Enforcement of Arbitral Awards in China
Domestic vs Foreign Awards
Chinese law distinguishes between domestic arbitral awards, foreign-related awards, and foreign awards for enforcement purposes. Domestic awards are rendered by Chinese arbitration institutions in disputes without a foreign element. Foreign-related awards (shèwài zhòngcái cáijué) are issued by Chinese institutions in disputes involving foreign parties, foreign investment, or cross-border transactions. Foreign awards are those rendered outside mainland China. The enforcement regime differs significantly: domestic awards are subject to full judicial review under the Civil Procedure Law, while foreign-related and foreign awards benefit from a more limited review consistent with international standards.
Under Article 237 of the Civil Procedure Law (mínshì sùsòng fǎ), a party seeking enforcement of a domestic award must apply to the intermediate people’s court at the domicile of the party against whom enforcement is sought or where the property is located. The court may refuse enforcement on grounds including procedural defects, lack of a valid arbitration agreement, or violation of public policy. The review is more searching than for foreign-related awards, with courts examining both procedural and substantive issues.
New York Convention Application
China acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) on 22 April 1987, with two reservations: reciprocity and commercial reservation. Foreign awards made in other contracting states are enforceable in China under the Convention, subject to the limited grounds for refusal in Article V. China’s courts have generally adopted a pro-enforcement stance, recognising and enforcing foreign awards in the majority of cases.
The Supreme People’s Court has issued multiple judicial interpretations clarifying the Convention’s application. The SPC requires that intermediate people’s courts report any decision to refuse recognition or enforcement of a foreign award to the SPC for review under the prior reporting system (shàngbào zhìdù). This system has significantly reduced the incidence of improper refusals and has contributed to China’s reputation as a Convention-compliant jurisdiction.
Public Policy Exception
The public policy exception in Article V(2)(b) of the New York Convention is interpreted narrowly by Chinese courts. The SPC has held that public policy refers to the fundamental legal principles, national sovereignty, security, and public interest of China. In Huating v Wandai (2015), the SPC clarified that a violation of mandatory laws does not necessarily constitute a violation of public policy, and that the exception should be confined to circumstances where enforcement would jeopardise the fundamental legal order of China.
Chinese courts have refused enforcement on public policy grounds in limited cases, including where the underlying dispute involved matters non-arbitrable under Chinese law (such as certain intellectual property validity issues) or where enforcement would violate China’s sovereignty or national security. The SPC’s cautious approach to the public policy exception aligns with international best practice and limits its use as a tool to resist enforcement.
CIETAC Rules
The China International Economic and Trade Arbitration Commission (CIETAC) is China’s primary international arbitration institution. CIETAC administered over 5,000 cases annually, making it one of the busiest arbitral institutions globally. The CIETAC Arbitration Rules (2024 edition) provide for institutional arbitration with model arbitration clauses, expedited procedures for smaller claims, and provisions for emergency arbitrator relief, consolidation, and joinder.
CIETAC awards are classified as foreign-related awards when the dispute involves a foreign element. They benefit from the limited review standards applicable to foreign-related awards under Article 274 of the Civil Procedure Law. The enforcement rate of CIETAC awards in China is high, and CIETAC awards have been enforced in over 80 jurisdictions under the New York Convention.
SPC Reporting System
The Supreme People’s Court Prior Reporting System (shàngbào shěnpàn zhìdù) is a mechanism that centralises judicial oversight of decisions to refuse enforcement. Established in 1995 for foreign-related awards and extended to foreign awards under the New York Convention, the system requires intermediate courts to refer any proposed refusal of enforcement to the SPC for approval. The SPC reviews the proposed decision and issues a binding reply. If the SPC disagrees, the intermediate court must enforce the award.
The reporting system has been highly effective in preventing local protectionism and ensuring uniform application of the New York Convention. Data published by the SPC indicates that fewer than 5% of enforcement applications are ultimately refused. The system has been praised by international practitioners as a model for ensuring pro- enforcement outcomes in jurisdictions with limited experience in international arbitration.
Non-Enforcement Cases
Despite the generally pro-enforcement environment, Chinese courts have refused enforcement in specific circumstances. Grounds for non-enforcement include: invalidity of the arbitration agreement under Chinese law; failure to give proper notice of the arbitration proceedings; violation of due process rights; the award exceeding the scope of the arbitration agreement; and non-arbitrability of the subject matter. In a small number of cases, enforcement has been refused on public policy grounds, typically involving corruption, fraud, or violation of fundamental legal principles.
Parties resisting enforcement bear the burden of proving one of the enumerated grounds under the New York Convention or the Civil Procedure Law. Chinese courts do not review the merits of the award, and errors of fact or law do not constitute grounds for refusal. The limited grounds for non-enforcement reinforce China’s commitment to the finality and efficiency of international arbitration.