LIU Jingdong: Progress Made by Chinese Courts on Applying New York Convention

Keynote Speech on the 60th Anniversary of New York Convention and “One Belt and One Road” Conference

by Mr. LIU Jingdong

Director of International economic law department at the Institute for International Law Studies of Chinese Academy of Social Sciences,

Special Counselor of the PRC Supreme People’s Court 

I appreciate the chance that Mr. Liu Xiaochun, the president of the SCIA invited me to share our progress on New York Convention applying to Chinese courts, as well as some problems to be addressed in the future.

I would like to talk about the New York Convention, one of the best conventions implemented by member states among all international trading conventions. Under the New York Convention, international business arbitration, to some extent, has gotten rid of barriers of different territories, and it has become a very important means of dispute resolution. In 1986, we joined the New York Convention. The appropriate application of the New York Convention can not only increase the competiveness and trustworthiness of our dispute resolution mechanism, but also guarantee the enormous impact of the One Belt One Road Initiative in the area of dispute resolution.

Since 2015, our courts have made a huge progress on the understanding and application of New York Convention. I would explain it from three perspectives.

First, from the results of the recognition and enforcement of foreign arbitral cases, our courts have recognized and executed the vast majority of foreign arbitral awards. Of the 81 cases of recognition and enforcement of foreign arbitral awards that we collected from Chinese courts in 2015-2017, only three foreign arbitral awards were refused recognition and execution, four foreign arbitral awards were partially refused because they exceeded the scope of arbitration, and 61 foreign arbitral awards were fully recognized and enforced by Chinese courts. There were 8 that parties themselves withdrew their lawsuits. One of those cases withdrew was because the materials provided by the parties did not meet the requirements of the court. The other case was transferred to another jurisdiction. Basically most of them have been accepted by China, so we've fulfilled our promise to the New York Convention.

Second, for the scope of application of the New York Convention, we have made a change on the first article of the New York Convention about the standard of the recognition and enforcement of foreign arbitral awards. We have adopted the standard of the seat of arbitration, instead of the standard of the State where the case was heard. As mentioned earlier, we have collected 81 cases, except that 12 cases were withdrawn or rejected due to some reasons, among which 50 cases have adopted the standard of the seat of arbitration. Only 16 cases applied the standard of the State where the cases were heard. Interestingly, 3 cases applied the standard of the State of the claimants.

Third, following the spirit of benefiting the recognition and execution of foreign arbitral awards, we have strictly followed the procedural requirements of the refusal of any award. For instance, the article 5 section 1 (b) of the New York Convention states that recognition and enforcement of the award may be refused, at the request of the party against whom it I invoked, if the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case. Among 81 cases we collected, 29 cases made a defense based on the article 5, but none of them was upheld by the court.

Besides that, we followed the article 5 section 1 (d) of the convention, that the composition of the arbitral authority or the arbitral procedural should be in accordance with the agreement of the parties. There were 10 cases among those we collected raised a defense based on this rule. During the trails of 6 cases, we investigated the procedure issues according to the agreement of the parties. Other 3 cases had no relevant agreements, so we investigated according to the rule of the seat of the arbitration. The only one case we did not follow the agreement of the parties was because it exceeded the scope that parties can agree upon, and did not fall into the rule of the article 5 section 1 (d), although I personally think this award is not accordance with the opinion of the Supreme People’s Court.

Additionally, one case that we collected was related to the article 5 section 1 (e). The court followed the rule and did not support the defense that the award has not yet become binding on the parties just because one party has not yet received the award.

Fourth, in terms of the arbitral award and its conflict with the public policy, one case was related to labor dispute was not triable. According to the arbitration laws of China, labor disputes were not subject to arbitration, so the court dismissed the case. This interpretation follows the public policy in China, and we execute the New York Convention in good faith.

In 11 cases, the opposing parties raised the defense of violation of public policy, but none of them were supported by the court. There were 2 cases had successfully raised such defense in the lower courts, but was later reversed by the Supreme People’s Court. From the cases we collected between 2015 to 2017, we can see that the courts have fulfilled the obligations in the New York Convention, according to the instruction of the Supreme People’s Court. However, we can also see that there were some deviations of the interpretation and application of the New York Convention among different courts, especially on the rule of applicable laws and the scope of arbitration.

Though we have certain issues, the Supreme People's Court consistently support the international arbitration, under the implementation of the One Belt One Road Initiative. Also, the attitude of the Supreme People's Court has been followed by lowers courts, which has created a pro-arbitration phenomenon. From all data mentioned above, we can conclude that China has become one of the greatest examples of implementation of the New York Convention. Though there are some shortcomings according to the empirical studies, we would need courts at different levels to work on the foreign arbitral awards under the instruction of the Supreme People's Court.

By the end of last year, the Supreme People's Court has issued three notifications or judicial interpretations in a row, setting up three mechanisms. One is the centralized management. All the management of review of international arbitration will be centralized to a local department.  Second is the reporting mechanism. The denial of the arbitral award, no matter the domestic arbitration award or foreign award, should be reviewed by the Supreme People's Court. The third one is the interpretation of the arbitration clauses. Following such notifications or interpretations, I believe that China will make huge progress on the interpretation and application of the New York Convention. Thank you.