Service of arbitration documents on foreign parties

By Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC)
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It is a basic requirement of due process to give parties proper notice of arbitration proceedings so that the parties may have a reasonable opportunity to present their case. If such a basic requirement is not fulfilled, the award may become the subject of a successful challenge, and may not be recognized and enforced by a foreign court when the claimant seeks to enforce it in a foreign jurisdiction.

Therefore, when the tribunal has to proceed ex parte and render a default award, both the arbitration institution, if any, and the tribunal should exercise extra care; albeit it is normally the claimant’s responsibility to provide the respondent’s address and to properly serve arbitration documents on the respondent.

Before rendering a default award, the tribunal should explain in the award why it is of the view that the defaulting party: (1) has been given proper notice of the arbitration proceedings, and thus is fully aware that the arbitration is going on; (2) has been given a reasonable opportunity to present its case (for example, the period between the date of the respondent’s receipt of the Notice of Hearing and the hearing date set out in the notice meets the minimum requirement provided in the applicable arbitration rules); and (3) has deliberately made a decision not to take part in the arbitration, instead of being circumscribed from participating in the proceedings owing to justifiable causes such as force majeure.

In most cases, mainland China awards have been recognized and enforced in Hong Kong and Taiwan. In order to illustrate the importance of proper service on foreign parties, two precedents (one from Hong Kong and the other from Taiwan jurisprudence), in which enforcement of the awards were refused owing to failure to properly serve arbitration documents on the respondents are analyzed below.

(1) Case relating to an application for enforcement in Hong Kong

In the case of 楼外楼房地产咨询有限公司对何志兰(Ms Ho) ([2015] HKCFI 664; HCMP 3202/2013), the Guangzhou Arbitration Commission tried to serve the arbitration documents on the respondent in Hong Kong by express mail under its arbitration rules. For the first mail, which included the Notice of Arbitration, the respondent had acknowledged its receipt of the documents by signing. Later, when the arbitration institution mailed the Notice of Hearing to the same address, there was a signature in the column of the “signature of the recipient” on the express courier information sheet delivered, but there was also a seal with the wording “rejected, return to the place of mailer”.

The Notice of Hearing was actually returned to Guangzhou Arbitration Commission. The arbitral tribunal held that the Notice of Hearing was deemed duly served on the respondent under the applicable arbitration rules, as the first Notice of Arbitration had been successfully served on the same address in Hong Kong. Accordingly, the arbitral tribunal heard the case ex parte, in the absence of the respondent, and rendered a default award.

Later, when the claimant sought enforcement of the award in a Hong Kong court, Ms Ho, the respondent, objected on the grounds of improper service. Ms Ho admitted to receiving the first mail, namely the Notice of Arbitration, but claimed that “the address was not her place of residence” and she “happened to be present at the time, at the address, for supervision of the renovation work being done there”, when the Notice of Arbitration was mailed to the address, on 10 May 2013.

Having heard arguments from both parties, the High Court of Hong Kong held that the counsel to the applicant failed to provide any evidence showing a deemed-as-properly-served Notice of Hearing that under applicable arbitration rules can be regarded as a proper notice of the arbitration proceedings for the purpose of article 95(2) of the Hong Kong Arbitration Ordnance. Therefore, the High Court of Hong Kong refused to enforce the award on the grounds that the respondent was not given proper notice of the arbitral proceedings, or was otherwise unable to present its case.

(2) Case relating to an application for enforcement in Taiwan

As for service upon the parties concerning Taiwan, it is common practice for arbitration institutions in mainland China to serve upon the respondents in Taiwan by express post (China Post’s EMS), according to their arbitration rules. If the EMS Global Postal Express Service is used, the partner of the EMS in Taiwan is Chunghwa Post. Therefore, it is possible to trace the service by entering tracking numbers on the website of Chunghwa Post, Taiwan.

In a case involving an application to a Taiwan court for recognition and enforcement of an arbitral award issued by the Shanghai Arbitration Commission (Civil Ruling of Taiwan Taipei District Court, case number: 2017 Kang Gong Er Zi No.8, and Civil Ruling of Taiwan High Court, case number: 2017 Fei Kang Zi No.55), although the Shanghai Arbitration Commission had issued a proof of service, in which it is provided that: “For the case (Hu Zhong Zi [2015] No.1188) accepted by this commission, the arbitral tribunal had rendered an award on 28 January 2016.

The Notice of Composition of Arbitral Tribunal, the Notice of Hearing, and the arbitral award had been served on the respondents, Suzhou Wellpool Green Energy & Building Material, Zhang Mingji, Zhang Zhonghe and Gao Zhenyi, respectively.” However, the copy of the EMS delivery record indicated that no signature could be found in the column of “receipt by recipient”.

In addition, the applicant had not submitted any other evidence to prove that the Notice of Arbitration, including its attachments, had been properly served upon the respondents. Therefore, the Taiwan court upheld the objection by the applicant (namely, the respondent in the original arbitration proceedings) that the Shanghai Arbitration Commission did not serve a copy of the arbitration application and its attachments on the respondent.

As a result, the court believed that the arbitration proceedings were against the public order and good morals of Taiwan and refused to enforce the award in accordance with article 74 of the Act Governing Relations between the People of Taiwan Area and the Mainland Area.

The above-mentioned two precedents demonstrate the importance of proper service to ensure the requirement of due process is fulfilled. In particular, in the case of a default award, the respondent will always consider relying on an objection that it has not been given proper notice of the arbitral proceedings. When cross-jurisdiction enforcement may be involved, it is advisable to acquire a good understanding of relevant jurisprudence in possible place(s) of enforcement, to be on the safe side.

Helena H C Chen is an arbitrator of Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC), and partner and China joint head of office at Pinsent Masons. BAC/BIAC’s senior manager, Terence Xu, also contributed to this article.