Maritime Law and Practice in China

Liang Zhao and Lianjun Li

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CHAPTER 26 Maritime arbitration, conciliation and recognition and enforcement of foreign arbitration awards and foreign judgments

Introduction

26.1 Maritime arbitration has a long history, which has developed in step with worldwide maritime trade. A large number of maritime disputes are referred to arbitration in London, of which a notable amount is administrated under the terms of the London Maritime Arbitrators Association. London, as one of world’s largest maritime disputes resolution centres, is a preferred choice for the seat of arbitration and is usually used as a standard choice in the major standard forms of charterparties and bills of lading. 26.2 With the development of the shipping industry in China, increasing numbers of Chinese shipping companies began to be involved in maritime disputes. Occasionally these companies will choose to conduct arbitration in China in order to avoid the high legal costs for arbitration in foreign countries such as England. 26.3 The main maritime arbitration institution, the China Maritime Arbitration Commission (the “CMAC”), was established in China in 1958. The CMAC focuses on the resolution of contractual and non-contractual maritime disputes arising from, or in the process of, transportation, production and navigation by or at sea, in coastal waters and other navigable waters adjacent to sea, by arbitration. 26.4 There is now no restriction that maritime disputes can only be referred to the CMAC for arbitration. Thus other major arbitration commissions in China can also handle maritime arbitrations. 26.5 Conciliation (mediation) is another dispute resolution method available for solving maritime disputes. Same as with other civil disputes, the court can conduct conciliation between the parties at trial upon the agreement of the parties.1 The arbitral tribunals are also allowed to arrange conciliation during the arbitration.2 In addition, there is a special kind of mediation procedure for certain maritime accidents, known as the maritime administrative mediation. This kind of mediation is conducted by a competent authority of the government. 26.6 This chapter will also discuss the recognition and enforcement of foreign court judgments and arbitration awards in China. Generally speaking, it is easier to recognise and enforce a foreign arbitration award than a court judgment in China, since China is a contracting State to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Award (the “New York Convention”). The recognition and enforcement of

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a foreign court judgment is mainly made based on bilateral treaties entered into between China and other countries.

Review of the Arbitration Law of People’s Republic of China (the “Arbitration Law”)

Types of arbitration

26.7 Unlike in many other countries, there is no concept of an ad hoc arbitration in China. The only type of arbitration available in China is an institutional arbitration. Thus, article 16 of the Arbitration Law requires that a valid arbitration agreement must choose a valid arbitration commission.

The Arbitration Law and its judicial interpretation

26.8 The Arbitration Law is the major legislation regulating arbitration in China. The Arbitration Law was promulgated on 31 August 1994 and was later revised in 2009. The Arbitration Law provides detailed rules in relation to the arbitration institution, the arbitration agreement, the arbitration procedure, the setting aside of an arbitral award, and the enforcement of an arbitration award. The Arbitration Law also contains a special chapter that provides for the relevant rules of foreign-related arbitration. 26.9 All contractual disputes and other disputes over rights and interests in property between citizens, legal persons and other organisations can be referred to arbitration in China and such arbitrations are regulated by the Arbitration Law. Maritime arbitrations are generally regulated by the Arbitration Law, the Maritime Code of People’s Republic of China (the “CMC”) and the Special Maritime Procedure Law (the “SMPL”) together with the arbitration rules of the arbitration institutions. 26.10 Another major legislation that regulates arbitration in China is the “Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of the Arbitration Law of the People’s Republic of China” (the “Interpretation of Arbitration Law”). This judicial interpretation was promulgated by the Supreme People’s Court (the “SPC”) on 23 August 2006 and came into effect on 8 September 2006, providing interpretations for certain unclear issues in the Arbitration Law.

Valid arbitration agreement

26.11 Maritime arbitration agreements can generally be divided into two types, namely arbitration clauses and the separate arbitration agreements.3 26.12 Article 16 of the Arbitration Law sets out the rule for a valid arbitration agreement, which will also apply to a maritime arbitration: an arbitration agreement shall contain three elements, including an expression of intention to apply for arbitration, the matters for arbitration and a designated arbitration commission.

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26.13 Among the three requirements, the last one, i.e. an agreement for a designated arbitration commission, is sometimes omitted by some foreign-related arbitration agreements as there is generally no such requirement in other countries that allow for ad hoc arbitration. However, it should be noted that under certain circumstances an arbitration agreement can be considered valid even if there is no designated arbitration commission. For example, where parties have reached a supplementary agreement or an arbitration institution may be identified through the agreed arbitration rules in the agreement.4 In addition, if an arbitration agreement provides that arbitration shall be conducted by an arbitration institution at a certain place, and there is only one arbitration institution at that place, although the name of the arbitration institution is not identified, such arbitration institution can be deemed the agreed-upon arbitration institution.5 26.14 The Arbitration Law also provides that the establishment of an arbitration commission needs to be registered with the administrative department of justice of the relevant province. As a result, there was an issue of the validity of the arbitration agreement if the parties had agreed that the arbitration should be conducted in China but administered by a foreign arbitration institution not registered in China. However, this issue has now been considered by the SPC in a recent case, Anhui Longlide Packing and Printing Co., Ltd v BP Agnati S.R.L.6 In this case, the arbitration agreement provided that any disputes were to be submitted to arbitration by the International Chamber of Commerce (the “ICC”) and the place of arbitration was to be Shanghai. A dispute arose as to whether this arbitration agreement was a valid one. This case was reported to the SPC for their review and it was held that since the three elements of a valid arbitration agreement under article 16 of the Arbitration Law had been satisfied, the arbitration clause was valid. According to this response from the SPC, it seems that there is no longer a restriction for a foreign arbitration institution to conduct arbitrations in China and the validity of such arbitration agreements may be upheld. 26.15 Apart from the requirements set out in article 16 of the Arbitration Law, article 17 provides three circumstances where an arbitration agreement will be considered as an invalid one, including where the agreed matters for arbitration exceed the range of arbitrable matters as specified by law, where one party that concluded the arbitration agreement has no capacity for civil conduct or has limited capacity for civil conduct or where one party has coerced the other party into concluding the arbitration agreement. 26.16 That the parties to the arbitration agreement must be “qualified” refers to the requirement that parties who conclude the arbitration agreement must have capacity for civil acts. Thus an arbitration agreement concluded by persons without or with limited capacity for civil acts is invalid. To determine whether the person has capacity or not, different criteria are adopted according to whether the person is a natural person or a legal person. Under the conflict laws of China, the natural person’s civil capacity for concluding an arbitration agreement is determined according to the law of habitual residence. The legal person’s civil capacity for concluding an arbitration agreement is determined according to its domestic law, namely the law of its place of registration or the location of the headquarters of the legal person.7

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26.17 An arbitration agreement must be a true and voluntary declaration of intention of the parties to submit to arbitration. If one party adopts the use of fraud, duress or any other means to force the counter party against their true will to sign an arbitration agreement, such arbitration agreement is invalid. 26.18 In addition, the contents of the arbitration agreement must be legitimate. The scope of arbitrable matters is referred to in articles 2 and 3 of the Arbitration Law. Article 2 provides that disputes over contracts and disputes over property rights and interests between citizens, legal persons and other organisations as equal subjects of law may be submitted to arbitration. In contrast, article 3 sets out the disputes that cannot be submitted to arbitration, including (1) disputes over marriage, adoption, guardianship, child maintenance and inheritance; and (2) administrative disputes falling within the jurisdiction of the relevant administrative departments according to law. 26.19 Apart from the circumstances as set out in the Arbitration Law, the Interpretation of the Arbitration Law also provides several other circumstances where an arbitration agreement will be considered invalid. For example, where the parties agree on two arbitration commissions in the agreement or where the parties agree in the arbitration agreement that disputes may be resolved either through arbitration or by court, the arbitration agreement will be deemed invalid.8 26.20 There is also a form requirement of valid arbitration agreement, which is that the arbitration agreement must be made in written form.9 Such written forms may include an arbitration clause in a contract, or any other agreement on arbitration concluded in the form of letter or by electronic text.10 The New York Convention also has the same requirements11 and thus makes it not only important for the commencement of arbitration but also for the recognition and enforcement of the arbitration award. 26.21 As to foreign-related arbitration agreements, there is an “Inside Review Regime” on the validity of arbitration agreement in China, which requires a lower court that considers the arbitration agreement an invalid one to report the case for the higher court’s review. This is the Notice of the Supreme People’s Court Concerning Some Issues on Disposal of Foreign-related Arbitration and Foreign Arbitration 12 (the “Notice”) published by the SPC in 1995, which provides that:

As to all the foreign related, Hong Kong, Macau or Taiwan related commercial, maritime or admiralty disputes, in the event that the contract contains an arbitration clause or the parties reach an arbitration agreement after the disputes have arisen, and the People’s Court considers that an arbitration clause is invalid, ceases to be valid or cannot be performed due to uncertainty, it shall be reported to the High People’s Court for a review first; if the High People’s Court agrees with the lower courts, the High Court is then required to report to the Supreme People’s Court for its confirmation. Without the confirmation from the Supreme People’s Court, the court shall not exercise its jurisdiction.

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