First CIETAC Hong Kong award enforced in mainland China

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The Nanjing Intermediate People’s Court of Jiangsu province, on 13 December 2016, issued its ruling to enforce an arbitral award issued by the CIETAC Hong Kong Arbitration Centre. The Nanjing court’s ruling marks the first time that a Chinese mainland court has enforced a CIETAC Hong Kong arbitral award upon application from the party seeking enforcement.

CIETAC_picIn 2015, the claimant, an American architectural design firm, commenced arbitration proceedings at CIETAC Hong Kong against a Chinese property developer (the respondent), seeking design fees and unpaid interest pursuant to their arbitration agreement. An award was rendered in favour of the claimant, and the respondent later voluntarily enforced a portion of the award (design fees). The claimant and the respondent at that stage also reached a new settlement agreement on the unpaid interest.

The parties agreed that either the respondent could pay voluntarily the interest in the amount of RMB600,000 (US$87,000) before 31 May 2016, or the claimant could seek payment of the full amount before court. When the respondent did not pay voluntarily before the deadline, the claimant sought enforcement at the Nanjing court. The court subsequently held that the unpaid interest should be enforced.

The author made a summary based on the ruling and the information provided by the case management team of CIETAC Hong Kong as follows, for easy reference.

The administrative body and the applicable rules. It was agreed by the claimant and the respondent that any dispute arising out of the contract must be submitted to CIETAC for arbitration in Hong Kong. According to article 73 of the CIETAC Arbitration Rules, effective from 1 January 2015, where the parties have agreed to submit their disputes to the CIETAC Hong Kong Arbitration Centre for arbitration or to CIETAC for arbitration in Hong Kong, the CIETAC Hong Kong Arbitration Centre must accept the arbitration application and administer the case. Parties should be aware that the entire chapter VI of the CIETAC Arbitration Rules applies to cases submitted to CIETAC Hong Kong.

The seat of arbitration and the legal basis for enforcement. According to article 74 of the CIETAC Arbitration Rules, unless otherwise agreed by the parties, for an arbitration administered by the CIETAC Hong Kong Arbitration Centre, the place of arbitration must be Hong Kong, the law applicable to the arbitral proceedings must be the arbitration law of Hong Kong, and the arbitral award must be a Hong Kong award. According to the circumstance of this case, the seat of arbitration is Hong Kong.

In its ruling, the Nanjing court expressly referred to and relied on the Supreme People’s Court’s (SPC) Arrangement Concerning Mutual Enforcement of Arbitral Awards between mainland China and Hong Kong. The court held that the arbitration was carried out in accordance with procedural laws in Hong Kong, and that the respondent did not invoke any of the grounds listed in article 7 of the arrangement. Finding that enforcement of the award would not contradict the public interests of mainland China, the Nanjing court ruled to enforce the part of the award as per the claimant’s application.

The nomination/appointment of arbitrators. According to article 76 of the CIETAC Arbitration Rules, the CIETAC panel of arbitrators in effect must be recommended in arbitration cases administered by the CIETAC Hong Kong Arbitration Centre. The parties may nominate arbitrators from outside the CIETAC’s panel of arbitrators, however, according to the case management team, parties at CIETAC Hong Kong would normally still nominate arbitrators from the panel.

Meeting deadlines. According to the ruling, an oral hearing was held for this case on 25 August 2015, and the award was rendered about three months later. Because CIETAC Hong Kong applies the CIETAC Arbitration Rules to administer its cases, a six-month time limit to render an award in normal procedures, and a three-month time limit for summary procedures, applies after the formation of an arbitral tribunal. However, according to the case management team, the average time period for rendering an award at CIETAC Hong Kong was 115 days in 2015.

The case management team also commented that efficient arbitration requires quality arbitrators and case managers. Located in the hub of international arbitration, CIETAC Hong Kong is positioned to draw from an experienced pool of arbitrators, and all members of the case management team have received a legal education in at least two jurisdictions. These core competencies are crucial in that CIETAC Hong Kong manages disputes that are either cross-border in nature, or that involve non-Chinese parties.

The costs of arbitration. The CIETAC Arbitration Rules have provided a transparent fee schedule for CIETAC Hong Kong cases, collecting a registration fee, administrative fee and arbitrators’ fees and expenses separately on instalments by parties. According to the court ruling, the arbitrators’ fees and expenses were about 5% of the amount in dispute, also forming the most significant part of the costs of the arbitration.

The costs and procedure of enforcement. RMB400 was collected by the Nanjing court to accept the case. A three-judge tribunal was formed by the court to review the case and question the parties. The ruling is well structured and easy to follow, thus providing a valuable reference for parties interested in understanding how a Chinese mainland court would enforce a CIETAC Hong Kong award.

Brad Wang is the managing counsel at CIETAC Hong Kong Arbitration Centre. Kevin Walker, a law student at the University of California, Berkeley, and a former intern at CIETAC Hong Kong, and Candice Zhao, a law student at the University of Hong Kong and a former intern at CIETAC Hong Kong, also contributed to this article