
China
An applicant may be considered to have waived those rights when he or she knows, or should have reasonably known, that there was procedural non-compliance during the arbitration process yet did not raise any objections and consented to proceed without reservation.
Some arbitration rules have outlined this kind of waiver of the right to object. For instance, Article 10 of the 2015 China International Economic and Trade Arbitration Commission Arbitration Rules (the CIETAC Arbitration Rules) states:
A party shall be deemed to have waived its right to object where it knows or should have known that any provision of, or requirement under, these Rules has not been complied with and yet participates in or proceeds with the arbitral proceedings without promptly and explicitly submitting its objection in writing to such non-compliance.
The waiver will preclude the parties from raising challenges on procedural issues in subsequent proceedings, including setting-aside applications.
Further, if the applicant withdraws the setting-aside application from the court or does not apply to withdraw the arbitral award within six months of receipt, the arbitral award will take effect, and the parties will be deemed to have waived their rights to object to the validity of the arbitral awards.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
15. What is the effect of the decision on the setting-aside application in your jurisdiction? What challenges or appeals are available?
China
Court decisions on applications for setting aside an arbitral award are non-appealable and effective immediately on service to the parties (Provisions of the Supreme People’s Court on Several Issues Concerning the Hearing of Cases Involving the Judicial Review of Arbitration, Article 20).
If an arbitral award is set aside, the parties may initiate another arbitration proceeding based on a new arbitration agreement on the subject matter or initiate litigation before a competent court.
According to Article 81 of the Proposed Revision of the Arbitration Law, a party is entitled to apply for reconsideration by a higher-level court against an order to set aside an arbitral award within 10 days of receipt of the order. The court shall give a decision within one month of its acceptance of the application for reconsideration.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
16. Will courts take into consideration decisions rendered in relation to the same arbitral award in other jurisdictions or give effect to them?
China
Courts will refuse recognition and enforcement of an award if a party provides evidence proving that the foreign arbitral award has not come into force, has been set aside or has ceased to be enforced (Notice of the Supreme People’s Court on Promulgation of the Minutes of the Second National Work Conference for Foreign-related Commercial and Maritime Trials, Article 83).
Answer contributed by
Xianglin Chen
Han Kun Law Offices
Recognition proceedings
19. Is there a time limit for applying for the recognition and enforcement of an arbitral award?
China
Applications for recognition and enforcement of an arbitral award must be submitted within two years of the last day for performance stipulated in the award (Civil Procedure Law, Article 246). If the award does not stipulate a time for performance, the two-year limit begins on the date the award takes effect. These rules apply to both domestic and foreign arbitral awards, although domestic awards require only enforcement, whereas foreign awards require both recognition and enforcement.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
20. Which court has jurisdiction over an application for recognition and enforcement of an arbitral award? Is there a specific court or chamber in place with specific sets of rules applicable to international arbitral awards?
China
For domestic arbitral awards, parties can directly apply for enforcement with the intermediate people’s court where the defendant resides or where the assets are located. In certain exceptional cases, a competent intermediate people’s court may direct a district people’s court to exercise jurisdiction. Domestic arbitral awards do not first require recognition to be enforced.
For foreign arbitral awards, the parties should apply for both recognition and enforcement. The competent court is the intermediate people’s court where the defendant resides or where the assets are located. If neither the defendant nor the assets are located in mainland China, the applicant should simply apply for recognition of the award as follows:
- If the foreign arbitral award concerns litigation heard by a Chinese court (if it is a district people’s court), the competent court to hear the proceedings regarding recognition of the foreign award is the intermediate people’s court above the district court, whereas if the court is itself an intermediate people’s court or a higher-level court, the court has jurisdiction over the recognition of the foreign award.
- If the foreign arbitral award concerns an arbitration heard by a domestic arbitral institution, the intermediate people’s court where the institution is located has jurisdiction over the recognition of the award.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
21. What are the requirements for the court to have jurisdiction over an application for recognition and enforcement and for the application to be admissible? Must the applicant identify assets within the jurisdiction of the court that will be the subject of enforcement for the purpose of recognition proceedings?
China
A competent court that receives an application for recognition and enforcement must accept the application, provided that the defendant’s domicile or assets are located within the court’s jurisdiction. This applies to both domestic and foreign arbitral awards.
If the enforcement application is filed to the court where the assets are located, the applicant must, as a minimum, identify several assets to prove that the court is competent.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
22. Are the recognition proceedings in your jurisdiction adversarial or ex parte? What are the different steps of the proceedings?
China
Recognition proceedings are adversarial. The defendant must be properly served and has the right to appear and, in a limited manner, contest recognition or enforcement.
Steps of the recognition proceedings
Regarding foreign arbitral awards, if one party applies to a court for recognition and enforcement of the award, the court will first decide on the application for recognition.
The basic proceedings for determining an application for recognition are as follows:
- the applicant files an application with the court (in practice, a single application is filed for recognition and enforcement);
- the court accepts the application, and the application and exhibits are served to the defendant;
- the defendant is entitled (but not obliged) to provide a written defence or exhibits, if any;
- the court constitutes a panel of judges that determines the date for a court hearing (there is usually only one court hearing); and
- the court will issue a decision after the court hearing.
The basic procedure for the court hearing is as follows:
- the parties present their respective pleadings;
- the applicant produces evidential materials and the defendant submits comments thereon, and vice versa;
- the parties present their respective substantive opinions; and
- the parties present their respective closing statements.
If the court grants the application for recognition, it should make the decision within two months of accepting the application. The decision is final and is not subject to appeal.
If the court denies an application for recognition of a foreign award, it should report the denial to the higher people’s court (Provisions of the Supreme People’s Court on Issues Concerning the Reporting and Examination of Cases Involving the Judicial Review of Arbitration, Article 2). If the higher people’s court takes the position that the application should be granted, the court will directly return its opinions to the intermediate people’s court; however, if it agrees with the intermediate people’s court’s denial of the application, the higher people’s court should, in turn, report the denial to the Supreme People’s Court. Only once the Supreme People’s Court agrees to deny the application for recognition and return its decision, level by level, to the intermediate people’s court, can the intermediate people’s court issue the decision denying the application for recognition of the foreign award.
A domestic arbitral award becomes binding upon issuance and needs no recognition before being enforced in front of a Chinese court.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
23. What documentation is required to obtain recognition?
China
Applicants for recognition of a foreign arbitral award must submit the following documents to a Chinese court:
- application for recognition of the foreign arbitral award, which specifies basic information about the applicant and the defendant, the main contents and the effective date of the arbitral award, and the claims and reasons for the application;
- authenticated documents (with notarisation and legalisation) that certify the applicant’s identity;
- power of attorney for the applicant. If the applicant is an overseas company or individual, the power of attorney must be notarised and certified;
- authenticated documents certifying the defendant’s qualifications (with notarisation and legalisation); and
- a notarised and authenticated original copy of the foreign arbitral award and a certified copy.
A domestic arbitral award becomes binding upon issuance and does not need recognition to be enforced before a Chinese court.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
24. If the required documentation is drafted in a language other than the official language of your jurisdiction, is it necessary to submit a translation with an application to obtain recognition? If yes, in what form must the translation be?
China
All documents submitted to the courts in a language other than Chinese must be accompanied by a Chinese translation.
No mandatory certification requirements exist for Chinese language translators and interpreters in this regard; however, in practice, parties seeking recognition of an award tend to select translators and interpreters who are recommended by the higher people’s courts in designated directories. Selecting a verified translator may ensure the effectiveness of the translation.
In addition, documents submitted to the court must be accompanied by a full translation rather than an abstract or excerpt. Full translations can also prevent challenges from the courts or the opposing party.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
25. What are the other practical requirements relating to recognition and enforcement? Are there any limitations on the language and length of the submissions and of the documentation filed by the parties?
China
Pursuant to Measures for the Payment of Legal Costs, applicants must pay an application fee of 500 yuan to apply for recognition of an arbitral award, which should eventually be borne by the losing party.
For enforcement proceedings, court fees are based on the amount subject to enforcement. Specifically, the fee rates for each enforcement proceeding are as follows:
- between 50 yuan and 500 yuan, if the enforcement involves no amount of money or value;
- 50 yuan if the enforcement involves an amount not greater than 10,000 yuan;
- 1.5 per cent of an amount in excess of 10,000 yuan but less than 500,000 yuan;
- 1 per cent of an amount in excess of 500,000 yuan but less than 5 million yuan;
- 0.5 per cent of an amount in excess of 5 million yuan but less than 10 million yuan; and
- 0.1 per cent of any amount that exceeds 10 million yuan.
All documents submitted to the courts must be written in Chinese or accompanied by a Chinese translation. Courts do not prescribe limitations for the length of applications for recognition and enforcement. In practice, documents submitted to a court should be as concise as possible; the submission of lengthy documents is generally discouraged.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
26. Do courts recognise and enforce partial or interim awards?
China
All arbitral awards, whether final, interim or partial, can be applied to the courts for recognition and enforcement, provided that the award is rendered with final effect on substantive issues in the case.
In principle, the courts will not recognise or enforce an interim decision or interim measure on procedural issues rendered by an overseas arbitral tribunal.
The parties to eligible arbitration proceedings in Hong Kong may apply directly to a court in mainland China for property preservation, evidence preservation and conduct preservation, according to the Arrangement of the Supreme People’s Court 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 (effective as of 1 October 2019, Fa Shi [2019] No. 14). Eligible arbitration proceedings must be seated in Hong Kong and be administered by an arbitration institution jointly chosen by the Supreme People’s Court and the Hong Kong Department of Justice.
These jointly chosen arbitration institutions currently include the Hong Kong International Arbitration Centre, the Hong Kong Arbitration Centre of the China International Economic and Trade Arbitration Commission, the Asian Affairs Office of the International Chamber of Commerce, the China Maritime Arbitration Commission (CMAC) Hong Kong Arbitration Centre, the Shenzhen Court International Arbitration and the Electronic Business Related Arbitration and Mediation (eBRAM) International Online Dispute Resolution Centre. In principle, the courts will not recognise or enforce an interim decision or interim measure on procedural issues rendered by an overseas arbitral tribunal.
There is also a special Arrangement of the Supreme People’s Court for Mutual Assistance in the Preservation of Arbitral Proceedings by the Courts of the Mainland and of the Macau Special Administrative Region.
Prior to the issuance of an arbitral award, a party to civil and commercial arbitration proceedings filed with a Macau arbitral institution according to the arbitration regulations of Macau may, by referring to mainland China’s Civil Procedure Law, Arbitration Law and relevant judicial interpretations, apply for preservation to the intermediate people’s court at the place of the residence of the party in mainland China against the respondent or the place where the property or evidence is located. If the place of residence of the respondent or the place where the property or evidence is located falls under the jurisdiction of different people’s courts, the applicant shall make an application to one of those people’s courts, but shall not make separate applications to two or more people’s courts.
Where an application for preservation is made before an arbitral institution accepts the arbitration case, but the people’s court in mainland China has not received a letter from the institution certifying its acceptance of the arbitration case within 30 days of the date preservation is taken, the people’s court in mainland China will discharge the preservation.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
27. What are the grounds on which an arbitral award may be refused recognition? Are the grounds applied by the courts different from the ones provided under Article V of the New York Convention?
China
The grounds for refusing recognition of a foreign arbitral award in China are those provided under Article V of the New York Convention. The courts will decide whether to recognise a foreign arbitral award by referring to the New York Convention (primarily Article V).
For arbitral awards rendered in Hong Kong, Macau and Taiwan, the Chinese courts will decide whether to recognise the awards in accordance with arrangements reached between mainland China and Hong Kong, Macau and Taiwan. The grounds adopted in those arrangements are very similar to those under the New York Convention. Those arrangements include the following:
- Hong Kong arbitral awards are governed by the Arrangement of the Supreme People’s Court on the Reciprocal Enforcement of Arbitration Awards by Mainland China and the Hong Kong Special Administrative Region (2000), the Notice of the Supreme People’s Court on Issues Concerning the Enforcement of Hong Kong Arbitral Awards in the Mainland (2009) and the Supplemental Arrangement of the Supreme People’s Court on Reciprocal Enforcement of Arbitration Awards between the Mainland and the Hong Kong Special Administrative Region (2020).
- Macau arbitral awards are governed by the Arrangement of the Supreme People’s Court on Mutual Recognition and Enforcement of Arbitration Awards Between the Mainland and the Macau Special Administrative Region (2008).
- Taiwan arbitral awards are governed by the Provisions of the Supreme People’s Court on the Recognition and Enforcement of Arbitral Awards Issued in Taiwan (2015).
Answer contributed by
Xianglin Chen
Han Kun Law Offices
28. When assessing the grounds for refusing recognition, may the recognition judge conduct a full review and reconsider factual or legal findings from the arbitral tribunal in the award? Is the judge bound by the tribunal’s findings? If not, what degree of deference will the judge give to the tribunal’s findings?
China
In a recognition application, the judge will usually defer to the factual and legal findings of the arbitral tribunal issuing the award. The judges will, therefore, normally give a high degree of deference to the tribunal’s findings. Even when a judge is required to consider the potential issues in the Arbitration Law and the Civil Procedure Law that might give rise to a setting-aside claim, the judges will usually only consider the procedural issues in the arbitral proceeding rather than the factual and legal findings of a tribunal.
However, in rare circumstances, when there are potential issues in the Arbitration Law or the Civil Procedure Law that might require the judges to scrutinise whether the concealed evidence may impede an impartial decision or whether there is any violation of public policy, the judges will review the factual and legal decisions by the tribunal. The review is, however, restricted to limited grounds.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
29. Is it possible for a party to be considered to have waived its right to invoke a particular ground for refusing recognition of an arbitral award?
China
If the parties consented, either expressly or impliedly, to the tribunal’s jurisdiction and administration of the arbitral proceedings by acknowledging that there are issues that affect the validity of the arbitral award, or the parties should have known that those issues existed, that consent will preclude the parties from raising those grounds for a court to refuse to recognise the arbitral award.
If the parties failed to make timely objections in accordance with the rules of the arbitral proceedings, the failure may also prevent the party from invoking a particular ground for refusing recognition of an arbitral award.
Finally, should the applicant withdraw from a refusal of recognition of arbitral award proceedings, or the applicant did not commence such an action within the time limit to the court, the applicant may be deemed to have waived its right to challenge the validity of the arbitral award.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
30. What is the effect of a decision recognising an arbitral award in your jurisdiction?
China
A court decision recognising an arbitral award becomes effective once it is served on the parties to the case (Provisions of the Supreme People’s Court on Several Issues concerning the Hearing of Cases Involving the Judicial Review of Arbitration, Article 20). The parties to the case may not apply for reconsideration, lodge an appeal or apply for a retrial in respect of the decision.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
31. What challenges are available against a decision refusing recognition in your jurisdiction?
China
Decisions refusing to recognise an arbitral award are final. The parties may not apply for reconsideration, lodge an appeal or apply for a retrial in respect of the ruling.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
32. What are the effects of annulment proceedings at the seat of the arbitration on recognition or enforcement proceedings in your jurisdiction?
China
The courts have the discretion to suspend domestic proceedings for recognition or enforcement of foreign arbitral awards if a defendant has applied to set aside an award with a foreign court at the seat of arbitration, according to Article VI of the New York Convention and the Circular of the Supreme People’s Court on Printing and Issuing the Minutes of the Second National Meeting for Foreign-related Commercial Maritime Trial Work.
Factors that the courts must consider when deciding whether to suspend proceedings generally include:
- the objectives of the New York Convention to provide convenience for the enforcement of arbitral awards and facilitate the resolution of disputes;
- the possibility that the other party might obtain a favourable ruling in the annulment proceedings;
- the anticipated duration of the annulment proceedings;
- the difficulties that the parties may face; and
- judicial efficiency and international comity.
In judicial practice, depending on the circumstances, Chinese courts have both suspended recognition proceedings in light of pending foreign annulment proceedings and refused to do so.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
33. If the courts adjourn the recognition or enforcement proceedings pending annulment proceedings, will the defendant to the recognition or enforcement proceedings be ordered to post security?
China
The applicant to a suspended recognition or enforcement proceeding is entitled to request the court to order the defendant to post appropriate security, according to Article VI of the New York Convention and Article 7 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Cases by the People’s Courts to Enforce Arbitration Awards. The courts generally require the enforcement amount to be fully secured.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
34. Is it possible to obtain the recognition and enforcement of an award that has been fully or partly set aside at the seat of the arbitration? If an arbitral award is set aside after the decision recognising the award has been issued, what challenges are available?
China
Arbitral awards cannot be recognised or enforced in China to the extent that they have been set aside by a court at the seat of arbitration, according to Article V of the New York Convention and Article 83 of the Circular of the Supreme People’s Court on Printing and Distributing the Minutes of the Second National Meeting for Foreign-related Commercial Maritime Trial Work.
Remedies exist for defendants if a Chinese court recognises a foreign arbitral award that is later set aside by a court at the seat of arbitration. If the award has yet to be enforced, the respondent may apply to the Chinese court to void enforcement. The respondent may also claim a refund from the applicant if the award has been enforced. This situation has yet to arise in practice, and it remains to be seen precisely how courts would address these circumstances.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
Service
35. What is the procedure for service of extrajudicial and judicial documents to a defendant in your jurisdiction? If the extrajudicial and judicial documents are drafted in a language other than the official language of your jurisdiction, is it necessary to serve these documents together with a translation? When is a document considered to be served to the opposite party?
China
It is the court or arbitration institution that serves judicial documents rather than the parties to the dispute. The parties themselves usually serve extrajudicial documents.
Personal service is the most common means for courts and arbitration institutions to serve judicial documents, but documents may be served by express mail if personal delivery proves difficult. Courts and arbitration institutions also recommend electronic means, such as email and text messages, for the service of judicial documents other than judgments, rulings and mediation statements.
Judicial documents should be directly served on the addressee. If the addressee is a legal person, the legal person’s legal representative or an individual whom the legal person has designated should sign for and accept the documents. If the addressee has appointed an agent, the agent may sign for and accept the documents. If the addressee is a foreign company and has a representative office in China, the documents may be served on the representative office.
Courts require that Chinese be used to adjudicate foreign-related civil cases (Civil Procedure Law, Article 262). Judicial documents submitted to courts must be in Chinese. Documents drafted in a language other than Chinese must be accompanied by a Chinese translation. Parties seeking recognition of an arbitral award may select a translator from among those listed in directories designated by the higher people’s courts to translate the documents or certify a translation.
Although there are no specific rules regarding service of documents in arbitration proceedings in the Arbitration Law, almost all institutional arbitration rules in China include specific rules on this issue (e.g., CIETAC Arbitration Rules, Article 8).
According to Article 34 of the Proposed Revision of the Arbitration Law, arbitration documents must be served on the parties in a reasonable manner and in good faith. If the parties agree on the manner of service, the agreement shall be followed. If the parties have not made an agreement in this respect, service may be made by personal delivery, registered mail, express delivery, facsimile, email, instant messaging or other means recordable by information systems.
Service of arbitration documents shall be deemed completed when they are delivered to the parties by the means specified in the preceding paragraph or sent to the parties’ place of business, place of registration, place of domicile, place of habitual residence or mailing address. If any of these places cannot be found after reasonable enquiry, the arbitration documents are deemed to have been served by delivery to the party's last known place of business, registration, domicile, usual place of residence or mailing address by other means that provide a record of delivery. The document is considered to be served on the completion of delivery.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
36. What is the procedure for service of extrajudicial and judicial documents to a defendant outside your jurisdiction? Is it necessary to serve these documents together with a translation in the language of this jurisdiction? Is your jurisdiction a party to the 1965 Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Service Convention)? Is your jurisdiction a party to other treaties on the same subject matter? When is a document considered to be served to the opposite party?
China
China is a party to the Hague Service Convention, which came into effect in China on 1 January 1992. Generally, the service of judicial documents to addressees outside China is subject to the provisions of the Hague Service Convention and relevant bilateral judicial assistance agreements.
If an addressee has no domicile, or service cannot otherwise be completed in China and service outside China is necessary, courts will usually review whether a judicial assistance agreement exists between China and the addressee’s country of residence (Civil Procedure Law, Article 274). If a judicial assistance agreement exists, the court may serve in the manner specified in the agreement.
If an agreement does not exist, the court may review whether the country where the addressee is located is a party to the Hague Service Convention; if so, the court may serve in the manner specified in the Hague Service Convention.
Courts may choose to serve documents by mail if so permitted in accordance with the laws of the state in which the addressee is located. In those cases, if the acknowledgement of service is not returned within three months of the date of mailing and service can be certified by evidence, the documents will be deemed to have been served on the expiry of the three-month period.
Service by public announcement is permitted when service by any of the foregoing means has been unsuccessful. In those cases, documents shall be deemed served three months after the release date of the announcement.
When serving addressees that are located outside China, judicial documents in Chinese are ordinarily accompanied by a translation into the official language of the addressee’s country or region.
The foregoing service methods apply only for Chinese courts to serve documents to addressees located outside China.
Service in arbitration proceedings can be effected via various means without having to consider the Hague Service Convention or judicial assistance agreements between states. International courier is the most commonly used means for the service of documents in arbitration proceedings.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
Enforcement proceedings
39. What kinds of assets can be attached within your jurisdiction?
China
A wide range of award debtor assets can be sealed, distrained or frozen by the court, including movable assets, real properties registered in the name of the debtor, specific movable assets and other property rights (tangible or intangible assets) (Provisions of the Supreme People’s Court on the Sealing up, Distraining and Freezing of Properties by the People’s Courts in Civil Enforcement (revised in 2020), Article 2).
Answer contributed by
Xianglin Chen
Han Kun Law Offices
40. Are interim measures against assets available in your jurisdiction? Is it possible to apply for interim measures under an arbitral award before requesting recognition? Under what conditions?
China
In litigation proceedings, parties may apply to the court for interim measures, including property preservation, evidence preservation and conduct preservation.
In arbitration proceedings, parties may apply for interim measures with the arbitration institution (Arbitration Law, Articles 28 and 46), which will refer the application to the competent court pursuant to the relevant provisions of the Civil Procedure Law. An application for property preservation will generally be approved by the court so long as the applicant posts appropriate security. In practice, opinions diverge between courts in different regions as to whether conduct preservation can be applied in arbitration procedures.
Parties to eligible arbitration proceedings in Hong Kong may apply directly to a court in mainland China for property preservation, evidence preservation and conduct preservation, according to the Arrangement of the Supreme People’s Court 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 (effective as of 1 October 2019, Fa Shi [2019] No. 14). Eligible arbitration proceedings must be seated in Hong Kong and be administered by an arbitration institution jointly chosen by the Supreme People’s Court and the Hong Kong Department of Justice.
These jointly chosen arbitration institutions currently include the Hong Kong International Arbitration Centre, the Hong Kong Arbitration Centre of the China International Economic and Trade Arbitration Commission, the Asian Affairs Office of the International Chamber of Commerce, the CMAC Hong Kong Arbitration Centre, the Shenzhen Court International Arbitration, and the eBRAM International Online Dispute Resolution Centre.
China has also signed the Arrangement of the Supreme People’s Court for Mutual Assistance in the Preservation of Arbitral Proceedings by the Courts of the Mainland and of the Macau Special Administrative Region. Under Article 2 of the Arrangement, prior to the issuance of an arbitral award, a party to civil and commercial arbitral proceedings filed with a Macau arbitral institution according to the arbitration regulations of Macau may, by referring to China’s Civil Procedure Law, Arbitration Law and relevant judicial interpretations, apply for preservation to the intermediate people’s court at the place of the residence of the party in mainland China against the respondent or the place where the property or evidence is located. If the place of residence of the respondent or the place where the property or evidence is located falls under the jurisdiction of different people’s courts, the applicant shall make an application to any of those people’s courts, but shall not make separate applications to two or more people’s courts.
Where an application for preservation is made before an arbitral institution accepts the arbitration case, but the people’s court in mainland China has not received a letter from the institution certifying its acceptance of the arbitration case within 30 days of the date preservation is taken, the people’s court in mainland China will discharge the preservation.
According to Article 17 of the Arrangement of the Supreme People’s Court on Reciprocal Recognition and Enforcement of Arbitration Awards between the Mainland and the Macau Special Administrative Region (effective as of 12 December 2007, Fa Shi [2007] No. 17), a court can, before or after accepting an application for admitting and enforcing an arbitration award, take preservation measures for the property of the party against whom the application is filed in accordance with the legal provisions of the locality of the court if the party concerned requires it.
Similarly, according to Article 4 of the Supplementary Arrangement of the Supreme People’s Court on the Reciprocal Enforcement of Arbitration Awards between the Chinese Mainland and the Hong Kong Special Administrative Region (effective as of 18 May 2020, Fa Shi [2020] No. 13), the competent court may, before or after accepting the application for enforcing any arbitration awards, adopt preservation or enforcement measures in accordance with the application and the law of the place of enforcement.
There are yet to be legislation, regulations or judicial interpretations that expressly authorise China’s courts to attach the respondent’s property amid the recognition and enforcement of a foreign arbitral award proceeding in other foreign jurisdictions.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
41. What is the procedure to apply interim measures against assets in your jurisdiction?
China
Parties who apply for interim measures during an arbitration proceeding must submit to the arbitration institution a formal application for interim measures. Applications for interim measures are typically submitted with the application for arbitration. The arbitration institution will conduct a preliminary examination of the application and, if approved, forward it to a competent court.
On receipt of an application, the court will contact the applicant and examine the application materials. The court will require the applicant to post security if the application is for asset preservation. Permissible forms of security include cash, letters of guarantee issued by the applicant or a third party, letters of guarantee issued by an insurance company and independent letters of guarantee issued by a financial institution.
The court will make a ruling on interim measures if it approves the application, and the internal enforcement department of the court will be responsible for the specific implementation of the interim measures. Courts generally do not contact the party subject to the interim measures before ruling on and implementing interim measures.
The court will inform both parties in writing after interim measures are implemented.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
42. What is the procedure for interim measures against immovable property within your jurisdiction?
China
First, the court confirms the ownership of the immovable property (which may include land use rights, construction in progress and real estate) by one of several methods, including:
- checking the registration of the name of the arbitration respondent;
- checking the land use right examination and approval documents and other relevant evidence for unregistered buildings and land use rights;
- verifying ownership with the respondent or the third person who possesses the immovable property; and
- obtaining confirmation in accordance with a valid legal instrument.
Next, the court will issue a preservation ruling that specifies the amount subject to preservation. Real estate and other immovable property can be partially sealed, distrained or frozen if its overall value exceeds that specified in the preservation order, except when the use of the immovable property would not allow for its division or its value would be seriously undermined if so divided.
Subsequently, the court will implement the following preservation measures:
- For registered real estate, a court will post seals or make announcements, collect and keep relevant property rights certificates, serve preservation rulings and notices of assistance in execution to the registration authorities (real estate registration centres and land and resource departments), and relevant authorities will cooperate and immediately carry out the procedures for suspension of the change of registration.
- For a building of which the owner has not been registered, the court will notify the administrator or actual occupant of the building and post a notice at a conspicuous location on the building.
The term of preservation for immovable property may not exceed three years. An application for renewal of the preservation term is required to be submitted to the court seven days before the expiry of the preservation term.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
43. What is the procedure for interim measures against movable property within your jurisdiction?
China
First, the court confirms the ownership of the movable property (including special movable property such as motor vehicles, aircraft, machinery and equipment) by:
- verifying the ownership with the respondent or the third party that possesses the movable property; and
- obtaining confirmation in accordance with a valid legal instrument.
Next, the court will issue a preservation order and confirm the amount subject to preservation, which will not exceed the amount owed by the respondent. Subsequently, the court will take the following preservation measures:
- With regard to registered special movable properties (vehicles, ships, aircraft, machines and equipment), rulings on interim measures and notices of assistance in execution shall be served to the registration authorities (administrative departments of vehicles, maritime and civil aviation, credit information centres, etc.), and the relevant authorities will cooperate and immediately carry out the procedures for suspension of the change of registration.
- With regard to unregistered motor vehicles, the engine numbers are recorded on the list of distrained items. If the owner of a motor vehicle requests to register ownership of the motor vehicle during the period of distrainment, the court will permit the request and accordingly handle the distrained registration on time.
- If the court does not hold the sealed or distrained property, it may designate the person subject to preservation to do so (the person may be allowed to continue using the property if its continued use would not significantly affect its value). If it is inappropriate for the person subject to preservation to hold the property, it may be entrusted to a third party or to the applicant (such holders cannot use the property).
The term of sealing or distrainment may not exceed two years. To extend the term, the parties concerned need to apply to the court for renewal seven days before the expiry of the preservation term.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
44. What is the procedure for interim measures against intangible property within your jurisdiction?
China
First, the court confirms the ownership of the intellectual property rights (trademark rights, patents, patent application rights, copyrights (property rights), domain names, etc.).
Registered trademarks and patents (application rights) available for interim measures must satisfy the following conditions:
- they must be registered in the name of the respondent;
- the third party under whose name the intellectual property is registered confirms in writing that the trademarks and patents belong to the respondent; and
- there must be confirmation in accordance with a valid legal instrument.
Copyrights for which interim measures are available must satisfy the following two conditions:
- the work has been published (this condition does not apply to unpublished inventions and unpublished works); and
- the respondent is the author of the work.
Next, the court will deliver its ruling on the interim measures to the respondent and the applicant and deliver a notice of assistance in enforcement to the relevant registration departments. Subsequently, the court will implement the following preservation measures:
- If necessary, the court may order the respondent to submit the certificate of the property right or the right to use to the court for preservation.
- The court will notify the relevant competent authorities or operators either by mail or in person to seal the intellectual property and to cease the registration of transfer of property rights. These authorities include the Trademark Office of the China National Intellectual Property Administration, the Patent Office of the China National Intellectual Property Administration, the copyright registration authority of computer software and operators of network domain names, among others. Competent authorities or operators are prohibited from altering authorship and other particulars in relation to the property and must suspend examination and approval procedures for distrained patent application rights.
The term for the preservation of the intellectual property may not exceed three years (the preservation term of a patent right must not exceed six months). To extend the term, the parties concerned need to apply to the court for renewal seven days before the expiry of the preservation term.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
45. What is the procedure to attach assets in your jurisdiction? Who are the stakeholders in the process?
China
After a court accepts an application for enforcement, the court will serve an enforcement notice on the party whose assets are subject to enforcement. In the notice, the court will urge the party to perform the obligations as determined in the arbitral award (or other valid legal instruments, such as a judgment or notarised debt instrument) and warn that the party’s failure to make prompt payment will result in late performance interest or a late fee of 0.175 per cent of the payment due per day.
Once the enforcement procedures have started, the preservation measures adopted during litigation or arbitration will be converted automatically into measures to seal, distrain or freeze property in the course of enforcement. The period will be calculated continuously, and there is no need for the enforcement court to issue a new ruling.
Regarding the enforcement procedure, the court will first take measures to seal, distrain or freeze the property subject to enforcement before the actual disposal of the assets. The court will then dispose of the movable and immovable property by auction or sale. For bank deposits and other types of property that can be directly deducted or transferred, the court may directly issue a deduction or transfer order, transfer the same to the court’s account and then distribute the same to the applicant.
For a defendant who refuses to obey valid legal instruments, the court may adopt or notify other authorities to adopt punitive measures, such as restrictions on travelling overseas and excessive and unnecessary consumption (e.g., restriction from purchasing real estate, payment of high insurance premiums and prohibition from taking China Railway high-speed trains, as specified in Article 3 of the Several Provisions of the Supreme People’s Court on Restriction of High-value Consumption of Enforcees), naming the person on a credit record blacklist and publicly announcing the non-performance via media, among other sanctions.
The court will usually conduct the attachment and enforcement proceedings itself. The judges from the enforcement tribunal of the court will issue the attachment order to the relevant registration agencies (e.g., the real estate registration agency) or the financial institutions that might hold the assets subject to execution. If necessary, a judicial auction will also be held by the execution tribunal for fulfilment of the compensation obligation borne by the losing party.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
46. What is the procedure for enforcement measures against immovable property within your jurisdiction?
China
As a general rule, when a court disposes of immovable property that has been sealed, distrained or frozen, the court must dispose of the property via auction, unless otherwise stipulated.
Procedure for enforcement measures
Appraisal
In most cases, the first step in the enforcement process is to randomly select an appraisal institution to ascertain the value of the property. Usually, the institution is selected through the court’s online lottery system from a directory that the higher people’s court creates and routinely updates.
No appraisal is required if the value of the property is relatively low or is easily determined by other means.
Auction
The court will further randomly select and entrust an auction institution to conduct the auction. The court must supervise the auction unless otherwise provided.
Before the auction, the court will set the appraisal price as the benchmark (reserve) price for the first auction. If no appraisal is made, the benchmark price will be determined by considering the market price and consulting with the relevant parties.
If the first auction is unsuccessful, a second auction will be held. The benchmark price may be lowered at the court’s discretion but must not be lower than 80 per cent of the previous benchmark price.
If the second auction is unsuccessful, the court can request the opinions of the award creditor and other creditors with regard to whether any of them wish to take the property in satisfaction of debts owed at an agreed price. If no creditor takes the property or if the property cannot otherwise be used to satisfy the award debt, a third auction will be held within 60 days.
If the third auction is also unsuccessful and the award creditor or other creditors refuse to accept the property, or in the event that the property cannot otherwise be used to satisfy the award debt, the court must issue a public announcement for sale within seven days of the date of the conclusion of the third auction. If no buyer is willing to buy the property at the benchmark price of the third auction within 60 days of the date of the announcement, and neither the enforcement applicant nor any other creditor is willing to take the property in satisfaction of the award debt, the seal or freeze measures must be released, and the property will be returned to the award debtor.
If the auction or satisfaction of the award debt is successful, the ownership of the property will be transferred to the bidder at the time of the successful auction or when the court delivers to the award creditor and other creditors a ruling on the satisfaction of the debt. The auction proceeds will then be transferred to the award creditor and other creditors according to the nature of the amounts owed.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
47. What is the procedure for enforcement measures against movable property within your jurisdiction?
China
As a general rule, when a court disposes of movable property that has been sealed, distrained or frozen, the court must dispose of the property via auction, unless otherwise stipulated.
Procedure for enforcement measures
Appraisal
In most cases, the first step in the enforcement process is to randomly select an appraisal institution to ascertain the value of the property. Usually, the institution is selected through the court’s online lottery system from a directory that the higher people’s court creates and routinely updates.
No appraisal is required if the value of the property is relatively low or is easily determined by other means.
Auction
The court will further randomly select and entrust an auction institution to conduct the auction. The court must supervise the auction unless otherwise provided.
Before the auction, the court will set the appraisal price as the benchmark (reserve) price for the first auction. If no appraisal is made, the benchmark price will be determined by considering the market price and consulting with the relevant parties.
If the first auction is unsuccessful, a second auction will be held. The benchmark price may be lowered at the court’s discretion but must not be lower than 80 per cent of the previous benchmark price.
If the second auction is unsuccessful, the court can request the opinions of the award creditor and other creditors with regard to whether any of them wish to take the property in satisfaction of debts owed at an agreed price. If the award creditor or other creditors refuse to accept the property, or in the event that the property cannot otherwise be used to satisfy the award debt, the court must issue a public announcement for sale within seven days of the date of conclusion of the second auction.
If no buyer is willing to buy the property at the benchmark price of the third auction within 60 days of the date of the announcement, and neither the enforcement applicant nor any other creditor is willing to take the property in satisfaction of the award debt, the seal or freeze measures must be released, and the property will be returned to the award debtor.
If the auction or satisfaction of the award debt is successful, the ownership of the property will be transferred to the bidder at the time of the successful auction or when the court delivers to the award creditor and other creditors a ruling on the satisfaction of the debt. The auction proceeds will then be transferred to the award creditor and other creditors according to the nature of the amounts owed.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
48. What is the procedure for enforcement measures against intangible property within your jurisdiction?
China
As a general rule, when a court disposes of intangible property that has been sealed, distrained or frozen, the court must dispose of the property via auction, unless otherwise stipulated.
Procedure for enforcement measures
Appraisal
In most cases, the first step in the enforcement process is to randomly select an appraisal institution to ascertain the value of the property. Usually, the institution is selected through the court’s online lottery system from a directory that the higher people’s court creates and routinely updates.
No appraisal is required if the value of the property is relatively low or is easily determined by other means.
Auction
The court will further randomly select and entrust an auction institution to conduct the auction. The court must supervise the auction unless otherwise provided.
Before the auction, the court will set the appraisal price as the benchmark (reserve) price for the first auction. If no appraisal is made, the benchmark price will be determined by considering the market price and consulting with the relevant parties.
If the first auction is unsuccessful, a second auction will be held. The benchmark price may be lowered at the court’s discretion but must not be lower than 80 per cent of the previous benchmark price.
If the second auction is unsuccessful, the court can request the opinions of the award creditor and other creditors with regard to whether any of them wish to take the property in satisfaction of debts owed at an agreed price. If no creditor takes the property or if the property cannot otherwise be used to satisfy the award debt, a third auction will be held within 60 days.
If the third auction is also unsuccessful and the award creditor or other creditors refuse to accept the property, or in the event that the property cannot otherwise be used to satisfy the award debt, the court must issue a public announcement for sale within seven days of the date of the conclusion of the third auction. If no buyer is willing to buy the property at the benchmark price of the third auction within 60 days of the date of the announcement, and neither the enforcement applicant nor any other creditor is willing to take the property in satisfaction of the award debt, the seal or freeze measures must be released, and the property will be returned to the award debtor.
If the auction or satisfaction of the award debt is successful, the ownership of the property will be transferred to the bidder at the time of the successful auction or when the court delivers to the award creditor and other creditors a ruling on the satisfaction of the debt. The auction proceeds will then be transferred to the award creditor and other creditors according to the nature of the amounts owed.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
49. Are there specific rules applicable to the attachment of assets held by banks? Is it possible to attach in your jurisdiction sums deposited in bank accounts opened in a branch or subsidiary of a foreign bank located in your jurisdiction or abroad? Is it possible to attach in your jurisdiction the bank accounts opened in a branch or subsidiary of a domestic bank located abroad?
China
Attachments against bank accounts in China are subject to provisions mainly in judicial interpretations and normative documents issued by the Supreme People’s Court, such as the Provisions of the Supreme People's Court on Several Issues Concerning Enforcement by the People's Courts (for Trial Implementation) (Fa Shi [1998] No. 15, revised in 2020) and the Notice of the Supreme People’s Court and the People’s Bank of China Concerning Regulation of Enforcement by People’s Courts and Assistance for Enforcement by Financial Institutions (Fa Fa [2000] No. 21).
Courts have the authority to attach bank accounts opened in China, regardless of whether the bank account is opened with a domestic bank or a foreign bank.
At present, the courts have formed a cooperation with the China Banking and Insurance Regulatory Commission and local banking and insurance administrative departments to establish a national network to assist with online enquiries and attachment.
The judges in charge of taking preservation or enforcement measures are empowered to:
- enquire about the ownership and status of bank accounts; and
- take corresponding measures against an award debtor’s bank accounts through the national network, such as freezing, releasing, extending the freeze period, deducting and transferring funds, and other financial products.
The effectiveness of handling a case online is the same as the effectiveness of handling the case in person.
The statutory period for freezing bank funds cannot exceed one year, although this period is eligible for renewal.
Certain types of bank accounts are not subject to attachment, including but not limited to the financial institutions’ deposit account opened at the People’s Bank of China, deposits of enterprises whose bankruptcy petitions have been accepted by the court, state treasury funds and deposits of military and armed police forces.
Regarding bank accounts opened outside China, courts have no enforcement jurisdiction even if the bank is a subsidiary of a Chinese bank. Applicants must consult a local attorney and file an application with a local court where the account was opened if attachment measures are available under the local law.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
50. May a creditor of an award rendered against a private debtor attach assets held by another person on the grounds of piercing the corporate veil or alter ego? What are the criteria, and how may a party demonstrate that they are met?
China
Under the Corporate Law and the relevant regulations promulgated by the Supreme People’s Court, a shareholder shall be jointly and separately liable for the liabilities of the company when he or she:
- has not contributed enough funds to cover the capital subscription;
- has breached his or her obligations to contribute to the company’s subscription; or
- fraudulently transferred the funds from the company.
A judgment creditor or an award creditor may then request the court to list the shareholder as a joint debtor who is subject to execution and repayment of the award or judgment.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
Recognition and enforcement against foreign states
51. Are there any rules in your jurisdiction that specifically govern recognition and enforcement of arbitral awards against foreign states?
China
There are no domestic, codified rules that specifically govern the recognition and enforcement of arbitral awards against foreign states; therefore, Chinese courts may apply the general rules on recognition and enforcement as provided in Article 266 of the Civil Procedure Law and general sovereign immunity principles.
China signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) in 1990, which entered into force in 1993. As a party, China is, in principle, obliged to recognise and enforce International Centre for Settlement of Investment Dispute (ICSID) awards, as provided by Chapter 6, Section 4 of the Convention.
China has also signed or acceded to numerous bilateral investment treaties. Many of these have clauses requiring parties to submit all disputes to ICSID arbitration and that state that awards rendered are final and binding, and that the parties undertake to execute the award.
In practice, Chinese courts have yet to encounter any investment arbitration cases that apply the above provisions. China has not designated a competent court or other authorities to receive a copy of the award in accordance with Article 54(2) of the ICSID Convention. As a result, the status of the implementation of those rules remains unclear.
However, in December 2022, China promulgated the proposed version of the Foreign State Immunity Law (released by the Ministry of Justice on 30 December 2022 for public consultation). Article 7 provides that a foreign state may not claim sovereign immunity for purely commercial activities with other entities within China or outside China with direct impacts within China’s jurisdiction. Article 12 of the proposed version of the Foreign State Immunity Law provides that:
Disputes arising from commercial activities between a foreign state and natural persons, legal persons, or unincorporated organisations of other countries, including the People’s Republic of China, which are submitted to arbitration pursuant to a written agreement concluded, or where a foreign state agrees in writing, such as through an international investment treaty, to submit to arbitration investment disputes arising between it and natural persons, legal persons, unincorporated organisations of other countries, including the People’s Republic of China, the courts of the foreign state in the People’s Republic of China shall not enjoy immunity from jurisdiction in respect of proceedings regarding the following matters:
1. the validity and interpretation of the arbitration agreement;
2. the recognition and annulment of arbitration awards; and
3. other causes of actions provided by law for judicial review of arbitration.
Article 13 of the proposed Foreign State Immunity Law provides that when a foreign state expressly waives immunity from judicial coercive measures by means of international treaties, arbitration agreements, written contracts or written documents submitted to the courts of the People’s Republic of China, the property of the foreign state will no longer enjoy judicial immunity; therefore, its property will be subject to attachment or enforcement.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
52. What is the procedure for service of extrajudicial and judicial documents to a foreign state? Should they be served through diplomatic channels? Is it necessary to serve extrajudicial and judicial documents together with a translation in the language of the foreign state? When is a document considered to be served to a foreign state?
China
Chinese courts do not accept enforcement cases against foreign states; therefore, no procedures exist for the service of extrajudicial and judicial documents to foreign states.
Article 16 of the proposed Foreign State Immunity Law provides that a service of summons or other processes on foreign states must be made in accordance with the provisions of the relevant international agreements to which the foreign state and China are parties, or using alternative means that are accepted by the foreign state and are not prohibited under Chinese law. If such service cannot be made, the documents may be passed to the foreign state’s foreign affairs department through a diplomatic note. The documents are deemed served on the date the note is sent.
The documents will be served alongside a translation into the language designated by the relevant international agreement to which the foreign state and China are parties or, in the absence of a relevant international agreement, into an official language of the foreign state.
Article 17 of the proposed Foreign State Immunity Law provides that if a foreign state fails to appear before the Chinese court within the period specified in the served documents, the court will determine whether the foreign state benefits from sovereign immunity. If the foreign state is immune, the court may render a default judgment. The foreign state may make an appeal within six months of the date of service of the judgment.
Since China is a contracting state to the Hague Service Convention, a foreign state may be served through diplomatic channels in accordance with the relevant provisions of the Hague Service Convention or the Foreign State Immunity Law, after the latter is formally enacted.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
53. May a foreign state invoke sovereign immunity (immunity from jurisdiction) to object to the recognition or enforcement of arbitral awards?
China
The grounds for refusing recognition of a foreign commercial arbitral award in China are those provided under Article V of the New York Convention. So far, there has been no case where sovereign immunity is regarded as a public policy matter to refuse recognition or enforcement.
Under the proposed Foreign State Immunity Law, a foreign state may challenge the recognition or enforcement of an arbitral award by invoking sovereign immunity in accordance with Article 12 of the Law. Article 7 provides that a foreign state may not claim sovereign immunity for purely commercial activities with other entities within China or outside China that have direct impacts within China’s jurisdiction.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
54. May award creditors apply interim measures against assets owned by a sovereign state?
China
There is no legal basis in China for applying interim measures against assets owned by a sovereign state.
Chinese courts rarely accept applications or cases against a foreign state. When a plaintiff brings a civil lawsuit before a Chinese court against a defendant who enjoys privileges and immunities in China (e.g., a sovereign state), the court must undertake a reporting process before accepting the case. Trial courts can register those cases only once all the higher-level courts, up to the Supreme People’s Court, have agreed to accept the case. This process is set forth in the Circular of the Supreme People’s Court on Issues Concerning the Acceptance and Hearing of Civil Cases Involving Privileges and Immunities by People’s Courts (Fa [2007] No. 69).
Under Article 13 of the proposed Foreign State Immunity Law, a foreign state shall not be deemed as having waived its sovereign immunity, even if it consents to a Chinese court exercising jurisdiction over it, unless:
- it has expressly waived its sovereign immunity over the property in treaties or conventions to which it is a party, arbitration agreements, contracts or other written submissions to a Chinese court;
- it has reserved or assigned certain property for a Chinese court to apply interim measures; or
- a Chinese court has rendered an effective judgment against it, and the foreign state has properties that are related to commercial activities and to the litigation at hand, and are located within Chinese territory.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
55. Are assets belonging to a foreign state immune from enforcement in your jurisdiction? Which classes of assets belonging to states are immune from enforcement as a matter of principle? Are there exceptions to immunity? How can it be proven whether an asset is immune from enforcement? Provide practical examples of assets belonging to states that were successfully attached in your jurisdiction.
China
China adheres to the principle of ‘absolute immunity’ when dealing with judicial jurisdiction and enforcement jurisdiction against a foreign state. This means the courts do not have jurisdiction over and will not handle cases in which a foreign state is a defendant or award debtor. Furthermore, China will not accept foreign courts’ jurisdiction over cases in which China is named as a defendant or cases against Chinese assets.
In terms of international conventions, although China signed the United Nations Convention on Jurisdictional Immunities of States and Their Property on 14 September 2005, the Convention has yet to come into force.
In the proposed draft of the Foreign State Immunity Law, Article 13 provides the rare exceptions where the assets of a foreign state may be subject to enforcement actions, and Article 14 takes one step further to carve out the property used for commercial activities under Article 13:
(1) property of diplomatic and consular missions, special missions, missions to international organisations or missions appointed to international conferences that is used or intended to be used for official duties, including the balance in bank accounts;
(2) property of a military nature or property used, or intended to be used, for military purposes;
(3) property of the central bank or of a financial regulatory body performing the functions of a central bank of a foreign state or of a regional economic integration organisation, including cash, notes, bank deposits, marketable securities, foreign exchange reserves, gold reserves and real and other property of such central banks or of such financial regulatory bodies performing the functions of a central bank;
(4) property comprising a part of the cultural heritage or archives of the foreign state and not for sale or intended for sale;
(5) property of scientific, cultural or historical value used for exhibition and not offered or intended to be offered for sale; and
(6) other property that, in the opinion of the Chinese courts, should not be considered as being used for commercial activities.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
56. Is it possible for a foreign state to waive immunity from enforcement in your jurisdiction? What are the requirements of waiver?
China
To date, there is no general legal basis or any practical cases involving immunity and waiver by a foreign state.
Only the central bank of a foreign state can claim an exemption of property from compulsory judicial measures such as property preservation and enforcement. The exceptions to waiver of immunity include where the central bank of a foreign state, or the government to which it belongs, explicitly waives immunity in written form or has designated property used specifically for property preservation and enforcement.
The legal basis for this is the Law on Immunity of the Property of Foreign Central Banks from Compulsory Judicial Measures (effective as of 25 October 2005).
In the proposed Foreign State Immunity Law, the foreign state, in accordance with Article 13 of the Law, may waive its immunity from the enforcement actions in China by ad hoc consent, consent in treaties or conventions to which it is a party, consent in the arbitration agreement, consent in the contract or consent by assigning specific properties for enforcement actions. Except for such express consent, consent to a Chinese court to exercise jurisdiction over a dispute to which it is a party will not automatically amount to a waiver of the jurisdictional immunities of the enforcement actions.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
57. Is it possible for a creditor of an award rendered against a foreign state to attach the assets held by an alter ego of the foreign state within your jurisdiction? What are the criteria, and how may a party demonstrate that they are met? Provide practical examples of assets held by alter egos that were successfully attached by a state’s creditor in your jurisdictions.
China
There is no legislation or regulation addressing this issue. In the proposed Foreign State Immunity Law, a foreign state will not be subject to judicial enforcement actions or interim measures except for when it has provided express consent; therefore, even if the state owns the assets via an alter ego, any attachments or enforcement actions against the state will not be possible without the state’s consent.
Answer contributed by
Xianglin Chen
Han Kun Law Offices
58. May property belonging to persons subject to national or international sanctions be attached? Under what conditions? Is there a specific procedure?
China
In 2021, China enacted the Anti-Foreign Sanctions Law, which provides in Article 6 that the relevant departments of the State Council may, in light of their respective responsibilities and tasks, decide to seize, distrain or freeze movable property, immovable property and other types of property within Chinese territory or take more measures against individuals and organisations in accordance with other provisions of the Anti-Foreign Sanctions Law in accordance with the specific circumstances of the case. Although the government has employed anti-sanctions measures against several foreign entities, no applications against foreign state governments have been made to date.
Answer contributed by
Xianglin Chen
Han Kun Law Offices