China Arbitration Yearbook (2022) 9819971640, 9789819971640

Table of contents :
Preface
Contents
Abbreviations and Short Forms
Official Replies by the Supreme People’s Court Concerning Arbitration in China
1 Arbitration Agreement
1.1 Independence of Arbitration Clause
1.2 “Arbitration or Litigation” Clause
1.3 Standard Form Contract
1.4 Implied Arbitration Agreement
1.5 Continued Validity of Contract
1.6 Unilateral Option/Asymmetric Arbitration Clause
1.7 Arbitration Clause Without Foreign-Related Factors
1.8 Governing Law of Arbitration Agreement
2 Parties and Participants
2.1 Additional Parties
2.2 Corporation Deadlock
2.3 Guarantors
2.4 Undisclosed Agent
2.5 Company Deregistration
2.6 Shareholder of One-Person Limited Liability Company
2.7 House Owners
2.8 Independence of Arbitration Agreement
2.9 Joinder of Additional Parties
2.10 Arbitration Agents
3 Evidence and Substantive Matters
3.1 Concealment of Evidence
3.2 Falsification of Evidence
3.3 Methods of Remedying Evidentiary Problems
3.4 Concealment of Facts
3.5 “Sufficient to Affect an Impartial Award”
3.6 Third Party Application to Oppose Enforcement of Arbitration Award
3.7 Evidence of Doubtful Authenticity
3.8 Estoppel
3.9 Foreign-Related Arbitration Award
4 Public Policy
4.1 Verification System
4.2 State-Owned Assets
4.3 P2P Online Lending
4.4 Ex Officio Review
4.5 Private Equity Funds
4.6 Concealing Illegitimate Purpose Under Legitimate Acts
4.7 Group Interest
4.8 Livelihood Project
4.9 Substantive Issues
5 Arbitration and Criminal Proceedings
5.1 Criminal and Civil Intersection Cases and Suspension of Arbitration Proceedings
5.2 Who Can Suspend the Proceedings Involving Criminal Issues
5.3 The Same Facts
5.4 Application for Revoking Arbitral Awards
5.5 The Crime of Illegally Absorbing Public Deposits
5.6 Forgery of Seals
6 International and Interregional Recognition and Enforcement of Arbitral Awards
6.1 Nationality of Arbitral Awards
6.2 Competent Court
6.3 Incapacity
6.4 Validity of Arbitration Agreement
6.5 Lack of Proper Notice
6.6 Beyond the Scope of Arbitration
6.7 Scope of the Judicial Review of the Validity of the Arbitration Agreement
6.8 Service Procedure
6.9 The Bankruptcy or Winding up of the Parties
6.10 Parallel Proceedings
Table of Cases
Chapter 1
1.1 Independence of Arbitration Clause
1.2 “Arbitration or Litigation” Clause
1.3 Standard Form Contract
1.4 Implied Arbitration Agreement
1.5 Continued Validity of Contract
1.6 Unilateral Option/Asymmetric Arbitration Clause
1.7 Arbitration Clause Without Foreign-Related Factors
1.8 Governing Law of Arbitration Agreement
Chapter 2
2.1 Additional Parties
2.2 Corporation Deadlock
2.3 Guarantors
2.4 Undisclosed Agent
2.5 Company Deregistration
2.6 Shareholder of One-Person Limited Liability Company
2.7 House Owners
2.8 Independence of Arbitration Agreement
2.9 Joinder of Additional Parties
2.10 Arbitration Agents
Chapter 3
3.1 Concealment of Evidence
3.2 Falsification of Evidence
3.3 Methods of Remedying Evidentiary Problems
3.4 Concealment of Facts
3.5 “Sufficient to Affect an Impartial Award”
3.6 Third Party Application to Oppose Enforcement of Arbitration Award
3.7 Evidence of Doubtful Authenticity
3.8 Estoppel
3.9 Foreign-Related Arbitration Award
Chapter 4
4.1 Verification System
4.2 State-Owned Assets
4.3 P2P Online Lending
4.4 Ex Officio Review
4.5 Private Equity Funds
4.6 Concealing Illegitimate Purpose Under Legitimate Acts
4.7 Group Interest
4.8 Livelihood Project
4.9 Substantive Issues
Chapter 5
5.1 Criminal and Civil Intersection Cases and Suspension of Arbitration Proceedings
5.2 Who Can Suspend the Proceedings Involving Criminal Issues
5.3 The Same Facts
5.4 Application for Revoking Arbitral Awards
5.5 The Crime of Illegally Absorbing Public Deposits
5.6 Forgery of Seals
Chapter 6
6.1 Nationality of Arbitral Awards
6.2 Competent Court
6.3 Incapacity
6.4 Validity of Arbitration Agreement
6.5 Lack of Proper Notice
6.6 Beyond the Scope of Arbitration
6.7 Scope of the Judicial Review of the Validity of the Arbitration Agreement
6.8 Service Procedure
6.9 The Bankruptcy or Winding up of the Parties
6.10 Parallel Proceedings
Official Replies by the Supreme People’s Court Concerning Arbitration in China

Citation preview

China Arbitration Yearbook Series Editor: Yifei Lin

Yifei Lin

China Arbitration Yearbook (2022)

China Arbitration Yearbook Series Editor Yifei Lin, Shenzhen, Guangdong, China

Yifei Lin

China Arbitration Yearbook (2022)

Yifei Lin Yi & Partners Shenzhen, Guangdong, China

ISSN 2524-8618 ISSN 2524-8626 (electronic) China Arbitration Yearbook ISBN 978-981-99-7164-0 ISBN 978-981-99-7165-7 (eBook) https://doi.org/10.1007/978-981-99-7165-7 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Paper in this product is recyclable.

Preface

In 2021, Chinese arbitration institutions accepted more than 415,900 arbitration cases. Although the overall statistics of all Chinese arbitration institutions in 2022 have not yet come out, it can be seen that Chinese arbitration continues to develop steadily based on the data already released by some major arbitration institutions. As far as the data is concerned, the Guangdong-Hong Kong-Macao Greater Bay Area, Beijing and Shanghai are still the most important regions for arbitration in China, occupying an absolute quantitative advantage, of which the overall amount of arbitration cases newly accepted in the Guangdong-Hong Kong-Macao Greater Bay Area and Beijing in 2022 exceeded RMB200 billion. From the perspective of judicial review of arbitration, the court has further strengthened its support and supervision of arbitration through various forms, highlighting its pro-arbitration position. On December 31, 2021, the Supreme People’s Court released the Minutes of the National Foreign-related Commercial and Maritime Trial Work Conference, which provides clear guidance on several issues of judicial review of arbitration. In 2022, the Supreme People’s Court released a number of guiding cases in the field of judicial review of arbitration. In addition, courts in many places, such as the High People’s Court of Hubei Province, Beijing No. 4 Intermediate People’s Court, Shanghai No. 1 Intermediate People’s Court, Shanghai No. 2 Intermediate People’s Court, Shandong Qingdao Intermediate People’s Court and other courts, have issued judicial review reports or white papers on arbitration. In addition, there are a large number of cases related to judicial review of arbitration in various courts, including jurisdictional challenges, setting aside awards, enforcement of awards, recognition and enforcement of foreign arbitral awards, etc. As I mentioned in the Preface of the last volume, with some reading guidance therein, this series is aimed to provide cases, materials and commentary on the main issues arising in Chinese arbitration, with many decisions, rulings and interpretations rendered by China’s courts in recent years. For possible errors, omissions and confusions which may arise due to translation from Chinese to English of some contents, readers may contact me for discussion.

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Preface

In recent years, Yi & Partners and CNARB, founded by myself and some colleagues, have also been committed to, in addition to engaging in arbitration practice, theoretical research and the promotion of arbitration as effective dispute resolution. The Yi & Partners Cup Arbitration Essay Competition has entered its fifth year, and the CNARB Arbitration Week (2023), which began in early 2023, has also been well received by the community with thousands of participants. Our official Wechat account (ID: cnarb1), and CNARB Arbitration Database (www.cnarb.com) have become important channels for the legal and arbitration circles to understand and know more about arbitration. This series of books is also our effort to introduce Chinese arbitration to the world. Thanks to my friends, colleagues, readers and arbitration users who have been supporting me. They are passionate and persistent, motivating me to do more to practice and study arbitration, and explore more potentials and opportunities. If you have any ideas, suggestions or queries on arbitration or arbitration in China, just let me know via [email protected]. Shenzhen, China June 2023

Yifei Lin

Contents

1 Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Independence of Arbitration Clause . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 “Arbitration or Litigation” Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Standard Form Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 Implied Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 Continued Validity of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 Unilateral Option/Asymmetric Arbitration Clause . . . . . . . . . . . . . . 1.7 Arbitration Clause Without Foreign-Related Factors . . . . . . . . . . . . 1.8 Governing Law of Arbitration Agreement . . . . . . . . . . . . . . . . . . . . .

1 2 6 15 21 31 35 44 50

2 Parties and Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Additional Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Corporation Deadlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Undisclosed Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 Company Deregistration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 Shareholder of One-Person Limited Liability Company . . . . . . . . . 2.7 House Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 Independence of Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . 2.9 Joinder of Additional Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10 Arbitration Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57 57 61 67 71 76 80 83 86 89 92

3 Evidence and Substantive Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Concealment of Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Falsification of Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Methods of Remedying Evidentiary Problems . . . . . . . . . . . . . . . . . 3.4 Concealment of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 “Sufficient to Affect an Impartial Award” . . . . . . . . . . . . . . . . . . . . .

95 95 100 103 108 111

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Contents

3.6

Third Party Application to Oppose Enforcement of Arbitration Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evidence of Doubtful Authenticity . . . . . . . . . . . . . . . . . . . . . . . . . . . Estoppel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign-Related Arbitration Award . . . . . . . . . . . . . . . . . . . . . . . . . .

115 118 123 127

4 Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Verification System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 State-Owned Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 P2P Online Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Ex Officio Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 Private Equity Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6 Concealing Illegitimate Purpose Under Legitimate Acts . . . . . . . . . 4.7 Group Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 Livelihood Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 Substantive Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

133 133 138 144 150 157 162 168 174 181

5 Arbitration and Criminal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Criminal and Civil Intersection Cases and Suspension of Arbitration Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Who Can Suspend the Proceedings Involving Criminal Issues . . . . 5.3 The Same Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Application for Revoking Arbitral Awards . . . . . . . . . . . . . . . . . . . . 5.5 The Crime of Illegally Absorbing Public Deposits . . . . . . . . . . . . . . 5.6 Forgery of Seals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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3.7 3.8 3.9

6 International and Interregional Recognition and Enforcement of Arbitral Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Nationality of Arbitral Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Competent Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Incapacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Validity of Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 Lack of Proper Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 Beyond the Scope of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7 Scope of the Judicial Review of the Validity of the Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8 Service Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 The Bankruptcy or Winding up of the Parties . . . . . . . . . . . . . . . . . . 6.10 Parallel Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

187 192 200 208 213 218 223 224 228 232 236 241 245 249 253 255 259

Table of Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 Official Replies by the Supreme People’s Court Concerning Arbitration in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285

Abbreviations and Short Forms

AAA Arbitration Enforcement Provision

AFI Arbitration Law Arbitration Law (Draft for Comments)

Arbitration Law Interpretation

Arbitration Judicial Review Provision

Arrangements on Mutual Enforcement of Awards

American Arbitration Association Provisions of the Supreme People’s Court on Several Issues concerning the Handling of Cases regarding Enforcement of Arbitral Awards by the People’s Courts Association of Food Industries Arbitration Law of the People’s Republic of China Arbitration Law of the People’s Republic of China (2021) (Draft for Comments) Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of the Arbitration Law of the People’s Republic of China Provisions of the Supreme People’s Court on Several Issues concerning Deciding Cases of Arbitration-Related Judicial Review Arrangements of the Supreme People’s Court on the Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region ix

x

BelCCI

BIMCO China Civil Code Civil Procedure Law Civil Procedure Law Interpretation

Law on Choice of Law

Choice of Law Interpretation

CICC CIETAC

Co. Company Law

Conference Minutes

Contract Law Corp. ed. etc.

Abbreviations and Short Forms

International Arbitration Court of the Belarusian Chamber of Commerce and Industry Baltic and International Maritime Council People’s Republic of China Civil Code of People’s Republic of China Civil Procedure Law of the People’s Republic of China Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China Law of the People’s Republic of China on Choice of Law for Foreign-Related Civil Relationships Interpretations of the Supreme People’s Court on Several Issues Concerning Application of the Law of the People’s Republic of China on Choice of Law for Foreign-Related Civil Relationships China International Commercial Court China International Economic and Trade Arbitration Commission Company Company Law of the People’s Republic of China (Amended in 2018) The Minutes of the National Courts’ Civil and Commercial Trial Work Conference Contract Law of the People’s Republic of China Corporation Edition et cetera

Abbreviations and Short Forms

FAI

FOSFA GAFTA Guarantee Law Interpretation

Hong Kong HKIAC i.e. IBA ICA ICC

ICDR JCAA KCAB L.P. LCIA LMAA Ltd. Macao Model Law

New York Convention

No. p./pp.

xi

The Arbitration Institute of the Finland Chamber of Commerce The Federation of Oils, Seeds and Fats Association Ltd. The Grain and Feed Trade Association Interpretation of the Supreme People’s Court on Some Issues Regarding the Application of the Guarantee Law of the People’s Republic of China Hong Kong Special Administrative Region Hong Kong International Arbitration Centre id est (that is) International Bar Association International Cotton Association International Court of Arbitration of the International Chamber of Commerce International Centre for Dispute Resolution Japan Commercial Arbitration Association Korean Commercial Arbitration Board Limited Partnership London Court of International Arbitration London Maritime Arbitrators Association Limited Macao Special Administrative Region UNCITRAL Model Law on International Commercial Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards Number Page/Pages

xii

Singapore Convention on Mediation

SIAC SPC UK UNCITRAL v.

Abbreviations and Short Forms

United Nations Convention on International Settlement Agreements Resulting from Mediation Singapore International Arbitration Centre Supreme People’s Court of China United Kingdom United Nations Commission on International Trade Law Versus (against)

Official Replies by the Supreme People’s Court Concerning Arbitration in China

1. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Objection to Jurisdiction over Voyage Charter Party Dispute between Shanghai Jiexi International Freight Transportation Agency Co., Ltd. and Shanghai Hengxin Shipping Co., Ltd. February 23, 2017, (2017) Zui Gao Fa Min Ta No. 4 2. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of RAFFLES INTERNATIONAL LIMITED for Recognition and Enforcement of a Hong Kong Arbitral Award March 28, 2017, (2017) Zui Gao Fa Min Ta No. 16 3. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shanghai on the Case Concerning the Application of GUANGSHA MIDDLE EAST CONSTRUCTION LLC for Revocation of the (2015) Hu Mao Zhong Cai No. 318 Arbitral Award made by Shanghai International Economic and Trade Arbitration Commission March 29, 2017, (2017) Zui Gao Fa Min Ta No. 3 4. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Zhang and Guan for Confirmation of the Validity of an Arbitration Agreement May 23, 2017, (2017) Zui Gao Fa Min Ta No. 36 5. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Yantai Moon Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement May 23, 2017, (2017) Zui Gao Fa Min Ta No. 41 6. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Jiangsu Province on the Case Concerning the Application of Plexus Cotton Limited for Recognition and Enforcement of an Arbitral Award Made by ICA May 25, 2017, (2016) Zui Gao Fa Min Ta No. 31 7. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Jiangsu Province on the Case Concerning the Application of

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8.

9.

10.

11.

12.

13.

14.

15.

16.

Official Replies by the Supreme People’s Court Concerning Arbitration …

Bright Morning Limited for Recognition and Enforcement of the 2011 No. 130 (ARB130/11/MJL) Arbitral Award Made by SIAC July 23, 2017, (2017) Zui Gao Fa Min Ta No. 44 Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Application of Noble Resources Internationa1 Pte. Ltd. for Recognition and Enforcement of a Foreign Arbitral Award June 26, 2017, (2017) Zui Gao Fa Min Ta No. 50 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Hebei Province on the Case Concerning the Application of Hebei Puxing Electronic Technology Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement September 13, 2017, (2017) Zui Gao Fa Min Ta No. 70 Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application for Confirmation of Validity of the Arbitration Clause in the Carriage of Goods by Sea Contract between the Claimant FUJIAN YUAN CHENG BEAN CO., LTD and the Respondent Fuxing Shipping Limited September 30, 2017, (2017) Zui Gao Fa Min Ta No. 109 Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Application of Li and Han for Revocation of an Arbitral Award October 31, 2017, (2017) Zui Gao Fa Min Ta No. 100 Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Contractual Dispute between Wacai Network Technology Co., Ltd, Hangzhou Wacai Internet Finance Service Co., Ltd. and Miao, WACAI HOLDINGS LIMITED November 17, 2017, (2017) Zui Gao Fa Min Ta No. 116 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Beijing on the Case Concerning the Application of Guangzhou Huashangmao Lands Development Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement November 17, 2017, (2017) Zui Gao Fa Min Ta No. 78 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Confirmation of Validity of the Arbitration Clause in the Sino-Foreign Cooperation Contract among EAGLE FAITH LIMITED, Dongguan Xietong Enterprise Service Co., Ltd and Dongguan Villas November 30, 2017, (2017) Zui Gao Fa Min Ta No. 132 Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Dispute on Loan and Guarantee Contract among NANYANG COMMERCIAL BANK, LIMITED and BEST SYSTEM (HK) LIMITED, Zhu, Dongguan Jieweixun Electronics Co., Ltd. December 5, 2017, (2016) Zui Gao Fa Min Ta No. 71 Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Validity of the Foreign-Related Arbitration Clause in the Carriage of Goods by Sea Contract between the Claimant Suzhou

Official Replies by the Supreme People’s Court Concerning Arbitration …

17.

18.

19.

20.

21.

22.

23.

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Branch of China Pacific Life Insurance Co., Ltd. and the Respondent RIZZO BOTTIGLIERI DE CARLINI ARMATORI S.P.A. December 14, 2017, (2017) Zui Gao Fa Min Ta No. 127 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shandong Province on the Case Concerning the Jurisdiction over the Confirmation of Validity of Contract between S.M. ENTERTAINMENT and Huang December 18, 2017, (2017) Zui Gao Fa Min Ta No. 123 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Zhejiang Province on the Case Concerning the Application of Louis Dreyfus Commodities Suisse SA for Recognition and Enforcement of Foreign Arbitral Award December 19, 2017, (2017) Zui Gao Fa Min Ta No. 96 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Yang for Revocation of an Arbitral Award December 19, 2017, (2017) Zui Gao Fa Min Ta No. 117 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Zhejiang Province on the Case Concerning the Application of MASPAL INVESTMENT CORPORATION for Recognition and Enforcement of a Foreign Arbitral Award December 20, 2017, (2017) Zui Gao Fa Min Ta No. 67 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Golden Wind Hot Stamping Company for Revocation of Hua Nan Guo Zhong Shen Cai [2014] No. 146 Arbitral Award Rendered by CIETAC South China Sub-Commission December 22, 2017, (2017) Zui Gao Fa Min Ta No. 139 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Beijing on the Case Concerning the Application of IP Cathay II, L.P. for Recognition and Enforcement of an Arbitral Award in Hong Kong December 25, 2017, (2017) Zui Gao Fa Min Ta No. 131 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shandong Province on the Case Concerning the Application of The Dragon Project (China) Limited for Recognition and Enforcement of an Arbitral Award in UK December 26, 2017, (2017) Zui Gao Fa Min Ta No. 114 Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Guangdong Sanmao Railway Industry Development Co., Ltd. for Non-Enforcement of an Arbitral Award December 26, 2017, (2017) Zui Gao Fa Min Ta No. 115

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Official Replies by the Supreme People’s Court Concerning Arbitration …

25. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Tianjin on the Case Concerning the Application of Palmer Maritime Inc for Recognition and Enforcement of a Foreign Arbitral Award March 9, 2018, (2017) Zui Gao Fa Min Ta No. 140 26. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangxi Zhuang Autonomous Region on the Case Concerning the Application of Li for Recognition and Enforcement of a Foreign Arbitral Award March 20, 2018, (2018) Zui Gao Fa Min Ta No. 9 27. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shandong Province on the Case Concerning the Application of Lanhai Ecological Agriculture Co., Ltd for Confirmation of the Validity of an Arbitration Agreement March 26, 2018, (2018) Zui Gao Fa Min Ta No. 25 28. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of E-Welly Advance Technology Co., Ltd. for Confirmation of the Invalidity of an Arbitration Agreement March 29, 2018, (2018) Zui Gao Fa Min Ta No. 14 29. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Pixelplus Co., Ltd for Recognition and Enforcement of an Arbitral Award Rendered by KCAB March 29, 2018, (2018) Zui Gao Fa Min Ta No. 15 30. Reply of the Supreme People’s Court to the Request for Instructions of the Application of Law on Placing the “Advance Arbitral” Awards or Mediations of Arbitration Institutions on File and Enforcement (Adopted by the Judicial Committee of the Supreme People’s Court on May 28, 2018 at the 1740th session, came into force on June 12, 2018. Fa Shi (2018) No. 10) 31. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province of the Application of Fujian Group Limited for the Revocation of [2015] Shen Zhong Cai No. 2475 Arbitral Award Rendered by Shenzhen Arbitration Commission June 20, 2018, (2018) Zui Gao Fa Min Ta No. 34 32. Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Application of Hu for Confirmation of the Validity of an Arbitration Agreement June 20, 2018, (2018) Zui Gao Fa Min Ta No. 38 33. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Beijing on the Case Concerning the Application of Tebon Fund Management Company Limited for Revocation of (2016) Zhong Guo Mao Zhong Jing (Hu) Cai No. 193 Arbitral Award June 21, 2018, (2018) Zui Gao Fa Min Ta No. 43

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34. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of the Inner Mongolia Autonomous Region on the Case Concerning the Application of ADM ASIA-PACIFIC TRADING PTE. LTD. for Recognition and Enforcement of the No. 4440 Arbitral Award Rendered by FOSFA June 22, 2018, (2018) Zui Gao Fa Min Ta No. 33 35. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Hubei Province on the Case Concerning the Application for Confirmation of the Validity of the Arbitration Clause of the Carriage of Goods by Sea Contract between the Claimant Xiamen ITG Group Corp., Ltd. and the Respondent King Navigation Co. June 22, 2018, (2018) Zui Gao Fa Min Ta No. 52 36. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shandong Province on the Case Concerning the Application of Beijing Guofeng Jianye Door and Window Manufacturing Co., Ltd for Confirmation of the Validity of an Arbitration Agreement June 22, 2018, (2018) Zui Gao Fa Min Ta No. 54 37. Reply of the Supreme People’s Court to the Request for Instructions from the High People’s Court of Guangdong Province on the Centralized Jurisdiction of the Guangzhou Municipal Basic People’s Court over Foreign-Related Civil and Commercial Cases Involving Hong Kong, Macao and Taiwan June 28, 2018, (2018) Zui Gao Fa Min Ta No. 58 38. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Pizibao Kangning (Yantai) Insulation Materials Co., Ltd for Confirmation of the Validity of an Arbitration Agreement September 11, 2018, (2018) Zui Gao Fa Min Ta No. 99 39. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shanghai on the Case Concerning the Application of Song for Revocation of (2015) Hu Zhong An No. 0347 Arbitral Award Rendered by Shanghai Arbitration Commission October 12, 2018, (2018) Zui Gao Fa Min Ta No. 186 40. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Shanghai Haosheng Hotel Management Co., Ltd. for Enforcement of an Arbitral Award November 9, 2018, (2018) Zui Gao Fa Min Ta No. 176 41. Reply of the Supreme People’s Court to the Request for Instructions of on the Case Concerning the Application of Tianjin Haotai Labor Service Co., Ltd. for Revocation of an Arbitral Award November 19, 2018, (2018) Zui Gao Fa Min Ta No. 187 42. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Chifeng City Yuanbaoshan Distrct Bureau of Land and Resources for Revocation of (2017) Chi Zhong Cai No. 86 Arbitral Award Rendered by Chi Feng Arbitration Commission December 28, 2018, (2018) Zui Gao Fa Min Ta No. 204

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43. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of the Inner Mongolia Autonomous Region on the Case Concerning the Application of Wang for Revocation of an Arbitral Award December 28, 2018, (2018) Zui Gao Fa Min Ta No. 288 44. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Heilongjiang Province on the Case Concerning the Application of SuZhou GaoFeng Starch Technology Co., Ltd for Revocation of an Arbitral Award February 27, 2019, (2019) Zui Gao Fa Min Ta No. 20 45. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Zhao for Non-Enforcement of an Arbitral Award April 29, 2019, (2019) Zui Gao Fa Min Ta No. 56 46. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Sinopec Petroleum Engineering Machinery Co., Ltd. Third Machinery Factory for Confirmation of the Validity of an Arbitration Agreement June 14, 2019, (2019) Zui Gao Fa Min Ta No. 296 47. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Qinshui Haokun Coalbed Methane Co., Ltd for Confirmation of the Validity of an Arbitration Agreement June 17, 2019, (2019) Zui Gao Fa Min Ta No. 33 48. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Cai for Revocation of an Arbitral Award June 17, 2019, (2019) Zui Gao Fa Min Ta No. 110 49. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Objection of SuZhou MiTac Precision Technology Co., LTD. over the Non-Enforcement of an Arbitral Award June 21, 2019, (2019) Zui Gao Fa Min Ta No. 72 50. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Shenzhen Aoyu Energy-saving Technology Co., Ltd. for Revocation of an Arbitral Award June 27, 2019, (2019) Zui Gao Fa Min Ta No. 115 51. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Zhejiang Wanda Construction Group Co., Ltd. for Confirmation of the Validity of an Arbitration Award August 23, 2019, (2019) Zui Gao Fa Min Ta No. 168 52. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Wuhan Zhongheng Property Management Co., Ltd for Confirmation of the Validity of an Arbitration Agreement September 23, 2019, (2019) Zui Gao Fa Min Ta No. 169 53. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of BEIJING HOMYEAR CAPITAL HOLDINGS CO., LTD for Confirmation of the Validity of an Arbitration Agreement September 27, 2019, (2019) Zui Gao Fa Min Ta No. 221

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54. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Shanghai Shengdanna Electronic Technology Co., Ltd for Confirmation of the Validity of an Arbitration Agreement September 27, 2019, (2019) Zui Gao Fa Min Ta No. 239 55. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Huadian Power International Corporation Limited for Confirmation of the Validity of an Arbitration Agreement December 14, 2019, (2019) Zui Gao Fa Min Ta No. 137 56. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Lianyungang Highway Administration Office for Revocation of an Arbitral Award December 17, 2019, (2019) Zui Gao Fa Min Ta No. 278 57. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Nanchang Stall Food Company for Revocation of an Arbitral Award December 23, 2019, (2019) Zui Gao Fa Min Ta No. 298 58. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Huaxi Staff Sanatorium of Guizhou Federation of Trade Unions for Non-Enforcement of an Arbitral Award December 24, 2019, (2019) Zui Gao Fa Min Ta No. 321 59. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Hangzhou Baihe Real Estate Development Co., Ltd for Confirmation of the Validity of an Arbitration Agreement December 27, 2019, (2019) Zui Gao Fa Min Ta No. 308 60. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Xi’an Fangzhou Construction Labor Service Co., Ltd for Confirmation of the Invalidity of an Arbitration Agreement December 27, 2019, (2019) Zui Gao Fa Min Ta No. 296

Chapter 1

Arbitration Agreement

The expression of intention to arbitrate between the parties is a prerequisite for initiating arbitration. The arbitration agreement can bind the parties to submit the dispute to arbitration and thus exclude the jurisdiction of the court, which essentially stems from the support and supervision of national laws and judicial authorities. In line with the legislative practice of other countries around the world, the Arbitration Law clearly defines the core elements necessary for an arbitration agreement. But in practice, the parties have various agreements on dispute resolution methods, which often leads to disputes between the parties as to the existence of a valid arbitration agreement. Such disputes may arise before or at the beginning of the commencement of arbitration, when the parties file jurisdictional objections to arbitration institutions or courts and apply for confirmation of the validity of the arbitration agreement. They may also occur after an arbitral award is rendered that a party files an application with the court for revocation or non-enforcement of the award. When reviewing arbitration agreements, Chinese courts have always adhered to the principles of respecting party autonomy, supporting arbitration, confirming the validity of arbitration agreements in accordance with the law, and reducing judicial intervention. The aforementioned situation could be manifested as interpreting in good faith on the existence of agreement on arbitration institution, the existence of flaws in arbitration agreements, upholding the independence of arbitration clauses, and maintaining judicial modesty and reasonable determination of the scope of arbitration, etc.

This Chapter is coauthored with Lulu Cai, counsel of Yi & Partners Law Firm.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 Y. Lin, China Arbitration Yearbook (2022), China Arbitration Yearbook, https://doi.org/10.1007/978-981-99-7165-7_1

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1.1 Independence of Arbitration Clause The independence of the arbitration clause means that, although the arbitration clause is attached to the main contract, it exists separately from other clauses of the main contract, and does not become invalid due to the invalidity or revocation of the main contract. The Arbitration Law stipulates that the validity of an arbitration clause shall not be affected by the modification, rescission, termination or invalidity of the contract.1 The Arbitration Law Interpretation provides that, if the contract does not take effect or is revoked after its formation, the provisions of the aforementioned Arbitration Law shall apply, and further explains that if an arbitration agreement is reached on the dispute at the time of the conclusion of the contract, the failure of the contract to be concluded shall not affect the validity of the arbitration agreement.2 In the arbitration judicial practice in China, there is not much controversy over the determination of the validity of an arbitration clause when the contract is invalid, unestablished, revoked or rescinded. The divergence mainly focuses on the issue of how to determine the validity of the arbitration clause when the contract has not been established or the parties raise objections to whether the contract is established. Whether an arbitration clause is valid on the basis of its independence is automatically valid is a matter of divergence in theory and practice. This often leads to another question, that is, whether the establishment of the arbitration clause is subject to the discretionary jurisdiction of arbitration or is it subject to judicial review by the court. If reviewed by the court, is it a case on application for confirmation of the validity of the arbitration agreement? Eslite Lifestyle Department Store (Shanghai) Co., Ltd. v. Shanghai Tower Construction & Development Co., Ltd.3 In June 2013, Eslite Lifestyle Department Store (Shanghai) Co., Ltd. (“Eslite”) signed a pre-lease letter of intent with Shanghai Tower Construction & Development Co., Ltd. (“Shanghai Tower”) to lease the property of Shanghai Tower. The prelease letter of intent provided that the relevant disputes would be submitted to the Shanghai International Economic and Trade Arbitration Commission for arbitration. According to the pre-lease letter of intent, Eslite set up an affiliated enterprise in Shanghai to promote the subsequent leasing matters. Eslite sent a representative to the office of Shanghai Tower to complete the signing of the pre-lease contract as promised. Shanghai Tower’s lawyer confirmed the content of the pre-lease contract and completed the signature page by page, and handed it to the representative of 1

Article 19 of the Arbitration Law: “An arbitration agreement shall exist independently. The amendment, rescission, termination or invalidity of a contract shall not affect the validity of the arbitration agreement.” 2 Article 10 of the Arbitration Law Interpretation: “Where a concluded contract has not taken effect or has been revoked, the provisions in the first paragraph of Article 19 of the Arbitration Law shall apply in the determination of the arbitration agreement’s validity. Where the parties reach an arbitration agreement at the time when they agree to contract, the validity of the arbitration agreement shall not be affected by the contract that has not yet been concluded.” 3 (2019) Hu Min Zhong No.533.

1.1 Independence of Arbitration Clause

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Shanghai Tower to bring back the signed text, which was to be sealed by the Shanghai Tower. After that, Shanghai Tower did not reply or bring back the sealed pre-lease contract. After being urged by Eslite, Shanghai Tower said that it had no objection to the content of the contract, but the company was still in the process of sealing and did not deliver the sealed pre-lease contract to Eslite. Subsequently, Shanghai Tower issued a notice requesting the rescission of the pre-lease letter of intent and making alternative arrangements for the leased property. Eslite replied that it did not agree to rescind the pre-lease letter of intent. Shanghai Tower initiated an arbitration to request the rescission of the pre-lease letter of intent. Eslite filed a counterclaim on continuing the performance of the prelease contract. Shanghai International Economic and Trade Arbitration Commission ruled to dismiss Eslite’s arbitration claim and found that the pre-lease contract had not been established. Eslite filed a lawsuit with the Shanghai No. 1 Intermediate People’s Court, requesting Shanghai Tower to bear the liability for damages caused by contractual negligence. Shanghai No. 1 Intermediate People’s Court, i.e. the first-instance court, held that, although this case was a dispute over contractual negligence liability initiated by Eslite on the basis that the pre-lease contract was ruled to be unestablished and ineffective, it was also a dispute between the two parties in the process of performing the contract, and should be submitted to Shanghai International Economic and Trade Arbitration Commission for arbitration in accordance with the arbitration agreement agreed upon by both parties. The court dismissed Eslite’s lawsuit. Eslite appealed to the High People’s Court of Shanghai against the first-instance court’s ruling. The High People’s Court of Shanghai held that, a valid arbitration agreement had been concluded between Eslite and Shanghai Tower. First, Eslite unilaterally sealed the pre-lease contract of the confirmed text and handed it over to Shanghai Tower for internal sealing proceeding, which was an offer to submit the relevant dispute to arbitration for resolution, and the offer had reached Shanghai Tower. Second, although Shanghai Tower did not seal the entire pre-lease contract, due to the independence of the arbitration clause, the parties never raised any objection to the arbitration clause during the communication process. Therefore, the two parties had reached an arbitration agreement, and Shanghai Tower had committed to the arbitration offer of Eslite. Third, the parties had confirmed the arbitration clause in the pre-lease contract by actual arbitration after the dispute occurred. Fourth, the arbitration agreement between the parties was concluded in a manner consistent with the arbitration rules chosen by the parties. In summary, the High People’s Court of Shanghai ruled to dismiss the appeal and uphold the original ruling. This case mainly concerns the issue of whether an arbitration clause exists if the contract has not been established yet. Referring to the judgments of three cases4 issued by CICC in September 2019, the court explained in this case that the arbitration clause between the parties did not exist because the underlying legal relationship had not been established. In addition to the basic legal relationship of pre-lease contract, 4 (2019) Zui Gao Fa Min Te No. 1, No.2, No.3. Also See Y. Lin, China Arbitration Yearbook (2021), 2–3 (Springer, 2022).

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the provisions of the Contract Law on the requirements for the establishment of the “offer-acceptance” of the contract should be applied. The arbitration clause in the contract should be examined separately as an independent contractual jurisdiction, so as to determine whether the two parties had reached an arbitration agreement. In determining the “acceptance” requirement, the court also separately examined the negotiation of the arbitration clause, apart from other rights and obligations clauses in the pre-lease contract. Although Shanghai Tower did not seal the entire pre-lease contract, it did not raise a separate objection to the arbitration clause. Therefore, Shanghai Tower’s commitment to the arbitration clause came into effect. The court eventually found that the parties had reached an agreement on arbitration. Regarding the aforementioned three cases issued by CICC as the dividing point, China’s judicial practice has shown a relatively obvious change in the determination of the validity of the arbitration clause when the contract has not been concluded. Before 2019, the courts held that when the contract had not yet been established, the arbitration clause, as part of the contract, shall be deemed to have not been established either. Since 2019, the courts have more inclined to review arbitration clauses as separate agreements, not affected by the establishment of the contract. Taking the judicial review of commercial arbitration in recent years in consideration, it can be seen that the change in the logic of determining the independence of arbitration clauses in China’s judicial practice is related to the increasing support of the country for commercial arbitration at the judicial level. The three cases issued by CICC have greatly promoted the unification of the court’s adjudication views on determining the validity of arbitration clauses. However, the understanding of the independence of arbitration agreements from main contracts and the control of their boundaries in both theoretical and practical areas has been controversial. Different from the abovementioned 2019 cases of CICC, those who have the opposite view hold that if the main contract has not been established, the court should explore the parties’ intention or waiver based on the specific analysis of the contract negotiation process, rather than completely abandoning the main contract to determine whether the arbitration clause is established. For example, in Diaoyutai Food Biotechnology Co., Ltd. v. Huaxia Shulian Technology Co., Ltd.,5 the court held that during the negotiation of the main contract, although the parties did not raise separate objections to the arbitration clause, the contract was ultimately not signed, and the arbitration clause was not valid because of its independence. Even if the both parties promoted the establishment of the contractual relationship through actual performance, the arbitration clause should not exist. The opposing viewpoint believes that, from a factual point of view, negotiations between commercial entities are often carried out as a whole. Reviewing whether the arbitration clause is reached in isolation from the main contract is inconsistent with the negotiation practice of commercial entities. From a legal point of view, since the main contract has not been established, the basis for the existence of the arbitration clause, as an adjunct or part of the main contract, has been lost.

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(2020) Jing 04 Min Te No.281.

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As to the issue on whether the establishment of an arbitration clause belongs to a case applying for confirmation of the validity of an arbitration agreement, there are different approaches in judicial practice. Some courts hold that the establishment of an arbitration clause does not fall within the scope of review in cases confirming the validity of an arbitration agreement. The main reason is the Arbitration Law only concerns the circumstances on the validity or invalidity of the agreement, which is essentially a legal judgment. The question of whether an arbitration clause exists should be a factual judgment. When courts review issues involving factual judgment, there is usually a risk of judicial intervention that touches on more substantive issues in the case. Therefore, these courts tend to rule that the establishment of an arbitration clause should be left to the arbitration institution for review. For example, in Sichuan Haoxiang Construction Engineering Co., Ltd. v. DCQ,6 the court held that, arbitration was contractual in nature, and the judicial review of arbitration shall follow the statutory principles of review scope and review procedure. The current Arbitration Law and relevant judicial interpretations did not provide that the parties may file separate lawsuits in respect of the aforementioned disputes. The people’s courts would not accept the aforementioned litigation filed by the parties based on the principle of procedural legality. “No arbitration agreement” was a cause for revoking an arbitral award. If the parties believed that they did not have an arbitration agreement, they could raise it with the arbitration institution during the arbitration procedure for review by the arbitration institution, or apply to the court to revoke the award or not to enforce the award after the arbitral award was rendered. Other courts have taken the opposite view, holding that the issue on the establishment of an arbitration clause should be included in the scope of review cases confirming the validity of the arbitration agreement. In Chengdu Maigao Property Management Co., Ltd. Fortune Center Branch v. Chengdu Carrefour Hypermarket Co., Ltd,7 the court clarified that although the application for confirmation of the non-establishment of the arbitration agreement was different from the application for confirmation of the invalidity of the arbitration clause, the existence and validity of the arbitration agreement was the same preliminary issue that needed to be resolved, which was a broad objection to the validity of the arbitration agreement. If a party applied for confirmation of the non-establishment of the arbitration agreement, it would fall within the scope of the application for confirmation of the validity of the arbitration agreement and shall be reviewed by the court. In WSJ v. ZJW,8 the court indicated that confirming the existence of an arbitration agreement was a prerequisite for confirming the validity of an arbitration agreement, and confirming the validity of an arbitration agreement would necessarily include a review of the existence of an arbitration agreement.

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(2020) Su 03 Min Te No.24. (2020) Jing 04 Min Te No.310. 8 (2018) Yue 03 Min Te No.507. 7

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The difference between the courts’ opinions was more obvious in CL v. Jiangsu Huata Communication Engineering Co., Ltd.9 The court of first instance held that, according to Article 58 of the Arbitration Law, the dispute over whether there was an arbitration agreement between the parties should be examined by the arbitration institution in the arbitration procedure or by the people’s court in the case of applying for revoking the arbitral award. CL applied to the court for confirmation of the existence of an arbitration agreement between the two parties, which lacked legal basis. The court of second instance, on the other hand, held that, “an arbitration agreement shall exist independently” under the Arbitration Law should be a general provision. The issue of whether the arbitration agreement existed, shall include issues such as whether the arbitration agreement was established and valid. When the parties apply for confirmation of whether the arbitration agreement was established and valid, etc., the people’s court should accept it as a case confirming the validity of the arbitration agreement. It can be seen from the above cases that although CICC clearly indicated in the three cases issued in 2019 that the issue on the existence of arbitration agreement is a case confirming the validity of the arbitration agreement, which plays a guiding role in the subsequent court rulings. However, judging from the judicial practice in various places since the release of the cases, the practices of courts at all levels are still different. Based on this, SPC issued the Minutes of the National Foreignrelated Commercial and Maritime Trial Work Conference, which stipulates that if a dispute arises between the parties over whether the arbitration agreement is established, effective, valid, and whether it binds specific parties, the people’s court shall accept it as an application to confirm the validity of the arbitration agreement. It is foreseeable that the aforementioned provision issued by SPC would greatly promote the unification of the adjudication standards of China’s judicial review on this issue.

1.2 “Arbitration or Litigation” Clause The “arbitration or litigation” clause means that, the parties stipulate in the dispute resolution clause of the contract that the dispute shall be resolved by arbitration or litigation, or may be resolved through arbitration and litigation. Based on different legal systems, different countries adopt different positions on the determination of the validity of such provisions. China’s legislation and judicial practice generally take a negative attitude. According to Article 710 of the Arbitration Law Interpretation, such dispute resolution clauses should be invalid due to lack of clear intention to arbitrate. This provision 9

(2020) Su Min Zhong No.896. Article 7 of the Arbitration Law Interpretation: “Where the parties agree that a dispute may be submitted for arbitration with an arbitration agency or filed with the People’s Court for commencement of legal proceedings, the arbitration agreement shall be invalid, unless one party has submitted

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usually leads to discussions in practice on the following three issues: 1. Since the dispute resolution clause is found to be an invalid arbitration clause, there are differences in judicial practice as to whether the litigation part of the agreement is valid. 2. Whether the waiver of the right of a party to object to jurisdiction means that it has expressed its intention to arbitrate by its actual conduct and constitutes an arbitration agreement. If it constitutes an arbitration agreement, whether the agreement binds all disputes arising from the contract involved in the case. 3. How to define whether a clause constitutes an “arbitration or litigation” clause. Mingfa Group Co., Ltd. v. Powerlong Group Development Co., Ltd.11 On November 8, 2002, Mingfa Group Co., Ltd. (“Mingfa”) and Powerlong Group Development Co.,Ltd. (“Powerlong”) signed a Cooperation Contract. Powerlong applied to Xiamen Arbitration Commission for arbitration in accordance with Article 12 of the Cooperation Contract, which stipulated that “disputes arising from the implementation and interpretation of this contract shall be resolved through friendly consultation as far as possible, and if the dispute cannot be mediated, it may be submitted to the local arbitration institution for arbitration or to the people’s court of the jurisdiction for litigation”. After the award was rendered, Mingfa submitted an application to Xiamen Intermediate People’s Court to revoke the award. Xiamen Intermediate People’s Court ruled to reject its application. Subsequently, Mingfa filed a lawsuit with the High People’s Court of Fujian Province. The High People’s Court of Fujian Province held that, first, the parties had chosen to resolve contractual disputes through arbitration. On December 1, 2009, Mingfa received the notice of acceptance and related materials sent by Xiamen Arbitration Commission. Mingfa selected the arbitrators. Mingfa had no objection to the acceptance of the arbitration case by Xiamen Arbitration Commission and the composition of the arbitral tribunal. The two parties participated in the arbitration hearing. The arbitration commission rendered the award on October 30, 2018. According to Paragraph 2 of Article 20 of the Arbitration Law12 and Article 7 of the Arbitration Law Interpretation, the abovementioned acts of the parties indicated that the parties had chosen to settle the disputes arising from their cooperation through arbitration. Second, after Xiamen Arbitration Commission made an award on the dispute between the parties based on the application of Powerlong on 30 October 2018, Xiamen Intermediate People’s Court also issued a rejection ruling on Mingfa’s application for revocation of arbitration. The lawsuit (including the additional claims) brought by Mingfa was still based on the dispute arising from the performance of the Cooperation Contract signed by the parties on November 8, 2002. Based on Article 9 of the Arbitration Law, Mingfa could no longer file a civil lawsuit in court for disputes that have already been arbitrated. Disputes arising from their cooperation an arbitration application to an arbitration agency but the other party failed to object within the time limit stipulated in the second paragraph of Article 20 of the Arbitration Law.” 11 (2021) Zui Gao Fa Min Zhong No.480. 12 Paragraph 2 of Article 20 of the Arbitration Law: “A party’s challenge of the validity of the arbitration agreement shall be raised prior to the arbitral tribunal’s first hearing.”

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shall still be resolved by the preferred arbitration method. In summary, the court of first instance dismissed the lawsuit filed by Mingfa in accordance with Item 2 of Article 124, Item 3 of Article 154 of the Civil Procedure Law, Article 9 of the Arbitration Law, Paragraph 3 of Article 208 and Article 215 of the Civil Procedure Law Interpretation. Dissatisfied with the aforementioned civil ruling, Mingfa appealed to SPC, requesting that the first-instance ruling be revoked and the first-instance court be ordered to continue hearing the case. The main facts and reasons were: 1. The dispute involved in the case was the first time that Mingfa submitted relevant claims to the judicial authority, and without being dealt with judicial authority, it was wrong for the court of first instance did not accept it. 2. In the absence of an agreement between the two parties on the arbitration institution, Mingfa may resolve disputes through litigation in respect of other disputes under the Cooperation Contract. Mingfa’s participation in arbitration was only deemed that it had agreed to resolve the contents of the claims and counterclaims in the arbitration case by arbitration. It could not be presumed that it agreed to resolve other disputes under the contract involved in the case by arbitration, unless the parties had a new arbitration agreement or other express intention. SPC referred to Article 7 of the Arbitration Law Interpretation and Paragraph 2 of Article 20 of the Arbitration Law, and found that, on November 26, 2009, Powerlong applied to Xiamen Arbitration Commission for arbitration in accordance with the aforementioned clause. Mingfa received the notice of acceptance and related materials sent by Xiamen Arbitration Commission Mingfa did not raise objections to the settlement of disputes by arbitration and the arbitration institution, and participated in the arbitration activities until Xiamen Arbitration Commission rendered an award on October 30, 2018. The acts of Powerlong and Mingfa complied with the abovementioned law and judicial interpretation. Article 12 of the Cooperation Contract was legally binding on both parties. According to Article 5 of the Arbitration Law and Article 215 of the Civil Procedure Law Interpretation, disputes arising from the cooperation contract between the parties shall be settled by arbitration, and no lawsuit shall be filed in the people’s court. It was not improper for the court of first instance to dismiss Mingfa’s lawsuit. In summary, Mingfa’s appeal could not be upheld and shall be dismissed. The dispute resolution clause involved in this case is a typical “arbitration or litigation” clause in judicial practice in China, which would usually be found invalid. However, the fact that the party in this case, Mingfa did not raise an objection to jurisdiction after Powerlong initiated the arbitration but participated in the arbitration proceedings until the award was rendered, which constituted an exception to the “arbitration or litigation” clause under the Arbitration Law Interpretation. Therefore, the court found that the parties had reached an arbitration agreement, which is also a common practice in Chinese courts. Nonetheless, in practice, there are some dispute resolution clauses that have the appearance of “arbitration or litigation”, but in fact there is no conflict of jurisdiction. Whether such atypical “arbitration or litigation” clauses constitute the “arbitration or litigation” clause stipulated in Article 7(1) of the Arbitration Law Interpretation and

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therefore be considered as invalid, the courts have different adjudication standards for determination. Judging from judicial review cases in recent years, based on the policy position in favor of arbitration, the standard of the courts upon determining “arbitration or litigation” clauses is increasingly strict. In the early days, if the two dispute resolution methods of arbitration and litigation were agreed at the same time, the courts usually directly determined the arbitration clause as invalid. For instance, in Anhui Runxiangda Investment Management Consulting Co., Ltd. v. Lanxi Yintuo Precious Metals Trading Co., Ltd.,13 the Precious Metals Agency Contract provided that “Any dispute arising out of or in connection with this contract shall be settled through friendly negotiation. If the negotiation fails, either party has the right to submit the dispute to the Shanghai Sub-Commission of CIETAC for arbitration in accordance with the arbitration rules in force at the time. If the parties still disagree with the award, they should submit the claim to the competent court of Party A.” The court held that the clause indicated that the dispute should be settled by arbitration or litigation, and therefore the arbitration agreement was invalid. In Zhejiang Hairui Electrical Co., Ltd. v. Shanghai Zonfa Electric (Group) JointStock Co., Ltd.,14 the court pointed out that, in general, there was no situation in which an arbitration institution could not make a decision on the dispute after accepting a case. In the reference clause, “failed to settle through consultation…failed to settle through arbitration…”, the expression “failed” was more appropriately understood to have a consistent meaning, which was, after arbitration, either party could still raise objections to the outcome of the arbitration. Allowing to file objection against arbitration award was equivalent to agreeing on arbitration or litigation at the same time, which violated the principle of finality of arbitration and the principle that arbitration excluded the jurisdiction of the court. Therefore, the terms of the arbitration agreement agreed upon by the parties shall be deemed invalid. In recent years, more and more courts hold the opinion that, although some dispute resolution clauses have the appearance of “arbitration or litigation”, if it can be determined that the parties have expressed their intention to resolve disputes through arbitration, the arbitration clause can be deemed valid.15 Here are three common scenarios in practice: 1.

By refining the type of “arbitration or litigation” clause and distinguishing the logical relationship between arbitration and litigation in the contract text, some courts held that an agreement that could determine that arbitration has priority was not an arbitration or litigation clause, and the arbitration clause was valid.

In BY.O v. Shanghai Yushang Investment Group Co., Ltd.,16 the Contract provided that “any dispute or controversy arising out of or in connection with this Contract 13

(2013) Hu Er Zhong Min Ren (Zhong Xie) Zi No.19. (2017) Hu 01 Min Te No.130. 15 The Forth Civil Division of SPC, SPC Annual Report on Judicial Review of Commercial Arbitration (2019), 26, (People’s Court Press, 2021). 16 (2020) Hu 01 Min Xia Zhong No. 780. 14

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(including disputes concerning the existence, validity or termination of the terms of this Contract, or the consequences of invalidity) shall first be resolved by arbitration through SIAC. If the parties cannot agree on the outcome of the arbitration at SIAC, either party shall have the right to submit the dispute to the commercial court with jurisdiction in the place where Party A is domiciled for litigation.” The court held that the clause clarified the priority of arbitration between the arbitration method and the litigation method. The choice of arbitration institution was specific, clear and unique, and did not have the characteristics of the choice of “arbitration or litigation”. Therefore, it recognized the arbitration clause. The further agreement of the parties to settle the dispute by litigation was invalid because it did not comply with the provisions of the Arbitration Law on “single and final award”. In Yang v. He,17 the court stated that the expression of dispute resolution in question did not list arbitration and litigation together as the same level of choice, but made it clear that arbitration had priority. A few courts also have different approaches to such “arbitration before litigation” clauses. In Jiangsu Jinsha Construction Group Ltd. v. Shanxi Yirong Real Estate Development Co., Ltd.,18 the dispute resolution clause provided that “in the process of implementing this Contract, if there is a disagreement, it can be resolved through negotiation. If the negotiation fails, it can be submitted to the relevant department for mediation. If the mediation fails, it can be submitted to arbitration in Jinzhong Arbitration Commission. If the arbitration and mediation fail, it can be resolved by litigation by the people’s court where the contract is signed”. The court held that although the parties agreed to submit the dispute to an arbitration institution for arbitration, it also agreed that if arbitration and mediation failed, it could be resolved by litigation by the people’s court where the contract was signed. Arbitration was not regarded as the final solution to the dispute. Therefore, the arbitration clause was found to be invalid. 2. Some courts explored the true intention of the parties as much as possible in the situation where different dispute resolution methods were agreed upon in the same contract text, and tried to make the arbitration clause as effective as possible, by using contract interpretation rules, taking into account the context of the contract text, the background of the signing, etc. In Maoming Huiji Real Estate Co., Ltd. v. YZB,19 General Clause 36.1 of the Construction Project Contract stipulated that “if a dispute arises between the employer and contractor during the performance of the contract, it may be settled by conciliation, or by mediation by the competent authority. If the mediation fails, the two parties may agree in the Special Clause to resolve the dispute in one of the following ways: settlement method: filing a lawsuit with a competent people’s court.” Special Clause 30.1 provided that “in the event of a dispute arising in the process of performing the contract: (1) The two parties fully negotiate and sign a supplementary agreement, 17

(2020) Yue 01 Min Te No.841. (2019) Zui Gao Fa Min Zhong No.279. 19 (2020) Yue 09 Min Te No.14. 18

1.2 “Arbitration or Litigation” Clause

11

which has the same legal effect as this contract. If the negotiation fails, it shall be carried out in accordance with paragraph (2) of this clause; (2) submit to Shenzhen Arbitration Commission for arbitration.” The court held that although the parties agreed on the method of settlement of litigation in General Clause 36.1, the parties obviously agreed in Special Clause 30.1 to submit the dispute to arbitration. According to the definition and the relationship between the Special Clauses and the General Clauses under Clauses1.2 and 2.3 of the Contract, Special Clauses were agreed upon by the parties after consultation in combination with the actual situation of the specific project. Special Clauses were the concretization, supplement or modification of General Clauses. When the General Clauses were inconsistent with the Special Clauses, Specific Clauses should apply. Therefore, if the arbitration clause agreed by the parties in the Specific Clause satisfied the requirements of the arbitration agreement stipulated in the Arbitration Law, the arbitration clause shall be deemed valid. In Intersystems Software (Beijing) Co., Ltd. v. Beijing Shiying Hezhong Digital Technologies Co., Ltd.,20 Article 7 of the End User Subscription Agreement provided that the applicable law of this Agreement shall be the laws of the People’s Republic of China and shall be construed in accordance with the laws of the People’s Republic of China, and the parties agreed with the exclusive judgment of the court having jurisdiction in Beijing, China. At the same time, paragraph e of Article 10 of the Agreement stipulated that disputes that could not be resolved through discussion, including the conditions for submitting disputes to arbitration and the applicability or effect of dispute resolution procedures, shall, except as otherwise provided in this Agreement, be submitted to Beijing Arbitration Commission for arbitration in accordance with the arbitration rules currently in force at the time of the application for arbitration. The arbitral award shall be final and binding on the parties. The court’s review opinions are briefly summarized below. First, understanding the issues addressed by Article 7 and Article 10 by using the text meaning interpretation method and system interpretation method were not in conflict. The End User Subscription Agreement was a general agreement of the contract, with a total of 11 clauses, including the interpretation of contract terms, license content, scope of liability, agreement termination procedures, application of law, transfer by agreement, dispute resolution, service, etc. According to the framework of the above clauses, the content of Articles 7 and 8 was the application of law rather than dispute resolution clause. Only Article 10 was expressly a dispute resolution clause. The first half of the sentence of Article 7 was on applicable law. The second half of the sentence of Article 7, which provided that the parties agree with the exclusive judgment of the court having jurisdiction in Beijing, China, may be construed as limiting the dispute resolution clause to the application of law. Second, to determine whether an arbitration clause was invalid, it was necessary to consider the content and nature of the dispute indicated in the agreement and the priority effect given by the parties to the different clauses. Where the parties agreed on different dispute resolution methods for different dispute contents in the 20

(2019) Zui Gao Fa Zhi Min Xia Zhong No. 477.

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agreement, it was not appropriate to hold the arbitration clause invalid in general terms, but should make the determination based on the specific content, nature and priority effect given by the parties to the different clauses. The dispute involved in the parties’ claim was the dispute content under paragraphs e and f of Article 10, and did not involve the dispute over the application of law under Article 7, so Article 7 did not affect the submission of the dispute to arbitration. Third, paragraph f of Article 10 in question expressly provided that, notwithstanding any provision to the contrary in this agreement, in the event of a dispute between the parties over data protection, privacy, refusal to pay, confidential information or ownership of intellectual property rights, both parties may initiate arbitration and seek reasonable remedies at the arbitral tribunal with jurisdiction over Beijing Arbitration Commission. It could be seen that the parties had expressly given priority to paragraph f of Article 10 of the agreement in question. Even if other clauses of the agreement had different expression, disputes of specific content and nature, such as data protection, privacy, refusal to pay, etc., could still be submitted to arbitration. In Beijing Homyear Capital Holdings Co., Ltd. v. Guangzhou Securities Co., Ltd.,21 the Prospectus for the issuance of bonds did not provide a uniform agreement on the dispute resolution method, but was scattered in different terms. Among them, Article 2 of Chapter 11 “Investor Protection Mechanism” provided that “if the issuer fails to repay the principal and interest of the current short-term financing when due, the investor may file a lawsuit according to law”. Article 7 “Change of Control Clause” stipulated that “when there is a change of control of the issuer, … the issuer shall unconditionally accept the resolution made by the meeting of holders. If the issuer is not exempted, the issuer will constitute a breach of the agreement on the date of the trigger, and the holder of debt financing instruments for the current period may file a lawsuit or arbitration on the day following the date of the meeting of holders”. The last paragraph of Article 7 stipulated that “if the issuer violates the above agreement, the investor has the right to apply to CIETAC in Beijing in accordance with its arbitration rules in force at the time of the application for arbitration”. The court held that the entire text of the arbitration clause pointed to “debt financing instruments for the current period”, so the “above agreement” in the arbitration clause should refer to the full text of the Prospectus. When different dispute resolution methods were agreed upon before and after the Prospectus, the last expression of intention of both parties shall prevail. The arbitration clause involved in the case conformed to the formal requirements stipulated in the Arbitration Law and was a valid arbitration clause. 3. In other cases, some courts judged the true intention of the parties to reach a dispute settlement through arbitration based on the actual situation in cases where certain words in the clause cause flaws, such as “the plaintiff could file lawsuit with the XX arbitration institution”.

21

(2019) Jing 04 Min Te No.135.

1.2 “Arbitration or Litigation” Clause

13

For example, in Nanjing Beilitang Beauty Gymnasium v. Ouhua Meike Dongtou (Tianjing) Medical Technology Co., Ltd.,22 the dispute resolution clause provided that “all disputes arising from the performance of this contract shall be settled by the parties through friendly negotiation. If the dispute cannot be resolved, the plaintiff shall apply to the arbitration institution where it is located for arbitration.” The court held that the parties agreed on an arbitration clause when signing the contract, which indicated that both parties had the intention to submit their possible contract disputes to the arbitration institution for arbitration. The arbitration agreement reached by the parties should be fully respected. The “plaintiff” in the arbitration clause in question should be an error of the parties, which should refer to the “claimant to arbitration”, in line with the principle of interpretation of the purpose of the contract. In addition, according to the agreement, the arbitration institution in the respective location of the parties when a dispute arose between the parties, there was respectively one arbitration commission in the location of both parties. Regardless of which party applied for arbitration, the arbitration institution was clear, so the arbitration agreement was valid. In Taizhou Zhongdian Energy Co., Ltd. v. Guodian Nanjing Automation Co., Ltd.,23 the dispute resolution clause provided that “if the parties cannot reach an agreement within 60 days from the date of the dispute during the performance of the contract, either party may file a lawsuit with Nanjing Arbitration Commission”. The court pointed out that, although the legal meaning of “initiating litigation” was different from “applying for arbitration”, it could be seen from the content agreed by the parties in Article 20 “Claims, Disputes and Litigation” of the contract involved in the case that the original intention of the parties was to apply to Nanjing Arbitration Commission for arbitration rather than to file a lawsuit in the people’s court for the issue of how to resolve the dispute. Although the expression “filing a lawsuit with Nanjing Arbitration Commission” was inaccurate, there was no circumstance claimed by Taizhou Zhongdian Energy Co., Ltd. that it had agreed to apply to an arbitration institution for arbitration and to file a lawsuit with the people’s court. The flaws in the expression did not affect the validity of the arbitration clause involved in the case. After the “arbitration or litigation” clause is found to be an invalid arbitration clause, it usually involves the determination of whether the agreement between the parties on litigation jurisdiction is valid. There are two different approaches in China’s judicial practice. In early judicial review cases, some courts held that the clause was invalid as a whole, and the competent court should be determined according to the statutory jurisdiction. In Jiangsu Huachang Chemical Co., Ltd. v. Beijing Yingdeqingda Technology Co., Ltd.,24 the court held that the parties had agreed on two mutually exclusive dispute resolution methods in the contract, arbitration and litigation. The agreed clause was invalid as a whole because it violated the principle that the jurisdiction 22

(2018) Su 01 Min Te No.26. (2018) Su 01 Min Te No.107. 24 (2014) Su Zhi Min Xia Zhong Zi No. 0002. 23

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clause shall be single and exclusive. In cases involving such jurisdictional agreements, the competent court shall be determined in accordance with the principle of statutory jurisdiction. In recent years, in more and more cases, courts have held that dispute resolution clauses are divisible, and the invalidity of arbitration clauses does not automatically affect the validity of litigation jurisdiction agreements. In QSZ v. Yunnan Copper Co., Ltd., Tian Jin Tian Heng Nonferrous Metals Co., Ltd., ZHM,25 the court clarified that, according to the true intention of the parties in the agreed clause, the validity of the arbitration or litigation jurisdiction agreement in the clause should be determined separately, and the partial invalidity of the agreement did not automatically lead to the invalidity of the dispute resolution clause as a whole. The court further explained that the dispute resolution clause was an agreement between the parties to choose the dispute resolution method in accordance with the principle of autonomy of will, which was essentially a contract reached between the parties on the dispute resolution method. In the absence of prohibitive provisions, the autonomy of the parties should be respected to the greatest extent, which was in line with the value concept of the modern civil dispute consensual resolution mechanism. Following the same standard of adjudication, in RXC v. Wuhan Bailianfu Biotechnology Co., Ltd. Changsha Branch,26 the court held that, in the case that the arbitration clause was invalid, the agreement between the parties on the jurisdiction was not automatically invalid. The true intention of the parties should be fully respected. If the competent court could be determined by the contract, the jurisdiction shall be determined in accordance with the contract. The same decision was made in Joy Global (Jiamusi) Mining Machinery CO.,Ltd. v. Datong Longmei Coal Mine Machinery Sales Co., Ltd.27 Through the above cases, combined with of Article 9428 of the Minutes of the National Foreign-related Commercial and Maritime Trial Work Conference issued by SPC at the end of 2021, the basic position and judicial status of Chinese courts on the determination of the validity of “arbitration or litigation” clauses can be summarized as below: 1. In principle, according to the Arbitration Law and the Arbitration Law Interpretation, putting two dispute resolution methods side by side, the “arbitration or litigation” clause may cause confusion in judicial order and violate the principle of “single and final award” of arbitration, and should be regarded as an invalid arbitration clause. 25

(2016) Zui Gao Fa Min Xia Zhong No. 285. (2017) Zui Gao Fa Min Xia No.32. 27 (2016) Zui Gao Fa Min Xia Zhong No.39. 28 Article 94 of Minutes of the National Foreign-related Commercial and Maritime Trial Work Conference stipulates that, if the parties agree in the arbitration agreement that after the dispute arises, ‘arbitration first, litigation later’, does not fall under the circumstance of invalidity in Article 7 of the Arbitration Law Interpretation. According to Paragraph 1 of Article 9 of the Arbitration Law, which stipulates that the parties may not file a lawsuit in the people’s court over the same dispute after an arbitral award is rendered, the agreement on litigation of ‘arbitration first, litigation later’ is invalid, but it does not affect the validity of the arbitration agreement. 26

1.3 Standard Form Contract

15

2. The review criteria for “arbitration or litigation” clause found by the courts have undergone development from leniency to strictness, from generalization to differentiated treatment. Adhered to the principle of respecting party autonomy and supporting arbitration, the courts have adopted a more flexible attitude to determine the validity of arbitration clauses. 3. In the process of determining each case, there are still differences in the courts’ understanding of the meaning of specific clauses, the interpretation of the contract, and the degree of recognition of the true intention of the parties.

1.3 Standard Form Contract Standard form contract, also called standard contract or form contract, is a contract that is drawn up in advance by one party for repeated use, and the other party accepts all the contents of the prepared contract when signing it. In business activities, standard form contracts have the advantages of saving transaction costs and improving transaction efficiency. However, it is undeniable that the standard form contract restricts the freedom of the parties to a certain extent. This feature seems to be in contradiction with the arbitration agreement that emphasizes autonomy of will and voluntary negotiation, resulting in the risk that the arbitration clause in the standard form contract will be invalid due to violation of the principle of autonomy of will. In practice, not all the clauses in a standard form contract are standard clauses. Even if the arbitration clause is a standard clause, it is not necessarily invalid. Therefore, to determine the validity of an arbitration clause in a standard form contract, it is necessary to first determine whether the arbitration clause is a standard clause. The dispute resolution clause of some standard form contracts lists multiple options for the counterparty to choose. Judicial practice generally believes that this arrangement is not a standard clause. Even if it is a standard arbitration clause, it is necessary to further determine whether the clause has the situation of invalid standard clause stipulated by law. Foshan Tongyong Pharmaceutical Co., Ltd. v. Sinopharm (Guangzhou) Medical Equipment Co., Ltd.29 On August 24, 2018, Foshan Tongyong Pharmaceutical Co., Ltd. (“Tongyong”) and Sinopharm (Guangzhou) Medical Equipment Co., Ltd. (“Sinopharm”) signed the Medical Device Product Sales Contract. Article 12 of the Contract provides that “The dispute between the two parties arising from the conclusion, validity, interpretation, performance, modification of this contract and assumption of legal liability shall be settled by the two parties through negotiation. If the negotiation fails, either party have the right to submit the dispute to Beijing Arbitration Commission for arbitration according to law. The arbitration rules of the Commission at that time shall apply, and the award shall be final and binding on both parties.” In accordance with the 29

(2021) Jing 04 Min Te No. 557.

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arbitration clause in the abovementioned contract, Sinopharm filed an application for arbitration with Beijing Arbitration Commission with Tongyong as the respondent. Tongyong then applied to Beijing No. 4 Intermediate People’s Court, requesting the court to confirm the invalidity of the arbitration agreement in the contract. The main facts and reasons of Tongyong’s application are as follows. The contract was a standard form contract unilaterally provided by Sinopharm. Sinopharm did not give special reminders or explanations on the arbitration clause to Tongyong when the contract was signed, which restricted the right of Tongyong to choose a dispute resolution institution. Tongyong referred to Article 496 of the Civil Code30 to support its claim. However, in fact, it was not until Tongyong received the notice of defense and other materials from Beijing Arbitration Commission that it realized that the two parties had agreed in the contract that Beijing Arbitration Commission would arbitrate the dispute. The agreement on the method of contract dispute resolution was related to the significant interests of Tongyong. As the party providing the standard clauses, Sinopharm did not remind or explain to Tongyong. Tongyong did not pay attention to and understand the clauses in which it had significant interests, so the clause could not become the content of the contract in question. The arbitration matters and the arbitration commission agreement in Article 12 of the contract should be deemed to be non-existent. Sinopharm did not recognize Tongyong’s application to confirm the invalidity of the arbitration agreement. The reason is that the arbitration clause involved in the case was not a standard clause, and the contract could be changed by supplementary agreement between the two parties. The arbitration clause involved in the case was legal and valid, and choosing Beijing Arbitration Commission as arbitration institution was in line with the principle of fairness. Beijing No. 4 Intermediate People’s Court found that, this case was on the application for confirmation of the validity of a domestic arbitration agreement. Articles 2031 and Article 1732 of the Arbitration Law were the statutory grounds for the people’s court to confirm the invalidity of the arbitration agreement. In this case, Tongyong 30

Article 496 of the Civil Code: “…upon concluding a contract, where a standard clause is used, the party providing the standard clause shall determine the parties’ rights and obligations in accordance with the principle of fairness, and shall, in a reasonable manner, call the other party’s attention to the clause concerning the other party’s major interests and concerns, such as a clause that exempts or alleviates the liability of the party providing the standard clause, and give explanations of such clause upon request of the other party. Where the party providing the standard clause fails to perform the aforementioned obligation of calling attention or giving explanations, thus resulting in the other party’s failure to pay attention to or understand the clause concerning his major interests and concerns, the other party may claim that such clause does not become part of the contract.” 31 Article 20 of the Arbitration Law: “If a party challenges the validity of the arbitration agreement, he may request the arbitration commission to make a decision or apply to the people’s court for a ruling. If one party requests the arbitration commission to make a decision and the other party applies to the people’s court for a ruling, the people’s court shall give a ruling. A party’s challenge of the validity of the arbitration agreement shall be raised prior to the arbitral tribunal’s first hearing.” 32 Article 17 of the Arbitration Law: “An arbitration agreement shall be null and void under one of the following circumstances: (1) The agreed matters for arbitration exceed the range of arbitrable matters as specified by law; (2) One party that concluded the arbitration agreement has no capacity

1.3 Standard Form Contract

17

submitted that the arbitration clause stipulated in the Medical Device Product Sales Contract was a standard clause unilaterally provided by Sinopharm, but Sinopharm did not give special reminders or explanations on the arbitration clause, which limited Tongyong’s right to choose a dispute resolution institution, and it was unreasonable to agree on Beijing Arbitration Commission as the arbitration institution in a far-reaching manner. In this regard, the court held that the choice of arbitration to resolve the dispute could not be regarded as an aggravation of the liability of one party or the exclusion of the main rights, nor does it limit the choice of either party. The agreement of the two parties to submit the dispute to an arbitration institution for arbitration could not be deemed invalid in the standard clauses stipulated by law. Tongyong did not submit evidence to prove that it was coerced or contrary to its true intention when signing the Medical Device Product Sales Contract. The arbitration clause in the Medical Device Product Sales Contract indicated a clear expression of meaning, arbitration matters and selected arbitration institution, which complied with the formal and substantive requirements stipulated in Article 16 of the Arbitration Law. It did not have the invalid circumstances stipulated in Articles 17 and 18 of the Arbitration Law. The arbitration clause shall be valid. Tongyong’s claim that the arbitration clause in the contract involved in the case was invalid, that the arbitration matters in Article 12 of the contract, that the agreement of the arbitration commission should be deemed to be non-existent, and that the arbitration clause was not binding on it, could not be sustained. Regarding the determination of the validity of standard clauses, Article 496 of the Civil Code stipulates that the provider of standard clauses shall perform a reasonable reminder or explanation obligation to the counterparty. The content of the reminder or explanation is on the clauses concerning the other party’s major interests and concerns, such as a clause that exempts or alleviates the liability of the party providing the standard. Article 490 of the Civil Code further stipulates three types of invalid standard clauses: (1) the invalidity of a contract that complies with the law; (2) the party providing the standard terms unreasonably exempts or reduces its liability, increases the other party’s liability, or restricts the other party’s main rights; (3) the party providing the standard terms excludes the other party’s main rights. In this case, the court reviewed the validity of the arbitration clause in accordance with the Arbitration Law. As for the applicant’s claim that the arbitration clause was a standard clause, the court responded that the choice of arbitration to resolve the dispute could not be regarded as an aggravation of one party’s liability or an exclusion of the main rights, nor did it limit either party’s right to choose. The agreement of both parties to submit the dispute to an arbitration institution for arbitration could not be deemed as falling within the scope of the circumstances of invalid standard clause stipulated by law. In cases involving the validity of standard arbitration clauses, the main reasons for the parties to claim the invalidity of arbitration clauses can be briefly summarized as for civil conducts or has limited capacity for civil conducts; or (3) One party coerced the other party into concluding the arbitration agreement.”

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follows: (1) the arbitration clause is a unilaterally customized standard clause, which is not voluntarily negotiated by the two parties, and lacks the substantive requirements for a valid arbitration clause; (2) the standard arbitration clause exempts or reduces the liability of the provider and other clauses that have a significant interest in the other party, and the provider fails to perform the obligation of reasonable reminder and explanation; (3) the standard arbitration clause excludes the right of the other party to bring the dispute to court, and it is invalid according to the review rules of the standard clause. Regarding the claim that the standard arbitration clause is involuntary negotiation, the courts generally hold that after the unilaterally customized standard arbitration clause is signed by the parties, it is not invalid, which falls within the circumstance of “expression of intention to apply for arbitration” stipulated under the Arbitration Law. However, in practice, there is a special circumstance that the standard form contracts provided by some financial institutions usually include contract modification clauses, and the agreed modification method is announcement of change. If the financial institution later announces changes to the terms of the contract, including changes to the dispute resolution clause, such as changing the dispute resolution method to arbitration, the arbitration clause is likely to be found invalid by the court. In WJC v. China Securities Co., Ltd.,33 the court first clarified that where there were two or more interpretations of the standard terms, an interpretation that was unfavorable to the party providing the standard terms should be made. Judging from the literal meaning of the terms of the Margin and Securities Lending Business Contract, the scope of the contract that China Securities Co., Ltd. could adjust focused on its own business rules. The contract did not explicitly contain dispute resolution clauses. Second, the court held that the dispute resolution clause was closely related to the interests of the parties and was independent. Therefore, the modification of the dispute resolution clause shall be subject to special consultation between the two parties, and the consensus shall prevail. Alternatively, the parties shall make a clear agreement on the method of changing the dispute resolution clause, and stipulate that the unilateral party may make the change in the form of an announcement. Third, the court pointed out that although it was a commercial practice to change the content of a contract by means of announcement, the “content of the contract” should have certain restrictions and scope. From the specific content, the content of contract included the revision of laws, administrative regulations, rules, normative documents and rules. Or the situation where its own business rules are adjusted, etc. It did not include the relatively independent “dispute resolution clause”. In view of the fact that when the parties signed the Margin and Securities Lending Business Contract, there was no “expression of intention to apply for arbitration” and the contract did not specify that the relevant contract variation clause was applicable to dispute resolution. The court found that the effect of the change of the substantial rights and obligations of the contract in the form of a unilateral announcement during the performance of the contract did not

33

(2021) Jing 04 Min Te No.216.

1.3 Standard Form Contract

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extend to the dispute resolution clause in the contract. Even if the unilateral willingness to arbitrate was expressed in the announcement, it was not sufficient to form the agreement of the parties to the change of the contract dispute resolution clause. As to whether the failure to perform the obligation to give reasonable notice to the standard arbitration clause invalidates the arbitration clause, and whether excluding the counterparty’s right to bring the dispute to the court implies the exclusion of the other party’s primary rights, courts in different areas of China have decided differently. Even if the judgment results are the same, there are differences in the reasoning. In particular, in January 2021, the Civil Code partially revised the relevant provisions of the previous Contract Law on standard form clauses, which to some extent has had an impact on the consistency of judgments. For example, the provisions that a party providing a standard form clause needs to draw attention to is adjusted from the term “exclusion or restriction of its liabilities” in the Contract Law to “the clause concerning the other party’s major interests and concerns, such as a clause that exempts or alleviates the liability of the party providing the standard clause” in the Civil Code. For the violation of the duty of care, the Civil Code adds a provision on legal consequences. With regard to the invalidity of standard form clauses, on the basis of “the party which supplies the standard terms exempts itself from its liabilities, increases the liabilities of the other party, and deprives the material rights of the other party, the terms shall be invalid” under the Contract Law, the Civil Code adds the circumstance that “the party providing the standard clause unreasonably exempts or alleviates himself from the liability” and “restricts the main rights of the other party”. Some courts hold that the legal provisions on the invalidity of standard form clauses should not be applied to reviewing the validity of arbitration clauses. The choice of arbitration to resolve disputes cannot be regarded as an aggravation of a party’s liability or an exclusion of major rights, nor does it limit either party’s right to choose. The parties’ agreement to submit the dispute to an arbitration institution for arbitration cannot be deemed invalid under the circumstance of standard form clauses stipulated by law. The relevant cases are as follows. In Cai v. Shantou Ruijing Real Estate Development Co., Ltd.,34 as to the claimant’s claim that the arbitration clause in the contract was a standard form clause unilaterally produced by Shantou Ruijing Real Estate Development Co., Ltd. (“Ruijing”), the court held that, first, if the contract unilaterally produced by Ruijing had been signed by the claimant, it was deemed that the claimant had accepted the arbitration clause in the contract. Second, even if the arbitration clause in the contract was a standard form clause, the arbitration clause was only an agreement on the dispute resolution method between the parties, did not affect the substantive rights of the parties or restrict the rights of the applicant or increase the applicant’s liability, so it did not belong to the clause required to be specially reminded of the other party under Article 496 of the Civil Code. The court did not support the claimant’s claim that the arbitration clause was invalid.

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(2021) Yue 01 Min Te No.1613.

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Having the same decision, in Xiao v. Xue,35 in response to the claimant’s claim that the arbitration clause was invalid because it was a standard form clause, the court directly determined that the arbitration clause was valid in accordance with the principle of independence of the arbitration clause based on the requirements for reviewing the validity of the arbitration clause under the Arbitration Law. In LAX v. Baihe Jiayuan Network Group Co., ltd.,36 the court held that, litigation and arbitration, as different dispute resolution mechanisms, had their own characteristics, advantages and disadvantages. Compared with litigation dispute resolution, since arbitration institutions had the advantages and characteristics of efficient and fast dispute resolution and final adjudication, the choice of arbitration to resolve disputes could not be regarded as an aggravation of a party’s liability or an exclusion of its main rights. In addition, some courts directly reviewed and confirmed the validity of the arbitration clause in accordance with the Arbitration Law. For instance, in Tahoe Investment Group Co., Ltd. (“Tahoe”) v. Cura For-the-Best Investment Fund Management, LP.,37 the court held that the claimant, Tahoe, had indeed noticed the existence of the arbitration clause when signing the contract and later affirmed it. The court found that the arbitration clause in the standard form contract in question was valid. In LRX v. Sichuan Tianxiao Law Firm,38 the court followed exactly the same line of thought as in the previous case. Some courts hold that if the dispute resolution clause is an agreement with which the parties have a significant interest, the standard form contract review rules shall apply. If the standard form contract provider does not give a reasonable reminder of the clause, the arbitration clause is invalid. The relevant cases are as follows. In LC v. AXA Jining Center Branch,39 the court held that the insurance company had not provided evidence to prove that it had brought the arbitration clause to LC’s attention in a reasonable manner. The arbitration clause in question was invalid. In WY v. Beijing Hongshang Education Consulting Co., Ltd.,40 the court stated that the dispute resolution clause was the main clause of the contract and should be a clause in which the parties had a significant interest. As the formulating party of the agreement, Beijing Hongshang Education Consulting Co., Ltd. (“Hongshang”) should perform the obligation of reminder or explanation to the counterparty WY. However, Hongshang failed to prove this. The court finally confirmed that the arbitration agreement was invalid. In Beijing Hulian Jingwei Technology Development Co., Ltd. v. LMJ,41 the court held that the End User License Agreement in question was a contract concluded using standard form clauses, in which the arbitration clause had a significant interest 35

(2021) Hu 01 Min Te No. 418. (2022) Jing 04Min Te No.458. 37 (2021) Min 01Min Te No.170. 38 (2021) Chuan 06 Min Te No. 3. 39 (2017) Lu 11 Min Zhong No.1111. 40 (2021) Jing 04 Min Te No. 968. 41 (2021) Jing 04 Min Xia Zhong No.5. 36

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relation with the counterparty. The standard form contract provider failed to remind the counterparty by means of special marks such as words, symbols, fonts and other special marks sufficient to attract the attention, and failed to fulfill its obligation to give reasonable notice. Based on the claimant’s claim, the court found that the arbitration clause of the standard form contract in question was not established. The above ruling was also agreed by SPC. Following the same adjudication reasoning, in Shanghai Aisiai Medical Technology Co., Ltd. v. TUV Rheinland (Shanghai) Co., Ltd.,42 the court of second instance revoked the court of first instance’s ruling confirming the validity of the arbitration clause. It can be seen from the above judicial precedents that the differences in the reasoning of local courts in adjudication are mainly reflected in the different understandings of the following issues: 1. whether it is necessary to apply the review rules of standard form clauses in the review of standard arbitration clauses; 2. whether standard arbitration clauses fall within the circumstance that “the clause concerning the other party’s major interests and concerns, such as a clause that exempts or alleviates the liability of the party providing the standard clause” under Article 496 of the Civil Code and should be prompted and explained; 3. whether standard arbitration clauses fall under the circumstances stipulated in Article 497 of the Civil Code that “unreasonably exempts or alleviates himself from the liability, imposes heavier liability on the other party” or “restricts the main rights of the other party” resulting in the invalidity of the clause; 4. whether it is necessary to review whether the party providing the standard form terms has fulfilled the obligation to give instructions. The review and adjudication standards of the courts in China on cases, in which the validity of standard arbitration clauses is determined, still need to be gradually unified in future judicial practice.

1.4 Implied Arbitration Agreement In the field of commercial arbitration, there is no unified definition of the meaning of an implied arbitration agreement, mainly because the definition of “implied” under different standards is different. Referring to the provisions of Chinese law on expression of intention, “implied” expression is an indirect expression relative to the explicit direct expression. Implied expression including the expression of intention of silence, the expression of intention of the act, etc. With regard to implied arbitration agreements, discussions on implied conclusion and implied waiver are usually involved. With regard to the implied conclusion of an arbitration agreement, according to the Arbitration Law and the Arbitration Law Interpretation, a clear expression of intention is one of the necessary elements for reaching a valid arbitration agreement. This expression of intention should be contained in the written form document. The written form usually includes an agreement to request arbitration in the form of 42

(2020) Hu 02 Min Zhong No.4718.

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contracts, letters, data messages, etc., which is basically consistent with the requirements of the New York Convention for the form of arbitration agreements. In practice, it is inevitable that there will be various defects in the drafting or modification of the text of the arbitration agreement. Therefore, after a dispute arises, the parties often disagree on the conclusion of a valid arbitration agreement. Diaoyutai Food Biotechnology Co., Ltd. v. Huaxia Shulian Technology Co., Ltd.43 In December 2017, Huaxia Shulian Technology Co., Ltd. (“Huaxia Shulian”) and Diaoyutai Food Biotechnology Co., Ltd. (“Diaoyutai”) fully negotiated and decided to use their respective advantages and professional technologies to jointly build “Diaoyutai” and “organic food industry + Internet + standard + big data supply chain financial ecology” pattern. The two parties reached the Cooperation Agreement, which contained the cooperation content, period, service return, payment method and dispute resolution method. Article 7.2 of the Agreement provided that “if any differences the parties are encountered, they shall be settled through friendly consultation, otherwise, either party may apply to Beijing Arbitration Commission for an award in accordance with the arbitration rules of the commission. The award is final and legally binding on both parties.” In January 2018, Huaxia Shulian held a project initiation meeting and completed the development of B2B1.0 system software according to the agreed period. In August 2018, Diaoyutai B2 xx.0 version system software began to be put into operation. By January 11, 2019, the transaction volume of the platform system had reached more than RMB 12 million. Moreover, Huaxia Shulian assisted Diaoyutai to apply for the copyright of relevant system software. After the Diaoyutai B2 xx.0 system software was launched, Huaxia Shulian required Diaoyutai to sign a formal written “Cooperation Agreement” in accordance with the agreement reached between the two parties in December 2017. On August 23, 2018, the two parties reached an agreement on the terms of the written agreement, but Diaoyutai did not seal the agreement. On December 31, 2019, Huaxia Shulian filed an arbitration with Beijing Arbitration Commission against Diaoyutai, requesting: 1. to terminate the Cooperation Agreement between Huaxia Shulian and Diaoyutai; 2. to rule that Diaoyutai shall pay Huaxia Shulian a basic service fee from January 2018 to the date of actual termination of the cooperative relationship between the two parties (tentatively calculated until December 31, 2019, RMB 960,000 in total); 3. to rule that Diaoyutai shall bear the arbitration costs of the case. The court held that, in line with Paragraph 1 of Article 19 of the Arbitration Law, the arbitration agreement or arbitration clause was independent as the method of resolving the dispute as agreed by the parties. Huaxia Shulian argued that, although Diaoyutai had not signed and sealed the Cooperation Agreement, Huaxia Shulian had fulfilled its main obligations, and Diaoyutai had accepted that the Cooperation Agreement had been established. The abovementioned claim of Huaxia Shulian pointed to the specific rights and obligations of the parties in the Cooperation Agreement. Since 43

(2020) Jing 04 Min Te No.281.

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the arbitration agreement or arbitration clause was independent, Huaxia Shulian was required to provide evidence to prove that Huaxia Shulian and Diaoyutai had reached an arbitration agreement or arbitration clause as stipulated in Paragraph 1 of Article 16 of the Arbitration Law, or that the parties had formed an agreement to submit the dispute to an arbitration institution for settlement after the dispute arises. Diaoyutai did not sign and seal the Cooperation Agreement. Judging from the content of the WeChat conversation between the two parties, the two parties did not reach an agreement on submitting the dispute to arbitration, nor was there any evidence to prove that the parties formed an agreement to submit the dispute to an arbitration institution for resolution after the dispute arose. In summary, Diaoyutai’s claim was justified and fully substantiated, which was supported by this court. Pursuant to Paragraph 1 of Article 16 and Paragraph 1 of Article 19 of the Arbitration Law, the ruling was as follows: The arbitration agreement between the Diaoyutai and Huaxia Shulian was not established. Judicial practice has different views on whether the act of silence in which the parties do not raise separate objections to the arbitration clause constitutes an implied expression of intention to arbitrate. The parties in this case determined the main content of the cooperation agreement through negotiation. Although Diaoyutai did not sign and seal the agreement, Huaxia Shulian has actually performed the main obligations of the agreement and has been accepted by Diaoyutai. Based on the principle of independence of the arbitration agreement. According to Article 490 of the Civil Code, the court separately examined the main contract and the arbitration clause, and separately found that the main contract had been established, but the arbitration clause had not yet been reached. The court held that the arbitration clause was not automatically established by the parties actually performing the rights and obligations of the main contract, and the arbitration agreement was not reached because the unsigned party did not raise objections in the process of negotiation and performance of the agreement. This means that the court in the above case denied the validity of silence as an implied expression of intention to arbitrate. In LR v. Renren Xing Technologies Co., Ltd.,44 the court held that if a party modified the arbitration clause and gave the other party a clear objection period, the “silence” of the other party without raising an objection could not constitute a valid implied arbitration agreement. In this case, Renren Xing Technologies Co., Ltd. (“Renren Xing”) notified the other party by SMS that the dispute resolution method of the agreement was changed to submit the summary procedure to Zhanjiang Court of International Arbitration for written hearing, and required the other party to raise an objection to the change within three days. In this regard, the arbitral tribunal held that, the agreement clearly provided that during the performance of the agreement, Renren Xing may modify the agreement according to the circumstances, and if the other party continued to use the loan service, it would be deemed as accepting the modification of the agreement. The agreement also provided that the exclusive notice will be confirmed by the platform by sending a mobile phone SMS to the registered 44

(2020) Ji Zhi Jian No.52.

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mobile phone number, and once sent, it would be deemed that it had been delivered. Since Renren Xing had notified the other party of the change of dispute resolution method by SMS, the other party did not raise an objection after receiving the notice. Therefore, according to the agreement, it could be determined that the dispute resolution method had been changed to “submit to Zhanjiang Court of International Arbitration for summary procedure in writing”. However, the court held a different opinion that, according to Article 445 of the Arbitration Law, Renren Xing’s notice of a change in dispute resolution method should be deemed to be an offer to modify the contract. The counterparty’s failure to raise an objection within the time limit should not be regarded as a commitment to the terms of the contract modification. However, some courts affirmed the effect of silence as an implied expression of intention to arbitrate. For example, in Eslite Lifestyle Department Store (Shanghai) Co., Ltd. v. Shanghai Tower Construction & Development Co., Ltd.,46 the court ruled that an arbitration agreement had been concluded between Eslite and Shanghai Tower. The court reviewed the arbitration agreement in accordance with the contractual rules and held that when Eslite handed over the contract with unilateral seals containing the arbitration clause to Shanghai Tower, it was a successful offer. Although Shanghai Tower did not sign and seal the arbitration clause after receiving it, it was found that Shanghai Tower had accepted the aforesaid offer. The court considered that the parties had reached an arbitration agreement. Unlike silence and inaction, China’s Courts generally recognize the arbitration agreement on the act of intention. For example, in Mingfa Group Co., Ltd. v. Powerlong Group Development Co., Ltd.,47 the court stated that, the parties had chosen to resolve the contractual dispute through arbitration. Mingfa received the notice of acceptance and related materials of Xiamen Arbitration Commission, and selected arbitrators. It had no objection to the acceptance of the case by Xiamen Arbitration Commission and the composition of the arbitral tribunal. Both parties participated in the arbitration hearing activities until the arbitration commission made an award. According to Paragraph 2 of Article 20 of the Arbitration Law48 and Article 7 of the Arbitration Law Interpretation,49 the

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Article 4 of the Arbitration Law: “The parties’ submission to arbitration to resolve their dispute shall be on the basis of both parties’ free will and an arbitration agreement reached between them. If a party applies for arbitration in the absence of an arbitration agreement, the arbitration commission shall not accept the case.” 46 (2019) Hu Min Zhong No.533. 47 (2021) Zui Gao Fa Min Zhong No.480. 48 Paragraph 2 of Article 20 of the Arbitration Law: “A party’s challenge of the validity of the arbitration agreement shall be raised prior to the arbitral tribunal’s first hearing.” 49 Article 7 of the Arbitration Law Interpretation: “Where the parties agree that a dispute may be submitted for arbitration with an arbitration agency or filed with the People’s Court for commencement of legal proceedings, the arbitration agreement shall be invalid, unless one party has submitted an arbitration application to an arbitration agency but the other party failed to object within the time limit stipulated in the second paragraph of Article 20 of the Arbitration Law.”

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abovementioned acts of the parties indicate that the parties had chosen to settle the disputes arising from the cooperation through arbitration. In the Reply of SPC to the Request for Instructions on the Case Concerning the Application of Peng for the Confirmation of the Validity of the Arbitration Agreement against PICC Property and Casualty Company Limited Hangzhou Branch,50 the SPC pointed out that, the insurance policy was issued unilaterally by the insurance company. Peng’s signature on the insurance policy was not signed by himself. But after receiving the insurance policy, Peng initiated arbitration with Hangzhou Arbitration Commission in accordance with the arbitration clause recorded in the insurance policy, which showed that Peng agreed to be bound by the arbitration clause. An arbitration agreement had been reached between Peng and PICC Property and Casualty Company Limited Hangzhou Branch (“PICC Hangzhou”) through specific acts in the arbitration procedure. Moreover, the arbitration agreement between the parties complied with Article 16 of the Arbitration Law. It was legal and valid. Even though Peng withdrew his application for arbitration after the hearing of the arbitral tribunal, the arbitration agreement already reached between Peng and PICC Hangzhou was not invalid. It should be noted that the support of the Chinese courts on the issue of whether the parties’ participation in arbitration proceedings constitutes an arbitration agreement is conditional. In other words, there must be a written agreement between the parties, and the participation of one party in the arbitration proceedings itself cannot constitute a valid implied arbitration agreement. The arbitration agreement may be recognized by the court only if the parties simultaneously perform positive acts such as defense and do not raise a valid jurisdictional objection. As to the implied waiver of the arbitration agreement, according to Article 2651 of the Arbitration Law, if the parties reach an arbitration agreement and one party sues in people’s court without declaring that there is an arbitration agreement and after the people’s court accepts it, the other party does not raise an objection to the people’s court’s acceptance of the case before the first hearing, the other party shall be deemed as having waived the arbitration agreement and the people’s court shall continue to hear the case. This provision clarifies that, the failure of a party to raise a jurisdictional objection in the litigation proceedings shall be deemed as a waiver of the arbitration agreement. In judicial practice, to determine that a party’s conduct constitutes a waiver of the arbitration agreement as provided for above, two conditions usually need to be met: 1. the time condition: the parties do not raise an objection before the first hearing; 2. the conditions for conduct: in addition to requiring the parties to meet the “no objection”, it also requires the parties to have actively participated 50

(2015) Zhe Shang Wai Que Zi No.2. Article 26 of the Arbitration Law: “If the parties have concluded an arbitration agreement and one party has instituted an action in a people’s court without declaring the existence of the arbitration agreement and, after the people’s court has accepted the case, the other party submits the arbitration agreement prior to the first hearing, the people’s court shall dismiss the case unless the arbitration agreement is null and void. If, prior to the first hearing, the other party has not raised an objection to the people’s court’s acceptance of the case, he shall be deemed to have renounced the arbitration agreement and the people’s court shall continue to try the case.”

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in the litigation at the same time, such as submitting a representation statement and participating in the trial defense. Guanxian Ganghai Sheet Metal Co., Ltd. v. Guanxian Hengrun Composite Materials Co., Ltd.52 In June 2015, Guanxian Ganghai Sheet Metal Co., Ltd. (“Ganghai”) and Guanxian Hengrun Composite Material Co., Ltd. (“Hengrun”) signed the Lease Contract. In December of the same year, the Supplementary Agreement was signed. The Supplementary Agreement provided that “both parties unanimously confirm that any dispute arising out of or in connection with the Lease Contract and this Supplementary Agreement shall be submitted to Beijing City Arbitration Commission for arbitration in accordance with the arbitration rules of the Commission. The arbitral award shall be final and binding on the parties. If there is any inconsistency between this Supplementary Agreement and the Lease Contract, this Supplementary Agreement shall prevail.” In 2016, Ganghai sued Hengrun to terminate the Lease Contract signed by the two parties. Hengrun appeared in court to answer the lawsuit in the case, arguing that the Lease Contract signed by the two parties was legal and valid and should continue to be performed. On February 13, 2017, Guan County People’s Court issued a civil judgment, ruling that it granted the termination of the Lease Contract signed by the two parties. Hengrun appealed. Liaocheng Intermediate People’s Court (“Liaocheng Intermediate Court”) issued a civil judgment on August 23, 2017, dismissing the appeal and upholding the original judgment. In September 2017, Ganghai sued Hengrun again with Liaocheng Intermediate Court, requesting that Hengrun be ordered to: (1) pay RMB 37.5 million in rent, (2) return RMB 15,830,015.83 of proceeds from finished products, semi-finished products, scraps, raw materials, etc., (3) compensate RMB 14,032,827.3 for damage and unauthorized disposal of Ganghai’s production and office equipment, (4) pay RMB 3,168,010 for the use of Ganghai’s spare parts, and (5) pay RMB 2,056,488.04 in arrears of taxes. Liaocheng Intermediate Court accepted the case on September 29, 2017. On October 13, 2017, Hengrun raised a jurisdictional objection with Liaocheng Intermediate Court, holding that the Lease Contract signed by the two parties provided that the place where the contract was signed was Beijing, and the actual place where the agreement was signed was Chaoyang District, Beijing. In accordance with Article 34 of the Civil Procedure Law and Article 30 of the Civil Procedure Law Interpretation, the agreement between the parties on the place of jurisdiction was valid. The case shall be under the jurisdiction of Chaoyang District People’s Court, where the contract was signed. In addition, the actual place of performance of the Lease Contract was in Beijing, so Chaoyang District People’s Court was more conducive to ascertaining the facts of the case. Therefore, Hengrun requested that the case be transferred to the Chaoyang Court for trial. On November 10, 2017,

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(2020) Zui Gao Fa Min Zai No.150.

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Liaocheng Intermediate Court rendered (2017) Lu 15 Min Chu No. 297 Civil Ruling, ruling to reject Hengrun’s objection to the jurisdiction of the case. Dissatisfied with the civil ruling, Hengrun filed a jurisdictional objection appeal with the High People’s Court of Shandong Province on November 20, 2017, arguing that the Lease Contract signed by the two parties provided that the place where the contract was signed was Beijing, and the people’s court where the contract was signed shall have jurisdiction. The jurisdiction should be determined in accordance with the jurisdiction agreement. The place where the contract was signed was Chaoyang District, Beijing, so it should be under the jurisdiction of Chaoyang District People’s Court. On December 8, 2017, the High People’s Court of Shandong Province issued (2017) Lu Min Xia Zhong No. 478 Civil Ruling to dismiss the appeal and to uphold Liaocheng Intermediate Court’s ruling. During the trial by Liaocheng Intermediate Court, Hengrun filed a lawsuit with the Beijing No. 3 Intermediate People’s Court on the day of the hearing, requesting the court to confirm the validity of the arbitration clause, and submitted the Supplementary Agreement containing the arbitration clause to Liaocheng Intermediate Court, requesting that the lawsuit of Ganghai be dismissed. In the process of the trial of Liaocheng Intermediate Court, Beijing No. 3 Intermediate People’s Court issued a ruling on March 16, 2018, ruling that, the arbitration clause in the Supplementary Agreement had the intention to request arbitration and the arbitration matters, and the arbitration commission had been selected. The arbitration clause should be a valid arbitration clause. The court confirmed the arbitration clause in the Supplementary Agreement was valid. Beijing No. 3 Intermediate People’s Court held that, judging from the formal content, the two parties signed the Supplementary Agreement, which contained an arbitration clause. It should be pointed out that although the termination of the Lease Contract has been confirmed by the effective judgment, and the dispute over the payment after the termination was still in the trial process of Liaocheng Intermediate Court, the above circumstances could not overturn the fact that the parties have corresponding dispute resolution clauses in the Supplementary Agreement. At the same time, although the name of the arbitration institution agreed upon by the dispute resolution institution between the parties was “Beijing City Arbitration Commission”, which differed only from the word “City” with “Beijing Arbitration Commission”, the inaccuracy of the name of the arbitration institution does not cause obvious confusion. It could be determined that the specific arbitration institution should be Beijing Arbitration Commission according to the agreement. It was not a circumstance where the agreement on the arbitration institution was not clear. Therefore, if the arbitration clause in the Supplementary Agreement had the intention to request arbitration and the arbitration matters, and the arbitration commission had been selected, it complied with the content of the arbitration agreement stipulated in Article 16 of the Arbitration Law and Article 2 of the Arbitration Law Interpretation. There was no evidence to prove that the clause was invalid under Article 17 of the Arbitration Law, the arbitration clause should be valid. However, it should also be noted that, based on the facts ascertained by the review, Hengrun directly responded

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to the lawsuit to terminate the Lease Contract, and raised a court jurisdiction objection in the payment lawsuit after the termination of the contract, arguing that the case should be heard by Chaoyang District People’s Court. At that time, it did not contest the court’s hearing of the dispute involving the Lease Contract. Nor did Hengrun raise the existence of the Supplementary Agreement until the High People’s Court of Shandong Province rejected Hengrun’s jurisdictional objection appeal. After the High People’s Court of Shandong Province rejected its objection on jurisdiction of Chaoyang District People’s Court, Hengrun filed the application on the ground that the Supplementary Agreement existed between the parties and the arbitration clause was valid. Therefore, the confirmation of the validity of the arbitration clause of the Supplementary Agreement in this case was only a determination that the parties had agreed on the arbitration clause. As far as this case was concerned, the determination of this case did not directly serve as the basis for confirming the competent issue of dispute in (2017) Lu 15 Min Chu No. 297 case. In summary, the court ruled that the arbitration clause in the Supplementary Agreement of the Lease Contract signed between Hengrun and Ganghai in December 2015 was valid. Liaocheng Intermediate Court found that, Ganghai negotiated with Hengrun to determine that disputes involving the Lease Contract and the Supplementary Agreement should be resolved by arbitration proceedings, excluding the people’s court’s competence over the relevant disputes. In conjunction with the abovementioned legal provisions, Ganghai’s lawsuit should be dismissed. Ganghai may apply for arbitration to an arbitration institution agreed upon by the parties in accordance with the Supplementary Agreement and the law. Ganghai’s lawsuit should be dismissed. Ganghai was dissatisfied with the judgment of Liaocheng Intermediate Court and appealed to the High People’s Court of Shandong Province. The High People’s Court of Shandong Province held that, the Supplementary Agreement had been signed between Ganghai and Hengrun, which contained an arbitration clause. This fact had been confirmed and effective by the people’s court, so the court of first instance dismissed Ganghai’s lawsuit in accordance with the above legal provisions. Although Ganghai claimed that the Supplementary Agreement involved in the case was a forgery by Hengrun, there was no evidence to prove it and it was contrary to the facts confirmed by the effective ruling, so this court did not support it. Ganghai claimed that Hengrun did not raise an objection to the court of first instance’s acceptance of the case within the statutory time limit. But after this court reviewed the case materials, Hengrun raised an objection before the trial, and the court of first instance immediately adjourned the trial and did not conduct substantive hearing of the case. This court did not support Ganghai’s claim. As to whether Hengrun had any unreasonable acts in this case, it did not affect the existence of an arbitration clause between the parties and the fact that Hengrun objected to the court’s acceptance of the civil case before the first hearing. Therefore, the High People’s Court of Shandong Province dismissed Ganghai’s appeal and upheld the decision of Liaocheng Intermediate Court.

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Ganghai was not satisfied with the decision of the High People’s Court of Shandong Province and filed an application for retrial with the SPC. SPC accepted the application for retrial. The SPC held that, Ganghai and Hengrun signed the Supplementary Agreement in December 2015, which stated “The parties entered into the Lease Contract on June 10, 2015, in order to further clarify the rights and obligations of the parties… both parties unanimously confirm that any dispute arising out of or in connection with the Lease Contract and this Supplementary Agreement shall be submitted to Beijing City Arbitration Commission for arbitration in accordance with the arbitration rules of the Commission. The arbitral award shall be final and binding on the parties. If there is any inconsistency between this Supplementary Agreement and the Lease Contract, this Supplementary Agreement shall prevail.” The agreement was confirmed as valid by the (2018) Jing 03 Min Te No. 97 Civil Ruling rendered by the Beijing No. 3 Intermediate People’s Court. However, in November 2016, when Ganghai filed a lawsuit against Hengrun with the Guan County People’s Court, requesting the termination of the Lease Contract signed by the two parties on June 10, 2015, Hengrun did not declare to the people’s court that there was an arbitration agreement between the two parties. Hengrun responded to the substance of the case and filed a counterclaim and an application for additional defendants. The case has already been tried by the Guan County People’s Court and Liaocheng Intermediate Court, which rendered effective judgments. Therefore, Hengrun’s act of response and defense during the trial of the case showed that Hengrun had accepted the jurisdiction of the court and waived the agreement on arbitration. Moreover, during the defense of the first instance of this case, Hengrun only raised an objection to the court of first instance that the case should be under the jurisdiction of the Chaoyang District People’s Court, and did not raise an objection to the supervising court, which indicated that Hengrun had made a choice to litigate in the court in this case. Therefore, since the courts of the two instances rejected Hengrun’s jurisdictional objection, Hengrun had no right to raise any objections to the jurisdiction of the court, and could no longer raise a defense on the ground that there was an arbitration agreement between the parties and the court did not have jurisdiction. The parties in this case signed two contracts, the Lease Contract and the Supplementary Agreement. The Supplementary Agreement indicated that the parties agreed to submit the dispute related to the two contracts to arbitration. But in the proceedings in which Ganghai sued Hengrun to rescind the Lease Contract, Hengrun actually appeared in court to respond to the lawsuit and argued that both parties should continue to perform the contract. Later, in the dispute case arising from the Supplementary Agreement, Hengrun proposed that there was an arbitration clause that should be submitted to arbitration. Therefore, SPC did not accept its claim. The mainstream rulings and judgments of China’s courts are basically the same on the determination that whether a party has waived its jurisdictional objection by actual conduct and participated in the litigation proceedings. In Yutai Luning Real

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Estate Development Co., Ltd. v. WYL, ZYQ,53 during the trial, neither of the parties raised the defense that the court did not have jurisdiction due to the existence of an arbitration clause, which was deemed as a waiver of the arbitration agreement. In Lhasa Maji Ami Restaurant Chain Co., Ltd. v. Lhasa Natural Resources Bureau,54 the court also pointed out that although the arbitration clause was agreed upon, in the case of reduction of liquidated damages previously heard by the court, Lhasa Natural Resources Bureau not only did not object to the court’s acceptance of the case based on the existence of the arbitration clause, but on the contrary, filed a counterclaim in the case requesting payment of liquidated damages according to the agreement. It was deemed as be a waiver of the arbitration agreement according to Article 26 of the Arbitration Law. However, in specific cases, the criteria for finding implied waivers vary from court to court. Some courts have relatively strict review standards, holding that the failure to declare the arbitration agreement or the failure to raise a defense of hindrance is not sufficient to exclude the validity of the arbitration agreement, and the parties should also actually participate in the litigation proceedings and make a defense. Moreover, some court hold that, the existence of an arbitration clause should be explained to the parties at the hearing by the court, and if the parties still do not raise an objection and appear in court to respond to the lawsuit, it could be deemed that they have waived the arbitration agreement. See Haitian Construction Group Co., Ltd. Guangdong Branch v. Guangdong Zhejiang Dongyang Chamber of Commerce.55 Other courts hold the view that if a party does not raise a jurisdictional defense before the first hearing, it can be regarded as waiving the arbitration agreement, and the people’s court has the right to continue to hear the case. For example, in DC, GNR v. Huayuan Touzi Nantong Co., Ltd.,56 the court stated that, although the parties agreed on an arbitration clause in the contract, Huayuan did not declare the arbitration clause before the first hearing of the first instance of this case, nor did it raise any objection to the people’s court’s acceptance of the case, which was deemed as a waiver of the arbitration agreement. The court should continue to hear the case. Some courts also find that the parties have waived the arbitration agreement when they have not raised an objection and are heard in absentia. In Sichuan Saite Refrigeration Co., Ltd. v. Linshui Huanyu Steel Structure Co., Ltd.,57 Saite did not submit the arbitration agreement before the first hearing, did not appear in court to participate in the litigation in the first instance, and did not raise an objection to the people’s court’s acceptance of the case before the first hearing. The court held that it should be regarded as a waiver of the arbitration agreement.

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(2020) Lu Min Zhong No.1217. (2020) Zang Min Zhong No.19. 55 (2017) Yue Min Shen No.10480. 56 (2019) Su 06 Min Zhong No.3865. 57 (2019) Chuan Min Shen No. 1960. 54

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1.5 Continued Validity of Contract An arbitration agreement is a written document in which the parties voluntarily submit a contract dispute to arbitration for settlement, and generally exists as part of the contract. If the contract between the parties expires and is not renewed in writing, and for some reason the parties continue to perform the original contract, are the disputes arising in connection with the contract subject to the original arbitration clause? According to Chinese law, the fact of continuing performance constitutes a continuation of the original contract. However, the law does not expressly stipulate whether the arbitration clause can continue to be valid as a result. BXN v. King & Wood Mallesons (Shenzhen)58 BXN signed the Entrustment Agency Contract with King & Wood Mallesons (Shenzhen) (“KWM”). Both parties agreed that the legal service period was from 29 January 2018 to 13 February 2018. They concluded an arbitration agreement in the contract. BXN filed a lawsuit with the court on the ground that after the expiration of the legal service period under the original contract, KWM had violated the confidentiality obligation by leaking BXN’s personal privacy in the course of performing the de facto principal-agent relationship formed between it and BXN. Shenzhen Intermediate People’s Court ruled in the second instance that there was a valid arbitration agreement between the parties and that the dispute in question should be bound by the arbitration agreement. Dissatisfied with the court’s ruling, BXN applied to the High People’s Court of Guangdong Province for a retrial, claiming that the legal service period under the Entrustment Agency Contract was from January 29, 2018 to February 13, 2018. The infringement of KWM occurred on 22 June 2018, which was no longer part of the legal service period under the contract. KWM submitted an opinion stating that the parties in this case had changed the legal service period stipulated in the Entrustment Agency Contract. BXN sent an email on February 13, 2018, requesting KWM to carry out relevant litigation work. After KWM replied to its email on February 22, 2018, BXN expressly agreed to continue to charge according to the standard in the Entrustment Agency Contract, and signed a power of attorney to entrust KWM on February 27, 2018. The above facts showed that the dispute in this case was a dispute arising in the course of performing the Entrustment Agency Contract, and it should be bound by the arbitration agreement in the Entrustment Agency Contract. The High People’s Court of Guangdong Province held that, according to the facts of the case that have been ascertained, BXN signed the Entrustment Agency Contract with KWM, in which the two parties agreed on the period of legal services and entered into an arbitration agreement in the contract. The arbitration agreement was the true intention of the parties and complied with Article 16 of the Arbitration Law, so it was legal and valid. In this case, the parties jointly confirmed that KWM continued to provide legal services to BXN after the expiration of the legal service period stipulated 58

(2019) Yue Min Shen No. 7674.

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in the Entrustment Agency Contract. Since the legal services were continuous and related to the entrustment matters in the original contract, so it should be deemed that the parties had changed the legal service period in the original contract. BXN had filed a lawsuit on the ground that KWM had leaked his personal privacy. In BXN’s complaint, he cited the confidentiality clause stipulated in the Entrustment Agency Contract as the main basis. The contract expressly indicated that KWM’s confidentiality obligation shall not be terminated by the termination of the contract, and the dispute involved in the case was still a dispute arising from the parties in the process of performing the Entrustment Agency Contract, which fell within the scope of arbitration under the contract. The second-instance ruling dismissed BXN’s lawsuit on the ground that the parties had concluded a valid arbitration agreement on the dispute in question and that the dispute should be resolved through arbitration. The facts and applicable law in the second-instance ruling were not improper. The correspondence between BXN and KWM’s lawyers by email after February 13, 2018 submitted by BXN for retrial did not overturn the basic facts found in the second-instance ruling. BXN’s application for retrial on the ground that the facts and applicable law in the second-instance ruling found were indeed erroneous was insufficient, which was not supported by this court. In this case, the original period term of the written Entrustment Agency Contract signed between the parties was from January 29, 2018 to February 13, 2018. The fact that BXN claimed that KWM had infringed occurred in June 2018. BXN filed a jurisdictional objection to exclude arbitration jurisdiction. The court first confirmed that the parties had changed the period of legal services agreed in the original contract. The legal services of the law firm were continuous and related to the entrusted agency matters provided in the original contract. The court then pointed out that BXN’s claim was mainly based on the confidentiality clause stipulated in the contract, which clearly stated that “the confidentiality obligation of the law firm shall not be terminated by the termination of the contract”. Therefore, it was found that the dispute in question was still a dispute arising from the parties’ performance of the Entrustment Agency Contract, which fell within the scope of arbitration noted in the Entrustment Agency Contract. Upon the expiration of the contract, if the parties have not renewed it in writing but continue to perform, whether the original arbitration clause continues to be valid? China’s current judicial practice is generally consistent with the view of the abovementioned case that, if the parties are in fact still performing the expired contract, the original arbitration clause should continue to bind the parties. In Beijing Urban Construction Property Management Co., Ltd. v. Beijing Chongwen District Yilong Villa Owners Committee,59 the court held that, after the expiration of the Property Service Contract on March 25, 2015, although the two parties did not sign a new property service contract, the Beijing Urban Construction Property Management Co., Ltd. continued to carry out actual management of the property in the community with the approval of Beijing Chongwen District Yilong 59

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Villa Owners Committee. Beijing Urban Construction Property Management Co., Ltd. did not raise any objection. The two parties continued to perform in accordance with the original Property Service Contract. The arbitration clause in the original Property Service Contract was clear and valid. The courts adopted the same view in cases such as Guangzhou Yingjing Sea Logistics and Transportation Service Co., Ltd. v. Guangzhou Shuiwu Asset Management Co., Ltd.,60 Hefei Huareixing Optoelectronics Technology Co., Ltd. v. Hefei Jingdongfang Display Light Source Co., Ltd.,61 etc. However, it should be noted that during the trial of a case, the court usually examines whether there is a close connection and continuity between the facts of the dispute and the original written contract, and then makes a judgment on whether the dispute is subject to the original arbitration clause on this basis. In other words, the prerequisite for the court to confirm the continued validity of the original arbitration clause is that the legal relationship and subject matter involved in the facts of the dispute are consistent with the original contract in which the arbitration clause is agreed in writing. Otherwise, the court will not recognize the continued validity of the arbitration clause. In Guangxi Guilin Jiankang Jiayuan Investment Co., Ltd. v. YLP,62 the Joint-stock Store Operation Contract provided that the cooperation period was from November 1, 2016 to December 31, 2017. An arbitration clause was also agreed in the contract. After the expiration and termination of the contract, Guangxi Guilin Jiankang Jiayuan Investment Co., Ltd. (“Jiankang Jiayuan”) should return part of the capital contribution. After the negotiation on the capital contribution by both parties, Jiankang Jiayuan issued an IOU, agreeing to pay the remaining capital contribution before July 31, 2019. Afterwards, a dispute arose between the two parties over the repayment of the remaining capital contribution. The court held that, after the termination of the Joint-stock Store Operation Contract, the parties reached an agreement on the refund of the capital contribution. The legal relationship between the two parties changed from a partnership to a lending relationship. Although the arbitration clause was agreed in the Joint-stock Store Operation Contract, the contract was terminated. The dispute involved was not a dispute arising in the course of the partnership. The legal relationship between the parties had been transformed into a creditor-debt relationship. The transformed legal relationship was not bound by the original contract. Therefore, the dispute should not be submitted to arbitration. In practice, a more complex situation is that the case involves multiple contracts before and after and the transformation of the legal relationship between different subjects, in which case the court usually denies the binding force of the arbitration clause.

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For example, in Haikou State-owned Assets Operation Co., Ltd. v. ZLC,63 in September 2015, Industry and Commerce Bureau signed a mall operation entrustment agreement with Hainan Changyang Real Estate Development Co., Ltd. (“Changyang”), a real estate developer. Changyang was responsible for the operation and management of the mall until the property was transferred to the municipal government to receive and the handover procedures were completed. One year after the signing of the agreement, in May 2016, the Industry and Commerce Bureau signed the Asset Transfer Letter with Haikou State-owned Assets Operation Co., Ltd. (“Haikou SA”) entrusted by the municipal government, transferring the entire operating assets such as the mall to the municipal government, and the specific recipient was Haikou SA. On the day of signing, the Industry and Commerce Bureau and Haikou SA jointly informed the lessee of the mall about the transfer of assets and the overall transformation. In April 2017, Changyang signed a lease agreement with ZLC to lease a booth in the mall for the lease period until July 1, 2020. One year performance of the lease agreement, in October 2018, Changyang was informed by Haikou SA that the period of entrusted operation and management of the mall had expired, and the entrusted operation and management relationship was terminated. Haikou SA entrusted the Equity Exchange to list and publicly solicit leases to the public. ZLC filed a lawsuit against Haikou SA as the defendant due to the stall rent and other issues involved in the case. Haikou SA objected to the court’s jurisdiction, arguing that the dispute should be under the jurisdiction of the arbitration institution according to the arbitration clause noted in the lease agreement. The court found that Haikou SA succeeded to the rights and obligations of the principal in the operation entrustment agreement. Since the Industry and Commerce Bureau did not serve Changyang with the notice of handover of the assets after the assets involved in the case were handed over to Haikou SA, Haikou SA issued a notice to Changyang stating that “the entrusted operation and management period has expired, and now Haikou SA has terminated the entrusted operation and management relationship of Yerun Mall”. Haikou SA continued to collect rent after receiving the assets involved, which showed that Haikou SA recognized the entrusted management legal relationship between the Industry and Commerce Bureau and Changyang, and continued to fulfill the operation entrustment agreement signed between the Industry and Commerce Bureau and Changyang. Moreover, the court held that Changyang signed the lease agreement signed with ZLC during the entrustment management period. ZLC’s requirement on confirmation that the agreement was legal and valid and continued to perform had a reasonable basis. Therefore, the court stated that the agreement in question was signed between ZLC and Changyang, and the arbitration clause in the agreement only directly bound ZLC and Changyang. Haikou SA did not reach an arbitration agreement with ZLC after receiving the assets in question, so the dispute in question should be under the jurisdiction of the court. Based on the above cases, if the contract is not renewed in writing after the expiration of the arbitration agreement, even if the substantive rights and obligations 63

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are recognized by the court, whether the arbitration clause will continue to be valid after the expiration needs to be judged in combination with factors such as the relationship between the facts of dispute and the original contract, and whether the subject of the dispute is consistent with the entity signing the original contract.

1.6 Unilateral Option/Asymmetric Arbitration Clause The “unilateral option arbitration clause”, also known as “asymmetric arbitration clause” is a type of unilateral option of jurisdiction clause. The unilateral option arbitration clause is a dispute resolution clause in a commercial contract that gives only one party the option to submit a dispute to arbitration. Unlike traditional dispute resolution clauses, unilateral option arbitration clauses have not yet reached a final arbitration agreement between the parties at the time of the conclusion of the dispute resolution clause, and whether to submit them to arbitration is decided by the specific party according to the circumstances of the dispute. This arrangement is more flexible than traditional dispute resolution clauses. The party holding the option can consider whether to arbitrate based on factors such as the amount of the dispute, complexity and ease of execution. Therefore, it is often used in international commercial transactions. However, the “unilaterality” and “incomplete certainty” in the wording of unilateral option of jurisdiction clauses, including unilateral option of arbitration, have triggered discussions in the industry on a series of issues such as whether the clause is “agreeable” and whether it violates the principle of equality. In addition, few jurisdictions in the world regulate issues related to unilateral option of jurisdiction clauses through statutory law. The judicial practice of various countries/regions on the determination of the validity of unilateral option litigation or unilateral option arbitration clause has always been controversial. In recent years, China’s courts have begun to have a small number of cases involving the validity of unilateral option of jurisdiction clauses, most of which are unilateral option litigation clauses. Cases involving unilateral option arbitration clauses are rare. Judging from the current judicial cases, different courts still have quite different views on unilateral option of jurisdiction clauses. Hainan Kangda Micro Loans Co., Ltd. v. Hainan Xinyang Junan Real Estate Development Co., Ltd., ZM 64 On May 14, 2018, Hainan Kangda Micro Loans Co., Ltd. (“Kangda Loan”) signed the Loan Contract with Hainan Xinyang Junan Real Estate Development Co., Ltd. (“Xinyang Junan”). The contract provided that Xinyang Junan borrowed RMB 3.2 million from Kangda Loan. The loan period was 12 months, from the date of the actual loan by the lender. The borrowing interest rate was 1.5% per month. The interest settlement was monthly settlement to collect interest, and Xinyang Junan 64

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must pay the interest payable for the month on the 20th of each month. The contract noted that if Xinyang Juan breached the contract, the liquidated damages shall be that, if one day overdue, it would be charged at 2/1000 of the default amount each day. In the event of a dispute, Kangda Loan could file a lawsuit in the people’s court where Kangda Loan was domiciled. On the same day, ZM signed the Warranty Contract with Kangda Loan. The Warranty Contract stipulated that ZM would provide Kangda Loan with a joint and several liability guarantee for the above loans, and the guarantee period would be two years from the date of the expiration of the performance period of the obligations under the main contract. On the same day, Xinyang Junan and Kangda Loan also signed the Mortgage Contract, agreeing that Xinyang Junan would mortgage an asset under its name (Building 2, Haikou Feixingyuan Yaju, Lingshan Town, Qunshan County, Meilan District, Haikou City), to Kangda Loan for the repayment guarantee of the abovementioned RMB 3.2 million loan. After signing the contract, the two parties went to the Haikou Real Estate Registration Office to register the mortgage. After the maturity of the loan, Xinyang Juan failed to repay the principal and interest of the loan on time. In order to protect the legal rights of Kangda Loan, Kangda Loan filed a lawsuit with Xiuying District People’s Court in Haikou City, Hainan Province, requesting Xinyang Junan to bear the responsibility for repayment and ZM to bear joint and several liability for liquidation. Xiuying District People’s Court held that, this case was a loan contract dispute. According to Article 23 of the Civil Procedure Law and Article 18 of the Civil Procedure Law Interpretation, unless the parties had other agreements, the place of performance was the domicile of the lending party. After investigation, Kangda Loan’s residence was C3-8, Qibu Area, Longhai Fengqing Town, Haitang Bay, Sanya City, Hainan Province. The location of Xinyang Junan and ZM was in Meilan District, Haikou City. The plaintiff’s residence and defendant’s location in this case were not under the jurisdiction of Xiuying District Court, so Kangda Loan’s lawsuit against Xiuying District People’s Court did not comply with relevant laws and regulations. The case shall be transferred to Meilan District People’s Court for handling. In accordance with Articles 23 and 36 of Civil Procedure Law, this case should be transferred to Meilan District People’s Court. Meilan District People’s Court stated that, the Loan Contract signed by Kangda Loan and Xinyang Junan had agreed on the jurisdiction clause, in which the jurisdiction court was the people’s court where the plaintiff Kangda Loan was domiciled. Although the Loan Contract noted that the Kangda Loan’s office address was in ×× District, Haikou City, the existing evidence could not prove that its main office was located in the jurisdiction of Haikou. Therefore, according to the jurisdiction clause in the contract and the industrial and commercial registration address, Meilan District People’s Court did not have jurisdiction over this case. The case should be transferred to the Sanya Suburban People’s Court. Under Article 36 of the Civil Procedure Law and Article 40 of the Civil Procedure Law Interpretation, the case was submitted to the Haikou Intermediate People’s Court for designation of jurisdiction on October 17, 2019. Haikou Intermediate People’s Court submitted to this court for designated jurisdiction on December 4, 2019.

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The High People’s Court of Hainan Province noted that, upon review, this court held that, this case was on a loan contract dispute. Kangda Loan filed a lawsuit according to the main debt contract, the Loan Contract. The resolution method under Article 10 of the contract was: “Any dispute under this contract shall be settled by friendly negotiation between the two parties. If the negotiation fails, Party B may file a lawsuit with the people’s court where Party A is located. Party A can choose any of the following methods to protect its rights, while Party B has no objection: 1. File a lawsuit with the people’s court where Party A is located; 2. Apply to Hainan Arbitration Commission for arbitration; …” The above clause provided that disputes may be submitted to an arbitration institution for arbitration or file a lawsuit in a people’s court which shall be deemed as invalid arbitration agreement according to Article 7 of the Arbitration Law Interpretation. However, according to Article 34 of the Civil Procedure Law, if the agreement on litigation jurisdiction clause in the contract dispute resolution method complies with the law, it is still valid and binding on the parties. As far as the specific circumstances of this case were concerned, the plaintiff also filed a lawsuit in Xiuying District People’s Court. In order to facilitate the litigation of the parties, the people’s court to fully investigate the facts of the case and efficiently exercise its adjudication power, the court considered that the case should be heard by Xiuying District People’s Court. This case reflects the common thinking of some courts in China: According to the existing legal framework, the courts usually regard the clause as an arbitration or litigation clause to review whether there is an agreement on litigation competence or an arbitration clause, and respectively find the arbitration clause invalid according to Article 765 of the Arbitration Law Interpretation, and recognize the validity of the litigation jurisdiction agreement according to Article 3466 of the Civil Procedure Law. The dispute resolution clause in this case requires one party to settle the dispute by litigation, and at the same time stipulates that the other party can choose between litigation and arbitration to protect its rights. The court held that, this kind of special agreement that the parties have the right to choose, allowing one party to choose both litigation and arbitration, is an invalid clause of “arbitration or litigation”, and the agreement on the competent court in the clause is valid and binding on both parties.

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Article 7 of the Arbitration Law Interpretation: “Where the parties agree that a dispute may be submitted for arbitration with an arbitration agency or filed with the People’s Court for commencement of legal proceedings, the arbitration agreement shall be invalid, unless one party has submitted an arbitration application to an arbitration agency but the other party failed to object within the time limit stipulated in the second paragraph of Article 20 of the Arbitration Law.” 66 Article 34 of the Civil Procedure Law: “The following cases shall be under the exclusive jurisdiction of the people’s courts herein specified: (1) a lawsuit brought on a dispute over real estate shall be under the jurisdiction of the people’s court of the place where the estate is located; (2) a lawsuit brought on a dispute over harbour operations shall be under the jurisdiction of the people’s court of the place where the harbour is located; and (3) a lawsuit brought on a dispute over succession shall be under the jurisdiction of the people’s court of the place where the decedent had his domicile upon his death, or where the principal part of his estate is located.”

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In CYH v. DBS Bank (China) Co., Ltd. Shanghai Branch,67 the dispute resolution clause in the case provided that “19.1 The parties to this contract agree that any dispute under this contract relating to the transaction of secured financial derivatives shall be submitted to CIETAC for arbitration in accordance with the CIETAC Financial Dispute Arbitration Rules in force at that time…. 19.2 The above agreement does not preclude the right of the right holder to assert or apply for enforcement at any other dispute resolution institution (regardless of one or more jurisdictions) having jurisdiction over this contract.” The court upheld the claim that the clause indicated that both the application for arbitration and the filing of litigation with the court were “arbitration or litigation” clauses and were therefore invalid. The court stated that from the form and content of the agreement, the two paragraphs were juxtaposed. Although the intention of Article 19.1 to request arbitration was clear, Article 19.2 did not exclude the right to submit the dispute to the court, so the dispute resolution clause was invalid under Article 7 of the Arbitration Law Interpretation. It can be seen that the court did not identify whether the dispute resolution clause in question was a “unilateral option of jurisdiction clause”, but adopted the idea of reviewing the arbitration or litigation clause according to the existing legal provisions on the validity of arbitration clauses and denied the validity of the arbitration clause. In practice, there are also some courts which recognize the validity of unilateral option of jurisdiction clauses and do not deny the validity of any part of the arbitration and litigation methods contained in the clauses. In Xiamen C&D Chemical Co., Ltd. v. MB Barter & Trading S.A.,68 the dispute resolution clause in the agreement in question stipulated that “the seller (i.e. the defendant) may choose to submit all disputes arising therefrom to the Kanton Zug Court in Switzerland for settlement or arbitration in Kanton Zug in accordance with the ICC Arbitration and Mediation Rules in Paris.” The court found the agreement to be a “unilateral option dispute settlement clause”, which was an agreement reached by equal commercial transaction subjects after equal consultation. The court held that, although granting the right to choose the dispute resolution method to one party would limit the rights of the other party, but since the agreement was the result of consensus between the two parties, it was not sufficient to constitute the loss of fairness on the rights and obligations of the two parties. The two parties should abide by the agreement. It is worth mentioning that the court distinguished this clause from the “arbitration or litigation clause” and found that the clause in question did not belong to the “arbitration or litigation clause”. The court noted that the arbitration or litigation clause actually gave both parties the option to initiate different proceedings at the same time. When one party initiated litigation or arbitration, resulting in a conflict of jurisdiction, in which case there was no single and definitive opinion on the way to resolve the dispute during the contracting process. However, the unilateral option dispute resolution clause involved in the case was different. Whether the case was under the arbitration jurisdiction or the court jurisdiction depended on

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the option of one party. Once the option was made, the dispute resolution method was exclusive and certain. As to the issue on determination of the validity of unilateral option arbitration clauses, there is no consensus in China’s judicial practice. Before the relevant laws, regulations or normative documents regulate this issue, only from the judicial review cases, it seems that the courts tend to treat such clauses as “arbitration or litigation” clauses, invoking Article 7 of the Arbitration Law Interpretation to find that the arbitration agreement is invalid. As to whether the agreement in the litigation part is valid, as described in the arbitration or litigation clause in Sect. 1.2 of this Chapter, there are different practices. However, in the past two years, a number of cases involving unilateral option litigation clauses have emerged one after another, which may serve as an important reference for the courts to review the validity of unilateral option arbitration clauses in the future. SRC et al. v. Asia Rich Shipping Limited 69 On July 14, 2010, Asia Rich Shipping Limited (“RICH SHIPPING”) signed the Bareboat Charter Party with the outsider Wuzhou Shipping, agreeing that Wuzhou Shipping would charter the “Fortune East” ship of RICH SHIPPING. The Bareboat Charter Party was amended on the basis of the terms of the BIMCO Standard Bareboat Charter (BARECON2001). Clause 30 of the contract was a dispute resolution clause, of which paragraphs A, B and C of Clause 30 were terms on arbitration to resolve disputes. Paragraph A was the application of English law to arbitration in London. Paragraph B was the application of United States law to arbitration in New York. Paragraph C was the agreement of the parties to determine the law applicable to arbitration and the place of arbitration. In the Bareboat Charter Party eventually signed by the parties, all three items of Clause 30 A/B/C were removed. Clause 30D, which read, “notwithstanding the terms of Clause 49 of the Additional Clause, the parties may at any time agree to submit to mediation any differences and/or controversies arising out of or in connection with this Charter. In the circumstance that the arbitration has commenced pursuant to subsection A or B or C, the following terms apply: (i) Either party may at any time request the other party to consent to mediation by giving written notice to which the other party elects to submit the dispute or part of the dispute to mediation. (ii) The other Party shall confirm its consent to the mediation within 14 calendar days of receipt of the notice of mediation, in which case the Parties shall agree on the selection of the mediator within 14 calendar days thereafter. If no agreement is reached, the arbitral tribunal or a person designated for that purpose by the arbitral tribunal shall appoint a conciliator immediately upon application by either party. Mediation shall take place at the place, under the procedure and conditions as the parties may agree to and, in the event of disagreement, shall be determined by the mediator. (iii) If the other party does not agree to conciliation, this fact may be brought to the attention of the arbitral tribunal and the arbitration tribunal may take this fact into account in the allocation of the costs of arbitration between the 69

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parties. (iv) Mediation shall not affect the remedies or the right of either party to take such remedy or steps as may be necessary to protect its interests. (v) Either party may notify the arbitral tribunal that it has agreed to conciliate. During the conciliation process, the arbitral proceedings shall continue, but the arbitral tribunal may take into account the mediation schedule when setting a timetable for the steps in the conciliation proceedings. …” Clause 49 of the Bareboat Charter Party was on applicable law and jurisdiction. Clause 49.2 provided that “Subject to Clause 49.4 the courts of Hong Kong have exclusive jurisdiction to settle any dispute arising out of or in connection with this Charter.” Clause 49.4 provided that “This Clause 49 is for the benefit of the Owner only. As a result, the Owner shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Owner may take concurrent proceedings in any number of jurisdictions.” On the same day, SRC and CFX signed the Individual Guarantee with RICH SHIPPING as guarantors. Clause 9 of the Individual Guarantee was on jurisdiction. Clause 9.1 indicated that “For the benefit of the Owner, and subject to Clause 9.4 below, each and every Personal Guarantor hereby irrevocably agrees that the courts of Hong Kong shall have exclusive jurisdiction.” Clause 9.4 stated that “Nothing in this Clause 9 limits the right of the Owner to bring proceedings, including third party proceedings, against any Personal Guarantor, or to apply for interim remedies, in connection with this Guarantee in any other court and/or concurrently in more than one jurisdiction. The obtaining by the Owner of judgment in one jurisdiction shall not prevent the Owner from bringing or continuing proceedings in any other jurisdiction, whether or not these shall be founded on the same cause of action”. RICH SHIPPING filed a lawsuit with Xiamen Maritime Court, demanding early termination of the contract, requiring the lessee to compensate for losses, and requiring the guarantors to bear joint and several guarantee liability for the charterer’s rent payment obligation and damages under the Bareboat Charter Party. SRC et al. objected to the jurisdiction, arguing that: 1. The dispute resolution mechanism noted in the main contract corresponding to the guarantee contract was mediation (arbitration plus mediation), and the court should not accept it before the parties’ negotiation, arbitration and mediation. The plaintiff directly sued in the Xiamen Maritime Court. It violated China’s law on foreign-related arbitration and China’s obligations under international law as a party to Singapore Convention on Mediation. 2. The Bareboat Charter Party provided that the Hong Kong court had exclusive jurisdiction over the case, and if the jurisdiction of the Individual Guarantee was inconsistent with the main contract, the jurisdiction shall be determined according to the main contract, and Xiamen Maritime Court shall have no jurisdiction. 3. The Individual Guarantee indicated that the Hong Kong court had exclusive jurisdiction over the case, and the case should first be under the jurisdiction of the Hong Kong court, and then Xiamen Maritime Court shall conduct concurrent proceedings. 4. The trial of Xiamen Maritime Court was not conducive to ascertaining the facts. Hong Kong court had jurisdiction and it was more convenient to hear the case. Xiamen Maritime Court held that, this case was a dispute over a guarantee contract arising from a bareboat charter contract. The plaintiff’s registered place was Hong

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Kong. Therefore, this case had Hong Kong-related factors. Pursuant to Articles 551 and 259 of the Civil Procedure Law, it was a matter of procedure to determine whether the jurisdiction clause in question could exclude the jurisdiction of the mainland China courts and whether this court had jurisdiction over the case. Therefore, the law of mainland China should apply. The issues on this case were: 1. Whether the Bareboat Charter Party had arbitration and mediation terms and whether it excluded the jurisdiction of this court; 2. Whether the jurisdiction clause of the Bareboat Charter Party excluded the jurisdiction of this court; 3. Whether the jurisdiction clause of the Individual Guarantee excluded the jurisdiction of this court; 4. Whether this court had jurisdiction over the case or whether it was inconvenient to exercise the jurisdiction. 1. Whether the Bareboat Charter Party had arbitration and mediation terms and whether it excluded the jurisdiction of this court Based on Clause 30D of the Bareboat Charter Party, SRC claimed that disputes should be submitted to mediation first. But this clause mainly contained the content that the parties could choose to mediate and how to start mediation in the arbitration procedure, how the mediator was selected, unilaterally agreeing to mediation, and arbitration and mediation conducted at the same time. From the content point of view, it was not clear whether the parties could choose to conduct mediation when the parties did not choose to arbitrate to resolve the dispute. In this aspect, the court studied the Drafting Note on Standard Bareboat Charter (BARECON2001) issued by BIMCO. The Drafting Note stated that the conciliation referred to in Clause 30D, should be triggered only after the commencement of the arbitral proceedings, and that the parties could choose to conduct arbitration and conciliation simultaneously, thus avoiding conciliation as a delaying tactic by the parties. Therefore, the court held the view that BIMCO is the formulator of the standard contractual clauses in question, and the drafting notes issued by BIMCO could supplement the content that was not specified or mentioned by the parties at the time of conclusion of the contract, and could serve as a reference for the court when interpreting the contract. According to Clause 30D, the premise for mediating a dispute was that the dispute had entered into arbitration proceedings. The Bareboat Charter Party signed by the parties in this case deleted Clause 30 A/B/C. The contract in question did not stipulate an arbitration clause, and the parties did not reach an agreement on arbitration. Hence, the conditions for mediation in arbitration proceedings could not be fulfilled. The objection that the case should be submitted to arbitration or mediation and excluding the jurisdiction of this court was not valid. This treatment would not be contrary to China’s obligations under international law as a member of the Singapore Convention on Mediation. 2. Whether the jurisdiction clause of the Bareboat Charter Party excluded the jurisdiction of this court The court held that Clauses 49.2 and 49.4 of the Bareboat Charter Party constituted an asymmetric exclusive jurisdiction clause, i.e., the Hong Kong courts only had

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exclusive jurisdiction when the shipowner chose to sue in the Hong Kong courts, and the charterer must obey the agreement on exclusive jurisdiction, but did not exclude the right of the shipowner to choose other courts outside Hong Kong to sue. The above agreement did not violate the Civil Procedure Law and should be deemed valid. The plaintiff in this case did not choose to sue in the Hong Kong court, but chose Xiamen Maritime Court to sue, so the condition of exclusive jurisdiction of the Hong Kong court was not fulfilled. The objection that the Hong Kong courts had exclusive jurisdiction was not valid, and should not be supported by this court. 3. Whether the jurisdiction clause of the Individual Guarantee excluded the jurisdiction of this court Clauses 9.1 and 9.4 of the Individual Guarantee were also asymmetric exclusive jurisdiction clauses, i.e., the Hong Kong courts had exclusive jurisdiction only if the creditor chooses to sue in a Hong Kong court, but it did not exclude the creditor’s right to choose to sue in a court other than Hong Kong. The plaintiff in this case did not choose the Hong Kong court to sue, but chose Xiamen Maritime Court to sue, which complied with the contract and the laws of Mainland. The objection that the Hong Kong courts had exclusive jurisdiction was not valid, and should not be supported by this court. 4. Whether this court had jurisdiction over the case or whether it was inconvenient to exercise the jurisdiction Pursuant to Article 532 of the Civil Procedure Law Interpretation, SRC, XCT and CFX were residents of mainland China, and the case involved the interests of the mainland, so this case did not conform to the principle of “forum inconveniens” as prescribed by law. On the issue of prior litigation, Clause 49.4 of the Bareboat Charter Party and Clause 9.4 of the Individual Guarantee gave the shipowner (creditor) the right to bring an action against the guarantor (debtor) in multiple jurisdictions, but did not indicate that the shipowner (creditor) must file a lawsuit in the Hong Kong court before bringing an action in other jurisdictions. Therefore, the objection that the shipowner (creditor) must file a lawsuit in the Hong Kong court was not established and the court did not support it. In summary, both the main contract and the guarantee contract in this case provided that in the event of a creditor’s lawsuit, the Hong Kong court had only non-exclusive jurisdiction, and did not exclude the jurisdiction of the mainland court. The defendants SRC, XCT and CFX were all domiciled in Fujian Province and were under the jurisdiction of the court. The court had jurisdiction over this case. The defendant SRC’s jurisdictional objection could not be established and should be rejected. In accordance with Paragraph 1 of Article 127 of the Civil Procedure Law and Article 129 of the Guarantee Law Interpretation, the court rejected SRC’s objection to the jurisdiction of this case. This case is included in the 2020 National Typical Maritime Trial Cases released by SPC. With regard to the dispute resolution clause, Xiamen Maritime Court found that Clauses 49.2 and 49.4 of the Bareboat Charter Party and Clauses 9.1 and 9.4 of the

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Individual Guarantee were asymmetric exclusive jurisdiction clauses, holding that since the shipowner and creditor did not choose the Hong Kong court to litigate, but chose the Xiamen Maritime Court to litigate, it was in accordance with the contract and Chinese mainland legal provisions. Besides, other courts also recognized the validity of asymmetric jurisdictional clauses. See Shenyang Shenyang Amusement Park Co., Ltd. v. Export–Import Bank of Malaysia Berhad,70 CMA CGM S.A. v. Xiamen Mingxiangda Logistics Co., Ltd.,71 and GMA CGM S.A. v. Shaoxing Haoyi Trading CO., Ltd.72 In December 2021, SPC issued the Minutes of the National Foreign-related Commercial and Maritime Trial Work Conference, of which the Article 2 clarifies that, if a jurisdiction agreement signed by the parties in a foreign-related contract dispute or other property rights and interests dispute expressly provides that one party may choose the court of a certain country from the courts of more than one country to initiate a lawsuit, while the other party can only file a lawsuit in the court of a specific country, the people’s court will not support the party’s claim that the jurisdiction agreement is invalid on the grounds of obvious unfairness; however, the jurisdiction agreement that involves the rights and interests of consumers and workers, or violates the exclusive jurisdiction provisions of the Civil Procedure Law, is excluded. Therefore, the validity of unilateral option litigation jurisdiction clauses has been recognized in the form of highly authoritative normative documents, which is a major development worthy of attention. The challenges to the validity of unilateral option arbitration clauses in China’s judicial practice can be roughly summarized in two aspects. First, whether the unilateral option of jurisdiction clause violates the principle of equality. This involves equity between the values of party autonomy and the principle of equality. Referring to the mainstream views of courts and relevant normative documents on unilateral option of litigation clauses, China’s judicial practice does not hold that the unilateral option jurisdiction clauses violate the principle of equality and thus result in the loss of fairness. The second is whether the unilateral option arbitration clause makes an only definitive arrangement for the dispute settlement method, which is related to the issue on whether it constitutes an arbitration or litigation clause that is found to be invalid under Article 7 of the Arbitration Law Interpretation. Judging from the few judicial review cases at present, China’s judicial practice has not yet formed a unified adjudication rule on whether and how to determine the validity of unilateral option arbitration clauses.

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(2017) Zui Gao Fa Min Zhong No.636. (2015) Yue Gao Fa Li Min Zhong Zi No. 190. 72 (2016) Zhe Min Xia Zhong No.294. 71

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1.7 Arbitration Clause Without Foreign-Related Factors Whether a legal dispute between the parties without foreign-related factors can be submitted to overseas arbitration is related to important issues such as the ultimate jurisdiction of the dispute and whether the overseas arbitral award can be recognized and enforced. In China’s judicial practice, purely domestic disputes cannot be submitted to overseas arbitration for settlement. Once the parties agree to do so, the arbitration agreement will be found invalid by the China’s Court, or future awards will not be enforceable in China. At the legislative level, there is currently no law or judicial interpretation in China that explicitly prohibits this. There are differences in the identification standards of courts for foreign-related factors in disputes, so this issue has always been a matter of continuous concern and discussion in the industry. ArcSoft Corporation Limited v. Spreadtrum Communications (Shanghai) Co., Ltd.73 In 2017, ArcSoft Corporation Limited (“ArcSoft”) and Spreadtrum Communications (Shanghai) Co., Ltd. (“Spreadtrum”) signed a Software License Contract on the development and licensing of software related to computer vision technology. In July 2020, ArcSoft filed a lawsuit with Hangzhou Intermediate People’s Court on the grounds that Spreadtrum was in arrears and intentionally defaulted, requesting that Spreadtrum continue to perform its contractual obligations and pay the arrears, interest, losses, and other expenses arising from Spreadtrum’s breach of contract. Spreadtrum raised a jurisdictional objection that the parties’ contract-based dispute should be submitted to arbitration in SIAC in Singapore: 1. According to the Singapore International Arbitration Law and Model Law, the parties had a genuine and valid arbitration agreement in respect of the dispute involved in the case. 2. The agreement involved in the case was a foreign-related contract, and overseas arbitration may be agreed upon according to law. Both parties to the agreement were Sino-foreign joint ventures. Spreadtrum was incorporated in the free trade zone, and ArcSoft was a wholly foreign-owned enterprise of Bermuda e-image Limited at the time of signing the contract, which had foreign-related elements. Most of the subject matters of the contract involved were ArcSoft’s intellectual property rights enjoyed abroad. Even if the contract involved did not have foreign-related elements, considering the fact that the parties were registered and established in the free trade zone and were Sino-foreign joint venture, it should be determined that the parties had the right to agree that arbitration would be conducted by other arbitration institutions. The court of first instance held that, this case was a dispute over a computer software copyright licensing contract. Since the parties agreed on an arbitration clause in the Software License Contract in question, it was necessary to first determine the validity of the arbitration clause in the case. Only after determining that the court had competent power over the case could the issue of jurisdiction over the case be further involved. 73

(2021) Zui Gao Fa Zhi Min Xia Zhong No. 90; (2020) Zhe 01 Zhi Min Chu No.406.

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As to the issue on the validity of the arbitration clause, Article 17.2(b) of the Software License Contract provided that, if any dispute was not resolved within the prescribed period, the dispute shall be resolved by arbitration by the SIAC located in Singapore in accordance with the then prevailing SIAC Arbitration Rules. In the abovementioned clause, the parties’ intention to agree to submit the dispute involved in the case to an extraterritorial institution for arbitration was clear. According to Article 271 of the Civil Procedure Law and Article 182 of the Contract Law, disputes with foreign-related elements may be submitted to extraterritorial arbitration. As to the determination of foreign-related civil relationship, the relevant provision was Article 522 of the Civil Procedure Law Interpretation. Specifically, both Sino-foreign joint ventures and wholly foreign-owned enterprises were enterprise legal persons registered in mainland China and were not “foreign enterprises or organizations” as stipulated in Article 522 of the Civil Procedure Law Interpretation. Although Article 9 of Opinions on Providing Judicial Safeguards for the Construction of Pilot Free Trade Zones (Fa Fa [2016] No. 34) provides that where the wholly foreign-owned enterprises registered in the pilot free trade zone agree to submit the commercial dispute to extraterritorial arbitration, the relevant arbitration agreement shall not be deemed invalid solely on the ground that the dispute does not have a foreign-related factor. But the provisions also stipulate that, disputes of wholly foreign-owned enterprises can be exceptionally recognized as on foreign-related civil relationship, must meet the requirements that both parties are registered in the pilot free trade zone and all of them are wholly foreign-owned enterprises. This case obviously did not meet this circumstance. As for the relevant content of Notice of the SPC on Clarifying Relevant Matters Concerning the Standards for Hierarchical Jurisdiction over and Centralized Handling of Foreign-related Civil and Commercial Cases of First Instance, it was only to adjust the division of labor in the internal trial working division of the court, it could not be a basis on which to determine the WFOE had foreign-related elements. In terms of the legal status of the parties, both parties to the dispute in this case were Chinese legal persons. Since the contracting party of the Software License Contract were ArcSoft and Spreadtrum, they were the direct bearer of the rights and obligations under the Software License Contract. The overseas enterprise that had a control relationship with Spreadtrum, was not a party and actual performer of the Software License Contract involved in the case. The Software License Contract case did not directly bind Spreadtrum’s overseas affiliated enterprise. The relationship between Spreadtrum and its affiliates was only an internal relationship. It did not affect the identity of the domestic subjects in mainland of the parties involved. The main content of the Software License Contract involved in the case was that the parties license Spreadtrum to use the computer software owned by ArcSoft, for which Spreadtrum had paid royalties, and the computer software in question was developed by ArcSoft in mainland China. The intellectual property rights were enjoyed by the domestic subjects in mainland, so the subject matter of the contract between ArcSoft and Spreadtrum was not foreign-related. As for Spreadtrum’s claim that the mobile phone products it produced in 2018 and 2019 using the software involved in the case were mainly sold overseas. Even if Spreadtrum’s statement was true, the sale

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did not change the basic legal relationship between the parties. It was insufficient to determine that the dispute in this case had foreign-related elements. Since PRC law did not stipulate that the parties may submit their disputes without foreign-related elements to overseas arbitration institutions for arbitration, the parties in this case had no legal basis to submit the dispute to the SIAC in Singapore for extraterritorial arbitration. The arbitration clause in question shall be invalid, and the jurisdiction of the case shall be determined in accordance with ordinary domestic civil cases. SPC held that, in this case, the arbitration clause of the contract in question clearly stated the intention of submitting the dispute to an extraterritorial arbitration institution for arbitration. The arbitration institution’s agreement was clear and specific. But according to Article 271 of the Civil Procedure Law,74 Article 65 of the Arbitration Law75 and Paragraph 2 of Article 128 of the Contract Law, PRC law did not allow domestic parties to submit disputes that did not have foreign-related elements to foreign arbitration. Accordingly, the parties in this case were all domestic parties, and when examining the validity of the arbitration clause of the agreement in question, it should also examine whether the agreement in question has a foreign-related element. This case should be handled by referring to the provisions of Article 522 of the Civil Procedure Law Interpretation on determination of foreign-related civil cases. After examination, it was found that the parties in this case were all Chinese legal persons. The conclusion of the contract involved in the case and the subject matter were all within the territory of mainland China. The legal facts of the establishment, modification and elimination of the legal relationship between the parties did not have foreign-related factors. Therefore, the arbitration clause in the contract in question was an extraterritorial arbitration clause reached by the domestic parties for disputes that did not have foreign-related elements, which was invalid. The people’s court had jurisdiction over this case. The parties in this case are Sino-foreign joint ventures. Spreadtrum is incorporated in the free trade zone, and the other party, ArcSoft, is a wholly foreign-owned enterprise of Bermuda e-image Limited at the time of signing the contract. Most of the subject matters of the contract are the intellectual property rights enjoyed by ArcSoft abroad. After review, the court found that neither the entity attributes nor

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Article 271 of the Civil Procedure Law stipulates that, as to disputes arising in the course of foreign-related economic trade, transportation and maritime affairs, if the parties have agreed on an arbitration clause in the contract or reach on a written arbitration agreement after the dispute occurs, and submit the dispute to a foreign-related arbitration institution or other arbitration institutions in China, the parties shall not file a lawsuit in the people’s court; If the parties do not have an arbitration clause in the contract or do not reach a written arbitration agreement afterwards, they may file a lawsuit in the people’s court. 75 Article 65 of the Arbitration Law: “The provisions of this Chapter shall apply to the arbitration of disputes arising from economic, trade, transportation and maritime activities involving a foreign element. For matters not covered in this Chapter, the other relevant provisions of this Law shall apply.”

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the underlying legal relationship of the parties had foreign-related factors, and ruled that the agreement on the submission of contract disputes to SIAC should be invalid. The court’s review of the validity of an agreement submitted to overseas arbitration without foreign-related factors usually involves judgment on two levels. First, whether the agreement to be submitted to extraterritorial arbitration without foreignrelated factors is valid. Second, whether the agreement has foreign-related elements. In the past two decades, Chinese courts have basically formed a consensus on the adjudication of “for disputes without foreign-related factors, the arbitration agreement concerning overseas arbitration is invalid”. However, there has always been controversy in practice as to how to identify the foreign-related nature of a dispute. Especially in recent years, with the increasing diversity and complexity of transaction entities and transaction modes in the commercial field, it is difficult to identify the foreign-related elements of disputes. According to Article 1 of the Choice of Law Interpretation,76 the determination of a foreign-related civil relationship should be examined from the aspects of whether the subject and the subject matter of the contract, and the place where the relevant legal facts of the civil relationship occurred are foreign-related. In addition, the fallback clause stipulated by law gives the courts certain discretion. Judicial review cases in recent years have shown that in some disputes that do not have typical foreignrelated factors, some courts are trying to break through the limitations of the inherent review standards, to determine the foreign-related nature of the dispute through the reasonable use of discretion, and then affirm the validity of the arbitration clause, so as to reflect the importance attached to the principle of party autonomy. However, this practice is not yet widespread in China’s current judicial practice. Siemens International Trading Ltd., Shanghai v. Shanghai Huangjin Zhidi Co., Ltd.77 is regarded as a typical case with a major breakthrough in practice. This case also involves the parties of the dispute whose place of registration was in the free trade zone, but the court’s ruling was different. In this case, the court did not limit itself to the examination of the three elements of the traditional foreign-related civil legal relationship. It introduced new considerations, and finally found that the dispute had foreign-related elements and the arbitration agreement was valid. The court pointed out that although both parties were Chinese legal persons, both parties were registered in the China (Shanghai) Pilot Free Trade Zone (“Shanghai Free Trade Zone”) and were wholly foreign-owned enterprises. The source of capital, ultimate benefit attribution and business decisions were generally closely related 76

Article 1 of the Law on Choice of Law Interpretation: “Where a civil relationship falls under any of the following circumstances, the people’s court may determine it as foreign-related civil relationship:1. where either party or both parties are foreign citizens, foreign legal persons or other organizations or stateless persons; 2. where the habitual residence of either party or both parties is located outside the territory of the People’s Republic of China; 3. where the subject matter is outside the territory of the People’s Republic of China; 4. where the legal fact that leads to establishment, change or termination of civil relationship happens outside the territory of the People’s Republic of China; or 5. other circumstances under which the civil relationship may be determined as foreign-related civil relationship.” 77 (2013) Hu Yi Zhong Min Ren (Wai Zhong) Zi No.2.

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to foreign investors, so the parties had more obvious foreign-related factors than ordinary domestic-funded enterprises. In addition, the court clarified that although the subject matter involved in the case was finally delivered in mainland China, from the process of signing and performing the contract, the subject matter was transported from overseas to the Shanghai Free Trade Zone and then went through the import procedures. The circulation process of the subject matter had certain characteristics of international sale of goods, which was obviously different from that of the ordinary domestic sales contracts. In Ningbo Xinhui International Trading Co., Ltd. v. China Meheco International Trade Development Corporation,78 the subject matter involved in the case was uncleared goods in the Shanghai Free Trade Zone, and the performance of the contract involved in the case also took place in the free trade zone. The court stated that, it was not improper for the arbitral tribunal to hold that the case had foreignrelated elements on this basis. The court pointed out that, according to the customs management system, the goods that had not been cleared in the free trade zone were unentered goods. Therefore, it found that the case had foreign-related elements and should be a foreign-related arbitration case. In Jing-Jin Electric Technologies Co., Ltd. v. Semikron Electronics (Zhuhai) Co., Ltd.,79 by reviewing the series of transaction arrangements related to the contract involved in the case, the court held that the content of the agreement involved in the case was the same as the content of the previous agreement. The core clauses of the previous agreement were obviously related. The previous agreement showed that the subject, subject matter, performance and other aspects were foreign-related. Hence, the court found that the sales relationship between the parties involved in the case was a foreign-related civil relationship, and the clauses of overseas arbitration were valid. As indicated in ArcSoft Corporation Limited v. Spreadtrum Communications (Shanghai) Co., Ltd.,80 based on the legal provisions on the three elements of identifying foreign-related civil legal relationships (subject, subject matter and legal facts), it was the practice of other courts to formally examine and determine that the dispute involved in the case did not have foreign-related elements, so that the clause on overseas arbitration was invalid. In Advanced Bionics (China) Co., Ltd. v. Aier Shidai medical technology (Beijing) Co., Ltd.,81 the court held that, Aier Shidai medical technology (Beijing) Co., Ltd. (“Aier”) and Advanced Bionics (China) Co., Ltd. (“Advanced”) were registered and established in accordance with Chinese laws, and had a place of business in mainland China, which belonged to Chinese enterprise legal persons. According to the agreement, Advanced imported the relevant products and provided them to Aier. And then Aier sold them in China. Neither the subject matter of the transaction nor the legal relationship between the two parties had a foreign-related factor. During the actual 78

(2015) Si Zhong Min (Shang) Te Zi No. 00152. (2018) Jing 04 Min Te No.145. 80 (2021) Zui Gao Fa Zhi Min Xia Zhong No.90; (2020) Zhe 01 Zhi Min Chu No. 406. 81 (2018) Hu Min Shen No.921. 79

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performance of the disputed agreement, some of the products under the agreement were delivered to Aier’s customer in Hong Kong. But the actual performance did not change the basic legal relationship between the parties, so the court found that the dispute did not have a foreign-related element. In Tianweini (Shanghai) Trade Co., Ltd. v. E. Land International Fashion (Shanghai) Co., Ltd.,82 the party claimed that the agreement involved in the case was an addendum of the contract, signed by Weige Nasi Fashion Co., Ltd., the indirect shareholder of Tianweini (Shanghai) Trade Co., Ltd. (“Tianweini”), and E-Land Fashion Hong Kong Limited, the indirect wholly owned parent company of E.Land International Fashion (Shanghai) Co., Ltd. (“Eland”). The agreement involved in the case clearly provided that it formed a complete agreement with the contract. Tianweini and Eland were the trading subject of the agreement. The dispute involved in the case had obvious foreign-related factor. The court denied the abovementioned claim, holding that the parties were all Chinese mainland enterprise legal persons, and the subject matter, the establishment, the performance of the agreement were in mainland China. It did not constitute a foreign-related civil relationship. The agreement involved in the case was not a foreign-related agreement. In Zhengli Oceanic Engineering Co., Ltd. v. Picc Property And Casualty Company Limited Marine Insurance Operations Center, Picc Property And Casualty Company Limited Zhoushan Branch,83 the court found out the facts that, the case involved in the Ship Insurance Endorsement Agreement provided that the 2017 version of the West of England P&I Club Rules applies. Article 57 of the Rules stipulated that the dispute involved in the policy shall be subject to the jurisdiction of the High Court of Justice of England and Wales or an independent arbitrator appointed the London Court of Arbitration. Nonetheless, the court still found that the dispute did not have foreign-related elements and the jurisdiction agreement between the parties was invalid, based on the fact that the parties were Chinese enterprises, the location of domicile, the subject matter, and the place where the contract was signed was in mainland China. In Tianjin Garbage Sorting and Treatment Center v. Tianjin Daman Nanfang Environmental Protection Engineering Co., Ltd.,84 the court did not accept that the grounds that “the actual controller of the party is an overseas company, the business decision or the ultimate ownership of interests is closely related to the overseas shareholders”, etc., which constituted a reasonable reason for determining that the dispute had foreign-related factors. The court held that, both parties were Chinese legal persons, the subject matter, conclusion and performance of the contract was also in China. There were no constituent elements of foreign-related civil relationships. The contract was not a foreign-related contract, so the arbitration clause should be deemed invalid.

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(2019) Hu Min Xia Zhong No. 199. (2019) Min 72 Min Chu No.149. 84 (2021) Jin 01Min Te No.11. 83

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In Shandong Shengdong International Engineering Co., Ltd. v. Qingdao Xinguangzheng Steel Structure Co., Ltd.,85 the court denied the parties’ claim that “the export of foreign enterprises, the technical standards of the contract, and the delivery and acceptance of goods involve foreign enterprises, and therefore the contract have foreign-related factors”, and found that the arbitration clause was invalid. The determination of the validity of arbitration agreements for overseas arbitrations without foreign-related factors has been a topic of much debate in the field of commercial arbitration in China. Under China’s existing legal framework, disputes without foreign factors are not allowed to be arbitrated overseas, and judicial practice has long reached a consensus. However, the identification of foreign-related factors involved in the review process of cases has never been able to form a unified adjudication standard. With the international development of China’s arbitration system, in addition to the formal identification of the traditional three-element foreign-related civil relationship, whether more flexible factors can be introduced into judicial review and gradually form a unified, clear and explicit judicial review path is the direction that Chinese courts are and must continue to explore.

1.8 Governing Law of Arbitration Agreement The validity of an international commercial arbitration agreement affects important issues such as the basis of dispute jurisdiction and whether the award can be recognized and enforced. The review of the validity of an international commercial arbitration agreement must be based on the provisions of the governing law of the arbitration agreement. In practice, when drafting contractual arbitration clauses or governing law clauses, the parties usually agree on matters such as the arbitration institution, arbitration language, arbitration rules, contract applicable law, and place of arbitration, but rarely specifically stipulate the governing law of the arbitration agreement. In the absence of an explicit or implicit choice of the law applicable to the arbitration agreement, how to determine the governing law of the arbitration agreement is a common issue in the practice of international commercial arbitration. The discussion of this topic in China’s legislation and judicial practice mainly focuses on three aspects: 1. Whether the law applicable to the main contract agreed by the parties is naturally applicable to the arbitration agreement; 2. In the absence of agreement between the parties, the criteria for determining the governing law to which the arbitration agreement should apply; 3. Whether the arbitration agreement exists or is established, whether it falls within the scope of review of the validity of the arbitration agreement and applies to the same governing law.

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(2020) Lu 05 Min Xia Zhong No.106.

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Henan Kanghui Aviation Technology Co., Ltd. v. Jetstar Pacific Airlines Aviation Joint Stock Company86 On 17 July 2017, Jetstar Pacific Airlines Aviation Joint Stock Company (“JPA”) signed the Contract (No. 01/JPA-HCAT/2017) with Henan Kanghui Aviation Technology Co., Ltd. (“HCAT”) for the carriage of passengers and their baggage between Hanoi, Vietnam and Zhengzhou, China. Article 16 of the Contract provided that “this contract shall be governed by and construed in accordance with the laws of the Socialist Republic of Vietnam. Any questions and disputes related to the contract shall be negotiated by JPA and HCAT in good faith and trust. However, in the event of a dispute, controversy and/or discrepancy that may arise between JPA and HCAT relating to or in breach of this contract, the parties shall not agree without undue delay and shall be arbitrated in the Socialist Republic of Vietnam in accordance with the provisions of the Procedures of the Socialist Republic of Vietnam. The result of the determination shall be final and binding on both parties. The language of the arbitration shall be Vietnamese.” On June 17, 2010, the 12th Session of the 7th Legislative Council of Vietnam promulgated the Commercial Arbitration Law of the Socialist Republic of Vietnam. Article 18 “Invalid Arbitration Agreement” stipulated that, “1. The dispute arises in a department other than the arbitration authority provided for in Article 2 of this Law. 2. The entity entering into the arbitration agreement lacks the competence prescribed by law. 3. The entity entering into the arbitration agreement lacks civil capacity. 4. The form of the arbitration agreement does not comply with Article 16 of this Law. 5. One of the parties is deceived, threatened or coerced in the process of concluding the arbitration agreement and requests that the arbitration agreement be declared null and void. 6. The arbitration agreement violates the prohibition provided by law.” Article 43 “Consideration of whether the arbitration is invalid or unenforceable and whether the arbitral tribunal has jurisdiction” stipulated that “if the parties have an arbitration agreement but do not clearly specify the arbitration institution, the form of arbitration or the specific arbitration institution, when a dispute arises, they must reach an agreement on the form of arbitration or the specific arbitration institution to settle it. If the parties cannot reach an agreement, they shall, at the request of the parties, choose the form of arbitration and the arbitration institution to resolve the dispute.” Article 81 “Effect” stipulated “1. This Law shall come into force on January 1, 2011. 2. Regulation No. 03/2003/PL-UBTVQH11 on Commercial Arbitration shall no longer enter into force as of the date of entry into force of this Law. 3. An arbitration agreement concluded before the effective date of this Law shall be implemented in accordance with the provisions of the law in force from the date of conclusion of the arbitration agreement.” The Court held that, based on Article 2 of the Arbitration Judicial Review Provision (Fa Shi [2017] No.22), this case fell within the jurisdiction of this court because HCAT’s domicile was located in the Zhengzhou Area (Zhengdong) Business Outer Ring Road of Henan Pilot Free Trade Zone, which. This case was on the confirmation 86

(2019) Yu 01 Min Te No.18.

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of the validity of a foreign-related arbitration agreement. In this case, the parties only agreed in the Contract that the governing law is the Vietnamese law. Although the parties did not explicitly agree on the applicable law on the validity of arbitration clause, they agreed the place of arbitration is Vietnam. Therefore, pursuant to Article 13 of the Arbitration Judicial Review Provision and Article 16 of the Arbitration Law Interpretation, the applicable law on the validity of arbitration clause in this case was Vietnamese law. HCAT requested confirmation of the invalidity of the arbitration clause agreed between it and JPA in the Contract pursuant to Article 10 of Commercial Arbitration Law of the Socialist Republic of Vietnam (PL-UBTVQH11/2003/02 of February 25, 2003), but Vietnam had promulgated the Commercial Arbitration Law of the Socialist Republic of Vietnam on June 17, 2010, which had been in force since January 1, 2011. HCAT argued that Regulation No. 03/2003/PL-UBTVQH11 on Commercial Arbitration shall no longer be in force on the date of entry into force of the Law. The Contract in this case was signed on July 17, 2017, so the validity of the arbitration clause in this case shall be reviewed in accordance with the Commercial Arbitration Law of the Socialist Republic of Vietnam (2010).87 Therefore, HCAT’s claim for confirmation of the invalidity of the arbitration clause could not be upheld and the court did not support it. As to the issue of whether the governing law of the main contract applies to the arbitration agreement, there is no consensus at the international level based on different understandings of the principle of independence of the arbitration agreement. China’s judicial practice tends to exclude the application of the main contract governing law to the arbitration agreement, which is also in line with the provisions of the law that the application of law shall be expressly chosen by the parties.88 In this case, the court clearly pointed out that, according to Article 13 of the Arbitration Judicial Review Provision, the parties that agreed to confirm the law applicable to the validity of a foreign-related arbitration agreement should make a clear indication of their intention, and only stipulating the law applicable to the contract cannot be regarded as the law applicable to confirm the validity of the arbitration clause in the contract. Regarding the criteria to be used to determine the governing law of an arbitration agreement without an express agreement between the parties, there is no consensus at the legislative level or judicial practice in China. At the legislative level, Article 1689 of the Arbitration Law Interpretation promulgated in 2006 stipulates that, the law of the place of arbitration prevails; if the parties 87

According to the Commercial Arbitration Law of the Socialist Republic of Vietnam (2010), if the parties already have an arbitration agreement but do not clearly specify the arbitration institution, the form of arbitration or the specific arbitration institution, it does not necessarily lead to the invalidity of the arbitration agreement. 88 See Article 3 of the Law on Choice of Law, Article 13 of the Arbitration Judicial Review Provision. 89 Article 16 of the Arbitration Law Interpretation: “The governing law for a determination of validity of a foreign related arbitration agreement shall be the governing law as agreed between the parties; where the parties have agreed on the place of arbitration but not the governing law, the law of the place shall apply to the arbitration; where the parties have not agreed on both the governing

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have not agreed on both the governing law and the place of arbitration or where agreement on the place of arbitration is unclear, the law of the place where the court is located shall apply. Article 18 of the Law on Choice of Law promulgated in 2011 and Article 12 of the Choice of Law Interpretation stipulate that, apply the law of the location the arbitration institution is located or the place of arbitration; if the arbitration institution and the place of arbitration is not agreed upon, apply Chinese law to confirm the validity of the arbitration agreement. The Arbitration Judicial Review Provision90 promulgated in 2018 further provides that if the law of the location of arbitration institution provides different determination on the validity of arbitration agreement from that of the law of the place of arbitration, the court shall apply the law that confirms the arbitration agreement as valid. In summary, the idea of determining the governing law of arbitration agreements in Chinese law is that, if there is an agreement from the agreement, the agreement shall apply; in the absence of an agreement, the law of the place of arbitration or the location of the arbitration institution shall apply; if the place of arbitration or arbitration institution is not stipulated, the law of the forum (referring to the Chinese law) shall apply; if the application of different standards leads to different determinations of the validity of the arbitration agreement, law that determines the validity of the arbitration agreement shall apply. In judicial practice, courts have different ideas in adjudicating in the face of various agreed situations in commercial contracts. In Henan Kanghui Aviation Technology Co., Ltd. v. Jetstar Pacific Airlines Aviation Joint Stock Company,91 the parties expressly agreed the governing law, arbitration matters, arbitration language and place of arbitration in the contract. Based on Articles 13 and 16 of the Arbitration Law Interpretation, the court determined that the validity of the arbitration clause was governed by the law of the place of arbitration, i.e. the law of Vietnam. In Unicore Resources Pte Ltd v. Rizhao Zhongrui Native Produce Co., Ltd.,92 the arbitration clause in question provided that the dispute case would be arbitrated in Hong Kong, English law would apply. The court ruled that the agreement in question did not expressly stipulate the governing law of the validity of the arbitration clause, so the law of Hong Kong, the place of arbitration, should be applied to determine the validity of the arbitration clause. In Tianjin Zhongse International Trading Co Ltd v. Wangda International Trading Limited,93 the parties agreed that if the dispute or claim could not be settled through law and the place of arbitration or where agreement on the place of arbitration is unclear, the law of the place where the court is located shall apply.” 90 Article 14 of the Arbitration Judicial Review Provision: “A people’s court shall, when deciding the law applicable to the recognition of the effect of a foreign-related arbitration agreement under Article 18 of the Law of the People’s Republic of China on Choice of Law for Foreign-Related Civil Relationships, invoke the law recognizing the effect of the arbitration agreement, where neither party chooses an applicable law, and the application of the law in the place of the arbitral institution will lead to a recognition conclusion regarding the effect of the arbitration agreement different from that of the law in the place of arbitration.” 91 (2019) Yu 01 Min Te No.18. 92 (2016) Lu Min Xia Zhong No.78. 93 (2018) Zui Gao Fa Min Shen No. 6088.

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friendly negotiation, the case shall be referred to the arbitration institution (any branch of the CIETAC or HKIAC) where the respondent was located. The court held that, according to Article 18 of the Choice of Law for Foreign-Related Civil Relationships Law, the parties had not agreed on the applicable law of the arbitration agreement, but had agreed to submit the dispute to the arbitration institution where the respondent was located for arbitration. Since the defendant Wangda International Trading Limited was registered in Hong Kong and the dispute resolution institution pointed to the arbitration institution of Hong Kong, the law of the location of arbitration institution should be applied. The validity of the arbitration agreement shall be determined in accordance with the laws of Hong Kong. In Beijing Sunway Imp. & Exp. Co., Ltd. v. Ronald A. Chisholm Limited,94 judging from the “final binding arbitration” clause in Article 13 on the second page of the Order Confirmation, this clause does not indicate the law applicable to the validity of the arbitration agreement, but mentions that the place of arbitration and the location of the arbitration institution are both Toronto, Ontario, Canada, so Canadian law should be applied as the applicable law to determine the validity of the arbitration agreement. In Sanhe Construction pte. Ltd. v. Jiangsu Chundu Steel Structure Engineering Co., Ltd.,95 the parties agreed that if the disputes concerning the contract cannot be settled through friendly negotiation, they would submit the dispute to the Singapore Arbitration Commission for arbitration or Party B’s local court for arbitration. The court held that, the parties had not agreed on the applicable law of the arbitration clause, and there was no “Singapore Arbitration Commission” as an arbitration institution, nor had they agreed on the place of arbitration. Therefore, according to Article 18 of the Law on Choice of Law and Article 14 of the Choice of Law Interpretation, PRC law was applied to review the validity of the arbitration clause. As to the issue on the existence and establishment of foreign-related arbitration agreements, from the perspective of the wording of the law, Article 16 of the Arbitration Law Interpretation adopts the review on validity of foreign-related arbitration agreement. Article 12 of the Choice of Law Interpretation adopts “foreign-related arbitration agreements”. The expression in the Arbitration Judicial Review Provision is “recognition of the effect of an arbitration agreement”. In judicial practice, judging from the currently published precedents, the mainstream view is that the existence of foreign-related arbitration agreements and other related issues fall within the scope of review of the validity of foreign-related arbitration agreements in a broad sense, and the same governing law applies. In Honest May Limited v. Shenzhen Guodi Construction Engineering Co., Ltd.,96 Honest May Limited claimed that its director YXL’s signature in the arbitration agreement was not signed by YXL, the actual signatory did not obtain the authorization of Honest May Limited, and the parties did not reach an arbitration agreement. The case was heard by Shenzhen Intermediate People’s Court and then was reported 94

(2021) Jin 03 Min Zhong No.1985. (2019) Su Min Xia Zhong No.160. 96 (2015) Min Si Ta Zi No.36. 95

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to SPC for confirmation. The court held that, the case was on a dispute over an application for confirmation of the validity of an arbitration agreement involving Hong Kong, and the parties had not agreed on the law applicable to confirm the validity of the arbitration agreement. With reference to Article 18 of the Law on Choice of Law, the case should be examined by applying the law of the location of the agreed arbitration institution, i.e. Chinese mainland law. In Luck Treat Limited v. Shenzhen Zhongyuancheng Commercial Investment Holdings Co., Ltd.,97 the issue under review is that whether the arbitration clause has established. The court pointed out that the existence and validity of an arbitration agreement directly affect the dispute resolution method and were also prerequisite issues that need to be resolved. Therefore, requiring the confirmation that there was no arbitration agreement between the parties was also a broad objection to the validity of the arbitration agreement. When confirming the validity of an arbitration agreement, it is first necessary to determine the governing law. When questioned by the court, all parties expressly agreed to apply the laws of China to determine the validity of the arbitration agreement involved in the case. Therefore, according to Article 18 of the Law on Choice of Law, the arbitration agreement in this case shall be governed by the laws of China. In international arbitration, the standards and ideas for determining the governing law of foreign-related arbitration agreements vary from country to country. There are many discussions in theoretical and practical circles. How to find a reasonable balance between various factors such as the principle of validity of arbitration agreements and the principle of independence of arbitration agreements is still being explored in China’s legislation and judicial practice.

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(2019) Zui Gao Fa Min Te No.1.

Chapter 2

Parties and Participants

2.1 Additional Parties Applying for cancellation of the arbitral award is one of the remedies for the parties who refuse to accept the arbitration result. Article 58 of the Arbitration Law stipulates, “A party may apply for setting aside an arbitration award to the intermediate people’s court in the place where the arbitration commission is located if he can produce evidence which proves that the arbitration award involves one of the following circumstances …”. In this Article, a “party” shall refer to parties to the arbitration case, that is, the claimant or the respondent. Apart from parties to the arbitration case, the existing Chinese laws do not clearly stipulate that whether an additional party, who is not involved in the arbitration proceedings, has the right to apply to the court for cancellation of the arbitral award. If an additional party is connected to the arbitration case or has interests in the arbitration result, can it apply to the people’s court for cancellation of the arbitration award? In the following case, the people’s court confirmed that the entity applying to the court for revocation of the arbitration award must be the claimant or respondent of the arbitration cases. If a party is deregistered after the arbitral award has been made, the liquidation group is the qualified entity to apply to the court for setting aside the arbitration award. Ma v. Xunling Tengfeng Automotive Power Technology (Beijing) Co., Ltd.1 Ma applied to Beijing No. 4 Intermediate People’s Court for revocation of the arbitral award rendered by the Beijing Arbitration Commission. Ma claimed that Xunling Tengfeng Automotive Power Technology (Beijing) Co., Ltd. (“Xunling Company”)

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This Chapter is coauthored with Mingyang Chen, partner of Yi & Partners Law Firm.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 Y. Lin, China Arbitration Yearbook (2022), China Arbitration Yearbook, https://doi.org/10.1007/978-981-99-7165-7_2

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concealed evidence sufficient to affect the impartiality of the arbitral award, the arbitration proceedings violated the legal procedures. Ma was not only a shareholder of Huisite Company, but also the successor of rights after the company was deregistered. Therefore, Ma’s application for cancellation of the arbitral award in this case complied with the laws and regulations. Xunling Company rejected the application for cancellation of the arbitral award proposed by Ma. Xunling Company asserted that Ma was not a party to the arbitration case, so his application had no legal basis and he was not a qualified entity in this case. Beijing No. 4 Intermediate People’s Court held that this case was a judicial review case, and the claimant or respondent to the arbitration case should have the right to apply to the court for revocation of the arbitral award according to law. Ma applied to the court for revocation of the award rendered by Beijing Arbitration Commission, but the parties to the arbitration case were the claimant Xunling Company and the respondent Huisite Company. Ma argued that Huisite Company was deregistered after the arbitral award was made. He, as a shareholder during the company’s existence, was the successor of rights of Huisite Company, so he had the right to apply to set aside the arbitral award, of which Huisite Company was one of the parties. Upon examination, the court verified and confirmed that Huisite Company established a liquidation group with five shareholders before the deregistration, and the shareholders’ meeting resolved that “all outstanding matters after the deregistration shall be borne by all shareholders”. Therefore, Ma was unqualified to apply to set aside the arbitral award in his own name. In the reply to the High People’s Court of Beijing Request for Instructions on Whether the People’s Court Should Accept the Application of a Third Party for Revocation of an Arbitral Award, the SPC pointed out2 that, the “parties” specified in Article 70 of the Arbitration Law referred to the claimant or respondent of the arbitration case. Pro-Justice Group Limited was not the claimant or respondent of the arbitration case, and the company did not have the qualification to apply for revocation of the arbitral award. Therefore, the court shall not accept the application. In the above case, Beijing No. 4 Intermediate People’s Court first affirmed that the qualified entity to apply for revocation of the arbitral award should only be parties to the arbitration case. Based on this, the court further determined that if one party was deregistered after the arbitral award was rendered, the shareholder was not a qualified entity to apply for the revocation of the arbitral award in its own name. According to the relevant provisions of the Company Law, the liquidation group shall exercise the corresponding functions during the process of deregistration. Therefore, the liquidation group, on behalf of the company, applying for revocation of the arbitral award did not go beyond the scope of parties to the arbitration case. In the case of Beijing Changping Zhaofeng Village Town Bank Co,.Ltd v. Yan,3 Beijing No. 4 Intermediate People’s Court also clearly confirmed that the “parties” specified in Article 58 of the Arbitration Law referred to the claimant or respondent of the 2 3

[2001] Min Li Ta Zi Di No.36. (2020) Jing 04 Min Te No. 406.

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arbitration case, and Changping Bank was not the claimant or respondent of the arbitration case, so it was not eligible to apply for cancellation of the arbitral award. However, in the judicial review of some local courts, there have been cases where an additional party is allowed to apply for cancellation of the arbitral award under certain circumstances. Article 23 of the Provisions of the Higher People’s Court of Shaanxi Province on Several Issues Concerning the Trial of Domestic Civil and Commercial Arbitration Cases,4 issued in December 2010, stipulates that if an additional party claims rights on the subject matter determined in the arbitral award and settlement agreement, it may apply to the intermediate people’s court in the place where the arbitration institution is located for revocation within 3 months from the date when it knows or should know the arbitral award is rendered. Apart from these, as to applying for confirmation of the validity of the arbitration agreement or refusing to enforce the arbitral award, are parties to the arbitration case the only qualified entities? Article 20 of the Arbitration Law specifies, “If a party challenges the validity of the arbitration agreement, he may request the arbitration commission to make a decision or apply to the people’s court for a ruling.” It can be seen that the qualified entity of applying for confirmation of the validity of the arbitration agreement is still limited to parties to the arbitration case. In Yunji Hotel v. Shaoxing Lejia Property Management Co., Ltd.,5 Shaoxing Intermediate People’s Court found that, Yunji Hotel applied to this court to confirm that the arbitration agreement involved in the case was invalid after receiving the Notice of Defense and other arbitration materials from Shaoxing Arbitration Commission. This complied with the provisions of law in procedure. However, in substantive issues, the said arbitration agreement was recorded in the Property Management Service Contract signed by Lejia Company and another party. Since Yunji Hotel was not a party to the Property Management Service Contract, and the arbitration agreement also involved the interests of another party, Yunji Hotel’s application for confirmation of invalidity of the arbitration agreement lacked factual and legal basis. As to additional parties to apply for not enforcing the arbitral award, there are clear legal provisions in Chinese laws. According to Article 9 of the Arbitration Enforcement Provision, three conditions shall be met for an additional party to apply to the people’s court for not enforcing an arbitral award or a settlement agreement: (1) There is evidence to prove that parties to the arbitration initiate the arbitration case with bad faith or bring a false arbitration, which damages the legitimate rights and interests of the additional party; (2) The subject matter, which the additional party claims legal rights and interests in the execution procedure, has not been executed; (3) The application shall be submitted to the people’s court within 30 days after the date on which the additional party knows or should know that the court has taken enforcement measures against the subject matter.

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Another related issue is whether the arbitration institution, as an additional party to the arbitration case, can correct itself and voluntarily revoke the arbitral award when it finds errors in the arbitral award? The Civil Procedure Law regulates that a clear mechanism for correcting errors for the people’s courts who finds any verified error in a legally effective judgment, ruling or settlement agreement. But arbitration is different from litigation. Article 58 of the Arbitration Law only provides that parties to the arbitration case have the right to apply for revocation of the arbitral award, but no other provisions of law state that the arbitration institution can revoke the arbitral award on its own. Although the arbitration rules usually stipulate that the arbitral tribunal may make corrections to the arbitral award, the corrections generally refer to any clerical, typographical or computational errors, which is essentially different from the application for cancellation of the arbitral award due to dissatisfied with the arbitration result.6 It is generally believed that, whereas there is no clear legal regulations for the arbitration institution to cancel the arbitral award on its own initiative, so the arbitration institution’s behavior of canceling the arbitral award is without merit and is against the basic principle of “first award being the final”. Zhejiang Provincial Department of Justice once gave guidance to Jinhua Municipal Legal Affairs Office on the Request for Instructions on Whether Arbitration Institutions can Cancel Arbitral Awards on Their Own.7 According to the contents of this guidance, the Arbitration Law stipulates that “disputes shall be fairly and reasonably settled by arbitration on the basis of facts and in accordance with the relevant provisions of law”. The arbitration commission shall abide by this principle and correct the arbitral award that does not conform to the facts and legal provisions in accordance with the arbitration rules. Meanwhile, since the intermediate people’s court in the place where the arbitration commission is located has the power to review and cancel the arbitral award according to law, the arbitration commission should actively listen to the advice of the intermediate people’s court.

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Article 54 of the SCIA Arbitration Rule: “(1) Within thirty (30) days after its receipt of the arbitral award, either party may request the arbitral tribunal in writing for a correction of any clerical, typographical or computational errors, or any errors of a similar nature contained in the award. If such an error does exist in the arbitral award, the arbitral tribunal shall make a correction in writing within thirty (30) days of receipt of the written request for the correction; (2) Either party may, within thirty (30) days from its receipt of the arbitral award, request the arbitral tribunal in writing for an additional award on any claim which was advanced in the arbitration proceedings but was omitted from the arbitral award. If such an omission does exist, the arbitral tribunal shall render an additional award within thirty (30) days of receipt of the written request. (3) The arbitral tribunal may, on its own initiative, make corrections of the arbitral award or render additional award in writing, within a reasonable time period after the arbitral award is rendered. (4) Such correction of award or additional award in writing shall form a part of the arbitral award.” 7 Zhe Fu Fa Fa (2010) No.57.

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2.2 Corporation Deadlock In arbitration practice, when an arbitration institution accepts an arbitration case, the party that initiates the arbitration proceedings is usually requested to provide the identification materials, such as the company registration materials. The arbitration rules of the arbitration institution may have corresponding provisions. For example, Article 11 of SCIA Arbitration Rules stipulates that evidentiary materials and identification documents of the Claimant shall be attached to the Request for Arbitration. The official seal of a company is generally held and controlled by its legal representative, which represents the will of the legal representative and is also considered as representing the will of the company. But sometimes, the person who holds the company’s official seal is not the legal representative, especially when a corporate deadlock occurs. Then here arises the question, who has the right and power to conduct arbitration proceedings on behalf of the company? In other words, sometimes, the company initiates arbitration as the Claimant with the official seal, but the legal representative may not agree to initiate the arbitration proceeding. At this time, the will of the legal representative conflicts with that of the company. In the following case, the people’s court considered that under the circumstances of “separation of person and seal”,8 the legal representative should be deemed as representing the will of the company, unless the seal-controller can provide effective evidence to prove that the will of the company is not the will expressed by the legal representative. Star Pipe Products, Ltd. v. Dachang Huaxing Foundry Co., Ltd.9 Star Pipe Products, Ltd. (“Star Company”) of the United States requested to cancel the arbitral award made by CIETAC. During the arbitration stage, one of the key disputes was “who has the right to represent Dachang Huaxing Foundry Co., Ltd.” Star Company believed that, the initiation of the arbitration case was illegal and it didn’t represent the real intent of Dachang Huaxing Foundry Co., Ltd. (“Huaxing Company”), therefore CIETAC had no jurisdiction on the arbitration case. In fact, the application for arbitration was submitted by FZH, vice chairman of Huaxing Company, only with a photocopy of an Appointment Letter dated on June 17, 2004. The authenticity of the Appointment Letter was in doubt. The arbitral tribunal held that, “although FZH only submitted a photocopy of the Appointment Letter, but Qigezhuang Credit Union of Dachang County provided a Statement, which said “the copy is identical with the original copy”. What’s more, both parties recognized the fact that Mr. Navin Bhargava has not worked in China and Huaxing Company for a long time, Mr. FZH, as the vice chairman and general manager, was actually in charge of the company’s daily operation (including the settlement of credits and debts)”. Therefore, the arbitral tribunal believed that the authenticity of the contents of the Appointment Letter should be accepted. But the Statement itself was neither original 8

“Separation of Person and Seal” in this article means the official seal of a company is held and controlled by a person, other than its legal representative. 9 (2018) Jing 04 Min Te No.304.

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nor cross-examined in the hearing. The arbitral tribunal refused Star Company’s application for requiring Qigezhuang Credit Union of Dachang County to testify in the hearing. This violated the provisions of Article 55 of the Several Provisions of the Supreme People’s Court on Evidence in Civil Proceedings, which provides “The witness shall appear in court to testify and accept the inquiries of the parties”. Therefore, both the Statement and the Appointment Letter should not be accepted. In addition, the arbitral tribunal held that, “After confirming that FZH has the right to file an arbitration application on behalf of Huaxing Company, Mr. Navin Bhargava, the legal representative of Huaxing Company, has no right to withdrawal the application on behalf of Huaxing Company in this case”. According to the Civil Procedure Law and other relevant laws and regulations, the legal representative did not lose relevant rights by authorizing others. The above-mentioned decisions of the arbitral award were equivalent to a direct denial of the rights and legal status of the legal representative given by China’s mandatory laws. The contents of the arbitral award also showed that Star Company reminded the tribunal to pay attention to Article 10 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II).10 Therefore, even if the above Appointment Letter was assumed to be true (Star Company denied this), after the company entered into the liquidation state, not only the original Appointment Letter lost its effectiveness, but the provisions of law even put the legal representative with the label “original” to indicate that the company to be liquidated could no longer engage in business activities, and any litigation involving the company should be attended by the original legal representative on behalf of the company. In other words, before the formation of the liquidation group, only the original legal representative had the right to sue and/or respond to the lawsuit on behalf of Huaxing Company. When determining that “Huaxing Company has the right to claim rights against the debtor on its own”, the arbitral tribunal deliberately avoided the mandatory legal provisions on who had the right to claim rights against the debtor on behalf of Huaxing Company under this circumstance. The arbitral tribunal, based on the so-called Appointment Letter that had long expired, rendered an award that seriously violated Huaxing Company’s will. The arbitral award should be canceled. Huaxing Company argued that, the arbitral award should be canceled. According to the provisions of Article 10 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II), both this lawsuit and the arbitration case should be attended by Mr. Navin Bhargava, the original legal representative, on behalf of Huaxing Company, or by other agent appointed by Mr. Navin Bhargava in the name of Huaxing 10

Article 10 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II): “Before the completion of the liquidation and the cancellation of registration of the company in accordance with the law, the civil proceedings concerning the company shall be conducted in the name of the company… … If a liquidation group has not been established, the original legal representative shall participate in the proceedings on behalf of the company.”

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Company. The copy of the Appointment Letter dated on June 17, 2004 provided by FZH was not authentic. Mr. Navin Bhargava confirmed that Huaxing Company had never held a board meeting on the contents involved the Appointment Letter, let alone made any board resolution. The copy of the Appointment Letter was illegible, obviously not a direct copy of the original. The Statement provided by Qigezhuang Credit Union of Dachang County had no signature or seal of the person in charge of the unit and no contact information. According to the relevant provisions of the Civil Procedure Law and the rules of evidence, the witness should testify in court. During the period of review, Beijing No.4 Intermediate People’s Court listened to FZH, vice chairman and general manager of Huaxing Company and holding the official seal of Huaxing Company, who entrusted a lawyer in the name of Huaxing Company. This party asked the court to reject the application of Star Company: First, the initiation of arbitration was the true intention of Huaxing Company, and CIETAC had indisputable jurisdiction over the arbitration case. Second, the expiration of the cooperation period was only the reason for the dissolution of a company. Huaxing Company did not enter into the liquidation procedure so far, and the legal representative had no right to file a lawsuit on behalf of Huaxing Company. Third, the two resolutions of the board of directors of Huaxing Company had been confirmed to be revoked by effective judgments, and the authenticity of the Appointment Letter couldn’t be denied. To sum up, the reasons that Star Company requested to cancel the arbitral award were not valid. Basic facts confirmed in the court trial: Huaxing Company was a Sino-foreign joint venture, and its foreign shareholder (holding 51% of shares) was Star Company. The legal representative and chairman of Huaxing Company, Mr. Navin Bhargava, was appointed by Star Company. The Chinese shareholder was Xingda Company (holding 49% of shares). FZH, vice chairman and general manager of Huaxing Company, was appointed by Xingda Company and actually took charge of the daily operation of Huaxing Company. The official seal of Huaxing Company was kept by FZH. In addition, Feng also held a copy of the Appointment Letter (original in English), which mainly stated that the board of directors of Huaxing Company decided to appoint FZH as the vice chairman of the board of directors, responsible for managing the company’s casting, credits and debts. The Appointment Letter showed the signature of Mr. Navin Bhargava, “chairman of the board of directors of Huaxing Company”. Beijing No. 4 Intermediate People’s Court held that, one of the key disputes of this case was who had the right to represent Huaxing Company under the circumstances of separation of person and seal. Under the legal system of Chinese law, the official seal was an important external manifestation of the company’s will, but the official seal itself was only the company’s property existing in physical form and could not represent the company’s will. Holding and using the official seal was an objective state. The act of using the official seal could be presumed that the holder of the official seal has the right to make the corresponding declaration of will on behalf of the company. However, if there was contrary evidence, the above presumption could be overturned, so it was still necessary to examine the corresponding evidence to make sure

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whether the holder had obtained the corresponding authorization to make a declaration of will. Besides, according to the basic system of the Company Law, the legal representative was the representative organ of the company’s will and was the natural representative subject of the company’s will. The declaration of will made by the legal representative in the name of the company shall be regarded as the will of the company in the absence of negative evidence. When the situation of ‘separation of person and seal’ occurred, it meant there was a problem with the governance of the company, then it needed to be reviewed and determined whether the legal representative or the seal-holder could represent the will of the company according to the rules of corporation autonomy. The legal representative should be recognized preferentially as representing the will of the company, but if the seal-holder could provide valid evidence to prove that the company’s will was not the intention expressed by the legal representative, then the company’s will should be judged by the evidence. In this case, FZH affixed the seal of Huaxing Company to the application for arbitration and submitted it to CIETAC. CIETAC’s acceptance of the application for arbitration of Huaxing Company did not violate any legal procedure. After that, Mr. Navin Bhargava, the legal representative of Huaxing Company, proposed to CIETAC to withdraw the arbitration application in the name of Huaxing Company, which shall be deemed as the will of Huaxing Company. Huaxing Company was a Sino-foreign cooperative enterprise, and its highest authority was the board of directors. If FZH, as the holder of the official seal, believed that the intention of Mr. Navin Bhargava to withdraw the arbitration application on behalf of Huaxing Company was contrary to the true will of Huaxing Company, he shall submit to CIETAC a resolution of the board of directors on the matter of continuing the arbitration proceedings. Otherwise, it should be recognized that the declaration of will made by Mr. Navin Bhargava represented the will of Huaxing Company. However, in fact, there was no such resolution of the board of directors. On this basis, this court believed that Huaxing Company had withdrew the arbitration application to CIETAC during the arbitration period. The court also stated that, it should be noted that the arbitral tribunal also reviewed the same issue mentioned above. However, the conclusion of the arbitral tribunal was contrary to that of this court. The arbitral tribunal held that the board of directors of Huaxing Company had made a resolution on June 17, 2004 authorizing FZH to be responsible for the production and sales, as well as the collection and settlement of the company’s credits and debts. Because of this authorization, FZH could deal with the debts in the name of Huaxing Company without the additional authorization of Huaxing Company. What’s more, there was conflict of interests between Mr. Navin Bhargava and Star Company in this case, therefore, it was justifiable for FZH to represent Huaxing Company. In this regard, the court believed that, on the one hand, there was doubt about the authenticity of the Appointment Letter dated on June 17, 2004. And even if the Appointment letter was real, it was not a resolution of the board of directors, only a circumstantial evidence signed by the chairman of the board. The so-called resolution of the board of directors was not enough to determine that FZH obtained the privilege of exceeding the legal representative (In fact, under the legal representative system

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stipulated by Company Law, no one can obtain such privileges), and it was not enough to overturn the declaration of will made by Mr. Navin Bhargava on behalf of Huaxing Company from 2015 to 2016. On the other hand, Mr. Navin Bhargava was appointed by Star Company to act as the director, chairman and legal representative of Huaxing Company. There was conflict of interests in this case indeed, but it couldn’t deny the legal status of Mr. Navin Bhargava as the legal representative of Huaxing Company. FZH and Xingda Company which he represented should safeguard their rights and interests through the internal governance mechanism of the company. In particular, before applying for arbitration, the operation period of Huaxing Company had expired on July 1, 2015, which already met the legal conditions for dissolution of the company. But up to now, Huaxing Company did not establish a liquidation group to carry out liquidation. According to Article 10 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II), the legal representative shall participate in the litigation on behalf of the company at this time. Therefore, even if the board of directors of Huaxing Company once authorized FZH to represent Huaxing Company, the authorization shall automatically become invalid due to the dissolution of Huaxing Company. Mr. Navin Bhargava, the legal representative of Huaxing Company, shall conduct litigation or arbitration on behalf of the Company. The arbitral tribunal found that it was more justifiable for FZH to represent Huaxing Company because of Mr. Navin Bhargava’s problem of conflict of interests, and this violated the basic rules of the Company Law and was obviously inappropriate. Based on the above analysis, the court believed that Mr. Navin Bhargava, on behalf of Huaxing Company, had clearly proposed to CIETAC to withdraw the arbitration application. Based on the rules of autonomy in arbitration system and the provisions of Article 46 of the Arbitration Rules, CIETAC had no right to refuse Huaxing Company’s declaration of will to withdraw the arbitration application. After Mr. Navin Bhargava submitted an application for withdrawal of arbitration application on behalf of Huaxing Company to CIETAC, the arbitration proceedings shall be terminated. However, CIETAC and the arbitral tribunal continued the arbitration proceedings and rendered an award, which constituted unauthorized arbitration and violation of the arbitration rules, and met the legal conditions for revocation of the arbitral award. Beijing No.4 Intermediate People’s Court reported to the higher people’s court for review according to Article 2(1) of the Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review. The SPC held that, the core issue of this case was whether FZH, Vice Chairman of Huaxing Company, had the right to apply for arbitration on behalf of Huaxing Company. According to the facts reflected in the case materials, the Appointment Letter held by FZH recorded that “the board of directors of Dachang Huaxing Foundry Co., Ltd. decides to appoint FZH as the Vice Chairman of the board of directors, and to be responsible for managing the company’s casting, credits and

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debts”. The Appointment letter was signed by Mr. Navin Bhargava, the legal representative of Huaxing Company. Mr. Navin Bhargava did not deny the authenticity of the signature. Although the Appointment Letter submitted by FZH was a copy, it was supported by a Statement issued by Qigezhuang Credit Union of Dachang County which noted that “the copy is identical with the original copy”. FZH was actually responsible for the daily operation of Huaxing Company, and kept the company’s official seal, which was consistent with the contents stated in the Appointment Letter. The arbitral tribunal accepted the Appointment Letter based on the facts and evidence, which fell within the scope of discretion of the arbitral tribunal in its analysis and determination of evidence. On the condition that the arbitral tribunal confirmed the authenticity of the Appointment Letter, FZH, authorized by the board of directors of Huaxing Company, had the right to deal with the company’s credits and debts. Therefore, the arbitral tribunal’s decision on not allowing Mr. Navin Bhargava to withdraw the arbitration application did not constitute a violation of the arbitration rules in the arbitration proceedings. The above subject case involves the special situation of “separation of person and seal”, which means the legal representative is not the person who holds and controls the official seal of the company. Once there is conflict of interests between the legal representative and the seal-controller, a dispute may arise as to who has the right to represent the company. Generally speaking, there are two main views in practice. One view is that, based on Article 61 of the Civil Code11 and Article 51 of the Civil Procedure Law,12 the legal representative, as the natural representative organ of the will of the legal person, is the natural subject of the will of the legal person. The act of the legal representative in the name of the company shall be deemed as the act of the company. In case of conflict of interests between the legal representative and the seal-controller, the act of the legal representative shall prevail. If the controller only holds the official seal and has not been authorized by the legal representative, then he/she has no right to file a lawsuit or respond to a lawsuit on behalf of the company. Another view is that in case there is conflict of interest between the legal representative and the seal-controller, if the seal-controller has clear evidence to prove that he can represent the company’s will, and the evidence is sufficient to deny that the legal representative as the representative of the company’s will, then the seal-controller can be deemed that has made a declaration of will on behalf of the company. Otherwise, the legal representative is the natural person representative of the company. The Conference Minutes (Draft for Comments) once stipulated such “separation of person and seal” circumstance, but it was deleted in the later official draft. Article 30 defined that: “serious conflict of interests between shareholders of the company may lead to the situation that the legal representative does not hold the official seal and 11

Article 61 of the Civil Code: “The legal consequences of the civil activities conducted by the legal representative in the legal person’s name shall be assumed by the legal person.” 12 Article 51 of the Civil Procedure Law: “Legal persons shall be represented in litigation by their legal representatives. Other organizations shall be represented in litigation by their officers in charge.”

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the person holding the official seal is not the legal representative when the company files a lawsuit.” At present, no common understanding has been reached in judicial practice on the judgment of who can sue on behalf of the company. In order to avoid excessive judicial intervention in the internal governance of the company, the people’s court should inform the relevant parties to resolve the internal disputes of the company first, and then bring a lawsuit to the people’s court after achieving the consistency of the person and the seal. Before that, the lawsuit, whether it is filed by the legal representative who does not hold the official seal on behalf of the company or by the person who holds the official seal on behalf of the company, shall be dismissed. Another example can be found in Beijing Shoushang Dingfuzhuang Cultural Industry Development Co., Ltd. v. Beijing Beiqi Hengsheng Real Estate Co., Ltd.13 Beijing No.4 Intermediate People’s Court first affirmed that the legal representative had the right to engage in civil activities in the name of the legal person according to the provisions of Article 61 of the Civil Code. After the case was accepted, the legal representative of Beijing Shoushang Dingfuzhuang Cultural Industry Development Co., Ltd. (“Shoushang Company”) withdrew the application for revocation of the arbitral award, and claimed that the application couldn’t represent the will of the company. The court held that, the two shareholders of Shoushang Company were fighting for the right to file a lawsuit, and each held 50% of shares of the company. These two shareholders did not reach an agreement on the contents of the arbitral award. Therefore, based on the existing evidence, the court could not confirm the true will of Shoushang Company, which did not satisfy the acceptance conditions regulated by law. Shoushang Company’s application should be rejected. It should be noted that the court’s decision of the parties’ litigation behavior must be consistent. If a lawsuit is filed in the name of the company with an official seal, when it comes to withdrawing of the lawsuit, the very same official seal, not just the signature of the legal representative, shall be deemed as representing the company’s will. Similarly, if the legal representative files a civil complaint, it should be for the legal representative to sign the relevant documents and withdraw the lawsuit, not just by the company with the official seal alone. In case of conflict of interest, the court should decide how to move forward the procedure considering the specific situation of the case.

2.3 Guarantors In modern commerce, the parties sometimes may conclude multiple contracts for one transaction. They may sign corresponding supplementary contracts or guarantee contracts based on the principal contract. Since the principal contract and the accessory contract are not always concluded at the same time, and the parties to the 13

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contracts are probably not legal professionals, there may be no dispute resolution clause in the accessory contract or the dispute resolution clause is unclear. Take the guarantee contract as an example, according to relevant laws and regulations, the guarantee contract is subordinate to the principal contract. If the principal contract is null and void, then the guarantee contract shall be null and void as well. Does this mean that the methods of dispute resolution should also be subordinate to the principal contract when there is no dispute resolution clause in the accessory contract or the clause is unclear? In addition, although the validity of the guarantee contract is subordinate to the principal contract, the specific contents between the principal contract and the guarantee contract are independent to a certain extent, especially when a third party provides a guarantee. Under this situation, how to deal with the jurisdiction problem between the principal contract and the accessory contract? In the following case, the people’s court held that the Letter of Guarantee was an integral part of the Equity Transfer Agreement and was subject to the arbitration clause of the Equity Transfer Agreement. Li v. Ningxia Wan’an Tiancheng Equity Investment Center (Limited Partnership)14 Li applied to Beijing No. 4 Intermediate People’s Court to set aside the arbitral award rendered by CIETAC. Li claimed that there was no arbitration agreement for the disputes arising from the Letter of Guarantee, therefore CIETAC had no jurisdiction over the disputes, and the arbitral award should be set aside. The reasons were as follow: (1) There was no arbitration agreement reached by the arbitration parties in the Letter of Guarantee, nor was there any arbitration agreement between the parties afterwards, so CIETAC had no right to make an award according to the Letter of Guarantee. (2) Li didn’t sign the Equity Transfer Agreement, and Letter of Guarantee was signed separately by Li and Ningxia Wan’an Tiancheng Equity Investment Center (Limited Partnership) (“Wan’an Company”). These two documents were not contained in the same contract, so Li could not know the provisions of Article 8.1, Article 15 and Article 16.2 of the Equity Transfer Agreement. Apart from this, the Letter of Guarantee only specified the guarantee relationship and guarantee matters, but did not specify that it was an annex to the Equity Transfer Agreement or an integral part of the Equity Transfer Agreement. (3) The Equity Transfer Agreement, signed among Wan’an Company, Beijing Maidijin Biotechnology Co., Ltd. and Mr. Lu Yang, indicated a legal relationship of equity transfer, while the Letter of Guarantee, signed between Li and Wan’an Company, set up a legal relationship of guarantee. These two were completely different from each other. (4) The arbitration proceeding was the full embodiment of the autonomy of will of the parties, which was different from the compulsory jurisdiction of the litigation 14

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system. The arbitration institution had no right of compulsory jurisdiction over any party, and only the people’s court could exercise the corresponding judicial compulsory jurisdiction. To sum up, the arbitral award, which involved the situations of “no arbitration agreement between the parties” and “the matters of the award are beyond the extent of the arbitration agreement” as regulated in Article 58 of the Arbitration Law, shall be revoked. Wan’an Company argued that, first, the Letter of Guarantee was made according to Article 8.1 of the Equity Transfer Agreement. It was a refinement of Article 8.1 of the Equity Transfer Agreement and an annex to the Equity Transfer Agreement. The Letter of Guarantee and the Equity Transfer Agreement were inseparable. The arbitration clause in the Equity Transfer Agreement was certainly applicable to the Letter of Guarantee. Second, the guarantor that signed the Letter of Guarantee was the original shareholder of the target company and the beneficiary of this equity transfer. All shareholders knew the transfer of equity. It was clearly stated in the “whereas” section of the Letter of Guarantee that the commitment party and the guarantor made commitments in accordance with the provisions of the Equity Transfer Agreement. Li stated in the application that he did not know the provisions in Article 8.1, Article 15 and Article 16.2 of the Equity Transfer Agreement were inconsistent with the facts and the common sense. Third, Li did not raise an objection to the validity of the arbitration agreement within the statutory period specified in the Arbitration Law. It shall be deemed that he agreed to apply the arbitration clause in the Equity Transfer Agreement to resolve disputes. Beijing No. 4 Intermediate People’s Court considered that the focus of the dispute in this case was whether there was an arbitration agreement between Li and Wan’an Company, and whether Li, as the guarantor of the Letter of Guarantee, was bound by the arbitration clause in the Equity Transfer Agreement. In the court’s opinion, first of all, from the text of the Letter of Guarantee, the facts determined by the arbitral tribunal and the review of the court, Li, as a shareholder of the company, knew the existence of the Equity Transfer Agreement. Second, according to the contents of the Equity Transfer Agreement, the Letter of Guarantee was an integral part of the Equity Transfer Agreement and shall be subject to the arbitration clause of the Equity Transfer Agreement. Finally, Li raised a jurisdictional objection to CIETAC, and CIETAC determined that it had jurisdiction based on the facts of the case and rejected Li’s application for jurisdictional objection, which was confirmed by the court. To sum up, the court did not support Li’s claim. According to Article 129 of the Guarantee Law Interpretation, if the principal contract states that relevant disputes shall be resolved by litigation, and there is no clear agreement about jurisdiction clause in the accessory contract or the agreement is in conflict with that of the principal contract, the court of jurisdiction shall be determined according to the agreement in the principal contract.

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However, arbitration is different from litigation. The arbitration system emphasizes the autonomy of the parties. The only basis for arbitration institutions to accept a case is the arbitration agreement. In the absence of a clear agreement between the parties, the arbitration clause agreed in the principal contract cannot bind the guarantee contract as an accessory contract. In Chengdu Youbang Stationery Co., Ltd. v. WGJ,15 SPC held that there was no arbitration clause in the guarantee contract, and the arbitral tribunal’s opinion that the principal contract had arbitration clauses and the guarantee contract as an accessory contract should be bound by the arbitration clauses in the principal contract, lacked legal basis. The arbitral tribunal heard and made an award on the guarantee contract without an arbitration clause. Therefore, SPC supported the grounds of the guarantor to apply for revocation of the arbitral award involving the guarantor’s part were valid. In the above Li v. Ningxia Wan’an Tiancheng Equity Investment Center (Limited Partnership),16 the Letter of Guarantee did not have an arbitration clause, but the arbitral tribunal and the court still held that the arbitration clauses agreed in the principal contract were binding on the guarantee contract, mainly because the Letter of Guarantee constituted an integral part of the Equity Transfer Agreement in substance. Similarly, in Kunshan Liti Chengshi Tongying Investment Center (limited partnership) and Kunshan Tridimensional City Investment Management Co., Ltd.,17 Beijing No. 4 Intermediate People’s Court held that, Supplementary Agreement II and the Service Agreement as the principal contract were integrated in form and substance. Supplementary Agreement II was attached to the principal contract and could not exist independently. The arbitration clause in the Service Agreement extended to Supplementary Agreement II. It can be seen that, when dealing with the issue of arbitration jurisdiction between the principal contract and the accessory contract, the content, form and relationship between the principal contract and the accessory contract, and the specific facts of the case must be taken into account, so as to determine whether the effectiveness of the arbitration clause of the principal contract should extend to the accessory contract. Some judicial documents that issued recently seem to have some conflicts over the jurisdiction of the principal and accessory contracts. Article 21 of the Supreme People’s Court’s Interpretation of the Civil Code of the People’s Republic of China on the Application of the Security System stipulates that, if the principal contract or the security contract has agreed on arbitration clauses, the people’s court has no jurisdiction over disputes between the parties to the contract that have agreed on arbitration clauses. On July 30, 2021, the Ministry of Justice issued the revised Arbitration Law (Draft for Comments), which stipulates in Article 24 that, if a dispute involves a principal contract and an accessory contract, but the arbitration agreements in the principal contract and the accessory contract are inconsistent, the agreement in the principal contract shall prevail. If there is no arbitration agreement in the accessory contract, 15

(2013) Min Si Ta Zi No.9. (2021) Jing 04 Min Te No.792. 17 (2020) Jing 04 Min Te No. 507. 16

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the arbitration agreement in the principal contract shall be valid for the parties to the accessory contract. On January 24, 2022, SPC issued Minutes of the National Foreign-related Commercial and Maritime Trial Work Conference, of which Article 97 stipulates that, if the principal contract and the accessory contract have different ways of dispute resolution, which is litigation and arbitration respectively, the ways of dispute resolution should also be determined respectively according to the provisions in the principal contract and the accessory contract. If the parties to the principal contract agree on the arbitration agreement, but the accessory contract does not agree on the way of dispute resolution, the arbitration agreement in the principal contract cannot bind the parties to the accessory contract, unless the parties to the principal contract and that of the accessory contract are the same. When judging the issue of jurisdiction involving guarantee contract, the elements of rationality and autonomy of will need to be considered. Litigation and arbitration are two parallel dispute resolution methods. When the principal contract and the accessory contract have agreed on litigation and arbitration jurisdiction respectively, they should be handled separately according to their respective agreements. The dispute resolution method of the accessory contract cannot be determined simply and generally according to the agreement of the principal contract. However, when the parties to the principal contract and the accessory contract are the same, if the principal contract contains arbitration clauses while the accessory contract does not conclude on dispute resolution, it is reasonable to expand the scope of arbitration clauses of the principal contract to the accessory contract. Under the circumstance of the parties the principal contract and the accessory contract are not entirely consistent, or the principal contract and the accessory contract have agreed on different arbitration institutions, if the jurisdiction is still determined in accordance with the arbitration agreement in the principal contract, then it is a serious violation of the agreement of the parties and is not consistent with the principle of voluntary arbitration.

2.4 Undisclosed Agent Article 925 of the Civil Code stipulates that, “Where an agent, acting within the scope of authority granted by the principal, concludes a contract with a third person in his own name, if the third person is aware of the agency relationship between the agent and the principal, the said contract shall directly bind the principal and the third person, unless there is definite evidence establishing that the said contract binds only the agent and the third person.” In an undisclosed agency relationship, there are three roles: the principal, the agent and the third person. Generally, the principal will not directly sign or participate in the transaction contract containing arbitration clause. When the agent has disputes with a third person, whether the principal is bound by the arbitration clause signed by the agent and the third person is in dispute. If the principal is bound by the arbitration clause, on the one hand, it is helpful to solve

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the disputes between the parties efficiently and quickly; on the other hand, it may violate the principle of relativity of contract and voluntary arbitration. In the following case, the people’s court held that if the third party knew and recognized the agency relationship between the principal and the agent, the arbitration clause was binding on the principal. Ivathem S.R.L v. SHINES (Shanghai) International Trading Co., Ltd.18 The applicant Ivatherm S.R.L applied to the people’s court to cancel the arbitral award made by CIETAC. Ivatherm S.R.L claimed that there was no arbitration agreement between Ivatherm S.R.L and SHINES (Shanghai) International Trading Co., Ltd. (“SHINES”). When concluding the Distribution Agreement, CW, the actual controller of SHINES, never disclosed that SHINES and Jiangsu Huihong International Group Pharmaceutical and Health Products Import and Export Company (“Huihong Company”) had an agency relationship, nor did Ivatherm S.R.L know about their relationship. At the time of signing the Distribution Agreement, SHINES had not been established, so Ivatherm S.R.L could not enter into a contract with it. If Ivatherm S.R.L knew that Huihong Company was the agent of SHINES, Ivatherm S.R.L would not enter into a Distribution Agreement at all. Similarly, at the time of signing the Agency Import Agreement, SHINES had not been established, and Huihong Company could not enter into the Distribution Agreement as an agent, so no agency relationship could be established between them. During the conclusion and performance of the Distribution Agreement, Huihong Company and/or SHINES never informed Ivatherm S.R.L of the agency relationship between them, and Ivatherm S.R.L never regarded SHINES as the counterparty to the contract. Until the termination of the Distribution Agreement, SHINES still did not disclose the identity of the principal, and Ivatherm S.R.L was unable to know the agency relationship. Based on the above, Ivatherm S.R.L believed that there was sufficient evidence to prove that SHINES was not the counterparty to the Distribution Agreement. There was no arbitration agreement between Ivatherm S.R.L and SHINES, and the arbitral award should be revoked. The respondent SHINES argued that the focus of the case was whether the arbitration clause of the Distribution Agreement bound on Ivatherm S.R.L and SHINES. SHINES submitted enough evidence to prove that it was SHINES that communicated with Ivatherm S.R.L directly all the time during the transaction. Ivatherm S.R.L knew the agency relationship between Huihong Company and SHINES from beginning to end, and did not raise any objection to the identity of SHINES from 2015 to 2019. As a result, SHINES claimed that Ivatherm S.R.L’s reasons for revoking the award were insufficient and should be rejected. Beijing No. 4 Intermediate People’s Court held that the actual dispute between the two parties was whether SHINES was the principal in the undisclosed agency relationship as stipulated in Article 402 of the Contract Law,19 and whether SHINES 18

(2020) Jing 04 Min Te No.570. Article 402 of the Contract Law stipulates that, where an agent, acting within the scope of authority granted by the principal, concludes a contract with a third person in his own name, if the

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could be involved in the Distribution Agreement signed between the agent Huihong Company and Ivatherm S.R.L. According to the facts that had been found out, during the period of negotiation between Ivatherm S.R.L and Huihong Company, CW, as the actual controller of SHINES, participated in the negotiation of the terms of Distribution Agreement. He informed, before the Distribution Agreement was officially signed, Luke Sandra of Ivatherm S.R.L that he had established a company in Shanghai and made corresponding preparations for signing the contract. In combination with the fact that SHINES had always performed the Distribution Agreement as an actual dealer, and Ivatherm S.R.L directly negotiated with SHINES about compensation for product quality problems, and Luke Sandra attended SHINES’s dealer conference held in Shanghai, and Ivatherm S.R.L never raised identity objections to CW and SHINES during the performance process. It can be reasonably believed that Ivatherm S.R.L knew and recognized the agency relationship between Huihong Company and SHINES from the beginning. Therefore, according to Article 402 of the Contract Law, the Distribution Agreement was binding on Ivatherm S.R.L and SHINES. With regard to Ivatherm S.R.L’s argument that SHINES was not established at the time of signing of the Distribution Agreement with Huihong Company, and that CW was involved in the Distribution Agreement just as a translator and intermediary, the court believed that the promoters signed contracts in the name of the company to be established, and the company would inherit relevant rights and obligations after it was established. Although SHINES was not officially established when the Distribution Agreement was signed, it obtained the pre-approval of the enterprise name. CW, when negotiating with the responsible person of Ivatherm S.R.L about the specific terms of the Distribution Agreement, informed him that he had established a company in Shanghai. Although there was no evidence to show that the company established in Shanghai was SHINES, Ivatherm S.R.L never raised an objection to the identity of SHINES during the performance of the Distribution Agreement. From the content of the emails between Luke Sandra, CW and Huihong Company, CW had the substantive right to decide on the drafting of the terms of the agreement, which was by no means just a translator and intermediary status advocated by Ivatherm S.R.L. As for the Distribution Agreement. Although parties to the Distribution Agreement were only Ivatherm S.R.L and Huihong Company and there was no agreement on the beneficial third party, it could not rule out the situation of undisclosed agency. Therefore, the above application reasons proposed by Ivatherm S.R.L were not tenable, and the court did not accept them. In the above case, the people’s court determined that the arbitration clause was binding on the principal because the evidence showed that Ivatherm S.R.L knew and recognized the agency relationship between Huihong Company and SHINES from

third person is aware of the agency relationship between the agent and the principal, the said contract shall directly bind the principal and the third person, unless there is definite evidence establishing that the said contract binds only the agent and the third person.

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beginning to end, which was in line with the provisions of Article 402 of the Contract Law. In Beifang Wanbang Logistics Co., Ltd. Applying for Revocation of the Arbitral Award,20 SPC held that, the arbitration clause in the case can only bind the parties to the contract, namely, Wanbang Company and Zhuoyu Company. Jinyuan Company, as the first applicant, applied to the arbitration institution against Wanbang Company, but Jinyuan Company had no evidence to prove that there was an effective arbitration clause between itself and Wanbang Company. After Wanbang Company raised a jurisdictional objection, the arbitral tribunal determined, in accordance with Article 403 of the Contract Law, that it had jurisdiction over Jinyuan Company, and the arbitration proceedings shall continue among Jinyuan Company, Zhuoyu Company and Wanbang Company. The decision of the arbitral tribunal lacked sufficient factual and legal basis. The difference between this case and the above case is that the third party does not know the relationship between the principal and the agent when concluding the contract. Based on this, both Tianjin Maritime Court and the High People’s Court of Tianjin proposed to revoke the China Maritime Arbitration Commission’s arbitral award on the grounds of violating the principle of voluntary arbitration. Tianjin Maritime Court held that, the parties to the agency contract with the arbitration clause in this case were Wanbang Company and Zhuoyu Company. At the time of signing the contract, Wanbang Company did not know that Zhuoyu Company and Jinyuan Company had an agency relationship, that is to say, Wanbang Company reached an agreement with Zhuoyu Company when signing the arbitration agreement, not other subject. Jinyuan Company did not participate in the signing of the arbitration clause, and there was no other form of arbitration agreement between Jinyuan Company and Wanbang Company. After signing the arbitration agreement, Zhuoyu Company disclosed to Wanbang Company the principal. Zhuoyu claimed that the principal and Wanbang Company could also conduct arbitration according to the arbitration agreement. This claim made Wanbang Company face the situation that when it signed the arbitration agreement, it could not specify the counterparty, which violated the principle of voluntary arbitration. The High People’s Court of Tianjin held that the arbitration clause, which was agreed by Wanbang Company and Zhuoyu Company in the agency contract, was for the dispute that occurred between them, and could only bind the parties to the contract, i.e. Wanbang Company and Zhuoyu Company. At the beginning of concluding the agency contract, Wanbang Company did not know that Jinyuan Company was the actual principal. When Zhuoyu Company disclosed the existence of Wanbang Company to Jinyuan Company, Jinyuan Company cited Article 403 of the Contract Law to get involved in the agency contract and submitted the dispute to arbitration. This only meant that Jinyuan Company unilaterally agreed to settle the dispute by arbitration. Later, Wanbang Company raised a jurisdictional objection to the China Maritime Arbitration Commission. It was a clear expression of Wanbang Company’s intention to refuse to settle the dispute with Jinyuan Company through 20

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arbitration. On this basis, the court determined that Wanbang Company and Jinyuan Company had not reached an agreement to resolve the dispute through arbitration. In Huaying Chuangke (Beijing) International Culture Media Co., Ltd. Wuhan Branch v. Yang,21 Wuhan Intermediate People’s Court also recognized that the arbitration clause was binding on the principal on the ground that it constituted an undisclosed agency relationship. However, it was worth noting that in this case, neither the arbitral tribunal nor the people’s court mentioned whether there was evidence to prove the third party knew the agency relationship between the principal and the agent when signing the arbitration clause. In accordance with the provisions of law, the arbitration clause can directly bind upon the principal and the third party in the undisclosed agency relationship. It, to a certain extent, breaks through the traditional arbitration theory that the arbitration agreement must be signed by the parties in written form, and expands the scope of application of the effect of the arbitration agreement. And such circumstance is consistent with the current trend of supporting the development of commercial arbitration. In addition to the undisclosed agency, the extension of the effect of the arbitration agreement to the non-signatory may also be involved in the unauthorized agency or apparent agency. With respect to unauthorized agency, in Shandong Qiyang Petrochemical Engineering Co., Ltd. v. Dongying Dongze Chemical Technology Co., Ltd.,22 Dongying Intermediate People’s Court of Shandong Province held that although the name of Qiyang Company was printed on the warranty agreement, neither the seal of Qiyang Company nor the signature of its legal representative was found. The warranty agreement had the signature of “Sang”, but Dongze Company, when investigated and inquired by the court, admitted that it did not see Qiyang Company’s authorization for “Sang” to sign the agreement on behalf of Qiyang Company. Therefore, in the absence of Qiyang Company’s authorization and subsequent ratification, Sang’s behavior of signing the agreement couldn’t be regarded as Qiyang Company’s approval of the content of the warranty agreement. As Qiyang Company did not express its intention to be bound by the warranty agreement, the arbitration clause in the agreement had no effect on Qiyang Company. Dongze Company’s claim that “Sang is an employee of Qiyang Company, and his signature on the guarantee agreement is an act of duty” had no legal basis. In regard to apparent agency, in Jiufu Hujin Holding Group Co., Ltd. v. Microsoft (China) Co., Ltd.,23 Beijing No. 4 Intermediate People’s Court held that Jiufu Company asserted it did not authorize Mr. Lin to sign the contract, but authorized Mr. Lin to purchase related products through Kunlun Company, an authorized dealer of Microsoft company. It can be recognized that Mr. Lin was the trustee of Jiufu Company to purchase Microsoft products. Mr. Lin, in the name of Jiufu Company, entered Microsoft Company’s website by clicking the link sent to his mailbox, filled 21

(2020) E 02 Min Te No.277. (2020) Lu 05 Min Te No.15. 23 (2020) Jing 04 Min Te No.432. 22

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in and checked on the website, and signed an Additional Selection Agreement with Microsoft Company. The purpose of the Additional Selection Agreement was to buy and use Microsoft Company’s related products, which was consistent with the purpose of the Sales Contract. Although Mr. Lin did not obtain additional authorization from Jiufu Company when signing the Additional Selection Agreement, according to his authority and behavior to sign the Sales Contract and the common purpose of the Sales Contract and the Additional Selection Agreement, Mr. Lin’s behavior constituted an apparent agency. Microsoft Company had reason to believe that Mr. Lin had the agent right and the act of agency was effective. Therefore, the intention of signing the Additional Selection Agreement between Jiufu Company and Microsoft Company was true. The arbitration clause, as agreed upon in the contract, did not meet the situations specified in Article 17 of the Arbitration Law, and should be recognized as legal and valid.

2.5 Company Deregistration In practice, it is common to encounter such a situation that after one party has signed the contract and fulfilled its obligations, it suddenly finds that the other party has completed the company deregistration. At this time, who should bear the contractual liability? According to Article 20(2) of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II),24 the creditor may require the original shareholder of the debtor to bear the liability. Then the problem may arise as to whether the creditor can require the original shareholders of the debtor to bear the corresponding liability in accordance with the arbitration agreement signed before deregistration of the debtor. In the following case, the people’s court held that if a company canceled its registration without liquidation in accordance with the law, and the shareholder of this company or a third person promised to be responsible for the company’s debts during the process of cancellation of company registration, the shareholder or the third person, as the successor of the company’s debts, should be bound by the arbitration agreement signed by the company. Xingshu Energy Technology Co., Ltd. v. Sichuan Jiping Technology Co., Ltd.25 Xingshu Energy Technology Co., Ltd. (“Xingshu Company”) applied to confirm the arbitration clause in the Construction Contract signed between Sichuan Jiping Technology Co., Ltd. (“Jiping Company”) and Qinghai Zhongxing New Energy 24

Article 20(2) of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II): “Where a company cancels its registration without liquidation in accordance with the law, the shareholders or a third party promises to be responsible for the company’s debts when the company registration authority handles the cancellation of its registration, and the creditors claim that they bear corresponding civil liability for the company’s debts, the people’s court shall support them in accordance with the law.” 25 (2021) Jing 04 Min Te No.756.

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Co., Ltd. (“Qinghai Company”) had no binding effect on Xingshu Company. The main reasons included: (A) There was no arbitration agreement between Xingshu Company and Jiping Company, and Jiping Company’s application for arbitration did not meet the conditions prescribed by law. According to Article 21 of the Arbitration Law, the parties applying for arbitration shall have an arbitration agreement. In this case, according to the arbitration application, Jiping Company applied to Beijing Arbitration Commission for arbitration on the basis of the Construction Contract concluded by Jiping Company and Qinghai Company. However, Xingshu Company was not the signing party of the contract, so the contract and arbitration clause signed by Jiping Company and Qinghai Company had no legal binding force on Xingshu Company. Therefore, Jiping Company filed an arbitration against Xingshu Company according to the Construction Contract, which did not meet the conditions for applying for arbitration stipulated by law. (B) Jiping Company’s claim that Xingshu Company should take responsibility had no connection with the Construction Contract. Jiping Company claimed in the arbitration application that Xingshu Company, as a shareholder of Qinghai Company, should take responsibility, which had no connection with the Construction Contract signed by Jiping Company and Qinghai Company. Jiping Company’s claim and the Construction Contract belonged to different legal relations respectively. (C) Xingshu Company was neither the successor of the merger and division of Qinghai Company, nor the assignee of the credits and debts of Qinghai Company, thus it was not the party to the arbitration clause of the Construction Contract. The Debt Settlement Statement provided by Jiping Company was issued unilaterally by Qinghai Company. Xingshu Company, as an independent legal person, never issued any debt settlement documents related to Qinghai Company, and also never expressed any intention to be bound by the arbitration agreement. Jiping Company argued that, Xingshu Company was the promoter and shareholder of Qinghai Company. When Qinghai Company applied to cancel the company registration, Xingshu Company submitted the Debt Settlement Statement to Delingha Municipal Market Supervision and Administration Bureau, which meant that it explicitly recognized the “omitted debts” of Qinghai Company. Xingshu Company was the successor of the rights and obligations in the arbitration matters, and of course was bound by the arbitration agreement. Qinghai Company submitted the Debt Settlement Statement to the shareholders’ meeting of Qinghai Company, which recorded that, “If Qinghai Company has any omitted credits and debts in the future, the shareholders will be responsibility for it”. The shareholders of a limited liability company had the obligation to liquidate the debts of the company before deregistration. In this case, the liquidation group, including Xingshu Company, knew the existence of Debt Settlement Statement as mentioned before, not only did it raise any objection to the contents of the Debt Settlement Statement, but directly submitted

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it to Delingha Municipal Market Supervision and Administration Bureau. Xingshu Company recognized, in its practical action, the assumption of the omitted credits and debts of Qinghai Company, and also made clear arrangements for the inheritors of contingent credits and debts. In view of this, Xingshu Company should be bound by the arbitration agreement in the case. Beijing No.4 Intermediate People’s Court held that, the arbitration clause in the Construction Contract was valid for it complied with the provisions of Article 16 of the Arbitration Law. There were no such circumstances of invalidity of contracts as stipulated in Article 17 and Article18. The focus in this case was whether the arbitration clause in the Construction Contract signed between Qinghai Company and Jiping Company had any effect on Xingshu Company. Pursuant to Articles 826 and 927 of the Arbitration Law Interpretation, and Article 20 (2) of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II),28 if a company had canceled its registration without liquidation in accordance with the law and a shareholder or a third person promises to be responsible for the debts of this company when applying for cancellation of company registration to the company registration authority, the shareholder or the third person shall be the successor of the debts of the company. After Qinghai Company had been canceled, Xingshu Company, as the successor of the rights and obligations of Qinghai Company under the Construction Contract, should certainly be bound by the arbitration clause. In the above case, the court did not support Xingshu Company’s arguments. Actually, as for the issue of whether the shareholders should be bound by the arbitration agreement signed by the company after the company cancel its registration without liquidation, the decisions vary from courts to courts. The primary reason that supports the arbitration clause has binding force on shareholders is that the people’s court believes after the company has been deregistration,

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Article 8 of the Arbitration Law Interpretation: “Where a party is merged or divided upon the conclusion of an arbitration agreement, the arbitration agreement shall bind all successors to the rights and obligations of the party. Where the death of a party occurred after the conclusion of an arbitration agreement, the arbitration agreement shall bind the party’s successor who succeeds the rights and obligations to the subject matter of arbitration. The provisions in the preceding paragraphs shall not apply where the parties have agreed otherwise in the arbitration agreement.” 27 Article 9 of the Arbitration Law Interpretation: “An arbitration agreement shall bind a transferee of any creditor rights and debts transferred whether in whole or in part, unless the parties agreed otherwise, or where the transferee clearly objected or was unaware of the existence of a separate arbitration agreement at the time of the transfer.” 28 Article 20 (2) of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II) stipulates that, Article 20 (2) of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II) stipulates that, where a company cancels its registration without liquidation in accordance with the law, the shareholders or a third party promises to be responsible for the company’s debts when the company registration authority handles the cancellation of its registration, and the creditors claim that they bear corresponding civil liability for the company’s debts, the people’s court shall support them in accordance with the law.

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the shareholders are the successors of the rights and obligations of the company. See the following case. In CBN v. CX,29 Beijing No.4 Intermediate People’s Court held that on January 25, 2018, the shareholders’ meeting decided to dissolve Yase Company. CBN, a shareholder of Yase Company, promised on the same day in the resolution of shareholders’ meeting that “the outstanding matters after the cancellation of the company shall be borne by the shareholders, and the shareholders shall confirm the contents of the liquidation report”. Therefore, CBN was the successor of the rights and obligations under the Project Cooperation Agreement of Yase Company. With reference to Article 8 and Article 9 of the Arbitration Law Interpretation, and based on Chen BN’s inheritance of rights and obligations under the Project Cooperation Agreement, the arbitration clause in the Project Cooperation Agreement shall be binding on CBN. In JPX and JTP v. Inner Mongolia Siziwang Banner Gegentala Grassland Tourism Co. ltd,30 Hohhot Intermediate People’s Court held that there was arbitration clause in the Contract Management Agreement signed by Grassland Company and Xintian Company. This arbitration clause had a clear expression of arbitration intention, arbitration matters, and the selected arbitration commission, thus it was a valid arbitration agreement. As to the issue of whether the Contract Management Agreement was binding on its shareholders after the deregistration of Xintian Company, although Xintian Company was the contracting party, and after deregistration, JPX and JTP were the successors of Xintian Company’s rights and obligations, the arbitration clause in the Contract Management Agreement were still valid for them. The reasons that deny the arbitration clause is binding on shareholders after the deregistration of a company are more diversified, mainly include: (1) After the deregistration, the shareholders of the company are not necessarily the successors of rights and obligations under contract. In LWB v. Shanghai Defeng Advertising Communication Co., Ltd.,31 Shanghai No.1 Intermediate People’s Court held that after the deregistration of company A, whether its shareholders should bear corresponding responsibilities for the original contractual obligations to company B, or what kind of responsibility should the shareholders take, need to be judged according to relevant laws and regulations. As the shareholder of the original company A, LWB was not the successor of the rights and obligations of the company under the contract involved, nor there was transfer of credits and debts, so the arbitration clause in the above contract did not naturally bind Lin WB. (2) The legal basis for requiring shareholders to bear liability is the liability for compensation based on tort, not the liability for breach of contract. In LZW v. LJZ,32 Fuzhou Intermediate People’s Court held that Fujian Liannuo Automation Engineering Co., Ltd. (“Liannuo Company”) had finished the process 29

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of deregistration. LJZ took LZW, the shareholder of Liannuo Company, as the respondent to submit an arbitration to Fuzhou Arbitration Commission, and this was the problem of whether the company’s shareholders had not fulfilled the liquidation obligations after deregistration. Whether Liannuo Company’s shareholders should bear the corresponding liability for compensation was based on the liability for damages in the tort law, rather than the liability for breach of contract in the contract law. Therefore, the arbitration clause in the Urban Operation Cooperation Agreement did not have legal binding force on LZW. (3) The shareholders of the company are not the signing parties of the arbitration agreement, and haven’t expressed an intention to agree to be bound by the arbitration agreement in the contract. In YJS and YXY v. LMP and FSM,33 Guangzhou Intermediate People’s Court held that after the conclusion of Sales Contract, YJS and YXY made a resolution of shareholders meeting to form a liquidation group and to dissolve the Junjing Company. LMP and FSM filed claims against YJS and YXY according to the Sales Contract, but YJS and YXY were not the signing parties of the Sales Contract, and they did not express an intention to agree to be bound by the arbitration clause in the Sales Contract, so the arbitration clause had no binding force on them. From the cases mentioned above, it can be seen that the essence of whether the arbitration clause is binding on shareholders after the deregistration of a company lies in if the shareholders have inherited the rights and obligations of the company. It should be pointed out that after the deregistration, the shareholders are not necessarily the successors of rights and obligations of the company, unless there is evidence to prove it. In addition, in practice, the industrial and commercial registration authority often requires the company’s shareholders or members of the liquidation group to issue a letter of commitment to bear responsibility for the cancellation of registration. However, it is worth further considering whether shareholders can be surely identified as the successors of the rights and obligations of the company if they promise to bear the company’s debts.

2.6 Shareholder of One-Person Limited Liability Company The arbitration agreement is in principle only binding on the contracting parties. As the shareholder of one-person limited liability company is not the contracting party, so it should not be bound by the arbitration agreement signed by the company. In practice, the creditors usually require the shareholder of one-person limited liability company to bear liability according to the provision in Article 63 of the Company Law. This Article provides that “If the shareholder of a one-person limited liability company is unable to prove that the company’s property is independent from the shareholders’ own property, the shareholder shall bear joint and several liability 33

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for the debts of the company”. In litigation cases, the creditor may, based on the provisions of this Article, list the shareholder as co-defendants and require it to bear joint and several liabilities. But can the parties in the arbitration proceedings also use this article to claim that the shareholder is bound by the arbitration agreement signed by the one-person limited liability company and thus bear the joint and several liabilities? In the following case, the people’s court held that the shareholder of a company wholly-owned by a natural person signed the contract on behalf of the company, indicating that the shareholder knew and confirmed the arbitration agreement, so the arbitration agreement was binding on the shareholder. Guangzhou Linqingtang Biotechnology Co., Ltd. v. Kejie (Guangzhou) Daily Necessities Co., Ltd.34 The applicants Guangzhou Linqingtang Biotechnology Co., Ltd. (“Linqingtang Company”) and Mr. Xiao applied to set aside the arbitral award made by Guangzhou Arbitration Commission. One of the main reasons was that Mr. Xiao did not sign the arbitration agreement with Kejie (Guangzhou) Daily Necessities Co., Ltd. (“Kejie Company”), and the disputes between the two parties couldn’t be settled by arbitration. The arbitral award rendered by Guangzhou Arbitration Commission, which took Mr. Xiao as a party to the arbitration case, violated the relevant provisions of the Arbitration Law, and should be revoked. Kejie Company replied that the written contract signed by both parties had agreed on an arbitration institution, and Guangzhou Arbitration Commission had the right to accept and make an arbitral award according to law. After receiving the arbitration materials served by the arbitral tribunal, Linqingtang Company failed to raise objection to jurisdiction within the statutory period, which was deemed to recognize that Guangzhou Arbitration Commission had jurisdiction on the arbitration case. Guangzhou Intermediate People’s Court held that Article 9 of the Entrusted Processing Contract signed by and between Linqingtang Company and Kejie Company noted that if no agreement could be reached through negotiation, the matter in dispute shall be submitted to the local arbitration commission of Kejie Company for arbitration. Both parties made clear intention to submit the dispute to Guangzhou Arbitration Commission for arbitration and the agreed arbitration institution was clear. The arbitration agreement was valid according to law and binding on Linqingtang Company and Kejie Company. With regard to whether the arbitration agreement between Linqingtang Company and Kejie Company was binding on Mr. Xiao, Mr. Xiao, as the solo shareholder of Linqingtang Company, signed on behalf of Linqingtang Company in the Entrustment Processing Contract, which indicated that Mr. Xiao understood and confirmed the arbitration agreement. Therefore, the arbitration agreement had legal effect on Mr. Xiao. In the above case, the people’s court believed that Mr. Xiao, as the sole shareholder and legal representative of Linqingtang Company, signed the contract on behalf of Linqingtang Company, indicating that he clearly knew and confirmed the arbitration 34

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agreement, so the arbitration agreement was binding on him. Another similar case was Lou v. Beijing Qianhezhiyuan Film and Television Culture Investment Management Center (Limited Partnership).35 In this case, Beijing No.4 Intermediate People’s Court held that Lou was not only the legal representative of Jinbaozang Company, but also the sole shareholder and actual controller of it. Lou signed her name and sealed the Investment Contract and the Letter of Commitment, stating that she clearly knew and agreed to the contents of the Investment Contract and the Letter of Commitment. Therefore, the court did not support Lou’s claim that she was not the party of the Investment Contract and should not be governed by the arbitration clause. There may be problems in the above two cases that no doubt the shareholder of a one-person limited liability company signed the contract on behalf of the company, indicating that the shareholder clearly knew the arbitration agreement, but the shareholder signed the contract just on behalf of the company, not in its own name. The one-person limited liability company and its shareholder are independent legal subjects, even though the shareholder, on behalf of the company, signs and knows the arbitration clause, it does not mean that the shareholder should be bound by the arbitration clause. Therefore, it is necessary to distinguish the identity of the shareholder when signing the contract. As mentioned in the preceding paragraphs, the premise that the shareholder takes the joint and several liabilities for the debts of one-person limited liability company is the shareholder cannot prove that the company’s property is independent from its shareholder’s own property. Whether the shareholder’s property is independent from that of the one-person limited liability company requires substantive hearing before it can be determined. Furthermore, only when the property of the shareholder and that of the one-person limited liability company are identified as mixed, can the shareholder bear joint and several liabilities for the debts of the company. Then the arbitration clause signed by the company may be binding on its shareholder, and the shareholders’ participation in the arbitration procedure is legitimate. On the contrary, when a party submits an application for arbitration, it is unknown whether the property of a one-person limited liability company is independent from the shareholders’ property. Under such circumstance, there may be different views on whether the arbitration agreement signed by a one-person limited liability company can constrain its shareholder. In China Telecom Corporation Cloud Computing Branch v. QJQ,36 Beijing No.4 Intermediate People’s Court held that although Qu JQ was the only shareholder of Yijian Company before deregistration, according to the existing evidence, it could not be proved that the property of Yijian Company was mixed with that of the shareholder QJQ. It could not be determined that QJQ was the successor of the rights and obligations of Yijian Company. QJQ may bear the corresponding liquidation responsibility, but not as the successor of rights and obligations of Yijian Company. Therefore, QJQ should not be bound by the arbitration agreement involved in the case. 35 36

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Of course, even though it may not be able to determine whether the arbitration agreement signed by a one-person limited liability company is binding on its shareholder in the arbitration proceedings, it is possible that the shareholder be added as the person subject to execution in the execution procedure. Article 20 of the Provisions of the Supreme People’s Court on Certain Issues Concerning the Change and Addition of Parties in Civil Enforcement (revised in 2020) stipulates that, “If the property of a one-person limited liability company as the person subject to execution is not enough to pay off the debts determined by the effective legal documents, and the shareholder cannot prove that the company’s property is independent from its own property, the people’s court shall support the application for changing or adding the shareholder as the person subject to execution and taking joint and several liabilities for the company’s debts”. In Beijing Zhupengcheng Information Consulting Co., Ltd. V. TYY,37 Beijing No.3 Intermediate People’s Court pointed out that, when the debt was formed, Dongxi Company was a one-person limited liability company, and Tian YY was the sole shareholder of the company. Tian YY failed to prove that her personal property was independent from the company’s property, and the property of Dongxi Company was not enough to pay off the debt determined in the arbitral award. Therefore, Zhupengcheng Company’s application to add Tian YY as the person subject to execution and assume joint and several liabilities for the debt of Dongxi Company had factual and legal basis, and should be accepted.

2.7 House Owners One of the common circumstances in disputes related to property service contracts is that property management companies require house owners to pay the property management service fees. This may involve construction company, house owners’ committee or house owners’ meeting, property management companies and house owners. In such cases, the house owners usually defend on the ground that they are not a party to the property management contract or the property entrustment contract, so the relevant arbitration agreement has no effect on them. According to the relativity of the arbitration agreement, the house owner’s defense is reasonable to some extent, but is it the same in practice? In the following case, the people’s court held that the property service contract signed by the construction company and the property management company was binding on the owner. Li v. Guangzhou Jinhe Property Management Co., Ltd.38 Li applied to the people’s court to confirm that the arbitration agreement in the Property Management Entrustment Contract signed in 2007 between Guangzhou Jinhe 37 38

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Property Management Co., Ltd. (“Jinhe Company”) and Guangzhou Jinhuifeng Real Estate Development Co., Ltd. (“Jinhuifeng Company”) was inapplicable to him. Li claimed that Jinhe Company submitted arbitration application against Li to the Guangzhou Arbitration Commission according to the Property Management Entrustment Contract signed in 2007 between Jinhe Company and Jinhengfeng Company. However, Jinhe Company never informed Li of the signing of this contract, and Li was not aware of this contract. Li signed a Property Management Service Contract with Jinhe Company, which specified the property service matters, and had a term from November 28, 2001 to November 28, 2007. After the expiration of the Property Management Service Contract, although the two parties did not enter into another written contract, Jinhe Company continued to be the property service unit of Heping Jiayuan Community where Li currently lived. Li and Jinhe Company continued to perform the Property Management Service Contract by their actual behavior. The dispute between Li and Jinhe Company should be settled according to the Property Management Service Contract, rather than the Property Management Entrustment Contract signed by and between Jinhe Company and Jinhuifeng Company. The dispute over the Property Management Service Contract between the two parties would be submitted to the Haizhu District People’s Court of Guangzhou where the defendant Li was domiciled. The arbitration agreement agreed in the Property Management Entrustment Contract did not bind Li. Jinhe Company argued that Article 1 of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Specific Application of Law in the Trial of Property Service Dispute Cases stipulates that, the early stage property service contract signed between the construction company and the property service enterprise shall be binding on the house owners. The people’s court shall not support the owner’s defense on the ground that he was not a party to the contract. In this case, the Property Management Entrustment Contract signed by and between Jinhuifeng Company and Jinhe Company was an early stage property service contract and was binding on all the house owners of the Heping Jiayuan Community, therefore the arbitration clause in Article 34 of the contract was binding on all the house owners. Li raised a defense on the ground that he was not a party to the early stage property service contract. The people’s court should not support the defense. Guangzhou Intermediate People’s Court ruled on the issue of whether the arbitration clause in the Property Management Entrustment Contract was applicable to Li. First, according to Article 1 of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Specific Application of Law in the Trial of Property Service Dispute Cases, as Jinhe Company provided property management services to Heping Jiayuan Community under the Property Management Entrustment Contract, Jinhe Company’s claims that the contract was binding on all house owners complied with the legal provisions. Li, as a house owner of Heping Jiayuan Community, should be bound by all the terms of the Property Management Entrustment Contract, including Article 34. Second, Article 34 of the Property Management Entrustment Contract stipulated that the disputes shall be submitted to Guangzhou Arbitration Commission for arbitration. The agreement had a clear declaration of arbitration intention, a designated arbitration institution, and specific arbitration matters, which

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shall be recognized as valid according to law. To sum up, Li’s ground in the application for confirmation of the arbitration clause in the Property Management Entrustment Contract had no effect on him was not tenable, and the people’s court did not support it. Similarly, in ZZX v. CSX,39 Chenzhou Intermediate People’s Court recognized, in accordance with the provisions of Article 78 of the Property Law,40 that the house owners’ committee had the right to sign property service contract with the property service enterprise on behalf of all house owners, and the decision of the house owners’ committee was binding on house owners. Due to the clear legal provisions, the issue of whether the early stage property management contract signed by the construction company and the property management company, as well as the property service contract signed by the house owner committee and the property management company are legally binding on the house owners is not very controversial. But after all, such circumstance breaks through the principle of arbitration relativity. So, what is the rationale and legal basis of this situation? At present, the theory of contract assignment has gained more recognition. The house buyer concludes the house sales contract with the construction company, showing that the buyer is willing to replace the construction company as the party to the early stage property service contract. That is, when signing the house sales contract, the buyer also has accepted the early stage property service contract as a whole.41 The following case may better illustrate this issue. In Anhui Limin Road & Bridge Group Co., Ltd. v. Beijing Zhonghang Dabei Property Management Co., Ltd.,42 Beijing No.4 Intermediate People’s Court held that the early stage property service contract signed by the construction company as a party to the contract under Article 939 of the Civil Code was legally binding on the house owner. This originated from the house owners’ general acceptance of the early stage property service contract signed by the construction company. That is, when the construction company signed the house sales contract with the house buyer, it contained the consensus between the two parties to transfer the early stage property service contract. The rights and obligations of the early stage property service contract had been transferred to the house owner through the purchase of the house. According to Article 9 of the Arbitration Law Interpretation, although Limin Company knew and accepted the property services provided by Dabei Company, the arbitration clause was not an essential or characteristic clause in the early stage property service contract, and it was not a necessary part contained in all the early stage property service contracts. As discussed above, Limin Company had no way to know the existence of the arbitration clauses in the Beijing early stage Property Service Contract and the early 39

(2020) Xiang 10 Min Te No.19. Article 78 of the Property Law: “Decisions made by the owners’ meeting or the owners’ committee are binding to each owner. In case the legitimate rights and interests of any owner has been injured by any decision made by the owners’ meeting or the owners’ committee, the injured owner may require the people’s court to cancel the decision.” 41 W. Huang Wei, Commentaries of the Civil Code of the People’s Republic of China (middle), 1679, Law Press. 42 (2021) Jing 04 Min Te No.730. 40

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stage Property Entrustment Contract involved in the case. Therefore, the arbitration clauses in the contract had no legal effect on Limin Company. In the above case, Beijing No.4 Intermediate People’s Court first affirmed the theory of contract assignment. However, the special situation of this case was that the house sales contract was signed before the property management service contract, and there was no issue that the house owner accepted the property service contract as a whole because the house owner signed the house sales contract, nor was there any other evidence to show that the house owner knew the existence of the property management company or the property service contract when signing the house sales contract. Therefore, it was reasonable for the court to recognize that the property service contract was not binding on the house owner. In addition, there may also be another circumstance in practice, that is, whether the party, who obtains the ownership of the house through judicial auction, is bound by the arbitration clause of the early stage property service contract. This is an issue worth thinking about.

2.8 Independence of Arbitration Agreement Sometimes, the trading parties may be eager to conclude a transaction or based on mutual trust, and one party or both parties have actually performed the principal contract obligations before the contract is signed. Under such circumstance, when a dispute arises, one party usually raises an objection to jurisdiction by reasons of the contract has not yet been signed, the arbitration clause has not been established or has not become effective. Can the behavior of performing obligations of the contract be regarded as the parties’ recognition of the binding force of the arbitration agreement? In the following case, the people’s court held that when one party performed its main obligations and the other party accepted it, the contract with arbitration clause had been established, even though it was not signed by one of the parties. However, due to the independence of the arbitration agreement, if there was no evidence to prove that both parties reached an agreement on the submission of the dispute for arbitration, the arbitration agreement had not been established. Diaoyutai Food Biotechnology Co., Ltd. v. Huaxia Shulian Technology Co., Ltd.43 Diaoyutai Food Biotechnology Co., Ltd. (“Diaoyutai”) requested confirmation that the arbitration agreement between Diaoyutai and Huaxia Shulian Technology Co., Ltd. (“Huaxia Shulian”) was not established. Diaoyutai claimed that it did not enter into any form of arbitration clause or arbitration agreement with Huaxia Shulian. Huaxia Shulian held talks with Diaoyutai in the name of negotiation and consultation. Huaxia Shulian unilaterally sent draft contract to Diaoyutai, but Diaoyutai did not formally respond to it, and did not sign any contract with Huaxia Shulian. No arbitration clause or arbitration agreement in any form had been concluded between 43

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them, and the negotiation on this matter had actually terminated, so the “arbitration clause” in the draft contract had not been established. Huaxia Shulian argued that the Cooperation Agreement signed by both parties was true and effective and has been fulfilled. The arbitration agreement was binding on both parties, so the Beijing Arbitration Commission had jurisdiction over the case. Beijing No.4 Intermediate People’s Court held that, in accordance with Article 19 (1) of the Arbitration Law, an arbitration agreement shall exist independently, and the amendment, rescission, termination or invalidity of a contract shall not affect the validity of the arbitration agreement. The arbitration agreement or arbitration clause was independent as a way of resolving disputes agreed by the parties. Huaxia Shulian defended that although Diaoyutai did not sign the Cooperation Agreement, Huaxia Shulian had fulfilled its main obligations, which Diaoyutai had accepted, so the Cooperation Agreement had been established. Huaxia Shulian’s arguments pointed to the specific rights and obligations of both parties in the Cooperation Agreement. Due to the independence of the arbitration agreement or arbitration clause, Huaxia Shulian should provide evidence to prove that they reached an arbitration agreement or arbitration clause as stipulated in Article 16 (1) of the Arbitration Law, or they formed an agreement to submit the dispute to an arbitration institution for settlement after the dispute arises. Diaoyutai did not sign the Cooperation Agreement. From the records of the WeChat conversation between the two parties, they also did not reach an agreement on submitting the dispute to arbitration. And there was no evidence to prove that the two parties formed an agreement to submit the dispute to an arbitration institution for settlement after the dispute occurred. Therefore, the court ruled that the arbitration agreement between the applicant Diaoyutai and the respondent Huaxia Shulian was not established. Article 19 (1) of the Arbitration Law regulates the independence of the arbitration agreement, i.e. the separability or autonomy of the arbitration agreement, which means that the arbitration agreement is separated from the basic contract and exists independently, and is not affected by the validity of the relevant basic contract.44 What’s more, some scholars believe that when the parties conclude a contract containing an arbitration clause, not one but two contractual relationships have been formed between them.45 In the above case, as to the situation that although the parties did not sign the Cooperation Agreement, one of the parties actually performed its main obligations and the other party accepted it, the people’s court determined that the Cooperation Agreement had not been established. Due to the independence of the arbitration agreement, in light of the parties actually did not sign the Cooperation Agreement, the performance of the contract did not mean that the parties accepted the jurisdiction of the arbitration agreement. There was no evidence to show that the parties reached an agreement to submit the dispute to arbitration for settlement. Therefore, the people’s court decided

44

Y. Lin, Commercial Arbitration Practice Essentials (2016), Sect. 1.1 Independence of Arbitration Agreement, Peking University Press. 45 W. Jiang and J. Xiao, Arbitration Law (Edition 3), 57, Renmin University Press(2016).

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that the arbitration agreement was not established. In Guangzhou Mingderui Investment Co., Ltd. v. Guangzhou Baiyun International Airport Terminal 2 Management Co., Ltd.,46 Guangzhou Intermediate People’s Court made a similar decision that, “Although the party who did not sign the contract containing the arbitration clause actually performed obligations of the contract, it cannot be deemed that the aforesaid party accepted the jurisdiction of the arbitration clause, as there is no evidence to prove the existence of the arbitration agreement specified in Article 16 of the Arbitration Law”. Article 1647 of the Arbitration Law stipulates the positive elements for the validity of an arbitration agreement, in which the formal element of an arbitration agreement is in “written form”. Therefore, the above Diaoyutai Food Biotechnology Co., Ltd. v. Huaxia Shulian Technology Co., Ltd. can also be examined from another perspective. Although the parties actually performed the contractual obligations, they did not sign the contract, which did not meet the “written form” requirement of the arbitration agreement. Therefore, the parties did not reach an arbitration agreement. The “written form” of the arbitration agreement does not necessarily require the arbitration agreement be in “paper documents”, but emphasizes that the parties cannot be deemed to have reached an effective arbitration agreement by default or presumption. In the Reply of SPC to the Request for Instructions concerning Concordia Trading B.V.’s application for recognition and enforcement of the British Oil, Oilseed and Grease Association (FOSFA) Arbitral Award, the SPC clarified the requirement of written form and denied that an arbitration agreement was reached by default or presumption.48 The SPC held that the three contracts printed by Concordia Trading B.V. (“Hexie Company”) all contained dispute settlement clauses. However, after these three contracts were delivered to Nantong Gangde Grease Co., Ltd. (“Nantong Company”), Nantong Company did not sign or affix the seal thereto for confirmation or return the three contracts back to Hexie Company. It can not be determined that Hexie Company and Nantong Company reached a written arbitration agreement. In the subsequent correspondence between the two parties, the letter of guarantee issued by Nantong Company mentioned the serial numbers of the three contracts, but the quantity, the price and the security deposit clauses noted in the letter of guarantee were not the same as that of the three contracts. All of these were not sufficient to infer that the two parties had formed a consistent declaration of intent concerning the arbitration clauses contained in the three contracts. Meanwhile, the SPC held that Article II (1) of the New York Convention stipulates that arbitration clause shall be reached by written agreement. Article 2 (2) stipulates 46

(2020) Yue 01 Min Te No.105. Article 16 of the Arbitration Law: “An arbitration agreement shall include arbitration clauses stipulated in the contract and agreements of submission to arbitration that are concluded in other written forms before or after disputes arise. An arbitration agreement shall contain the following particulars: (1) an expression of intention to apply for arbitration; (2) matters for arbitration; and (3) a designated arbitration commission.” 48 [2009] Min Si Ta Zi No.22. 47

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that “written agreement” refers to the arbitration clause or arbitration agreement signed by the parties or specified in the exchange of letters and telegrams. It can be seen that the New York Convention does not recognize implied arbitration agreement. In this case, there was no sufficient evidence to show that Hexie Company and Nantong Company reached a consensus for arbitration and concluded a written arbitration agreement by signing or exchanging letters, which did not comply with the provisions the New York Convention on the requirements of written form for arbitration agreement, then the people’s court shall not recognize and enforce the arbitral award. An effective arbitration agreement is the basis for the parties to participate in the arbitration proceedings. If the parties have not actually signed the arbitration agreement, it is very difficult to break through the requirements for the independence and written form of the arbitration agreement under the current legal framework, unless it can be proved that the parties have reached a consensus to arbitrate.

2.9 Joinder of Additional Parties The Civil Procedure Law stipulates a well-established third party system in litigation. A third party, who has an independent claim against the subject matter of the action, or who, although not having an independent claim, has legal interests in the outcome of the litigation case, may apply to participate in the legal proceedings or be added to by the court. In contrast, the Arbitration Law has no clear provisions on the participation of a third party in arbitration proceedings. In judicial practice, the parties tend to take the initiative to apply for to join an additional party that has legal interests in the case to participate in the arbitration proceedings. But due to the absent of clear legal basis, it is hard to obtain permission from the arbitral tribunal. Moreover, the participation of an additional party in the arbitration proceedings may constitute a challenge to the principle of voluntary arbitration and the relativity of arbitration agreement. In the following case, the people’s court held that there was no basis in the Arbitration Law and the Arbitration Rules for one party to apply for an additional party, who did not sign the arbitration agreement, to participate in the arbitration proceedings. Youjia (Tianjin) Enterprise Management Co., Ltd. v. Xu49 Youjia (Tianjin) Enterprise Management Co., Ltd. (“Youjia Company”) applied to the people’s court to set aside an arbitral award rendered by CIETAC. Youjia Company claimed that the arbitration proceedings violated legal procedures. On November 23, 2020, Youjia company applied to the arbitral tribunal to add additional parties that had a substantial impact on the determination of the facts of the arbitration case, but the arbitral tribunal did not permit the joinder. In regard to the cooperation mode in the Entrusted Service Cooperation Agreement, Zhejiang Youjia Asset Management Co., Ltd. (“Zhejiang Youjia Company”), an affiliated 49

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company of Youjia Company, and Yiyunyou Network Technology Huai’an Co., Ltd. (“Yiyunyou Company”) had direct interests with the parties to this case. The main obligations of renting a house in the disputed agreement were fulfilled with the participation of Zhejiang Youjia Company and Yiyunyou Company. Failure to add these two companies as parties to the arbitration case would lead to the difficulty of finding out the facts and cause a substantial impact on the correct adjudication of the case. The respondent, Xu, argued that she did not accept the requests and reasons for revoking the arbitral award presented by Youjia Company. According to Article 18 of the Arbitration Rules of CIETAC, it was the authority of the arbitral tribunal to add parties, and the arbitral tribunal had its own discretion. Youjia Company’s grounds for revoking the arbitral award were not consistent with Article 58 (1) of the Arbitration Law. Beijing No. 4 Intermediate People’s Court held that, according to Article 4 of the Arbitration Law, the parties adopting arbitration as dispute settlement must reach an arbitration agreement on a mutually voluntary basis. An arbitration agreement had been agreed upon in the Entrusted Service Cooperation Agreement, according to which Xu submitted the dispute with Youjia Company to CIETAC for arbitration. CIETAC’s acceptance of the case conformed to the provisions of the law. Zhejiang Youjia Company and Yiyunyou Company were not the parties of the Entrusted Service Cooperation Agreement and there was no arbitration agreement between these two companies and Xu and Youjia company. There was no basis in the Arbitration Law and the Arbitration Rules for Youjia Company to apply for an additional party who did not sign the arbitration agreement to participate in the arbitration proceedings. Youjia Company’s claim that the arbitration proceedings violated the legal procedures lacked legal basis, and the grounds for revoking the arbitral award were not tenable. In the absence of clear provisions in law and arbitration rules, not only the parties cannot proactively apply for adding of additional parties to participate in the arbitration proceedings, but also the arbitration tribunal shall not, according to its powers, add the additional parties. In Liu v. Baoding Huajian Construction Engineering Co., Ltd.,50 Beijing No.4 Intermediate People’s Court held that, “If the parties adopt arbitration to settle their disputes, they shall reach an arbitration agreement on a voluntary basis. As the additional party did not conclude an arbitration agreement with Liu and Huajian Company, the arbitral tribunal obviously couldn’t add the additional as a party to the arbitration case according to its power”. It is worth noting that, adding a party is different from adding an additional party to participate in the arbitration proceedings. At present, major domestic arbitration institutions have different views towards adding additional parties. The arbitration rules of some arbitration institutions only provide for “add a party”, which indicates

50

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that adding a party must be based on “the same arbitration agreement”51 or “the arbitration agreement that ostensibly binds the additional parties”.52 Some other arbitration rules have made a breakthrough, beyond “adding a party”, these rules also set “joinder of additional parties”. The 2015 Arbitration Rules53 of Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Center) has stipulated the contents of “joinder of additional parties”. After that, SCIA54 and the Guangzhou Arbitration Commission55 have added the provisions of “joinder of additional parties” in the process of revising the arbitration rules. Whether it is “add a party” or “joinder of additional parties”, the essence is that the parties have reached an effective arbitration agreement in advance or afterwards. Without an arbitration agreement, the arbitration proceedings may violate the legal procedures. In Jining Shengji Real Estate Co., Ltd. v. Jining Tianhe Labor Service Co., Ltd.,56 the people’s court held that Jining Arbitration Commission invited Shengji Company to participate in the arbitration proceedings in the form of an Invitation for Arbitration, which was not a legal form specified in the Arbitration Law or the Arbitration Rules. Under the circumstances of no written arbitration agreement was concluded between the parties, according to Article 4 of the Arbitration Law, the arbitration institution shall not accept the arbitration application. Based on the above analysis, although there is no clear provision in the current Chinese law on the joinder of additional parties in the arbitration proceedings, the 51

Article 14(1) of the Beijing Arbitration Commission/Beijing International Arbitration Center Arbitration Rules: “Before the Arbitral Tribunal is constituted, the parties may apply to join an additional party to the arbitration under the same arbitration agreement, subject to approval by the BAC.” 52 Article 18(1) of CIETAC Arbitration Rules: “During the arbitral proceedings, a party wishing to join an additional party to the arbitration may file the Request for Joinder with CETAC, based on the arbitration agreement invoked in the arbitration that prima facie binds the additional party. Where the Request for Joinder is filed after the formation of the arbitral tribunal, a decision shall be made by CETAC after the arbitral tribunal hears from all parties including the additional party if the arbitral tribunal considers the joinder necessary.” 53 Article 31 of Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Center) Arbitration Rules: “The Claimant and the Respondent may request a third party to be joined in arbitration with its consent by a joint written application. A third party may also apply in writing to become a party in arbitration with the written consent of both parties. The tribunal shall decide on the joinder of a third party, or, if the tribunal has not been constituted, the Secretariat shall make such decision.” 54 Article 20(2) of Shenzhen Court of International Arbitration Arbitration Rules: “Subject to the unanimous consent of the parties and the additional party, the additional party may apply in writing to join the arbitration proceedings. The decision on whether to accept such application shall be made by the arbitral tribunal or, if it is not yet formed, by the SCIA.” 55 Article 27(4) of Arbitration Rules of Guangzhou Arbitration Commission: “The joinder of an additional party, without an arbitration agreement into the arbitration proceedings to becomes a party thereto, shall require unanimous consent by the additional party and all the parties concerned. The tribunal shall, at its discretion, decide whether or not to accept, or, if the tribunal has not been constituted, the Commission shall make the decision.” 56 (2017) Lu 08 Min Te No.124.

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arbitration rules of some major arbitration institutions have already made a breakthrough. On the basis of substantive examination of the arbitration agreement between the parties, it is possible for an additional party to participate in the arbitration proceedings. All around the world, regardless of whether it is a common law system or the civil law system, the third party system in arbitration have been established in some countries’ legislation. Therefore some people propose that China should, with reference to Civil Procedure Law, establish the third party system in arbitration. The third party system in arbitration can improve the efficiency of handling arbitration cases to a certain extent, and also avoid the conflicts between judgments or awards caused by the separate trial of cases. However, as mentioned earlier, the third party system in arbitration may challenge the existing basic principles of commercial arbitration, such as voluntary arbitration and the relativity of arbitration agreement. In addition, the participation of additional parties in arbitration proceedings may damage the confidentiality of arbitration, which is one of the advantages of the arbitration system compared to litigation system. Therefore, a reasonable balance among safeguarding the procedural rights of the third party, maintaining the confidentiality of the arbitration procedures and following the principle of arbitration autonomy needs to be made in the third party system in arbitration.

2.10 Arbitration Agents Article 61 of the Civil Procedure Law stipulates that the following persons can be entrusted as agents ad litem: (1) Lawyers and basic legal service workers; (2) Close relatives or staff members of the parties; (3) Citizens recommended by the communities, units and relevant social organizations of the parties concerned. Other ordinary citizens cannot accept entrustment as agents ad litem. As far as the agent of arbitration proceeding is concerned, there is no clear restriction in Chinese law. Article 29 of the Arbitration Law stipulates that, the parties and their legal representatives may entrust lawyers and other agents to conduct arbitration activities. Therefore, in principle, the parties may entrust any natural person with full civil capacity to participate in the arbitration proceedings as an agent. This is also an expression of the flexibility of arbitration compared with litigation. In the following case, the people’s court held that the parties may entrust nonlawyers as arbitration agents, and the failure of the arbitral tribunal to verify the identity of the agent did not constitute a violation of legal procedures. Guangdong Hanguan Biotechnology Co., Ltd. v. Guangzhou Jimei Cosmetics Co., Ltd.57

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The applicant Guangdong Hanguan Biotechnology Co., Ltd. (“Hanguan Company”) disagreed with the arbitral award against Guangzhou Jimei Cosmetics Co., Ltd. (“Jimei Company”) made by Guangzhou Arbitration Commission, therefore applied to the court for revocation of the arbitral award. One of the grounds that Han Guan Company applied to revoke the arbitral award was TSB, the agent entrusted by Jimei Company, was neither a lawyer nor an employee of Jimei Company. TSB could not appear in court as the agent of Jimei Company according to law. The arbitral tribunal did not verify Tang’s identity, which violated legal procedure. Jimei Company argued that the arbitration proceedings was legitimate, and it did not violate the provisions of law. Hanguan Company also had no evidence to prove that there were any procedural problems in the arbitration hearing, service and appointment of arbitrators. Guangzhou Intermediate People’s Court held that, as to the issue of whether TSB, the entrusted agent of Jimei Company, who was not a lawyer and could not appear in court and the arbitral tribunal did not verify the identity of Tang constituted a violation of legal procedure, Article 27 of the Arbitration Rules of Guangzhou Arbitration Commission clearly stipulated that the parties to arbitration or their legal representative can entrust an arbitration agent, but there is no requirement that an arbitration agent must be a lawyer. Jimei Company’s entrusting TSB as the arbitration agent did not violate the above provisions. Hanguan Company’s above reasons were unfounded, and the court did not support it. The Arbitration Law stipulates that “the parties and statutory agents may entrust lawyers and other agents to conduct arbitration activities”. But the scope of “other agents” is not further specified. In addition, an overview of the arbitration rules of the domestic arbitration institutions, there is no clear limitation on the identity of the arbitration agents. Therefore, apart from practicing lawyers, ordinary citizens can also act as arbitration agents. Other people’s courts58 also support the point that ordinary citizens can be entrusted as arbitration agents. However, commercial arbitration is a highly specialized activity. Due to the lack of professional legal practice skills and experience, ordinary citizens may have an obvious gap with professional lawyers in the control of arbitration procedures and substantive issues. The initiation of arbitration proceedings, the preparation of evidence, the appointment of arbitrators and the arbitration hearing all require the arbitration agents to fully respond with professional spirit. Therefore, it is advised to entrust a professional lawyer as an arbitration agent in order to protect the legitimate rights and interests of the parties. In addition, unlike “the second instance being the final” in civil litigation, commercial arbitration implements “first award being the final”. The result of losing a case due to the mistakes or inexperience of ordinary citizens as arbitration agents will be irreversible. Can lawyers can act as arbitration agents in the name of non-lawyers? Is it against legal procedures?

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(2020) Zhe 02 Min Te No.163.

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In Sancai Real Estate Management Co., Ltd. Xi’an Branch v. GHZ,59 the court held that, GHZ asserted that JSJ, the arbitration agent of Sancai Company, was a professional lawyer of Xinjiang Fuxing Law Firm and GHZ provided legal services as a non-lawyer, which violated the Code of Professional Ethics and Practice Discipline for Lawyers and the Code of Practice for Lawyers. GHZ did not raise any objection to JSJ’s qualification as an agent during the arbitration stage. Whether a lawyer provided legal service as a non-lawyer violated the relevant provisions should be reviewed and handled by the judicial administration authority. The above provisions were not arbitration rules applicable to arbitration case, and such circumstance did not lead to the violation of the “legal procedures” stipulated in Article 58 of the Arbitration Law.

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(2021) Shan 01 Min Te No.806.

Chapter 3

Evidence and Substantive Matters

3.1 Concealment of Evidence The concealment of evidence refers to the concealment by one of the parties in the arbitration proceedings of evidence that has a significant impact on the determination of the facts of the case, leading to an unfair award by the arbitration tribunal. According to Paragraph 1 of Article 16 of the Arbitration Enforcement Provision,1 upon satisfaction of the following conditions, the people’s court shall consider the opposing party withholds any evidence to the arbitral institution, which suffices to affect an impartial award: (1) The evidence is material to the affirmation of primary case facts; (2) The evidence is available only to the opposing party but hasn’t been submitted to the arbitral tribunal; (3) A party becomes aware of the existence of the evidence in the process of arbitration, and requests the opposing party to produce it or requests the arbitral tribunal to order the submission thereof, but the opposing party refuses to produce or submit the same without justified reasons. It can be seen that the Arbitration Enforcement Provision requires strict requirements on the identification of “concealment of evidence”, which can only be established if the above three conditions are met. Changchun Faway Gaoxin Automotive Accessories co., Ltd v. Changchun Atelier Environmental Protection Equipment Co., Ltd 2

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Arbitration Enforcement Provision came into force on March 1, 2018. (2020) Ji 01 Min Te No. 12.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 Y. Lin, China Arbitration Yearbook (2022), China Arbitration Yearbook, https://doi.org/10.1007/978-981-99-7165-7_3

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Changchun Faway Gaoxin Automotive Accessories co., Ltd (“FAA Company”) requested to revoke the arbitration award made by Changchun Arbitration Commission on May 21, 2020. One of the grounds for the revocation is that the respondent Changchun Atelier Environmental Protection Equipment Co., Ltd (“Atelier Company”) concealed evidence which would strictly affect the fairness of the award. According to FAA Company, the two parties in this case signed an Equipment Sale Contract, Technical Agreement and Supplementary Agreement on the Contract of Pure Water Equipment Renovation regarding the system renovation of pure water equipment. After the initiation of the arbitration, Atelier Company concealed “all the technical documents and records that the respondent should submit to reflect the truth of contract performance as stipulated in Technical Conditions of Water Treatment Equipment during the dispute over the pure water equipment renovation project (including the equipment sale contract)”. The evidence mentioned above actually concealed the scope of responsibility assumed by Atelier Company, the facts and results of the actual performance of Atelier Company, and the value and function of the engineering equipment in this case. In brief, the concealment of evidence by Atelier Company affected the fairness of the award and caused the perversion of law by the arbitration tribunal. Atelier Company replied that the so-called evidence of FAA Company were not the main evidence for identifying the basic facts of the case, and during the process of arbitration, FAA Company never asked Atelier Company to produce, or requested the arbitration tribunal to order Atelier Company to submit such evidence. Changchun Intermediate People’s Court held that, Atelier Company did not submit the evidence which could affect the determination of the basic facts of the case by the arbitral tribunal, as claimed by FAA Company, in the arbitration procedure. In view of the disputes between both parties in the process of fulfilment of contract and the problems affecting the normal operation after the equipment installation, if there did not exist such evidences mentioned by FAA Company, it would affect the determination of fact and law application of the arbitration tribunal. By examining the supplementary agreement signed in the process of contract performance, it could be seen that Atelier Company had fault in the process of contract performance. In addition, Atelier Company should have provided evidence to prove that its performance of obligations met the conditions of final acceptance of engineering equipment but it did not, which satisfied to the conditions of “the other party has withheld the evidence which is sufficient to affect the impartiality of the arbitration” under Item 5 of Paragraph 1 of Article 58 of the Arbitration Law. Therefore, the Intermediate People’s Court of Changchun ruled to revoke the arbitration award in this case. In the cases of application for cancellation of arbitration awards, “concealment of evidence” is the type of claim frequently raised by the applicant, and it is also the common ground for courts to revoke the arbitration award. In a strict sense, the three conditions under Article 16 of the Arbitration Enforcement Provision should be met at the same time when “concealment of evidence” is determined to constitute “concealment of evidence”, and none of the three conditions can be absent.

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In the above case, the court held that the respondent Atelier Company did not provide evidence in the evidence submitted in the arbitration proceedings that affected the determination of the basic facts of the case by the arbitration tribunal, and the evidence was only in the possession of Atelier Company. According to the supplementary agreement signed by both parties during the performance of the contract, Atelier Company had faults in the performance of the contract and should have provided evidence to prove that its performance of obligations meets the conditions of final acceptance of engineering equipment. However, Atelier Company did not submit such evidence. Therefore, the Intermediate People’s Court of Changchun finally revoked the award of Changchun Arbitration Commission in the ruling. It can be seen that in this case, the court determined that the respondent Atelier Company constituted “concealment of evidence” and made the ruling accordingly, which was mainly based on Paragraph 1 of Article 16 of the Arbitration Enforcement Provision. In judicial practice, it is usually not considered to constitute “evidence concealment” if only two of the conditions stipulated in Paragraph 1 of Article 16 of the Arbitration Enforcement Provision are met. For example, in Beijing Jinqiao Investment Co. Ltd et al. v. Guangdong Jinkuang Investment Group Co. Ltd et al.,3 the court held that, although Sansheng Exchange and Jinqiao Company proposed that the other party had ‘concealed’ evidence about the relevant situation of filing documents to the competent authorities during the arbitration, the filing itself was the joint obligation of both parties. During the arbitration, Sansheng Exchange and Jinqiao Company were fully capable of verifying the specific situation of the material declaration. Therefore, according to the provisions of the judicial interpretation, the claim of the other party ‘concealing evidence’ proposed by Sansheng Exchange and Jinqiao Company in this case cannot be established, and the court would not accept it. In such case above, the application of applicants did not meet the second condition of Paragraph 1 of Article 16 of the Arbitration Enforcement Provision, which means, “the evidence merely held by the other party, but not submitted to the arbitration tribunal” cannot prove that the respondents concealed the evidence which would strictly affect the justice of the arbitration institution. And the reason for concealing evidence may be abused in this case. Therefore, the court rejected the application of Sansheng Exchange and Jinqiao Company to revoke the arbitration award. In addition, in Huaibei Tianzhu Real Estate Development Co., Ltd. v. Jiangsu Wenxin Construction Engineering Co., Ltd.,4 the court also held that, the evidence “which suffices to affect an impartial award’ shall refer to the evidence which belongs to the basic facts of the case and was only possessed by the other party but not submitted to the arbitration tribunal. Besides, such kind of evidence should meet the fact that one party of the arbitration knew the existence of the evidence in the arbitration process and asks the other party to produce it or requests the arbitration tribunal to order him/her/it to produce it, but the other party failed to produce or submit it without justifiable reasons.

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(2018) Jing 04 Min Te No.23. (2019) Wan 06 Min Te No. 12.

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Accordingly, to determine the conditions of “concealment of evidence”, the applicant for arbitration shall, from the literal meaning of Paragraph 1 of Article 16 of the Arbitration Enforcement Provision, “ask the other party to produce or request the arbitration tribunal to order him/her/it to submit” the evidence that the applicant does not possess and has a significant impact on the determination of the facts of the case in arbitration proceedings. From a logical point of view, the applicant’s request for evidence disclosure is the prerequisite for the identification of “concealment of evidence”. However, in the judicial practice in recent years, when some local courts revoke the arbitration award on the ground of “concealing evidence”, the premise of “applicant should make a request for evidence disclosure” seems to become vague. There is an opinion arguing that “concealment of evidence” can be constituted without examining whether a party has made a request to disclose evidence to the other party or the arbitration tribunal in the arbitration procedure. The reason is as follows: The responsibility of the arbitral tribunal is to find out the truth and settle the dispute fairly. Both parties should disclose to the arbitral tribunal the evidence they have mastered (especially the key evidence that will directly affect the outcome of the case), or at least truthfully state to the arbitral tribunal the true situation of the case proved by such evidence. If the parties fail to submit the key evidence that may directly affect the outcome of the case or truthfully state to the arbitral tribunal the facts contained in the key evidence and cause the arbitral tribunal to make an incorrect award, then regardless of whether the parties apply to the arbitral tribunal for the evidence or whether the arbitral tribunal requires the production of the evidence or not, such situation shall be deemed to constitute the “concealment of evidence”.5 For example, in YFG v. Jinan Dongjin Longding Property Co. Ltd.,6 the court held that, according to the above-mentioned facts, it could be concluded that Dongjin Company concealed from the arbitration tribunal evidence about the completion and acceptance time of the involved buildings and the evidence concerning meeting the conditions of delivery, which was the main evidence for the identification of the basic facts of the case. However, judging from the content of the award itself, the applicant did not ask the other party to produce or request the arbitration tribunal to order it to submit in the arbitration. In addition, in Changchun Faway Gaoxin Automotive Accessories co., Ltd v. Changchun Atelier Environmental Protection Equipment Co., Ltd, the court did not make clear whether the applicant FAA Company had taken the initiative to put forward the evidence disclosure requirement in the trial. In other words, the requirement of evidence disclosure is sometimes just a formality in judicial practice, and its essence is whether the disclosure of the evidence will affect the basic judgment of the case facts in the arbitration award itself. Indeed, Paragraph 1 of Article 16 of Arbitration Enforcement Provision clearly stipulates that the evidence disclosure requirement of “requiring the other party to produce or 5

N.Li. The Identification of “Concealment of Evidence” in the Arbitration Procedure -- Also Discusses the Enlightenment of the Construction of the Arbitration Evidence Disclosure System in China, 202-216, Chinese Applied Jurisprudence [J], Issue 6, 2021. 6 (2022) Lu 01 Min Te No. 11.

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requesting the arbitral tribunal to order it to submit” is one of the three indispensable conditions for the formation of “concealment of evidence”, but the disclosure requirement has not been detailed in the specific aspects such as the way, content and how to disclose the evidence, and its emphasis lies in the legal consequences of non-disclosure of evidence. Therefore, when it comes to judicial practice, the conditions for the establishment of “concealment of evidence” are not so important, and the guarantee of correctness of the facts of the case is the core of the law which should be maintained. Such kind of circumstance in legal practice may be related to the Chinese system of rules of evidence in civil proceedings. Although the rules of evidence in arbitration and the rules of evidence in civil action are definitionally independent from each other, they actually are mutually connected and influence each other. The Arbitration Law and its judicial interpretation rarely contain relevant provisions on “evidence disclosure”, among which the main provisions on evidence are in Article 43, 45 and 46 of the Arbitration Law.7 Although there are some evidence disclosure provisions such as “specific request for disclosure” mentioned in the Guidelines on Evidence of CIETAC which came into effect on March 1, 2015, such provisions are generally only guidelines rather than mandatory.8 In other words, the guidelines are not automatically applicable due to the parties’ choice of arbitration institution or arbitration rules, but mainly depend on the autonomy of the parties. Therefore, in practice, the determination of “evidence disclosure” in arbitration often relies on the relevant provisions of evidence in civil proceedings. However, the system of evidence disclosure in civil proceedings has not yet been established, which may be one of the reasons why some courts easily fall into formal ambiguity when determining “concealment of evidence”. To sum up, when the court determines whether there is “concealment of evidence” in an arbitration case, the three conditions for the establishment of “concealment of evidence” stipulated in Paragraph 1 of Article 16 of the Arbitration Enforcement 7

Article 43 of the Arbitration Law: “The parties shall produce evidence in support of their claims. An arbitration tribunal may collect on its own evidence it considers necessary”. Article 45 of the Arbitration Law: “The evidence shall be presented during the hearings and may be examined by the parties”. Article 46 of the Arbitration Law: “Under circumstances where the evidence may be destroyed or lost or difficult to obtain at a later time, a party may apply for preservation of the evidence. If a party applies for preservation of the evidence, the arbitration commission shall submit his application to the basic people’s court in the place where the evidence is located”. 8 Article 7.1of the CIETAC Guidelines on Evidence: “A party may request the tribunal to order the other party to produce a specific document or a narrow and specific category of documents (“request to produce”). The requesting party shall state the reasons for its request, identify in sufficient detail the requested document(s), and explain the relevance and materiality of the requested document(s). The tribunal shall invite the other party to comment on the request to produce. Where the other party does not object to the request to produce, the relevant document(s) shall be produced in accordance with the request to produce. Where the other party objects, the tribunal shall decide whether or not to grant the request to produce”. The Preamble of CIETAC Guidelines on Evidence: “These Guidelines are not an integral part of the Arbitration Rules. The application of the Guidelines is subject to the consent of the parties in each case”.

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Provision should be met at the same time in a strict sense. However, in practice, because of the absence of relevant provisions on evidence disclosure in the civil procedure system, the court may, in order to pursue the legal effect of a fair verdict, blur the procedural requirements which play a key role in identifying the facts in some cases.

3.2 Falsification of Evidence Falsification of evidence is a circumstance under Chinese law in which an arbitration award can be challenged, that is, during the arbitration procedure, one of the parties falsified the main evidence used to determine the basic facts of the case, resulting in the arbitral tribunal making an unfair award. According to Article 15 of the Arbitration Enforcement Provision, upon satisfaction of the following conditions, the people’s court shall consider ‘the evidence for rendering the award is forged’ as prescribed in Paragraph 2 of Article 237 of the Civil Procedure Law: (1) the evidence has been accepted by the arbitration award; (2) the evidence is material to the affirmation of primary case facts; (3) the evidence is ascertained to have been formed or acquired by such illegal means as fabrication, alteration, provision of false proof, etc., which violates the objectivity, relevance and legality requirements of evidence. Accordingly, the three conditions stipulated in Article 15 of the Arbitration Enforcement Provision shall be met at the same time in order to determine the falsification of evidence, which is similar to the three conditions to be met in determining the concealment of evidence. JF v. Huaihua Jinding Real Estate Development Co., Ltd.9 The applicant JF requested the revocation of all award matters of the arbitration award made by Huaihua Arbitration Commission on January 10, 2019. One of the reasons for revocation was that the applicant never signed the “Commercial Housing Sale Contract” involved in the case with the respondent, Huaihua Jinding Real Estate Development Co., Ltd., and the signature and fingerprints of the contract in this case were forged. JF said that according to the “Contract for the Sale and Purchase of Commodity Housing” (“Housing Contract”) provided by the respondent Jinding Company on April 12, 2006, which was a forged and false contract, the award made by the tribunal which determined that JF owed Huaihua Jinding Real Estate Development Co., Ltd 58,129 yuan in payment of house was a complete mistake. First, the applicant JF never signed the Housing Contract with the respondent, the contract signature and fingerprints were forged. Second, the respondent Huaihua Jinding Real Estate Development Co., Ltd did not show the original contract according to legal procedures in court during the period of cross-examination, and therefore the authenticity and legitimacy of the copy could not be verified on the spot, which had constituted deliberately 9

(2019) Xiang 12 Min Te No. 1.

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concealment of evidence to affect a fair verdict. Last, when the respondent Huaihua Jinding Real Estate Development Co., Ltd did not provide the original contract and the applicant JF clearly expressed disagreement with the authenticity, legality and relevance of the copy evidence, the arbitral tribunal did not exclude the evidence of the copies to which it had objections in accordance with the procedures prescribed by law, but reversed the burden of proof on the grounds that the applicant JF failed to produce evidence to overturn it, and the applicant JF bore the adverse consequences of failing to provide evidence, and admitted false evidence, which constituted a procedural violation. After the Huaihua Intermediate People’s Court accepted the case on February 14, 2019, the applicant JF applied for identification of the handwriting and fingerprints of “JF” in the Housing Contract. After the appraisal by Hunan Dean Judicial Appraisal Center, an appraisal opinion was issued on March 18, 2019. The appraisal opinion was: the two fingerprints on the signature handwriting of “JF” at the “buyer (seal)” on the Housing Contract were not left by JF himself’s ten fingers; the handwriting of the signature of “JF” at the “buyer (seal)” on the Housing Contract was not written by the same person as the signature of “JF” on the sample provided. After examination, the respondent, Huaihua Jinding Real Estate Development Co., Ltd, had been revoked, and the original registered domicile had been no longer existed. The Huaihua Intermediate People’s Court held that, according to Paragraphs 1 and 2 of Article 58 of the Arbitration Law, “A party may apply for setting aside an arbitration award to the intermediate people’s court in the place where the arbitration commission is located if he can produce evidence which proves that the arbitration award involves one of the following circumstances: … (4) The evidence on which the award is based was forged; … If the people’s court determines that the arbitration award violates the public interest, it shall rule to set aside the award”. The opinion of the arbitration tribunal was made based on the Housing Contract. Based on the appraisal issued by the Hunan Dean Judicial Appraisal Center on March 18, 2019, which was entrusted by the Judicial Technology Office of the court, the appraisal opinion of the Housing Contract was: The two fingerprints on the signature handwriting of “JF” at the “buyer (seal)” on the Housing Contract were not left by JF himself; The handwriting of “JF” at the “buyer (seal)” on the “Housing Contract” is not written by the same person as the signature of “JF” on the sample provided. Accordingly, the evidence on which the Huaihua Arbitration Commission’s ruling was based was forged. Therefore, Huaihua Intermediate People’s Court ruled to revoke the arbitration award. In this case, judging from the content of the ruling made by Huaihua Intermediate People’s Court, the Housing Contract in the case was the main evidence for the Huaihua Arbitration Court to determine the basic facts of the case, and the court noticed that the Housing Contract was forged based on subsequent judicial appraisal opinions. Therefore, the court finally found that the evidence on which the award based by the Huaihua Arbitration Commission was forged and canceled the arbitral award in this case. It can be seen that in this case, the court mainly relied on Article 15 of the Arbitration Enforcement Provisions to find that the Housing Contract involved

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in the case was forged evidence, and then supported the claimant’s claim and revoked the arbitral award. Generally speaking, China’s judicial review of arbitral awards mainly examines procedural matters, and as an exception examines substantive matters, including two grounds: falsification of evidence and concealment of evidence. When examining whether the evidence involved in a case meets the three conditions for constituting “forged evidence” as stipulated in Article 15 of the Enforcement Provisions or not, the court is particularly careful in its examination of the second condition, i.e., “the evidence is material to the affirmation of primary case facts”. In other words, in order to determine that “forged evidence” is constituted, the evidence involved in the case should meet three conditions stipulated in Article 15 of the Arbitration Enforcement Provisions, and all these conditions are indispensable. Even if the evidence involved in the case is forged or altered and accepted by the arbitral tribunal but not the main evidence for determining the basic facts of the case, then whether the evidence is forged has no impact on the arbitration award, and it will not be recognized as “forged evidence” by the court in the end. For example, in YM v. Kexin Decoration Shop of Karamay District,10 the court held that in this case, YM and GXH believed that “GXH” was not signed by GXH on the “receipt” submitted by Kexin Decoration shop of Karamay District and signed on September 26, 2020, the validity of the evidence was not confirmed by the arbitration award. The evidence was not the basis of the award. Whether the “receipt” was forged or not had no impact on the arbitral award. Therefore, YM’s reason for withdrawing evidence of the Kexin Decoration Shop of Karamay District could not be established. Since the record of WeChat existed in the mobile terminal of both parties, both parties might submit it to the arbitration tribunal for review. Whether it was complete and valid or not shall be determined by the tribunal in accordance with law, which fell within the scope of evidence review and factual determination, and did not fall within the scope of the Court’s review of cases of setting aside arbitral awards. Therefore, the court in this case ultimately rejected Yang’s application to set aside the arbitral award. Besides, in Shanghai Lion Plastic Industrial Co., Ltd. v. Shanghai Lianyi Industry and Trade Development Co., Ltd.,11 the court also pointed out that the applicant, Shanghai Lion Plastic Industrial Co., Ltd., claimed that the Reply Letter and Building Layout Plan forged by the respondent, Shanghai Lianyi Industry and Trade Development Co., Ltd., had nothing to do with the arbitral award determining who was obligated to handle the approval procedures of the factory involved in the case. The above evidence was not the main evidence for determining the basic facts of the case. Such evidence had no material impact on the outcome of the arbitral award. There was no need to evaluate the time of formation of such evidence. The court rejected the applicant’s claim that the Reply Letter and the Building Layout Plan were forged.

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(2022) Xin 02 Min Te No.8. (2019) Hu 01 Min Te No. 676.

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In addition, it can be observed that in judicial practice in recent years, when determining whether “forged evidence” has been constituted, some courts have also examined the facts such as whether the parties have raised objections to the authenticity or validity of the evidence during the arbitration process. For example, in Haibei Shenghu Cultural Industry Development Co., Ltd. v. YXJ et al.,12 the court held that if the applicant, Haibei Shenghu Cultural Industry Development Co., Ltd., believed that the meaning in the agreement did not exist or that the official seal or private seal was forged, it should point it out in the arbitration procedure, apply for appraisal or take other remedies. However, until the arbitration award was made, Shenghu Company had not provided evidence to prove that it had raised any objection to the official seal and the private seal of its legal representative in the agreement, the other four parties to the arbitration case had not raised any objection to the validity of the above agreement in the arbitration procedure, and the validity of the agreement and its annexes had also been tried and confirmed by the arbitration tribunal. The claim on forgery did not conform to the provisions of the above laws and judicial interpretation, and the court did not accept it. Although the view that “the identification of forged evidence should be based on the premise of raising relevant objections in the arbitration proceedings” still needs further observation, the identification of forged evidence in practice has been a strict trend, and the trend has become more and more obvious. This can also be seen from the case above, in which the court assumed that the adverse consequences by the applicant who had not challenged the validity of the evidence involved in the case in the arbitration procedure should be borne by the applicant himself. To sum up, the identification of forged evidence should simultaneously meet the three conditions stipulated in Article 15 of the Arbitration Enforcement Provision, and when the court determines whether or not there is “forged evidence” in an arbitration case, the court should not only examine if the evidence in the case meets the three conditions stipulated in Article 15 of the Arbitration Enforcement Provision, but also examine if the applicant party has raised objections to the validity of evidence in the arbitration proceedings, which on the one hand reflects the exercise of the court’s discretion in how to identify forged evidence, and also reflects the trend of stricter examination of “forged evidence” in judicial practice on the other hand.

3.3 Methods of Remedying Evidentiary Problems Generally speaking, in the practice of judicial review of arbitration in China, the courts mainly review procedural issues, such as whether the arbitration procedure is illegal, whether the composition of the arbitration tribunal is reasonable, etc. Courts usually do not interfere too much in the substantive content of arbitration cases heard by the arbitral tribunal itself, but under some circumstances, it may involve substantive matters, among which the most important are the two substantive issues of 12

(2020) Jing 04 Min Te No. 312.

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evidence, forgery and concealment of evidence mentioned above. According to Item (4) and Item (5) of Paragraph 1 of Article 58 of the Arbitration Law and Paragraph 4 and Paragraph 5 of Article 244 of the Civil Procedure Law,13 in an arbitration case where the evidence is a problem, the parties can choose to apply for revocation of the arbitration award, or to apply to oppose the enforcement of arbitration award. LLM v. Bank of China Limited Guangzhou Liwan Branch and CWY 14 LLM applied to Guangzhou Intermediate People’s Court for revoking the part of the arbitration award made by Guangzhou Arbitration Commission on September 23, 2020, in which LLM was liable for repayment. One of the reasons for the revocation was that the Loan Contract, the evidence of the arbitration award made by Guangzhou Arbitration Commission to confirm LLM’s liability, was false and was signed by CWY. Therefore, LLM did not receive the notice of the arbitration tribunal and could not participate in the arbitration. The Guangzhou Intermediate People’s Court held that the existing evidence was not enough to prove that the Loan Contract and the receipt were signed by LLM herself, and the above evidence used by the arbitration tribunal to identify LLM as the co-borrower was not true evidence. On this basis, LLM’s application to set aside the grounds in the ruling that LLM bore corresponding responsibilities was established, and the court supported it in accordance with law. Therefore, Guangzhou Intermediate People’s Court ruled that: 1. The content of “the second respondent shall repay to the applicant the loan principal of RMB36,0004.52, handling fee of RMB 64,400, interest and repayment penalty [the first part is the interest of RMB 449.05 as of February 24, 2020 and repayment penalty. The second part refers to the interest and compound interest accrued from February 25, 2020 to the date of actual repayment. The interest is based on the actual amount owed, calculated according to the standard of 0.5%. Daily interest rate, and the compound interest is calculated at the standard of 0.5%. Daily interest rate. The third part is the repayment penalty, which is calculated according to the standard of 5% of the unpaid part of the minimum payment]” in Item (1) of the main article of the award made by Guangzhou Arbitration Commission shall be revoked. 2. The content of “the second respondent compensates the lawyer’s fee of the Applicant RMB 25,000” in Item (2) of the main article of the award made by Guangzhou Arbitration Commission shall be revoked.

13

Item (4) and Item (5) of Paragraph 1 of Article 58 of the Arbitration Law: “A party may apply for setting aside an arbitration award to the intermediate people’s court in the place where the arbitration commission is located if he can produce evidence which proves that the arbitration award involves one of the following circumstances: ……(4) The evidence on which the award is based was forged; (5) The other party has withheld the evidence which is sufficient to affect the impartiality of the arbitration; ……”. 14 (2021)Yue 01 Min Te No. 7.

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3. The content of “the arbitration fee of 16,996 Yuan, to be borne by the second respondent” in Item (3) of the main article of the award made by Guangzhou Arbitration Commission shall be revoked.” This case involves the circumstance where forged evidence was discovered in arbitration cases. In this case, after discovering that the evidence involved in the case was forged, the parties chose to file an application for setting aside the arbitration award with the court. It is worth noting that although the Arbitration Law and its judicial interpretations do not stipulate whether a party could apply for partial setting aside of an arbitration award or not, in judicial practice, an application for partial setting aside of an arbitration award is permitted by the court, just as the court made a final ruling in this case. Therefore, not all arbitration awards will be found to be invalid when it comes to the substance of the evidence. In addition, when it comes to the substantive issue of forged evidence, an application for non-enforcement of an arbitral award is also a judicial remedy often chosen by parties to arbitration cases. For example, in LSY v. Nanjing Jizhi Feng Metal Products Co., Ltd. and JGY,15 the court held that: “After investigation, it is found that there is a forged signature in the loan contract on which the arbitration is based, and the loan contract is the main basis for arbitration. This court upholds the claimant’s opinion that the main evidence on which the arbitration is based is forged and that the request not to enforce the arbitral award has a factual and legal basis”. According to Article 475 of the Civil Procedure Law Interpretation, a court may, in principle, partially enforce or partially reject an arbitral award that involves the substance of the evidence, except in the case of non-enforcement of the arbitral award as provided by law and the case of “the unenforceable part is inseparable from other parts”. However, different from the circumstance of partially revoking the arbitration award in the first case of this section, although there are two circumstances in practice in which the court does not enforce the arbitration award in whole and does not enforce the arbitration award in part, the court may adopt the method of completely rejecting the arbitral award when it comes to the issue of the substance of the evidence. For example, in general, there is a separability between the joint and several liability of the guarantor and the liability of the debtor to perform. However, in LSY v. Nanjing Jizhi Feng Metal Products Co., Ltd. and JGY where the signatures of Jiang and others were forged, although theoretically the court could rule to enforce the repayment obligation of Nanjing Jizhi Feng Metal Products Co., Ltd., and not to enforce the guarantor’s joint and several liability of the arbitration award. But in the end, the court still ruled against the enforcement of the entire content of the award. The result of the case above may be due to the consideration of the court’s discretion, but it can also be reflected from the side that when the arbitral award involves substantive issues of evidence, such as evidence forgery, the overall judgment of 15

(2021) Min 06 Zhi No. 263 Zhi Yi.

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the arbitral tribunals on the facts of the case often has a large deviation. And under this circumstance, even if there is an enforceable part in the award, the enforceable part and the unenforceable part are inseparable from the overall consideration of the outcome of the case. Therefore, in order to achieve a fair result of the arbitration case, the courts often choose to rule that the arbitration award shall not be enforced altogether. Shijiazhuang Guangming Zhengda Daily Chemicals Co., Ltd. v. Shijiazhuang Crown Display Material co., Ltd. and Hebei Runmin Fine Chemicals Co., Ltd 16 Shijiazhuang Guangming Zhengda Daily Chemical Co., Ltd. requested the revocation of the award made by the Shijiazhuang Arbitration Commission on January 30, 2019. One of the reasons for the revocation is that, part of the “List of External Processing Expenses” submitted by the respondent for arbitration was filled in by himself at a later stage, which was a forged evidence. The original copy of the “Mixed Crystal Delivery Sheet” was not provided, and the signature of the duplicate copy was forged. The respondent concealed the Production Record, and only if the contents of the List of External Processing Expenses and Production Record were the same that could they be used as the basis for the decision. The Shijiazhuang Intermediate People’s Court held that, the transcript of the arbitration hearing showed that the parties agreed to cross-examine the evidence submitted after the hearing in writing. After the hearing of the arbitral tribunal, the respondent submitted Evidence 18 and three explanations of cost estimation, and the claimant submitted a written cross-examination opinion. The procedure on evidence submission complied with the arbitration rules. The applicant claimed that the “List of External Processing Expenses” and “Mixed Crystal Outbound Slip” were forged and had no basis. The arbitral award did not violate the public interest. The costs and production profits disputed by the two parties shall be calculated according to the output, sales/inventory/loss, sales bids and inputs of each product produced by the cooperation in accordance with the contract. The cost of labor, power, raw and auxiliary materials claimed by the respondent shall be accounted for according to all original records during the cooperation period. The respondent failed to provide the Production Record during the period of cooperation, concealed evidence sufficient to affect the impartial award, and the arbitral award should be set aside. Therefore, the Shijiazhuang Intermediate People’s Court ruled to revoke the arbitration award. When it comes to the substantial issue of evidence, the parties may, depending on the circumstances of the case, file two applications for the revocation of the arbitration award at the same time. For example, in the above case, the applicant Guangming Zhengda Daily Chemicals Co., Ltd applied to the court for the revocation of the arbitration award because of concealment of evidence and falsification of evidence. The court finally ruled that there was no basis for the application of the falsification of evidence of Zhengda Daily Chemicals Co., Ltd, but the respondent did not provide the key evidence involved in the case, which constituted concealment 16

(2019) Yi 01 Min Te No. 95.

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of evidence. Therefore, the court finally supported Zhengda Daily Chemicals Co., Ltd’s application for revoking the arbitration award. The parties may also choose to apply for judicial relief against the enforcement of the arbitral award. For example, in Xinjiang Guanghui Xinbang Real Estate Development Co., Ltd. v. Bortara Mongolian Autonomous Prefecture Huakun Construction and Installation Engineering Co., Ltd.,17 the court held that, in this case, Xinjiang Guanghui Xinbang Real Estate Development Co., Ltd. did not know whether the transfer check issued by Xinjiang Guanghui Xinbang Real Estate Development Co., Ltd. to Bortara Mongolian Autonomous Prefecture Huakun Construction and Installation Engineering Co., Ltd. had been endorsed, transferred and cashed or not. Bortara Mongolian Autonomous Prefecture Huakun Construction and Installation Engineering Co., Ltd. concealed the endorsement of the transfer check issued to it by Xinjiang Guanghui Xinbang Real Estate Development Co., Ltd., and did not submit relevant evidence of endorsement transfer to the arbitral tribunal, resulting in the arbitration institution’s wrong confirmation of the amount of project payment made by Xinjiang Guanghui Xinbang Real Estate Development Co., Ltd. Therefore, the court supported the claim made by Xinjiang Guanghui Xinbang Real Estate Development Co., Ltd. To sum up, when an arbitration case involves the substantial issue of evidence, the parties’ judicial remedies mainly include two categories: application for cancellation of the arbitration award and application for refusal to implement the arbitration award. When the court hears the award involving the substantial issue of evidence, it can also directly notify the arbitration tribunal to re-arbitrate within a certain period of time.18 However, the re-arbitration procedure is still one of the revocation procedures for arbitral awards. In addition, if a party applies to the court to set aside the arbitral award and is rejected, and then files an application for non-enforcement on the same grounds in the enforcement proceedings, the court will not support it, and the reverse is also true.19 It is also the embodiment of the non bis in idem principle in civil proceedings.

17

(2021) Xin 01 Zhi Yi No. 340. Article 21 of the Arbitration Law Interpretation: “Under any of the circumstances where a party applies to revoke an arbitral award in China, the People’s Court may, pursuant to the provisions of Article 61 of the Arbitration Law, notify the arbitral tribunal to conduct a new round of arbitration: (1) the arbitral award is based on forged evidence; or (2) the counterparty has concealed evidence which affects a fair ruling. The People’s Court shall state the specific reasons for a new round of arbitration in the notice”. 19 Article 20 of the Arbitration Enforcement Provision provides that, after the application for revocation of arbitration award is dismissed, if a party applies for not enforcing on the same cause during the enforcement procedures, the people’s court shall not uphold; after the application for not enforcing the arbitration award is dismissed, if a party applies for revocation of arbitration award on the same cause, the people’s court shall not uphold. 18

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3.4 Concealment of Facts In the judicial review of arbitration in China, there are three conditions for determining the concealment of evidence, mainly based on Paragraph 1 of Article 16 of the Arbitration Enforcement Provision.20 Accordingly, when determining whether there is evidence concealment in an arbitration case, the court shall examine whether the other party has concealed evidence sufficient to affect the fairness of the award, and the evidence is only in the possession of the other party. Therefore, under normal circumstances, the party who proposed the cause of concealment of evidence should provide evidence to prove that the other party has concealed the evidence that has a significant impact on the arbitration award. However, in practice, the parties often confuse the difference between the concealment of evidence and the concealment of facts, which leads to a result that, the evidence in the “concealment of evidence” put forward by the party is actually a fact, rather than evidence. In this regard, the court often does not support the parties’ claims. Beijing CSCE Environmental Engineering Co., Ltd. v. Qingdao Tianren Environment Co., Ltd.21 Beijing CSCE Environmental Engineering Co., Ltd. (“CSCE Company”) requested to revoke the arbitration award made by CIETAC on 6 August 2018. One of the reasons for the revocation is that Qingdao Tianren Environment Co., Ltd. (“Tianren Company”) concealed factual evidence sufficient to affect the fairness of the award, namely that the oil extraction equipment had not been in continuous operation in this case. According to CSCE Company, on December 28, 2018, due to a series of problems in the kitchen project undertaken by Tianren Company, CSCE Company initiated arbitration in accordance with the law. And during the arbitration, Tianren Company submitted a reply to CIETAC, page 2 of the reply clearly stated that “the equipment for extracting grease has not been continuously operated”. The Commissioning Problems of Tai’an Food Waste and Explanation on the Completion and Acceptance of Equipment for Tai’an Food Waste Resource Utilization and Harmless Treatment Project both clearly stated that the acceptance requirement was “stable process operation, the technology meets the standard, the relevant parameters meet the requirements of the technical contract and relevant national specifications”. CSCE Company argued that since Tianren Company knew that the oil extraction equipment had not been 20

Paragraph 1 of Article 16 of the Arbitration Enforcement Provision provides that, upon satisfaction of the following conditions, the people’s court shall consider “the opposing party withholds any evidence to the arbitral institution, which suffices to affect an impartial award” as prescribed in Item 5 of Paragraph 2 of Article 237 of the Civil Procedure Law: (1) The evidence is material to the affirmation of primary case facts; (2) The evidence is available only to the opposing party but hasn’t been submitted to the arbitral tribunal; (3) A party becomes aware of the existence of the evidence in the process of arbitration, and requests the opposing party to present it or requests the arbitral tribunal to order the submission thereof, but the opposing party refuses to present or submit the same without justified reasons. 21 (2019) Jing 04 Min Te No. 99.

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continuously operated so far, how could it be confirmed that the extraction of oil meets the acceptance standards. Therefore, Tianren Company concealed this factual evidence to affect the fair ruling of this case. Tianren Company defended that it stated in the arbitration defense submitted before that “as far as Qingdao Tianren Company knew, CSCE Company believed that the cost of oil extraction was higher than the income from oil sales, and the high moisture content of raw materials could also get more processing fees, so CSCE Company had not been able to continuously operate the equipment for oil extraction”. The content above referred to the facts that Tianren Company knew about the operation of oil extraction equipment of CSCE Company after the project was accepted and handed over to CSCE Company, and did not refer to the operation problems of oil extraction equipment before the project was accepted and handed over. CSCE Company took the facts out of context and deliberately distorted the understanding. Moreover, the determination and handling of the facts of the case were within the jurisdiction of the arbitration tribunal, and the proper handling of the results by the arbitral award entity was beyond the scope of judicial review by the people’s court. The Beijing No.4 Intermediate People’s Court held that whether the relevant equipment in this case could operate normally or not was a fact of the case that should be proved through relevant evidence. The matters described by CSCE Company did not meet the basic definition of “evidence” in civil litigation, which obviously confused the basic relationship between “evidence” and “facts”. As for the facts of the case, they should be proved through the evidence provided by the parties. CSCE Company accused the other party of concealing evidence without fulfilling its burden of proof, which obviously did not comply with the law. Therefore, Beijing No. 4 Intermediate People’s Court finally ruled to reject the application of CSCE Company. Generally speaking, in arbitration cases, the parties that raise the claim of “concealment of evidence” should pay attention to one point: concealment of evidence is not equivalent to concealment of facts. For example, in Pingyang County Tourism Development Investment Co., Ltd. v. Tangfeng Hange Holding Co., Ltd.,22 the court held that, in this case, the applicant believes that the Tangfeng Hange Co., Ltd.’s equity had been sealed and frozen, which may lead to circumstance where the applicant paying the repurchase money but unable to complete the transfer registration. This claim of the applicant actually referred to that the respondent has concealed the relevant facts. The concealment of facts and the concealment of evidence were two different legal concepts. The concealment of facts did not belong to the scope of the people’s court’s review of the case of revoking the arbitration award, so the reason for the withdrawal of the applicant could not be established, and the court did not accept it. In Beijing CSCE Environmental Engineering Co., Ltd. v. Qingdao Tianren Environment Co.,Ltd., the court clearly pointed out in the ruling that, the facts of the case put forward by the parties shall be proved by the evidence provided by the parties. 22

(2022) Hu 01 Min Te No. 12.

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However, when CSCE Company claimed that the respondent Tianren Company concealed major evidence involved in the case, it did not prove the facts through relevant evidence, so the court finally rejected CSCE Company’s application for revoking the arbitration award. On this basis, two questions can be extended: how to distinguish “evidence” and “facts” and how to identify the burden of proof of the party who put forward the claim of “concealing evidence”. As for the first question, according to Article 66 of the Civil Procedure Law,23 the basis for ascertaining facts by evidence includes a series of forms such as documentary evidence, physical evidence, audio-visual materials and testimony of witnesses, etc. Therefore, evidence is the most important condition for proving the existence of facts, and it is also the most powerful basis for the court to review the facts of the case and restore the truth of the case. When determining whether there is a “concealment of evidence” in an arbitration case, the party making the claim shall provide evidence on the fact that the other party concealed the evidence involved in the case. It should also be noted that a party must request the other party to produce the evidence or request the arbitral tribunal to order the other party to produce the evidence in the course of the arbitral proceedings. If the parties become aware of the existence of such evidence after the arbitral award has been issued, in view of the basic principle of “first award and finality” in arbitration, it may be difficult for the parties to claim to a court to set aside or refuse enforcement of the arbitral award on the basis of “new evidence”. This leads to the second question, which is, the party who proposes the reason of “concealment of evidence” should have voluntarily proposed the reason to the arbitration tribunal during the arbitration process, and if not voluntarily, the arbitration tribunal has no obligation to take the initiative to review. Although in judicial practice, as has been discussed in Sect. 3.1, some courts do not consider whether a party has made a request to disclose evidence to the other party or the arbitration tribunal in the arbitration process when examining whether it constitutes “concealment of evidence”. However, such circumstances are rare in practice. In addition, the parties should bear the burden of proving the existence of the fact that “the evidence is only in the possession of the other party, but has not been submitted to the arbitral tribunal”, and in view of this layer of requirements, it is often more difficult for parties to prove in practice. This includes two possible situations. First, although the party making the claim has the evidence, it is not aware of the existence of the evidence during the arbitration process, and does not know it until the end of the arbitration. In this regard, due to the principle of “single and final award”, the court may not support the party’s claim of “concealment of evidence”. The arbitration result can only be attributed to the negligence of the parties themselves. Second, even if the evidence is only in the possession of the other party and has not 23

Article 66 of the Civil Procedure Law: “Evidence shall comprise the following categories: 1. statements of the parties; 2. documentary evidence; 3. physical evidence; 4. audio-visual materials; 5. electronic data; 6. testimony of witnesses; 7. expert opinions; and 8. records of inspections and examinations. Any of the above-mentioned evidence must be verified before it can be taken as a basis for ascertaining facts”.

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been submitted to the arbitral tribunal, the party would not be aware of the existence of the evidence during the arbitration. On the whole, for a party that raises the cause of “concealment of evidence”, its burden of proof not only includes the precondition that it should be aware of the fact that “the other party concealed evidence” during the arbitration process, but also should provide evidence on this condition to prove that the other party has such facts. In practice, this imposes a relatively high standard of proof on the party making the claim of “concealment of evidence”. In this regard, perhaps considering the fact that the requirement of proving “concealment of evidence” is too harsh for the parties in arbitration cases, as well as the fact that there is a discrepancy between judicial practice and legal provisions at some times, the circumstance of “the other party has withheld the evidence which is sufficient to affect the impartiality of the arbitration” in Article 58 of the current Arbitration Law has been deleted in the Arbitration Law (Draft for Comments).24 However, “concealment of evidence” is one of the most common substantive issues of evidence in judicial review and arbitration cases, and if it is completely deleted, it may not solve the practical judicial embarrassment at present. To sum up, theoretically, when distinguishing “concealment of evidence” from “concealment of facts”, attention should be paid to the difference between evidence and facts, that is, one party making a claim should prove that “the other party conceals important evidence involved in the case”, rather than simply claiming concealing facts. In addition, the burden of proof of the party claiming the reason of “concealment of evidence” is relatively high, which means the party should not only be aware of the fact that the other party has concealed evidence during the arbitration process, but also propose to the other party or the arbitration tribunal the proposition of “showing the concealed evidence”.

3.5 “Sufficient to Affect an Impartial Award” According to Paragraph 1 of Article 16 of the Arbitration Enforcement Provision, when conducting judicial review on whether there is concealed evidence in an arbitration case, the court shall firstly judge whether the “concealed evidence” put forward by the applicant is “sufficient to affect an impartial award”. What is “sufficient to affect an impartial award”? In fact, in judicial practice, if the concealed evidence claimed by the applicant is irrelevant to the basic facts recognized by the arbitration tribunal or does not affect the final award of the arbitration, the court will not support the applicant’s claim even if the other party does not submit it in the arbitration hearing. 24

Paragraph 5 of Article 77 of the Arbitration Law (Draft for Comments): “Where a party submits evidence to prove that an award has any of the following circumstances, it may apply to the intermediate people’s court at the place of arbitration to set aside the award: (5) the award was obtained as a result of fraudulent acts such as malicious collusion or Falsification of Evidence”.

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ZW v. LJX 25 Applicant ZW made an application to revoke the arbitration award made by Guangzhou Arbitration Commission on October 21, 2021. One of the reasons for the revocation was that LJX had concealed evidence which was sufficient to affect the fairness of the award. According to ZW, when LJX submitted the award to the court, she only quoted the statement that LJX had issued the Notice of Recission of the Real Estate Sublease Contract through wechat on February 27, 2019, which was determined in the case, but she did not mention all the contents of the wechat conversation. The wechat conversation contains the following words: “You shall return the deposit of RMB186,000 within two days from the date of receipt of this notice. Interest will be charged if the deposit is overdue. At the same time, you should compensate me for all economic losses”. This record of wechat was the evidence submitted by LJX in the arbitration case, indicating that LJX waived the right to return the double deposit agreed in Item 20 of Article 1 of the House Lease Contract. LJX did not claim compensation for economic losses during the period of arbitration, nor did she cite evidence of economic losses. Due to LJX’s failure to produce the wechat record, Guangzhou Arbitration Commission made an award of “double refund of the deposit of RMB372,000 to LJX”. Therefore, according to Item (5) of Paragraph 1 of Article 58 of the Arbitration Law, this arbitral award should be revoked. The respondent, LJX, replied that in this case, the concealed evidence claimed by Zhang could not reflect LJX’ s waiver of the right to claim double return of the deposit, and LJX did not waive her liability to recover ZW’ s breach of contract under the Housing Lease Contract and double the return of the deposit. The expression of the text message only indicated that LJX asked ZW to return the lease deposit, pay interest and compensate for losses, but it did not mean that LJX waived ZW’ s liability for breach of contract and the right to double the return of the deposit. The court held that the evidence that ZW claimed that LJX concealed from the arbitral tribunal was a WeChat record dated February 27, 2019. The content was that LJX notified ZW to terminate the contract and informed him of the relevant rights and obligations, and although LJX requested ZW to return the deposit, she did not waive her right to request ZW to return the deposit. Even if LJX did not submit the evidence to the Guangzhou Arbitration Commission, it was not enough to affect the arbitration award. ZW was actually dissatisfied with the substantive award determined by the arbitral tribunal, and his claim that LJX’s concealment of evidence sufficient to affect the fair award was not established. The court did not support it, so it ruled to reject ZW’s application to set aside the arbitral award. Zhongxin Guoan Guangshi Network Co., Ltd. v. Qingdao Hisense Broadband Multimedia Technology Co., Ltd 26

25 26

(2021) Yue 01 Min Te No. 1466. (2020) Jing 04 Min Te No. 37.

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Zhongxin Guoan Guangshi Network Co., Ltd. (“Guoan Company”) requested to revoke the award made by Beijing Arbitration Commission on 20 December 2019, and one of the grounds for revocation was that Qingdao Hisense Broadband Multimedia Technology Co., Ltd. (“Qingdao Hisense Company”) concealed evidence that could affect the fairness of the award. The applicant, Guoan Company, claimed that the important evidence provided by Qingdao Hisense Company was incomplete, and that the seal positions of the original copies of the confirmation of receipt of the purchase order submitted by Qingdao Hisense Company during the arbitration stage were inconsistent with those of the copies submitted to Beijing Arbitration Commission in advance. Qingdao Hisense Company explained that the different seal locations of the original and the copy were caused by the different versions of the preservation contract. It had presented the original evidence and submitted a new copy in court. The cross-examination opinion of Guoan Company was that the copy of the evidence resubmitted for approval was consistent with the original, but the authenticity of the evidence was doubted, the relevance and the purpose of proof were not recognized. The reason for crossexamination opinion of Guoan Company was that the receipt confirmation form clearly contained three attachments: receipt of goods, logistics information sheet and acceptance report. Qingdao Hisense Company should provide complete evidence to prove the receipt of goods if the acceptance recipient was not Guoan Company. However, Qingdao Hisense Company did not provide it. The court held that Guoan Company’ s claim pointed to three attachments to the receipt confirmation of the purchase order, namely the receipt of goods, the logistics information sheet and the acceptance report. According to the content ascertained by the arbitral tribunal, the two parties had reconciled their accounts and signed a statement on June 18, 2019, confirming that as of May 31, 2019, the balance of Qingdao Hisense Company’ s receivables to Guoan Company was 55,543,500 yuan. During the arbitral hearing, Guoan Company also confirmed that the total amount of unpaid goods was RMB 55,543,500, and explained that as of November 8, 2019, the outstanding amount was RMB 3,299,700, and the parties’ post-trial materials showed that there was no disagreement between the parties on the unexpired amount calculated according to November 8, 2019 and its composition. It could be seen that the facts and evidence on which the arbitral tribunal relied to make the arbitral award are the above-mentioned facts and evidence confirmed by the parties in court and after the hearing that there is no objection. Therefore, the receipt of goods, logistics information sheet and acceptance report claimed by Guoan Company were not the main evidence to determine the basic facts of this case. And under this circumstance, the court did not support Guoan Company’s claim that the arbitration award was set aside without factual and legal basis, and ruled to reject its application to set aside the arbitral award. Items (4) and (5) of Paragraph 1 of Article 58 of the Arbitration Law and Paragraph 4 and Paragraph 5 of Article 244 of the Civil Procedure Law stipulate that the other party “conceals evidence sufficient to affect the impartiality of the award” as the ground for revoking or refusing to enforce a domestic arbitration award. The “evidence sufficient to affect the impartiality of the award” here refers to evidence

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that directly affects the conclusion of the final award, which is usually related to the disputes, the focus of disputes and important circumstances involved in an arbitration case, and directly affects the judgment of the arbitration tribunal. On the contrary, if the evidence itself is irrelevant to the basic facts of the case, or if the other party does not submit such evidence, it does not directly affect the arbitral tribunal’s basic judgment of the case, and ultimately does not affect the fair ruling of the case. Such evidence will not be found by the court to constitute “concealment of evidence” even if the other party “conceals” such evidence. In Zhongxin Guoan Guangshi Network Co., Ltd. v. Qingdao Hisense Broadband Multimedia Technology Co., Ltd, the court held that the facts and evidence on which the arbitral tribunal relied to make the arbitral award were the above-mentioned facts and evidence confirmed by the parties in court and after the hearing that there was no objection, so the receipt of goods, logistics information sheet and acceptance report claimed by Guoan Company were not the main evidence to determine the basic facts of the case. In ZW v. LJX, the court held that even if LJX did not submit the evidence to the Guangzhou Arbitration Commission, it was not enough to influence the arbitral award. If a piece of evidence being concealed involves the basic legal relationship of the case, the judgment of the basic legal facts and the correct division of responsibility, then the evidence can be regarded as sufficient to affect the fairness and accuracy of the ruling. If a party conceals such evidence that may be unfavorable to others and not in the possession of others for its own interests, the arbitral tribunal’s judgment of the facts, the application of law and the division of responsibilities will be inconsistent with the true situation. The award made on this basis will inevitably be unfair and unreasonable to the other party. If the evidence concealed by the other party does not involve the determination of the underlying legal relationship and the basic legal facts, does not seriously affect the liability between the parties, but only has a slight impact on the result of the award, then the court should not revoke or refuse to enforce the arbitral award according to law in this case. In practice, for the arbitration cases in which the award is revoked or not enforced due to the concealment of evidence, the court generally only needs to review the evidence itself, and does not need to conduct a comprehensive review of the facts of the entire case. Otherwise, even though the court finds that there is a problem with the substance of the arbitral award, if it is difficult to see from the facts of the case whether the parties concealed evidence sufficient to affect the fair award as the basis for the arbitral award, the substantive issues claimed by a party cannot constitute grounds for setting aside or not enforcing the arbitral award. This is similar to another circumstance, “falsification of evidence”, in the matters of evidence. In the conditions for determining forged evidence, doubts about the authenticity of the evidence itself are not the same as doubts about the facts of the case themselves as determined by the arbitral tribunal during the arbitration process. For example, in JSX v. Antong Holding Co., Ltd.,27 on the issue of JSX’s claim that the evidence on which the award was based was forged, the court held that during the arbitration procedure, JSX recognized the authenticity of the special report on profit 27

(2021) Jing 04 Min Te No. 774.

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matters issued by the accounting firm, but believed that the content was seriously untrue and could not be used as the basis for the verdict, which was consistent with the opinion stated by him to this court. Therefore, JSX’ s claim involved the substantive trial of arbitration cases and whether the report made by the accounting firm can be used as evidence did not fall within the scope of judicial review of arbitration. Although in judicial practice, when examining whether an arbitration case has “concealed evidence” or “forged evidence”, the court will exceptionally conduct a substantive review, the content of this review is limited to the evidence itself, and does not include a comprehensive review of the arbitration case. This reflects the respect of the courts in China for the principle of “single and final award”, and also reflects the pro-arbitration position of China’s Courts on arbitration in recent years.

3.6 Third Party Application to Oppose Enforcement of Arbitration Award Among the matters of evidence in arbitration cases, “concealment of evidence” and “falsification of evidence” are general claims submitted by the parties to the arbitration case on the basis of which an application for setting aside or not enforcing an arbitral award is made. According to Paragraph 1 of Article 16 of the Arbitration Enforcement Provision, the basic recognition of the cause of “concealment of evidence” raised by the parties in the case is that the concealed evidence is sufficient to affect the impartial award of the arbitration itself. This raises a question: if the concealment of evidence by the parties to the case leads to an unfair award in the arbitration case, and the award itself affects the interests of the third party, can the third party apply to the court to oppose enforcement of the arbitral award? In fact, according to Article 9 and Article 18 of the Arbitration Enforcement Provision,28 if the third party wants to apply to the court not to enforce the arbitral 28

Article 9 of the Arbitration Enforcement Provision provides that, a person who is not a party to the case applying for not enforcing the arbitration award or written arbitral mediation shall submit an application form and supporting materials, and meanwhile, the following conditions shall be satisfied: (1) There is evidence to prove that the parties to the case have maliciously applied for arbitration or false arbitration, thus impairing its legitimate rights and interests; (2) The enforcement subject involving the legitimate rights and interests of the person who is not a party to the case hasn’t been fully enforced;(3) Filed within 30 days after the person knows or should have known the enforcement measures taken by the people’s court against the subject.

Article 18 of the Arbitration Enforcement Provision provides that, when a person who is not a party to the case applies for not enforcing the arbitration award or written arbitral mediation in accordance with Article 9 above, upon satisfaction of the following conditions, the people’s court shall uphold: (1) The person who is not a party to the case is the subject of the right or interest; (2) The right or interest claimed by the person who is not a party to the case is legal and true; (3) The parties to the arbitration case have fictitious legal relationship or have fabricated the facts of the case; (4) The results that the main body of the arbitration award or written arbitral mediation handles the civil rights and obligations of the parties are inaccurate in part or in whole, thus impairing the legitimate rights and interests of the person who is not a party to the case.

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award, the reasons claimed by the third party shall mainly include three aspects. First, the third party is the subject of rights or interests in the subject matter of the arbitral award, and the rights or interests claimed by the third party are legal and true. Second, in an arbitration case, there is a fictitious legal relationship between the parties or fabrication of the facts of the case. Third, there is evidence to prove that the fictitious legal relationship between the parties or fabrication of the facts of the case has led to some or all errors in the arbitral award, and the errors have harmed the legitimate rights and interests of third parties. Accordingly, it seems that the statutory grounds for the third party’ s application for non-enforcement of an arbitral award do not include claims on the substance of evidence in the arbitration case. However, in judicial practice, there is a circumstance in which the parties to the case concealed from the arbitral tribunal important evidence to determine the basic facts of the case, resulting in the arbitral tribunal failing to fully and truthfully understand the facts involved in the case and making a wrong judgment. To some extent, such practice of the parties to the case is not fundamentally different from fabricating legal relationships and fabricating the facts of the case. LX v. Tai’an Welfare Lottery Center et al.29 The applicant (the third party of this case), LX, requested not to enforce the award made by Tai’an Arbitration Commission on May 6, 2016. One of the reasons for not enforcing the award was that Tai’an Lucky Lottery Center concealed the key evidence and facts of LX’ s real estate right holder during the arbitration, leading to the wrong award made by Tai’an Arbitration Commission. And the award harmed her legitimate interests. The applicant LX claimed that she signed the Commercial Housing Pre-sale Contract with the executor, Dongping Rongqiao Real Estate Co., Ltd., on April 16, 2015, and the house was located in Room 105, the second shop of Rongqiao Central Mansion (house code: 55,813). She paid the house on the same day of signing the Commercial Housing Pre-sale Contract, and the executor delivered the house which had been used till now in March of the following year. In January 2019, Tai’an Welfare Lottery Center filed a lawsuit with the court to cancel the Commercial Housing Presale Contrac” signed between LX and the executor, Dongping Rongqiao Real Estate Co., Ltd.. The case was heard by the courts of first and second instance and confirmed that the house was sold in “one room for two houses”. LX argued that the Commercial Housing Pre-sale Contract signed between LX and the executor was legal and valid. Moreover, LX bought the house first, and Tai’an Welfare Lottery Center bought the house later. Tai’an Welfare Lottery Center concealed the key evidence and facts that LX was the owner of the real estate right during the arbitration. Besides, the evidences of the facts under the ruling made by Tai’an Arbitration Commission were insufficient and there was an error in the application of law in the arbitration award. It was ascertained that after Tai’an Arbitration Commission accepted the case, the applicant for enforcement, Tai’an Welfare Lottery Center, did not submit to Tai’an Arbitration Commission the key evidence that the party subjected to enforcement, 29

(2022) Lu 09 Zhi Yi No. 42.

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Dongping Rongqiao Real Estate Co., Ltd., and the applicant LX had registered and filed the commercial housing sales contract for the Commercial Housing Pre-sale Contract and handled the online signature registration. Because this case involved the ownership of real estate and Dongping Rongqiao Real Estate Co., Ltd. should have attended the court but did not appear in court, so the Tai’ an Arbitration Commission did not conduct the necessary investigation into the ownership of the real estate involved in the case and on May 6, 2016, in absentia, the award was made. The first item of this award stated: “within seven days from the date of service of this ruling, Rongqiao Real Estate Development Co., Ltd., shall deliver the front room of No. 105, Building 2, Central Mansion to the Tai’an Welfare Lottery Center.” Tai’an Intermediate People’s Court of held that, the award made by Tai’an Arbitration Commission was to arbitrate the ownership of housing sales. The applicant, Taian Fucai Center, applied for arbitration in court, and the respondent, Dongping Rongqiao Real Estate Co., Ltd., should have appeared in court, but did not. The parties to the arbitration shall submit to the Tai’an Arbitration Commission the key evidence that the defendant, Dongping Rongqiao Real Estate Co., Ltd, and the applicant LX had registered and filed the commercial housing sales contract and registered the online signature on the “Commercial Housing Pre-sale Contract”. But it concealed and did not submit the evidence, resulting in the Tai’an Arbitration Commission making a controversial award against LX, the third party in the case. Therefore, pursuant to Article 244 of the Civil Procedure Law, Tai’an Intermediate People’s Court ruled not to enforce the arbitral award. In the above case, the reason for the claim of the third party LX was not based on Article 18 of the Enforcement Provisions on the statutory grounds for the third party to apply for non-enforcement of the arbitral award, but “the applicant for enforcement in this case, Tai’an Fucai Center, concealed the key evidence and facts that LX was the owner of the right to immovable property during the arbitration”. The court also recognized the claim of the third party LX, and the legal basis cited in the ruling was Article 244 of the Civil Procedure Law concerning the statutory circumstances under which the respondent claimed not to enforce the arbitral award. It is worth noting that the Article 244 of the Civil Procedure Law applies to the parties of the case, but the third party LX is not a party to the original arbitration case. It seems debatable that the court directly applied the relevant provisions of the Civil Procedure Law on “concealing evidence” instead of the statutory grounds for the third party to apply for non-enforcement of an arbitral award in the Arbitration Enforcement Provision. One view holds that if the parties in a case conceal the important evidence for ascertaining the facts of the case from the arbitral tribunal for their own purposes, so that the arbitration tribunal makes an unfair award, and the result of the award damages the legitimate interests of third parties, then this circumstance is no different from the fictitious legal relationship or the fabrication of the facts of the case in essence. In other words, if the parties to an arbitration case have concealed from the arbitral tribunal evidence that is sufficient to affect the fairness of the award, and the act of concealing the evidence causes the arbitral tribunal to make an unfavorable award to third parties, then the “concealment of evidence” behavior of the arbitral

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parties shall be regarded as consistent with the “parties to the arbitration case have fictitious legal relationship or have fabricated the facts of the case” stated in Article 18 of the Arbitration Enforcement Provision. For example, in Xi’an Haisheng Shipbuilding Industry Co., Ltd. v. Shaanxi Haupu Real Estate Co., Ltd.,30 Xi’an Intermediate People’s Court held that the parties had the obligation to truthfully and comprehensively inform the arbitration tribunal of the facts related to the case during the arbitral process. The behavior of the parties which concealing important facts for the fulfillment of their purposes so that the arbitral tribunal failed to fully and truthfully understand the condition of the house involved in the case and thus made a wrong judgment had no fundamentally difference from the behavior of fabricating legal relationships and fabricating the facts of the case. Accordingly, when interpretating Article 18 of the Arbitration Enforcement Provision about the legal grounds for third parties to apply for the non-enforcement of the arbitration award, there indeed exists an analogy in judicial practice to interpret the factual behavior of the parties to an arbitration case to conceal evidence as “parties to the arbitration case have fictitious legal relationship or have fabricated the facts of the case”. And compared with the first case where the court directly applied the provisions of Article 244 of the Civil Procedure Law to rule the application for nonenforcement of the arbitral award made by the third party, the method of analogy is much more appropriate and reasonable. To sum up, in judicial practice, if the parties’ concealment of evidence leads to an unfair award in an arbitration case, and the award itself also affects the interests of the third party, then the third party can apply to the court for refusal to enforce the arbitration award. In addition, in order to ensure the ultimate fairness of the case and protect the legal rights and interests of the third party, to some extent, the court will interpret the evidence and important facts concealed by the parties involved in the case by analogy as “parties to the arbitration case have a fictitious legal relationship or have fabricated the facts of the case”, and then apply the Article 18 of the Arbitration Enforcement Provision to empower the legal basis to the ruling of the case.

3.7 Evidence of Doubtful Authenticity According to Article 15 of the Arbitration Enforcement Provision, in fact, the identification of “falsification of evidence” requires that the evidence admissible by the arbitral award is not only the main evidence for determining the basic facts of the case, but also the evidence obtained by the other party through fabrication, alteration and other illegal forms, that is, the evidence violates the requirements of “objectivity, relevance and legality”.31 If the authenticity of the evidence submitted by the parties 30

(2022) Shan 01 Zhi Yi No. 707. Article 15 of the Arbitration Enforcement Provision provides that, upon satisfaction of the following conditions, the people’s court shall consider “the evidence for rendering the award is forged” as prescribed in item 4, paragraph 2, Article 237 of the Civil Procedure Law: (1) The

31

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in the arbitration proceedings is in doubt, is that evidence necessarily equivalent to forged evidence? In judicial practice, the courts have set relatively strict standards on the identification of forged evidence when conducting judicial review of arbitration cases. If the parties to the arbitration are unable to provide evidence to prove that the evidence in question was obtained illegally by the other party, even if the authenticity of the evidence is in doubt, it will not affect the judgment of the arbitral tribunal on the final probative power of the evidence and the acceptance of the evidence. In other words, if the evidence with doubtful authenticity fails to meet the highly probable proof standard of determining that the evidence constitutes “forged evidence”, then the judicial review of the evidence by the court will be limited to the form, and will not interfere with the admissibility of the arbitral tribunal on the substantive issues of the evidence. Zunyi Kangcheng Real Estate Development Co., Ltd. v. Chongqing Yijian Construction Group Co., Ltd 32 Zunyi Kangcheng Real Estate Development Co., Ltd. (“Kangcheng Company”) requested to revoke the arbitration award made by Chongqing Arbitration Commission. One of the reasons for the revocation was that the main evidence on which the award was based, the Payment Agreement of Suspension Settlement Payment, was illogical in content and suspected to be forged. According to Kangcheng Company, the Lockout Settlement Payment Agreement in this case showed that the respondent Chongqing Yijian Construction Group Co., Ltd. (“Yijian Construction Company”) paid a RMB 5.1 million performance bond to Kangcheng Company twice. The first payment was RMB 4 million on October 24, 2013, before the establishment of Kangcheng Company on November 8, 2013. After that, Yijian Construction Company paid RMB 1.1 million, but Kangcheng did not receive the performance bond in its account. Kangcheng Company also pointed that according to the Lockout Settlement Payment Agreement, the settlement date was January 17, 2015, but the starting date of interest for the deposit of RMB 5.1 million and the project progress payment of RMB 3.88 million was May 1, 2014, which was unreasonable. In addition, the construction scope of Yijian Construction Company WAS not on the land of Kangcheng Company. Kangcheng company only developed the first phase of the project and there was no second phase of the project. Moreover, although the signature column of the representative of the construction unit in the Lockout Settlement Payment Agreement had the words “Wang”, but Wang was not an employee of Kangcheng Company, and his signature only represented his personal, which meant the signatures of the two jointly and severally liable guarantors in the “Lockout Settlement evidence has been accepted by the arbitration award; (2) The evidence is material to the affirmation of primary case facts; (3) The evidence is ascertained to have been formed or acquired by such illegal means as fabrication, alteration, provision of false proof, etc., which violates the objectivity, relevance and legality requirements of evidence. 32 (2019) Yu 01 Min Te No. 21.

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Payment Agreement” were written by one person, and the seal of “Yu” was not his own signature, nor his own signature. In fact, Kangcheng Company never settled with Yijian Construction Company, and Kangcheng Company had published a notice of loss of the company’s official seal in the Zunyi Evening News on December 12, 2018. Therefore, the authenticity of the Lockout Settlement Payment Agreement was doubtful and constituted forged evidence. Chongqing Intermediate People’s Court held that, the procedure of revoking the arbitral award was a type of civil litigation, and the parties who applied for revoking the award on the grounds of ‘forged evidence’ should bear the burden of proof for the fact of ‘forged evidence’. In this case, even if the stamp of Kangcheng Company on the Lockout Settlement Payment Agreement was different from the company’s record seal, it only involved the authenticity of the evidence itself, which might be related to the probative force or credibility of evidence. After all, the authenticity of Lockout Settlement Payment Agreement belonged to the substantial matters in nature and was not in the scope of judicial review by the court. In the civil field, the fact that the authenticity of the evidence could not be verified and therefore should not be admissible does not mean that the evidence was forged, and there was no corresponding relationship between the two, and the identification standard of the latter was much higher than that of the former. In judicial practice, when the people’s court could not determine the authenticity of civil evidence, it only concerned whether the evidence was admissible or not, rather than only identifying the parties concerned as falsification of evidence and then investigating their legal liability for falsification of evidence. To sum up, Kangcheng Company believed that the reason that “Lockout Settlement Payment Agreement” in this case was forgery lacked factual basis, so the court would not accept it. The court also did not support Kangcheng Company’s application for appraisal. Therefore, Chongqing Intermediate People’s Court ruled to reject Kangcheng Company’s application to revoke the arbitration award. In fact, the key to distinguish forged evidence is to prove that one party has the subjective intention and behaviors of forging evidence, such as deliberately imitating the real evidence to create false evidence, fabricating false evidence out of thin air or altering the real evidence. Merely proving that the content of evidence is inconsistent with the objective circumstances does not necessarily equate to falsification of the evidence. In the above case, even if the applicant Kangcheng Company believed that the “Lockout Settlement Payment Agreement” had genuine defects such as “although the signature column of the representative of the construction unit had the words “Wang”, but Wang was not an employee of Kangcheng Company”, such defects did not mean that the “Lockout Settlement Payment Agreement” was obtained by the respondent Yijian Construction Company in illegal forms such as forgery and alteration. When Kangcheng Company was unable to prove that the Lockout Settlement Payment Agreement was forged by the respondent, the court ultimately dismissed Kangcheng Company’ s claim and rejected its application to set aside the arbitral award. Therefore, if a party to an arbitration case wants to claim that the other party has “forged evidence”, it is not enough to prove that the authenticity of the evidence

3.7 Evidence of Doubtful Authenticity

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involved in the case is doubtful. The party should also prove that the other party has the subjective intention or behavior to forge evidence for the evidence with authenticity in doubt, and the standard of proof for the latter is much higher than that for the former. For example, in Rose Financial Leasing Co., Ltd. v. Shanghai Vcyber Technology Co., Ltd.,33 the court held that, the fact that Rose Financial Leasing Co., Ltd. merely selected individual words and phrases of witnesses was not sufficient to prove that witnesses had committed perjury. Forged evidence was usually the perpetrator deliberately providing false supporting materials to judicial organs, arbitration institutions, etc., thereby inducing judges or arbitral tribunals to make erroneous rulings. In this arbitration case, Shanghai Vcyber Technology Co., Ltd. clearly stated that the Cooperation Agreement was re-signed by Vcyber Intelligent Company, Xingyuan Advertising Company and Hantian Company on the previous real cooperation, that is, the Cooperation Agreement was formed by the three parties on the reverse date of signing, and in the absence of other sufficient evidence, it could not be determined that the Cooperation Agreement was forged based on the above circumstances alone. Besides, in Guohua Rongwei Taicang Energy Co., Ltd. v. Shanghai Dahong Construction Engineering Co., Ltd.,34 the court also pointed out in its ruling that, the falsification of evidence should have subjective and objective factors, which means, there was an intention and behavior of falsifying evidence, and the information conveyed by the evidence was inconsistent with the objective. In this case, Guohua Rongwei Taicang Energy Co., Ltd. (“Guohua Company”) believed that the “machinery and equipment have entered the site” shown in the “Project Start Review Form” was inconsistent with the actual situation, but the examination form had been reviewed by the supervision agency and there were no traces of alteration, and Guohua Company did not prove that Shanghai Dahong Construction Engineering Co., Ltd. or other entities had forged the examination form, so it could not be determined that the evidence was forged. Accordingly, to determine that the evidence involved in the case constituted “forged evidence”, it was not only necessary for the applicant to prove that the objective authenticity of the evidence was doubtful, but also for the applicant to prove that the other party subjectively had the intention or act of forging the evidence, that is, the dual standard of proof of subjectivity and objectivity. Sometimes, in judicial practice, the parties in an arbitration case are often not clear about the double standard of proof of “forged evidence”, which means the parties only put forward the claim that the authenticity of evidence is doubtful to the court or prove that the evidence accepted by the arbitration tribunal is inconsistent with the actual situation, which essentially requires the court to conduct a second hearing of the facts to be proved in their claim. However, it is the consideration and scope of examination for the arbitral tribunal to exercise its discretion to certify or judge the substance of evidence and contents of proof. As for the court, the main purpose of its judicial review is to determine whether the evidence on which the arbitral award 33 34

(2021)Jing 04 Min Te No. 536. (2017)Su 05 Min Te No. 2.

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was based itself has been formally “forged evidence”, and will not interfere with the admissibility and probative force of such evidence. In other words, the court does not conduct a full substantive review of the arbitral award. Even if the arbitral tribunal is wrong in determining the facts of the evidence involved in the case, it is not a circumstance that means the arbitral award can be set aside or not enforced. For example, in Jiujiang Luning Gas Co., Ltd. v. China Merchants Logistics Group Nanchang Co., Ltd.,35 the court held that, in fact, China Merchants Logistics Group Nanchang Co., Ltd and its wholly-owned subsidiary Luning Gas Company agreed on a high annual interest of 24%… and the repayment time agreed in the Loan Agreement was obviously after the equity transfer, so there was indeed some irrationality in the above situations. In addition, there were also contradictions between the Contract for the Transfer of Claims, the Logistics Approval and the China Merchants Approval. Therefore, the court did not fully agree with the award result, but whether the arbitral tribunal’s determination of the facts of the case was correct and whether the application of law was appropriate was not within the scope of review of the case of setting aside the arbitral award. Moreover, in CHM v. Beijing Xichuang Investment Management Co., Ltd.,36 the court also concluded in its ruling that, even if the party involved in the investment record of “CHM” submitted by Beijing Xichuang Investment Management Co., Ltd in arbitration had the same name as the applicant of this case CHM, it only involved the authenticity of the evidence itself, which may be related to whether the evidence should be admissibility, but it was still a substantive issue in nature, and was not within the scope of judicial review by the court. The reason why the court does not conduct a comprehensive substantive review of the arbitral award is due to a number of factors, one of which is that allowing the court to conduct a comprehensive substantive review of the arbitral award may materially undermine the value of arbitration as a means of dispute resolution independent of the court. In the practice of judicial review of arbitration in China, courts usually do not review substantive issues, including the admission of evidence and the determination of facts by the arbitral tribunal. Otherwise, the arbitral award will become an excuse for the losing party to delay the enforcement of its obligations. It will also violate the autonomy of the parties concerned. After all, the parties have chosen arbitration as a private means to settle the dispute, so they should not resort to public remedies for the result. In summary, when a party to an arbitration case raises the cause of the claim of “forging evidence”, it should not only prove that the authenticity of the evidence involved in the case is doubtful, but also prove that the other party has the subjective intention or behavior of using forgery, fabrication or other illegal forms to obtain the evidence and between them, the standard of proof of the latter is much higher than that of the former. If the party to the arbitration case do not provide evidence to prove that the other party has the subjective intention and conduct of forging evidence, the court will believe that the authenticity of the evidence involved in the case is essentially 35 36

(2018) Jing 04 Min Te No. 358. (2021) Jing 74 Min Te No. 94.

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an issue of arbitration substance that is not within the scope of judicial review, and ultimately will not support the party’s claim of “forging evidence”.

3.8 Estoppel The estoppel principle is the concrete embodiment of the principle of good faith. In civil proceedings, the principle of good faith includes: prohibition of contradictory acts, which means the litigant’s actions should be consistent; the obligation of truthfulness, which means the true statement should be made in the litigation; and invalidity of litigation rights, which means when one party fails to exercise its litigation rights for a long time so that the other party believes that it will not exercise it anymore.37 In view of this, the principle of estoppel generally means that when a party participates in the litigation and carries out the litigation acts, it shall be responsible for the litigation acts it has made in the whole process of the litigation. Especially when the other party has trusted and acted according to the litigation acts of the party, the party shall not arbitrarily deny the speech or behavior it has made before. In Jilin Xincheng Real Estate Integrated Development Co.,Ltd. v. TDP,38 SPC also pointed out that, the principle of estoppel was part of the principle of good faith, the basic principle of civil law in China. If one party relied on another party’s statement, the other party may not deny its previous statement. Zaozhuang Henglong Real Estate Co., Ltd. v. Shandong Yixiangyuan Construction Co., Ltd.39 Zaozhuang Henglong Real Estate Co., Ltd. (“Henglong Company”) requested to revoke the award made by Zaozhuang Arbitration Commission on October 28, 2021. One of the reasons for revoking the award was that the evidence based on the award was forged. According to the applicant Henglong Company, the official seal of the respondent in the Agreement dated April 14, 2020 submitted by the respondent Shandong Yixiangyuan Construction Co., Ltd. (“Yixiangyuan Company”) in Evidence 3 during the arbitration hearing was forged and was not the true expression of Yixiangyuan Company’s intention, so the Agreement was invalid. The Agreement was the main evidence on which the arbitration award was based. In addition, Yixiangyuan Company also forged the seal of Zaozhuang Engineering Construction Supervision Company and the signature of the chief supervision engineer in the Project Settlement Statement and the Drawing Review Record. The respondent Yixiangyuan Company defended that the Agreement was not a forged evidence. The Agreement was formed by the parties on April 14, 2020, and the 37

Wei Jiang, Jianguo Xiao. Civil Procedure Law [M]. China Renmin University Press. 7th Edition, 2015:55. 38 (2018) Zui Gao Fa Min Shen No.1774. 39 (2022) Lu 04 Min Te No. 9.

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respondent Yixiangyuan Company affixed the seal at a later stage. The seal belonged to the official seal of Yixiangyuan Company after its name was changed, and was not a forgery. Besides, the applicant Henglong Company had no objection to the authenticity of the evidence in the arbitration proceedings. The Project Settlement Statement was the settlement document that Yixiangyuan Company submitted to Henglong Company and the auditing institution for examination according to the Agreement. It was submitted to Henglong Company together with the construction materials on July 6, 2020, in which Henglong Company transferred to the auditing institution the next day. The preparation of the Project Settlement Statement was based on facts and contracts. In addition, the Drawing Review Record was not included in the evidence admissible in the arbitration award and was not subject to the examination of this case. The Intermediate People’s Court of Zaozhuang ruled against Henglong Company’s application to revoke the arbitration award. The court held that, the “Shandong Hengyou Building 1# Project Handover Order” jointly signed by the applicant Henglong Company, the respondent Yixiangyuan Company, the supervision unit and the audit unit had confirmed the specific quantity of work completed by the respondent. The completed work quantity stated in the Project Settlement Document was based on the quantity of work confirmed in the above-mentioned handover order. At the same time, the Project Settlement Document was submitted by the applicant to the audit institution after the respondent was handed over to the applicant. Even if the Project Settlement Document was inconsistent with the reality, the applicant Henglong Company, as the contractor, after receiving the “Project Settlement Document”, knowing that the “Agreement dated April 14, 2020” signed by the two parties clearly stipulates the settlement method, but neglected to perform the review obligation, and it shall bear adverse legal consequences. Therefore, the relevant claims of the applicant, Henglong Company, were not supported. In the arbitration proceedings, the Letter of Agreement dated 14 April 2020 was submitted by the respondent Yixiangyuan Company and the claimant Henglong Company demonstrated the authenticity of the evidence. Under the respondent’s reasonable explanation above and in accordance with the principle of “estoppel”, the applicant’s claim that the agreement was forged could not be established. The Drawing Review Record was not the evidence on which the ruling result of the award in question was based, so the evidence would not be reviewed. The principle of estoppel is not expressly stipulated in the Arbitration Law. Paragraph 1 of Article 13 of the Arbitration Law Interpretation stipulates that any objection to the validity of the arbitration agreement raised before the first hearing shall not be filed with the court thereafter, which may be regarded as estoppel in respect of the validity of the arbitration agreement.40 In addition, Paragraph 3 of Article 14 of the Arbitration Enforcement Provision clearly stipulates that a party who fails to 40

Paragraph 1 of Article 13 of the Arbitration Law Interpretation: “Pursuant to the provisions of the second paragraph of Article 20 of the Arbitration Law, where a party has not objected to the validity of an arbitration agreement before the opening session of hearings conducted by the arbitral tribunal, but the party subsequently applies to the People’s Court to determine the invalidity of the arbitration agreement, the People’s Court shall not hear such a case.”.

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raise objections to the statutory arbitration procedure before the arbitration award is made and then files a petition to the court on the ground that the arbitration violates the statutory procedure will not be supported by the court, which can be regarded as estoppel in respect of arbitration procedure.41 In terms of evidence for arbitration, the application of the estoppel principle in judicial practice mainly falls into two categories. One is that the parties acknowledge the authenticity of the evidence at the arbitration stage, and then deny the authenticity of the evidence at the litigation stage, claiming that it is forged. For example, in the above case, although the applicant Henglong Company claimed that the evidence submitted by the respondent Yixiangyuan Company in the arbitration stage was forged, Henglong Company also recognized its authenticity in the arbitration process. In this regard, the court held that the applicant had crossexamined and recognized the authenticity of the evidence at the arbitration stage and then asserted that the evidence was forged at the litigation stage, which was a clear violation of the principle of estoppel. Accordingly, the court finally rejected the applicant Henglong Company’s claim of “falsified evidence”. In addition, in Beijing Borui Qin Information Technology Co., Ltd. v. Beijing Hongmi Gongmao Co., Ltd.,42 Beijing No. 4 Intermediate People’s Court also held that, during the arbitration session, the applicant clearly stated that he recognized the authenticity of the House Lease Contract, but he applied for the revocation of the arbitration award on the ground that the House Lease Contract was forged, which obviously violated the basic litigation principle of estoppel, and the court did not accept this part of its opinion. The other is that the parties do not raise objections to the authenticity of evidence or express cross-examination opinions at the arbitration stage, but raise objections again at the litigation stage. For example, in LLS v. TN,43 the court held that, during the examination by the court, the evidence (“Extension Agreement” and “Extension Agreement Information Supplement Form”) on which LLS claimed that the arbitration award was based was forged. Accordingly, the court believed that, LLX did not attend the arbitration hearing after the written notice of Beijing Central Committee, and the corresponding adverse consequences should be borne by LLS himself. After LLS gave up attending the arbitration hearing to state his opinions and cross-examine evidence, he applied for the revocation of the arbitration award on the grounds of “falsified evidence” by the other party instead, which obviously violated the basic litigation principle of estoppel. In view of this, the court did not accept LLS’s application. 41

Paragraph 3 of Article 14 of the Arbitration Enforcement Provision provides that, after special instructions, if a party attends or continues to attend the arbitral proceedings without objection while knowing or should have known that the statutory arbitration procedures or the arbitration rules selected haven’t been complied with, the people’s court shall not uphold the party’s application for not enforcing the arbitration award on the excuse of violation of statutory procedures after an arbitration award is made. 42 (2018) Jing 04 Min Te No. 326. 43 (2018) Jing 04 Min Te No. 14.

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In addition, in Beijing JFR Technology Company Ltd. v. Beijing Sansheng Chuangxin Science&Technology Development Co.,Ltd.,44 Beijing JFR Technology Company Ltd. (“JFR Company”) claimed that, the evidence (lawyer’s letter and the Agency Contract) submitted by Beijing Sansheng Chuangxin Science&Technology Development Co.,Ltd. (“Sansheng Innovation Company”) during the arbitration were or might be forged. The court believed that during the arbitration, the Letter of Notice submitted by Sansheng Innovation Company was signed by Heilongjiang Sipurui Law Firm lawyer Shao, who was also the entrusted agent of Sansheng Innovation Company during the arbitration and attended the arbitration proceedings. Therefore, it could be seen that the so-called forged lawyer’s letter was impossible to be established. In addition, JFR Company did not issue cross-examination opinions on the entrusted Agency Contract submitted by Sansheng Innovation Company within the time limit stipulated by the arbitral tribunal. Instead, JFR Company applied for the cancellation of the arbitration award on the grounds that the other party falsified evidence, which clearly violated the basic litigation principle of estoppel. Accordingly, the court disapproved of the above opinion of JFR Company. In fact, estoppel is widely applied not only in China, but also in foreign legal systems. For example, in English case law, the court has made the following judgment: once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings. In addition, Article 1466 of the Code of Civil Procedure in France also states: A party who, with full knowledge and without good reason, fails to promptly contest a violation shall be deemed to have waived its right to assert that violation in an arbitral tribunal or court. In this regard, the Court of Appeal in Paris, France, in a precedent issued on February 16, 2021, invoked the estoppel rule of this article and made it clear that the “violation” in this article not only included procedural irregularity, but also included all circumstances that might result in the cancellation of an arbitral award, with the exception of Article 1520 (5) of the Code of Civil Procedure on claims that recognition or enforcement of arbitral awards is contrary to international public order.45 (27-Selon l’article 1466 du code de procedure civile, rendu applicable en matiere d’Arbitrage international par l’article 1506 du meme code, « la partie qui, en connaissance de cause et sans motif legitime, s’abstient d’invoquer en temps utile une irregularite devant le tribunal arbitral est reputee avoir renonce a s’en prevaloir»0.28 -Cette disposition ne vise pas les seules irregularities procedurales mais tous les griefs qui constituent des cas d‘Ouverture du recours en annulation des sentences, a l’exception des moyens fondes sur l’article 1520, Des Cas d’Ouverture du recours en Annulation des sentences, a l’exception des Moyens Fondes sur L’article 1520, 5o du code de procedure civile et tires de ce que la reconnaissance ou l’execution de la sentence violerait l’ordre public international.) To sum up, estoppel, as a widely applied legal principle in the world, has been frequently used as a reason for the court in judging the cases about the substantial matters of evidence, although it is not expressly stipulated by Chinese law. In the 44 45

(2018) Jing 04 Min Te No. 393. Cour d’appel de Paris RG n°18/16695.

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issues of evidence of arbitration cases, the principle of estoppel is often closely related to disputes related to the authenticity of evidence, and its application mainly includes two categories: the parties’ inconsistent statements of facts and the failure to raise objections in time. As an extension of the principle of good faith, what estoppel aims to maintain is the trust interest between the parties, and the res judicata of arbitral award.

3.9 Foreign-Related Arbitration Award According to Paragraph 4 and Paragraph 5 of Article 244 of the Civil Procedure Law and Items (4) and (5) of Paragraph 1 of Article 58 of the Arbitration Law, falsification of evidence and concealment of evidence are both legal reasons for the court to revoke or refuse to enforce an arbitration award when reviewing a domestic arbitration case. However, for foreign-related arbitration cases, is the same true in judicial practice? In fact, according to Articles 70 and 71 of the Arbitration Law and Article 281 of the Civil Procedure Law,46 the reasons for non-execution or cancellation of a foreignrelated arbitration award include: (1) no arbitration clause has been concluded; (2) failing to state an opinion for reasons other than those of the respondent; (3) the composition of the arbitration tribunal or the arbitration procedure is inconsistent with the arbitration rules; (4) matters decided in the award exceed the scope of the arbitration agreement or are beyond the arbitral authority of the arbitration institution; (5) the enforcement of the award is contrary to the public interest, etc. And these reasons do not involve the issues of arbitral award entity and substantial evidence. 46

Article 70 of the Arbitration Law: “If a party presents evidence which proves that a foreign-related arbitration award involves one of the circumstances set forth in the first paragraph of Article 258 (revised to Article 281 now) of the Civil Procedure Law, the people’s court shall, after examination and verification by a collegial panel formed by the people’s court, rule to set aside the award.”.

Article 71 of the Arbitration Law: “If the party against whom the enforcement is sought presents evidence which proves that the foreign-related arbitration award involves one of the circumstances set forth in the first paragraph of Article 258 (revised to Article 281 now) of the Civil Procedure Law, the people’s court shall, after examination and verification by a collegial panel formed by the people’s court, rule to disallow the enforcement.”. Article 281 of the Civil Procedure Law: “If the person against whom the application is made presents evidence that the arbitral award made by an arbitration institution of the People’s Republic of China for foreign-related disputes falls under any of the following circumstances, the people’s court shall, after examination and verification by a collegiate bench formed by the people’s court, rule to deny execution of the award: 1. the parties have neither included an arbitration clause in their contract nor subsequently reached a written arbitration agreement; 2. the person against whom the application is made was not requested to appoint an arbitrator or take part in the arbitration proceedings or the person was unable to state his opinions due to reasons for which he is not responsible; 3. the composition of the arbitration tribunal or the arbitration procedure was not in conformity with the rules of arbitration; or 4. matters decided in the award exceed the scope of the arbitration agreement or are beyond the arbitral authority of the arbitration institution. If the people’s court determines that the execution of the said award would be against public interest, it shall rule to deny execution.”.

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In practice, the issues of evidence generally cannot constitute a statutory ground for non-enforcement or annulment of foreign-related arbitral awards. Yunnan Yuanzhi Investment Co., Ltd v. Beijing Harmonious Growth Investment Center (L.P.)47 Yunnan Yuanzhi Investment Co., Ltd. (“Yunnan Yuanzhi Company”) requested the revocation of the award made by CIETAC on 1 July 2020. One of the reasons for the revocation was that the main evidence on which the arbitration award was based, the Five-Party Capital Increase Subscription Agreement, was forged. The claimant, Yunnan Yuanzhi Company, claimed that, the Five-Party Capital Increase Subscription Agreement submitted by the respondent, Beijing Harmonious Growth Investment Center (L.P.) (“Harmonious Investment Partnership”) as evidence during the arbitration process, was never signed by Yunnan Yuanzhi Company. From the formal point of view of this agreement, there existed several situations like missing contracting party (lack of ShengDian Capital I, Limited), inconsistent page numbers on signature pages, and ambiguous seals. From the content point of view, the composition of shareholders and the proportion of equity in this agreement contained facts that occurred nine months after the signing of the agreement, which are obviously illogical and contradictory. At the same time, during the examination of the arbitral tribunal, Harmonious Investment Partnership firstly issued the Six-Party Capital Increase Subscription Agreement signed by “ShengDian Capital I Limited”, and then replaced the Six-Party Capital Increase Subscription Agreement with the Five-Party Capital Increase Subscription Agreement and submitted it for cross-examination evidence. The Five-Party Capital Increase Subscription Agreement submitted by Harmonious Investment Partnership during the arbitration process and used as the basis for the award was obviously forged by patchwork and tampering on the basis of the Six-Party Capital Increase Subscription Agreement. The Beijing No.4 Intermediate People’s Court held that, the respondent of the arbitration in this case was a foreign enterprise, and the arbitral award involved in this case was a foreign-related award made by CIETAC in accordance with foreignrelated arbitration procedures. According to Article 70 of the Arbitration Law and Article 274 of the Civil Procedure Law (amended in 2012), the “falsified evidence” claimed by Yunnan Yuanzhi Company was not a statutory review ground for the people’s court to set aside the foreign-related arbitral award. The court did not support it, and ruled to reject Yunnan Yuanzhi Company’s application to set aside the arbitral award. In the judicial review of domestic arbitration cases, courts generally only review procedural issues, and exceptionally examine substantive matters, including evidentiary issues such as concealment of evidence, falsification of evidence, etc. However, the subject matter of review of foreign-related arbitral awards is different from that of domestic arbitral awards. China implements a “dual-track system” in the supervision of arbitration rights, that is, for foreign-related arbitral awards, the scope of court review is limited to procedural content and for domestic arbitral 47

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awards, some substantive issues, like substantial evidence, also fall within the scope of judicial review. In the abovementioned case, even though the claimant Yunnan Yuanzhi Company claimed that the respondent Harmonious Investment Partnership had “forged evidence” and filed an application to set aside the arbitral award, the court still held that the claimant’s claim of “falsification of evidence” was not a statutory cause for review of the foreign-related arbitral award, and ultimately rejected its application to set aside the arbitral award because of the fact that the respondent was a foreign enterprise. In addition, according to Article 21 of the Arbitration Judicial Review Provision, the courts would also apply the above-mentioned provisions on judicial review of foreign-related arbitration by reference in cases of application for non-enforcement or annulment of arbitral awards involving Hong Kong, Macao and Taiwan.48 For example, in WXR v. TJY,49 the court held that, WXR was a resident of Hong Kong. According to Articles 12 and 21 of the Arbitration Judicial Review Provision, Article 1 of the Choice of Law Interpretation and Article 70 of the Arbitration Law, this case was a Hong Kong-related arbitration award, which shall be reviewed in accordance with the provisions on the application of judicial review cases for foreignrelated arbitration. Therefore, Article 274 of the Civil Procedure Law shall be applied to this case. However, in this case, applicant WXR’s reason for falsifying evidence did not fall under Article 274 of the Civil Procedure Law. Therefore, according to Article 17 of the Arbitration Law Interpretation, the court shall not support it. In addition, in Guangzhou Huafeng Real Estate Development Co., Ltd. v. HCJ,50 the court also pointed out that, the respondent HCJ was a resident of the Hong Kong Special Administrative Region, and the arbitration award was a Hong Kongrelated arbitration award, which shall be examined with reference to Article 274 of the Civil Procedure Law. The reason for the application for non-enforcement of the arbitral award submitted by the claimant Huafeng Company was that the respondent concealed evidence sufficient to affect the fair award. However, this reason was not within the scope of examination of the statutory grounds for non-enforcement of the arbitral award listed in Article 274 of the Civil Procedure Law. Therefore, the court would not review Huafeng Company’s application for non-enforcement of the arbitral award. In fact, the “dual-track system” judicial review mechanism of foreign-related arbitration is the legislative product of a specific historical period. The Civil Procedure Law which promulgated in 1991 had already set different standards for judicial review of domestic and foreign-related arbitral awards. At that time, both the Contract Law 48

Article 21 of the Arbitration Judicial Review Provision provides: “The provisions on judicial review of foreign-related arbitration shall apply, mutatis mutandis, to a case of an application for recognition of the effect of an arbitration agreement involving the Hong Kong Special Administrative Region, the Macao Special Administrative Region or Taiwan region, or for enforcement or revocation of an arbitral award involving the Hong Kong Special Administrative Region, the Macao Special Administrative Region or Taiwan region made by a Chinese mainland-based arbitral institution, accepted by a people’s court.”. 49 (2018)Yue 01 Min Te No. 1169. 50 (2016)Yue 01 Zhi Yi No. 401.

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and the Foreign Trade Law had dual-track systems, but the Contract Law has now eliminated the internal and external differences.51 In recent years, academic circles have increasingly called for the unification of the “monorail system”, that is, the review mechanism of domestic arbitration and foreign arbitration. And this situation does exist in the judicial practice. For example, according to Article 2 of the the Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review,52 domestic arbitral awards and foreign-related arbitration awards are basically “merged” in terms of the internal reporting system of courts, that is, if a court with jurisdiction over an arbitration case intends to refuse to implement or revoke a domestic arbitral award, it shall be reported to a higher people’s court for review. In addition, in accordance with Article 88 and Paragraph 5 of Article 77 of the Arbitration Law (Draft for Comments),53 the case of falsification of evidence has also been added to the statutory grounds for setting aside foreign-related arbitral awards. In summary, under China’s current arbitration system, the matters of evidence cannot constitute a legal cause for the court to revoke or refuse to implement a foreign-related arbitration award. This is because China applies a “dual-track system” in the supervision of arbitration power. For foreign-related, Hong Kong, Macao and Taiwan-related arbitration awards, the scope of review by the court is limited to the procedural content, and does not include the review of the substantive content such as concealment of evidence and falsification of evidence. However, considering the nature of arbitration and the integration with the international arbitration system, this “dual-track system” review mechanism is likely to undergo changes in the future. 51

Yi Cai Arbitration. Can an Application Be Made For the Cancellation of a Hong Kong-related Arbitration Award on the Ground of Falsification of Evidence Before the Revision of Arbitration Law. [J/OL]. 2022.09.28. https://mp.weixin.qq.com/s/KM4SQsZ7lG6MIDs4D1AJNA. 52 Article 2 of the Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review: “where an intermediate people’s court or a special people’s court handles a judicial review case involving foreign-related arbitration involving Hong Kong, Macao and Taiwan, and after examination, intends to find the arbitration agreement invalid, not to enforce or revoke the arbitral award of an arbitration institution in China, or to refuse to recognize and enforce an arbitral award in the Hong Kong Special Administrative Region, Macao Special Administrative Region or Taiwan Region, or to refuse to recognize and enforce a foreign arbitral award, it shall report its ruling to the higher people’s court for verification. If the higher people’s court intends to approve the ruling after review, the higher people’s court shall report the ruling to the Supreme People’s Court for verification. And after review by the Supreme People’s Court, a final ruling will be made in accordance with the opinion of the Supreme People’s Court. Each intermediate people’s court or special people’s court handling judicial review cases involving non-foreign-related and non-related with Hong Kong, Macao and Taiwan arbitration, and after review, intending to determine that the arbitration agreement is invalid, and refusing to enforce or revoke the arbitration award of an arbitration institution in mainland China, it shall report the ruling to the higher people’s court for verification; After examination by the higher people’s court, a final ruling will be made in accordance with the opinions of the higher people’s court.”. 53 Article 88 of the Arbitration Law (Draft for Comments): “The provisions of this Chapter shall apply to the arbitration of disputes involving foreign elements. Where there are no provisions in this Chapter, other relevant provisions of this Law shall apply.”

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As mentioned in Chap. 2 “Basic Ideas for Revising the Arbitration Law” of Notes on Arbitration Law (Draft for Comments): “we should adhere to the unification of Chinese characteristics and international practice, fully summarize and absorb the experience with Chinese characteristics that has been tested in practice, draw on the recent development of institutions of UNCITRAL Model Law on International Commercial Arbitration, and take into account the latest legislative achievements of the UK, the United States, Singapore, Japan, South Korea, Russia and other countries, as well as the arbitration law of Hong Kong and Macao in China”. Perhaps, the implementation of “parallelism” between domestic arbitration and foreign-related arbitration in the review mechanism is an important step for the improvement of the Arbitration Law.

Chapter 4

Public Policy

4.1 Verification System China implements a verification system for court decisions that deny the validity of arbitration agreements or arbitral awards, which is, the relevant court decisions need to be reported to the High People’s Court or SPC level by level. The current verification system has undergone several changes. On August 28, 1995, SPC issued Notice of the Supreme People’s Court on the Handling by People’s Courts of Issues Concerning Foreign-related Arbitration and Foreign Arbitration, formally establishing a verification system for judicial review of foreign-related arbitration.1 Since then, SPC promulgated Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review (Fa Shi [2017] No. 21) (“Original Provisions on Verification Issues”). On December 24, 2021, it issued Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review (2021 Amendment) (Fa Shi [2021] No. 21) (“New Provisions on Verification Issues”) to further improve the verification system for arbitration judicial review cases. According to the Arbitration Law and the Civil Procedure Law, violating public interest is one of the circumstances in which the people’s court rules not to enforce or revoke an arbitral award. Whether it is under the Original Provisions on Verification Issues or the New Provisions on Verification Issues, the people’s court shall report to 1 In fact, before that, some cases were finally decided after being submitted to SPC. For example, in 1992, in the case of Henan Kaifeng Dongfeng Garment Factory applying for enforcement of an arbitral award, Zhengzhou Intermediate People’s Court found that the arbitral award was contrary to the public interest and ruled that it should not be enforced, on the grounds of import and export quotas of foreign-funded enterprises. The case was later reported to SPC. On 6 November 1992, SPC sent a letter to the High People’s Court of Henan Province, noting that Zhengzhou Intermediate People’s Court’s opinion was incorrect.

This chapter is coauthored with Haiying Cai, counsel of Yi & Partners Law Firm.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 Y. Lin, China Arbitration Yearbook (2022), China Arbitration Yearbook, https://doi.org/10.1007/978-981-99-7165-7_4

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the SPC if it finds that it intends to refuse enforcement or revoke an arbitral award on the grounds of violating the public interest. So, how has the new regulation changed from the original one? What are the controversies and issues to be resolved in the application of the verification system? Aksu Shunlong Material Co., Ltd. (“Shunlong”) v. Aksu Tongcheng Real Estate Development Co., Ltd. (“Tongcheng”)2 As for Shunlong v. Tongcheng, Urumqi Arbitration Commission of Xinjiang Uygur Autonomous Region (“Urumqi Arbitration Commission”) rendered the (2017) Wu Zhong A Cai No.18 Award on August 25, 2017, which decided that the Housing Settlement Agreement signed by both parties shall be rescinded, Tongcheng shall pay Shunlong RMB17,923,928 for steel, RMB6,000,000 in liquidated damages, and RMB121,513 in arbitration costs and other fees in the case. Because Tongcheng failed to perform its obligations under the arbitral award, Shunlong applied to Aksu Intermediate People’s Court for compulsory enforcement. During the enforcement process, Tongcheng applied to the Aksu Intermediate People’s Court to oppose enforcement of (2017) Wu Zhong A Cai No.18 Award on the grounds that the Urumqi Arbitration Commission had no authority to arbitrate and the facts were unclear and the law application was wrong. The Aksu Intermediate People’s Court held that when Shunlong applied to the arbitration institution for arbitration, Tongcheng objected to the validity of the arbitration agreement and did not raise it before the first hearing of the arbitral tribunal. Therefore, the arbitration institution had jurisdiction over the case. Tongcheng’s other grounds for application did not comply with Paragraph 2 of Article 237 of the Civil Procedure Law. On January 5, 2018, Aksu Intermediate People’s Court rejected Tongcheng’s application for non-enforcement of the arbitral award by the (2017) Xin 29 Zhi Yi No. 55 Ruling. Tongcheng was not satisfied and filed a complaint with the High People’s Court of Xinjiang Uygur Autonomous Region (“Xinjiang High Court”). Xinjiang High Court held that, Tongcheng and Shunlong actually had no direct creditor-debt relationship, because Tongcheng owed Aksu Jian’an Company and Aksu Huatong Company for the project, and Aksu Jian’an Company and Aksu Huatong Company owed Shunlong steel money. Upon the negotiation between Tongcheng and Shunlong, they reached the Housing Settlement Agreement. In order to fulfill the Housing Settlement Agreement, the two parties signed the Commercial Housing Sale and Purchasing Contract. In the process of performing the Commercial Housing Sale and Purchasing Contract, in pursuant to the contract, Tongcheng registered the credit property in the name of WJ, the agent entrusted by Shunlong and issued a uniform invoice for the sale of real estate. So far, Tongcheng had actually fulfilled the main obligations of the Housing Settlement Agreement and the Commercial Housing Sale and Purchasing Contract. Different dispute resolution methods were agreed in the Housing Settlement Agreement and the Commercial Housing Sale and Purchasing Contract, and the parties had different views on jurisdiction. It was unfair for the arbitral award to rescind the Housing Settlement Agreement when 2

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Tongcheng had actually fulfilled its main obligations. Therefore, on 11 February 2018, in accordance with Paragraph 3 of Article 237 of the Civil Procedure Law and Article 131 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Enforcement Work of the People’s Courts (for Trial Implementation), the court issued (2018) Xin Zhi Jian No. 5 Ruling: 1. Revoked the Aksu Intermediate People’s Court (2017) Xin 29 Zhi Yi No. 55 Ruling; 2. Not Enforced the Urumqi Arbitration Commission (2017) Wu Zhong A Cai No. 18 Award. Shunlong appealed to SPC against the (2018) Xin Zhi Jian No. 5 Ruling. SPC held that, the legal basis for the (2018) Xin Zhi Jian No. 5 Ruling rendered by Xinjiang High Court not to enforce an arbitral award was Paragraph 3 of Article 237 of the Civil Procedure Law.3 According to Article 3 of Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review, local courts at all levels shall report to SPC for verification of non-foreign or non-Hong Kong, Macao, or Taiwan-related arbitration judicial review cases, if they wanted to refuse to enforce or revoke the arbitral awards of arbitration institutions in mainland China on the grounds that they were contrary to the public interest, and only after reviewed by SPC could they make a ruling in accordance with the review opinions of SPC. However, Xinjiang High Court did not report to SPC before making the (2018) Xin Zhi Jian No. 5 Ruling, so it did not meet the above procedural requirements. SPC supported Shunlong’s grounds for appeal and ruled to revoke the (2018) Xin Zhi Jian No. 5 Ruling. In this case, the provision on which SPC made its ruling is Article 3 of the Original Provisions on Verification Issues. According to the aforementioned provision, for non-foreign or non-Hong Kong, Macao, or Taiwan-related arbitration cases under judicial review as prescribed in Paragraph 2 of Article 2 of the Original Provisions on Verification Issues, where, upon review, the higher people’s court is to approve the determination of the intermediate people’s court or special people’s court on the invalidity of an arbitral award, non-enforcement or revocation of an arbitral award rendered by an arbitration institution in the Chinese mainland, under any of the following circumstances, the higher people’s court shall file an application for verification with SPC. Upon review of SPC, the intermediate people’s court or special people’s court may render a ruling based on the review opinions of SPC: (1) The domiciles of the parties to an arbitration case under judicial review are in different provincial administrative regions. (2) The arbitral award rendered by an arbitration institution in the Chinese mainland is not enforced or is revoked on the ground of violating public interests. Item (1) of Article 3 of the Original Provisions on Verification Issues was deleted in the New Provisions on Verification Issues, that is, the relevant circumstances that cross provincial administrative regions were deleted, while the circumstances that are contrary to the public interest are still retained.4 3

Paragraph 3 of Article 237 of the Civil Procedure Law: “Where the people’s court determines that the execution of the award would be against the public interest, it shall rule to deny execution”. 4 In addition, New Provisions on Verification Issues added an article as Article 4, which provides that, for cases that are reviewed by the Higher People’s Court pursuant to the second paragraph of

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Public policy, also known as public order, refers to the major interests of all members of society, the basic concept of morality or the basic principles of law. Common manifestations that violate the public interest include violations of the basic systems and norms of Chinese law, violations of the basic values of social and economic life, and violations of China’s basic moral standards.5 From the foregoing, whether it constitutes a violation of the public interest, constitutes the circumstance that the people’s court may determine ex officio when hearing a case of application for setting aside an arbitral award or a case applying for non-enforcement of an arbitral award. Since China’s laws do not clarify the circumstances under which “contrary to the public interest” is constituted, nor do they restrict the scope of its application. It is inevitable that the people’s courts will have different application standards due to the exercise of judges’ discretion in determining this issue. In practice, some courts may even equate “arbitration procedures that do not comply with the law” with “contrary to the public interest”, which is not helpful and improperly expands the scope of judicial review of arbitration. Therefore, for judicial review cases against domestic arbitral awards, the implementation of the verification system will to a certain extent help to unify the application standards of the provision “contrary to the public interest”, and help local courts correctly understand and apply the relevant provisions. However, from the perspective of practice, there are still certain disputes over the application of the verification system in judicial review cases involving public interest arbitration awards against arbitration awards of arbitration institutions in mainland China. First, whether to report to SPC, and should the relevant procedures be disclosed in the ruling? If the verification system is not complied with, may it be found to be a procedural violation? Second, in the absence of a clear review period under the current legal provisions, will the existence of the filing system lead to an unlimited extension of the procedures for judicial review of arbitration? Third, does the verification system constitute an “appeal system” in essence for such cases? First, on the issue of whether the relevant verification procedures should be disclosed in the award and whether failure to report an arbitral award constitutes a procedural violation in a case where it is contrary to the public interest. In practice, there are two methods. One is disclosure of the verification in the ruling. See Zhongguo Huangjin Group Co.,Ltd., China Gold Group Liaoning Co.,Ltd. v. LW, LQF.6 Another is non-disclosure of the verification. See Shanghai Guangjian Information Technology Co., Ltd. v. RYB,7 Youxiang Financial Leasing (Guangzhou)

Article 2 of these Provisions, the Higher People’s Court shall report to the Supreme People’s Court within 15 days of making the review opinion. 5 L. Song, Arbitration Law, 239, (Wuhan University Press, 2020.9). 6 (2021) Jing 04 Min Te No. 383. 7 (2021) Yu 04 Zhi No. 162.

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Co., Ltd. v. XW,8 Guangxi Guigang Jinda Real Estate Development Co., Ltd. v. LSJ,9 Beijing Hengyuan Xinye Information Technology Co., Ltd. v. XXH.10 For cases in which do not disclose the issue that whether the trial has been reported and verified or not, if the people’s court does not inform the progress of the relevant procedure during the trial, the parties would not know whether the local court accepting the case has actually performed the verification procedure in accordance with the provisions of the current judicial interpretation during the review process. In fact, from the existing judicial practice, similar to the situation in this case, if the local court rules to set aside an arbitral award rendered by a domestic arbitration institution that is not to be enforced on the grounds of violating the public interest, but has not reported the procedure, there is a risk of procedural illegality, and the relevant ruling may be revoked. In QYY v. Yongzhou City Lingling District People’s Government,11 the High People’s Court of Hunan Province held that, according to Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review, for non-foreign or non-Hong Kong, Macao, or Taiwan-related arbitration cases under judicial review, where, upon review, the higher people’s court is to approve the determination of the intermediate people’s court or special people’s court on the invalidity of an arbitral award, non-enforcement or revocation of an arbitral award rendered by an arbitration institution in the Chinese mainland, under any of the following circumstances, the higher people’s court shall file an application for verification with SPC. Upon review of SPC, the intermediate people’s court or special people’s court may render a ruling based on the review opinions of SPC. Yongzhou Intermediate People’s Court rendered (2019) Xiang 11 Zhi 279 Ruling without reporting the case to higher level court for verification, which violated the aforementioned provision. For the parties, if the arbitral award rendered by the domestic arbitration institution involved is ruled to be revoked or not enforced by the local court because it is contrary to the public interest, and the relevant ruling does not clearly state whether the case has gone through the verification procedure, it may apply to a higher court for reconsideration in accordance with the relevant provisions of Provisions of the Supreme People’s Court on Several Issues concerning the Handling of Enforcement Opposition and Reconsideration Cases by People’s Courts (2020 Revision) to seek relief. Second, the issue on whether the existence of the verification system might lead to an unlimited extension of the proceedings in arbitral judicial review cases. Although the New Provisions on Verification Issues adds Article 4 to the provisions on procedure, that is, the High People’s Court shall report to SPC within 15 days from the date of making the review opinion, limiting the time for the High People’s Court 8

(2021) Yu 02 Zhi No. 23. (2020) Gui 08 Zhi Yi No. 18. 10 (2020) Yu Zhi Fu No. 333. 11 (2020) Xiang Zhi Jian No. 8. 9

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to report to SPC. However, the New Provisions on Verification Issues or the Original Provisions on Verification Issues do not specify a time limit for the High People’s Court and SPC to make review opinions involved in the reporting and verifying process. Under such circumstances, once the local court finds that the judicial review case of arbitration against a domestic arbitration institution for making an arbitral award involves a situation contrary to the public interest, the hearing procedure and time limit of the judicial review case will inevitably be extended. For example, in Zhongguo Huangjin Group Co.,Ltd., China Gold Group Liaoning Co.,Ltd. v. LW, LQF,12 Beijing No. 4 Intermediate People’s Court accepted the case on April 28, 2021, and the final ruling was made on March 22, 2022. It took nearly a year from the acceptance to the conclusion of the case. If SPC subsequently initiates the revision of the New Provisions on Verification Issues, consideration may be given to further clarifying the time limit for making relevant review opinions, so as to effectively avoid the occurrence of damage to the rights and interests of the parties due to procedural delays. At the same time, it can increase the parties’ expectations of the time required for the procedure, which is more conducive to protecting the legitimate rights and interests of the parties. Third, the issue on whether the verification system might constitute an “appeal system” for such cases. Judging from the New Provisions on Verification Issues, the verification procedure has gone through three levels in judicial practice, that is, the intermediate people’s court reports to the high people’s court, and the high people’s court reports to SPC. However, in practice, although the judgment documents for such arbitration judicial review cases are ultimately made by the intermediate people’s court or the special people’s court, the opinions determined by the lower level court in its ruling are mainly based on the opinions of a higher level court through the reply letter. Due to the fact that the relevant cases have been examined by three levels of courts in the reporting procedure, the question of whether the verification system constitutes an appeal system may be controversial. If the verification system constitutes an appeal system, it may be considered to conflict with the two-instance final adjudication system under China’s current laws.

4.2 State-Owned Assets China’s current laws and regulations do not clearly define the connotation and extension of social public interests. But generally speaking, social public interests refer to long-term interests enjoyed by unspecified members of society that go beyond local, obvious, protected by laws and administrative regulations, including public environment, social welfare and other matters.

12

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According to Law of the People’s Republic of China on the State-Owned Assets of Enterprises, state-owned assets in enterprises mean the rights and interests created by the various forms of State investment in enterprises. The state-owned assets belong to the State, that is, to the whole people. In other words, compared with private property, state-owned assets that constitute public property have the special attributes of ownership by the whole people. According to Articles 413 and 3014 of the Interim Regulation on the Supervision and Administration of State-owned Assets of Enterprises (2019 Revision), the state-owned assets belong to the people and the loss of state-owned assets of enterprises shall be prevented. As for the judicial revision on arbitral award that one party is state-owned enterprise and the case refers to the transaction that the property is paid by the state-owned enterprise, it is common for a party which is a state-owned enterprise to apply for setting aside of the arbitral award or for non-enforcement of the arbitral award on the grounds that the loss/enforcement of state-owned assets would harm the public interest. Then, can state-owned assets be equated with social public interests, and can such claims be supported by the people’s courts? Zhongguo Huangjin Group Co., Ltd. (“Zhongguo Huangjin”), China Gold Group Liaoning Co., Ltd. (“Gold Liaoning”) v. LW, LQF15 On December 31, 2011, LQF (Party A), LW (Party B), Zhongguo Huangjin (Party C) and Gold Liaoning (Party D) signed an Equity Transfer Contract. The contract provided that, LW would transfer their 40% equity in Jianchang County Hongqi Mining Co., Ltd. (“Hongqi Mining”) and LQF would transfer his 30% equity in Hongqi Mining to Zhongguo Huangjin for a contract price of RMB 70 million, and LW would transfer 10% of the equity interest to Gold Liaoning for a contract price of RMB 10 million. Upon signing the Equity Transfer Contract, from January 9, 2012 to March 8, 2013, Zhongguo Huangjin and Gold Liaoning, paid LW the contract price of 80 million yuan in five installments (Zhongguo Huangjin paid 70 million yuan and Gold Liaoning paid 10 million yuan). In April 2014, LW was investigated by Tieling People’s Procuratorate for suspected bribery in the Jintai-Hongqi gold mine acquisition. On February 16, 2017, Tieling Intermediate People’s Court rendered the (2015) Tie Xing Er Chu Zi No. 00005 Criminal Judgment. Hongqi Mining was fined RMB 15 million for the crime of bribery by the unit, and LW was sentenced to 2 years and 10 months in prison for the crime of bribery by the unit. 13

Article 4 of the Interim Regulation on the Supervision and Administration of State-owned Assets of Enterprises (2019 Revision): “the state-owned assets of enterprises belong to the state”. 14 Article 30 of the Interim Regulation on the Supervision and Administration of State-owned Assets of Enterprises (2019 Revision): “State-owned assets supervision and management bodies shall establish a system for the supervision and management of property rights transactions of state-owned assets of enterprises, strengthen the supervision and management of property rights transactions of state-owned assets of enterprises, promote the rational flow of state-owned assets of enterprises, and prevent the loss of state-owned assets of enterprises”. 15 (2021) Jing 04 Min Te No. 383.

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In addition, Zhang, director of the Investigation Division of the 11th Team, and Ding, deputy chief engineer of the 11th Team, were sentenced to fixed-term imprisonment by Tiexi District People’s Court on suspicion of accepting bribes and abusing their power by personnel of public institutions in the Jintai-Hongqi gold mine acquisition. Fan, the manager of the geological development department of Zhongjin Gold Corp. Ltd. at the time, Liu, who was then the deputy general manager of a Liaoning company, Wang, who was then the deputy manager of the China Gold Resources Development Department, and Sun, who was then the general manager of Zhongguo Huangjin, were sentenced separately for allegedly accepting bribes in the acquisition of Jintai-Hongqi gold mine acquisition. On August 16, 2018, Zhongguo Huangjin and Gold Liaoning sent a letter to LW and LQF to terminate the Equity Transfer Contract. In August 2018, Zhongguo Huangjin and Gold Liaoning filed an arbitration with CIETAC, requesting confirmation of the termination of the Equity Transfer Contract, and LW and LQF to return the contract price of RMB 80 million and compensate Zhongguo Huangjin and Gold Liaoning for the loss of production and prospecting funds invested after the acquisition of equity. On September 10, 2020, Zhongguo Huangjin and Gold Liaoning submitted the Application for Additional Arbitration Request to confirm the invalidity of the Equity Transfer Contract. On October 30, 2020, the arbitral tribunal notified that the additional claims of Zhongguo Huangjin and Gold Liaoning were not accepted on the grounds that the above-mentioned additional claims for arbitration were too late. On November 3, 2020, CIETAC rendered Zhong Guo Mao Zhong Jing Cai No.1406 Award (“No.1406 Award”), finding that the Equity Transfer Contract was legal and valid, that the seriousness of LW’s and LQF’s fictitious gold reserves did not constitute a fundamental breach of contract, that Zhongguo Huangjin and Gold Liaoning did not have the right to rescind the contract, and ruled to reject all arbitration claims of Zhongguo Huangjin and Gold Liaoning. Zhongguo Huangjin and Gold Liaoning applied to Beijing No. 4 Intermediate People’s Court to revoke the No.1406 Award issued by CIETAC on 3 November 2020. Beijing No. 4 Intermediate People’s Court held that, based on the facts ascertained in the criminal judgment, the actual gold reserves of Jintai-Hongqi gold mine were only 278.79 kg, but the Supplementary Exploration Geological Report provided by LW stated that the proved gold reserves of Jintai-Hongqi gold mine were 6984 kg, an inflated increase of 25 times. Both parties were aware of this. Under normal circumstances, knowing that the value of the subject matter had inflated by 25 times, and still trading in the market at the inflated price, was contrary to the normal market trading rules. The reason why the two parties signed and performed the Equity Transfer Contract in this case was obviously the result of bribery by both parties. Moreover, the bribery of both parties was not only to allow the respondent to obtain market trading opportunities, but to use this contract to defraud huge amounts of state-owned assets. In short, the Equity Transfer Contract involved in the case was an act of malicious collusion between the two parties to harm the interests of the state, and it also met the situation of concealing the illegal purpose in a legal form.

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Therefore, the Equity Transfer Contract had become a criminal tool for relevant persons to defraud huge amounts of state-owned assets. But the No. 1406 Award found that the Equity Transfer Contract was legal and valid, and the result of the award posed a hazard to the most fundamental legal principle of fairness and justice in society, and was a violation of the public interest, so the No. 1406 award should be revoked. Accordingly, Beijing No. 4 Intermediate People’s Court revoked the No.1406 Award rendered by CIETAC. Yunnan Water Investment Co., Ltd. (“Yunnan Water”) v. Shaanxi Zhongshi Infrastructure Investment Co., Ltd. (“Shaanxi Zhongshi”)16 On July 22, 2015, Yunnan Water and Shaanxi Zhongshi signed an Equity Transfer Agreement on Lüliang Dingheng Water Supply Co., Ltd., which contained an arbitration clause. Yunnan Water, with Shaanxi Zhongshi as the respondent, submitted an application for arbitration to the Beijing Arbitration Commission (“BAC”) pursuant to the arbitration clause in the above contract. BAC accepted the dispute under the contract on August 26, 2019, and issued the (2020) Jing Zhong Cai No. 1141 Award on December 10, 2020. Yunnan Water applied to Beijing No. 4 Intermediate People’s Court to revoke the (2020) Jing Zhong Cai No.1141 Award, one of the reasons was that the rulings in the award were contradictory, resulting in damage to Yunnan Water’s interests, the loss of state-owned assets, and serious damage to the public interest. Beijing No. 4 Intermediate People’s Court held that, first, Yunnan Water’s objection to the ruling was a disapproval of the substantive handling of the case. Whether the substantive disposition of the arbitral award was appropriate did not fall within the scope of judicial review of arbitration by the people’s court. Second, Yunnan Water regarded itself as a listed company and a state-owned enterprise, and claimed that the award was contrary to the public interest because it would result in stock price fluctuations and the loss of state-owned assets. Beijing No. 4 Intermediate People’s Court considered that violation to the common interests of the public interest in the society, involved the most fundamental laws and morals of the whole society, and its manifestation should be contrary to the basic system and norms of China’s law. It went against the basic values of social and economic life, endangered social public order and life order, and violated the basic moral principles generally recognized and followed by all members of society. This case was a civil dispute between equal civil subjects, and the effect of the award would extend to the individual rights and interests of equal civil subjects, which was not contrary to the public interest. Beijing No. 4 Intermediate People’s Court did not support Yunnan Water’s claim that the award was contrary to the public interest. Therefore, Beijing No. 4 Intermediate People’s Court noted that Yunnan Water’s grounds for setting aside the arbitral award were unfounded and ruled to reject Yunnan Water’s application.

16

(2021) Jing 04 Min Te No. 21.

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In the two abovementioned cases, Beijing No. 4 Intermediate People’s Court made very different decisions on the two cases. In view of the fact that the current legal provisions do not define the connotation of social public interest, the following two questions will be further discussed in conjunction with the aforementioned cases. First, are state-owned assets equivalent to social public interests? Second, under what circumstances would the loss of state-owned assets caused by the result of the ruling constitute a violation of the public interest? First, are state-owned assets equivalent to social public interests? From judicial practice, state-owned assets are not always equated with social public interests. In David Dein Consultancy Limited v. Bramley Corporation Ltd.,17 SPC pointed out that, the public interest in society should be related to the interests of all members of society, enjoyed by the public, and required by the development of the entire society, and should be public and social, different from the interests of the parties to the contract. The dispute handled by the arbitration involved in the case was a contract dispute between equal civil subjects. The result of the handling only affected the parties to the contract and did not involve the public interest. Although some of the assets of the respondent’s Guoan Club in this case were state-owned assets, all matters related to it could not be recognized as social public interest. Combined with the judgment of aforementioned Yunnan Water Investment Co., Ltd. v. Shaanxi Zhongshi Infrastructure Investment Co., Ltd., social public interests are often the most fundamental legal and moral common interests involving the entire society, and are significantly different from the rights and obligations of equal subjects. Therefore, when the dispute involved in an arbitration case is a contract dispute between equal civil subjects, even if one of the parties is a state-owned enterprise and ultimately has an obligation to pay or other performance obligations based on the arbitral award, the claim of the state-owned enterprise in the subsequent arbitration judicial review case against the relevant award that the enforcement of state-owned assets will lead to the loss of state-owned assets or that the result of the award will lead to fluctuations in stock prices or the loss of state-owned assets constitutes a violation of the public interest, which often cannot be supported by the people’s courts. When considering whether state-owned assets constitute a public interest, the local courts would adopt the same adjudication approach with David Dein Consultancy Limited v. Bramley Corporation Ltd. For instance, in Tuanfeng County Investment and Development Co., Ltd. v. Huanggang Honglin Real Estate Development Co., Ltd.,18 Huanggang Intermediate People’s Court held that, as a state-owned enterprise, Tuanfeng Company was a civil entity. China’s laws equally protect civil subjects in all forms of ownership. The arbitral award shall not affirm it violating social public interest when it executed contractual obligation just because it was a state-owned enterprise. Tuanfeng Company 17 18

(2020) Jing 04 Ren Gang No. 5. (2021) E 11 Min Te No. 15.

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believed that the award was contrary to the public interest, but did not provide sufficient evidence to prove it. The grounds for the withdrawal of the application issued by Tuanfeng Company were not supported by the court. Moreover, in LH, LW v. Xiushan Huaxin Real Estate Development Co., Ltd.,19 Chongqing No. 1 Intermediate People’s Court held that violation of the public interest referred to the violation of the interests of a public nature with an unspecified majority of the public as the main body of interest. In this case, as far as the res judicata of the arbitral award involved in the case was concerned, the adjudication rules followed in the case did not have the effect of general application. As far as the parties involved in the arbitral award were concerned, this case was a civil dispute, the two parties had equal litigation status, and the status of the applicant as a state-owned enterprise did not mean that it could enjoy privileges in this case. As far as the outcome of the arbitration award involved in the case was concerned, the result of the Chongqing Arbitration Commission’s award on the interest involved in the case was only related to the interest of the parties in the case, and had nothing to do with the public interest. Therefore, the court held that the claimant’s argument that the arbitral award was contrary to the public interest was obviously unfounded and should not be upheld. In fact, before SPC rendered a judgement on David Dein Consultancy Limited v. Bramley Corporation Ltd., the local courts had taken a similar approach in arbitration judicial review cases involving the question of whether state-owned assets constitute a public interest. For example, in Petro China Changqing Oilfield Branch v. Xi’an Ruipu Petroleum Technology Development Co., Ltd.20 and Jiangxi Liangyou Group Co., Ltd. v. Jiangxi Zhifei Industrial Development Co., Ltd.,21 the courts all held that the state-owned enterprises involved in the case, as civil subjects, enjoyed the same rights and obligations as other types of civil subjects, and should not equate their corporate interests with the public interests, so they did not adopt the relevant claims raised by the state-owned enterprises involved in the cases. Second, under what circumstances would the loss of state-owned assets caused by the result of the ruling constitute a violation of the public interest? In Zhongguo Huangjin Group Co., Ltd., China Gold Group Liaoning Co.,Ltd. v. LW, LQF,22 Beijing No. 4 Intermediate People’s Court eventually found that the the arbitral award involved in the case was contrary to the public interest. Because the case was special, and the dispute involved was not a contract dispute between equal civil subjects. From the signing of the Equity Transfer Contract involved in the case, the contract was concluded through illegal means of bribery, with the aim of obtaining huge improper benefits. In the case that the party liable for monetary payment was a stateowned enterprise, the signing of the Equity Transfer Contract not only conformed to the situation of “malicious collusion to harm the interests of the state”, but also 19

(2021) Yu 01 Min Te No. 140. (2017) Shaan 01 Min Te No. 74. 21 (2016) Gan 01 Min Te No. 10. 22 (2021) Jing 04 Min Te No. 383. 20

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met the circumstance of “concealing illegal purposes in a legal form”, and should be regarded as an invalid contract according to law. As to the outcome of this case, the relevant illegal facts related to the signing of the contract had been determined by the effective criminal judgment, but the arbitral tribunal did not accept the requests of China Gold and Gold Liaoning to confirm the invalidity of the contract, and directly found that the Equity Transfer Contract was legal and valid, and the award result was obviously unfair and had obvious errors. The Equity Transfer Contract and the arbitration award undoubtedly led to the reduction of state-owned assets. The loss of state-owned assets caused in this form was obviously contrary to the legal principle of preventing the loss of stateowned assets of enterprises, and constituted a violation of the public interest. The adjudication ideas and results would undoubtedly provide reference for adjudicators in similar cases.

4.3 P2P Online Lending Online lending includes individual online lending (i.e., P2P online lending) and online micro-lending. Individual online lending refers to direct lending between individuals and individuals through Internet platforms. Direct lending on individual online lending platforms falls within the category of private lending and is regulated by laws and regulations such as the Contract Law and the General Principles of Civil Law, as well as relevant judicial interpretations of the SPC.23 In recent years, domestic P2P online lending business platforms have experienced booming development, but later collapsed due to borrowers’ inability to repay loans. At present, online lending platforms that used to operate legally and involve real online lending relationships have been gradually withdrawn in batches, while some online lending platforms that have operated illegally and involve unreal lending relationships have been placed on file for investigation by the public security organs for suspected illegal absorption of public deposits or illegal fundraising. Since there are many P2P online lending contracts with arbitration clauses, for online lending projects with real lending relationships, after borrowers are in arrears and online lending business is stopped and online lending platforms are withdrawn one after another, can the arbitration award related to P2P online lending be supported by the arbitration claimant’s request for borrower and guarantor to repay the loan, and in the subsequent process of applying to the court for enforcement?

23

See Article 8 of Guiding Opinions of the People’s Bank of China, the Ministry of Industry and Information Technology, the Ministry of Public Security, et al., on Promoting the Sound Development of Internet Finance.

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Shanghai Guangjian Information Technology Co., Ltd. (“Guangjian”) v. RYB24 As for the lending dispute case between Guangjian v. RYB, (2020) Yong Wang Zhong Zi No.1869 Award rendered by Ningbo Arbitration Commission on May 31, 2020, had come into force. Because the debtor RYB failed to perform the obligations specified in the award, the applicant for enforcement, Guangjian, applied for compulsory enforcement, and Chongqing No. 4 Intermediate People’s Court filed a case for enforcement on May 28, 2021. Chongqing No. 4 Intermediate People’s Court found that on August 8, 2019, RYB borrowed RMB6,714 from ZQX and 11 other people through its intermediary, Shanghai PPDai Financial Information Service Co., Ltd. Guangjian received the claim in this case by way of debt assignment, and applied to Ningbo Arbitration Commission for arbitration as the rights holder. It was also found that the business scope of Shanghai PPDai Financial Information Service Co., Ltd. was: financial information services, technology development, technical consulting, technical services, technology transfer in the professional field of computer networks, computer system integration, software and hardware development and sales, data processing services, e-commerce (not engaged in financial business), telecommunications business, market information consultation and survey (not engaged in social surveys, social research, public opinion surveys, public opinion surveys), exhibition services, enterprise management consulting, investment consulting, corporate image planning, advertising design and production. Chongqing No. 4 Intermediate People’s Court held that, the business scope of Shanghai PPDai Financial Information Service Co., Ltd. clearly indicated that it shall not engage in financial business, but it still absorbed deposits from the public through the platform it operated and earned high interest by providing funds to unspecified objects in the society. The lending behavior was repeated and regular, and the purpose of borrowing was profit-making, which violated Article 19 of the Banking Supervision Law of the People’s Republic of China, disrupted the order of national financial management and harmed the public interest. Such acts should be evaluated negatively and prohibited. Accordingly, Chongqing No. 4 Intermediate People’s Court ruled to reject enforcement of (2020) Yong Wang Zhong Zi No.1869 Award rendered by Ningbo Arbitration Commission. Anhui Nana Information Technology Co., Ltd. (“NANA”) v. ZJT 25 As for the lending dispute enforcement case between NANA and ZJT, since ZJT failed to perform the obligations specified in (2019) Bao Cai Wang Zi No. 11535 Arbitral Award rendered by Baoding Arbitration Commission, upon the written application by NANA, Liao Yuan Intermediate People’s Court filed the case on July 2, 2021.

24 25

(2021) Yu 04 Zhi No. 162. (2021) Ji 04 Zhi No. 58.

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Liao Yuan Intermediate People’s Court found that, on March 27, 2018, ZJT, the executor, and PJL, the lender, signed the Loan Agreement through the “Baogongyoucai” platform operated by NANA, which provided that, ZJT borrowed RMB 6,000.00 from PJL, and the loan period was 6 months. After the Loan Agreement was signed, NANA transferred RMB 6,000.00 to the bank account designated by ZJT through a third-party payment platform. After entering the repayment period, ZJT only repaid the principal amount of $2,253.53 and still owed the principal amount of $3,746.47. Article 5.6 of the Loan Agreement stipulated that “Both parties agree that the platform and the overdue claims will be automatically transferred to NANA without compensation, without the need to sign a separate debt assignment agreement and notice. As a creditor assignee, NANA may directly claim all overdue claims from Party B under this Agreement”. On June 5, 2019, NANA submitted an application for arbitration to Baoding Arbitration Commission. On June 21, 2019, Baoding Arbitration Commission rendered (2019) Bao Cai Wang Zi No. 11535 Award, awarding ZJT to repay NANA the principal amount of the loan of RMB3,746.47 plus overdue interest, service fees, arbitration fees, etc. Liao Yuan Intermediate People’s Court held that, one of the legal basis of this case is Article 3 of the Interim Measures for the Administration of the Business Activities of Online Lending Information Intermediary Institutions.26 In this case, the Loan Agreement in question was signed through the online lending information intermediary service platform “Baogongyoucai” operated by NANA. According to the Loan Agreement, “Baogongyoucai” operated by NANA should be an intermediary providing intermediary services. But the Loan Agreement stipulated that if the loan was not repaid after the due date, the lender and the borrower agreed that the overdue claim would be automatically transferred to NANA free of charge, and NANA would become a real creditor due to the transfer of the claim, which was essentially a disguised pooling of funds. It also constituted the act of absorbing funds from unspecified entities, engaging in the business activities of banking financial institutions, disrupting the order of national financial management, and violating Article 19 of the Banking Supervision Law of the People’s Republic of China.27 It did not have the entity qualifications and could not engage in financial business activities. The arbitration award rendered by the Baoding Arbitration Commission based on the Loan Agreement submitted by NANA did not review the legality of the borrowing. In summary, the applicant for enforcement could not prove the legality of its qualifications as an entity engaged in financial business, which seriously disrupted the financial order and the enforcement of the award would be contrary to the public interest. 26

“We shall stick to the preferential development of urban public transport, moderate development of taxis and orderly development of taxis subject to online-booking according to the principles of high-quality services and differentiated operation. The freight rate for taxis subject to onlinebooking shall be subject to market-regulated price, unless urban people’s governments deem it necessary to apply government guided-price.” 27 Article 19 of Banking Supervision Law of the People’s Republic of China: “Without approval of the banking supervision institution of the State Council, no entity or individual may establish any banking financial institution or carry on operations as a banking financial institution”.

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Accordingly, Liao Yuan Intermediate People’s Court ruled to reject enforcement of (2019) Bao Cai Wang Zi No. 11535 Award. The lending legal relationship in the above two cases both involved P2P online lending and the transfer of creditors’ rights, but the specific transaction structure and the circumstances in the cases involved are slightly different. In Shanghai Guangjian Information Technology Co., Ltd. v. RYB, Guangjian, the transferee of creditors’ rights, was not the business entity of the P2P online lending platform involved in the case. In Anhui Nana Information Technology Co., Ltd. v. ZJT, the transferee NANA itself was the operator of the P2P online lending platform. Similarly, the competent courts in both cases ultimately ruled that the enforcement of the arbitral award supporting the arbitration request for repayment of the loan would constitute a violation of the public interest on the grounds that the online lending platform involved in the case did not have the qualifications to engage in financial business activities, and ruled that the relevant arbitral award would not be enforced. In fact, for a P2P online lending platform with a real legal relationship involving lending, the transaction arrangement is generally as follows: (1) the borrower publishes its financing needs through the P2P online lending platform; (2) several lenders lend funds to the borrower through the P2P online lending platform according to the investment intention; (3) the P2P online lending platform operator acts as an intermediary party, and jointly sign a loan contract with the lender and the borrower; (4) the loan contract stipulates that the principal and interest would be repaid through the P2P online lending platform, and the platform party charges a certain percentage of the intermediary service fee. Since the lenders involved in a single financing project often include multiple entities, in order to facilitate the recovery of the relevant loan funds and effectively protect the rights and interests of the lender after the borrower is overdue, the online lending platform often adopts the method of centralized transfer of the lender’s claim by a single entity (the factoring company associated with the online lending platform), and then the creditor transferee initiates relevant legal procedures against the lender to recover. In addition, since there are many online loan contracts with arbitration clauses, a large number of arbitration cases have been left after the relevant online loan platforms have ceased to operate, and the conclusion of arbitration cases has naturally triggered a large number of enforcement cases on arbitration awards. In existing judicial practice, the circumstances of non-enforcement of an arbitral award involving P2P online lending may arise in the procedure of the debtor applying for non-enforcement of the arbitral award or the procedure of the enforcement court ex officio for review, which will be further discussed below on a case-by-case basis. 1. Application for non-enforcement of arbitral awards involving P2P online lending platforms In the process of applying for enforcement of a domestic arbitration award in a private lending dispute involving a P2P online lending platform, the debtor will often apply to the court not to enforce the arbitral award on the grounds that the applicant or P2P online lending platform operator has engaged in lending business without obtaining the qualification to engage in financial business activities, which

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constitutes a violation of the public interest. For such cases, most of the existing cases, including the two thematic cases in this chapter, reflect the people’s court’s tendency to find that P2P online lending platform operators engage in lending business without obtaining the qualification to engage in financial business activities, violate Article 19 of Banking Supervision Law of the People’s Republic of China28 and other mandatory regulations, and enforcement of such awards will be contrary to the adjudication idea of the public interest. In Beijing Hengyuan Xinye Information Technology Co., Ltd. (“Hengyuan”) v. XXH,29 the High People’s Court of Hubei Province held that, in this case, without obtaining the approval of the financial regulatory authorities, Beijing Jiufu Puhui Information Technology Co., Ltd. used internet information technology to build a financing business platform and engaged in financial integration business for profit, which violated Law of the People’s Republic of China on Commercial Banks, Securities Law of the People’s Republic of China, Banking Supervision Law of the People’s Republic of China and the above-mentioned Notice, disrupted the order of the financial market, undermined the stability of the financial market, and harmed the public interest. This act was not legal, Hengyuan participated in the above-mentioned financial passage process. Therefore, the transferred claims were not legal. The people’s court could not enforce it. It was not improper for the Shangqiu Intermediate Court to rule to reject Hengyuan’s application for enforcement of the arbitration award. However, there are still a small number of jurisdictional courts facing the application for non-enforcement of arbitral awards, hold that the claimant has not provided evidence to prove the connection between the P2P online lending platform operator or the relevant creditor transferee engaging in financial activities without approval and that the enforcement of the arbitral award would be contrary to the public interest. For example, in WL v. Shenzhen Rongxinbao Non-financing Guarantee Co., Ltd. (“Rongxinbao”),30 regarding WL’s reason for non-enforcement of the arbitral award that Rongxinbao and Niwo Loan Company engaged in illegal financial activities contrary to the public interest. Beijing No. 2 Intermediate People’s Court held that WL had not submitted evidence to prove the correlation between the enforcement of the arbitral award involved in the case and the public interest. The reason for non-enforcement claimed by WL lacked factual and legal basis. The court did not support it. 2. Enforcement court ex officio active review From the cases retrieved so far, there are a few cases that the enforcement court examined whether the P2P online lending platform involved in the case had the relevant qualifications to engage in financial business activities, and determined that the enforcement of the relevant arbitral award violated the public interest on the basis that the P2P online lending platform did not have the relevant qualifications. 28

Article 19 of Banking Supervision Law of the People’s Republic of China: “Without approval of the banking supervision institution of the State Council, no entity or individual may establish any banking financial institution or carry on operations as a banking financial institution”. 29 (2020) Yu Zhi Fu No. 333. 30 (2020) Jing 02 Zhi Yi No. 175.

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In Shanghai Kuaisheng Financial Information Service Co., Ltd. v. ZW,31 Yueyang Intermediate People’s Court held that, interest collection (including penalty interest) was a concession right of financial institutions engaged in loan business. In this case, the applicant for enforcement did not obtain the qualification to practice in the financial industry. Through signing the Debt Transfer Agreement with Guangdong Jicheng Company in advance, it engaged in financial activities of collecting loans and interest in disguise, circumventing the above legal provisions. The enforcement of the award would be contrary to the public interest. In accordance with Paragraph 3 of Article 244 of the Civil Procedure Law, it was ruled as follows: (2021) Qu Zhong No. 2–18,315 Award rendered by Quzhou Arbitration Commission shall not be enforced. In H v. M,32 Shizuishan Intermediate People’s Court held that, after examination, it was found that the claim of the applicant for enforcement was obtained by way of a transferee of the claim. The basic legal relationship of the claim was the private lending legal relationship formed between the lender and the debtor through the online lending platform. In a series of cases accepted by this court in which H was applying for the enforcement of arbitral award made by Zhanjiang Arbitration Commission, the lender had repeatedly and operationally signed loan agreements with unspecified borrowers through online lending platforms. The defendant in this case, H, failed to provide the relevant approval documents of the financial regulatory authorities, and could prove the legality of his financial business. H violated the regulation under Notice of the China Banking Regulatory Commission, the Ministry of Public Security, the State Administration for Market Regulation, and the People’s Bank of China on Matters concerning Regulating Private Lending and Maintaining the Economic and Financial (Yin Bao Fa 【2018】No.10)33 and Interim Measures for the Administration of the Business Activities of Online Lending Information Intermediary Institutions (Yin Jian Hui Ling 【2016】 No.1)34 by collecting funds by way of a transferred claim. In summary, the court held that, if (2019) Zhan Zhong Zi No. Z000038011 Award rendered by Zhanjiang Arbitration Commission was enforced, it would be contrary to the public interest. It can be seen that in the current judicial practice, the people’s courts have not reached a consensus on whether the enforcement of arbitration awards in private lending disputes involving P2P online lending platforms constitutes a violation of 31

(2022) Xiang 06 Zhi No. 37. (2020) Ning 01 Zhi No. 241. 33 Notice of the China Banking Regulatory Commission, the Ministry of Public Security, State Administration for Market Regulation, and the People’s Bank of China on Matters concerning Regulating Private Lending and Maintaining the Economic and Financial (Yin Bao Fa 【2018】No.10) provides that, without the lawful approval of the competent organs, no unit or individual may establish institutions engaged in or mainly engaged in the business of issuing loans, or make the granting of loans a routine business activity. 34 Interim Measures for the Administration of the Business Activities of Online Lending Information Intermediary Institutions (Yin Jian Hui Ling 【2016】 No.1) provides that, online lending information intermediaries must not engage in or accept entrustment, directly or indirectly, accept or aggregate funds from lenders. 32

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the public interest. However, it is certain that even if the platform or factoring party has already transferred the lender’s claim through the transfer of claims in the relevant case, which fully protects the rights and interests of the lender, this measure can effectively reduce the possibility of mass incidents, but there is still a high risk that such arbitral awards will not be enforced by the court. It is worth noting that since there is often not only one borrower in arrears on the same P2P online lending platform, but also related private lending dispute cases often involve a large number of series of cases. The assignee of the claim designated by the P2P online lending platform or agreed upon in the agreement may need to pay a huge amount of debt assignment consideration to the lender in order to receive the unpaid claim. In the case that the relevant legal relationship with the loan is genuine and the consideration for the assignment of the claim has been paid in full, if the enforcement court or the arbitration judicial review court finds that the enforcement of the relevant arbitral award constitutes a violation of the public interest just because the platform party engages in financial activities without corresponding qualifications, it obviously makes it impossible to settle the claims involved in the case and the rights and interests of the transferee of the claims cannot be protected.

4.4 Ex Officio Review Normally, parties challenging an award need to provide evidence to prove the existence of a corresponding objection. However, there are also situations where, for example, that require the court to review on its own, such as public policy. Paragraph 3 of Article 237 of the Civil Procedure Law (2017 Amendment) stipulates that “Where the people’s court determines that the execution of the award would be against the public interest, it shall rule to deny execution.” Article 9 of the Arbitration Enforcement Provision stipulates that, a person who is not a party to the case applying for not enforcing the arbitration award or written arbitral mediation if there is evidence to prove that the parties to the case have maliciously applied for arbitration or false arbitration, thus impairing its legitimate rights and interests. Article 11 of the Arbitration Enforcement Provision provides that, the people’s court shall form a collegial panel to review the reasons for the application of the person subject to enforcement and the application of the person outside the case. The reasons for which the debtor did not apply will not be examined, except where the arbitral award may be contrary to the public interest. Pingxiang Weidu Financial Services Outsourcing Co., Ltd. (“Weidu”) v. SHM 35 As for the lending dispute between Weidu and SHM, (2020) Ping Zhong Wang Cai Zi No. 3718 Award rendered by Pingxiang Arbitration Commission has taken legal effect and was designated by Qingdao Intermediate People’s Court to be enforced by the Chengyang District People’s Court. 35

(2021) Lu 0214 Zhi No. 3852.

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Chengyang District People’s Court found out that, (2020) Ping Zhong Wang Cai Zi No. 3718 Award noted that: “1. The respondent shall pay the applicant RMB 2016.67 for the principal and interest of the loan, RMB 894.06 for liquidated damages calculated from December 04, 2017 to October 14, 2020, and later calculated at an annual rate of 15.4% based on RMB 2,000 until the date of repayment. 2. The respondent shall pay the applicant RMB58.21 for the arbitration service fee incurred in realizing the claim. 3. The arbitration fee of RMB 35 shall be borne by the respondent.” The award found that on November 3, 2017, SHM signed a loan contract with Weidu and its online lending platform information intermediary service provider, agreeing that the loan dispute would be handled by Pingxiang Arbitration Commission in writing. It was also found that the business scope of Weidu did not include financial business, nor did it have the qualifications to engage in financial business. In addition, Weidu signed a large number of “loan contracts”, issued loans to many unspecified members of the public, engaged in large-scale financial business, and collected high interest and liquidated damages. Chengyang District People’s Court held that, Article 19 of Banking Supervision Law of the People’s Republic of China36 was directly related to the order of national financial management, the security of social funds and public interest, which was a mandatory valid provision. Weidu granted loans to an unspecified and large number of members of the public, earned high interests. Its lending behavior was repetitive and recurrent. The purpose of borrowing was business. Without the approval of the banking regulatory authority under the State Council, it engaged in recurring loan business in disguise, which was illegal financial business activities. However, (2020) Ping Zhong Wang Cai Zi No. 3718 Award held that the loan contract in this case was legal and valid. If such awards had been enforced, illegal lending and illegal financial business activities would not be effectively stopped, and would also seriously disrupt China’s financial market, undermine financial order and harm the public interest. Above all, Chengyang District People’s Court ruled to dismiss Weidu’s enforcement application on the basis of Item 11 of Paragraph 1 of Article 54 of the Civil Procedure Law (2017 Amendment). Shanyin Financial Leasing (Shanghai) Co., Ltd. v. SJY 37 As for the recourse dispute between Shanying and SJY, on March 9, 2021, Shanying applied to Linyi Intermediate People’s Court for enforcement of an Award made by X Arbitration Commission. The case was filed and accepted by Linyi Intermediate People’s Court on March 9, 2021. The enforcement case number was (2021) Lu 13 Zhi No. 170. Linyi Intermediate People’s Court issued (2021) Lu 13 Zhi No.170 Enforcement Ruling that Luozhuang District Court was responsible for the enforcement. The enforcement case number was (2021) Lu 1311 Zhi No.1085.

36

Article 19 of Banking Supervision Law of the People’s Republic of China: “Without approval of the banking supervision institution of the State Council, no entity or individual may establish any banking financial institution or carry on operations as a banking financial institution”. 37 (2021) Lu 1311 Zhi No. 1085.

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Luozhuang District Court found that, SJY, signed the Loan Contract through the Lujin platform and borrowed 75,790.00 yuan from DML. The debtor, SJY, failed to repay the loan on time. On October 30, 2019, DLL signed the Debt Transfer Agreement with Shanying, transferring its claims against SJY to Shanying free of charge. Since SJY failed to perform its repayment obligations in accordance with the agreement, Shanying applied to X Arbitration Commission for arbitration. The arbitration committee accepted the case on December 13, 2019 and heard it in closed session. On June 25, 2020, X Arbitration Commission issued the Award, and served it to the parties electronically on July 11, 2020, but did not provide the evidence materials received by the parties. Luozhuang District Court held that, the arbitration institution had not reviewed the situation that the online lending contract exempted the liabilities of the platform party and creditors, increased borrower’s liabilities and excluded the borrower’s main procedural rights through standard clauses. The above situation was contrary to the public interest. The arbitration institution did not have sufficient evidence to prove that it had guaranteed the parties’ rights to apply for challenging arbitrators, providing evidence, and conducting defense. It made an award in absentia without providing the parties with a reasonable period of time. There was no sufficient evidence to prove that the award had been effectively served on the parties. The arbitration procedure violated legal procedures. The fairness of the arbitral award had been affected. Luozhuang District Court found that the arbitral award involved in the case failed to protect the basic procedural rights of the parties in this case, such as “the arbitration hearing was not held publicly”, “the qualifications of the applicant for enforcement, intermediary or lender to engage in financial business”, “the assignment of claims” and “the method of service”. The court dismissed Shanying’s enforcement application based on Article 154 of the Civil Procedure Law (2017 Amendment). Article 3 of the Arbitration Enforcement Provision clearly stipulates the circumstances and scope that the enforcement court should meet when ruling to reject a party’s application for enforcement of an arbitral award or arbitration mediation document.38 However, from the abovementioned two cases, the enforcement application obviously did not refer to the circumstances under Article 3 of Arbitration Enforcement Provision. In the above two cases, the enforcement courts ruled to reject the application for enforcement of the arbitral award not based on Article 3 of 38

Article 3 of the Arbitration Enforcement Provision provides that, if the enforcement content of an arbitral award or arbitration mediation document is unenforceable under any of the following circumstances, the people’s court may rule to reject the application for enforcement. If part is rendered unenforceable, an application for enforcement of that part may be dismissed. If part is rendered unenforceable and that part is inseparable from other parts, the application for enforcement may be dismissed. (1) The subject of rights and obligations is not clear; (2) The specific amount of monetary payment is not clear or the calculation method is not clear, making it impossible to calculate the specific amount; (3) The specific object delivered is unclear or cannot be determined; (4) The standards, targets, and scope of conduct performance are not clear. Where the arbitration award or arbitration mediation document only determines the continued performance of the contract, but the specific contents of the rights and obligations to continue to be performed, as well as the manner and time limit for performance, are not clear, resulting in the inability to enforce it, it shall be handled in accordance with the provisions of the preceding paragraph.

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Arbitration Enforcement Provision, but took the initiative to examine the substantive content of the arbitral award involved in the case and summarized that the arbitral award was procedurally illegal and contrary to the public interest. Besides, the legal basis for the enforcement courts to rule on the above two cases is not Article 154 of the Civil Procedure Law (2017 Amendment), instead of Article 237 of the Civil Procedure Law (2017 Amendment). In fact, from the cases retrieved so far, there are many cases in which enforcement courts have taken the initiative to conduct substantive reviews of relevant arbitral awards and have directly determined that the enforcement of relevant arbitral awards is contrary to the public interest. In Shanghai Kuaisheng Financial Information Service Co., Ltd. v. ZW,39 Yueyang Intermediate People’s Court recognized that the enforcement applicant did not obtain the qualification to practice in the financial industry. Through signing the Debt Transfer Agreement with Guangdong Jicheng Company in advance, it engaged in financial activities of collecting loans and interest in disguise, circumventing the Article 19 of Banking Supervision Law of the People’s Republic of China. The enforcement of the award would be contrary to the public interest. In accordance with Paragraph 3 of Article 244 of the Civil Procedure Law, it is ruled that (2021) Qu Zhong No. 2–18,315 Award rendered by the Quzhou Arbitration Commission shall not be enforced. In H v. M,40 Shizuishan Intermediate People’s Court held that, after examination, it was found that the claim of the applicant for enforcement was obtained by way of a transferee of the claim. The basic legal relationship of the claim was the private lending legal relationship formed between the lender and the debtor through the online lending platform. In a series of cases accepted by this court in which H was applying for the enforcement of arbitral award made by Zhanjiang Arbitration Commission, the lender repeatedly and operationally signed loan agreements with unspecified borrowers through online lending platforms. The defendant in this case, H, failed to provide the relevant approval documents of the financial regulatory authorities, and could prove the legality of his financial business. H violated the regulation under Notice of the China Banking Regulatory Commission, the Ministry of Public Security, the State Administration for Market Regulation, and the People’s Bank of China on Matters concerning Regulating Private Lending and Maintaining the Economic and Financial (Yin Bao Fa 【2018】No. 10)41 and Interim Measures for the Administration of the Business Activities of Online Lending Information

39

(2022) Xiang 06 Zhi No. 37. (2020) Ning 01 Zhi No. 241. 41 Notice of the China Banking Regulatory Commission, the Ministry of Public Security, State Administration for Market Regulation, and the People’s Bank of China on Matters concerning Regulating Private Lending and Maintaining the Economic and Financial (Yin Bao Fa 【2018】No. 10) provides that, without the lawful approval of the competent organs, no unit or individual may establish institutions engaged in or mainly engaged in the business of issuing loans, or make the granting of loans a routine business activity. 40

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Intermediary Institutions (Yin Jian Hui Ling 【2016】 No. 1)42 by collecting funds by way of a transferred claim. In summary, the court held that, if (2019) Zhan Zhong Zi No. Z000038011 Award rendered by Zhanjiang Arbitration Commission was enforced, it would be contrary to the public interest. The court ruled not to enforce Zhan Zhong Zi No. Z000038011 Award based on Paragraph 3 of Article 237 of the Civil Procedure Law (2017 Amendment). Different from Pingxiang Weidu Financial Services Outsourcing Co., Ltd. v. SHM and Shanyin Financial Leasing (Shanghai) Co., Ltd. v. SJY, in Shanghai Kuaisheng Financial Information Service Co., Ltd. v. ZW 43 and H v. M,44 the enforcement courts directly ruled not to enforce the arbitral award. The legal basis of the rulings was the relevant provision of Civil Procedure Law that if the people’s court determines that the enforcement of the award is contrary to the public interest, it shall rule not to enforce it. The above cases raise some questions that require further consideration. For example, does the enforcement court have the power to directly conduct a substantive review of the arbitral award and directly determine that the enforcement of the arbitral award involved in the case would be contrary to the public interest? Does the enforcement court have the power to dismiss the application for enforcement or rule not to enforce an arbitral award directly on the grounds that it is contrary to the public interest? If the enforcement court directly rules not to enforce the arbitral award on the basis that if the people’s court determines that the enforcement of the award is contrary to the public interest, it shall rule not to enforce it, would it constitute a procedural violation? Some examples are given below to further analyse these issues. In fact, from the provisions of the current law and relevant judicial interpretations, the law does not give the enforcement court the authority to directly determine that the enforcement of the arbitral award involved in the case will violate the public interest. But in practice, courts obviously have not reached a unified opinion on this issue. In Jincheng Chengqu Xiejunbao Wood Floor Distribution Department v. XJB,45 the High People’s Court of Shanxi Province held that, the court may conduct judicial review of the arbitral award during enforcement proceedings, but shall examine whether there are statutory circumstances for not enforcing the arbitral award in accordance with Article 237 of the Civil Procedure Law and other relevant laws. In this case, where no party or outsider applied for non-enforcement of the arbitral award, it was not an exceptional circumstance of prior arbitration. In accordance with the aforementioned laws and judicial interpretations, the enforcement court could 42

Interim Measures for the Administration of the Business Activities of Online Lending Information Intermediary Institutions (Yin Jian Hui Ling 【2016】 No. 1) provides that, online lending information intermediaries must not engage in or accept entrustment, directly or indirectly, accept or aggregate funds from lenders. 43 (2022) Xiang 06 Zhi No. 37. 44 (2020) Ning 01 Zhi No. 241. 45 (2021) Jin Zhi Fu No. 171.

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only examine whether the arbitral award was contrary to the public interest ex officio. At the same time, before making a ruling not to enforce an arbitral award, it shall be submitted to a higher court for review and approval in accordance with the Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review. However, in YHY, LZY, SSB v. Guangdong Foshan Nanhai District Kepai Enterprise Co., Ltd. (“Keipai”),46 the High People’s Court of Guangdong Province held a negative view on this issue. The High People’s Court of Guangdong Province noted that, as the debtor of other courts, whether Kepai, applied for arbitration in bad faith or sham arbitration, harmed the legitimate rights and interests of the person applying for enforcement in another case, or whether the arbitral award in this case violated the public interest, it should be dealt with in the judicial review procedure for the non-enforcement of the arbitral award. The enforcement court may notify the enforcement court of other related cases, and the outsider shall decide whether to apply for not to enforce the arbitral award in this case, so as to protect the legitimate rights and interests of other enforcement creditors. It is also possible to consult the real estate administration department whether the land transfer involved in the case complied with administrative regulations. On this basis, the court could examine whether the arbitral award was contrary to the public interest ex officio. However, replacing the judicial review of non-enforcement of an arbitral award with the filing and review of an enforcement case, and rejecting the application for enforcement instead of the non-enforcement of an arbitral award, would directly damage the rights and obligations determined by the parties through the arbitral award and would endanger the legal arrangements of China’s arbitration system. According to Article 237 of the Civil Procedure Law (2017 Amendment), Article 244 of the Civil Procedure Law (2021 Amendment) and Article 11 of the Arbitration Enforcement Provision, even if the court has the authority to actively review whether the enforcement of the arbitral award involved in the case constitutes a violation of the public interest, such authority is limited to the application for non-enforcement of the arbitral award, which is within the arbitration judicial review procedure. If no party applies for non-enforcement of the arbitral award and the enforcement court directly conducts a substantive review of the arbitration case and rules not to enforce it, it is tantamount to evolving into a situation where “case filing review replaces judicial review of non-enforcement of the arbitral award” as claimed by the High People’s Court of Guangdong Province. And the legality of its ruling will obviously be questioned. Moreover, in line with Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review (Fa Shi [2021] No. 21), when a court refuses to enforce an arbitral award of an arbitration institution in mainland China on the grounds of violating the public interest, it shall follow the provisions of verification system. Only after SPC has reviewed the award can the enforcement court make a ruling in accordance with 46

(2019) Yue Zhi Fu No. 770.

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SPC’s review opinion. If the enforcement court directly rejects the application for enforcement or does not enforce the arbitral award on the grounds that it is contrary to the public interest in the non-arbitration judicial review procedure, it undoubtedly “avoids” the application of verification procedure. In this way, the courts will enjoy great discretion in determining what constitutes a violation of the public interest. It will be difficult to unify the adjudication standards. In such cases, the ultimate right is often damaged by the applicant for enforcement who has obtained the judgment but cannot enforce it. As far as the parties concerned, from the perspective of fully protecting their own rights, if the enforcement court directly rules to reject the application for enforcement or ruling not to enforce the arbitral award on the grounds that the enforcement of the award is contrary to the public interest, the parties may consider filing an appeal with the court to initiate enforcement supervision procedures for such rulings in accordance with the law. In Hubei Shengfeng Pharmaceutical Co., Ltd. (“Shengfeng”), GMN, YZT v. Wuhan Donghu Baixing Venture Investment Centre L.P.(“Wuhan Baixing”),47 the SPC pointed out that, Paragraph 5 of Article 237 of the Civil Procedure Law48 and Article 478 of the Civil Procedure Law Interpretation49 only stipulated that the people’s court shall not accept the objection or reconsideration of the enforcement of a ruling by a party against the enforcement of an arbitral award, but they did not prohibit the people’s court from initiating enforcement supervision procedures for such ruling in accordance with the law. In this case, Wuhan Baixing filed an appeal against (2017) E 28 Zhi No. 9 Enforcement Ruling made by Enshi Intermediate People’s Court rather than an enforcement objection or reconsideration. The High People’s Court of Hubei Province also made (2019) E Zhi Jian No. 16 Enforcement Ruling in accordance with Article 129 of Provisions of the Supreme People’s Court on Several Issues Concerning the Enforcement Work of the People’s Courts (for Trial Implementation) (the Provisions were amended in 2020 and is now Article 71), which did not violate the provisions of the above judicial interpretations in terms of procedure. Shengfeng, GMN and YZT’s claim that the High People’s Court of Hubei Province had no competence to accept the appeal filed by Wuhan Baixing against the (2017) E 28 Zhi No. 9 Enforcement Ruling could not be sustained.

47

(2021) Zui Gao Fa Zhi Jian No. 12. Paragraph 5 of Article 237 of the Civil Procedure Law stipulates that if an arbitral award is ruled not to be enforced by a people’s court, the parties may reapply for arbitration in accordance with the written arbitration agreement reached by both parties, or may file a lawsuit with the people’s court. 49 Article 478 of the Civil Procedure Law Interpretation stipulates that, in accordance with Paragraphs 2 and 3 of Article 237 of the Civil Procedure Law, if a people’s court rules not to enforce an arbitral award, the people’s court shall not accept it if a party raises an objection or reconsideration to the enforcement of the ruling. The parties may re-conclude a written arbitration agreement on the civil dispute and apply for arbitration, or may file a lawsuit in the people’s court. 48

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4.5 Private Equity Funds In recent years, as an emerging financial investment product, private equity investment funds have been widely favored by investors because of their non-public offering and high returns. At the time of the rise of private investment funds, due to the lag in legislation, there were no relevant laws and regulations specifically formulated for private investment funds in China. The fund managers at that time often made agreements in fund contracts that were inconsistent with the current laws and regulations in order to attract investors, such as fund managers or their affiliates promising rigid redemption payment to investors. What’s more, in order to pay high returns, some fund managers illegally absorbed deposits from the public in the name of issuing private equity funds, and did not invest the funds raised in the projects agreed in the contracts, but used them for lending. With the improvement of legislation and the strengthening of the supervision of the operation of private investment funds by relevant departments, the issuance and operation of private investment fund products have gradually developed in the direction of compliance. For instance, the rigid redemption clause in the private investment fund contract has been clarified as invalid by Article 15 of the Interim Measures for the Supervision and Administration of Privately Offered Investment Funds,50 Article 24 of the Notice of the Asset Management Association of China on Issuing the Measures for the Administration of the Fundraising of Privately Offered Investment Funds,51 and Paragraphs 1 and 2 of Article 13 of the Notice for the Filing of Private Investment Funds.52 Private equity fund managers suspected of breaking the law and committing crimes had also been placed on file for investigation by the public security organs. During the process of the criminal case, the relevant responsible persons are also required to bear corresponding criminal responsibilities. In current days, when the relevant legislation emphasizes “sellers do their duty, buyers are responsible for themselves”, a large number of private equity fund products are facing the dilemma of difficulty in paying due to factors such as the market environment. As there are many private equity fund contracts that choose arbitration as the dispute resolution method, domestic arbitration institutions have accepted a large number of disputes arising from private equity investment fund contracts arising 50

Article 15 of the Interim Measures for the Supervision and Administration of Privately Offered Investment Funds: “Private equity fund managers and private equity fund sales institutions shall not promise investors that the investment principal will not be lost or promise a minimum return”. 51 Article 24 of the Notice of the Asset Management Association of China on Issuing the Measures for the Administration of the Fundraising of Privately Offered Investment Funds: “When promoting private equity funds, fundraising institutions and their practitioners are prohibited from promising investors in any way that their funds will not be lost, or promising investors a minimum return in any way, including publicizing ‘expected returns’, ‘expected returns’, ‘predicted investment performance’ and other related content”. 52 Paragraphs 1 and 2 of Article 13 of the Notice for the Filing of Private Investment Funds: “【Prohibition of rigid redemption payment】The manager and its actual controllers, shareholders, affiliates and fundraising institutions shall not promise investors a minimum return, promise that the principal will not be lost, or limit the amount and proportion of loss”.

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from investors requiring fund managers, fund custodians or related parties to repay principal and interest. In judicial practice, there are many cases on private equity disputes in which claimants apply to the people’s courts to set aside arbitral awards on the grounds that the award is contrary to the public interest. Zhehao Asset Management (Shanghai) Ltd. v. HW 53 Based on the arbitration application submitted by HW, the arbitration clause in the Fund Contract and relevant laws and regulations, Beijing Arbitration Commission accepted the arbitration case arising from the abovementioned Fund Contract on February 11, 2019. The case number was (2019) Jing Zhong An Zi No. 0666. The case was governed by the expedited procedure provisions under the Beijing Arbitration Commission Arbitration Rules, which came into effect on April 1, 2015. On November 15, 2019, the Beijing Arbitration Commission rendered (2019) Jing Zhong Cai ZiZi No. 2945 Award, ruling Zhehao Asset Management (Shanghai) Ltd. (“Zhehao”) to pay HW RMB53,086 in damages. Zhehao applied to Beijing No. 4 Intermediate People’s Court to set aside the arbitral award, claiming that (2019) Jing Zhong Cai Zi No. 2945 Award rendered by Beijing Arbitration Commission was contrary to the public interest. According to the relevant provisions of China, private equity funds could not impose capital protection, interest guarantee, or set a fallback clause for investors’ investment results. The arbitration award actually set a fallback clause for private equity funds, which violated the relevant provisions on private equity funds and contradicted the entire market environment and national regulations. Beijing No. 4 Intermediate People’s Court held that, violation of the public interest shall refer to the violation of the common interests of the law and morality of the whole society with the public as the main body of interests, involving the most fundamental law and morality of the whole society. Its manifestation shall be in the form of violating the basic system and norms of our country’s laws, violating the basic value orientation of social and economic life, endangering social public order and life order, and violating the basic moral norms generally recognized and followed by all members of society. This case was on the civil disputes between equal civil subjects. Zhehao failed to provide evidence to prove that the arbitral award was contrary to the public interest. The arbitral tribunal had examined and determined the validity of the Fund Contract and whether Zhehao had fulfilled its appropriateness obligations in the course of the sale of the fund in question at the arbitration hearing, and made an arbitral award based on the law on the basis of ascertaining the facts. The arbitral tribunal found that the issues of fact and applicable law fell within the scope of the arbitral tribunal’s substantive review and did not fall within the scope of the people’s court’s judicial review of arbitration. Therefore, Zhehao’s claim was not supported by Beijing No. 4 Intermediate People’s Court.

53

(2020) Jing 04 Min Te No. 55.

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China Everbright Bank Beijing Branch v. ZQ, Beijing XiChuang Investment Management Co., Ltd.54 CIETAC accepted the arbitration case based on the arbitration clause in the Fund Contract signed by ZQ, Beijing XiChuang Investment Management Co., Ltd. (“Xichuang”) and China Everbright Bank Beijing Branch (“Everbright”). ZQ claimed that Xichuang should return the principal and interests and Everbright should bear the joint liability of ZQ’s abovementioned debts. CIETAC rendered the arbitral award on 9 August 2021, ruling Everbright and ZQ to pay part of the principal loss and bear 10% of the arbitration costs. Everbright claimed that the arbitral award in question was contrary to the public interest. The arbitral tribunal’s finding was that the responsibility of the administrator was transferred to the custodian bank, and at the same time imposed the custodian bank on the obligation of substantive review, which violated Articles 1655 and 2056 of the Guidelines of the China Banking Association for the Asset Custody Business of Commercial Bank. Meanwhile, although the case was on the dispute arising from the fund product contract, the ruling of this case was a ruling on a case-by-case basis on the surface, but in essence it was a violation of the responsibility boundary of the custodian bank, harming the custodian industry, a serious impact on the stability of the financial order, a violation of the rigid redemption rules of the financial regulatory authorities, and a declaration that the bank should bear liability as a custodian for all unspecified investors who may be engaged in private equity fund investment, which violated the public interest. In particular, the banking and financial regulatory authorities clearly stipulated that the custodian institution should only conduct a formal review of the transfer instruction, and would not be responsible for the operation of funds or investment losses. The arbitral award ignored the legal provisions and contractual agreements, excessively aggravated the responsibility of the custodian bank, and deviated from the requirements and legal principles of financial supervision regulations. As to the grounds that Everbright claimed that the arbitral award was contrary to the public interest, Beijing Financial Court held that, “contrary to the public interest” under Article 58 of the Arbitration Law mainly referred to situations where the arbitration award violated the basic principles of Chinese law, violated good social customs, endangered the state and social public safety, etc., and should involve the common interests of an unspecified majority, which was different from the interests of the parties to the contract. In this case, the dispute among Everbright, ZQ and Xichuang was a contract dispute among equal civil subjects, which only involved the interests of social individuals and did not constitute harm to the public interest. 54

(2021) Jing 74 Min Te No. 99. Article 16 of the Guidelines of the China Banking Association for the Asset Custody Business of Commercial Banks stipulates that, the custodian bank shall not bear joint and several liability for the acts of the administrator, trustee and other relevant institutions. 56 Article 20 of the Guidelines of the China Banking Association for the Asset Custody Business of Commercial Banks stipulates that, the custodian bank conducts formal review of the administrator’s transfer instructions. 55

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Therefore, Everbright’s application to set aside the arbitral award could not be established. The arbitral awards involved in the above two cases both required the fund manager or both the fund manager and the custodian to bear certain responsibilities to the investors. And the relevant liability bearers all claimed in the subsequent judicial review procedure that the arbitral award in question violated the order of financial management and thus the public interest. Although private equity fund contracts often involve a large number of investors, and fund managers and custodians may face multiple arbitration cases due to the inability to make smooth payments, it is clear that the competent courts have held that the disputes involved in the cases are contractual disputes between equal civil subjects and do not constitute harm to the public interest. In other arbitration judicial review cases, the competent courts have adopted similar adjudication views involving fund contracts. In SSJ v. Ningbo Yuxiang Investment Management Co., Ltd., Guotai Junan Securities Co., Ltd.,57 the applicant claimed that, the respondent did not strictly follow the regulations and requirements for raising, operating and supervising fund products, but used improper means to trick the applicant into purchasing and signing the prepared format text in advance to avoid risks. Shanghai Arbitration Commission failed to review the facts and evidence of the case in accordance with the law, resulting in the content of the final award being contrary to the public interest and violating Item (3) of Paragraph 1 of Article 58 of the Arbitration Law. In this regard, on the issue of whether the arbitral award in this case violated the public interest, the Shanghai Financial Court held that, this case was a dispute arising from the Fund Contract signed among the applicant SSJ and the two respondents. The award only ruled on the rights and obligations among the applicant and the two respondents, and did not involve the interests of other unspecified majorities, nor did it violate the public interest. In YYJ v. Ningbo Meishan Bonded Port Area Chanxiang Investment Center L.P.,58 YYJ claimed that repurchase conditions stipulated in the Investment Supplement Letter would inevitably occur, eliminating the uncertainty of VAM, Ningbo Meishan Bonded Port Area Chanxiang Investment Center L.P. violated the provisions that private equity funds were not allowed to lend and it did not have the business scope of loan business approved by the financial regulatory authorities, which violated the basic principles of the Company Law, the essence of private equity funds and the requirements for clarity of equity in public companies, harmed the public interest, endangered financial security and constituted a violation of public order and good customs. The agreement was invalid. Therefore, the arbitration award involved in the case violated public order and good customs and was obviously unfair and contrary to the public interest. In this regard, Shanghai No. 2 Intermediate People’s Court held that, on the issue of whether the arbitral award violated public order and good morals, YYJ had made 57 58

(2022) Hu 74 Min Te No. 21. (2022) Hu 02 Min Te No. 169.

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this proposition during the hearing of the arbitration case in question. The VAM clause was signed after full consultation between the contracting parties, and did not fall within the category of real debts of famous stocks, did not harm the target company, the rights and interests of other shareholders and creditors of the target company, did not violate the public order of the securities market or harm the public interests of an unspecified majority of investors. Hence, Shanghai No. 2 Intermediate People’s Court did not support YYJ’s claim. The applicant’s claim in the above-mentioned case and the final judgment of the court also raised questions worthy of further consideration: how does a case involving a private investment fund violate the order of financial management? Does it constitute a violation of the public interest, and how should it be defined? The adjudication ideas of the following cases can be used as a reference to answer this question. In LCH v. XRH, ZJW,59 the plaintiff was LCH, a private equity fund investor. The defendants were XRH, ZJW and CYF, shareholders of Guangdong Eastern Pishon Fund Management Co., Ltd., of which XRH was the legal representative of the company and ZJW was the chairman of the company. The parties signed a supplementary agreement in addition to the fund contract, agreeing that the loss of the investor during the liquidation of the fund shall be compensated by XRH, ZJW and CYF, involving the shareholders, legal representatives and other related parties of the private equity fund manager to provide a guarantee to the investor. Guangzhou Intermediate People’s Court held that the parties making the minimum guarantee and the manager were in fact a community of interests, and that the agreement made by the related party of the manager to circumvent the supervision of laws and administrative regulations violated the basic laws of the market and the rules of the capital market, seriously damaged the reasonable pattern of the capital market, was not conducive to risk prevention in the financial market, and harmed the public interest. In CJJ v. Shenzhen Guotou Investment Capital Management Co., Ltd.,60 Futian District People’s Court held that, the plaintiff and the defendant agreed in the Investment Memorandum that “the performance comparison benchmark (annualized) of the investment amount of 3 million yuan (inclusive) to 8 million yuan (excluded) was 9.5% per year, and the income distribution method is to pay interest on a semi-annual basis, and repay the principal and interest when due”, which was the defendant’s commitment to the plaintiff’s investment to guarantee a fixed return on principal and interest, which constituted a minimum guarantee clause. The above-mentioned minimum guarantee clause made the investment risk stay within the financial system, and the risk of asset loss that should be borne by investors was passed on to financial institutions or non-financial institutions. When rigid redemption could not be maintained, it was very easy to cause market panic, resulting in investors rushing to redeem investment, negatively affecting the financial and economic order and harming the public interest. According to Paragraph 2 of Article 153 of General Provisions of the 59 60

(2019) Yue 01 Min Zhong No. 16045. (2020) Yue 0304 Min Chu No. 26442.

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Civil Law and Article 52(4) of the Contract Law, the court found that the guarantee clause in the fund contract was invalid. It can be seen that when handling disputes involving fund contracts, the court may determine that such agreements harm the public interest on the basis that the fund contract involved in the case contains a minimum guarantee clause and violates the order of financial management, and then find that the relevant clause is invalid. In other words, if the arbitral tribunal finds that the minimum guarantee clause of the fund contract is valid and accordingly makes an arbitral award requiring the fund manager or custodian to repay the principal and interest to the investor, the parties may consider claiming to the court that the arbitral award is contrary to the public interest.

4.6 Concealing Illegitimate Purpose Under Legitimate Acts “An illegitimate purpose is concealed under the guise of legitimate acts” is one of the circumstances of which a contract is invalid under Article 52 of the original Contract Law. In the process of compiling the Civil Code, the legislature had deleted this circumstance that led to the invalidity of the contract ab initio in the past. According to Understanding and Application of the General Provisions of the Civil Code of the People’s Republic of China (Part II),61 the main reason of “an illegitimate purpose is concealed under the guise of legitimate acts” is cancelled as a cause of invalidity is that: on one hand, the expression of “illegitimate purpose” is easy to cause controversy, because it is the subjective intention of the parties and it is difficult to determine. On the other hand, even if the purpose of the parties is illegitimate, it needs specific analysis on whether the civil legal acts they carry out themselves declared invalid. In adjudication practice, there are very few types of cases regarding “an illegitimate purpose is concealed under the guise of legitimate acts”. It is a typical kind of case that concealing criminal purposes in the form of signing a contract. We could find other kind of case such as entering into gift contracts with the aim of evading court enforcement. Cases in which the people’s courts apply Paragraph 3 of Article 52 of the Contract Law to render judgments are ever fewer. It now seems that such contracts can be found invalid on the grounds that they violate the mandatory provisions on the validity of laws and administrative regulations. For arbitration judicial review cases, concealing illegitimate purpose under legitimate acts is one of the common reasons for the parties to claim that the arbitral award involved in the case is contrary to the public interest. Will such claims be accepted by the competent court in judicial practice?

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Leading Group for the Implementation of the Civil Code of SPC, PEOPLE’S COURT PRESS.

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Jiangsu Lianyou Network Co., Ltd., Shanghai Shengzhuang Construction Labor Engineering Co., Ltd. v. Shanghai Yinxin High Technology Developement Co. ltc62 The applicants Jiangsu Lianyou Network Co., Ltd. (“Lianyou”) and Shanghai Shengzhuang Construction Labor Engineering Co., Ltd. (“ShengZhuang”) claimed that (2019) Hu Zhong An Zi No.0942 Award rendered by Shanghai Arbitration Commission had revocable circumstances that violated the public interest. 1. There were a number of statutory grounds for invalidity of the contract in dispute. First of all, the name of the contract in dispute was a labor construction contract, which was actually a construction project contract, and the parties to the contract deliberately disguised the contract as a labor construction contract in order to circumvent the law and cover up the illegal purpose of illegal subcontracting and unqualified actual construction party borrowing by a qualified construction enterprise to sign a construction project construction contract, which was a legal form to cover up the illegal purpose. The disputed contract should be an invalid contract. Second, the respondent, as the general contractor, did not carry out the construction itself, but subcontracted all the subjects of the project involved in the case to the applicants, which violated Article 272 of the Contract Law. The contract in dispute was an illegal subcontract and should be invalid. Third, Lianyou, the actual constructor of the project involved in the case, did not have the corresponding qualifications, but signed the disputed contract with the respondent in the name of Shengzhuang, which had the relevant qualification. According to Article 4 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law in the Trial of Cases Regarding Disputes over Construction Contracts for Construction Projects, the disputed contract should be invalid. 2. If the arbitral award recognized an invalid contract as a valid contract, it would harm the public interest. First, the quality of the project involved in the case was related to the information security of securities trading, financial futures trading and securities transaction information on the national platform of securities trading, financial futures trading and national platform of the securities registration and settlement system. The disputed contract also involved the transaction information security of an unspecified number of people. Second, the recognition of the disputed contract as a valid contract would cause a serious impact on the market order and social management order in the field of construction projects in China, and would ultimately endanger the public interest. The arbitral tribunal was obliged to take the initiative to review the validity of the contract, but it actually failed to perform its statutory duties, resulting in an erroneous determination of the validity of the contract. Accordingly, Lianyou and Shengzhuang requested the revocation of (2019) Hu Zhong An Zi No.0942 Award issued by Shanghai Arbitration Commission in accordance with Item (5) of Paragraph 1 and Paragraph 3 of Article 58 of the Arbitration Law. 62

(2020) Hu 01Min Te No. 103.

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Shanghai No. 1 Intermediate People’s Court held that, the public interest of society shall be related to the interests of all members of society or an unspecified majority of people in society, and shall be public and social, which is different from the interests of the parties to the contract. Judging from the content of the contract at issue in this case, the contract in dispute only involved the rights and obligations relationship among the two applicants and the respondent. The agreement among the parties in the contract was a voluntary agreement reached on the basis of equal civil subjects on the basis of equal consultation. The content of the agreement did not involve the interests of all members of society or an unspecified majority of people in society. Judging from the results of the arbitral award, the award only had an impact on the two applicants and the respondent. There was no violation of the public interest. It was true that behind each specific legal relationship there was a certain social order and had a certain value guidance, but the aforementioned order and value could not be directly equated with the existing public interests in social life, and the invalidity of the contract does not necessarily constitute damage to the public interest. The reasons raised by the two applicants that they did not have construction qualifications, that the arbitral award would affect the market order and management order in the field of construction and would affect the security of public information, lacked factual and legal basis. It was difficult for the court to support them. Hengchang Zhongding Financial Leasing Co., Ltd. v. FXQ63 On August 23, 2018, the applicant (Party A, Hengchang Zhongding Financial Leasing Co., Ltd.) and the respondent (Party B, FXQ) signed Auto Financial Leasing Contract, numbered GD1811010506062160, stipulating that Party B would sell its own vehicle to Party A, transfer the ownership of its vehicle to Party A, and would sign a financial lease contract with Party A to lease it back from Party A. Party A accepted the aforementioned transfer and leases the vehicle to Party B for use. Party B ensured that the vehicle transferred by it was in good appearance, flawless in quality, and meeted the needs of use. Party B leased and paid rent to Party A, and occupied and used the financial leased vehicle as agreed in the contract. The annex to the contract “Lease Payment Table” stipulated that the rent payment time was the 10th of each month, and the rent payment amount was 2675.56 yuan per month. On August 23, 2018, after deducting the leasing service fee of RMB28,675.03 and the lessee’s accident insurance fee of RMB602, the applicant paid the balance of the financing amount of RMB51,000 to the respondent through the online banking of Kincheng Bank Of Tianjin Co., Ltd. As of the date of the applicant’s application to the Hengshui Arbitration Commission for arbitration, the total unpaid rent under the financial lease contract was RMB82,938.26. According to the repayment records submitted by the applicant, the respondent had not paid rent since the 6th instalment. Based on the above facts, the Hengshui Arbitration Commission made Heng Wang Cai [2019] No.509 Award and ruled that the respondent FXQ shall pay the applicant Hengchang Zhongding Financial Leasing Co., Ltd. (“Zhongding”) RMB 82,938.26 in rent and overdue liquidated damages. 63

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Because FXQ failed to perform the obligations determined by Heng Wang Cai [2019] No.509 Award within the time limit, the applicant Zhongding applied to the Chongqing No.2 Intermediate People’s Court for enforcement. After review, Chongqing No.2 Intermediate People’s Court held that, according to Article 735 of the Civil Code64 and Article 1 of the Interpretation of The Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Financial Lease Contract Dispute Cases,65 financial leasing transactions had he dual attributes of “financing funds” and “financing objects”, and both were indispensable. The objective existence of the leased object and the transfer of ownership by the seller to the lessor were important features of a financial lease contract that distinguished it from a loan contract. If there was no actual leased object or the ownership of the leased object had not been transferred from the seller to the lessor, it should be deemed that the financial lease contract had no financial properties, and there was only a financial facility between the parties, which was called a financial lease but was actually a loan. In this case, Zhongding and FXQ signed Auto Financial Leasing Contract. It was agreed that Zhongding purchased the model of Beijing Hyundai brand vehicle under FXQ through financial lease and configured as XXXXXXXX2011 Hyundai Yuedong 2011 1.6L manual comfort vehicle, but the vehicle was still registered in the name of FXQ. Zhongding did not obtain the ownership of the vehicle in question, and the nominal financial lease contract between the two parties obviously did not have the property of financing, so the legal relationship in this case was called financial lease and was actually a loan. Zhongding was subject to its business scope [approved business scope: financial leasing business; leasing business; purchase of leased assets at home and abroad; disposal and maintenance of residual value of leased property; advising and guaranteeing leasing transactions; sale of electronic products, devices and components, communication equipment, auto parts (projects subject to approval according to law, business activities are carried out in accordance with the approved content after approval by relevant departments)]. The disguised operation of lending business in the form of financial lease was a legal form to cover up illegal purposes and undermined normal financial order. Heng Wang Cai [2019] No.509 Award made by Hengshui Arbitration Commission was contrary to the public interest. If a party claims in the judicial review procedure that the contract involved in the case is a contract that “concealing illegitimate purpose under legitimate acts”, and 64

Article 735 of the Civil Code: “A contract for financing lease is a contract under which a lessee selects a leased object and its seller, and a lessor purchases the leased object from the selected seller and provides it to the lessee for use, who pays the rent in return”. 65 Article 1 of the Interpretation of The Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Financial Lease Contract Dispute Cases stipulates that, the people’s court shall, in accordance with the provisions of Article 735 of the Civil Code, determine whether a financial lease legal relationship is constituted, taking into account the nature and value of the subject matter, the composition of the rent, and the contractual rights and obligations of the parties. Where a financial lease contract is called but does not actually constitute a legal relationship of financial leasing, the people’s court shall handle it in accordance with the legal relationship it actually constitutes.

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then further claims that the arbitral award in the case constitutes a violation of the public interest, because the claim is related to the validity of the contract involved in the case. The court will inevitably consider the following issues when examining the application of the parties: 1. Should there be a substantive review of the facts ascertained in the arbitral award and the applicable law? 2. If the contract involved in the case is indeed a contract that “concealing illegitimate purpose under legitimate acts”, will the validity of the contract affect the public interest? It can be seen from the results of the above two cases that the people’s court adopted different review angles and review standards for the parties’ claim that the contract involved in the case was “concealing illegitimate purpose under legitimate acts” and thus caused the arbitral award to violate the public interest. For the above-mentioned case heard by Shanghai No. 1 Intermediate People’s Court, Shanghai No. 1 Intermediate People’s Court obviously did not examine substantive issues such as the signing of the contract involved in the case and the legal application of the arbitral award, but focused on whether the legal relationship involved in the case and the outcome of the adjudication would have an impact on the public interest. Shanghai No. 1 Intermediate People’s Court’s view is not uncommon in current judicial practice. In Qinghai Chaidamu Financing Guarantee Co., Ltd. (“Chaidamu”) v. Haibei Shenghu Cultural Industry Development Co., Ltd.66 , the claimant, Chaidamu, argued that Investment Agreement, Shareholders’ Agreement, Performance Guarantee Agreement and Equity-for-Debt Agreement, which were used as evidence in this case, may conceal illegitimate purpose under legitimate acts, and the arbitral award was suspected of violating the public interest. Beijing No. 4 Intermediate People’s Court held that, the facts and reasons for setting aside the arbitral award claimed by Chaidamu were essentially dissatisfied with the outcome of the arbitral award and it raised an objection to the arbitral tribunal’s determination of the facts and applicable law. However, the judicial review procedure of arbitration was a limited supervision of the arbitration procedure by the people’s court within the scope prescribed by law, rather than a second-instance procedure of an arbitration case. The determination of facts and applicable law fell within the scope of the substantive jurisdiction of the arbitral tribunal and did not fall within the scope of judicial review of arbitration by the court. For the aforementioned case heard by Chongqing No.2 Intermediate People’s Court, Chongqing No.2 Intermediate People’s Court apparently examined substantive issues such as the facts of the case and the application of law of the arbitral award during the hearing. Although Chongqing No.2 Intermediate People’s noted in its ruling that the contract in question constituted a contract signed “to conceal illegitimate purpose under legitimate acts”, but its final determination was that the arbitration award in question violated the public interest based on the disguised operation of lending business in the form of financial lease, which undermined the financial order.

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However, some courts also found that the contract involved in the case constituted a contract signed “to conceal illegitimate purpose under legitimate acts “, and finally found that the arbitration award involved in the case constituted a violation of the public interest. In Zhongguo Huangjin Group Co., Ltd., China Gold Group Liaoning Co., Ltd. v. LW, LQF,67 Beijing No. 4 Intermediate People’s Court held that the reason why the two parties signed and performed the equity transfer contract in this case was obviously the result of bribery by both parties. Moreover, the bribery of both parties was not only to allow the respondent to obtain market trading opportunities, but to use this contract to defraud huge amounts of state-owned assets. In short, the equity transfer contract involved in the case was an act of malicious collusion between the two parties to harm the interests of the state, and it also met the situation of concealing illegitimate purpose under legitimate acts. Therefore, the equity transfer contract had become a criminal tool for relevant persons to defraud huge amounts of state-owned assets, but No. 1406 Award found that the equity transfer contract was legal and valid. The result of the award posed a hazard to the most fundamental legal principle of fairness and justice in society, and was a violation of the public interest. Therefore, No. 1406 Award should be revoked. In addition, in some cases, courts conducted substantive reviews of the arbitral awards involved, but ultimately did not find that the arbitral awards in question constituted a violation of the public interest. In WXY v. Enshi Zhonghao Trading Co., Ltd. (“Zhonghao”),68 WXY claimed that the respondent Zhonghao subleased the rented housing to the applicant for business, changed the use of the public rental housing, and deprived the object who should enjoy the public rental housing the right to rent, which undoubtedly violated the public interest. The respondent had the illegal fact of concealing illegitimate purpose under legitimate acts. Enshi Intermediate People’s Court held that, the Measures for the Administration of Public Rental Housing did not prohibit the subleasing of supporting commercial service facilities of public rental housing. Moreover, the subleasing of supporting commercial service facilities did not affect the guaranteed nature of public rental housing. In this case, Zhonghao and Enshi Housing Management Office signed Housing Rental Agreement. Zhonghao rented the façade of Enshi Gengjiaping public rental housing in Enshi City, but not housing. Moreover, from the Housing Rental Supplementary Agreement signed by Zhonghao and Enshi Housing Management Office, Zhonghao could sublease the rented façade house based on the actual situation. After Zhonghao subleased the rented façade to WXY, WXY failed to pay the relevant rent and property management fees in accordance with Gengjiaping Hexiejiayuan Shop Façade Lease Contract signed between the two parties. Zhonghao applied to Enshi Arbitration Commission for arbitration, requesting WXY to pay the relevant fees in accordance with the contract. After review, Enshi Arbitration Commission issued an arbitral award, which did not violate the public interest.

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It is true that the courts conducted substantive examinations of the arbitral awards involved in the above two cases in which they found that the arbitral awards constituted a violation of the public interest. But in Zhongguo Huangjin Group Co., Ltd, China Gold Group Liaoning Co., Ltd. v. LW, LQF 69 , Beijing No. 4 Intermediate People’s Court found that, in addition to the circumstance of concealing illegitimate purpose under legitimate acts, there were also circumstances of defrauding state-owned assets and harming the interests of the nation, which clearly violated mandatory legal provisions and were even worse. In contrast, in Hengchang Zhongding Financial Leasing Co., Ltd. v. FXQ,70 under the circumstance that the validity of contract involved in the case would only affect the rights and obligations of the parties, Chongqing No.2 Intermediate People’s Court directly determined that the award constituted a violation of public interest on the ground that the act would damage financial order, which was obviously lacking in reason. In fact, as Shanghai No. 1 Intermediate People’s Court pointed out in Shengzhuang Construction Labor Engineering Co., Ltd. v. Shanghai Yinxin High Technology Developement Co.ltc,71 behind each specific legal relationship, there was a certain social order and had a certain value guidance. But the aforementioned order and value could not be directly equated with the existing public interests in social life. The invalidity of the contract did not necessarily constitute damage to the public interest. Therefore, as for whether a single legal relationship constituted a violation of the public interest, the court should be more cautious in exercising its discretion and in making a judgment.

4.7 Group Interest “Violation of the public interest” is a legal ground for a court in China’s arbitration judicial review system to make a ruling to set aside an arbitral award or not to enforce an arbitral award. The legislator has not clarified the connotation and extension of “social public interest” in the legal provisions. In CIVIL PROCEDURE LAW OF THE PEOPLE’S REPUBLIC OF CHINA: A PRACTICAL GUIDE TO UNDERSTANDING AND ITS APPLICATION, the SPC interprets “social public interest” as follows: “The so-called social public interest is what is commonly called public interest in law, which refers to the interests of all members of society. The core content of the category of public interest is its publicity. Its basic meaning refers to the public value realized through public procedures and led by the government

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under specific social historical conditions, abstracted from private interests to meet the public needs of all or most members of society in the community.”72 In the current practice of judicial review of arbitration, if the judicial review procedure of arbitration is initiated against an arbitral award in a group case or a series of cases involving multiple subjects, the arbitral award or enforcement of the arbitral award will harm the interests of the group will often be used by the parties as the basis for claiming that the arbitral award constitutes “violation of the public interest”. The expression “group interest” is not uncommon in arbitration judicial review case judgment documents. It is not rare to see that the reasoning part of the judgment involves the connotation of “social public interest”. As a non-statutory concept, how should “group interest” be generally defined in practice? Will the claim that “group interest” constitute social public interest be upheld by the courts? Guangxi Guigang Jinda Real Estate Development Co., Ltd. (“Jinda”) v. LSJ 73 On 27 January 2015, Jinda and LSJ signed Commercial Housing Pre-sale Contract (Contract No. 201501260007), agreeing that LSJ would purchase a shop in a real estate project developed by Jinda and deliver it before 31 December 2015. Article 13 of the contract noted that the liability for breach of contract for late delivery is: “… If the buyer requests continued performance of the contract, the contract continues to be performed and the seller pays liquidated damages to the buyer on a daily basis of two ten-thousandths of the total amount paid …”. LSJ paid the purchase price. Later, due to the disconnection of Jinda’s funds, the project was suspended from June 2015, resulting in the inability to deliver the houses (shops) agreed under the Commercial Housing Pre-sale Contract to LSJ on schedule. LSJ applied to Guigang Arbitration Commission for arbitration. Guigang Arbitration Commission rendered an award on October 9, 2020, ruling Jinda should pay liquidated damages. Due to Jinda’s non-performance, LSJ applied to Guigang Intermediate People’s Court for compulsory enforcement. Jinda argued that there was a non-enforcement ground in the case and requested that the arbitral award in the case not be enforced. Guigang Intermediate People’s Court referred to Paragraph 3 of Article 237 of the Civil Procedure Law.74 The court held that, in this case, as the project developer, Jinda should actively raise funds to complete the development and construction of the project. Due to a variety of factors, its funds were cut off and it could not complete the project development and construction, resulting in its inability to complete the construction and hand over the house to the owner on schedule. Later, with the coordination of Guigang Municipal Party Committee, the city and the joint efforts of all parties, through investment promotion, after more than two-thirds of the 72

B. Jiang, Civil Procedure Law of the People’s Republic of China: a practical guide to understanding and its application, 226 (Law Press China, 2015). 73 (2020) Gui 08 Zhi Yi No. 18. 74 Paragraph 3 of Article 237 of the Civil Procedure Law: “Where the people’s court determines that the execution of the award would be against the public interest, it shall rule to deny execution”.

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owners agreed to change the default clause to 0.28/10,000 per day and Agreement on Compensation for Overdue Delivery of the First Phase of the Project was signed, Guangxi Xinyan Investment Co., Ltd., an outsider, was introduced to assume the rights and obligations of Jinda. It invested in the completion of the construction of the remaining project projects, and smoothly delivered the houses in the project to the owner for management and use. The Agreement on Compensation for Overdue Delivery of the First Phase of the Project signed by the owners was the true intention of most owners, which had been recognized and supported by most owners, and had safeguarded the legitimate rights and interests of most owners. Moreover, solving such social problems by attracting investment could effectively maintain social stability. In summary, the arbitration award violated the true will of the majority of owners of the community and went against the public interest. The award should not be enforced according to law. Jinda’s argument that the calculation of the LSJ’s claim that the overdue liquidated damages was too high and should be calculated at 0.28/10,000 per day, based on which the claim for non-enforcement of th award, was clear in facts, was sufficient in evidence, and had a legal basis in law. It was accepted by the court according to law. WL v. Hefeng Tianxia Yingye (Beijing) Co., Ltd. (“Hefeng”)75 WL applied to revoke the arbitration award rendered by Beijing Arbitration Commission. One of the grounds was that the award had violated social public interest and should be set aside. The contract involved in this case was Film (tentative name) Investment Contract. According to the contract, Hefeng should have been the production unit and filming unit of the movie “Tai Wei’er” involved in the case. However, both the film unit and production unit were Jingcheng Liuhe Yingye (Beijing) Co., Ltd. In fact, as the legal representative and controlling shareholder of Jingcheng Liuhe Yingye (Beijing) Co., Ltd., ZPF had used Hefeng to finance its projects and even maliciously colluded to commit fraud, which had a great negative impact on the Internet. WL was only a microcosm of thousands of victims. Hefeng not only infringed on the individual legitimate rights and interests of WL, but also the interests of many groups with similar experiences of being deceived. If the award made by Beijing Arbitration Commission did not consider the particularity of the film investment industry, increased the investor’s duty of care, and only made an unfair ruling unilaterally based on the terms of the standard contract, the similar cases would follow and would infringe on group interest and violate the public interest. WL applied to Beijing No. 4 Intermediate People’s Court for revoking (2021) Jing Zhong Cai No.3144 Award rendered by Beijing Arbitration Commission. Regarding WL’s claim that the award was contrary to the public interest, Beijing No. 4 Intermediate People’s Court held that, violation of the public interest referred to the violation of the common interests of the law and morality of the whole society with the public as the main body of interests, involving the most fundamental law and morality of the whole society. Its manifestation shall be in the form of violating the basic system and norms of our country’s laws, violating the basic value orientation of 75

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social and economic life, endangering social public order and life order, and violating the basic moral norms generally recognized and followed by all members of society. In this case, the dispute between WL and Hefeng was a dispute arising from a civil agreement, which was a dispute between equal civil subjects. The result of the award only involved the two parties. There was no violation of the public interest. WL alleged that Hefeng had malicious collusion and fraud, but she did not provide evidence to prove it, nor did the public security organ file a case for investigation. Therefore, the court did not support WL’s claim. Although the above two cases are individual cases, from the relevant facts, the two cases involve different “groups”. The group involved in the Jinda case is the owner of the house buyer of the “Jinda Shangri-La” project, while the group claimed by the applicant in the Hefeng case is investors in the film investment industry. It can be seen that the basis for a certain part of the group of people to form a group and have a “group interest” as determined by the court or claimed by the parties is that, this part of the population has the same status in a certain situation. It is precisely because of this limitation of equal status that the parties claim that cases involving “group interests” are more common in the real estate field and financial investment. However, in fact, from the existing judicial practice, the overwhelming majority of parties’ claims that the case involves “group interests” and equates them with “social public interests” will not be accepted by the court. In ZLS, ZJX v. Xiamen Zhongjing Real Estate Development Co., Ltd. (“Zhongjing”),76 the applicants ZLS and ZJX claimed that, the case did not only refer to the dispute between ZLS, ZJX and Zhongjing, but also related to the disputes between the owners and the developer. This case would have great impact on the healthy and orderly development of Xiamen’s real estate market in the future. If the arbitral award was not revoked, it would allow developers to deceive consumers and infringe on the legitimate rights and interests of consumers, which would cause serious adverse social impacts. Therefore, the arbitral award involved in the case was contrary to the public interest. In this regard, Xiamen Intermediate People’s Court held that, violation of the public interest generally referred to the violation of the general interests of all members of society or a specified majority of people, involving the most fundamental laws and morals of the entire society. Its manifestation should be contrary to the basic system and norms of our laws, the basic value orientation of social and economic life, and the basic moral standards of our country. In this case, the dispute between ZLS, ZJX and Zhongjing was based on the civil dispute arising from Commercial Housing Sale and Purchasing Contract signed by the parties. It was an arbitration case between equal civil subjects arising from contract disputes. The effect of the award only involved among the specific house buyers ZLS, ZJX and the real estate developer Zhongjing. The award matter was the difference in the price of the house decoration. Only the interests of individuals or specific groups were involved, not the public interest. There was no evidence that the award was contrary to the public interest. The social effects that ZLS and ZJX may produce were also the 76

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commercial risks they face in commercial activities as commercial entities, which could not be used as the basis for determining that the award violated the public interest. Therefore, ZLS and ZJX’s claim that the arbitration award involved in the case was contrary to the public interest should not be supported. In Huaibei Tianzhu Real Estate Development Co., Ltd. (“Tianzhu”) v. Jiangsu Wenxin Construction Engineering Co., Ltd.(“Wenxin”),77 the applicant claimed that, the actual constructor of the project involved in the case, had violated the law by borrowing the qualifications of others. The project involved in the case had not been completed to date, and there were quality problems in the completed part. Under such circumstances, the arbitral tribunal ruled that Tianzhu should pay for the project when the quality issues were not clear, which obviously harmed the interests of Tianzhu and the demolition and resettlement households, and violated the public interest. Huaibei Intermediate People’s Court held that, on the issue of whether an arbitral award was contrary to the public interest, Tianzhu claimed that the arbitration award in this case was contrary to the public interest and should be set aside. The content of the award was to deal with the dispute over project costs between Tianzhu and Wenxin during the construction of the project, which was a different legal relationship from the interests of the majority of demolition and resettlement households. The evidence submitted by Tianzhu could not prove that the arbitration award in this case was contrary to the public interest, so the grounds for the revocation of Tianzhu were not established. Obviously, unlike Guigang Intermediate People’s Court in Jinda case which directly identified the interests of the owners of the real estate projects as “social public interests”, the above two cases that also involved disputes in the real estate field, even if a single case may involve the interests of more than one individual, but the interests of the same group of people, the competent courts considered whether such “group interest” was sufficient to constitute “social public interest”. Both of them adopted a judgment approach similar to that of Beijing No. 4 Intermediate People’s Court, distinguishing between private subject interest, group interest, social public interest, etc., and always maintaining a cautious attitude towards the use of discretion. This makes people ponder, whether “group interest” and “social public interest” are related? Can “group interest” be equated with “social public interest”? In this regard, the court’s elaboration of the connotation of “social public interest” in some arbitration judicial review judgments may provide a certain degree of reference for answering these questions. In Lonkey Industrial Co., Ltd., Guangzhou v. Xing Fa (Hong Kong) Imp.&Exp. Limited,78 Beijing No. 4 Intermediate People’s Court pointed out that, the public interest of society shall be related to the interests of all members of society, enjoyed by the public, and necessary for the development of the entire society, and shall be of a public and social nature, different from the interest of the parties.

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In Kunming Heji Trading Co., Ltd. v. Elle Construction Machinery (China) Co., Ltd.,79 Beijing No. 4 Intermediate People’s Court pointed out that, violation of the public interest referred to the violation of the common interests of the public as the main body of interests and involving the most fundamental laws and morals of the entire society. In Suining Municipal Government Feijingyingxingxiangmu Daijian Center (“Daijian Center”) v. Xinan Jiangong Group Co., Ltd. (“Xinan Jiangong”),80 Suining Intermediate People’s Court stated that, social public interest referred to the general interests of the public as the main body of interests and involving the most fundamental legal and moral interests of the entire society. Its main body was of public nature and its content was universal. “Violation of the public interest” under Item (3) of Paragraph 1 of Article 58 of the Arbitration Law shall include situations where the arbitral award violated the basic principles of law, violated good social customs, and endangered national and social security. The judgment of social public interest generally referred to the interest of an unspecified majority of people in society. If it only involved the interest of an individual in society, it did not belong to the category of social public interest. The invocation of the legal principle of “violation of the public interest” could only be adopted in special circumstances and as a last resort and exceptionally in order to safeguard the major fundamental interests of the state and society, and could not be abused. Although this case referred to livelihood project, but the dispute in this case was on the settlement of construction fee. Daijian Center did not provide evidence to prove that Xinan Jiangong conducted acts that violated public interest during the performance of the contract. Daijian Center’s claim on revocation of award based on violation of public interest was not supported by the court. It can be seen that in response to the “contrary to the public interest"claim raised by the parties in the judicial review case, most courts emphasize the two characteristics of publicity and fundamentality when interpreting the connotation of “social public interest”, and emphasize that it should be distinguished from disputes between equal civil subjects, which is consistent with the interpretation of SPC mentioned above. In Jinda case, although the real estate project involved in the case may involve many home buyers, the legal relationship reflected in the facts of the case was only a contractual relationship between equal civil subjects based on equal legal status. From the perspective of the demographic attribute of the owner, it obviously did not have a “public nature”. From the point of view of the interest represented by the owners, it was obviously not “fundamental” either. Moreover, the case did not involve a violation of mandatory legal provisions or a situation that undermined the fundamental order of society. Under such circumstances, Guigang Intermediate People’s Court ruled not to enforce the arbitral award on the grounds of “violation of the public interest”. The result of the ruling may be criticized for failing to reasonably apply the legal provisions “violation of the public interest”.

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4.8 Livelihood Project In general, livelihood projects are a series of active policy measures adopted by the government to protect the basic rights of citizens and improve living standards, covering poverty alleviation, employment promotion, education assistance, social security, people’s housing, infrastructure, environmental improvement, culture and sports, medical care, social management and other social aspects. Livelihood projects are often closely related to the life of the public. One party to a commercial contract related to the development and construction of livelihood project is often a government department or state-owned enterprise. It is precisely based on this special attribute of the livelihood project that in commercial disputes involving livelihood projects, the livelihood project and the interests of the public often become one of the factual bases for a party to claim that the arbitral award in question violates the public interest when applying for the setting aside of the arbitral award or not enforcing the arbitral award after the arbitral award is rendered. Will the competent court then accept such claims by a party applying for setting aside an arbitral award or applying for non-enforcement of an arbitral award? Under what circumstances will the people’s court find that the livelihood project involved in the case constitutes the factual basis for the arbitral award involved in the case to violate the public interest? Henan Company v. Chengxian Management Bureau81 As for the construction contractual dispute between Henan Company and Chengxian Management Bureau, Lanzhou Arbitration Commission rendered Lan Zhong Cai (2018) No. 192 Arbitral Award. During the enforcement of the award, the defendant, Chengxian Management Bureau, submitted a written application to the enforcement court, Longnan Intermediate People’s Court, to dismiss the enforcement of the arbitral award. The defendant, Chengxian Management Bureau, claimed that the enforcement of the arbitration award was detrimental to the public interest, and requested the court to rule not to enforce it in accordance with relevant laws and regulations. The specific arguments were as follows: 1. The project was not completed, but it was ruled that all the project money had been paid, and an additional award of 1.8412 million yuan was awarded. If the corresponding project payment and warranty money for the unfinished project was paid, the project was not completed, there would be a loss of 10.8952 million yuan of state-owned funds. 2. The project with a residual value of 6.1317 million yuan needed to be re-contracted because it was not constructed, and need to find another person to complete it. The price of re-contracting would inevitably be greater than 6.13 million yuan. In addition to the cost of awarding the contract, it would also produce machinery entry and exit costs and other unforeseen expenses, and invisibly require the state to re-pay no less than 6.1317 million yuan for the project, which would result in double payment. 3. Defective works could not be corrected. The main part was the diversion tunnel project. Once the award had 81

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been enforced, the counterparty would not care about these project defects, which would cause the reservoir to operate with disease and threaten the lives and property of hundreds of thousands of people downstream. 4. If the counterparty refused to deliver the construction technical data, once the payment was completed according to the award, we would no longer be able to obtain these technical materials. The result would inevitably lead to the inability of the legal person acceptance and government acceptance. The most dangerous consequence was that the later operation and maintenance of the reservoir would have no basis. Due to the magnitude and complexity of the case, the case was submitted to the Longnan Intermediate People’s Court Judicial Committee for decision. On July 8, 2021, Longnan Intermediate People’s Court Judicial Committee referred to Paragraph 3 of Article 237 of the Civil Procedure Law.82 The Judicial Committee held that, Chengxian County reservoir project involved three projects, and the agreed contract price of the project was 22.56 million yuan. With the approval of the World Bank, the amount of work increased by 4,957,500 yuan in addition to the contract, and the total contract price was 27,522,500 yuan. During the construction process, 17,859,200 yuan had been paid to Henan Company. The arbitration award ruled to pay another 10,376,208 yuan, for a total of 28,235,481 yuan for the project. In the event that the work was not fully completed, and the arbitral award was enforced, the amount paid for the work would exceed the total contract price. Part of the project was not constructed as required, the 6.13 million yuan Zhongshangba highway project with payment certificate was only partially completed. The project had not been completed, nor had it been accepted. The uncompleted project quantity had not been audited and evaluated. The arbitration award ruled that the full amount of this part of the project should be paid in accordance with the relevant provisions of the project progress payment. Moreover, Henan Company, had now withdrawn from the construction site. It was difficult to resume work. The project was a livelihood project, involving the safety of life and property of an unspecified majority of people in the reservoir area. The enforcement of the arbitration award was contrary to the public interest and should not be enforced according to law. Accordingly, Longnan Intermediate People’s Court Review Committee made a decision that: 1. Lan Zhong Cai(2018) No. 192 Arbitral Award should not be enforced. 2. The parties may reapply for arbitration in accordance with the written arbitration agreement reached between the parties, or may file a lawsuit in the people’s court. 3. Request instructions from the provincial court on the outcome of the case. According to Articles 2 and 3 of Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review, the case had been reported to the High People’s Court of Gansu Province for review.

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Paragraph 3 of Article 237 of the Civil Procedure Law: “Where the people’s court determines that the execution of the award would be against the public interest, it shall rule to deny execution”.

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Suining Municipal Government Feijingyingxingxiangmu Daijian Center (“Daijian Center”) v. Xinan Jiangong Group Co., Ltd. (“Xinan Jiangong”)83 On May 26, 2014, Daijian Center, as the issuer, and Xinan Jiangong, as the contractor, signed Construction Project Contract for the road upgrading project of Kaishan East Road in Suining City. The start date of the project was May 27, 2014, the completion date was September 27, 2014, the signed contract price was 39,119,720 yuan, and the contract price was a fixed comprehensive unit price. On November 26, 2014, Daijian Center and Xinan Jiangong signed the Suining City Kaishan East Road Upgrade Project 10 kV High Voltage Cable Laying Engineering Construction Contract. The contract agreed that the project duration was 40 days, the contract price was tentatively set at 6 million yuan. On January 12, 2016, Jingcheng Cost Company issued Audit Report, confirming that the audit amount of the project involved in the case was 47,739,036 yuan. Xinan Jiangong and Daijian Center signed and approved the report. On January 18, 2018, Daijian Center, Xinan Jiangong, the supervision unit and the follow-up audit unit reached an agreement on some engineering calculations and disputed issues, and Daijian Center produced (2018) No. 3 Meeting Minutes. On January 16, 2019, Jinxin Cost Company provided the preliminary audit of the project amount of 42,909,868 yuan, which was subsequently disagreed by Xinan Jiangong. Xinan Jiangong failed to reach an agreement with Daijian Center on the final settlement of the project price, so it applied to Suining Arbitration Commission for arbitration in accordance with the Supplementary Agreement on the Road Upgrading and Reconstruction Project of Kaishan East Road in Suining City signed by the two parties, requesting: 1. To rule that Daijian Center should pay Xinan Jiangong Suining City Kaishan East Road Upgrading Project owed RMB10 million (subject to judicial audit) and interest (interest calculated based on the amount of arrears from December 5, 2014 at the interest rate of similar loans of the People’s Bank of China for the same period until the date of full payment), tentatively calculated until December 5, 2019, RMB1,295,272 in total; 2. To order that Daijian Center to bear the costs of arbitration. On November 27, 2020, Suining Arbitration Commission rendered (2020) Sui Zhong No. 0026 award, ruling that Daijian Center shall pay Xinan Jiangong RMB 11,480,423 and interest on the outstanding amount of the project within 10 days from the effective date of the award (interest was calculated based on RMB 114,80,423, according to the interest rate of similar loans of the People’s Bank of China for the same period from March 27, 2015 to August 19, 2019. From August 20, 2019 to the date of payment, calculated according to the market loan interest rate announced by the Interbank Offered Centre). After Suining Arbitration Commission rendered the arbitration award on November 27, 2020, Daijian Center commissioned Sichuan Zhongyi Judicial Appraisal Center on January 13, 2021 to authenticate LF’s signature on the Paving Engineering Completion Drawing, Road Engineering Completion Drawing, Electrical Engineering Completion Drawing, Plant Part Completion Drawing and 83

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Lighting Part Completion Drawing. The appraisal result was that the signature handwriting of “LF” on the above-mentioned completion drawing was not written by LF himself. SCR was the construction engineer of Xinan Jiangong in the project. LF and LW were the chief engineer and special supervision engineer of Sichuan Taixing Construction Management Co., Ltd., the supervision unit of the project involved in the case. Daijian Center applied to Suining Intermediate People’s Court for the revocation of (2020) Sui Zhong No. 0026 Arbitral Award in accordance with the law. Daijian Center believed that in the course of the arbitration, Xinan Jiangong had forged evidence and concealed evidence that was sufficient to affect the fair adjudication of the case, and harmed the public interest. Therefore, it requested that the arbitration award be set aside in accordance with the law. Daijian Center argued that the failure to pay for the project involved in the case was caused by Xinan Jiangong’s refusal to cooperate with the audit and settlement. Suining Arbitration Commission’s ruling on the Daijian Center’s payment of interest was unfounded in law. The project involved in the case was a livelihood project and used financial funds. The result of the arbitration award would cause the loss of state-owned assets and seriously affect the public interest. The Construction Project Contract signed by Daijian Center and Xinan Jiangong noted that the final payment of the project shall be paid based on the relevant audit results. Daijian Center had performed the payment obligation in strict accordance with the contract. The reason why the final payment of the project had not been paid was that Xinan Jiangong refused to cooperate with the audit and settlement work, resulting in the project had not been audited and settled so far. Suining Arbitration Commission did not make a judgment based on the contract and the facts. The facts were not clear, the award was wrong. The award would cause a serious loss of state-owned assets and would affect the public interest, it should be revoked in accordance with law. During the hearing, the Daijian Center added facts and reasons: according to Article 58 of the Arbitration Law… where the people’s court determines that the award is contrary to the public interest, it shall rule to revoke it, which is the embodiment of the people’s court’s judicial supervision of arbitration. Xinan Jiangong violated the principles of legality, good faith, fairness, public order and good customs. All projects undertaken by Xinan Jiangong in Suining had illegal activities. The relevant departments were also investigating and punishing it. Xinan Jiangong concealed its illegitimate purpose under legitimate acts, defrauded the arbitration award by submitting forged evidence, and then defrauded the state financial funds, which seriously damaged the national interest. Under the circumstance that the had not been legally accepted and the quality of the project had not been proved to be legal, paying the project fee at the time was not conducive to protecting the safety of people’s lives and property. Suining Intermediate People’s Court held that, social public interest referred to the general interests of the public as the main body of interests and involved the most fundamental legal and moral interests of the entire society. The main body was of public nature and its content was universal. The violation of the public interest

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stipulated in the Item (3) of Paragraph 1 of Article 58 of the Arbitration Law shall include situations where the arbitration award violated the basic principles of law, violated good social customs, and endangered the state and social security. The judgment of social public interests generally referred to the interests of an unspecified majority of people in society. If it only involved the interests of an individual in society, it did not belong to the category of social public interests. The invocation of the legal principle of violation of the public interest could only be adopted as a last resort or exception in order to safeguard the major fundamental interests of the state and society under special circumstances, and could not be abused. Although the project involved in the case was a livelihood project, the dispute in this case was a construction contractual dispute arising from a dispute between Daijian Center and Xinan Jiangong over the settlement of the project price. Daijian Center did not provide evidence to prove that Xinan Jiangong committed an act contrary to the public interest in the performance of the contract. Its claim that the arbitral award should be revoked based on violation of the public interest should not be established. The contracts involved in the above two cases are both related to livelihood projects and both are disputes arising from settlement. However, it can be seen from the results of the adjudication that the competent courts adopted completely different approaches when examining whether the arbitral award involved in the case constituted a violation of the public interest, as the specific circumstances of the cases were not similar. As for Henan Company v. Chengxian Management Bureau, although the dispute was caused by the settlement, but the project itself was not completed. The competent court not only considered the provisions of the contract, but also considered the subsequent impact that the status of the reservoir project involved in the case may have on the life and property safety of the people in the reservoir area. After examination, the court held that the project involved in the case was actually related to the interests of an unspecified majority of people and constituted a public interest. Although the case was still in the process of going through the verification procedure and had not yet reached a final conclusion, it can be judged from the discussion submitted by the competent court to Review Committee and the consideration of social consequences. Longnan Intermediate People’s Court adopted a relatively prudent attitude when determining that the arbitral award involved in the case constituted a violation of the public interest. In fact, from the search results, it is rare to find that the arbitral award involved in the case constitutes a violation of the public interest based on the livelihood project and the public interest it may involve. In most cases, the courts did not accept the applicant’s claim due to insufficient evidence or other reasons. In Leituo International Architectural Design Consultants (Beijing) Co., Ltd. (“Leituo”) v. Lvdi Beizhan Jinan Real Estate Co., Ltd.(“Lvdi”),84 the applicant claimed that the project involved in the case was an international convention and

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exhibition center project, which was a national and Jinan key project and livelihood project. The respondent terminated the contract without applicant’s authorization, and separately entrusted VP Company to take over the applicant’s work. The replacement company and the applicant were of the same nature. The design results had been approved by the national competent authorities, and the respondent had started construction. The arbitral award at issue found that the contract between the applicant and the respondent was invalid, which was tantamount to the fact that the entire project should be deemed invalid and the construction should be stopped. The resulting loss of national economy and people’s livelihood was contrary to the public interest. In this regard, Jinan Intermediate People’s Court held that, the public interest was the interests of an unspecified majority of people in society. The arbitration award involved in the case was a contract dispute between Leituo and Lvdi. The determination of the validity of the contract would directly affect the rights and obligations of the parties in this case as ordinary civil subjects. But Leituo had no evidence to prove that the result of the arbitration award could have an impact on the interests of unspecified groups in society. The court rejected Leituo’s application ground that the arbitration award is contrary to the public interest. In Yunnan Qihui Investment Co., Ltd. v. Shanghai Lianlue Investment Management Center,85 the applicant claimed that, Tripartite Agreement, the documents and letters from the Chenggong District Government submitted by the applicant were sufficient to prove that the project developed and constructed by the applicant was a livelihood project highly valued by the local government, involving the interests of more than 1,000 landless farmers. The award made by the arbitral tribunal resulted in the seizure of the applicant’s account and the inability to carry out construction, harming the interests of landless peasants and violating the public interest. Shanghai No. 1 Intermediate People’s Court held that, the public interest of society should be related to the interests of all members of society or an unspecified majority of people in society, and be public and social, which was different from the interests of the parties to the contract. Judging from the content of the agreement at issue in this case, the agreement only involved the rights and obligations between the specific subject, i.e., the applicant, the respondent and the person outside the case. The agreement made by the parties was a voluntary agreement reached on the basis of equal civil subject consultation on an equal basis. The content of the agreement did not involve the interests of all members of society or an unspecified majority of people in society. There was no violation of public order and good customs. Judging from the outcome of the arbitral award, the award only affected the applicant and the respondent. The applicant’s claim was manifestly unfounded. In Jiangsu Hehai Water Supply and Drainage Equipment Co., Ltd. v. Yongkang Water Bureau,86 the applicant claimed that the project in this case was a livelihood project. What the applicant completed was only the obligation to agree on the drawings, which was impossible to meet all the requirements of the respondent for the 85 86

(2021) Hu 01 Min Te No. 638. (2021) Zhe 07 Min Te No. 16.

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project. A dispute arose between the two parties, resulting in the delay of the livelihood project and its inability to deliver so far. The arbitral tribunal did not appraise the project and directly rejected the applicant’s request, which would only lead to the indefinite delay of the dispute, and the livelihood project would not be delivered for a long time, which would be contrary to the public interest. Jinhua Intermediate People’s Court held that, as for the applicant’s claim that it was “contrary to the public interest”, after examination by this court, this case involved a civil dispute between equal subjects and did not harm the public interest. The applicant’s argument that the award involved in the case violated the social public interest could not be established. As for Suining Municipal Government Feijingyingxingxiangmu Daijian Center v. Xinan Jiangong Group Co., Ltd., although the applicant claimed that the project involved in the case wasa livelihood project, its claim on contrary to the public interest actually linked the issue of settlement payments for the project with the loss of state-owned assets, and did not involve too much of public interest that may be related to the livelihood project. This type of claim is also a common proposition in cases involving the setting aside of arbitral awards or non-enforcement of arbitral awards in livelihood project contracts arising from contract settlement. In this regard, competent courts generally distinguish between the impact of the arbitral award on the rights and obligations of equal subjects and the impact of the arbitral award on the public interest, and then find that the arbitral award involved in the case does not involve the public interest. In Shantou Huada Building Materials Co., Ltd. (“Huada”),Shantou Huaxin Water Conservancy Engineering Co., Ltd. (“Huaxin”) v. Taizhou Xinghe Reclamation Engineering Co., Ltd. (“Xinghe”),87 the applicants, Huada and Huaxin, claimed that the project involved in this case was a key livelihood project in Shantou City. The arbitration award directly determined that the completion of the acceptance of the project without statutory acceptance violated the public interest. The award was contrary to the public interest and shall be revoked in accordance with law. Shantou Intermediate People’s Court held that, on one hand, the project in this case was a hidden project in a sub-project of a water conservancy project. The project had currently been completely covered by Huada and Huaxin. According to relevant law, regulation and judicial interpretation, it shall be deemed that Huada and Huaxin had accepted the project. Huada and Huaxin shall pay the owed transportation fee to Xinghe based on the agreement. On the other hand, the issue of this dispute was the payment of transportation fee. However, the transportation act itself was not related to the quality of the project. Therefore, it was not improper for the arbitral tribunal to rule that Huada and Huaxin should pay Xinghe the transportation fee and interests, liquidated damages. The application of Huada and Huaxin lacked factual and legal basis, which was not supported by the court.

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4.9 Substantive Issues In China, it is generally considered that judicial review of arbitration only involves procedural or formal matters, not substantive matters. The court’s judicial review of arbitration is a procedural formal review rather than a substantive review of the case. Otherwise the court’s judicial review will become an appeal procedure for arbitration, which is contrary to the system of final arbitration adjudication. Therefore, in the course of hearing such cases, the court conducts a formal examination in strict accordance with the provisions of Articles 16, 58 and 70 of the Arbitration Law and Paragraph 1 of Article 274 of the Civil Procedure Law.88 Social public interests generally include the basic principles and norms of national laws, the basic value trends and basic moral norms of social and economic life. Under such a broad definition, substantive review may be involved. Aral Tuoda Weiye Intelligent Technology Development Co., Ltd. (“Tuoda”) v. Tibet Reorient Capital Co., Ltd. (“Reorient”), XXD, LY 89 The applicant, Tuoda, claimed that the arbitral award in question violated the public interest and applied to Beijing No. 4 Intermediate People’s Court to set aside the arbitral award in question. Tuoda argued that: 1. The Capital Increase Agreement in this case did not verify the assets of Tianjin Xiehong Company, and each respondent contributed 20,000,000 yuan, equivalent to a 10% increase in shares, corresponding to an equity of 1,111,100 yuan, which was contrary to common sense. Three respondents did not participate in the operation of Tianjin Xiehong Company. They were not directors or employees of the company. They did not bear the risk of operation or participate in investment dividends. Therefore, such condition did not comply with the provisions on the company’s capital increase and shareholders’ rights under the Company Law. 2. The Matters Agreement did not verify the assets of Xiehong Company. It directly calculated the equity income according to the return of investment funds and 10%, which did not comply with the relevant provisions of the Company Law. 3. The withdrawal of shares agreed in Supplementary Agreement did not comply with the laws and regulations on equity transfer. 4. Three respondents obtained a return by providing funds, which was an illegitimate act of “professional lending” and should be deemed invalid according to law. In summary, this case referred to the legal relationship of “equity in name debt in substance”. This case was actually a private lending dispute, and the arbitration award violated the public interest. As to the issue of whether it is contrary to the public interest, Beijing No. 4 Intermediate People’s Court held that, the so-called violation of the public interest refers to the situation in which the result of the award violates the common interests of the public, endangers the most fundamental legal principles and moral standards of the entire society. Its manifestation is in the form of violating the basic system 88

See Shanghai No.1 Intermediate Court, Arbitration Judicial Review Case Trial Thoughts and Key Points of Adjudication, website: https://www.a-court.gov.cn/platformData/infoplat/pub/no1court_ 2802/docs/202005/d_3613073.html. 89 (2022) Jing 04 Min Te No. 439.

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and norms of our nation’s laws, the basic value orientation of social and economic life, endangering social public order and life order, and violating the basic moral standards generally recognized and followed by all members of society. The award involved in this case was a dispute between the parties arising from a commercial contract. The result of the award only involved the rights and obligations between the parties to the contract, and did not belong to the scope of social public interest. Tuoda’s characterization of the legal relationship of the dispute involved in the case by the arbitral tribunal fell within the scope of the substantive hearing of the arbitral tribunal, not the judicial review of the arbitration case. Xinyu City Natural Resources Bureau Xiannvhu Branch (“Xiannvhu”) v. Xinyu Kaiguang Real Estate Development Co., Ltd. (“Kaiguang”)90 Between July 2015 and November 2019, Xiannvhu and Kaiguang signed 15 Transfer of Right to Use of State-Owned Construction Land Contracts for 15 parcels of land. Kaiguang had paid the land transfer fee involved in the aforementioned contracts. On July 22, 2021, Xiannvhu filed an application with Xinyu Arbitration Commission seeking an award that Kaiguang should pay Xiannvhu liquidated damages of $16,094,681 for the delay in payment. Subsequently, the arbitration commission awarded that Kaiguang should pay RMB 2,416,698 liquidated damages for delay on the ground that part of the arbitration claim was time-barred. On July 11, 2022, Xiannvhu filed an application to set aside the arbitral award with Xinyu Intermediate People’s Court. Xiannvhu argued that the arbitral award was contrary to the public interest. Social public interest referred to the benefits that can be enjoyed by the broad masses of citizens. The broad masses of citizens here referred to the vastness within a specific scope, both national and regional, and their extension could be limited to the constituent areas enjoying legislative power. Kaiguang’s liquidated damages for late payment should be paid to Xinyu Finance Bureau. Every payment Kaiguang made to the state treasury would be ultimately reflected in the benefits that the majority of citizens could enjoy. Therefore, the arbitration commission only awarded Kaiguang to pay RMB2,416,698 liquidated damages to Xiannvhu on the ground that the statute of limitations had expired, resulting in the loss of RMB13,677,983 in liquidated damages, which was contrary to the public interest. Kaiguang argued that the award did not harm the public interest. Xiannvhu did not represent the public interest. In the process of transferring the land, Kaiguang had been assisting the relevant departments to complete the land acquisition work by paying the land transfer fee in advance. Kaiguang did not default on the land transfer fee. The contract was signed backwards, which made it appear that Kaiguang had an overdue payment. Xinyu Intermediate People’s Court held that, violation of the public interest would refer to the violation of the general interests of the law and morality that involve the most fundamental law and morality of the whole society with the public as the main body of interests, and its manifestation shall be in violation of the basic system and norms of our country’s laws, the basic value orientation of social and economic life, 90

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and the basic moral standards of our country. The Transfer of Right to Use of StateOwned Construction Land Contract signed by Xiannvhu and Kaiguang, was a civil legal act for the purpose of establishing the right to use construction land, which should be regulated by civil laws such as the Civil Code. Xiannvhu and Kaiguang were equal subjects in the sense of civil law. The contract for the right to use the construction land is a civil contract. Although Xiannvhu represented the state and signed a transfer contract with the landowner for the right of use of construction land, the state acted in the capacity of a civil subject to sign the contract with other subjects. The content of the contract itself did not involve the public interest. In addition, the arbitral award that ruled Kaiguang must pay liquidated damages for delay in payment to Xiannvhu considered a treatment of the substantive rights and obligations of the parties, and did not fall within the scope of judicial review of arbitration. Therefore, Xiannvhu’s argument that the arbitral award was contrary to the public interest was not supported. In the above two cases, the competent court did not accept the parties’ claim that the arbitral award involved in the case was contrary to the public interest. Combined with other cases with similar adjudication results, the courts’ reasons for rejecting the parties’ claims could be roughly summarized as being within the scope of the substantive hearing of the arbitration in the case, not within the scope of judicial review of arbitration, or that the result of the award only involved the rights and obligations of the parties but not the public interest. Both in Zhuhai Baolaikang Hotel Co., Ltd. v. Zhuhai Yibang Pharmaceutical Co., Ltd.91 and WCH v. LQ,92 the competent court, Beijing No. 4 Intermediate People’s Court, held that, the reasons stated by the claimant were mainly aimed at objecting the facts of the case and the result of the award determined by the arbitral tribunal. The result of the award only aimed at the parties, which involved the substantive hearing of the arbitral tribunal, but not within the scope of judicial review of the arbitration case. The court finally ruled to reject the parties’ application for setting aside the arbitral award. In WW v. Chongqing Nongchanpin Microcredit Co., Ltd. (“Nongchanpin”),93 the claimant argued that Nongchanpin conducted over-the-counter financing transactions on the stocks, circumvented supervision and disrupted the order of the financial market, so the arbitration award was contrary to the public interest. Both parties accepted that the Loan Contract was created pursuant to the Entrusted Investment Agreement, but the arbitral tribunal still did not conduct a substantive review of the validity of the Entrusted Investment Agreement and its supplementary agreement on the ground that the Entrusted Investment Agreement did not fall within the scope of hearing. The arbitral tribunal determined that the Loan Contract was legal and valid, resulting in serious damage to the public interest in the arbitral award. Chongqing No. 1 Intermediate People’s Court held that, the arbitral award involved in this case only dealt with the loan contract relationship between the parties, and did not involve the public interest. This case did not violate the public interest. 91

(2022) Jing 04 Min Te No. 344. (2022) Jing 04 Min Te No. 371. 93 (2022) Yu 01Min Te No. 203. 92

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As for the entrusted investment or over-the-counter financing mentioned by WW, at most, it was only the purpose or motivation of the parties to establish a loan contractual relationship, and the loan contractual relationship itself was independent and was not a subsidiary contract of other contracts. Even if the over-the-counter financing harmed the public interest, it had nothing to do with the borrowing relationship. Issues related to over-the-counter financing were not within the scope of the review of this case. In cases where the courts ultimately rule to set aside the arbitral award or not enforce the arbitral award on the grounds that it is “contrary to the public interest”, the court will often further clarify the legal acts of the parties involved in the arbitration case and the relationship between their rights and obligations. On this basis, the courts determine whether the arbitral award involved in the case constitutes a violation of the public interest (such as whether it violates mandatory legal provisions, etc.). In Shanghai Guangjian Information Technology Co., Ltd. v. RYB,94 Chongqing No. 4 Intermediate People’s Court held that, the business scope of Shanghai PPDai Financial Information Service Co., Ltd. clearly noted that it cannot engage in financial business, but it still absorbed deposits from the public through the platform it operated, and earned high interest by providing funds to unspecified objects in the society. The lending behavior was repeated and regular, and the purpose of borrowing was profit-making, which violated Article 19 of the Banking Supervision Law of the People’s Republic of China. If it disturbed the order of national financial management and harms the public interest, such acts should be negatively evaluated and prohibited. In Youxiang Financial Leasing (Guangzhou) Co., Ltd. (“Youxiang”) v. XW,95 Chongqing No. 2 Intermediate People’s Court held that, the financial lease contract relationship itself had the dual attributes of financing fund and financing objects, each of the two was indispensable. If there was no actual leased object or the ownership of the leased object had not been transferred from the seller to the lessor, the contract shall be deemed to be non-existent. Only the financial exchange did not constitute a financial lease. In this case, the applicant, Youxiang, signed the Vehicle Sales Contract and the Financial Lease Contract with the defendant XW, and obtained the ownership of the vehicle by way of possession modification. After registering the vehicle mortgage, the financial lease was carried out by way of sale and leaseback, but the vehicle was still registered in the name of XW. Youxiang, did not obtain the qualification of sale and leaseback. the legal relationship in this case was called financial lease and was actually a loan. Youxiang was subject to its business scope [Approved business scope: Car rental; Disposal and maintenance of residual value of leased property; Financial leasing services (limited to foreign-invested enterprises); Leasing business; Advising and guaranteeing leasing transactions; Purchase of leased property at home and abroad; Concurrently engaged in commercial factoring business related to the main business (only the operation of financial leasing enterprises)]. It operated loan business in the form of financial leasing in disguise, which ignored 94 95

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national financial regulatory regulations, and seriously undermined normal social financial order. It can be seen from the above cases that regardless of whether the court ultimately adopts the parties’ claim that the arbitral award involved in the case constitutes a violation of the public interest, the court will mostly review whether to apply this cause of judicial review of arbitration based on the following aspects. First, whether the relevant claim of the parties is an objection to the result of the award itself, and whether it falls within the scope of judicial review of arbitration. Second, whether the result of the ruling is related to the public interest. Third, if it is related to social public interests, what kind of social public interests are related. Even if at present, when domestic courts handle arbitration judicial review cases based on the consideration of fully respecting the principles of party autonomy and encouraging commercial arbitration, they mainly adopt the idea of formal review in arbitration judicial review cases. But when a party applies for setting aside an arbitral award or not enforcing an arbitral award on the ground of “contrary to the public interest” in an arbitration judicial review case, it will be difficult for the court to avoid reviewing the rights and obligations of the parties involved in the case and the legal application of the arbitral award involved. That is, when the arbitration judicial review case involves the cause of “contrary to the public interest”, the competent court often needs to review the substantive issues of the arbitration case. Judging from the existing cases alone, since the definition of “social public interest” is relatively broad, and there is no unified applicable standard in practice, there is no unified clear standard for the scope and boundary of relevant entity review.

Chapter 5

Arbitration and Criminal Proceedings

5.1 Criminal and Civil Intersection Cases and Suspension of Arbitration Proceedings With the development of the economy, more and more criminal cases frequently emerge in civil cases or look like civil and criminal cases. Such circumstance could be found in the practice of commercial arbitration in China. Such cases which may involve criminal procedures and civil procedures, or civil and criminal legal relationships that intersect, implicate and affect each other, are generally considered to be criminal and civil intersection cases. As for the concept of criminal and civil intersection, there is no unanimous conclusion in the academia. Some scholars believe that “the widely used ‘criminal and civil intersection’ generally refers to the situation where the case is at the intersection of criminal and civil, whether it constitutes a crime, a civil tort, or a breach of contract is difficult to decide.”1 The so-called ‘intersection of criminal and civil’ cases refer specifically to whether a certain act should be treated as a crime or whether it is determined to be a situation where the nature of the civil violation is unclear and ‘difficult to handle’. “Only looking into the concept, criminal and civil intersection cases are not easy to be distinguished simply. In the practical trial of criminal and civil intersection cases, the issue of procedural application is a “headache” for adjudicators, and has always been a critical and difficult issue in the practical and theoretical fields. Li v. Shenzhen Fucheng Asset Management Co., Ltd.2

1 G. Zhou, The Judging Logic of “Criminal and Civil Intersection” Cases [J]. China Criminal Journal. 2020(03). 2 (2021) Gui 05 Min Te No. 135.

This Chapter is coauthored with Xiaorong Liu, partner of Yi and Partners Law Firm.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 Y. Lin, China Arbitration Yearbook (2022), China Arbitration Yearbook, https://doi.org/10.1007/978-981-99-7165-7_5

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The applicant, Li, requested that the award rendered by the X Court of International Arbitration (“XCIA”) be revoked in accordance with the law. One of the grounds for the revocation was that the arbitration case was suspected of involving criminal issues and the hearing should be suspended. However, the tribunal made the arbitral award without suspending the hearing, which violated the arbitration procedure. The applicant claimed that XCIA should first suspend the trial of the case and resume the trial only after the suspected criminal case of Dongguan Tuan Dai Wang Technology Service Co., Ltd. (“Tuan Dai Wang”) was decided. XCIA’s act of rendering the arbitral award before deciding to suspend the hearing was a breach of the rules on arbitration procedure. The respondent argued that the rule on dealing with the criminal issues before the civil issues should not be applied in this case. XCIA had the right to decide whether to suspend the hearing. The loan in this case was transferred to the applicant through Tuan Dai Wang, which was related to the suspected criminal offense of Tuan Dai Wang in another case. But in this case, the Tuan Dai Wang was only an intermediary platform. The arbitration case dealt with the private lending relationship between the applicant and the respondent. The criminal case claimed by the applicant involves the suspected illegal fundraising crime of the Tuan Dai Wang, in which the relevant criminal suspect was not a party in this case, and the criminal acts involved also did not directly involve the performance of the contract in this case. Besides, the available evidence failed to prove that the respondent, the original creditor Li and the guarantor Dongguan Lian Sheng Non-financing Guarantee Co., Ltd. (“Lian Sheng”) were suspected of criminal offences. This case was not rendered based on the decision of the above-mentioned criminal case. It was not improper for the arbitral tribunal not suspending the hearing. The X Intermediate People’s Court held that, as for the issue of whether the arbitration procedure violated legal procedures, the applicant had expressly requested to suspend the hearing during the arbitration. After review, the arbitral tribunal held that the other case referred to the legal relationship between Tuan Dai Wang and other investment participants. According to Article 51 of the X Arbitration Commission/ XCIA Arbitration Rules, the arbitral tribunal had the power to decide whether to suspend the hearing of the arbitration case. After review, the arbitral tribunal found that it was not necessary to make a decision to continue the arbitration hearing on the basis of the outcome of the trial of another case, and therefore decided to continue the hearing. The procedure was not improper. And the arbitration case was on the legal relationship between the applicant and the respondent. Lian Sheng repaid all the loans to the lender Li on behalf of the applicant and assigned the right to recover the claims enjoyed by the applicant to the respondent. The previous legal relationship between the applicant and Li, Lian Sheng or Tuan Dai Wang has been terminated. Under the circumstance that the applicant had no evidence to prove that Tuan Dai Wang and Li, Lian Sheng colluded with each other to be suspected of committing crimes and the arbitration involved in the case and the suspected criminal case of Tuan Dai Wang did not share the same facts and the same subject, the arbitration case was not necessarily based on the result of the case which Tuan Dai Want was suspected

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of illegally absorbing deposits from the public. Therefore, the applicant’s claim that the arbitral tribunal’s violation of the arbitration procedure based on not suspending the arbitration hearing did not meet the grounds for revocation of arbitration award stipulated in Article 58 of the Arbitration Law, and was not supported by the court. The Arbitration Law does not specify under what circumstances that the arbitral proceedings should be suspended. However, in litigation procedures, when the people’s court hears a case involving the intersection of criminal and civil law, the court may, in accordance with Article 153 of the Civil Procedure Law3 on the circumstances under which the litigation should be suspended, or apply the provisions on how procedures should be handled when criminal offenses are involved in economic disputes, illegal fundraising, private lending, etc., and other relevant provisions. Neither the Arbitration Law nor relevant judicial interpretations have clarified the circumstances of suspension of arbitration proceedings. The arbitration rules of various arbitration institutions, which are formulated based on the Arbitration Law and the Civil Procedure Law, have different provisions on the suspension of arbitration proceedings. In this case, through the hearing of the arbitration case, XCIA analyzed whether the arbitration case and the criminal case had the same legal relationship, and whether they had the same facts and the same subject. In addition, XCIA’s determination of the arbitral tribunal’s power to suspend arbitral proceedings is mainly based on Article 51 of the XAC/XAIA Arbitration Rules.4 The above provisions clearly mention that if the arbitration should be based on the ruling of another case, while the other case has not yet been concluded, the arbitral proceedings may be suspended. In other words, the arbitral tribunal may choose to suspend the arbitral proceedings when facing a case that must be premised on the result of the other case. Where the criminal case is not related to the arbitration case 3

Article 153 of the Civil Procedure Law: “An action shall be suspended in any of the following circumstances: 1. one of the parties dies and it is necessary to wait for his successor to state whether he wishes to participate in the action; 2. one of the parties has lost the capacity to engage in litigation, and his statutory agent has not been determined yet; 3. the legal person or other organization acting as one of the parties has terminated, and the successor to its rights and obligations has not been determined yet; 4. one of the parties is unable to participate in the action due to an event of force majeure; 5. the case in question is dependent upon the outcome of the trial of another case that has not been concluded; or 6. other circumstances require the suspension of proceedings. Proceedings shall be resumed after the cause of suspension has been eliminated.”. 4 2018 Version. Article 52 of 2022 Version has the similar provision. It provides that: “1. Where the parties jointly request or special circumstances arise during the hearing of the case that require the suspension of the hearing, the arbitration proceedings may be suspended. Circumstances of suspension include: (1) If a party dies and needs to wait for the heirs to participate in the arbitration; (2) A party is incapacitated and has not yet determined a legal representative; (3) The legal person or other organization that is a party is terminated and the bearer of rights and obligations has not yet been determined; (4) A party is unable to participate in the arbitration due to force majeure; 5. The case must be based on the outcome of the trial of another case, and the other case has not yet been concluded; 6. Other circumstances in which arbitration shall be suspended. 2. Arbitration shall be resumed after the reasons for the suspension of arbitration have been eliminated. 3. The decision to suspend and resume the arbitral proceedings shall be made by BAC before the constitution of the arbitral tribunal; The arbitral tribunal shall make its constitution after its composition.”.

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and does not need to be heard on the basis of the outcome of the criminal case, the arbitral tribunal naturally has the power not to suspend the arbitral proceedings in such circumstances. In fact, the arbitration rules of many arbitration institutions in China refer to Article 153 of the Civil Procedure Law to make similar provisions on the suspension of arbitration proceedings.5 The arbitral tribunal may decide whether to suspend the arbitral proceedings in accordance with the express provisions of the arbitration rules. Regarding the suspension of arbitration proceedings, in addition to the provisions on suspension of arbitration proceedings similar to the reference to the relevant arbitration rules in this case and the provisions of the Civil Procedure Law on the circumstances of suspension, there are also provisions formulated by some arbitration institutions on how to further handle the arbitration procedures in criminal and civil intersecting cases. For example, Article 696 of Hangzhou Arbitration Commission Arbitration Rules (“HAC Rules”)7 provides a general suspension provision. According to Article 708 of HAC Rules, the arbitral tribunal may make a decision based on the facts ascertained. If the arbitral tribunal considers that it is unable to make a decision, it may explain to the parties that it recommends the parties to withdraw the application for arbitration. And if the parties refuse to withdraw the application for arbitration, the arbitral tribunal may reject the party’s application for arbitration in the form of a written decision. This Article further provides relatively clear provisions on the procedural handling of criminal cases in arbitration cases, on the basis of which the arbitral tribunal may handle the arbitration proceedings of criminal cases. It is easy for the court to confirm the power of the arbitral tribunal to suspend the proceedings in accordance with this rule.

5

Such as Article 54 of Xi’an Arbitration Commission Arbitration Rules, Article 68 of Chongqing Arbitration Commission Arbitration Rules, Article 59 of Changsha Arbitration Commission Arbitration Rules. 6 Article 69 of HAC Rules: “Where the parties jointly request or special circumstances arise during the arbitration of the case that require the suspension of the hearing, the arbitration proceedings may be suspended. After the reasons for the suspension of the proceedings are eliminated, the arbitration proceedings shall be resumed in a timely manner. The decision to suspend or resume the arbitral proceedings shall be made by the Commission before the constitution of the arbitral tribunal; The arbitral tribunal shall make its constitution after its composition. The period of suspension of proceedings shall not be counted in the trial period provided for in these Rules.”. 7 Amended for the fifth time by the sixth HAC on June 17,2020, come into force on July 1, 2020. 8 Article 70 of HAC Rules: “If an arbitration case involves a criminal case and has been formally filed by the investigating authority, it does not necessarily lead to the suspension of the arbitration procedure, and the arbitral tribunal may make a decision based on the facts ascertained. If the arbitral tribunal considers that it is unable to make a decision, it may explain to the parties that it recommends that the parties withdraw the application for arbitration, and if the parties refuse to withdraw the application for arbitration, the arbitral tribunal may reject the party’s application for arbitration in the form of a written decision.”.

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For instance, in Li v. Liang,9 the court held that Article 70 provided that the arbitral tribunal had the power to decide whether to continue hearing an arbitration case that may involve a criminal offence. Moreover, during the trial of the arbitration case, there was no evidence to prove that the private lending dispute involved in the case was involved criminal issues, so it was insufficient to determine that the arbitration dispute involved a criminal offense. With regard to the suspension of arbitration, more arbitration rules of arbitration institutions are general provisions. For example, Article 46 of SCIA Arbitration Rules10 provides general provisions on the suspension of arbitration proceedings under normal circumstances. Similar general provisions could be found in Article 46 of Shanghai Arbitration Commission Arbitration Rules, Article 44 of Beijing Arbitration Commission Arbitration Rules, Article 42 of Shanghai International Arbitration Center Arbitration Rules, Article 45 of CIETAC Arbitration Rules and Article 57 of Wuhan Arbitration Commission Arbitration Rules. If the Arbitration Law, judicial interpretations and arbitration rules do not clearly stipulate the circumstances of suspension, how should the suspension of arbitration proceedings be handled during the arbitration hearing of cases involving criminal and civil matters? Under such circumstances, the arbitral tribunal’s handling of the suspension of arbitral proceedings does not result in the loss of power due to the lack of clarity in the provisions of the arbitration rules. On the contrary, whether the hearing of the arbitration case depends on the outcome of the criminal case is reviewed and decided by the arbitral tribunal. For example, in Shanghai Juliang Retirement Management Consulting Co., Ltd. v. Jin,11 the applicant claimed that the arbitral award violated legal procedures, arguing that the case involved economic crimes and therefore the arbitral tribunal should suspend the hearing, but the arbitral tribunal did not suspend the hearing, which violated legal procedures. The court held that, according to Article 20 of the Arbitration Law Interpretation, “not in conformity with the statutory procedures” under Article 58 of the Arbitration Law referred to circumstances that violation of the arbitration procedures stipulated in the Arbitration Law and the arbitration rules chosen by the parties may affect the correct adjudication of the case. The Arbitration Law and Shanghai Arbitration Commission Arbitration Rules do not expressly stipulate the circumstances under which an arbitration should be suspended. Whether the hearing of this arbitration case needs to wait for the outcome of the criminal case shall be reviewed and decided by the arbitral tribunal ex officio. Moreover, according to the Notice of Enforcement on Bail Awaiting Trial provided by the applicant, the 9

(2020) Zhe 01 Min Te No. 373. Article 46 of SCIA Arbitration Rules (2022): “1. Where parties request a suspension of the arbitration proceedings, or under circumstances where such suspension is necessary pursuant to relevant law or provisions of the Rules, the arbitration proceedings may be suspended by the arbitral tribunal. Where the arbitral tribunal has not yet been formed, such decision shall be made by the SCIA. 2. The arbitration proceedings shall resume as soon as the reason for the suspension no longer exists.”. 11 (2021) Hu 01 Min Te No. 307. 10

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public security organ investigated the case of Company C because it is suspected of illegally absorbing deposits from the public, and did not involve the applicant. There was no legal document to affirm that the applicant had committed a criminal offense. Therefore, the arbitral tribunal did not suspend the hearing, which did not violate the statutory procedures. And the applicant’s grounds for revocation were not established.

5.2 Who Can Suspend the Proceedings Involving Criminal Issues The main purpose of the suspension of arbitration proceedings is to avoid inconsistencies that may arise in criminal and civil intersecting cases, and to better protect the legal rights of the parties, both in litigation and arbitration proceedings. In the process of hearing an arbitration case that involves criminal and civil issues, the suspension of the proceedings of the arbitration case does not only mean that the “pause button” has been pressed, but also affects the substantive rights of the parties when it comes to procedural issues such as the time limit for hearing and the limitation of actions. For example, as for issue on the source of funds in loan arbitration cases, if the borrower requests a suspension on the grounds of criminal involvement documented by the public security organ’s acceptance documents and other materials, and the arbitral tribunal accordingly decides to suspend the arbitration proceedings, it will lead to the result that the borrower may delay the performance of the debt, and ultimately even if the tribunal rules that the borrower should repay the loan immediately, the lender may not be repaid, and the ruling will become a dead letter. Belated justice is unjust and the submission of suspension of the arbitration proceedings may affect the substantive rights of the parties. Therefore, who initiates or decides on the suspension of procedures in arbitration cases directly involves whether the interests of the parties can be effectively protected. Zhejiang Jindun Fans Holding Co., Ltd. v. ZXY 12 The applicant, Zhejiang Jindun Fans Holding Co., Ltd. (“Jindun”), requested confirmation that the arbitration agreement was invalid, had not been established, or had no legal effect on the applicant. Jindun claimed that the arbitration case involved was based on the arbitration clauses in the Maximum Loan Contract, the two Maximum Guarantee Letters and the two Equity Pledge Contracts. But the applicant’s company’s seal and legal representative’s seal on the Maximum Guarantee Letter were forged, so the Maximum Guarantee Letter was not established and invalid ab initio. Therefore, the arbitration clause in the Maximum Guarantee Letter was also invalid and unestablished. First, the seals of the applicant and the legal representative on the Maximum Guarantee Letter were forged, and the Maximum Guarantee Letter was not established and invalid ab initio. After the death of the applicant’s shareholder, ZJC, the applicant 12

(2018) Zhe 06 Min Te No. 10.

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discovered that there were forgeries of the applicant’s company seals in a number of lawsuits and arbitrations. The applicant had reported the case to the Shangyu District Public Security Bureau on suspicion of forging the company seal and fraud. The Shangyu District Public Security Bureau also filed a case for investigation on February 5, 2018 on suspicion of forging the company’s seal. It can be seen that the criminal fact that the applicant’s company seal and the legal representative’s seal were forged did exist. This case was also within the scope of investigation by the Shangyu District Public Security Bureau, so the applicant’s company seal and legal representative seal affixed to the Maximum Guarantee Letter are indeed forged. Second, the Maximum Guarantee Letter was not established and invalid ab initio, nor was the arbitration clause agreed thereon valid or invalid, and had no legal effect on the claimant. In summary, the applicant submitted the abovementioned request to the court. The respondent, ZXY, argued that: 1. the respondent did not believe in or accept the so-called forgery of the seal stated in the application. The deceased Mr. ZJC was the controlling shareholder and actual controller of the applicant, who served as the chairman of the board. There was no reason for him to forge the seal of the company which he controlled. 2. The validity of the contract involved the review of the substantive aspects of this case. This case was on the procedural review of the validity of the agreement, not a review of the substantive rights of the parties. The logic of the applicant seeking to confirm the invalidity of the arbitration agreement in this case through the validity of the entire contract was not established. 3. Analyzing based on the Arbitration Law and the relevant judicial interpretations of the SPC, judicial review focused on the validity of the arbitration agreement and did not review whether the arbitration agreement was established, which involved substantive rights and obligations. 4. The authenticity of the seal did not fall under the circumstance that the arbitration agreement was invalid under Article 17 of the Arbitration Law. 5. There were legal remedies for the authenticity of the seal claimed by the applicant, as well as the validity and invalidity of the contract. The applicant may claim the validity of the contract and the formation of the contract before the arbitration commission. If the award was rendered, the applicant could also apply to the relevant court to set aside the arbitral award. Even if the applicant had evidence to prove it during the enforcement process, it could claim to the court where the enforcement was located that the arbitration agreement between the parties was invalid or the contract was invalid and should not be enforced. The applicant was wrong in making the above claims in the present case. In summary, the court was requested to reject all the applicant’s applications in this case according to law. It was learnt that on February 1, 2018, Wuhan Arbitration Commission accepted the loan contract dispute case concerning ZXY against ZC, WYF (the two were the legal first heirs of the deceased ZJC), ZX, Jindun and other entities, and notified Jindun. On February 5, 2018, the Shangyu District Public Security Bureau stated in its Notice of Case Registration to CGR that the bureau had placed on file to investigate on the case regarding Jindun’s company seal being forged. On February 28, 2018, the Shangyu District Public Security Bureau placed on file to investigate on the fundraising fraud case of Zhejiang Jindun Fire Fighting Equipment Co., Ltd..

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On the same day, the Shangyu District Public Security Bureau filed an investigation of ZX illegally absorbing deposits from the public. April 3, 2018, the Economic Investigation Brigade of the Shangyu District Public Security Bureau stated in its Situation Statement to Wuhan Arbitration Commission that, after investigation, the case accepted by Wuhan Arbitration Commission on the applicant ZXY and the respondent Golden Shield Company and other units and individuals, fell within the scope of its investigation, and it requested Wuhan Arbitration Commission to handle it according to law. During the hearing of this case, the applicant requested the Wuhan Arbitration Commission to suspend the arbitration of this case. On May 21, 2018, the court issued a notice notifying Wuhan Arbitration Commission to suspend the arbitration of the (2018) Wu Zhong Shou No. 000000274 arbitration case. On June 14, 2018, the Shangyu District Public Security Bureau requested this court to obtain the original copy of the Maximum Guarantee Letter. On July 25, 2018, the Shangyu District Public Security Bureau stated in the Notice of Appraisal Opinion to CGR that the seal of Jindun affixed to the original scanned copy of the Maximum Guarantee Letter involved in the case was not formed with the same seal of Jindun stamped on the three Certificates provided by Jindun and the Application for Enterprise Replacement of Bank Reserved Seal provided by Jindun. Shaoxing Intermediate People’s Court held that, the civil subjects related to this case were suspected of fund-raising fraud and other crimes, and the public security organs had filed the case for investigation and notified Wuhan Arbitration Commission of the relevant situation. According to Paragraph 2 of Article 7 of the Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fund-raising Criminal Cases (Gong Tong Zi [2014] No. 16)13 , the court noticed that the contract dispute case among Shenzhen Guotou Commercial Factoring Co., Ltd. and the applicant of this case Jindun and the third party, Zhejiang Jindun Fire Fighting Equipment Co., Ltd., and this case both had background of suspected fund-raising fraud and other crimes. The High People’s Court of Guangdong Province upheld the lawsuit filed by Shenzhen Guotou Commercial Factoring Co., Ltd. against Jindun in (2018) Yue 03 Min Chu No. 1362 (2) Judgment based on (2018) Yue Min Zhong No. 2111 Civil ruling. The conclusion of the ruling was also in line with the spirit of the above-mentioned Gong Tong Zi [2014] No. 16 Opinion.14 13

Paragraph 2 of Article 7 of the Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fund-raising Criminal Cases (Gong Tong Zi [2014] No.16) provides that, where the People’s Courts discover that there is suspicion of illegal fund-raising in the course of hearing civil cases or enforcement, they shall rule to dismiss the indictment or suspend enforcement, and promptly transfer the relevant materials to the public security organs or procuratorial organs. 14 Gong Tong Zi [2014] No. 16 Opinion also provides that, “the people’s courts support and supervise arbitration activities in accordance with the law. In the light of the judicial policy of criminal and civil intersection issues in trial practice, it is inappropriate to initiate arbitration proceedings for relevant civil disputes when there are facts with a suspected criminal background and the relevant civil dispute does not enter the civil litigation procedure for the time being.”.

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Accordingly, it was not appropriate to initiate arbitration proceedings in this case at this time. If, during the relevant criminal proceedings or after the conclusion of the relevant criminal proceedings, it was found that the factors obstructing the settlement of the dispute through arbitration or civil litigation had disappeared, the parties may still apply for arbitration or file a civil lawsuit in accordance with the law. In this case, the arbitration case touched on criminal involvement and forgery of official seals. Jindun, as the applicant, filed a lawsuit to confirm the validity of the arbitration agreement with Shaoxing Intermediate Court, claiming that the official seal and corporate seal of Jindun in the maximum guarantee contracts involved in the case were forged, the relevant contracts were not established, and the arbitration clause did not exist. Based on this, the applicant requested the arbitration commission to suspend the hearing of the arbitration case, and Shaoxing Intermediate Court issued a notice to Wuhan Arbitration Commission to suspend the arbitration. So, does Shaoxing Intermediate Court have the right to require the arbitration commission to suspend the arbitration proceedings in the form of notice? According to Article 415 of the Reply of the Supreme People’s Court Regarding Several Issues Relating the Validity of Arbitration Agreements, if a party raises objections to the validity of the arbitration agreement, the people’s court shall, after acceptance, notify the arbitration institution to suspend the arbitration. Therefore, the court shall, after accepting the lawsuit confirming the validity of the arbitration agreement, notify the arbitration institution to suspend the arbitration procedure. It is not necessary for the court to notify the arbitration institution to suspend the arbitration procedure based on the application of the parties to make it. In this case, Shaoxing Intermediate Court had the right to request Wuhan Arbitration Commission to suspend the arbitration proceedings by way of notice. Although this case is a lawsuit to confirm the validity of the arbitration agreement, there are also criminal factors. In the circumstances of the present case, the subject of initiating the suspension of arbitral proceedings is the court. If the circumstance for suspension ceases, the arbitral tribunal may resume the hearing considering the situation of the case. In addition to the courts, in general, arbitral institutions and the parties are the most common subjects for initiating suspension proceedings. Normally, arbitration rules will provide that if a party or the parties apply for suspension, the arbitration institution may decide to whether to suspend it, which means that the parties are also one of the subjects initiating the suspension of criminal arbitration proceedings. Besides, the arbitration institution may also initiate or decide to suspend the arbitral 15

Article 4 of the Reply of the Supreme People’s Court Regarding Several Issues Relating the Validity of Arbitration Agreements (Fa Shi 〔1998〕 No. 27): “Where one party applies for arbitration in respect of a contract dispute or other property rights dispute, while the other party challenges the validity of the arbitration agreement and requests the people’s court to confirm that the arbitration agreement is invalid and files a lawsuit with the court regarding the contract dispute or other property rights dispute, the people’s court shall accept the suit and notify the arbitration institution to suspend the arbitration proceeding. Where a people’s court makes a ruling on the validity of an arbitration agreement, it shall serve a copy of the written decision on the arbitration institution, and the arbitration institution shall resume the arbitration proceeding or revoke the arbitration case according to the ruling of the people’s court.”.

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proceedings based on the application or the hearing situation of the case, even for the same cause. If new facts arise based on the cause and it is found that the suspension is improper, the arbitral proceedings may resume. For example, in Xiangxiang Transmission and Transformation Company v. Hangzhou Jiangnan Cable Co., Ltd.,16 Hangzhou Intermediate People’s Court held that, the intersection of criminal and civil cases did not necessarily have an impact on the substantive trial of civil cases. When the facts were clear and the evidence was sufficient, the arbitral tribunal had the power to decide to make an award according to law. According to the evidence in this case and the statements of both parties, the outcome of the criminal procedure did not affect the assumption of civil liability in this case. Hangzhou Arbitration Commission suspended the trial after Xiangxiang Transmission and Transformation Company submitted the file decision of Xiangxiang Public Security Bureau, and then resumed the trial based on the relevant similar case judgments and the new facts of the case, and rendered an award in accordance with the law. The procedure was legal. What’s more problematic is that the role of the public security organs in suspending procedures. In the Jindun case, the Economic Investigation Brigade of the Shangyu District Public Security Bureau had filed an investigation on the case of the forged official seal of Jindun and the case of ZX, a party in the Jindun case, illegally absorbing deposits from the public, and notified the arbitration committee of the relevant circumstances of the investigation of the case. According to the Official Reply of the Ministry of Public Security on Issues concerning the Applicability of the Several Provisions of the Public Security Organs Handling Economic Crime Cases to a Case Where a Party Applies for Arbitration,17 as for the arbitration cases accepted by arbitration institutions, if a party reports to the public security organ on the grounds that the same legal facts are suspected of economic crimes, the public

16

(2017) Zhe 01 Min Te No. 51. THE Official Reply of the Ministry of Public Security on Issues concerning the Applicability of the Several Provisions on the Public Security Organs’ Handling of Cases Involving Economic Crimes to a Case Where a Party Applies for Arbitration (Gong Fu (2013) No. 1): “Public Security Department of Shaanxi Province: The Request for Instructions on Whether Articles 11 and 12 of the Several Provisions of the Public Security Organs on Handling Economic Crime Cases Apply to the Cases in which the Parties Apply for Arbitration (Shaan Gong Chuan Fa [2013] No. 468) submitted by your department has been received. The replies are as follows: Where an arbitration institution has accepted an application for arbitration by one of the parties and the other party reports the case to the public security organ on the grounds that the same legal facts are suspected of economic crimes, it shall apply Articles 11 and 12 of the Several Provisions of the Public Security Organs Handling Economic Crime Cases.”. 17

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security organ may refer to the relevant provisions of Articles 1118 and 1219 of the Several Provisions of the Public Security Organs Handling Economic Crime Cases.20 The arbitration institutions apply to the relevant provisions of the people’s court. The public security organ has the right to report to the arbitration institution if it discovers that it is suspected of economic crime with the same legal facts as the arbitration case accepted by the arbitration institution by explaining the reasons and attaching relevant materials. The arbitration institution shall, on the basis of the relevant documents of the public security organ, decide whether to suspend the hearing of the arbitration case. In current arbitration practice, if an arbitration institution considers that the case is relevant and the hearing of the arbitration case needs to be based on the outcome of the criminal case, it usually prefers to suspend the arbitration procedure. In 2017, the Notice by the Supreme People’s Procuratorate and the Ministry of Public Security of Issuing the Several Provisions of the Supreme People’s Procuratorate and the Ministry of Public Security on the Public Security Organs’ Handling

18

Article 11 of the Several Provisions of the Public Security Organs Handling Economic Crime Cases [Gong Tong (2005) No. 101]: “Where public security organs discover suspected economic crimes and are of the same legal facts as civil cases in which the people’s courts have accepted or rendered effective judgments or rulings, they shall explain the reasons and attach copies of relevant materials, and send a letter to the people’s court that accepted or made the judgment or ruling, and at the same time, notify the relevant people’s procuratorate.”. 19 Article 12 of the Several Provisions of the Public Security Organs Handling Economic Crime Cases [Gong Tong (2005) No. 101]: “Cases that need to be put on file for investigation are the same legal facts as civil cases accepted or made by people’s courts that make effective judgments or rulings, and if any of the following conditions are met, the public security organs shall file a case for investigation: (1) the people’s court decides to transfer the case to the public security organs or revoke the judgment or ruling; (2) the people’s procuratorate notifies the public security organs to file a case in accordance with law.”. 20

The Reply was issued in 2013. The effective provision at that time, was the Several Provisions of the Public Security Organs Handling Economic Crime Cases [Gong Tong (2005) No. 101] (which has been abandoned). The current effective provision is the Notice by the Supreme People’s Procuratorate and the Ministry of Public Security of Issuing the Several Provisions of the Supreme People’s Procuratorate and the Ministry of Public Security on the Public Security Organs’ Handling Economic Crime Cases (2017 Revision) [Gong Tong (2017) No. 25]).

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Economic Crime Cases (2017 Revision), in which the Articles 2021 and 2122 are similar to Articles 11 and 12 of the Several Provisions of the Public Security Organs Handling Economic Crime Cases. Articles 20 and 21 of the 2017 Revision add new procedural handling methods for people’s courts upon discovering suspected 21

Article 20 of the Notice by the Supreme People’s Procuratorate and the Ministry of Public Security of Issuing the Several Provisions of the Supreme People’s Procuratorate and the Ministry of Public Security on the Public Security Organs’ Handling Economic Crime Cases (2017 Revision) [Gong Tong (2017) No. 25]):” Where a case suspected of economic crime and a civil case in which the people’s court is trying or has rendered effective judgment have the same legal facts or are connected, and any of the following conditions are met, the case shall be filed:

(1) the people’s court, in the course of hearing a civil case or in the course of enforcement, discovers that there is suspicion of an economic crime, and rules not to accept the case, dismiss the prosecution, suspend the lawsuit, rule to dismiss the litigation claim, or suspend the enforcement of the effective judgment, and transfer the relevant materials to the public security organs; (2) the people’s procuratorate notifies the public security organs to file a case in accordance with law; (3) the public security organ finds that there is evidence to prove that there are criminal facts and need to be investigated for criminal responsibility, and is approved by the responsible person of the public security organ at the provincial level or above. In the circumstances of items (2) and (3) of the preceding paragraph, after the public security organ file a case, it shall employ compulsory measures and investigative measures in strict accordance with the requirements and procedures prescribed by law, and send a copy of the decision on case filing and other legal documents and relevant case materials to the people’s court that is hearing or has rendered effective judgment, explain the reasons for filing the case, and at the same time notify the people’s procuratorate at the same level as the people’s court handling the civil case, and when necessary, may report to the public security organ at the higher level. In the course of investigation, the normal conduct of the people’s court’s civil litigation activities must not be obstructed.”. 22 Article 21 of Notice by the Supreme People’s Procuratorate and the Ministry of Public Security of Issuing the Several Provisions of the Supreme People’s Procuratorate and the Ministry of Public Security on the Public Security Organs’ Handling Economic Crime Cases (2017 Revision) [Gong Tong (2017) No. 25]): “Where public security organs discover any of the following circumstances in the course of investigation or people’s procuratorates in the course of reviewing prosecutions, they shall send copies of legal documents such as case filing decisions, prosecution opinions, and copies of relevant case materials to the people’s court that is hearing or has made effective judgment, and the people’s court shall handle it in accordance with law: (1) the economic crime cases under investigation or review and the civil cases being tried or had been rendered effective judgment by people’s courts have the same legal fact or are connected; (2) the property involved in the case has been applied for enforcement by the relevant parties. Where there are circumstances provided for in the preceding paragraph, the public security organs and people’s procuratorates shall simultaneously notify the people’s procuratorate at the same level as the people’s court handling the civil case. If the public security organs do not receive a response within one month after they send copies of relevant legal documents and case materials to the people’s court, when necessary, they may report it to the public security organ at the level above.

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economic crimes, such as ruling inadmissibility, dismissing indictment, suspending litigation, ruling to dismiss litigation claims, or suspending enforcement of effective judgments, and transferring relevant materials to the public security organs. Article 22 of the 2017 Revision further stipulates that where a case suspected of economic crime is related to the case being heard by the court but does not belong to the same legal facts, the public security organ may file the case for investigation, but may not request the people’s court to transfer the case, rule to dismiss the indictment, suspend the lawsuit, rule to dismiss the claim, or request the people’s court to revoke the arbitral award on the grounds of filing a criminal case. With regard to the aforesaid provisions, since there is no express provision as to whether the arbitration commission can apply them by reference, the arbitration commission may not be bound by the relevant provisions, but may refer to the handling of the people’s court according to the spirit of the aforementioned provisions. If the public security organ may recommend that the people’s court suspend the hearing, in practice there may also be circumstances where the arbitration institution may be suggested or requested to suspend the hearing. So, whether the arbitration institution can or need to refer to the provisions of 2017 Revision to dismiss the case, dismiss the lawsuit, suspend the litigation, and dismiss the claim? Since the people’s court has the power to independently determine whether the case noticed by the public security organ has the same legal facts or is connected with the civil case being heard, and decide whether to suspend the hearing of the arbitration case or adopt other methods, the arbitration commission also has the power to decide the trial procedure of the arbitration case and whether to adopt the public security organ’s suggestions or materials on criminal matters. For example, in the dispute over the confirmation of the invalidity of a contract between Inner Mongolia Shengli Resource (Group) Co., Ltd., Inner Mongolia Yidong Coal Group Co. Ltd. and China Huarong Financial Leasing Co., Ltd. (“Shengli Resources Case”),23 during the first instance of the Shengli Resources case, the public security organ sent a letter to the court of first instance recommending that the trial of the civil case be suspended. After determining that the case investigated by the public security organ was insufficient to affect the handling of the civil dispute, the court of first instance did not suspend the trial of the civil case, continued the trial and rendered its judgment. When the parties appealed the judgment of first instance, the court of second instance also upheld the original judgment. The court may decide whether to suspend the hearing of a civil case based on the circumstances of the case. Public security organs are not judicial bodies, and they may not be able to make accurate judgments on whether the criminal issues involved in civil cases have the same legal facts, and whether they should be suspended. Combined with the provisions of Paragraph 5 of Article 153 of the Civil Procedure If an economic crime case filed for investigation or examination for prosecution has the same legal fact or is related to the civil case in which the arbitration institution made an arbitral award, and the people’s court has already accepted an application related to the arbitral award, it shall be handled in accordance with the provisions of paragraphs 1 to 3 of this Article.”. 23 (2017) Zui Gao Fa Min Zhong No. 17.

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Law, if a case heard by a people’s court must be based on the outcome of another case, the trial shall be suspended, even if the public security organ sends a letter informing the people’s court or requesting the dismissal of the lawsuit, suspension of the trial, revocation of the arbitral award, etc., the people’s court has the power to decide on its own which method to adjudicate. Arbitration institutions also have the power to decide on their own how to handle the case procedures. However, in practice, the mentality on handling the criminal issues prior to the civil issues is overwhelming. In arbitration practice, it is necessary to avoid adopting a onesize-fits-all approach of criminal priority, so as to be consistent with the principles and spirit of the national civil and commercial trial on distinguishing whether civil and criminal intersecting cases have the same facts, the same legal relationship, and the same subject.

5.3 The Same Facts According to Article 224 of the Arbitration Law, only contractual disputes and other disputes over property rights and interests that arise between equal citizens, legal persons and other entities can be arbitrated. In other words, disputes involving personal relations such as marriage, family, inheritance and so on in criminal, administrative and civil cases are not within the scope of arbitration. As one of the main methods of commercial dispute resolution, arbitration is increasingly used in economic activities. It is generally believed that for arbitration cases with criminal elements, the arbitration institution has the power to decide whether to continue the trial of the arbitration case. In other words, the arbitration institution may decide to suspend the conduct of the arbitration proceedings when the case meets certain conditions. Then, once there may be criminal-related factors in an arbitration case, how can the arbitration institution define that these factors are sufficient to suspend the arbitration proceedings? Hengfuhuitong Investment Management Co., Ltd. v. Chen, China Merchants Bank Co., Ltd. Foshan Branch25 The applicant Hengfuhuitong Investment Management Co., Ltd (“Hengfuhuitong”) argued that the case involved in the arbitration was a criminal case being heard by the Futian Public Security Bureau. The Foshan Arbitration Commission had no jurisdiction over it, and the arbitration award harmed the public interest and should be revoked. The reasons were as follows. First, the fund invested by Chen, Hengfu Changfeng M&A Private Investment Fund, was owned by Shenzhen Hengfu Financial Group Co., Ltd. (“Hengfu”), a 24

Article 2 of the Arbitration Law: “Contractual disputes and other disputes over rights and interests in property between citizens, legal persons and other organizations that are equal subjects may be arbitrated.”. 25 (2020) Yue 06 Min Te No. 328.

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third party to this case. At present, Futian Public Security Bureau had filed an investigation of Hengfu for suspected of illegally absorbing public deposits. Therefore, the arbitration commiscion had no right to arbitrate. On May 15, 2019, Futian Public Security Bureau issued Shenfu Gong (Jing) Li [2019] No. 35143 Decision on Case Registration, deciding to file a case for investigation against Hengfu for suspected illegal absorption of public deposits. In fact, Hengfuhuitong issued private equity fund products and signed fund contracts with investors to absorb investors’ deposits. At the same time, the investors signed a repurchase agreement with Hengfu. Hengfuhuitong was a wholly-owned subsidiary of Hengfu and was controlled by Hengfu. Therefore, the public security organ regarded Hengfuhuitong’s deposit absorption behavior as the behavior of Hengfu, and filed a case for investigation on suspicion of the crime of illegally absorbing deposits from the public. After an investigation of Hengfu was filed, the investigating authority retrieved all the fund product information and investment information of Hengfuhuitong, and entrusted a third-party judicial audit to conduct a judicial audit of the cash flow of fund products. The economic issues involved in the case are already being dealt with by the public security organs, so there was an inevitable relationship between the criminal filing of Hengfuhuitong and the act of Hengfuhuitong absorbing investors’ deposits by releasing the fund products. In this case, it was a part of the facts that Chen signed a fund contract with Hengfuhuitong to establish Hengfu Changfeng M&A Private Investment Fund and signed a repurchase agreement with Hengfu. In summary, the facts of the contractual relationship between Chen and Hengfuhuitong, Hengfu were the same as the facts of Hengfu’s suspected crime of illegally absorbing deposits from the public. The dispute concerned a criminal case being handled by Futian Public Security Bureau. According to Section 129, Article 12 of the Conference Minutes (Fa [2019] No. 254), Article 2 of the Arbitration Law and Paragraph 2 of Article 7 of the Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fund-raising Criminal Cases, the arbitration institution had no power to accept criminal cases, and the arbitral award involved in the case shall be revoked and transferred to the public security organ for handling. Second, in the case which had the same facts as this case, the Shenzhen Intermediate People’s Court and Shenzhen Futian District People’s Court had dismissed the investor’s lawsuit due to the suspected fundraising crime, which was sufficient to prove that the facts involved belong to the criminal case being investigated by Futian Public Security Bureau. The relevant disputes did not fall within the scope of civil cases. The cases referred to by the applicant were Zhang v. Hengfu, Wang and Li Property Damage Compensation Dispute [(2019) Yue 03 Min Zhong No. 27994] and Huang v. Hengfu Wang and Li Property Damage Compensation Dispute [(2019) Yue 03 Min Zhong No. 27992 and (2019) Yue 03 Min Zhong No. 27993], Sun v. Wang, Li and the third parties, Hengfu and Hengfuhuitong Contract Dispute [(2019) Yue 03 Min No. 35539], Su v. Wang, Li and the third parties, Hengfu and Hengfuhuitong [(2020) Yue Min Shen No. 2573].

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The arbitral award involved in this case was contrary to the public interest, and if enforced, it would inevitably infringe the rights and interests of other investors. According to Article 4 of Measures for Banning Illegal Financial Institutions and Illegal Financial Business Activities [Guo Wu Yuan (1998) No. 247 Order],26 the crime of illegally absorbing deposits from the public involved unspecified targets in society, i.e., the public. In fact, the number of people involved in the fund products released by Hengfuhuitong reached several hundred. The lawsuits of other investors were rejected by the court, but the arbitral award in question ruled that Hengfuhuitong should return Chen’s investment funds. It could be seen that the rulings made by arbitration institutions were completely different from those made by courts, in which the arbitration institutions ignored China’s criminal system of safeguarding social public interests. While criminal cases and civil cases had the same facts, civil cases should give way to criminal cases, private interests should give way to public interests, so as to safeguard China’s basic legal system and norms, and safeguard the public interest. The arbitral award involved in the case violated China’s basic criminal system and norms and the public interest. If the arbitral award in question was enforced, it would inevitably harm the interests of other victims in the suspected crime of illegally absorbing deposits from the public. The respondent, Chen, argued that (2019) Fo Zhong Shun No. 0036 Award was rendered based on a legal and valid arbitration clause, and Foshan Arbitration Commission had jurisdiction over the arbitration case. Based on Chen’s arbitration application, the arbitration tribunal was constituted in line with legal procedures, and the arbitral award rendered after hearing had legal effect. Hengfuhuitong’s mention of the suspected illegal fundraising crime of Hengfu had nothing to do with the Hengfu M&A fund contract. First, the fund involved in the case was established in accordance with the law and had been filed in accordance with the law and the requirements of the fund association. The illegal fundraising crime involving Hengfu had nothing to do with the fund in this case. Second, according to the provisions of Fund Law, fund assets were independent from other financial assets, and had nothing to do with the third parties. The suspected illegal fundraising case of Hengfu had nothing to do with the funds and contracts involved in this case. The contract signed by the parties was an expression of their true intention, in which the content was legal and valid. Hengfuhuitong had no evidence to prove that it was suspected of illegal fundraising due to the contract involved in this case. The respondent China Merchants Bank Co., Ltd. Foshan Branch argued that, first, Hengfuhuitong had no evidence to prove that the award involved in this case had circumstances that should be revoked according to law. The award involved in the 26

Article 4 of Measures for Banning Illegal Financial Institutions and Illegal Financial Business Activities [Guo Wu Yuan (1998) No. 247 Order]: “The so-called illegally absorbing deposits from the public’ mentioned in the preceding paragraph refers to activities that without the approval of the People’s Bank of China, absorb funds from unspecified targets in the society, issue certificates, and promise to repay principal and interest within a certain period of time. The so-called disguised absorption of public deposits refers to activities that do not absorb funds from unspecified targets in society in the name of absorbing public deposits without the approval of the People’s Bank of China, but undertake to fulfill the same obligations as those of absorbing public deposits.”.

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case did not have the circumstances stipulated in Article 58 of the Arbitration Law that should be set aside. Therefore, the Hengfuhuitong’s application to revoke the award in the case had no factual basis. Second, Hengfu was suspected of illegally absorbing deposits from the public, and was placed on file for investigation, which had no relationship with Hengfuhuitong. Hengfuhuitong was a subsidiary of Hengfu, both of which were independent legal person organizations, and each shall independently bear responsibility for the its own actions and debts with its independent property according to law. The existence of illegal acts of Hengfu was not equivalent to the existence of illegal acts of Hengfuhuitong. The arbitration application against the subsidiary could not be rejected just because an investigation was filed against the parent company. Third, Hengfuhuitong shall independently bear the liability for breach of contract according to the fund contract involved in this case. The fund involved in this case was established in accordance with the law and filed in accordance with laws and regulations and the provisions of the Asset Management Association. The fund contract involved was also the true intention of the parties. The form and content were in accordance with national laws and regulations and were valid according to law. Hengfuhuitong shall independently bear the liability for breach of contract with its independent property. Fourth, Hengfuhuitong had used the same reasons as the defense and requested Foshan Arbitration Commission to reject Chen’s arbitration application and transfer the case to the public security organ. Foshan Arbitration Commission had reviewed the defense claim in accordance with the law and affirmed not to support it. Foshan Intermediate People’s Court held that, upon review, first, the cause of arbitration involved in this case was a dispute over a securities investment fund contract, which fell within the circumstances of arbitrability under Article 2 of the Arbitration Law. Second, according to Paragraph 2 of Article 14 of the Company Law of the People’s Republic of China, Hengfuhuitong, as a subsidiary established by Hengfu, had legal personality and shall independently bear civil liability. The claim made by Hengfuhuitong was based on the belief that the performance of the securities investment fund contract involved in this case was related to the crime of illegal absorption of public deposits by Hengfu. However, the evidence submitted by Hengfuhuitong could only prove that an investigation was filed against Hengfu on suspicion of illegal absorption of public deposits, and the existing evidence was not enough to prove that Hengfuhuitong was also suspected of this crime, or arbitrated fund contract dispute was directly related to the crime. Hengfuhuitong’s claim that the arbitration award damaged the public interest, had no factual and legal basis, which could not be supported by the court. In conclusion, Hengfuhuitong’s grounds for revoking the arbitration award were untenable and its application shall be rejected. In this case, there was a legal relationship between Hengfuhuitong and Chen in the fund contract, an investigation was filed against Hengfu on suspicion of illegally absorbing public deposits. After hearing the case, Foshan Intermediate People’s Court held that Hengfuhuitong and its parent company, Hengfu, were different legal persons and should bear independent civil liabilities. In addition, although Hengfu was suspected of crimes, it was only in the investigation stage, and there was no

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evidence to show that Hengfuhuitong had committed the same crime, so it rejected Hengfuhuitong’s claims. The handling principles of cases involving the intersection of criminal and civil cases have changed several times: from the principle that the case should be transferred to the public security organs if there are criminal circumstances involved, to the subsequent principle that the whole case should be transferred as the principal handling method while partial transfer based on the rule of “criminal prior to civil” as the exception, to the principle of “civil and criminal parallel” in which civil cases and criminal cases are handled separately. As early as 1985, the SPC, the Supreme People’s Procuratorate, and the Ministry of Public Security jointly issued the Notice on Timely Investigation and Punishment of Economic Crimes Discovered in Economic Dispute Cases, which for the first time stipulated the rules for handling criminal charges in economic cases. In 1987, the SPC, the Supreme People’s Procuratorate, and the Ministry of Public Security jointly issued the Notice on Timely Transfer of Economic Crimes Found in the Trial of Economic Dispute Cases, which further stipulated the handling of intersection of criminal and civil cases, clarifying the general principle of transfer of whole cases should be transferred as the principal handling method and partial transfer as an exception, which is for the first time established the procedure of “criminal prior to civil”. In 1998, the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases (“98 Provisions”), which has the most comprehensive provisions on handling cases involving criminal and civil intersection. Articles 127 and 1028 of the 98 Provisions respectively stipulate that criminal clues and materials suspected of economic crimes that are not of the same legal facts and are not related to the same legal relationship shall be transferred to the public security organs or procuratorial organs for investigation and handling, and the economic dispute cases shall continue to be tried. In fact, the 98 regulations clarified in written form the concept and direction of “civil and criminal parallel” trial. But in practice, the trial scale is different, and the tendency of “criminal prior to civil” is more serious. The use of “same legal facts” and “the same legal relationship” as the criteria for distinguishing the handling of criminal and civil intersection cases was clarified in the 98 regulations.29 Where criminal cases and civil and commercial cases have different 27

Article 1 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases: “Where the same natural person, legal person or unincorporated organization is separately involved in economic disputes and suspected economic crimes due to different legal facts, the economic dispute cases and suspected economic crime cases shall be tried separately.”. 28 Article 10 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases: “If the people’s court, in hearing an economic dispute case, finds that there are clues and materials suspected of economic crimes that are involved in this case but are not the same legal relationship with this case, it shall transfer the suspected clues and materials to the relevant public security organs or procuratorial organs for investigation and handling.”. 29 Article 1 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases: “Where the same natural person, legal

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legal facts, criminal and civil and commercial cases shall be tried in parallel. Where criminal cases and civil and commercial cases have the same legal facts, the criminal cases shall be handled prior to the civil cases. According to this provision, the court focuses on whether the subject, content and form of the legal relationship are identical. Subsequently, Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fund-raising Criminal Cases, which was promulgated and implemented in 2014, adopted the expression “same facts”.30 Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases, promulgated and implemented in 2015, also continued to use the expression “same facts”.31 In November 2019, the Conference Minutes clarified the difficult issues in the current criminal and civil intersection cases, and distinguished between “the same facts” and “different facts of the same party” by listing the circumstances under which criminal and civil and commercial cases should be tried separately.32 In judicial practice, where criminal cases and civil and commercial cases involve “the same facts”, in principle, they should be resolved through criminal proceedings. Whether it should be considered the “same facts” should be judged in accordance with the following principles:33 (1) Judging from the perspective of the subject of the act. “The same facts” should be an act committed by the same subject, and the act committed by different subjects does not belong to the same facts. (2) Judging from the perspective of legal relationship. If the victim of a criminal case is also a counterparty to a civil person or unincorporated organization is separately involved in economic disputes and suspected economic crimes due to different legal facts, the economic dispute cases and suspected economic crime cases shall be tried separately.” Article 10 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases: “If the people’s court, in hearing an economic dispute case, finds that there are clues and materials suspected of economic crimes that are involved in this case but are not the same legal relationship with this case, it shall transfer the suspected clues and materials to the relevant public security organs or procuratorial organs for investigation and handling.””. 30 Article 7 “On the disposition of cases involving civil cases” of Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fund-raising Criminal Cases: "Where relevant units or individuals file a civil lawsuit with the people’s court or apply for enforcement of assets involved in the case of illegal fundraising that is being investigated, prosecuted, or tried by the public security organs, people’s procuratorates, or people’s courts, the people’s courts shall not accept them and shall transfer the relevant materials to the public security organs or procuratorial organs.”. 31 Article 6 of Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases: “After filing a case, if the people’s court discovers clues or materials suspected of illegal fundraising and other crimes that are related to the private lending dispute case but are not the same facts, the people’s court shall continue to hear the private lending dispute case, and transfer the clues and materials suspected of illegal fundraising and other crimes to the public security organs or procuratorial organs.”. 32 Article 28 of the Conference Minutes. 33 See the Speech by Liu Guixiang, Adjudication Committee of the Supreme People’s Court, at the National Conference on Civil and Commercial Adjudication of Courts.

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legal relationship, the fact may generally be deemed to be “the same facts”. (3) Judging from the perspective of the facts of the elements. Only when the facts in dispute in a civil case are also essential facts constituting a criminal offence, they are deemed to be “the same facts”. Article 128 of the Conference Minutes lists five circumstances34 that criminal and civil intersection cases should be tried separately. Under the aforementioned provision, if the same party separately has a civil and commercial dispute and a suspected criminal offense due to different facts, the civil and commercial case and the criminal case shall be tried separately. Although the the Conference Minutes mainly considers from the perspective of the courts, in the arbitration proceedings, the above circumstances should also be heard separately, and the arbitration institution or the arbitral tribunal should not suspend the arbitration proceedings or dismiss the application. Further, Article 13035 of the Conference Minutes clarifies the conditions for the suspension of the trial of civil and commercial cases civil and criminal intersecting cases, such as, the civil and commercial cases heard by the people’s courts must be based on the trial results of the relevant criminal cases, and if the relevant criminal cases have not yet been concluded, the civil case shall be suspended, otherwise the trial shall continue. the Conference Minutes unifies the judicial thinking and help the courts to establish the order of handling criminal and civil intersection cases: “criminal prior to civil”, “civil and criminal parallel”, or “civil prior to criminal”. Whether an arbitration institution can invoke the provisions of the Conference Minutes is not expressly stipulated in law. In determining how to deal with the procedures for criminal and civil intersection cases in arbitration cases, and whether they are within the jurisdiction of civil cases heard by the arbitration commission, it shall be judged in accordance with the provisions of the arbitration rules and the actual circumstances of the case. If the impact 34

(1) the debtor of the main contract is suspected of a criminal offense or is determined as constituting a crime by the criminal judgment, and the creditor requests the guarantor to bear civil liability;( 2) the perpetrator’s act of concluding a contract in the name of a legal person, unincorporated organization, or others is suspected of a criminal offense or is determined as constituting a crime by the criminal judgment, and the counterparty to the contract requests the legal person, unincorporated organization, or others to bear civil liability; (3) the legal representative, responsible person or other staff of a legal person or unincorporated organization is suspected of a criminal offense or is determined as constituting a crime by the criminal judgment, and the victim requests the legal person or unincorporated organization to bear civil liability; (4) the infringer is suspected of a criminal offense or is determined as constituting a crime by the criminal judgment, and the insured, beneficiary or other right holder of compensation requests the insurer to pay the insurance premium; (5) the victim requests a subject other than the perpetrator of the suspected criminal offense to bear civil liability. 35 Article 130 [Conditions for the Suspension of Civil and Commercial Cases in Civil and Criminal Intersection Cases] of the Conference Minutes: “When a people’s court hears a civil or commercial case, if the civil or commercial case must be based on the outcome of the trial of the relevant criminal case, and the criminal case has not yet been concluded, the people’s court shall rule to suspend the litigation in accordance with the provisions of Item 5 of Article 150 of Civil Procedure Law. After the conclusion of the criminal case, the trial of civil and commercial cases will resume. If a civil and commercial case does not have to be based on the outcome of the relevant criminal case, the civil and commercial case shall continue to be heard.”.

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of the outcome of a criminal case on the arbitration case reaches the circumstance that is not premised on the outcome of the criminal case, the arbitral tribunal cannot and has no authority to deal with it, and can only choose to suspend the proceedings. However, it is generally accepted that such decisions should be made after the substantive hearing by the arbitral tribunal. For example, in Ping An Bank Co., Ltd. Chengdu Branch v. Luo,36 the applicant applied for setting aside the arbitral award on the grounds that the respondent had concealed the evidence which would sufficiently affect the impartiality of the award during the arbitration and the arbitration had violated legal procedures. The court held that whether a criminal case and an arbitration case are based on the same legal facts, whether the arbitration case must be based on the outcome of the relevant criminal case hearing, and whether it should be transferred or suspended, falls within the scope of the arbitral tribunal’s determination of the merits of the case. The court should not arbitrarily expand the scope of judicial review for matters within the scope of the arbitral tribunal’s discretion. Therefore, the court ruled to reject the applicant’s application. Moreover, in CITIC Securities Company Limited v. Qian,37 Zhenjian Yingye Co., Ltd. v. Dadi Shichuang Film Distribution (Beijing) Co., Ltd.,38 the court clarified in the reasoning part of the rulings that whether a criminal offence was involved in the arbitration case, whether the criminal conduct affected the hearing of the arbitration case, and whether the arbitration hearing should be held after the criminal case was handled, fell within the scope of the arbitral tribunal’s review of the substance of the case. Normally, the arbitral tribunal needs to consider whether the trial of the case should be based on the outcome of the criminal case and whether it constitutes the same facts, and on such basis it will make a decision on whether to suspend the proceedings. In summary, in the trial of a criminal-related arbitration case, the arbitration institution or arbitral tribunal may refer to the court’s premise on whether the civil case and the criminal case have “the same facts”. If they have “the same facts”, in principle, criminal procedures should be applied to resolve the case, and the arbitration institution has no power to continue the trial. In addition, it is necessary to further analyze whether the outcome of the criminal case should be used as the basis to determine whether the arbitration procedure should be suspended or the trial should be continued.

36

(2022) Jing 74 Min Te No. 17. (2022) Jing 04 Min Te No. 187. 38 (2022) Jing 04 Min Te No. 242. 37

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5.4 Application for Revoking Arbitral Awards Once it is found that the case may involve criminal issues, the parties may challenge the proceedings while the arbitration proceedings are in progress, or may apply for the revocation or non-enforcement of the award after it has been rendered. Article 58 of the Arbitration Law and Article 17 of the Arbitration Law Interpretation provide the circumstances under which an arbitral award may be revoked. These situations can be grouped into three types. First, no arbitration authority, includes no competence to arbitrate and excessively arbitrate, which means that the arbitral tribunal has no authority to handle the case itself or although it has certain authority, the award exceeds the matters requested for arbitration or the agreed arbitration matters, and there is no basis for the parties’ intention to arbitrate. Second, it violates the statutory or agreed procedures. Procedural defects will not lead to revocation, only if the procedural violations reach a certain degree will cause the consequences of revocation. Third, it may or is sufficient to affect the fairness of the entity, such as concealed the evidence which would sufficiently affect the outcome of the case, or the arbitrator accepts bribes and reaches the degree of arbitrary arbitration, or the result of the case is contrary to the public interest. In recent years, it is also common to set aside arbitral awards on the grounds that there are criminal issues involved in the case, and the specific reasons given may involve the abovementioned categories. Beijing Sunshine Freight Int’l Co., Ltd. v. Sumstar Group Corp.39 The claimant Beijing Sunshine Freight Int’l Co., Ltd. (“Sunshine”) argued that the arbitration case was not an economic and trade dispute case, but a suspected economic crime case, and the arbitration case did not meet the arbitrability requirements stipulated in Article 2 of the Arbitration Law, nor did it fall within the scope of acceptance under Article 3 of the CIETAC Arbitration Rules, so the matters awarded by the arbitration did not fall within the scope of the arbitration agreement, and CIETAC had no authority to arbitrate. Sunshine claimed that, first, according to the Indictment Opinion, it could be proved that Sumstar Group Corp. (“SUMSTAR”) was the victim of Li and others suspected contract fraud cases. The amount of goods loss caused to SUMSTAR by the suspected criminal act contained in the Indictment Opinion was consistent with the amount of cargo loss claimed by SUMSTAR in this arbitration case. The Indictment Opinion had detailed descriptions of the criminal acts. It had been confirmed that the applicant of this arbitration case was the victim of the criminal case. The amount of loss caused by the criminal suspect to SUMSTAR was completely consistent with the amount of cargo loss (after deducting 20% security deposit) claimed by SUMSTAR in initiating this arbitration case. Second, the arbitration case had the same facts as the criminal case. According to the “the opinion of this court” section of the Zui Gao Fa (2015) Min Shen No. 1778 39

(2018) Jing 04 Min Te No. 184.

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Civil Ruling, the same facts should be used as the criterion for the judging the selection of civil and criminal procedures in civil and criminal intersection cases, rather than adopting the concept of legal relationship and legal facts. At present, the handling methods of civil and criminal intersection cases were mainly based on the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases, Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fundraising Criminal Cases, and Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases. The aforementioned provisions all adopted the same criterion in handling the issue on civil and criminal intersection cases, while the specific formulation was slightly different. Since legal facts and legal relationships referred to the facts and relationships adjusted by legal norms, as long as the nature of legal norms was different, legal relationships or legal facts are different. In this sense, due to the different nature of civil norms and criminal norms, there was no same legal fact or the same legal relationship in the intersection of civil and criminal cases, so it was more scientific to use the expression of the same facts as the criterion for judging the selection of civil and criminal procedures. The determination of the same facts did not refer to the essential facts stipulated by civil and criminal legal norms, but to the facts themselves in the natural sense. If the facts involved in a civil case had an impact on the trial and the aftermath disposal of the criminal case, they should also be considered as the same facts. “The same facts” view mentioned above was fully reflected in Article 10 of the Several Specific Issues of the Supreme People’s Court on the Current Trial of Commercial Cases that, if the facts involved in a commercial case and those in criminal proceedings were identical, and the facts of the case fundamentally belonged to criminal cases. This case fully complied with the requirement of Article 11 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases, and was also in line with Article 10 of the Several Specific Issues of the Supreme People’s Court on the Current Trial of Commercial Cases that commercial cases and criminal proceedings involved exactly the same facts and that the facts of the case fundamentally belonged to criminal cases. The people’s court shall rule to dismiss the indictment and transfer it to the public security organs. For the arbitration commission, the decision to revoke the case shall be made in accordance with Article 6(7) of the Arbitration Rules. SUMSTAR argued that, the matters of arbitration award fell within the scope of the arbitration agreement. In accordance with the arbitration clause in Article 6, Paragraph 10 of the Logistics Service Agreement signed between SUMSTAR and Sunshine, SUMSTAR applied to CIETAC for arbitration, requiring Sunshine to bear the liability for breach of contract under the Logistics Service Agreement. The matters applied for arbitration fell within the scope of the arbitration agreement. Sunshine’s claim that the arbitration case involved a criminal case involving a third party outside the case, that the arbitration case did not fall within the scope of the arbitration agreement because it involved criminal law, and that CIETAC had no

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power to arbitrate, lacks a clear legal basis. In this case, the “criminal involvement” issue claimed by Sunshine was not the ground of revocation expressly stipulated in Article 58 of the Arbitration Law, and Sunshine’s claim lacked legal basis. According to the evidence submitted by Sunshine, the criminal case alleged by Sunshine was the case concerning the third parties, Li and others, were suspected of committing crimes, and the employees of Sunshine may be involved in criminal activities. SUMSTAR is not involved in criminal activities. The facts involved in this criminal case were only whether Li and others defrauded property through contract fraud. However, the arbitration case was based on a legally valid civil contract, the Logistics Service Agreement, concluded between SUMSTAR and Sunshine. The arbitration case involved the facts of whether Sunshine constituted a breach of contract under the Logistics Service Agreement and whether it should bear civil liability. Obviously, the arbitration case and the suspected contract fraud case of Li and others did not share the same facts and the same legal relationship, and the two cases did not contain each other. Under Article 10 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases,40 the economic dispute case continued to be heard, and the arbitral tribunal found that it had jurisdiction over the arbitration case, which complied with the law and the Arbitration Rules. Even if the facts of the crime of Li and others were established, pursuant to Article 3 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases,41 if Sunshine failed to perform its contractual obligations under the Logistics Service Agreement, it would not exempt Sunshine from its contractual liabilities. Beijing No. 4 Intermediate People’s Court held that, according to Articles 2 and 3 of the Arbitration Law, in the arbitration involved, concerning SUMSTAR’s application, the legal relationship on which it was based and the result of the arbitration award, the arbitration award dealt with a dispute over a warehousing contract between SUMSTAR and Sunshine based on the Logistics Service Agreement. It was a contract dispute between a legal person with equal subjects as stipulated in Article 2 of the Arbitration Law. As for the criminal case alleged by Sunshine involving a third party, the arbitral tribunal had found that the criminal case was a contract fraud case involving the person in charge of the Ningbo branch of Sunshine and Li and others 40

Article 10 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases provides that, if the people’s court, in hearing an economic dispute case, finds that there are clues and materials suspected of economic crimes that are involved in this case but are not the same legal relationship with this case, it shall transfer the suspected clues and materials to the relevant public security organs or procuratorial organs for investigation and handling. 41 Article 3 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases provides that, if the directly responsible managers and other directly responsible personnel of the unit sign an economic contract in the name of the unit and partially or wholly take the property obtained as their own which constituent crime, in addition to pursuing the criminal responsibility of the perpetrator according to law, the unit shall bear civil liability for the consequences caused by the actor’s signing and performance of the economic contract in accordance with law.

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as criminal suspects, which was different from the legal subject of the contract case between SUMSTAR and Sunshine. The cases did not share the same legal facts and causation, and could not contain each other. The court did not object to the arbitral tribunal’s determination. The reason for Sunshine’s application for revocation had no factual and legal basis. The application was not supported by the court. In this case, the applicant claimed that the arbitration case and the criminal case had the same facts, therefore, the arbitration case involved criminal issues and the arbitration commission did not have the power to arbitrate and should be set aside. After hearing, the court held that the contract fraud case in which the person in charge of the Ningbo branch of the applicant and the third parties, Li and others, were criminal suspects which were different from the legal subjects in the arbitration case. The two cases did not have the same legal facts and causation, so the court rejected the applicant’s application for revocation. Under normal circumstances, revocation of an arbitral award involving criminal issues may refers to the following three situations: First, similar to the present case, on the grounds of lack of authority to arbitrate. On the issue of whether there is no authority to arbitrate, the court generally considers whether the arbitration case and the criminal case have the same facts, whether it is a criminal case, and whether it should be handled by the public security organs. On the premise that it is not considered to be a criminal case, the matter of arbitration case is found to be an arbitrable, and the applicant’s application for dismissal is dismissed. However, if the court finds that the arbitration case and the criminal case have the same facts, it may set aside the award on the ground that it does not have the authority to arbitrate. For example, in SPC’s Reply on Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Fujian Group Co., Ltd for Revocation of [2015] Shen Zhong Cai No. 2475 Arbitral Award Rendered by Shenzhen Arbitration Commission,42 the court held that the funds involved in the arbitration case were criminal and stolen funds, which were the same facts in the criminal case, and held that the arbitration commission did not have the authority to arbitrate on this ground, and therefore revoke the arbitral award. Second, on the ground of violation of legal procedures. In practice, there have been a large number of cases on application for revocation of arbitral awards based on the ground that arbitration cases involve criminal issues but the arbitration commission has not suspended the arbitration procedure, which is a violation of legal procedures. It is generally believed that “not in conformity with the statutory procedure” under Article 58 of the Arbitration Law refers to the circumstance in which the violation of the arbitration procedures stipulated in Arbitration Law and the arbitration rules chosen by the parties may affect the correct adjudication of the case, and the arbitral tribunal has the power to decide whether to suspend the arbitration proceedings. For example, in cases such as (2021) Hu 01 Min Te No. 307 and (2021) Gui 05 Min Te No. 135, the court held that the arbitral tribunal had the power to review and 42

(2018) Zui Gao Fa Min Ta No. 34.

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determine ex officio whether the arbitration needed to be based on the outcome of the criminal case and whether the arbitration procedure should be suspended. Third, on the ground of violating the public interest. Generally, when a party applies for revocation on the ground of criminal involvement, regardless of whether the arbitration case is related to the public interest, this ground is usually used as one of the grounds that is submitted collaterally. As for whether it affects the public interest, the court will strictly grasp the issue, but in practice there are also successful cases of revocation. For example, in China Gold Group Liaoning Co., Ltd. v. LQF,43 the court held that the content of the Equity Transfer Contract involved in the arbitration case was obviously the result of bribery and malicious collusion between the parties, which was in the form of an equity transfer, and in essence, the parties had defrauded a huge amount of state-owned assets by criminal means. The arbitral award held that the Equity Transfer Contract was legal and valid. The decision of the arbitral award obviously violated the value orientation of Chinese law to safeguard social fairness and justice, and violated the basic moral standards generally recognized and followed by all members of society. It did not conform to public order and good customs. It posed harm to the most fundamental legal principles of fairness and justice, and also contradicted the core socialist values, and was contrary to the public interest, so the court ruled to revoke the arbitral award. Besides, in cases where an arbitral award is revoked on the grounds of criminal involvement, there are other grounds, such as wrongful award, excessive award or forgery of evidence. In dealing with these situations, the court will usually consider whether the criminal case has the same fact as the arbitration case. On the issue of whether an arbitrator has made the decision in violation of the law, generally, the court will find that there must be a legal document confirming the award in violation of the law as a basis. For example, in XW v. Shanghai Heijunma Equity Investment Partnership (L.P.),44 the court rejected the application for revocation on the ground that the applicant had failed to provide relevant effective criminal legal documents or disciplinary decisions to prove that there was a violation of the law. This view is consistent with Article 18 of the Arbitration Judicial Review Provisions.45

43

(2021) Jing 04 Min Te No. 383. (2021) Hu 02 Min Te No. 400. 45 Article 18 of the Arbitration Judicial Review Provision: “The arbitrator commits an act of seeking or taking a bribe, practicing favoritism or making falsehood, or making the award by legal abuse, when deciding the case’ as described in paragraph 1(6), Article 58 of the Arbitration Law of the People’s Republic of China and paragraph 2(6), Article 237 of the Civil Procedure Law of the People’s Republic of China means an act determined in an effective criminal legal instrument or a disciplinary action decision.”. 44

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5.5 The Crime of Illegally Absorbing Public Deposits The question of whether private lending involves criminal offenses such as illegal fund-raising and illegal absorption of deposits from the public is complex and difficult. In accordance with Paragraph 1 of Article 5, Article 6, Paragraph 1 of Article 12, and Article 13 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases,46 if private lending itself is suspected of involving the crime of illegal fundraising, it shall be transferred to the public security or procuratorial organs. If the borrower or lending act is suspected of committing a crime, the relevant private lending contract is not automatically invalid, and the validity of the contract shall be determined in accordance with the relevant provisions of the Civil Code. If private lending and illegal fund-raising and other crimes are related but not have the same facts, the civil case and the criminal case shall be tried separately. The court shall continue to hear the private lending dispute case, and the materials on the criminal part shall be transferred to the public security or procuratorial organs. Whether the criminal case is prior to the civil case or the civil case and criminal case is parallel, there are often different situations in practice, which is a critical question to the issue on whether to revoke the arbitral award. Fujian Group Co., Ltd. v. Sun47 Fujian Group Co., Ltd. (“Fujian Group”) claimed that Shenzhen Arbitration Commission had no competence to arbitrate. Shenzhen Arbitration Commission accepted the arbitration case on April 15, 2015, and on June 13 and June 16, the Funing County Public Security Bureau sent letters to inform Shenzhen Arbitration Commission that the borrower, Fujian Group, was suspected of illegally absorbing public deposits and an investigation was filed against it. According to Paragraph 46

Paragraph 1 of Article 5 of Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases (2020s Amendment): “After filing a case, if the people’s court discovers the private lending behavior itself is suspected of illegal fundraising and other crimes, it shall rule to dismiss the prosecution and transfer the clues and materials suspected of illegal fundraising and other crimes to the public security or procuratorial organs. “. Article 6 of Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases (2020s Amendment): “After filing a case, if the people’s court discovers clues or materials suspected of illegal fundraising and other crimes that are related to the private lending dispute case but are not the same facts, the people’s court shall continue to hear the private lending dispute case, and transfer the clues and materials suspected of illegal fundraising and other crimes to the public security organs or procuratorial organs.”. Paragraph 1 of Article 12 of Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases (2020s Amendment): “If the borrower or lender is suspected of committing a crime, or if a judgment that has taken effect determines that a crime is constituted, and the parties file a civil lawsuit, the private lending contract is not automatically invalid. The people’s court shall determine the validity of a private lending contract in accordance with the provisions of Articles 144, 146, 153 and 154 of the Civil Code and Article 13 of this Provision.”. 47 (2018) Zui Gao Fa Min Ta No. 34.

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2of Article 7 of the Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fund-raising Criminal Cases, “where the People’s Courts discover that there is suspicion of illegal fund-raising in the course of hearing civil cases or enforcement, they shall rule to dismiss the indictment or suspend enforcement, and promptly transfer the relevant materials to the public security organs or procuratorial organs”. After receiving the letter from the Funing County Public Security Bureau, Shenzhen Arbitration Commission had no power over the case. The case should no longer be handled by Shenzhen Arbitration Commission, but should be transferred to the Funing County Public Security Bureau for handling in accordance with the procedures of the criminal case. However, Shenzhen Arbitration Commission still required the hearing on July 9, 2015 despite the request for transfer made by the eight respondents in the arbitration case, which was obviously a procedural error and had no basis in law. On January 6, 2016, Shenzhen Arbitration Commission sent a letter to the Funing County Public Security Bureau, stating that the circumstances affecting the continuation of the arbitration case have disappeared. The Reply of the Funing County Public Security Bureau clearly noted that the facts of this case are covered within the facts of Fujian Group’s illegal absorption of public deposits, and it requested Shenzhen Arbitration Commission to reject Sun’s arbitration application in accordance with the law and transfer the relevant materials to the public security organ for joint handling. Sun argued that, Sun was not involved in the illegal fundraising case of Fujian Group. First, the crime of illegally absorbing deposits from the public was committed against public deposits. Deposit and borrowing were two different concepts. Sun did not deposit funds with Fujian Group, but lent funds to Fujian Group. The two parties not only signed a standardized loan contract, but also went through the mortgage registration procedures, and Fujian Group provided a mortgage guarantee, which was precisely as a guarantee measure for Sun’s claim against Fujian Group after the loan expired. Therefore, the relationship between Sun and Fujian Group was a typical borrowing relationship, not a deposit relationship. Sun had never been involved in Fujian Group’s illegal absorption of public deposits. Second, according to the law, civil cases should be tried separately from the criminal cases. The borrowing relationship in this case was based on different legal facts from the criminal case of Fujian Group’s alleged illegal absorption of public deposits. Even if an intersection occurred, it should be handled in accordance with the principle of handling civil cases prior to the criminal cases according to relevant provisions. Article 1 of the Provisions of the Supreme People’s Court on Several Issues Involving Suspicion of Economic Crimes in the Trial of Economic Dispute Cases stipulates: “Where the same citizen, legal person or other economic organization is separately involved in economic disputes and suspected economic crimes due to different legal facts, the economic dispute cases and suspected economic crime cases shall be tried separately.” Third, in judicial practice, a large number of civil cases involving Fujian Group had not been transferred. Fujian Group’s suspected illegal absorption of public deposits was criminally filed at least before June 18, 2015. But after that date, there were still

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many judgments in civil cases involving Fujian Group in courts across the nation. A lot of cases filed during this period could also be queried from the information network of the person subject to enforcement. The courts continued to deal with the cases according to civil procedures, which fully indicated that civil cases had not been transferred in various places. After review, Shenzhen Intermediate People’s Court formed the following two opinions on how the case should be handled. The majority opinion held that the arbitration case was originally a contractual dispute between equal civil subjects, and the arbitration institution had the power to conduct arbitration. However, after the public security organs filed a case and investigated the suspected crime of illegally absorbing public deposits by Fujian Group, the respondent in arbitration, the nature of the dispute changed. According to the prosecution opinions of the public security and procuratorial organs, the loans involved in the arbitration dispute were covered by the criminal facts of Fujian Group, so it could be determined that the dispute involved in the case has the same fact as Fujian Group’s suspected crime of illegally absorbing public deposits. The dispute between arbitration applicant and respondent was no longer a simple contract dispute. The lending relationship between the two parties should be handled together in the criminal case of Fujian Group’s crime of illegally absorbing deposits from the public. Based on Article 2 of the Arbitration Law, since the relationship between the parties in this case was not a contractual dispute between equal civil subjects, the arbitration institution had no power to arbitrate the dispute. According to Item (2) of Paragraph 1 of Article 58 of the Arbitration Law, the arbitration institution had no power to arbitrate, and the arbitral award shall be revoked. The minority opinion held that the arbitral tribunal had the power to determine whether the dispute involved in the arbitration case was part of the criminal facts. If the arbitral tribunal found that they were not part of the same criminal facts, the arbitral tribunal had the power to decide to continue the trial without transferring it to the public security organs. The review of revoking an arbitration award should be strictly based on the circumstances stipulated in Article 58 of the Arbitration Law. Since the law did not expressly provide that the arbitration institution had no power to arbitrate a private lending dispute involving the crime of illegally absorbing deposits from the public, there was no statutory cause for revoking the arbitral award in this case, and the applicant’s application for revoking the award should be rejected. After discussion by the judicial committee of the High People’s Court of Guangdong Province, it was unanimously held that, according to the investigation results of the Funing County Public Security Bureau, the prosecution opinion of the procuratorate and the judgment of the court, the loans involved in the arbitration dispute were covered by the criminal facts of Fujian Group’s suspected illegal absorption of public deposits, so it could be determined that the loan contract dispute involved in the case and Fujian Group’s suspected crime of illegally absorbing public deposits have the same facts. In addition to Fujian Group as the defendant in the criminal case and Jiang as the defendant in the criminal case, the guarantors of the loan involved in the case (i.e. the respondent involved in the arbitration) Shanghai Fujian Hotel Co., Ltd., Shanghai Jiangsu Hotel, and Fushi Branch of Fujian Group were also involved in the criminal facts. According to Paragraph 1 of Article 7 of the Opinions of the Supreme

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People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fund-raising Criminal Cases (Gong Tong [2014] No. 16),48 Shenzhen Arbitration Commission had no authority to arbitrate the loan contract dispute between Sun and Fujian Group. According to Item (2) of Paragraph 1of Article 58 of the Arbitration Law, the arbitral award in question was a matter that the arbitration commission had no authority to arbitrate, so the arbitral award should be revoked. SPC held that, the investigation results of the public security organs, the prosecution opinions of the procuratorate, and the effective criminal judgment of the people’s court fully proved that the facts involved in the arbitration case accepted by the Shenzhen Arbitration Commission were part of the criminal facts of Fujian Group illegal absorption of public deposits. Therefore, the case was a criminal case. According to Article 2 of the Arbitration Law, arbitration institutions did not have the competence to accept criminal cases. SPC agreed with the request of the High People’s Court of Guangdong Province to revoke the arbitral award involved in the case in accordance based on Item (2) of Paragraph 1of Article 58 of the Arbitration Law. In this case, the private lending dispute between Sun and Fujian Group involved the crime of illegally absorbing public deposits. The private lending itself involved a criminal offence. According to Paragraph 1 of Article 5 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases, the arbitration case should be dismissed and transferred to the public security organs. Moreover, the Funing County Public Security Bureau sent several letters to the arbitration commission and clearly mentioned that the arbitration case itself was covered by the facts of the criminal case, which belonged to the same fact. The arbitration commission should handle it cautiously under such circumstances. According to the court’s opinion, it should focus on whether the lender’s loan funds are involved in criminal issues, whether the private lending case itself is part of the crime of illegally absorbing deposits from the public, and whether it is the same fact. In practice, it is not the case that once private lending encounters criminal involvement or once the public security organ files a criminal case, the arbitration commission will not deal with it. As the adjudication body, the arbitral tribunal shall conduct specific analysis and handle according to the specific circumstances of the case. For example, in Guangxi Guangtou Financing Guarantee Co., Ltd. v. Yang,49 the court held that Guangxi Guangtou Financing Guarantee Co., Ltd. (“Guangtou”) 48

Paragraph 1 of Article 7 of the Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law in the Handling of Illegal Fund-raising Criminal Cases (Gong Tong [2014] No. 16): “Where a relevant unit or individual initiates a civil lawsuit or applies for enforcement of the assets involved in the case to the people’s court on the same facts, the people’s court shall not accept a criminal case of illegal fundraising that is being investigated, prosecuted or tried by the public security organ, people’s procuratorate, or people’s court, and shall transfer relevant materials to the public security organs or procuratorial organs.”. 49 (2021) Yue 01 Min Te No. 535.

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claimed that the arbitration in this case was suspected involving the crime of illegally absorbing deposits from the public on the ground that Qianpan Company was involved in the illegal absorption of public deposits, and the arbitration committee had no jurisdiction. The arbitration award resolved the loan and guarantee dispute between Yang and Lantian Company and Guangtou. Qianpen Company was not liable in this case. The award also did not dispose of or determine the rights and obligations of the Qianpen Company. The civil legal relationship in the arbitral award was not the same as that of Qianpan Company’s alleged crime of illegally absorbing deposits from the public. Guangtou also failed to prove that the money involved in the case was also included in the criminal investigation scope of the crime of illegally absorbing deposits from the public by Qianpen Company. Guangtou’s claim that Guangzhou Arbitration Commission did not have the competence to arbitrate had no factual basis. If the act of lending itself involves the crime of illegally absorbing deposits from the public, generally, it may be determined that private lending and illegal fundraising have the same fact, and the criminal issues should be handled prior to the civil issues. For example, in the (2021) Zui Gao Fa Min Shen No. 1078 case, SPC held that, Cui confirmed that the money lent to Song came from public deposits absorbed by the “Beimi Wallet” online platform, and the source of the money was Cui’s illegally absorbing public deposits, which was not only related to criminal offenses, but also stolen funds, which were the same facts and should be recovered and dealt with by criminal proceedings. Cui did not enjoy legal civil rights to the funds involved in the case. If in the criminal procedure of Cui’s suspected crime, the loan involved in the case was not recognized as stolen money or had not been dealt with in the recovery procedure, Cui could claim against Song in another case. Regarding the handling of (2021) Zui Gao Fa Min Shen No. 1078 case, there are two different views. One view is that the indictment should be dismissed. Since the crime of illegally absorbing public deposits is consistent with the subject of private lending, and the lending itself involves a criminal offense, the court shall, in accordance with Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases, rule to dismiss the prosecution and transfer the criminal case. Another view is that civil cases could be temporarily suspended and restarted after the criminal case is concluded. If the criminal proceedings have not been concluded, the civil case proceedings may be suspended. If the criminal case finds that the lender has committed a crime, it may be determined that private lending is invalid because it violates the prohibitive provisions of the law. There may also be different adjudication ideas for different adjudication bodies. For example, in Hengfuhuitong Investment Management Co., Ltd. v. Chen, China Merchants Bank Co., Ltd. Foshan Branch,50 the contract involved in the case was a fund contract dispute similar to that of private lending, and it was also suspected of the crime of illegally absorbing deposits from the public. The arbitration case 50

(2020) Yue 06 Min Te No. 328.

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continued to be tried as a civil case. The parties filed an action to revoke the arbitral award. Foshan Intermediate People’s Court held that the arbitration commission had the power to hear the case and decide whether to involve criminal issues and suspend the arbitration proceedings. For example, in the first-instance procedure of the (2020) Yue Min Shen No. 2573 case, Shenzhen Intermediate People’s Court ruled to reject the related similar case, and the High People’s Court of Guangdong Province upheld the rejection after trial. It is worth noting that China is not a country of case law. There are no two leaves that are exactly the same, and there are special features in the circumstances of each case. If only the funds come from the stolen funds in the case, but the lender itself is not related to the criminal case, or the lending behavior and illegal fundraising are not the same act, attention should be paid to whether the conduct and boundary of crimes such as private lending and illegal absorption of public deposits can be distinguished. The specific circumstances should be analyzed specifically. It should not always be dismissed once the criminal issue is involved. The arbitral tribunal has the authority to hear arbitration cases, and should pay attention to distinguishing whether the arbitration case involves criminal issues and whether it has the same fact as the criminal case, so as to avoid the arbitral award being revoked.

5.6 Forgery of Seals The jurisdiction of an arbitration institution derives from an arbitration agreement or arbitration clause voluntarily reached by the parties. The parties may determine the dispute resolution method of before, when or after a dispute arises by signing an arbitration agreement separately or stipulating an arbitration clause in the contract. Under normal circumstances, when the parties sign or affix their official seals to the document containing the arbitration agreement, it means that the arbitration agreement is established and effective, and arbitration can be initiated after a dispute occurs. In the arbitration practice of arbitration institutions, arbitration can usually be initiated as long as there is an arbitration agreement signed by the parties in form. In some cases, however, the apparent existence of a signature or seal may not necessarily represent the true intention of the parties. For example, a party may claim that the seal is false or forged after the commencement of arbitral proceedings. Minsheng Securities Co., Ltd. v. Wang51 The Fund Entrustment Wealth Management Agreement dated April 25, 2015 provided that if a dispute arises between party A and party B in the performance of the contract, they will submit to Taiyuan Arbitration Commission for arbitration. Wang was the principal (Party A), Xu was the trustee (Party B), and Minsheng Securities Co., Ltd. was Party C (supervisor). (2017) Jin Xing Zhong No. 226 Judgment confirmed that Xu, as the general manager of Taiyuan Business Department 51

(2018) Jin 01 Min Te No. 10.

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of Minsheng Securities Co., Ltd., privately engraved the official seal of the unit, forged the contract, and defrauded property, which constituted a criminal offense. On January 24, 2018, the respondent, Wang, applied to Taiyuan Arbitration Commission for arbitration, requesting confirmation that the Fund Entrustment Wealth Management Agreement was invalid, and the applicant should return the investment funds to the respondent. After receiving the notice of arbitration, the applicant Minsheng Securities Co., Ltd. applied to Taiyuan Intermediate People’s Court to confirm that the arbitration clause in the Fund Entrustment Wealth Management Agreement was invalid. The applicant Minsheng Securities Co., Ltd. claimed that, first, the form and content of the Fund Entrustment Wealth Management Agreement submitted by Wang are basically the same as the agreement submitted by the deceived party in Xu’s criminal case, and Wang quoted the relevant contents of the effective judgment on Xu’s private engraving of official seals and forgery of contracts in the application for arbitration. Based on this, Wang affirmed that Xu’s fraud in the form of purchasing fund wealth management products was a legal form to cover up the illegal purpose, and the Fund Entrustment Wealth Management Agreement was invalid. The above showed that Wang recognized the facts that Xu privately engraved the official seal and forged the Fund Entrustment Wealth Management Agreement. According to Articles 4 and 16 of the Arbitration Law, the arbitration agreement shall have an indication of the intention to apply for arbitration. The applicant had no intention of entering into an arbitration agreement with the respondent, and the arbitration clause involved in the agreement was invalid. Second, the applicant was not the subject of the arbitration clause of the Fund Entrustment Wealth Management Agreement. The arbitration clause in the agreement provided that “if a dispute arises between party A and party B in the performance of the contract, they will submit to Taiyuan Arbitration Commission for arbitration.” Since the applicant was Party C, the effect of this clause did not extend to the applicant. Third, the arbitration case was a tort liability case arising from Xu’s criminal conduct, and the arbitration matters exceeded the scope of arbitration, so it requested confirmation that the arbitration agreement between the applicant and the respondent, Wang, was invalid. The respondent Wang argued that, first, Xu was the person in charge of the applicant’s registration with the industry and commerce department. The place of signing was the applicant’s business department. The respondent had sufficient reason to believe that the wealth management product was a genuine product sold by the applicant. The case constituted apparent representation. The effect of the arbitration clause extended to Minsheng Securities Co., Ltd. Second, Minsheng Securities Co., Ltd., as the guarantor of the agreement, had a guarantee obligation attached to the main contractual obligation, and the dispute resolution method stipulated in the wealth management agreement shall be applied in this case. Third, the arbitration case was caused by the inability to perform the Fund Entrustment Wealth Management Agreement. The respondent had reason to believe that the fund was issued by the applicant. The respondent requests the applicant to bear responsibility in accordance with the Fund Entrustment Wealth Management Agreement and the applicant’s fault, which did not exceed the scope of arbitration. Moreover, the invalidity of the contract did

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not affect the validity of the dispute resolution clause in the contract. The application for rejecting Minsheng Securities Co., Ltd.’s application was requested. Taiyuan Intermediate People’s Court held that the Fund Entrustment Wealth Management Agreement involved in this case was found to be a forged contract in the relevant criminal cases. The respondent failed to provide evidence to prove that the Fund Entrustment Wealth Management Agreement in this case was different from the agreements involved in other criminal cases. Therefore, the arbitration clause in the Fund Entrustment Management Agreement between the applicant and the respondent is invalid. In accordance with Article 16 of the Arbitration Law, it was ruled as follows: The arbitration clause in the Fund Entrustment Management Agreement between the applicant Minsheng Securities Co., Ltd. and the respondent Wang was confirmed to be invalid. In this case, the applicant held that the Fund Entrustment Wealth Management Agreement was invalid because Xu privately engraved official seal and forged the contract, which was consistent with the agreement in the criminal case. Moreover, the applicant did not have the true intention to arbitrate, so the arbitration clause was invalid. Taiyuan Intermediate People’s Court held that the contract in question was found to be a forged contract in the criminal case adjudicated, and further found that the arbitration clause in the contract in question was invalid. There is a special circumstance in this case, that the person involved in the criminal offence of privately engraving the official seal and forging the contract is the person in charge of applying for registration to the industry and commerce department and the contract involved in the case is also signed in the business department of the applicant. In the circumstance of signing an arbitration agreement with a forged official seal which is similar to this case, if the person who forges the official seal and affixes it involves a criminal offence, but is the representative of the company, the other party has reason to believe that he could represent the company. It may be deemed to constitute apparent representation and thus the arbitration clause is valid. For instance, in Shandong Lihua Chunqiu Real Estate Co., Ltd. (“Lihua”) v. Qian,52 Jining Intermediate People’s Court held that Qian and Lihua had signed the Commercial Housing Purchase Contract and the Subscription Agreement on September 6, 2017. The property consultant was Wang. After that, Wang signed the Commercial Housing Purchase Contract with Qian with his privately engraved Lihua seal (Note: Wang’s act of signing the contract with the private engraved official seal had been recognized as a criminal offense), but Qian had reason to believe that Wang is performing his official behavior. Although on June 8, 2018, Lihua and Wang terminated the labor contract, but Lihua did not provide evidence to prove that Qian had been notified of the termination, so the behavior of Wang constituted an apparent representation. The Commercial Housing Purchase Contract signed with the privately engraved Lihua seal was binding on Lihua. Therefore, Article 27 of Commercial Housing Purchase Contract clearly provided that the dispute resolution method was to submit the dispute to Jining Arbitration Commission for arbitration. The arbitration clause was valid. 52

(2020) Lu 08 Min Te No. 36.

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The circumstance of forging official seal in Lihua case the is basically the same as that in Minsheng Securities case. But the judgements on whether the forgery of official seal constitutes apparent representation are different. The SPC’s view tends to be that as long as the contractor has the authority of representation or agency at the time of sealing, even if the official seal affixed to the contract is false, as long as it can prove that the false seal was affixed by the person with the authority of representation or agency or agreed to be stamped by others, the act of affixing the official seal is still an act of the company, and the company bears the corresponding legal consequences. For example, in (2016) Zui Gao Fa Min Shen No. 733 case, SPC held that although the criminal judgment had determined that the official seal was privately engraved by Weng, regarding the special position of Weng in Wanxiang Company and the apparent rights such as the identity of the shareholder, it was sufficient for the counterparty You to have reasonable reliance. It was too strict for the counterparty to undertake the obligation to conduct a substantive examination of the authenticity of the official seal, which was not conducive to protecting the transaction security. Therefore, Weng’s behavior had constituted an apparent representation, and Wanxiang Company should bear the guarantee liability for Weng’s debts involved in the case. Wanxiang Company’s claim that, Weng was not the legal representative of Wanxiang Company and had privately engraved the official seal, so it should not bear the guarantee liability, was untenable. As for whether the actor’s act of entering into an arbitration agreement or arbitration clause by forging an official seal extends to the company, generally, it is considered from the aspects of the actor’s position, agency or authorization authority, and the reasonable reliance of the other party, which is also consistent with the principle of “looking at people without looking at the seal” under Article 41 of the Conference Minutes.

Chapter 6

International and Interregional Recognition and Enforcement of Arbitral Awards

Since its adoption by the United Nations in 1958, the New York Convention has been enriched through the legal practice of the local courts of the Contracting States in various jurisdictions. This has given international commercial arbitration worldwide dynamism with more countries joining the New York Convention. As of May 2023, the number of the Contracting States has reached 172.1 In cases involving recognition and enforcement of foreign arbitral awards, Chinese courts continues to adopt a pro-arbitration approach and seek to converge with international commercial arbitration practice. In the China Arbitration Yearbook (2021),2 127 cases regarding recognition and enforcement of foreign arbitral awards in China between 2008 and 2018 have been introduced in detail or in brief, while this chapter will cover the latest (from 2019 to 2022) typical decisions rendered by Chinese courts on application for recognition and enforcement of foreign arbitral awards. Apart from those decided pursuant to Article V of the New York Convention, which are the main legal grounds for recognition and enforcement of foreign arbitral awards, this Chapter will also introduce typical cases related to other important articles of the New York Convention.

1

See New York Convention, List of Contracting States, at https://www.newyorkconvention.org/ list+of+contracting+states, May 26, 2023. 2 Y. Lin, China Arbitration Yearbook (2021), (Springer, 2022). This Chapter is coauthored with Shuqi Gui, Ziyun Feng and Yini Chen, associate of Yi and Partners Law Firm.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 Y. Lin, China Arbitration Yearbook (2022), China Arbitration Yearbook, https://doi.org/10.1007/978-981-99-7165-7_6

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6.1 Nationality of Arbitral Awards Paragraph 1 of Article I of the New York Convention defines the territorial scope of the arbitral awards to which the New York Convention shall apply. Pursuant to Paragraph 1 of Article I of the New York Convention, the courts shall first identify the place where the arbitral award was made. In some cases, for example, where the arbitral award is made by ICC in London, the answer to this question would be quite obvious. While in other cases, some arbitral awards are not “made in the territory of a State other than the State where the recognition and enforcement of such awards are sought”, then the courts may need to identify whether the arbitral award in dispute is a “non-domestic award”. This identification determines whether the arbitral award sought to be recognized and enforced is a “foreign arbitral award” in the context of Chinese law. In the Brentwood case to be discussed in this section, the arbitral award in question was made by ICC in Guangzhou, China, under Chinese law. The nationality of the arbitral award and whether New York Convention or Civil Procedure Law shall apply are the main legal issues. Brentwood Industries, Inc. (U.S.A) v. Guangdong Fa’anlong Machinery Complete Set Equipment Engineering Co., Ltd. et al.3 On April 13, 2010, Guangzhou Zhengqi Maoyi Co., Ltd. (“Zhengqi Company”, as the buyer), Brentwood Industries, Inc. (U.S.A) (“Brentwood Company”, as the seller) and Guangdong Fa’anlong Machinery Complete Set Equipment Engineering Co., Ltd. (“Fa’anlong Company”, as the principal) executed the Contract in Guangzhou, whereby Fa’anlong Company entrusted Zhenqi Company to act as import agent of goods and purchase from Brentwood Company a chain plate type mud scraper. Article 16 “Arbitration” of the Contract stipulated that “Any dispute arising from or in connection with the Contract shall be resolved by the parties through friendly negotiation. In case no settlement can be reached, the case may then be submitted to the International Court of Arbitration of the International Chamber of Commerce in the project seat in accordance with international practice. The arbitral award made by the arbitration commission shall be final and binding upon both parties. The arbitration fee shall be borne by the losing party unless otherwise decided by the arbitration commission. The language of the arbitration shall be Chinese and English”. Article 17 “Applicable Law” stipulated that “the Applicable Law of the Contract shall be the laws of the People’s Republic of China.“ According to the Supplementary Agreement entered into by and among the parties, the project was located in Guangzhou, China. On May 9, 2011, Brentwood Company applied to Guangzhou Intermediate People’s Court to confirm the invalidity of the arbitration clause of the Contract. On February 22, 2012, Guangzhou Intermediate People’s Court confirmed the validity by a ruling.4

3 4

(2015) Sui Zhong Fa Min Si Chu Zi No. 62. (2011) Sui Zhong Fa Zhong Yi Zi No. 11.

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On August 31, 2012, Brentwood Company applied to ICC for arbitration. On March 17, 2014, the sole arbitrator of ICC rendered the Final Award in favour of Brentwood Company. After the Final Award was made, Brentwood Company applied to Guangzhou Intermediate People’s Court for the recognition and enforcement of the Final Award on the legal basis of the New York Convention or the Arrangements on Mutual Enforcement of Awards. Brentwood Company asserted that, in accordance with the judicial practice of the Chinese courts to identify the nationality of arbitral awards based on the location of arbitration institutions which made the arbitral awards in question, the Final Award made by ICC whose headquarters are located in Paris, France should be a French arbitral award. Or, it should be a Hong Kong arbitral award as it could be considered to be made by the Hong Kong branch of ICC. For the former case, New York Convention shall apply, while for the later one, the court shall apply to Reciprocal Enforcement Arrangements. However, the respondent argued that ICC was not a Chinese arbitration institution, and the Final Award was rendered by a foreign arbitration institution, so the Final Award was neither a domestic award nor a foreign award. Therefore, the Final Award did not have Chinese nationality. Furthermore, the Final Award was not rendered in the territory of another Contracting States to the New York Convention, and thus the Final Award did not hold the nationality of a foreign country. According to the reciprocity reservation that China made upon its accession to the New York Convention, China would only recognize and enforce, on the basis of reciprocity, arbitral awards rendered by foreign arbitration institutions in the territory of another Contracting State, thus excluding arbitral awards made by foreign arbitration institutions within the territory of China from the application of New York Convention. The Guangzhou Intermediate People’s Court held that, based on the existing facts, the arbitral award in question was made by a foreign arbitration institution in mainland China and should be deemed as a foreign-related arbitral award in China. As a result, if the respondent did not perform the Final award, the applicant could apply for enforcement to the intermediate court where the respondent or its property located under Article 273 of the Civil Procedure Law. The legal bases (i.e. the New York Convention and the Arrangements on Mutual Enforcement of Awards) of the application for recognition and enforcement of the Final Award were obviously wrong. The respondent refused to correct them after repeated explanations made by the court. Consequently, Guangzhou Intermediate People’s Court made the ruling on August 6, 2020 that the examination of this case was concluded. The ruling made by Guangzhou Intermediate People’s Court in the Brentwood is consistent with the pro-arbitration approach the SPC held in the LD case5 and Daesung case.6 In the LD case, the applicant applied to the Hefei Intermediate 5

Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Validity of the Arbitration Agreement between LD Intelligent Technology Corp., Ltd. and BP Agnati S.R.L, (2013) Min Si Ta Zi No. 13. 6 (2020) Hu 01 Min Te No. 83. The basic facts of this case are as below: On August 7, 2012, Article 14.2 of the Purchase Agreement signed between Daesung Industrial Gases Co., Ltd. (“Daesung

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People’s Court for confirming the invalidity of the arbitration agreement that stipulated the submission to ICC and the place of jurisdiction of Shanghai, China. Hefei Intermediate People’s Court and the minority of Anhui High People’s Court held that arbitration was a professional service which could only be provided with special license from the authority, and China had not yet opened up its arbitration market, therefore the arbitration agreement in dispute was invalid in violation of the Arbitration Law. However, the reply of the SPC held that the arbitration agreement in dispute was valid and consistent with Article 16 of the Arbitration Law as it included the expression of intention to apply for arbitration, matters for arbitration and a designated arbitration commission. In the LD case, the parties agreed in the contract that disputes arising out of the contract would be arbitrated by ICC and “the place of jurisdiction shall be Shanghai, China”. According to Article 16 of the Arbitration Law Interpretation, the validity of arbitration agreement shall be governed by the law of the place of arbitration, i.e. Chinese Law in this case. Therefore, the arbitration agreement in dispute was valid because it included the expression of intention to apply for arbitration, matters for arbitration and a designated arbitration commission pursuant to Article 16 of the Arbitration Law. The significance of this case is that it draws a conclusion from the previous debate on whether a foreign arbitration institution can be interpreted as “a designated arbitration commission” under Article 16 of the Arbitration Law, and determines the validity of such clauses. In its reply, the SPC interpreted the “designated arbitration committee” under Article 16 of the Arbitration Law broadly to include domestic and foreign arbitration institutions, which mirrored the pro-arbitration approach in Chinese judicial practice, and this was reasserted in the Daesung case. Company”) and Praxair (China) Investment Co., Ltd. (“Praxair Company”) stipulates that any dispute arising therefrom shall be arbitrated in Shanghai by Singapore International Arbitration Centre (“SIAC”). Thereafter, Daesung Company, Praxair Company and Daesung (Guangzhou) Gases Co., Ltd. (“Daesung Guangzhou”) signed the Supplementary Agreement I, pursuant to which Company A assigned its rights and obligations under the Agreement to Daesung Guangzhou. In March 2016, Daesung Company and Daesung Guangzhou applied for arbitration to SIAC as joint claimants. In the course of the arbitration, the parties commenced proceedings in the High Court of Singapore Supreme Court and the Court of Appeal of Singapore Supreme Court in a case known as “bna v bnb” against the majority decision of the arbitral tribunal on the jurisdiction of the seat of arbitration in Singapore. On August 30, 2017, the High Court of Singapore Supreme Court made its decision on “bna v bnb” case, holding that a reference to the SIAC for arbitration in Shanghai should be read as meaning that the seat of arbitration was Singapore and that Singapore law was the law applicable to the arbitration agreement. On November 14, 2019, the Court of Appeal of Singapore Supreme Court held the natural meaning of the phrase “arbitration in Shanghai” was to use Shanghai as the seat of arbitration. The fact that the parties had only agreed on a sole geographical location in the arbitration agreement should be interpreted as a choice by the parties as to the seat of arbitration. The literal meaning of the phrase “arbitration in Shanghai” therefore means that Shanghai is agreed as the seat of arbitration. The parties’ implied choice of the law applicable to the arbitration agreement was Chinese law. However, the Court of Appeal of Singapore Supreme Court only reversed the decision on the seat of arbitration and the applicable law, without deciding whether the arbitral tribunal had jurisdiction over the dispute, which meant that the issues of jurisdiction of the tribunal and the validity of the arbitration agreement are left to the local court of the place of arbitration, namely Shanghai court.

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In the Daesung case, the arbitration agreement in question agreed to submit the dispute to arbitration in Shanghai (the place of arbitration) by SIAC in accordance with its arbitration rules. As to whether a foreign arbitration institution could administer arbitration in China, the Shanghai No. 1 Intermediate People’s Court held that the SPC had confirmed in the LD case that an arbitration clause in the foreignrelated contract, providing any disputes would be arbitrated by a foreign arbitration institution in China shall be valid if only Article 16 of the Arbitration Law was complied with. The law of the PRC did not prohibit foreign arbitration institutions from administering arbitration with the seat of arbitration in China. Although the Arbitration Law was not comprehensive at the time of its enactment and was inconsistent with international commercial arbitration to some extent, the legislation and the judicial system should be complementary and the argument that in legislative level. The Arbitration Law did not address the issue of whether foreign arbitration institutions could arbitrate in China. Such circumstance could not deny the validity of the aforementioned judicial interpretation of the SPC at the judicial level. The aforementioned cases only addressed the issue of the validity of arbitration agreements of foreign arbitration institutions arbitrating in China. The question of the nationality of arbitral awards rendered by foreign arbitration institutions in China was explicitly answered by the Chinese court in the Brentwood case for the first time. In the Brentwood case, by taking the seat of arbitration but not the place of arbitration institution as the basis for determining the nationality of the arbitral award, the Guangzhou Intermediate People’s Court did not avoid addressing the issue of the nationality of the Final Award and found it to be a foreign-related award. Accordingly, the Final Award shall be enforced under the Civil Procedure Law rather than the New York Convention. This ruling also has practical implications in supporting the enforcement of commercial arbitration. Even if the court upholds the Final Award as a “non-domestic award” under Paragraph 1 of Article V of the New York Convention, according to the reciprocity reservation that China made upon its accession to the New York Convention, that China will only recognize and enforce arbitral awards made in the territory of another contracting state so that such arbitral awards are still be excluded from application for the New York Convention. This would not be beneficial to the enforcement of such arbitral awards. Also, this ruling provides a basis for Chinese courts to determine the nationality of ad hoc arbitration based on the seat of the arbitration. The Brentwood case was listed by the SPC as one of the third batch of 10 typical cases involving “One Belt, One Road” construction. On December 31, 2021, the SPC issued the Minutes of the National Foreignrelated Commercial and Maritime Trial Work Conference, in which Article 100 stipulates the enforcement of awards made by foreign arbitration institutions in China. According to this Article, an arbitral award made by foreign arbitration institutions with China as the place of arbitration shall be regarded as a foreign-related arbitral award in China. And if the parties apply to the intermediate people’s court of the place of arbitration to set aside the arbitral award, the court shall examine the case under Article 70 of the Arbitration Law. If the parties apply for enforcement, the court shall examine the case under Article 281 of the Civil Procedure Law. Since the

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issuance of the abovementioned Minutes, the ambiguity and possible inconsistent practice on the same issue has been diminished.

6.2 Competent Court The New York Convention itself does not regulate the issue of jurisdiction of the courts of the Contracting States over foreign arbitral awards, but leaves it to the courts of the place of enforcement to decide in accordance with the law of the forum. Article 3 of the New York Convention provides that “Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles”, which is designed to respect the judicial practice of the forum. However, it is possible that some arbitral awards may not be recognized and enforced in the jurisdiction intended by the parties due to the lack of a minimum connection between the award and the forum. In the context of Chinese law, both Article 290 of the Civil Procedure Law and Article 11 of the Special Maritime Procedure Law of the People’s Republic of China7 stipulate the jurisdiction of recognition and enforcement of foreign arbitral awards, i.e. such cases of recognition and enforcement shall be applied directly by the parties to the intermediate people’s court or maritime court where the parties domicile or their properties locate. Article 3 of the Notice of the Supreme People’s Court on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China stipulates that if the respondent is a legal person, the intermediate people’s court in the place where its main office is located shall govern the case of recognition and enforcement of foreign arbitral awards. This stipulation has broadened the concept of “domicile” of the respondent, but disputes often arise in individual cases as to whether the respondent has a domicile in China. In particular, as the forms of enterprise organization continues to develop, it has become more common for enterprises to carry out commercial activities in China by establishing offshore entities. In the cases of recognition and enforcement of arbitral awards involving such offshore entities, it has become more controversial as to the jurisdiction of Chinese courts over such awards.

7

Article 290 of the Civil Procedure Law stiupulates that if an award of a foreign arbitration institution needs to be recognized and enforced by the people’s court of the People’s Republic of China, the party shall apply directly to the intermediate people’s court of the place of residence of the executee or the place where his property is located The application shall be made by the people’s court in accordance with the international treaties concluded or participated by the People’s Republic of China, or in accordance with the principle of reciprocity. Article 11 of the Law of the People’s Republic of China on Special Procedures in Maritime Litigation stipulates that a party applying for recognition and enforcement of a foreign maritime arbitral award may apply to the maritime court of the place of domicile of the executee or the place where the property is located.

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Oriental Prime Shipping Co., Limited v. Hong Glory International Shipping Company Limited 8 On September 21, 2018, the parties entered into a time charter party and agreed that any disputes between them would be submitted to arbitration in London, applying English law and the rules of the LMAA. Thereafter, a dispute arose between the parties regarding the performance of the time charter party. The applicant, Oriental Prime Shipping Co., Limited (“Oriental Company”) applied for arbitration with the LMAA based on the arbitration clause of the time charter party. The arbitral award was made by the tribunal on October 10, 2019, ruling that, Hong Glory International Shipping Company Limited (“Glory Company”) shall pay the applicant US$ 90,790.28 of charter hire, £11,400 of arbitration fees, and costs incurred by the applicant in connection with the arbitration and interest on each of the above costs. Since the respondent failed to fulfill its payment obligations under the arbitral award, the applicant applied to the Shanghai Maritime Court for recognition and enforcement of the award. During the trial of the case, the respondent objected to the jurisdiction of the Shanghai Maritime Court during the period for the submission of statement of defence. The respondent argued that it was registered in the Marshall Islands and had not established its main office or owned any property in mainland China, therefore the Shanghai Maritime Court had no jurisdiction over the case and the applicant was not entitled to apply for recognition and enforcement of the arbitral award in the Shanghai Maritime Court. Shanghai Maritime Court overruled the respondent’s jurisdictional objection, after which the respondent filed an appeal. However, the High People’s Court of Shanghai made the same decision ((2020) Hu Min Xia Zhong No. 110 Ruling) to reject the appeal of the respondent. The High People’s Court of Shanghai relied on the following facts to determine that Shanghai was where the respondent’s principal office situated: (i) the arbitral award in question clearly stated that the respondent was a company registered in the Marshall Islands but operated in Shanghai, China; (ii) the time charter party in question also explessly stated that the address of Glory Company was Room 1203, 12th Floor, Ruifeng International Building, No. XXX Yang Shupu Road, Shanghai, China; (iii) the content of the relevant business correspondence emails in the case showed that the office address of Glory Company was the same as the respondent’s address stated in the charter confirmation. In this case, the respondent did not submit a request or evidence to refuse the recognition and enforcement of the arbitral award in question under Paragraph 1 of Article V of the New York Convention. Shanghai Maritime Court also found ex officio that the arbitral award in question was not covered by Paragraph 2 of Article V of the New York Convention, and ruled that the final award was recognized and enforced. In this case, the location of the principal office of a legal person is the core criteria for determining its domicile, and this rule is also stipulated in Article 3 of the Civil Procedure Law Interpretation and Article 36 of the Civil Code. In the reasoning of this 8

(2020) Hu 72 Xie Wai Ren No. 1; (2020) Hu Min Xia Zhong No. 110.

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case, Shanghai Maritime Court held that the criteria for determining the location of the principal office of a legal person has not been unified in Chinese judicial practice, but there was a tendency to regard the forum as the domicile of the respondent by proving a “close connection” between the forum and the respondent. In summary, in judicial practice, the parties usually prove the “close connection” through the following connection points: (1) documents issued by the authorities; (2) lease contract, rent payment proof and invoices, property and utility payment proof and invoices; (3) tax payment receipts; (4) the addresses stated in any of the following: the business contract, the business card of the personnel, the website accessible by the public, mail or publicity; (5) other evidence found from field survey. Under current business practice of the enterprises, enterprises with multiple business area, entities or offices are commonly seen, so it is difficult to judge whether an office is “principal” or not. As long as the parties can prove they run business in the alleged “principal office”, it is not necessary to qualify the “principle” with criteria of sizes or establishing time of the office. However, in the following China Merchants Bank case, the connecting point that the applicant relied upon in application for recognition and enforcement of foreign arbitral award to Xiamen Maritime Court was neither the respondent’s domicile nor its property location. The reason why Xiamen Maritime Court had the jurisdiction over the case is that a related case was heard by Xiamen Maritime Court at the same time. China Merchants Bank Co., Ltd. Xiamen Branch v. MK Offshore Pte Ltd. and DBS BANK Ltd.9 China Merchants Bank Co., Ltd. Xiamen Branch (“CMB”), as the applicant, applied to the Xiamen Maritime Court for recognition of the Partial Final Award No. 023 of 2019 and Final Award No. 059 of 2019 made by SIAC, making obliging CMB to pay MK Offshore Pte Ltd. (“MK Ltd.”) and DBS BANK Ltd. (“DBS”). In this case, the Respondent MK Ltd and DBS were both non-resident enterprises in China. The jurisdiction of the Xiamen Maritime Court over the case was based on Paragraph 1 of Article 3 of the Arbitration Judicial Review Provision, which provides that where a foreign arbitral award and a case that has been admitted by the people’s court are related, and the applicant applies for recognizing the foreign arbitral award on the grounds that neither the respondent nor the respondent’s property is located within the mainland China, the people’s court that has accepted the related case shall have jurisdiction. The court held that the arbitral award in question was related to the series of cases of independent letter of guarantee entrustment contract disputes between Xiamen Shipbuilding Industry Co., Ltd. and CMB, namely (2019) Min 72 Min Chu No. 335, (2019) Min 72 Min Chu No. 984 and (2019) Min 72 Min Chu No. 2020, which were heard by the Xiamen Maritime Court. Therefore, Xiamen Maritime Court shall have the jurisdiction over this case in accordance with the above Paragraph 1 of Article 3.

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(2019) Min 72 Min Te No. 1042.

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The particularity of this case lies in that the applicant is the losing party of the arbitral award. The purpose for bringing up the application for recognition of the arbitral award is to confirm the validity of the award under the PRC law so that the arbitral award can be used in the related cases accepted by Xiamen Maritime Court. Since CMB had fulfilled its payment obligations under the arbitral award involved in the case, and the application was made voluntarily by the applicant, which did not prejudice the interests of other parties or third parties, let alone violate public policy, the Xiamen Maritime Court made a ruling recognizing the arbitral award. Both the Oriental Company case and China Merchants Bank case reflects the judicial practice in cases of Chinese courts’ jurisdiction over foreign arbitral awards. Though the courts referred to different laws in the above two cases. Their reasoning shows the same tendency to decide jurisdiction based on a “close connection”. In the Oriental Company case, the respondent must have a minimum connection with the place of forum. Even if the applicant has no definite clue of property subject to enforcement, it is still necessary to find out clues to the business carried out by the respondent in the place of forum, such connecting points as the correspondence address exchanged through the business contacts, office address recorded on the official website and other evidence to show that there is at least an office in the place of forum. While in the China Merchants Bank case, the applicant only needs to recognize the foreign arbitral award in China in order to cite the facts contained in the award as facts exempt from evidence in the related cases. In such a case, the related cases shall be the connecting point for jurisdiction over recognition cases. However, “related cases” as a connecting point does not enable the court to obtain the enforcement jurisdiction over the respondent who does not own property or domicile in the place of forum. The principle of determining jurisdiction through the close connection test bears some resemblance to the judicial practice of the United States courts. Through the case of International Shoe Co. V. Washington10 and a series of precedents,11 the United States courts have gradually established the “minimum connection test” and long-arm jurisdiction in their judicial practice. Specifically, the state court does not have jurisdiction over a respondent who is not a resident of that state, unless there is some minimum contact between the respondent and the state, such as owning property, engaging in business activities, committing a tort within the state, etc. This approach obviously has the advantage of pragmatism. Where an offshore company has its main business operated in China, and its personnel and office are located in China, but the winning party in the arbitral award has no way to have the award recognized and enforced in China, this would make the arbitral award obtained with huge efforts and cost in vain and would encourage offshore enterprises to avoid legal supervision and violates the legislative purpose of the New York Convention to facilitate the enforcement of foreign arbitral awards.

10

International Shoe Co. V. Washington, 326 U. S.310,326 (1945). World-Wide Volkswagen Corp. V. Woodson 444 U.S. 286 (1980), Helicopteros Nacionales de Colombia, S.A. V. Hall, 466 U.S. 408.417 (1984).

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6.3 Incapacity To raise the defense against recognition and enforcement of a foreign arbitral award under Article V(1)(a)12 of the New York Convention, namely “The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity”, it is necessary to define the scope of the concept of “incapacity” at the first place. In the context of Chinese law, the scope of the concept of “incapacity” is quite limited. According to Article 59 of the Civil Code, the capacity for civil rights and capacity for civil conduct of a legal person arise when the legal person is established and cease to exist when the legal person terminates; Article 6913 of the Civil Code stipulates that the circumstances of legal person’s termination, including but not limited to dissolution of a legal person and declaration of bankruptcy of a legal person. However, in the following case, Tianjin No. 1 Intermediate People’s Court did not limit itself to the common understanding of “incapacity” in the context of the PRC law, but follow the broader understanding of “incapacity” under Article V(1)(a) of the New York Convention, which is more consistent with the purpose of this Article. IM Global, LLC v. Tianjin Beifang Dianying Jituan Co. Ltd.14 The applicant, IM Global, LLC (“IM Company”), applied to Tianjin No. 1 Intermediate People’s Court for the recognition and enforcement of the No. 17–01 award issued by the International Arbitration Court of Independent Film and Television Alliance (“IFTA”) on April 11, 2017. The respondent was Tianjin Beifang Dianying Jituan Co. Ltd. (“Tianjin Beifang”). During the Cannes Film Festival from May 11 to 22, 2016, Mr. Sun negotiated with IM Company for the introduction of a film. Mr. Sun provided IM Company with his business card. The name of Mr. Sun, “President”, and “Tianying Hengxing (Tianjin) Investment Co. Ltd.“ was printed on the front of the business card. Pictures, the name of “Tianjin North Film”, “Tian Ying Group” and “Tianying Hengxing (Tianjin) Investment Co. Ltd.“(“Tianying Company”) were printed on the back of the business card. On May 15, 2016, Mr. Sun and IM Company signed a Memorandum of Transaction in Cannes, France. The Memorandum of Transaction was written in English, and the parties to the contract were IM Company and Tianjin North Film Corporation. 12

“The parties to the agreement referred to in article 2 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.” 13 Article 69 of the Civil Code: “A legal person is dissolved under any of the following circumstances: (1) the term stipulated in its articles of association expires, or any other cause for dissolution as is stipulated in the articles of association exists; (2) the governing body of the legal person makes a resolution to dissolve the legal person; (3) the legal person has to be dissolved because of a merger or division; (4) the legal person’s business license or registration certificate is legally withdrawn, or the legal person has received an order of closure or been dissolved; or (5) another circumstance as provided by law exists.” 14 (2018) Jin 01 Xie Wai Ren No. 2.

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There was a signature by “Sun” at the party of “Tianjin North Film Corporation” on the signature page, but with no seal. The Memorandum of Transaction contained an arbitration clause that, “Any dispute under the Memorandum of Transaction shall be settled by negotiation between the parties after a party has given notice thereof. If no settlement agreement is reached within 120 days of such notice, any dispute under the Memorandum of Transaction shall be subject exclusively to arbitration in Los Angeles before the International Arbitration Court of IFTA in accordance with the arbitration rules in effect of that court.” On December 22, 2016, IM Company filed an arbitration with the International Court of Arbitration of IFTA because Mr Sun had not paid on time. On April 11, 2017, the International Court of Arbitration of IFTA issued the No. 17-01Award, ruling that “Tianjin North Film Corporation” shall pay IM Company the damages, pre-judgment interest, attorneys’ fees and expenses in certain amount. The award also ruled that the Memorandum of Transaction shall be terminated and IM Company had the right to assign the rights of the disputed movie to other parties in the region. Mr. Q. Sun, the shareholder of Tianying Company who signed the Memorandum of Transaction with IM Company, appeared before the court to explain the situation, stating that the signature of “Sun” in the Memorandum of Transaction was signed by him and it had nothing to do with Tianjin Beifang. Also, he did not sign it on behalf of Tianjin Beifang and had no authority to do so. IM Company stated to the court that before signing the memorandum with “Sun”, IM Company staff had checked “Sun”’s personal information in “Cinando”, a film industry database. It turned out that “Sun” was an employee of Tianjin Beifang. However, IM Company failed to provide evidence to prove that before signing the memorandum with “Sun”, it had inquired and confirmed that “Sun” had an affiliation with Tianjin Beifang. Prior to the memorandum, IM Company had never conducted any transactions with Tianjin Beifang. After verification with Tianjin Beifang, there was no senior management or ordinary staff member named “Sun” or “Q. Sun”. The registered sole shareholder of Tianjin Beifang was the Tianjin Municipal Bureau of Finance. The registration information of market entities of Tianying Company showed that the shareholders were Q. Sun and Tianjin Film Company, and Tianjin Beifang was not one of the shareholders. The legal representative of Tianying Company was Mr. Gao, and the manager was Q. Sun. The only shareholder of Tianjin Film Company was Tianjin Municipal Bureau of Culture. The respondent Tianjin Beifang raised four defenses under Paragraph 1 of Article 5 of the New York Convention, of which the main issue in this case was whether the respondent was incapacited. The respondent interpreted “incapacity” broadly as “lack of capacity to enter into contracts” and argued that Mr Sun had no agency relationship with the respondent and had no authority to represent the respondent in the conclusion of the memorandum in question. However, the applicant believed that the “incapacity” in Article V(1)(a) of the New York Convention should not

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be interpreted as there was no agency relationship. According to Article 1815 of the General Provisions of the Civil Law, Mr. Sun had reached the age of eighteen, which proved that he had full civil capacity and could carry out civil juristic acts independently. As for whether Mr Sun had the right to represent the respondent, it was a substantive issue and did not fall under the jurisdiction of the court under New York Convention. Tianjin No. 1 Intermediate People’s Court adopted the respondent’s argument that the understanding of “incapacity” in the New York Convention was not entirely consistent with that rooted in the Chinese law context. It should be understood as lacking the power to contract, which also included the actor not having the power to sign arbitration agreement on behalf of or as the agency of Tianjin Beifang. In this case, it should be examined whether Mr Sun had the power to sign the Memorandum of Understanding on behalf of or as the agency of Tianjin Beifang, and the examination should be conducted “in accordance with the law applicable to him”. The court held that, first, regarding the question of whether Mr Sun could represent Tianjin Beifang, according to Article 14 of the Law on Choice of Law,16 who can represent a legal person, was the issue of the civil rights capacity and organizational structure of a legal person. Therefore, the law of the place of registration of legal persons, i.e. Chinese law, shall apply in this case. According to Article 38 of the General Provisions of the Civil Law17 and Article 13 of the Company Law,18 the person in charge of exercising duties and functions representing the legal person was the legal representative of the legal person, which should be registered in accordance with the law. However, Mr Sun was not the registered as legal representative of the respondent and could not represent the respondent. Second, as to the question of whether Mr Sun could be Tianjin Beifang’s agency, based on Article 16 of the Law on Choice of Law,19 the issue on whether Mr Sun had the right to represent the respondent should apply the French law, i.e. the law of the place where the contract was signed. The French Civil Code defined agency 15

Article 18 of General Provisions of the Civil Law: “An adult shall have full capacity for civil conduct and may independently engage in civil activities. A minor aged 16 or above who lives mainly on the income earned by himself/herself shall be deemed as a person with full capacity for civil conduct.” 16 Article 14 of the Law on Choice of Law: “For the the capacity for civil rights and capacity for civil conduct, structure and organization, shareholder rights and obligations of the legal persons, the law of the place of registration shall apply.” 17 Article 38 of General Principles of the Civil Law: “A person who, in accordance with the law or the articles of association of the legal person, is responsible for representing the legal person in the exercise of its duties and functions is the legal representative of the legal person.” 18 Article 13 of the Company Law provides that, the chairman, an executive director or a manager shall act as the legal representative of the company in accordance with the provisions of the articles of association of the company and registration formalities shall be completed in accordance with the law. Where there is a change of legal representative of the company, change of registration formalities shall be completed. 19 Article 16 of the Law on Choice of Law: “The laws at the locality of agency act shall apply to agency, but the laws at the locality of agency relation shall apply to the civil relations between the principal and the agent.”

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relationship as follows: “Commission or agency means an act whereby one person authorizes another to carry out, in the name and for the benefit of a principal, a certain affair”; “A delegation may be given by a notarial or private deed, or even by letter. It may also be given orally. Nevertheless, proof of it shall only be permitted by witness in accordance with the rules set forth in the General Rules on Contracts and Consensual Obligations.” However, there was no evidence that Mr. Qing Sun was an employee of Tianjin Beifang, nor was there evidence that Mr. Qing Sun had been authorized by Tianjin Beifang to enter into the contract. The applicant asserted that Mr. Sun acts constituted apparent agency as stipulated in the French Civil Code, “an act done without the authority of or beyond the authority of the agent may not be invoked against the principal unless it is reasonable for the other party to rely on the genuine authority of the agent, in particular on the conduct or indication of the principal.“IM Company argued that it had a “reasonable reliance” because of Mr Sun’s business card and Cinando, the film industry database. The court held that the business card alone was not sufficient to confirm the identity of a commercial entity, and IM Company failed to provide evidence of the Cinando database, nor did it and the respondent have historical transaction records so that the court did not accept the application of the customary interpretation towards “reasonable reliance”. Therefore, the court found that Mr. Sun did not have the authority to enter into the arbitration agreement concerned on behalf of or as the agency of the respondent, and that the parties to the arbitration agreement in question were “under the law applicable to them, under some incapacity”. Consequently, the respondent’s claim prevailed, that the arbitral award should not be recognized and enforced pursuant to Article V(1)(a) of the New York Convention. The court ruled that the No. 17–01 Award shall not be recognized and enforced. With regard to the understanding of “incapacity” in Article V(1)(a) of New York Convention, Tianjin No.1 Intermediate People’s Court specifically distinguished the “incapacity” under the New York Convention from that in the context of Chinese law. If “incapacity” is understood in a narrow approach, the court would not review the actor’s lack of authority to act and to enter into a contract on behalf of or as agency of the parties to the contract. However, reading Article V(1)(a) of the New York Convention as a whole, the validity of the arbitration agreement and whether the parties have the right/capacity to enter into the arbitration agreement are important factors in considering whether a foreign arbitral award can be recognized and enforced, which is why this Article is listed as the first defending grounds. One of the most essential understandings of the principle of autonomy in commercial arbitration is reflected in the fact that the arbitral tribunal or ad hoc tribunal governs commercial disputes between the parties based on the arbitration agreement. The importance of the validity of the arbitration agreement and the manifestation of intention (including capacity to conclude) of the parties to the arbitration agreement goes without saying. If the court merely considers whether a party to an arbitration agreement has capacity for civil conduct when determining the capacity of parties, it may miss out the circumstance that the party has no capacity to enter into an arbitration agreement. Recognizing and enforcing a foreign arbitral award based on

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arbitration agreement to which parties has no capacity is not consistent with the purpose of Article V(1)(a) of the New York Convention. The understanding of the concept of “incapacity” has not been unified in Chinese judicial practice, and there are legal issues beyond the narrow definition of “incapacity” not examined by the Chinese courts. In such cases, the defense of unauthorized agency raised by the respondent may not be supported. In the 2021 Yearbook,20 the case of Spring Maritime Ltd. v. Shandong Haina Real Estate Co.21 was introduced. In that case, the respondent also referred to “incapacity” and “invalidity of arbitration agreement” as defenses, arguing that the respondent was not the actual contracting party of the Letter of Guarantee and the arbitration clause in dispute, which was formed by a third party forging the handwriting of the legal representative of the respondent and fraudulently using the seal. Therefore, the third party using the seal did not have the capacity to issue the Letter of Guarantee without the approval of the board of directors/shareholders’ meeting of the respondent, and accordingly the Letter of Guarantee and the arbitration clause were invalid. However, the court held that the respondent, as a Chinese legal person, should apply Chinese law to determine its civil capacity. According to Article 36 of the General Provisions of the Civil Law of the People’s Republic of China, the civil capacity of a legal person arises from the establishment of the legal person and is extinguished when the legal person terminates. Even if the Letter of Guarantee and arbitration clauses were formed by a third party through forging the handwriting of the legal representative and defrauding the seal, the respondent had the civil capacity to provide guarantee to an external party in accordance with the law during its existence. The fact that the third party or any personnel of the respondent used the official seal without the approval of the board of directors/shareholders’ meeting of the respondent had nothing to do with whether the party concerned or any person has capacity for civil conduct. In other words, the respondent’s claim did not fall within the statutory grounds under the New York Convention, thus the court would not examine it.

6.4 Validity of Arbitration Agreement In the previous section, “incapacity” of the parties to the agreement under Article V(1)(a) of the New York Convention has been discussed. While in this section, the judicial practice in China in relation to the second part of this paragraph will be discussed, that is “or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made”. Article V(1)(a) of the New York Convention stipulates the applicable law in default, either the law of the arbitration agreement or the law of the country where the 20 21

Y. Lin, China Arbitration Yearbook (2021), 290, (Springer, 2022). (2013) Qing Hai Fa Hai Shang Chu Zi No. 1032.

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award was made, rather than leaving the issue to the choice of law of the forum. In the following case, the respondent argued that the arbitration agreement leaves a choice between an arbitration and a lawsuit so that it should be invalid, but Shanghai No. 1 Intermediate People’s Court found the arbitration clause in question valid under Singapore law. IHS Global Limited v. Xinjiang Markor Chemical Industry Co. Ltd.22 On January 20, 2016, IHS Global Limited (“IHS Company”) and XX Group Limited entered into an acquisition contract (the “Contract”), which contained the provision of consulting services by IHS Company to XX Group Limited. Clause 6.7 of the Contract stated: “Choice of Law, the interpretation and execution of this contract shall be governed by the laws of Singapore. Any disputes submitted by either party under this contract shall be submitted to and finally resolved by arbitration in Singapore in accordance with the arbitration rules of SIAC for the time being in force”. Clause 6.11 stipulates that “The limitation of action, unless otherwise agreed, any action arising out of this Agreement shall be submitted to competent court within two (2) years from the date of its accrual or the date of the reasonable discovery of such cause of action by the suing party, whichever is later.“ On March 17, 2016, IHS Company, Xinjiang Markor Chemical Industry Co. Ltd. (“Markor Company”) and XX Group Co. entered into a Supplemental Agreement, which provided for a change of party to the contract from XX Group Co. to Markor Company. On October 10, 2017, IHS Company filed an arbitration application with SIAC based on the arbitration clause in the Contract on the grounds that Markor Company had breached the Contract by failing to pay the service fees as agreed in the Contract and unilaterally suspending the Contract. On July 3, 2018, the arbitral tribunal issued No. 071 Arbitration Award of 2018, ruling Markor Company to pay the second and third fee installments, and other costs to IHS Company. As Markor Company failed to fulfill its payment obligations under the arbitral award, the applicant IHS Company filed an application with the Shanghai No.1 Intermediate People’s Court for the recognition and enforcement of No. 071Arbitral Award of 2018 made by SIAC. The respondent raised objection to the validity of the arbitration agreement based on following grounds. First, IHS Company was not the party to the Contract because the arbitration agreement was not signed by legal representative with neither official seal nor any authorization documents from IHS Company. Also, the address recorded in the arbitration application and notarial certification materials were not consistent with the address recorded in the Contract. Second, the Contract contained two different dispute resolution clauses, arbitration and litigation. Apparently, Article 6.7 and Article 6.11 were in conflict, so the intention of the parties to resolve the dispute was not clear, leading to the invalidity of the arbitration clause. The court held that, as to the first objection, IHS Company’s authorized representative had signed the Contract and initiated the arbitration on behalf of IHS Company. Also, the respondent had never objected to IHS Company’s qualification as the party 22

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of the Contract during the arbitration. Although the address recorded in the Contract was different from that recorded in the notarial certification materials, the company names noted were the same and it should be concluded that the Contract was the genuine intention of IHS Company. The second objection was raised by the respondent in accordance with Article V(1)(a) of the New York Convention, according to which the validity of the arbitration agreement shall be determined first according to the law chosen by the parties, and if the parties had no such choice, the law of the place of the award shall apply. According to Article 6.7 of the Contract, the law applicable to the validity of the Contract, including the arbitration clause, was the law of Singapore. And the Singapore Court of Appeal in Insigma Technology Co Ltd v. Alston Technology Ltd 23 held that if the parties expressly intended to resolve any dispute by arbitration, despite of any ambiguous, inconsistent, incomplete part of the arbitration agreement, and only if the arbitration would be implemented without prejudice to the rights of either party and be effective, then such intention to arbitration, which did not lead to a situation where the arbitration was not expected by a party, should be upheld. The basic principle illustrated by the Singapore Appeal Court was also binding for the validity of the arbitration agreement in the above IHS case. As the abovementioned Article 6.7 was an arbitration clause for the submission of disputes to arbitration between the parties, which was a valid arbitration clause and showed a clear intention of the parties to submit disputes to arbitration. Moreover, Article 6.11 was not a dispute resolution clause, but mainly a limitation of action clause which did not exclude arbitration. Accordingly, the court decided that the award in question should be recognized and enforced. In this case, the court applied Singapore law to determine the validity of the arbitration agreement in question. According to the precedent established by the Singapore Court of Appeal, even if with ambiguities to some extent, the arbitration clause is valid as long as it is consistent with the parties’ express intention to resolve any dispute by arbitration. This is in contrast to the requirement of exclusivity of jurisdiction under Chinese law for arbitration agreements or arbitration clauses. According to Article 7 of the Arbitration Law Interpretation, where the parties agree that a dispute may be submitted to an arbitration agency for arbitration or filed with the people’s court for commencement of legal proceedings, the arbitration agreement shall be invalid, unless one party has submitted an arbitration application to an arbitration agency but the other party failed to object within the time limit stipulated in Paragraph 2 of Article 20 of the Arbitration Law. Thus, laws of different jurisdictions have different views on the issue of the validity of arbitration agreement. The defense of “invalidity of the arbitration agreement” under the New York Convention should be made pursuant to the applicable law of the arbitration agreement or the law of the country where the award was made. In addition to whether the arbitration agreement contains an express intention to resolve the dispute by arbitration, the validity of the arbitration agreement in Chinese law is also affected by whether the dispute in question is a foreign-related 23

[2009] 3SLR (R).

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one. If the dispute concerned is not foreign-related and however the Chinese parties have agreed on jurisdiction over the case owned by foreign arbitration institution or ad hoc tribunal, the arbitration agreement shall not be valid. Although this is not expressly written, there is a consensus in Chinese judicial practice. The SPC reiterated such consensus in ArcSoft Corporation Limited v. Spreadtrum Communications (Shanghai)Co., Ltd.24 that has been introduced in Chap. 1 of this book. However, in the Glencore case below, the court held that the dispute between two Chinese residents should be considered foreign-related under Paragraph 2 of Article 9 of Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones, and found the arbitration agreement in question to be valid. Glencore Ltd. v. Kunshan Lily Textile Co., Ltd.25 The applicant of this case, Glencore Ltd. (“Glencore”), was a wholly foreign owned enterprise established in the the China (Shanghai) Pilot Free Trade Zone. On March 3, 2011, the seller, Glencore, and the buyer, Kunshan Lily Textile Co., Ltd. (“Kunshan Lily”) entered into the Raw Cotton Sales Contract (“Sales Contract”) and agreed that the origin of the cotton was the United States and the delivery warehouse was Nantong bonded warehouse. The additional terms of the Sales Contract stipulated that “the Chinese Law shall apply to the establishment, validity, interpretation and performance of this Contract and any disputes arising from the Contract. Any disputes arising between the Buyer and the Seller in connection with or as a result of this Contract shall first be resolved by amicable negotiation. If the dispute is not resolved through negotiation, the parties agree to submit the dispute to arbitration exclusively in accordance with this Contract. Either party could refer the dispute to the ICA for arbitration in accordance with the arbitration rules of the ICA then in effect. The arbitral award is final and binding on both parties.” The subject matter of the Sales Contract was raw cotton from Memphis and Texas, imported from the United States by Glencore’s affiliates. The loading port located in Los Angeles, California and the discharge port was in Nantong, China. In performing the contract, a dispute arose between the parties. Glencore applied to ICA for arbitration. ICA issued an award in the United Kingdom on July 13, 2018, ruling that Kunshan Lily should repay Glencore the outstanding amount of RMB 53,947,797.34 and interest. The respondent argued that the case was a dispute arising from a domestic contract, with no foreign-related factors, and should not be submitted to extraterritorial arbitration. The arbitration agreement agreed by the parties was invalid. The court held that, according to the Sales Contract, the parties selected Chinese law as the applicable law, so the validity of the arbitration agreement in question should apply to Chinese law. After the dispute occurred, Glencore submitted the dispute to ICA for arbitration. ICA had served arbitration documents to Kunshan Lily upon acceptance of the arbitration. However, Kunshan Lily did not object to ICA regarding the validity of the arbitration agreement during the arbitration proceeding. 24

(2021) Zui Gao Fa Zhi Min Xia Zhong No. 90. Please refer to Sect. 7, Chap. 1 of this book for detailed case summary. 25 (2019) Su 05 Xie Wai Ren No. 2.

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Pursuant to Paragraph 2 of Article 9 of the Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones,26 the claims concerning the invalidity of arbitration agreement concerned was not supported by the court because the dispute did not have foreign-related factors. Moreover, the Sales Contract had foreign-related factors to certain extent because the subject matter of it was the raw cotton imported from the United States. Although the raw cotton was imported in the name of Glencore’s affiliates, the purpose of such importing was the sales from Glencore to Kunshan Lily and other Chinese buyers and the raw cotton had been stacked in the bonded warehouse. Consequently, Kunshan Lily’s argument that the arbitration agreement was invalid due to no foreign-related factors in this case was be supported by the court. In contrast to this case, the case of ArcSoft Corporation Limited v. Spreadtrum Communications (Shanghai)Co., Ltd. differs on the basic facts. In that case, the parties had not received an effective foreign arbitral award during their legal proceeding regarding the validity of arbitration agreement. Paragraph 1,27 instead of Paragraph 2 of Article 9 of the Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones shall apply. Compared to the Paragraph 2, considering no effective arbitral award made yet, the conditions to apply to Paragraph 1 are stricter. To be specific, the disputes will be regarded as foreign-related ones only if both parties are wholly foreign owned enterprises, instead of merely foreign invested enterprises, established in the free trade zones. However, the court applied Paragraph 2 of Article 9 to this case that one of the parties was a foreign invested enterprise established in free trade zone and an effective extraterritorial arbitration had been made. This indicates that the parties had recognized the jurisdiction of foreign arbitration by participating in arbitration. Considering the real situation in commercial practice, it is more likely that a commercial dispute is foreign-related if one or both parties to it are foreign invested enterprises registered in the free trade zones, despite of their Chinese nationalities. Article 9 of the Opinions on the Provision of Judicial Safeguards for the Construction of Pilot

26

Paragraph 2 of Article 9 of the Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones: “Where one party or both parties concerned which are foreign-funded enterprises registered in the FTZ have agreed to submit cross-border arbitration for commercial disputes, after the occurrence of a dispute, the parties concerned submit the dispute for arbitration abroad but then claim to not acknowledge, recognize or execute the award on the ground of invalidity of the arbitration agreement after the relevant award is made, the people’s court shall not uphold such request; where the other party concerned did not raised an objection to the validity of the arbitration agreement in the arbitration procedure, but claims that the arbitration agreement is invalid and refuses to acknowledge, recognize or execute the award therefor on the ground that the relevant dispute does not involve any foreign factor after the award is made, the people’s court shall not support the request.” 27 Paragraph 1 of Article 9 of the Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones: “Correctly determine the validity of arbitration agreements, and regulate the judicial review of arbitration cases. Where a foreign enterprise registered in the FTZ is bound to submit cross-border arbitration for commercial disputes, the relevant arbitration agreement shall not be invalidated on the ground that the dispute does not involve foreign factors.”

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Free Trade Zones is conducive to respecting the autonomy of the parties to foreignrelated commercial transactions in choosing foreign arbitration as a dispute resolution approach, and also embraces the pro-arbitration approach and shows respect to foreign arbitral awards.

6.5 Lack of Proper Notice Failure to give proper notice is one of the most common grounds for refusing recognition and enforcement of foreign arbitral awards. The parties often try to prove that they are not actually served with notice of arbitration proceedings or that notice was improper, and the courts would often determine whether such notice was proper based on the arbitration rules applicable to the arbitration proceedings. We have found in many cases that under many arbitration rules, proper notice is not just determined by actual receipt of relevant arbitration documents. In a recent case, the service of arbitration notice to the registered company address, but not actual address of one party, constitutes improper notice. Oue Lippo Healthcare Limited v. Lin28 On February 18, 2013, Mr. Lin and Dr. E, a third party, together as the sellers, and Singapore Z Ltd. (“Company Z”), as the buyer, entered into a Share Purchase Agreement, which stipulated in clause 13.2: “Any dispute arising out of or in connection with this Agreement, including any issue relating to the existence, validity or termination of this Agreement, shall be referred to the Singapore International Arbitration Centre for final resolution in Singapore in accordance with the arbitration rules (SIAC Rules) then in force which are deemed to be referred to in this Agreement. The arbitral tribunal shall consist of one arbitrator and the language of the arbitration shall be English.” On May 7, 2013, Mr. Lin, Dr. E and Company Z entered into a Deed of Novation and Amendment with applicant Oue Lippo Healthcare Limited (“Oue Lippo”), which was entered into as the same agreement as the Share Purchase Agreement. After the dispute occurred during the performance of the agreement, Oue Lippo submitted an application to the SIAC pursuant to clause 13.2 of Share Purchase Agreement. The arbitral tribunal issued Award (No. 002 of 2019) on January 7, 2019. The applicant applied to the Shanghai No. 1 Intermediate People’s Court for recognition and enforcement of the Award. The respondent Mr. Lin raised the defense that the arbitration was heard in absentia and the respondent had not been effectively and reasonably served proper notice, nor had the respondent been given an opportunity to reasonably defend itself, nor had the respondent been notified of the composition of the arbitral tribunal, of which the respondent had been unaware. The Court found that the third and forth paragraphs of the Award recorded the contact address of the respondent “Room X, Lane X, Pudong New Area, Shanghai, China”, and the email address: “[email protected]/[email protected].” According 28

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to Clause 10.1 and Schedule 1 of the Share Purchase Agreement, the above addresses were also provided to the respondent for the service of all notices, requests or letters. Although documents in the arbitration were served at the above address and copied to the respondent’s email address, the respondent did not participate in the arbitration proceedings. According to Article 20.9 of the new arbitration rules of SIAC, the arbitral tribunal may still proceed with the arbitration. The arbitration documents, including the Notice of Arbitration, the Notice of Appointment of Sole Arbitrator, Procedural Order No. 2, and the Final Award, were sent to Mr Lin’s above-mentioned address in Pudong Shanghai during the arbitration. And the notices and the proof of services were notarized by a notary. However, the respondent stated that the above contact address was not his permanent residence address, but a mere temporary address and two email addresses had been ceased to be used for a long time. Shanghai No. 1 Intermediate People’s Court held that whether the arbitration notice was proper should be reviewed in accordance with the SIAC Arbitration Rules. In this case, the respondent provided his address in Shanghai as notice address in the Share Purchase Agreement, and the service of the relevant arbitration documents at the above-mentioned address was complied with the Articles 2.1 and 2.2 of the SIAC Arbitration Rules.29 Accordingly, the service of arbitration documents shall be deemed to be legal and valid and the arbitration notice shall be deemed proper. Although the respondent alleges that it no longer lived at the above address, in accordance with SIAC Arbitration Rules, whether the respondent had actually received arbitration documents shall not be the basis to judge the legitimacy of procedure of service of arbitration. Therefore, the respondents’ objection shall not be supported by the court. Pursuant to Rule 2.1 of SIAC Arbitration Rules, any notice, communication or proposal shall be deemed to have been received if it is delivered to any address agreed by the parties. The Court held that the disputed arbitration proceedings were properly notified even though the respondent was absent from the arbitration hearing, and such hearing in absentia did not constitute a defense under Article V (1) (b)30 of the New York Convention. Similarly, this thought about efficiency of dispute resolution is also reflected in the following case. According to the arbitration rules of ICA, the actual receipt by the party is not deemed as the prerequisite for proper service of notices. 29

Rule 2.1 of SIAC Rules (6th Edition, 1 August 2016): “Any such notice, communication or proposal may be delivered by hand, registered post or courier service, or transmitted by any form of electronic communication (including electronic mail and facsimile), or delivered by any other appropriate means that provides a record of its delivery. Any notice, communication or proposal shall be deemed to have been received if it is delivered: (i) to the addressee personally or to its authorised representative; (ii) to the addressee’s habitual residence, place of business or designated address; (iii) to any address agreed by the parties; (iv) according to the practice of the parties in prior dealings; or (v) if, after reasonable efforts, none of these can be found, then at the addressee’s last-known residence or place of business.” Rule 2.2 “Any notice, communication or proposal shall be deemed to have been received on the day it is delivered in accordance with Rule 2.1.” 30 Article V (1) (b) of the New York Convention: “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; or … …”

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Louis Dreyfus Commodities Suisse SA v. Qingdao Free Trade Zone Cotton Exchange Market Co., Ltd 31 On March 27, 2018, Louis Dreyfus Commodities Suisse SA (“Louis Dreyfus”) and Qingdao Free Trade Zone Cotton Exchange Market Co., Ltd (“Qingdao Cotton Company”) entered into two contract, both of which agreed on the delivery address and email contact of Qingdao Cotton Company. The contract also provided that any disputes arising out of or in connection with this Contract would be resolved by arbitration in accordance with the ICA Bylaws and Rules, which is incorporated into this Contract and the arbitration shall take place at the ICA in Abbey Road, UK. Disputes arising out of or in connection with this Contract shall be governed by and construed in accordance with the laws of England and Wales. On November 20, 2020, the arbitral tribunal issued No. A01/202027 Arbitration Award at the ICA, awarding the respondent the payment obligation. The applicant later applied to the Qingdao Intermediate People’s Court for recognizing and enforcing the award. In this case, the respondent Qingdao Cotton Company raised the defense that it had not received the Notice of Arbitration, had not been notified of the appointment of the arbitrators and had not received the arbitral award, which was actually a defense of improper notice of arbitration documents. The court held that the arbitral tribunal had served the notice of arbitration, the application for arbitration, the notice of appointment of arbitrators and the arbitral award to the respondent by means of email. For one email addressed used by arbitral tribunal, it was recorded in the Contract, but the respondent claimed that it had ceased to be used. Pursuant to the arbitration rules of ICA, the last known address, place of business, email address or fax address of a party shall be a valid address and the service to the address known to the parties shall constitute proper notice. For another email address, it was used to submit Defense on Arbitration and revised contract in the name of respondent. The respondent claims that it had not aware of such arbitration and this email account was not under its control, which was not in line with common sense. In addition, the arbitral tribunal also served the notices to the address stated in the Contract by means of DHL. Although the address was not the registered business address of the respondent, the notary certificate submitted by the applicant could prove that there was no actual office locating at the registered business address of the respondent. Therefore, the address should be deemed as the last known domicile and place of business of the respondent and the service of such address complies with the Arbitration Rules. Thus, the court did not support the defense of the respondent on the improper notice. The arbitration rules mentioned in these two cases convey the similar idea of efficiency in the arbitration, that is, establishing a set of arbitration rules to determine the validity and effectiveness of notice and service where there is no need to determine whether the parties actually received any notices. This is helpful to

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reduce contentious legal issues during the arbitration proceedings and subsequent enforcement proceedings. However, in IM GLOBAL, LLC v. Tianjin Beifang Dianying Jituan Co. Ltd (“the IM case”),32 which has been introduced in Sect. 3 of this chapter, the third party Mr. Sun did not have the right to sign the arbitration agreement on behalf of the respondent or as its agent. Therefore, the court did not determine that the losing party had been properly notified based on the fact that the arbitration document had been served to the agreed address left by Mr Sun in the agreement in question. In the IM case, the respondent argued under Article V(1)(b) of the New York Convention that the arbitration document sent by IFTA at the address and email address listed in the Memorandum of Transaction was not a valid service on Tianjin Beifang. The address was ceased to be used by the Tianjin Beifang long before the signing of the Memorandum of Transaction. The secretary of the arbitral tribunal stated that the package could not be traced or returned. The email address was not owned or used by the Tianjin Beifang. Therefore, the Tianjin Beifang never received any arbitration documents, including the Notice of Arbitration and the IFTA Arbitration Rules from the arbitral tribunal, and was not properly notified of the appointment of arbitrators or the arbitration proceedings, which prevented Tianjin Beifang from pleading its case before the tribunal. So, under Article V(1)(b) of the New York Convention, the award in question shall not be recognized and enforced. Although the award noted that the secretary of the arbitral tribunal sent the notice of arbitration and the arbitration rules to Tianjin Beifang by registered mail on January 5, 2017 and it was indicated that Tianjin Beifang received the above documents on January 16, 2017. But the secretary of the arbitration stated after the hearing that it was unable to trace the registered parcel of arbitration correspondence sent to “Tianjin North Film Corporation”. The respondent claimed that it had moved out of the registered address before March 2016, but its website had not corrected the address. It also submitted a statement from the registered owner and the web server hosting service to prove that it was not using the registered address made public. The court held that in the event of a conflict between the statement of service in the arbitral award and the post facto statement of the secretary of the arbitral tribunal, the respondent had provided sufficient evidence to refute it. Therefore, it could be confirmed that the respondent had not been served in this manner. Moreover, in the IM case, the court found that Tianjin Beifang had not signed an agreement with IM Compnay and the arbitral tribunal had failed to make effective service, leading to Tianjin Beifang’s absence from the hearing and deprivation of defending right, which constitutes “or was otherwise unable to present his case” as stipulated in Article V(1)(b) of the New York Convention. Therefore, the respondent’s defense under Article V(1)(b) of the New York Convention was established. We find the IM case a unique case in that applying the “deemed service” logic commonly used by many international arbitration institutions to determine that the respondent had been properly notified would be contrary to the principle of party autonomy. The court examined whether the respondent had actually received the 32

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arbitration documents because the signatory had no capacity to sign, in other words, the situation of “incapacity” under Article V(1)(a) of the New York Convention was met. This means the respondent had not actually made the choice and agreed on the IFTA arbitration rules. Therefore, it would be unreasonable and against to the party’s autonomy over arbitration to determine the effectiveness of service under the IFTA arbitration rules.

6.6 Beyond the Scope of Arbitration According to Article V(1)(c) of the New York Convention, if the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, its recognition and enforcement may be refused. There are similar provisions in Chinese law. In accordance with Paragraph 1 of Article 58 of the Arbitration Law, if a party can produce evidence proving that the matters decided in the award exceed the scope of the arbitration agreement or are beyond the arbitral authority of the arbitration commission, the award may be set aside. It seems that as long as the award does not deal with matters beyond the arbitration agreement, the award will not be annulled due to “beyond the scope of arbitration”. However, in its Reply to the Request for Instructions on the Case Involving WGL’ s Application to Revoke Arbitral Award No. 3 (2012) of the China International Economic and Trade Arbitration Commission South China Sub-commission,33 the SPC held that the award concerning decided matters was beyond the scope of the submission to arbitration, and constituted “beyond the scope of arbitration”. Therefore, it should be revoked. In the common practice of judicial review of arbitral awards, different courts all see the arbitration claims as the boundary to determine the scope of the arbitral tribunal’s jurisdiction. Despite of such rules established, the Chinese court will not directly apply them to determine a foreign award is “beyond the scope of arbitration” in cases of recognition and enforcement of foreign arbitral awards, but will refer to arbitration rules applied to foreign arbitral awards, to decide whether the award falls into Article V (1)(c) of the New York Convention. Emphor FZ Co. v. Guangdong Yuexin Ocean Engineering Co., Ltd.34 On September 14, 2014, Emphor FZ Co (“Emphor”) ordered a 60.6-m-long full rotary anchor tug supply vessel (“the vessel”) from Guangdong Yuexin Ocean Engineering Co., Ltd. (“Yuexin”). The parties entered into a contract for the construction of the vessel on the same day. The contract also provided that any dispute arising out of the contract should be referred to the Singapore Chamber of Maritime Arbitration (“SCMA”) and that English law and the rules of SCMA shall apply.

33 34

(2013) Min Si Ta Zi No. 8. (2020) Yue 72 Xie Wai Ren No. 1.

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Yuexin was unable to deliver the vessel on time due to force majeure and Emphor served it a notice of termination of the contract. On April 10, 2017, Yuexin submitted a request for arbitration to the SCMA while Emphor submitted a counter request for arbitration on May 9, 2017. On July 20, 2018, the SCMA issued an arbitral award on the ship construction contract dispute between Emphor and Yuexin, in which Yuexin was in fundamental breach of contract and shall refund the deposit and pay liquidated damages, as well as US$7,262 in costs incurred in inspecting the Zhongshan shipyard, and pay interest on all the aforementioned costs. As Yuexin did not completely perform the final award, Emphor applied to the Guangzhou Maritime Court for recognition and enforcement of the award. Yuexin claimed that the arbitral tribunal’s award of interest at 6% per annum on the inspection costs of Zhongshan Shipyard was beyond the scope of the arbitration claim since Emphor’s arbitration claim did not include any interest on the inspection costs. However, the Guangzhou Maritime Court held that although Emphor had not submit a claim for the interest on the Zhongshan Shipyard inspection costs, its counterclaim for arbitration covered the Zhongshan Shipyard inspection costs. According to Article 37.2 of the Third Edition of the SCMA Arbitration Rules,35 the tribunal may award simple or compound interest on any sum awarded as it considers just, and the award also explained that “the tribunal shall have great discretion in the award of interest”. Therefore, the tribunal’s award of interest on the inspection costs of Zhongshan Shipyard was not a matter beyond the scope of the arbitration, as Emphor had requested to the tribunal for the inspection costs of Zhongshan Shipyard. The court decided that Yuexin’s argument that the interest on the inspection costs of Zhongshan Shipyard pursuant to Article V(1)(c) lacked factual and legal basis and could not be supported. In this case, the Guangzhou Maritime Court did not determine whether the interest was “matters beyond the scope of the submission to arbitration” in the context of Chinese law, but relied on the Rules of SCMA chosen by the parties in the arbitration agreement. The Rules of SCMA allow the arbitral tribunal some discretion in awarding interest, so even if the party did not claim for interest on inspection costs of Zhongshan Shipyard, the tribunal could rely on the Rules of SCMA and obtain the authority to award such interest. But does this rule violate party autonomy? There is a view that arbitration as a product of autonomy, the competence of the arbitral tribunal fundamentally depends on the authorization of the parties. When the parties enter into an arbitration agreement providing for institutional arbitration, the parties should be deemed to have agreed to authorize the tribunal to apply the particular rules of arbitration of that arbitration institution to the dispute because the institutional arbitration’s rules will be applied by the default. Therefore, it may be considered that the arbitration rules grant the arbitral tribunal the power to determine the amount of interest in a discretionary manner achieve, instead of violating, the parties’ autonomy. 35

Rule 37.2 of the SCMA RULES 3RD EDITION (OCTOBER 2015): “The Tribunal may award simple or compound interest on any sum awarded at such rate or rates and in respect of such period or periods both before and after the date of the Award as the Tribunal considers just.”

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Although in the context of Chinese law, matters in excess of the request for arbitration are sufficient grounds for setting aside an arbitral award, it is still likely that in other jurisdictions, the scope and extent of the arbitral tribunal’s discretion in relation to costs such as interest may be determined by applicable substantive law of interest, due to diverse and different social circumstances, judicial philosophy or trading practices. Therefore, from the perspective of facilitating the enforcement of arbitration, the Chinese courts will also be more cautious about such issues to avoid involving a review of substantive legal issues in cases of recognition and enforcement of foreign arbitral awards. Triton Container International Limited v. Yangpu Economic Development Zone Construction Investment Development Co., Ltd. and Hainan PAN Ocean Shipping Co., Ltd.36 Between January 12, 2010 and August 15, 2011, the respondent, Hainan Pan Ocean Shipping Co., Ltd (“HPO”), the third party, Hai Nan P O Shipping (HK) Company Limited (“HPO HK”) and the applicant, Triton Container International Limited (“Triton”) entered into six agreements (with agreement numbers HPO40 to HPO45) to lease containers owned by the applicant. All six agreements provided for arbitration in San Francisco were under the laws of the State of California, USA, in the event of a dispute arising out of the performance of the agreement. The other respondent, Yangpu EDZ Jianshetouzikaifa Co., Ltd. (“YCID”) was not a party to agreements of HPO40, HPO41, HPO43, HPO44 and HPO45. However, under the Agreement HPO42, the respondent YCID signed as a co-lessee but did not seal it. The “commission clause” in this Agreement noted that: “YCID unconditionally and irrevocably authorizes each of HPO and HPO HK to take any steps or do on YCID’s behalf anything either HPO and/or HPO HK, in their absolute discretion, considers desirable in connection with this Agreement, to exercise all YCID’s rights, to discharge all YCID’s obligations and to incur all liabilities that may arise in relation to, or arising out of, in connection with this Agreement for and on behalf of YCID. YCID shall be bound by any decision either HPO and/or HPO HK makes in connection with this Agreement. YCID warrants that it shall at all times be jointly and severally liable with both HPO and HPO HK for all costs, expenses, damages and losses incurred as a result of or in connection with this Agreement.” On June 25, 2013, the applicant, two respondents and HPO HK entered into a Letter of Default, which collectively referred to the six agreements as “the Agreements” (in the plural) and the respondent HPO, YCID and HPO HK as “the Lessees” (in the plural). Also, at the signature column of YCID, HPO sealed its own official seal of “Hainan Pan Ocean Shipping Co., Ltd” and signed “pursuant to power of attorney granted under HPO42”. The second paragraph of the Further Assurance clause of the Letter of Default provided that “Except to the extent this Letter modifies them expressly, the Agreements shall remain in full force and effect. Without limiting the generality of the preceding sentence, any dispute arising from or relating to this Letter, or any prior

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(2015) Qiong Hai Fa Ta Zi No. 1.

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agreement relating to any containers the Agreements cover, shall be settled by arbitration in the same manner the Agreements provide”. The third paragraph of the same clause provided that “To the extent Tritons revokes some or all of this Letter, the revoked term shall have no effect. Lessees shall then be liable under the Agreements as if the revoked term never existed.” Still, on September 25, 2013, the applicant Triton gave notice to both respondents and partially revoked the Letter. On October 30, 2013, the applicant again gave notice to YCID, quoting the Notice of Revocation and the Letter of Default, and claiming that Notice of Revocation did not relieve YCID’s liabilities, especially under HPO42 where YCID was a lessee under that agreement. As a result of a dispute arising in the course of the performance of the agreements, the applicant filed a request for arbitration with ICDR in San Francisco, California, United States of America, on January 10, 2013. In the arbitration, the applicant asserted that after the Letter of Default which was also signed by YCID became effective, YCID should also be liable under the other 5 agreements, and therefore argued the respondent YCID should be jointly and severally liable with HPO for all six agreements. As the two respondents did not respond to the applicant’s claim, ICDR adopted the applicant’s view and ruled that the respondent HPO and the respondent YCID were jointly and severally liable for the amount and interest requested by the applicant. The Haikou Maritime Court found that in the HPO42 Agreement, the “Commission Clause” used the expression of “this Agreement” to refer to the meaning of “this agreement”. It was not in plural form and began with a capital “A” to refer in particular to this HPO42 Agreement only. Therefore, the joint and several obligations were undertaken only within the HPO42 Agreement, and did not extend to the other agreements. Also, there was no separate arbitration clause in the Letter of Default, so if arbitration was to be initiated, it must base on the Agreements. The purposeful distinction between “agreement” and “the Agreements” in the Further Assurance clause indicated that the six agreements and their arbitration clauses were separate and could not be treated as one. The third paragraph of Further Assurance clause also made it clear that once the applicant revoked the Letter in whole or in part, the lessee was still liable under the six agreements. There was no joint and several liability clause in the Letter. The notice sent by the applicant to YCID on October 30, 2013 also did not indicate that the YCID’s liability should be expanded to agreements other than HPO42 Agreement. It should be noted the Letter of Default was signed and sealed by HPO on behalf of YCID, and the signature column specifically noted “pursuant to power of attorney granted under HPO42”. According to the “Commission Clause” of the HPO42 Agreement, the respondent YCID was only jointly and severally liable under the HPO42 Agreement. The court held the respondent YCID was only a contracting party to the HPO42 Agreement but not of the other 5 agreements. Therefore, the arbitration clauses in the other 5 agreements were not binding on the respondent YCID. The arbitral tribunal should only rely on the arbitration clause in the HPO42 Agreement to exercise jurisdiction over the dispute involving the respondent YCID under that agreement. The arbitral award concerned held that the respondent YCID was liable to the applicant in respect of the five agreements other than the HPO42 Agreement, which was

6.7 Scope of the Judicial Review of the Validity of the Arbitration Agreement

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beyond the scope of the arbitration clause agreed under HPO42 Agreement. Besides, in respect of the respondent YCID, the award on matters submitted to arbitration could not be separated from those not so submitted. Therefore, the arbitral award related to YCID should not be recognized and enforced in whole pursuant to Article V(1)(c) of the New York Convention. In addition to awards dealing with matters beyond the applicant’s submission to arbitration as discussed in the Emphor case, it is also common to see awards which decide the matters of a third party who is not one of the parties of the arbitration agreement in question. In the Triton case, the respondent YCID raised a defense of “beyond the scope of arbitration”, claiming that it did not sign the HPO42 Agreement at all. As it is not the signing party of the Agreement, ICDR has no authority to rule it liable to the applicant under HPO42 Agreement. Although the Haikou Maritime Court found the part of award was related to YCID falling into Article V(1)(c) of the New York Convention and refused to recognize and enforce that part, the court did not follow YCID’s reasoning, but examined other facts of this case and made its own decision. The court held that although YCID should have been found to be a party to the HPO42 Agreement, the arbitral award should not have considered the six agreements as a whole and held YCID jointly and severally liable for the debts under all six agreements. Moreover, as the sums involved in the award were not separable under the six agreements, the arbitral award as a whole should not bind YCID and the part of the award involving YCID should not be recognized and enforced. This case is one of the few cases in the last three years in which recognition and enforcement have been denied on this ground.

6.7 Scope of the Judicial Review of the Validity of the Arbitration Agreement “Null and void arbitration agreement” is one of the grounds on which a party may claim that an arbitral award should not be recognized or enforced under the Arrangements on Mutual Enforcement of Awards. According to Article 7 of the Arrangements on Mutual Enforcement of Awards, the party against whom an application is filed may, after receiving notice of an arbitral award, whether made in the Mainland or in the HKSAR, adduce evidence to show any of the situations set out below. If a party to the arbitration agreement was, under the law applicable to him, under some incapacity, or the arbitration agreement was not valid under the law to which the parties subjected it, or, failing any indication thereon, under the law of the place in which the arbitral award was made, the relevant court may refuse to enforce the arbitral award. According to the above provisions, one of the parties can claim not to enforce the arbitration award on the ground that the arbitration agreement is null and void. If one party argues that the arbitration agreement does not exist, can it invoke this provision to claim not to enforce the arbitration agreement?

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Farenco Shipping Pte. Ltd. v. Eastern Ocean Transportation Co., Ltd 37 Farenco Shipping Pte. Ltd. (“Farenco”) applied to recognize and enforce the arbitral awards made in Hong Kong. As the respondent, Eastern Ocean Transportation Co., Ltd (“Eastern Ocean”) responded that, first, the instruments Farenco submitted for application did not satisfy the formal requirements of application for recognition and enforcement of the arbitration awards. Second, the freight in question was the subject matter of the supplementary contract, which was reached orally by both parties over the phone without having any arbitration clauses agreed on or any arbitration agreement concluded. Besides, Eastern Ocean had never acknowledged the jurisdiction of the arbitral tribunal. Therefore, the enforcement of the arbitration awards would violate the requirement under the Arbitration Law that arbitration agreement must be express and the relevant provisions of the General Provisions of the Civil Law on the expression of intention, and the enforcement would constitute the violation of social public interests. With respect to the issue of whether the arbitration agreement was valid or not, Guangzhou Maritime Court held that, the arbitral tribunal had ascertained that the supplementary contract was concluded in writing by the email dated April 21. The Letter of Confirmation contained in the email incorporated the clauses of the Contract of Affreightment which containing an arbitration agreement into the supplementary contract by reference to “other terms/conditions remain unchanged”, which made the arbitration agreement of the Contract of Affreightment a part of the supplementary contract. Pursuant to Article 19(4) and 19(6) of the Arbitration Ordinance, it was sufficient to affirm that an arbitration agreement in writing had been concluded. Even though Eastern Ocean believed that the supplementary contract in question was concluded orally through telephone communication, it was still recorded through an email dated April 21. The arbitration agreement shall be deemed to constitute in writing in accordance with Article 19 (3)38 of the Arbitration Ordinance. 37

(2018) Yue 72 Ren Gang No. 1 Zhi Yi, (2019) Yue 72 Ren Gang No. 1. Article 19 of the Arbitration Ordinance of Hong Kong stipulates the definition and form of arbitration agreement as follows: (1) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (2) The arbitration agreement shall be in writing. (3) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means. (4)The requirement that an arbitration agreement be in writing is met by an electronic communication if the information contained therein is accessible so as to be useable for subsequent reference; “electronic communication” means any communication that the parties make by means of data messages; “data message” means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy. (5) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. (6) The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.

38

6.7 Scope of the Judicial Review of the Validity of the Arbitration Agreement

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Therefore, the Guangzhou Maritime Court held that a written arbitration agreement between both parties had been concluded and it was valid in accordance with the Arbitration Ordinance of Hong Kong. It ruled that the two arbitration awards rendered in Hong Kong by arbitrators Arthur Bowring, Andrew James Heppard and Mok SaiKit should be recognized and enforced. In the judicial review of validity of arbitration agreements in the mainland, there are different views in the previous judicial practice as to whether the existence of an arbitration agreement is included in the scope of review of validity of arbitration agreement. Article 2039 of the Arbitration Law only provides that if a party objects to the validity of an arbitration agreement, it may apply to the arbitration commission for a decision or to a people’s court for a ruling, but it does not mention the issue of the existence of an arbitration agreement. In practice, some courts have dismissed the lawsuit filed by the party arguing that the arbitration agreement does not exist because the “non-existence of the arbitration agreement” does not fall into the scope of the causes of invalidity of the arbitration agreement as set forth in Article 17 of the Arbitration Law.40 However, the SPC clarified the relevant practice for determination of the validity of the arbitration agreement in Luck Treat Ltd. v. Shenzhen Zhongyuancheng Commercial Investment Holdings Co., Ltd.41 In this case, after Shenzhen Zhongyuancheng Commercial Investment Holdings Co., Ltd. applied for arbitration, Luck Treat Ltd. applied to a people’s court to confirm that no valid arbitration clause existed between both parties on the ground that the arbitration clauses had not been established. The SPC held that, although this was different from a request for confirming the invalidity of an arbitration agreement, whether or not an arbitration agreement existed directly affected the dispute resolution method in the same way validity did. The question of “whether an arbitration agreement exists” was classified as a threshold question to be resolved. Therefore, broadly speaking, a request to confirm the non-existence of an arbitration agreement between the parties was an objection to the validity of an arbitration agreement. Therefore, a request made by the party for confirming the nonexistence of an arbitration agreement on the ground that the arbitration clause has not been established was a case of an application to confirm the validity of an arbitration agreement, and thus the people’s court shall accept the case and conduct hearing accordingly. This case is instructive for people’s courts in determining “whether or

39

Article 20 of the Arbitration Law: “If a party challenges the validity of the arbitration agreement, he may request the arbitration commission to make a decision or apply to the people’s court for a ruling. If one party requests the arbitration commission to make a decision and the other party applies to the people’s court for a ruling, the people’s court shall give a ruling. A party’s challenge of the validity of the arbitration agreement shall be raised prior to the arbitral tribunal’s first hearing.” 40 Article 17 of the Arbitration Law: “ An arbitration agreement shall be null and void under one of the following circumstances:(1) The agreed matters for arbitration exceed the range of arbitrable matters as specified by law; (2) One party that concluded the arbitration agreement has no capacity for civil conducts or has limited capacity for civil conducts; or (3) One party coerced the other party into concluding the arbitration agreement.” 41 (2019) Zui Gao Fa Min Te No. 1.

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not an arbitration agreement existed is within the scope of review of the invalidity of the arbitration agreement”. In the above case Farenco v. Eastern Ocean, Eastern Ocean claimed that the arbitral award should not be enforced on the grounds that the two parties had not agreed on an arbitration clause and an arbitration agreement did not exist. In Guangzhou Maritime Court’s judgment, it maintained the same view as the SPC on the scope of review of the validity of the arbitration agreement, holding that whether the arbitration agreement is established is a prerequisite for the validity of the arbitration agreement, which falls within the scope of review of the validity of the arbitration agreement and should be reviewed by applying the provisions of Article 7(1) of the Arrangements on Mutual Enforcement of Awards. This case has also been selected by the SPC as one of the “Typical Cases of Mutual Enforcement of Arbitral Awards Issued by the Mainland and the Hong Kong”. The SPC commented on the typical significance of the case that, Article 7(1) of the Arrangement on Mutual Enforcement of Awards stipulates that the court may refuse to enforce an arbitral award if the arbitration agreement was invalid. In practice, however, there was controversy over whether a broad or strict interpretation should be adopted for invalid arbitration agreements and whether the case of failing to prove the existence of an arbitration agreement should be included. In this case, the court looked beyond the literal meaning for the intent of the provision of the Agreement and ruled that the proof of existence of the arbitration agreement was a prerequisite for it to be valid, which fell within the scope of review of its validity. The invalidity of the arbitration agreement included the situation where the arbitration agreement was not established. Therefore, when a party holds that the arbitration agreement does not exist, it may invoke the provisions of Article 7(1) of the Arrangements on Mutual Enforcement of Awards to claim that the arbitral award rendered in Hong Kong is not enforceable, which shall be reviewed by the people’s court. Moreover, according to Article 7(1) of the Arrangements on Mutual Enforcement of Awards, in the absence of an agreement on the applicable law of the arbitration agreement, the non-existence of the arbitration agreement shall be reviewed in accordance with the law of the seat of the arbitration. In the above Farenco v. Eastern Ocean, even though Eastern Ocean argued that the arbitration agreement was not established on the ground that “the cargo transportation in question was agreed in the supplementary contract, which was reached orally between the parties by telephone, and no arbitration clause or arbitration agreement was agreed”, while the Guangzhou Maritime Court held that the arbitration agreement had been established according to the Arbitration Ordinance of Hong Kong, which was also the law of the place of arbitration.

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6.8 Service Procedure As an important part of the arbitration process, service or delivery procedure affects the proceeding of the arbitration process and the realization of the parties’ rights to arbitration. That the notice has been successfully served is the most basic requirement and guarantee of procedural justice. “Deliver notice to the Respondents in an appropriate manner” directly related to the parties’ right to participate in arbitration. Article 7 of the Arrangements on Mutual Enforcement of Awards provides that: “The party against whom an application is filed may, after receiving notice of an arbitral award, whether made in the Mainland or in the HKSAR, adduce evidence to show any of the situations set out below. Upon such evidence being examined and any of the said situations being found proved, the relevant court may refuse to enforce the arbitral award: ……(2) The party against whom the application is filed was not given proper notice of the appointment of the arbitrator or was otherwise unable to present his case;……” “Non-delivery of notice pursuant to the law” is a ground commonly used by respondents for refusing the enforcement of arbitral awards. Bensley Design Group International Consulting Co., Ltd v. Chengdu Mind River Land Company Limited and Chengdu Chenchuan Industrial Co., Ltd.42 Bensley Design Group International Consulting Co., Ltd. (“Bensley Co.“) applied to recognize and enforce arbitral awards made by the HKIAC. In their joint defence, Chengdu Mind River Land Co., Ltd. (“Mind Co.“) and Chengdu Chenchuan Industrial Co., Ltd. (“Chenchuan Co.“) responded that: first, the appointment of a sole arbitrator failed to seek the opinions of the parties by using the list-procedure ahead as required by Article 8 of the Arbitration Rules, which fell within the circumstance that “the composition of the arbitral authority or the arbitral procedure was not in accordance with agreement of the parties” as specified in Article 7(4) of the Arrangements on Mutual Enforcement of Awards. Second, The failure of the arbitrator to deliver relevant arbitration instruments to the Respondent in accordance with the Measures for the Administration of China Appointed Attesting Officers (Hong Kong) (Order No. 69 of the Ministry of Justice) ( “the Measures”) fell within the circumstances specified in Article 7(2) of the Arrangements on Mutual Enforcement of Awards that “the party against whom the application is filed was not given proper notice of the appointment of the arbitrator or was otherwise unable to present his case”. Chengdu Intermediate People’s Court made the following conclusions as to whether the arbitral tribunal delivered the legal instruments to the Respondent in an appropriate manner. As to the issue of whether the tribunal had given proper notice to the respondents, in the disputed arbitration proceeding, the arbitrators delivered the relevant instruments according to the address agreed by the parties in the Service Agreement, and the respondents proved that they had actually received such instruments, so there was no issue as to the failure of the arbitrators to give proper notice to the respondents. The respondents’ claim that the relevant instruments shall be delivered to the Respondent in accordance with the Measures was inconsistent with 42

(2019) Chuan 01 Ren Gang No. 1.

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Article 2 of the UNCITRAL Arbitration Rules.43 The court did not accept the respondents’ opinion. Therefore, it ruled that the Final Award (No. HKIAC/PA 18,043) and the Correction of the Final Award rendered by the HKIAC should be enforced. In this case, the parties had agreed that the UNCITRAL Arbitration Rules should apply to the arbitration proceedings. Chengdu Intermediate People’s Court confirmed that the arbitral tribunal involved in this case had properly delivered the notice to the respondents according to the provisions of the UNCITRAL Arbitration Rules. This case has also been selected by the SPC as one of the “Typical Cases of Mutual Enforcement of Arbitral Awards Issued by the Mainland and the Hong Kong”. The SPC pointed out that, this case expressly stated that the basis for determining whether the notice delivered successfully or not shall be the applicable arbitration rules. To determine whether the instruments had been delivered properly, the process of service shall first be clarified. “Non-delivery of notice pursuant to the law” is a ground commonly used by respondents for refusing the enforcement of arbitral awards. For example, in TS Haimalu Co Ltd v. Daqing PoPeyes Food Co., Ltd.,44 after TS Haimalu Co Ltd (“Haimalu”) applied to the Harbin Intermediate People’s Court for recognition and enforcement of the arbitral award, Daqing PoPeyes Food Co., Ltd., (“PoPeyes”) claimed that the arbitral award shall not be recognized and enforced on the ground that the arbitral tribunal failed to deliver the notice of hearing Hearing and arbitral award in accordance with Article 4 and Article 8 of the Treaty between the People’s Republic of China and the Republic of Korea on the Judicial Assistance in Civil and Commercial Affairs. The SPC held that delivered by mail and the failure to attach a Chinese translation did not violate the Arbitration Law of Korea and the Arbitration Rules of the KCAB. Since PoPeyes had failed to present any evidence to prove that the arbitral award in this case was under any circumstance prescribed in Article V(1) of the New York Convention to which China had acceded, the arbitral award in this case shall be recognized and enforced. The basis for determining whether the service of arbitration is valid is usually the arbitration rules of the arbitration institution and the arbitration law of the seat of arbitration. In addition, in judicial practice, with respect to the recognition of an arbitral award rendered overseas, some courts in certain regions have held that even if the delivery procedure complies with the arbitration rules of the arbitration institution, however, the examination on delivery process shall be conducted in combination with the laws of the place of enforcement, the protection of the procedural rights of the parties concerned and other factors. 43

Article 2 of the UNCITRAL Arbitration Rules stipulates that: “1. A notice, including a notification, communication or proposal, may be transmitted by any means of communication that provides or allows for a record of its transmission. 2. If an address has been designated by a party specifically for this purpose or authorized by the arbitral tribunal, any notice shall be delivered to that party at that address, and if so delivered shall be deemed to have been received …… 3. In the absence of such designation or authorization, a notice is:(a) Received if it is physically delivered to the addressee; or (b) Deemed to have been received if it is delivered at the place of business, habitual residence or mailing address of the addressee.” 44 [2005] Min Si Ta Zi No. 46.

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For example, in a case where Beijing IQIYI Science & Technology Co., Ltd. (“IQIYI”) applied for recognition and enforcement of an arbitral award,45 as the claimant, IQIYI stated that the arbitration instruments in this case had already been legally delivered to the respondent and that the arbitral award in this case should be recognized and enforced on the grounds that the address of delivery was the address agreed in the arbitration agreement and that the delivery of the arbitral award conformed to the arbitration rules. But Xinbei District Court of Taiwan region held that, the company, as the respondent in the arbitration involved in this case, had ceased its business, the arbitration instruments involved in this case shall be delivered to the legal representative. As the legal representative was in custody, the prison shall be entrusted with the delivery process. Therefore, it was difficult to affirm that the arbitration notice or other arbitration relating instruments had been delivered to the respondent in accordance with the provisions of the laws of Taiwan region. Given the respondent had not been properly delivered and given the opportunity to participating in the hearing, the court determined that the arbitration proceedings involved in this case violated the public order and good customs of Taiwan region, and the application for recognition of the arbitral award should not be granted. In addition, in CLY v. HZL,46 the Court of First Instance of the High Court of Hong Kong held that, although the notice of hearing should be deemed to have been delivered to the respondent in accordance with the Arbitration Rules of Guangzhou Arbitration Commission, the facts found in this case showed that the notice was not successfully delivered and the respondent also claimed that he did not receive the instruments for the second time. There was not sufficient evidence to rebut the claim that the respondent did not receive notice. According to the Arbitration Ordinance, the judge held that the notice of arbitration did not be properly delivered to the Respondent. As can be seen from the above-mentioned judicial cases in Taiwan region and Hong Kong, one of the important reasons for the denial of the arbitral award is that the court deemed that the delivery of instruments by the arbitration institution does not meet the standard of “deliver notice to the respondents in an appropriate manner” to protect the rights of the respondents to participate in the arbitration proceedings and give opinions.

6.9 The Bankruptcy or Winding up of the Parties The overlap between arbitration and bankruptcy proceedings occurs in certain cases. In cross-border arbitration, there is no universally accepted solution to resolve procedural conflicts as different jurisdictions have different approaches to deal with the overlap of arbitration and bankruptcy proceedings. In arbitration practice, we often 45

Civil Adjudication Lu Zhong Xu Zi [107 Year] No.1 of Xinbei District Court of Taiwan region and the Civil Adjudication Kang Zi [107 Year] No. 134 of Xinbei District Court of Taiwan region. 46 HCMP 3203/2013.

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see a circumstance where an arbitration institution has rendered an arbitral award and one of the parties concerned has gone bankrupt or has been wound up. Will the cross-border recognition and enforcement of arbitral award be affected in such a situation? Pacific Bulk Supramax Comany Limitedv. Bintan Mining Corporation47 Pacific Bulk Supramax Comany Limited (“PB”) applied to recognize and enforce the arbitral awards made in Hong Kong. Bintan Mining Corporation (“BMC”) responded that, first, since BMC had entered into winding-up proceeding, any action or proceeding instituted against the company after commencement of winding up was void under the law of British Virgin Islands as well as Hong Kong. Therefore, the arbitral award in this case fell under the circumstances of non-recognition and non-enforcement as stipulated in the Item (5) of Article 7(1) of the Arrangements on Mutual Enforcement of Awards. Second, with full knowledge of the relevant winding-up proceeding of BMC, PB still initiated the applications for goods seizure/auction in the Mainland of China, as well as applying to recognize and enforce the arbitral award rendered in Hong Kong, in an attempt to use the property of BMC to independently satisfy its own claims, to the detriment of the interests of other creditors, which went against fairness, good faith, public order and good morals, and was “contrary to the public interests of the Mainland” as stipulated in Article 7 of the Arrangements on Mutual Enforcement of Awards, and the award shall not be recognized and enforced. Qingdao Maritime Court held that, in accordance with Article 7(1) of the Arrangements on Mutual Enforcement of Awards,48 BMC responded that that the Partial Final Arbitral Award in question should not be recognized and enforced as being suspended pursuant to Sections 183 and 186 of Part V, Section 325 of Part IX, Section 327 (1) and Section 330 of Part X of the Companies (Winding Up and Miscellaneous Provisions) Ordinance of Hong Kong. However, PB argued that the BMC had not been wound up according to the procedures of the Companies (Winding-Up and Miscellaneous Provisions) Ordinance, and therefore none of the claims of BMC was consistent with the applicable laws. In this case, the focus of the dispute was whether BMC had conducted the winding-up process in accordance with the Companies (Liquidation and Miscellaneous Provisions) Ordinance, and thereby whether the abovementioned provisions were applicable to this case. The court further held that, first, the shareholders of BMC applied to wind up BMC in the British Virgin Islands in accordance with Section 159 (2) of the Insolvency Act of the British Virgin Islands. Subsequently, the Eastern Caribbean Supreme Court sent a Letter of Application for Acceptance to the High Court of Hong Kong. BMC did 47

(2021) Lu 72 Ren Gang No. 2. Article 7(1) of the Arrangements on Mutual Enforcement of Awards: “The party against whom an application is filed may, after receiving notice of an arbitral award, whether made in the Mainland or in the HKSAR, adduce evidence to show any of the situations set out below. Upon such evidence being examined and any of the said situations being found proved, the relevant court may refuse to enforce the arbitral award: …… (5) The award has not yet become binding on the parties, or has been set aside or suspended by the court or in accordance with the law of the place where the arbitration took place; ……”

48

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not directly file an application for winding-up to a court of Hong Kong in accordance with the Companies (Winding-Up and Miscellaneous Provisions) Ordinance of Hong Kong and therefore the procedures above are not complied with. Second, as the winding up of BMC was caused by the automatic winding up of its shareholders, the requirement of Section 327(2) of Part IV of the Companies (Winding Up and Miscellaneous Provisions) Ordinance that “no unregistered company shall be wound up by operation of this Ordinance” was not satisfied. Third, according to Item 4 of the Hong Kong High Court Order No. 730 2021, if BMC wished to stay the arbitral proceedings in Hong Kong or apply for the relevant instructions, the order would not give BMC the right to directly invoke the relevant provisions of the Hong Kong Companies (Winding Up and Miscellaneous Provisions) Ordinance. Therefore, the winding up of BMC was automatic winding up of the shareholders, no application for winding up was submitted to the court of Hong Kong, and it was not wound up in accordance with the law. In addition, BMC’s claim that the enforcement of the Partial Final Arbitration Award involved in this Case in the Mainland was against the social and public interests of the Mainland lacks factual and legal basis and was not supported by the court. Ultimately, the Qingdao Maritime Court ruled to recognize and enforce the Partial Final Arbitration Award rendered on May 7, 2021 by the arbitral tribunal composed of three arbitrators, namely Arthur Bowring, Cliff Aston and Sara Kay. This case concerns the recognition and enforcement of Hong Kong arbitral awards in the Mainland. In fact, recognition and enforcement can be two separate procedures. Article 1 of the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region provides that: “The procedures for enforcing arbitral awards of the Mainland or the HKSAR as specified in the Arrangement shall be interpreted as including the procedures for the recognition and enforcement of the arbitral awards of the Mainland or the HKSAR.“ As a result, the provision expands and clarifies the enforcement procedure49 in the Arrangements on Mutual Enforcement of Awards to include the recognition procedure. According to the Article 54450 and of the Civil Procedure Law Interpretation, if a party applies for recognition only without simultaneously applying for enforcement, the people’s court shall only review on whether the award shall be recognized or not. Therefore, with respect to whether the recognition and enforcement of arbitral awards rendered overseas shall be affected in the event of bankruptcy of a party, we shall discuss the recognition procedures and enforcement procedures separately. 49

The Arrangement on Enforcement of Awards which came into effect as of February 1, 2000, only mentions enforcement in words. 50 Article 544 of the Civil Procedure Law Interpretation provides that, where a judgment or ruling of a foreign court which has come into legal effect or a foreign arbitral award requires enforcement by the court in the People’s Republic of China, the parties concerned shall first apply to the people’s court for recognition. After examination and recognition, the people’s court shall enforce it in accordance with the provisions of Part III of the Civil Procedure Law. If the parties only apply for recognition without simultaneously applying for enforcement, the people’s court shall only review and make a ruling on whether recognition should be recognized.

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In the recognition procedures and enforcement procedures of arbitral awards rendered overseas, the nature of the recognition procedure is generally viewed as a kind of judicial recognition of enforceability rather than an act of enforcement. Therefore, recognition of an arbitral award will not constitute individual satisfaction to creditors nor damage the interests of other creditors. Under such circumstances, the bankruptcy and liquidation of the respondent usually will not affect the recognition of the arbitral award. For instance, in Canadian Solar Manufacturing (Luoyang) Inc. v. Lvneng Technology Co., Ltd,51 the administrator of the respondent Lvneng Technology Co., Ltd. ( “Lvneng”) claimed that the arbitral award in this case should not be recognized on the ground that the disputed bankruptcy claims has been registered. However, Taipei District Court of Taiwan region held that:"…….Even if the counterparty has listed the disputed bankruptcy claims in the claims list of Lvneng, the disputed claims are still subject to voting at the creditors’ meeting and were not final results. Therefore, it should not be deemed that the application of Canadian Solar Manufacturing (Luoyang) Inc. for recognition is unnecessary, the above defenses of Lvneng should not be accepted.” Ultimately, the court decided to recognize the arbitral award rendered by CIETAC. Whether the enforcement of arbitral awards rendered overseas will be affected or not when the respondent goes bankrupt depends on the jurisdiction in which the bankruptcy proceedings of the respondent are commenced. For example, in PB v. BMC, the shareholders of BMC had already applied to wind up BMC in the British Virgin Islands, the wind-up process did not hinder the court from making the decision to enforce the arbitration award. However, Section 183 of Part V of the Companies (Winding Up and Miscellaneous Provisions) Ordinance stipulates that: “Where any company is being wound up by the court, any attachment, sequestration, distress, or execution put in force against the estate or effects of the company after the commencement of the winding up shall be void to all intents.” Section 325 of Part IX provides that: “Where an order has been made for winding up a company registered in pursuance of Part IX of the pre-amended Ordinance, or Part 17 of the Companies Ordinance (Cap. 622), no action or proceeding shall be commenced or proceeded with against the company or any contributory of the company in respect of any debt of the company, except by leave of the court, and subject to such terms as the court may impose.” If the respondent has commenced bankruptcy proceedings in Hong Kong as alleged by the respondent, the wind-up process might become the obstacle of the recognition and enforcement of the award. On the other hand, if the respondent’s bankruptcy procedure has been initiated in mainland China, the relevant debtor’s enforcement procedure shall be suspended after the people’s court accepts the bankruptcy application in accordance with Article 19 of the Enterprise Bankruptcy Law.52 In this circumstance, after the arbitral award 51

Civil Adjudication No. 1 Lu Zhong Xu Zi Year 110 of Taipei District Court of Taiwan region. Article 19 of the Enterprise Bankruptcy Law: “After the people’s court accepts an application for bankruptcy, the measures for preserving the property of the debtor shall be lifted and the procedure for execution shall be suspended.”

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rendered overseas is recognized by the People’s Court in mainland, the creditor may assert a claim to the bankruptcy administrator. Meanwhile, if the bankruptcy administrator is of the opinion that there are reasons for refusing to recognize and enforce the arbitral award, it should also raise corresponding arguments. For example, in Triton Container International Limited v. Yangpu Economic Development Zone Construction Investment Development Co., Ltd. and Hainan PAN Ocean SHIPPING Co., Ltd.,53 the respondent argued that the award should not be recognized and enforced on the grounds that the administrator of the respondent continued to receive the respondent’s property during the arbitration proceeding and the respondent was a person without civil capacity.

6.10 Parallel Proceedings Parallel Proceedings includes the following situation: the same parties to the same dispute initiate litigation and arbitration in courts and arbitration institutions in more than two countries based on the same facts or transaction. In practice, such phenomenon is not uncommon. In Keep Bright Limited Co., Ltd. v. Super Auto Investments Limited Co., Ltd., Four Treasure Limited Co. Ltd., Four Treasure Limited(ZhuHai) Co., Ltd.,54 SPC pointed out that, while the parties initiated litigation in the mainland court and applied for arbitration to HKIAC over the same dispute, and HKIAC accepted and issued an arbitration award, it was a phenomenon of parallel dispute resolution of foreign-related and Hong Kong-related civil and commercial cases. So, when parallel proceedings occur, will there be any impact on the enforcement of arbitral award? NomuraHoldings, Inc. v. ShangHai Jiu You Equity Investment Fund Management L.P.55 NomuraHoldings, Inc. (“NomuraHoldings”) applied for the recognition and enforcement of HKIAC arbitration award HKIAC/A17248. ShangHai JiuYou Equity Investment Fund Management L.P. (“Jiu You Fund”) replied that, the award was in conflict with the judgement in force in the mainland, recognition and enforcement of the arbitral award was contrary to the public interest of the mainland society. This circumstance was specified in Article 7(3) of the Arrangements Mutual Enforcement of Awards, shall not be enforced. Shanghai Financial Court held that, first, about the No.599 Ruling, from the scope of the case, the request of JCCapital Ltd. (“JCCapital”) was designating Jiu You Fund as the liquidator and liquidation officer of Jiu You Quan Xing Partnership. This request was based on Article 86 of the Partnership Enterprise Law of the People’s Republic of China, within 15 days after the occurrence of the cause for the dissolution of the partnership enterprise, the partners may apply to the people’s court to designate 53

(2015) Qiong Hai Fa Ta Zi No. 1. (2013) Min Si Zhong No. 3. 55 (2020) Hu 74 Ren Gang No. 1. 54

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liquidators. The scope of the case did not include the matter of whether JCCapital should be delisted. Second, from the reasons of ruling, the court held that, both JCCapital and NomuraHoldings, as partners, were entitled to apply to the court for the appointment of liquidators. And after taking into account the claims and relationship of each partner, they designated that Jiu You Quan Xing partnership liquidation team shall be composed of intermediaries and persons designated by the partners. This showed that, the court held that JCCapital had the right to apply for the court to designate a liquidator and could designate the members of the liquidation team based on the status of the partners registered in the business register of JCCapital at that time. JCCapital’s partnership status was a prerequisite, not the results, for the court to find that it was entitled to participate in the liquidation. The ruling did not exclude the possibility of partners withdrawing due to removal from the partnership even after the partnership went into liquidation. Third, from the determination of the arbitration, in the course of the arbitration case, JCCapital had filed a defense to the conflict between No.599 ruling and NomuraHoldings’ arbitration claim. The arbitral tribunal had taken this into consideration and made relevant statements, and made a judgement on partner qualification of JCCapital from entity. Therefore, it was not contradictory that JCCapital had the right to apply for the designation of liquidators before delisted, and HKIAC issued an arbitration award to delist JCCapital in accordance with the Limited Partnership Agreement and relevant laws. Furthermore, JCCapital also claimed that the delist of partners should be in charge of the people’s court. According to the provisions of Article 49 of the Partnership Enterprise Law of the People’s Republic of China, in case of specific circumstances, a resolution may be made to delist the said partner upon the unanimous consent of the other partners. If the delisted partner disagrees with the delisting resolution, he or she may file a lawsuit with the people’s court within 30 days from the date of receiving the notice of delisting. Accordingly, this Article described the circumstances of filing a lawsuit with the people’s court that the delisted partner disagrees with the delisting resolution, but did not mention that the matter of the partner’s delisting should be in the competence of the people’s court. Therefore, the above claims of JCCapital did not comply with the law. As for the No.9147 ruling, the court noted that, Shanghai Xuhui People’s Court clearly stated in its ruling that the basis of the claim in this case should be based on the Partnership Enterprise Law of the People’s Republic of China. NomuraHoldings could realize the right to know as agreed in the partnership agreement separately through arbitration. Therefore, although part of NomuraHoldings’ claim in that case was dismissed, but the reason was based on the limitations of the scope of the legal right to know, HKIAC issued an arbitration award on the scope of the agreed right to know based on the partnership agreement. The basis of claim, the basis of decision and the subject of obligation in the two cases were different, and there was no conflict. As for Jiu You Fund’s argument that part of the arbitration award relating to the recognition and enforcement of the right to know had been enforced, the court held that the right to information was a fundamental right linked to partnership and

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had a continuing nature. Even if the former lawsuit had been enforced, the basis of NomuraHoldings’ right to rely on its partnership status to realize the right to know still existed. It did not affect its right to reassert its right to know by arbitration. Therefore, the argument of Jiu You Fund could not be supported. Jiu Yu Fund also asserted that Jiu Yu Quan Xing Partnership had entered into liquidation proceedings. NomuraHoldings should exercise its right to access to information directly to the liquidation team. The court held that subject of obligation was the partnership. However, the parties may agree in the partnership agreement that the managing partner also had the obligation to provide relevant information. Therefore, the fact that Jiu You Quan Xing Partnership was taken over by the liquidation team did not affect the performance of Jiu You Fund’s obligation to provide information as agreed in the partnership agreement. Additionally, as to the contents of the award on the distribution of investment profits, Jiu You Fond asserted that it was in conflict with the liquidation procedures established by No. 599 Ruling, and it was repetitive of the claims in the No.1365 Judgment. Both NomuraHoldings and Jiu You Fund specified that the ruling was only a “confirmation” of the amount of distributable income to be received by NomuraHoldings for the Phase I investment. Therefore, the court held that, this “confirmation” actually facilitated the liquidation process. The legal character of the distribution obligation was different from that of the No.1365 Ruling. There was no duplication, no violation of the principle of “non bis in idem”, and no circumstance that the content of the award did not meet the conditions of enforcement. Meanwhile, Jiu You Fund’s claim that the amount of proceeds in the award was incorrectly determined, was a matter of substantive determination, not within the scope of this review. Accordingly, Shanghai Financial Court ruled that the final award HKIAC/A17248 made by the HKIAC shall be recognized and enforced (except for costs). The Hong Kong arbitration award in this case involved decisions in a total of three cases in mainland court, No. 599 Ruling, No. 9147 Ruling and No. 1365 Ruling: (1) In No. 599 Ruling, Shanghai Financial Court held that, there was no contradiction between the Hong Kong arbitration award for the delisting of JCCapital from the Jiu Yuan Xing and No. 599, ruling that JCCapital, as a partner, had the right to apply to the court for the appointment of a liquidator. No. 599 Ruling did not exclude the possibility of partners withdrawing from the partnership due to removal from the partnership even after the partnership went into liquidation. (2) In No. 9147 Ruling, Shanghai Financial Court held that, case No. 9147 involved a statutory right to know, while the Hong Kong arbitration award involved a contractual right to know. The basis of the claim, the basis of the judgment and the subject of the obligation in the two cases were different, and there was no conflict. (3) In No. 1365 Ruling, Shanghai Financial Court held that, the Hong Kong arbitration award was merely a “confirmation” of the amount of distributable income to be received by NomuraHoldings in respect of the Phase I investment, and the “confirmation” actually facilitated the liquidation process. While No. 1365

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Ruling ruled that Jiu You Quan Xing distributed the proceeds to NomuraHoldings, the legal nature of the two cases was different and there was no duplication. Article 7 of the Arrangements on Mutual Enforcement of Awards stipulates that, “……The enforcement of the award may be refused if the court of the Mainland holds that the enforcement of the arbitral award in the Mainland would be contrary to the public interests of the Mainland, or if the court of the HKSAR decides that the enforcement of the arbitral award in Hong Kong would be contrary to the public policy of the HKSAR.” Although China does not clearly define the meaning of social public interest, in WesternBulkPte Ltd. v. Beijing Zhonggang Tiantie Steel Trading Co., Ltd,56 SPC held that, the public order stipulated in this Article shall be strictly interpreted and applied. Only if the recognition and enforcement of a foreign commercial arbitration award would result in violating the basic principles of China’s laws, infringing on China’s national sovereignty, endangering national and social public security, violating good customs and other circumstances that endangering the fundamental social and public interests of China, then the public policy grounds could be invoked to reject recognition and enforcement. In judicial practice, the parallel proceedings of mainland litigation and foreign arbitration leads to inconsistent adjudication results, which is often one of the reasons for parties and courts to invoke “contrary to the public interest” in order to refuse to enforce an offshore arbitration award. But the inconsistency of parallel dispute resolution does not necessarily prevent the recognition and enforcement of foreign arbitration awards. First, when the foreign arbitration award and the Chinese court ruling make no different determinations on the same disputed matter, there exists no conflict arising from the parallel dispute resolution procedure. Second, under the circumstance that there is an effective ruling in China, if the foreign arbitration award conflicts with the effective ruling in China, the people’s court may invoke the “contrary to the public interest” clause and reject the recognition and enforcement of the foreign arbitration award. For example, in AutomotiveGateFEZO v. Hebei Zhongxing Automobile Manufacturing Co., Ltd.,57 the CKD and Agency Agreement and Technical Cooperation Agreement signed by AutomotiveGateFEZO(“Gate”) and Hebei Zhongxing Automobile Manufacturing Co. Ltd. (“Zhongxing”) contained arbitration clauses respectively. After the dispute occurred, Zhongxing first applied to Shijiazhuang Intermediate Court to confirm the invalidity of the above arbitration clauses, and Gate applied to ICC for arbitration. Then the arbitral tribunal made partial award that it had jurisdiction over the case. Shijiazhuang Intermediate People’s Court ruled that the above arbitration clause was invalid. Later Gate applied to the Yichang Intermediate Court for recognition and enforcement of that part of the award. Yichang Intermediate people’s court held that, on the premise that Shijiazhuang Central Court has made a negative ruling on the validity of the above arbitration agreement, the 56 57

(2012) Min Si Ta Zi No. 12. (2015) E Yi Chang Zhong Min Ren Zi No. 00003 Zhi Yi.

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recognition and enforcement of the arbitration award based on an arbitration agreement would conflict with the effective ruling of Shijiazhuang Intermediate Court, and was contrary to the public interest. Therefore, it is ruled that the award shall not be recognized and enforced. It should be pointed out that, the time of the foreign arbitration award was made and effected earlier than the time of Chinese court ruling was made and effected. The inconsistency in the result of parallel proceedings should not prevent the recognition and enforcement of the foreign arbitration award. For example, in TCL Air Conditioner (Zhongshan) Co., Ltd. v. Castel Electronics Pty Ltd.,58 the SPC pointed out in the Reply of the SPC to the Request for Instructions on the Case Concerning the Application of Castel Electronics Pty Ltd. for Recognition and Enforcement of a Foreign Arbitration Award by the Applicant that, the arbitration awards in the case were rendered on 23 December 2010 and 27 January 2011, and the ruling of Chinese court on the invalidity of the arbitration clause was made on December 20, 2011. The arbitration award was apparently rendered earlier than the effective time of Chinese court’s ruling……but not yet to constitute a violation of China public policy.

58

(2013) Min Si Ta Zi No. 46.

Table of Cases

Chapter 1 1.1 Independence of Arbitration Clause Eslite Lifestyle Department Store (Shanghai) Co., Ltd. v. Shanghai Tower Construction & Development Co., Ltd. (2019) Hu Min Zhong No. 533 Luck Treat Limited v. Shenzhen Zhongyuancheng Commercial Investment Holdings Co., Ltd. (2019) Zui Gao Fa Min Te No. 1 Newpower Enterprises Inc. v. Shenzhen Zhongyuancheng Commercial Investment Holdings Co., Ltd. (2019) Zui Gao Fa Min Te No. 2 Beijing Gangzhonglv Hotel Management Co., Ltd. v. Shenzhen Zhongyuancheng Commercial Investment Holdings Co., Ltd. (2019) Zui Gao Fa Min Te No. 3 Diaoyutai Food Biotechnology Co., Ltd. v. Huaxia Shulian Technology Co., Ltd. (2020) Jing 04 Min Te No. 281 Sichuan Haoxiang Construction Engineering Co., Ltd. v. DCQ (2020) Su 03 Min Te No. 24 Chengdu Maigao Property Management Co., Ltd. Fortune Center Branch v. Chengdu Carrefour Hypermarket Co., Ltd. (2020) Jing 04 Min Te No. 310 WSJ v. ZJW (2018) Yue 03 Min Te No. 507 CL v. Jiangsu Huata Communication Engineering Co., Ltd. (2020) Su Min Zhong No. 896.

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 Y. Lin, China Arbitration Yearbook (2022), China Arbitration Yearbook, https://doi.org/10.1007/978-981-99-7165-7

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1.2 “Arbitration or Litigation” Clause Mingfa Group Co., Ltd. v. Powerlong Group Development Co., Ltd. (2021) Zui Gao Fa Min Zhong No. 480 Anhui Runxiangda Investment Management Consulting Co., Ltd. v. Lanxi Yintuo Precious Metals Trading Co., Ltd. (2013) Hu Er Zhong Min Ren (Zhong Xie) Zi No. 19 Zhejiang Hairui Electrical Co., Ltd. v. SHANGHAI ZONFA ELECTRIC (GROUP) JOINT-STOCK CO., LTD. (2017) Hu 01 Min Te No. 130 BY.O v. Shanghai Yushang Investment Group Co., Ltd. (2020) Hu 01 Min Xia Zhong No. 780 Yang v. He (2020) Yue 01 Min Te No. 841 Jiangsu Jinsha Construction Group Ltd. v. Shanxi Yirong Real Estate Development Co., Ltd. (2019) Zui Gao Fa Min Zhong No. 279 Maoming Huiji Real Estate Co., Ltd. v. YZB (2020) Yue 09 Min Te No. 14. Intersystems Software (Beijing) Co., Ltd. v. Beijing Shiying Hezhong Digital Technologies Co., Ltd. (2019) Zui Gao Fa Zhi Min Xia Zhong No. 477 BEIJING HOMYEAR CAPITAL HOLDINGS CO., LTD v. GUANGZHOU SECURITIES CO., LTD. (2019) Jing 04 Min Te No. 135 Nanjing Beilitang Beauty Gymnasium v. Ouhua Meike Dongtou (Tianjing) Medical Technology Co., Ltd. (2018) Su 01 Min Te No. 26 Taizhou Zhongdian Energy Co., Ltd. v. Guodian Nanjing Automation Co., LTD. (2018) Su 01 Min Te No. 107 Jiangsu Huachang Chemical Co., Ltd. v. Beijing Yingdeqingda Technology Co., Ltd. (2014) Su Zhi Min Xia Zhong Zi No. 0002 QSZ v. Yunnan Copper Co., Ltd., Tian Jin Tian Heng Nonferrous Metals Co., Ltd., ZHM (2016) Zui Gao Fa Min Xia Zhong No. 285 RXC v. Wuhan Bailianfu Biotechnology Co., Ltd. Changsha Branch, (2017) Zui Gao Fa Min Xia No. 32 Joy Global (Jiamusi) Mining Machinery CO., Ltd. v. Datong Longmei Coal Mine Machinery Sales Co., Ltd.. (2017) Zui Gao Fa Min Xia No. 32.

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267

1.3 Standard Form Contract Foshan Tongyong Pharmaceutical Co., Ltd. v. Sinopharm (Guangzhou) Medical Equipment Co., Ltd. (2021) Jing 04 Min Te No. 557 WJC v. China Securities Co., Ltd. (2021) Jing 04 Min Te No. 216 Cai v. Shantou Ruijing Real Estate Development Co., Ltd., (2021) Yue 01 Min Te No. 1613. Xiao v. Xue, (2021) Hu 01 Min Te No. 418 Tahoe Investment Group Co., Ltd. v. Cura For-the-Best Investment Fund Management, LP. (2021) Min 01Min Te No. 170 LRX v. Sichuan Tianxiao Law Firm (2021) Chuan 06 Min Te No. 3 LC v. AXA Jining Center Branch (2017) Lu 11 Min Zhong No. 1111 WY v. Beijing Hongshang Education Consulting Co., Ltd. (2021) Jing 04 Min Te No. 968 Beijing Hulian Jingwei Technology Development Co., Ltd. v. LMJ (2021) Jing 04 Min Xia Zhong No. 5 Shanghai Aisiai Medical Technology Co., Ltd. v. TUV Rheinland (Shanghai) Co., Ltd. (2020) Hu 02 Min Zhong No. 4718.

1.4 Implied Arbitration Agreement Diaoyutai Food Biotechnology Co., Ltd. v. Huaxia Shulian Technology Co., Ltd. (2020) Jing 04 Min Te No. 281 LR v. Renren Xing Technologies Co., Ltd. (2020) Ji Zhi Jian No. 52 Eslite Lifestyle Department Store (Shanghai) Co., Ltd. v. Shanghai Tower Construction & Development Co., Ltd. (2019) Hu Min Zhong No. 533 Mingfa Group Co., Ltd. v. Powerlong Group Development Co., Ltd. (2021) Zui Gao Fa Min Zhong No. 480 Guanxian Ganghai Sheet Metal Co., Ltd. v. Guanxian Hengrun Composite Materials Co., Ltd. (2020) Zui Gao Fa Min Zai No. 150 Yutai Luning Real Estate Development Co., Ltd. v. WYL, ZYQ (2020) Lu Min Zhong No. 1217 Lhasa Maji Ami Restaurant Chain Co., Ltd. v. Lhasa Natural Resources Bureau (2020) Zang Min Zhong No. 19 Haitian Construction Group Co., Ltd. Guangdong Branch v. Guangdong Zhejiang Dongyang Chamber of Commerce (2017) Yue Min Shen No. 10480

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Table of Cases

DC, GNR v. Huayuan Touzi Nantong Co., Ltd. (2019) Su 06 Min Zhong No. 3865 Sichuan Saite Refrigeration Co., Ltd. v. Linshui Huanyu Steel Structure Co., Ltd. (2019) Chuan Min Shen No. 1960.

1.5 Continued Validity of Contract BXN v. King & Wood Mallesons (Shenzhen) (2019) Yue Min Shen No. 7674 Beijing Urban Construction Property Management Co., Ltd. v. Beijing Chongwen District Yilong Villa Owners Committee (2018) Jing 04 Min Te No. 135 Guangzhou Yingjing Sea Logistics and Transportation Service Co., Ltd. v. Guangzhou Shuiwu Asset Management Co., Ltd. (2020) Yue 01 Min Zhong No. 14693 Hefei Huareixing Optoelectronics Technology Co., Ltd. v. Hefei Jingdongfang Display Light Source Co., Ltd. (2018) Wan 01 Min Zhong No. 8766 Guangxi Guilin Jiankang Jiayuan Investment Co., Ltd. v. YLP (2020) Gui 03 Min Zhong No. 3074.

1.6 Unilateral Option/Asymmetric Arbitration Clause Hainan Kangda Micro Loans Co., Ltd. v. Hainan Xinyang Junan Real Estate Development Co., Ltd., ZM (2020) Qiong Min Xia No. 2 CYH v. DBS Bank (China) Co., Ltd. Shanghai Branch (2016) Jing 02 Min Te No. 93 Xiamen C&D Chemical Co., Ltd. v. MB Barter &Trading S.A. (2012) Pu Min Er (Shang) Chu Zi No. S3375 SRC et al. v. ASIA RICH SHIPPING LIMITED (2020) Min 72 Min Chu No. 239 Shenyang Shenyang Amusement Park Co., Ltd. v. Export-Import Bank of Malaysia Berhad, (2017) Zui Gao Fa Min Zhong No. 636 CMA CGM S.A. v. Xiamen Mingxiangda Logistics Co., Ltd. (2015) Yue Gao Fa Li Min Zhong Zi No. 190 GMA CGM S.A. v. SHAOXING HAOYI TRADING CO., Ltd. (2016) Zhe Min Xia Zhong No. 294.

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1.7 Arbitration Clause Without Foreign-Related Factors ArcSoft Corporation Limited v. Spreadtrum Communications (Shanghai) Co., Ltd. (2021) Zui Gao Fa Zhi Min Xia Zhong No. 90; (2020) Zhe 01 Zhi Min Chu No. 406 Siemens International Trading Ltd., Shanghai v. Shanghai Huangjin Zhidi Co., Ltd. (2013) Hu Yi Zhong Min Ren (Wai Zhong) Zi No. 2 Ningbo Xinhui International Trading Co., Ltd. v. CHINA MEHECO INTERNATIONAL TRADE DEVELOPMENT CORPORATION (2015) Si Zhong Min (Shang) Te Zi No. 00152 Jing-Jin Electric Technologies Co., Ltd. v. Semikron Electronics (Zhuhai) Co., Ltd. (2018) Jing 04 Min Te No. 145 Advanced Bionics (China) Co., Ltd. v. Aier Shidai medical technology (Beijing) co., LTD. (2018) Hu Min Shen No. 921 TIANWEINI (SHANGHAI) TRADE CO., LTD. v. E.Land International Fashion (Shanghai) Co., Ltd. (2019) Hu Min Xia Zhong No. 199 Zhengli Oceanic Engineering Co., Ltd. v. Picc Property And Casualty Company Limited Marine Insurance Operations Center, Picc Property And Casualty Company Limited Zhoushan Branch (2019) Min 72 Min Chu No. 149 Tianjin Garbage Sorting and Treatment Center v. Tianjin Daman Nanfang Environmental Protection Engineering Co., Ltd. (2021) Jin 01Min Te No. 11 Shandong Shengdong International Engineering Co., Ltd. v. Qingdao Xinguangzheng Steel Structure Co., Ltd. (2020) Lu 05 Min Xia Zhong No. 106.

1.8 Governing Law of Arbitration Agreement Henan Kanghui Aviation Technology Co., Ltd. v. JETSTAR PACIFIC AIRLINES AVIATION JOINT STOCK COMPANY (2019) Yu 01 Min Te No. 18 UNICORE RESOURCES PTE LTD v. Rizhao Zhongrui Native Produce Co., Ltd. (2016) Lu Min Xia Zhong No. 78 TIANJIN ZHONGSE INTERNATIONAL TRADING CO LTD v. WANGDA INTERNATIONAL TRADING LIMITED (2018) Zui Gao Fa Min Shen No. 6088 Beijing Sunway Imp. & Exp. Co., Ltd. v. Ronald A. Chisholm Limited (2021) Jin 03 Min Zhong No. 1985 SANHE CONSTRUCTIONPTE. LTD v. Jiangsu Chundu Steel Structure Engineering Co., Ltd. (2019) Su Min Xia Zhong No. 160

270

Table of Cases

HONEST MAY LIMITED v. Shenzhen Guodi Construction Engineering Co., Ltd. (2015) Min Si Ta Zi No. 36 Luck Treat Limited v. Shenzhen Zhongyuancheng Commercial Investment Holdings Co., Ltd (2019) Zui Gao Fa Min Te No. 1.

Chapter 2 2.1 Additional Parties Ma v. Xunling Tengfeng Automotive Power Technology (Beijing) Co., Ltd. (2020) Jing 04 Min Te No. 133 Beijing Changping Zhaofeng Village Town Bank Co,. Ltd v. Yan (2020) Jing 04 Min Te No. 406 Yunji Hotel v. Shaoxing Lejia Property Management Co., Ltd. (2020) Zhe 06 Min Te No. 2.

2.2 Corporation Deadlock Star Pipe Products, Ltd. v. Dachang Huaxing Foundry Co., Ltd. (2018) Jing 04 Min Te No. 304 Beijing Shoushang Dingfuzhuang Cultural Industry Development Co., Ltd. v. Beijing Beiqi Hengsheng Real Estate Co., Ltd. (2021) Jing 04 Min Te No. 537.

2.3 Guarantors Li v. Ningxia Wan’an Tiancheng Equity Investment Center (Limited Partnership) (2021) Jing 04 Min Te No. 792 Chengdu Youbang Stationery Co., Ltd. v. WGJ (2013) Min Si Ta Zi No. 9 Kunshan Liti Chengshi Tongying Investment Center (limited partnership) and Kunshan Tridimensional City Investment Management Co., Ltd. (2020) Jing 04 Min Te No. 507.

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2.4 Undisclosed Agent Ivathem S.R.L v. SHINES (Shanghai) International Trading Co., Ltd. (2020) Jing 04 Min Te No. 570 Reply of SPC to the Request for Instructions concerning Beifang Wanbang Logistics Co., Ltd.’s Application for Revocation of the Arbitral Award (2013) Min Si Ta Zi No. 5 Huaying Chuangke (Beijing) International Culture Media Co., Ltd. Wuhan Branch v. Yang (2020) E 02 Min Te No. 277 Shandong Qiyang Petrochemical Engineering Co., Ltd. v. Dongying Dongze Chemical Technology Co., Ltd. (2020) Lu 05 Min Te No. 15 In regard to apparent agency, in the case of Jiufu Hujin Holding Group Co., Ltd. v. Microsoft (China) Co., Ltd. (2020) Jing 04 Min Te No. 432.

2.5 Company Deregistration Xingshu Energy Technology Co., Ltd. v. Sichuan Jiping Technology Co., Ltd. (2021) Jing 04 Min Te No. 756 CBN v. CX (2021) Jing 04 Min Te No. 942 JPX and JTP v. Inner Mongolia Siziwang Banner Gegentala Grassland Tourism Co. ltd, (2021) Nei 01 Min Te No. 92 LWB v. Shanghai Defeng Advertising Communication Co., Ltd. (2018) Hu 01 Min Te No. 168 LZW v. LJZ (2020) Min 01 Min Te No. 122 YJS and YXY v. LMP and FSM (2019) Yue 01 Min Te No. 564.

2.6 Shareholder of One-Person Limited Liability Company Guangzhou Linqingtang Biotechnology Co., Ltd. v. Kejie (Guangzhou) Daily Necessities Co., Ltd. (2021) Yue 01 Min Te No. 1475 Lou v. Beijing Qianhezhiyuan Film and Television Culture Investment Management Center (Limited Partnership) (2020) Jing 04 Min Te No. 354 China Telecom Corporation Cloud Computing Branch v. QJQ (2021) Jing 04 Min Te No. 14

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Beijing Zhupengcheng Information Consulting Co., Ltd. V. TYY (2020) Jing 03 Min Chu No. 584.

2.7 House Owners Li v. Guangzhou Jinhe Property Management Co., Ltd. (2020) Yue 01 Min Te No. 7 ZZX v. CSX (2020) Xiang 10 Min Te No. 19 Anhui Limin Road & Bridge Group Co., Ltd. v. Beijing Zhonghang Dabei Property Management Co., Ltd. (2021) Jing 04 Min Te No. 730.

2.8 Independence of Arbitration Agreement Diaoyutai Food Biotechnology Co., Ltd. v. Huaxia Shulian Technology Co., Ltd. (2020) Jing 04 Min Te No. 281 Guangzhou Mingderui Investment Co., Ltd. v. Guangzhou Baiyun International Airport Terminal 2 Management Co., Ltd. (2020) Yue 01 Min Te No. 105 Reply of SPC to the Request for Instructions concerning Concordia Trading B.V.’s application for recognition and enforcement of the British Oil, Oilseed and Grease Association (FOSFA) Arbitral Award [2009] Min Si Ta Zi No. 22.

2.9 Joinder of Additional Parties Youjia (Tianjin) Enterprise Management Co., Ltd. v. Xu (2022) Jing 04 Min Te No. 161 Liu v. Baoding Huajian Construction Engineering Co., Ltd. (2022) Jing 04 Min Te No. 171 Jining Shengji Real Estate Co., Ltd. v. Jining Tianhe Labor Service Co., Ltd. (2017) Lu 08 Min Te No. 124.

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2.10 Arbitration Agents Guangdong Hanguan Biotechnology Co., Ltd. v. Guangzhou Jimei Cosmetics Co., Ltd. (2020) Yue 01 Min Te No. 889 Sancai Real Estate Management Co., Ltd. Xi’an Branch v. GHZ (2021) Shan 01 Min Te No. 806.

Chapter 3 3.1 Concealment of Evidence Changchun Fawaygaoxin Automotive Accessories co., Ltd v. Changchun Aitelaier Environmental Protection Equipment Co., Ltd (2020) Ji 01 Min Te No. 12 Beijing Jinqiao Investment Co. Ltd et al. v. Guangdong Jinkuang Investment Group Co. Ltd et al. (2018) Jing 04 Min Te No. 23 Huaibei Tianzhu Real Estate Development Co., Ltd. v. Jiangsu Wenxin Construction Engineering Co., Ltd. (2019) Wan 06 Min Te No. 12 YFG v. Jinan Dongjin Longding Property Co. Ltd (2022) Lu 01 Min Te No. 11.

3.2 Falsification of Evidence JF v. Huaihua Jinding Real Estate Development Co., Ltd (2019) Xiang 12 Min Te No. 1 YM v. Kexin Decoration Shop of Karamay District (2022) Xin 02 Min Te No. 8 Shanghai Lion Plastic Industrial Co., Ltd. v. Shanghai Lianyi Industry and Trade Development Co., Ltd. (2019) Hu 01 Min Te No. 676 Haibei Shenghu Cultural Industry Development Co., Ltd. v. YXJ et al. (2020) Jing 04 Min Te No. 312.

3.3 Methods of Remedying Evidentiary Problems LLM v. Bank of China Limited Guangzhou Liwan Branch and CWY (2021) Yue 01 Min Te No. 7

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LSY v. Nanjing Jizhi Feng Metal Products Co., Ltd. and JGY (2021) Min 06 Zhi No. 263 Zhi Yi Shijiazhuang Guangming Zhengda Daily Chemicals Co., Ltd. v. Shijiazhuang Crown Display Material co., Ltd. and Hebei Runmin Fine Chemicals Co., Ltd (2019) Yi 01 Min Te No. 95 Xinjiang Guanghui Xinbang Real Estate Development Co., Ltd. v. Bortara Mongolian Autonomous Prefecture Huakun Construction and Installation Engineering Co., Ltd. (2021) Xin 01 Zhi Yi No. 340.

3.4 Concealment of Facts Beijing CSCE Environmental Engineering Co., Ltd. v. Qingdao Tianren Environment Co., Ltd. (2019) Jing 04 Min Te No. 99 Pingyang County Tourism Development Investment Co., Ltd. v. Tangfeng Hange Holding Co., Ltd. (2022) Hu 01 Min Te No. 12.

3.5 “Sufficient to Affect an Impartial Award” ZW v. LJX (2021) Yue 01 Min Te No. 1466 Zhongxin Guoan Guangshi Network Co., Ltd. v. Qingdao Hisense Broadband Multimedia Technology Co., Ltd (2020) Jing 04 Min Te No. 37 JSX v. Antong Holding Co., Ltd. (2021) Jing 04 Min Te No. 774.

3.6 Third Party Application to Oppose Enforcement of Arbitration Award LX v. Tai ’an Welfare Lottery Center et al. (2022) Lu 09 Zhi Yi No. 42 Xi’an Haisheng Shipbuilding Industry Co., Ltd. v. Shaanxi Haupu Real Estate Co., Ltd. (2022) Shan 01 Zhi Yi No. 707.

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3.7 Evidence of Doubtful Authenticity Zunyi Kangcheng Real Estate Development Co., Ltd. v. Chongqing Yijian Construction Group Co., Ltd (2019) Yu 01 Min Te No. 21 Rose Financial Leasing Co., Ltd. v. Shanghai Vcyber Technology Co., Ltd. (2021) Jing 04 Min Te No. 536 Guohua Rongwei Taicang Energy Co., Ltd. v. Shanghai Dahong Construction Engineering Co., Ltd. (2017) Su 05 Min Te No. 2 Jiujiang Luning Gas Co., Ltd. v. China Merchants Logistics Group Nanchang Co., Ltd. (2018) Jing 04 Min Te No. 358 CHM v. Beijing Xichuang Investment Management Co., Ltd. (2021) Jing 74 Min Te No. 94.

3.8 Estoppel Zaozhuang Henglong Real Estate Co., Ltd. v. Shandong Yixiangyuan Construction Co., Ltd. (2022) Lu 04 Min Te No. 9 Beijing Boruiqin Information Technology Co., Ltd. v. Beijing Hongmi Gongmao Co., Ltd. (2018) Jing 04 Min Te No. 326 LLS v. TN (2018) Jing 04 Min Te No. 14 Beijing JFR Technology Company Ltd. v. Beijing Sansheng Chuangxin Science&Technology Development Co., Ltd. (2018) Jing 04 Min Te No. 393.

3.9 Foreign-Related Arbitration Award Yunnan Yuanzhi Investment Co., Ltd v. Beijing Harmonious Growth Investment Center (L.P.) (2021) Jing 04 Min Te No. 42 WXR v. TJY (2018) Yue 01 Min Te No. 1169 Guangzhou Huafeng Real Estate Development Co., Ltd. v. HCJ (2016) Yue 01Zhi Yi No. 401.

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Chapter 4 4.1 Verification System Aksu Shunlong Material Co., Ltd v. Aksu Tongcheng Real Estate Development Co., Ltd (2018) Zui Gao Fa Zhi Jian No. 177 Zhongguo Huangjin Group Co., Ltd, China Gold Group Liaoning Co., Ltd. v. LW, LQF (2021) Jing 04 Min Te No. 383 Shanghai Guangjian Information Technology Co., Ltd v. RYB (2021) Yu 04 Zhi No. 162 Youxiang Financial Leasing (Guangzhou) Co., Ltd v. XW (2021) Yu 02 Zhi No. 23 Guangxi Guigang Jinda Real Estate Development Co., Ltd v. LSJ (2020) Gui 08 Zhi Yi No. 18 Beijing Hengyuan Xinye Information Technology Co., Ltd v. XXH. (2020) Yu Zhi Fu No. 333 QYY v. Yongzhou City Lingling District People’s Government (2020) Xiang Zhi Jian No. 8.

4.2 State-Owned Assets Zhongguo Huangjin Group Co., Ltd, China Gold Group Liaoning Co., Ltd. v. LW, LQF (2021) Jing 04 Min Te No. 383 Yunnan Water Investment Co., Ltd. v. Shaanxi Zhongshi Infrastructure Investment Co., Ltd. (2021) Jing 04 Min Te No. 21 DAVID DEIN CONSULTANCY LIMITED v. BRAMLEY CORPORATION LTD (2020) Jing 04 Ren Gang No. 5 Tuanfeng County Investment and Development Co., Ltd v. Huanggang Honglin Real Estate Development Co., Ltd (2021) E 11 Min Te No. 15 LH, LW v. Xiushan Huaxin Real Estate Development Co., Ltd (2021) Yu 01 Min Te No. 140 Petro China Changqing Oilfield Branch v. Xi’an Ruipu Petroleum Technology Development Co., Ltd (2017) Shaan 01 Min Te No. 74 Jiangxi Liangyou Group Co., Ltd v. Jiangxi Zhifei Industrial Development Co., Ltd (2016) Gan 01 Min Te No. 10.

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4.3 P2P Online Lending Shanghai Guangjian Information Technology Co., Ltd v. RYB (2021) Yu 04 Zhi No. 162 Anhui Nana Information Technology Co., Ltd. v. ZJT (2021) Ji 04 Zhi No. 58 Beijing Hengyuan Xinye Information Technology Co., Ltd v. XXH (2020) Yu Zhi Fu No. 333 WL v. Shenzhen Rongxinbao Non-financing Guarantee Co., Ltd. (2020) Jing 02 Zhi Yi No. 175 Shanghai Kuaisheng Financial Information Service Co., Ltd v. ZW (2022) Xiang 06 Zhi No. 37 H v. M (2020) Ning 01 Zhi No. 241.

4.4 Ex Officio Review Pingxiang Weidu Financial Services Outsourcing Co., Ltd v. SHM (2021) Lu 0214 Zhi No. 3852 Shanyin Financial Leasing (Shanghai) Co., Ltd v. SJY (2021) Lu 1311 Zhi No. 1085 Shanghai Kuaisheng Financial Information Service Co., Ltd v. ZW (2022) Xiang 06 Zhi No. 37 H v. M (2020) Ning 01 Zhi No. 241 Jincheng Chengqu Xiejunbao Wood Floor Distribution Department v. XJB (2021) Jin Zhi Fu No. 171 YHY, LZY, SSB v. Guangdong Foshan Nanhai District Kepai Enterprise Co., Ltd. (2019) Yue Zhi Fu No. 770 Hubei Shengfeng Pharmaceutical Co., Ltd., GMN, YZT v. Wuhan Donghu Baixing Venture Investment Centre L.P. (2021) Zui Gao Fa Zhi Jian No. 12.

4.5 Private Equity Funds Zhehao Asset Management (Shanghai) Ltd. v. HW (2020) Jing 04 Min Te No. 55 China Everbright Bank Beijing Branch v. ZQ, Beijing XiChuang Investment Management Co., Ltd (2021) Jing 74 Min Te No. 99

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SSJ v. Ningbo Yuxiang Investment Management Co., Ltd., Guotai Junan Securities Co., Ltd. (2022) Hu 74 Min Te No. 21 YYJ v. Ningbo Meishan Bonded Port Area Chanxiang Investment Center L.P. (2022) Hu 02 Min Te No. 169 LCH v. XRH, ZJW (2019) Yue 01 Min Zhong No. 16045 CJJ v. Shenzhen Guotou Investment Capital Management Co., Ltd (2020) Yue 0304 Min Chu No. 26442.

4.6 Concealing Illegitimate Purpose Under Legitimate Acts Jiangsu Lianyou Network Co., Ltd, Shanghai Shengzhuang Construction Labor Engineering Co., Ltd v. Shanghai Yinxin High Technology Developement Co.ltc (2020) Hu 01Min Te No. 103 Hengchang Zhongding Financial Leasing Co., Ltd v. FXQ (2021) Yu 02 Zhi No. 711 Qinghai Chaidamu Financing Guarantee Co., Ltd. v. Haibei Shenghu Cultural Industry Development Co., Ltd. (2020) Jing 04 Min Te No. 428 Zhongguo Huangjin Group Co., Ltd, China Gold Group Liaoning Co., Ltd. v. LW, LQF (2021) Jing 04 Min Te No. 383 WXY v. Enshi Zhonghao Trading Co., Ltd. (2020) E 28 Min Te No. 3 Shengzhuang Construction Labor Engineering Co., Ltd. v. Shanghai Yinxin High Technology Developement Co.ltc (2020) Hu 01Min Te No. 103.

4.7 Group Interest Guangxi Guigang Jinda Real Estate Development Co., Ltd. v. LSJ (2020) Gui 08 Zhi Yi No. 18 WL v. Hefeng Tianxia Yingye (Beijing) Co., Ltd. (2021) Jing 04 Min Te No. 836 ZLS, ZJX v. Xiamen Zhongjing Real Estate Development Co., Ltd. (2020) Min 02 Min Te No. 127 Huaibei Tianzhu Real Estate Development Co., Ltd. v. Jiangsu Wenxin Construction Engineering Co., Ltd.(2019) Wan 06 Min Te No. 12 Lonkey Industrial Co., Ltd., Guangzhou v. XING FA (HONG KONG) IMP.&EXP. LIMITED (2020) Jing 04 Min Te No. 661

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Kunming Heji Trading Co., Ltd. v. Elle Construction Machinery (China) Co., Ltd. (2020) Jing 04 Min Te No. 607 Suining Municipal Government Feijingyingxingxiangmu Daijian Center v. Xinan Jiangong Group Co., Ltd. (2021) Chuan 09 Min Te No. 1.

4.8 Livelihood Project Henan Company v. Chengxian Management Bureau (2020) Gan 12 Zhi No. 72 Suining Municipal Government Feijingyingxingxiangmu Daijian Center v. Xinan Jiangong Group Co., Ltd. (2021) Chuan 09 Min Te No. 1 Leituo International Architectural Design Consultants (Beijing) Co., Ltd. v. Lvdi Beizhan Jinan Real Estate Co., Ltd. (2021) Lu 01 Min Te No. 217 Yunnan Qihui Investment Co., Ltd. v. Shanghai Lianlue Investment Management Center (2021) Hu 01 Min Te No. 638 Jiangsu Hehai Water Supply and Drainage Equipment Co., Ltd. v. Yongkang Water Bureau (2021) Zhe 07 Min Te No. 16 Shantou Huada Building Materials Co., Ltd., Shantou Huaxin Water Conservancy Engineering Co., Ltd. v. Taizhou Xinghe Reclamation Engineering Co., Ltd (2020) Yue 05 Min Te No. 18.

4.9 Substantive Issues Aral Tuoda Weiye Intelligent Technology Development Co., Ltd. v. Tibet Reorient Capital Co., Ltd., XXD, LY (2022) Jing 04 Min Te No. 439 Xinyu City Natural Resources Bureau Xiannvhu Branch v. Xinyu Kaiguang Real Estate Development Co., Ltd. (2022) Gan 05 Min Te No. 31 Zhuhai Baolaikang Hotel Co., Ltd. v. Zhuhai Yibang Pharmaceutical Co., Ltd. (2022) Jing 04 Min Te No. 344 WCH v. LQ (2022) Jing 04 Min Te No. 371 WW v. Chongqing Nongchanpin Microcredit Co., Ltd. (2022) Yu 01Min Te No. 203 Shanghai Guangjian Information Technology Co., Ltd v. RYB (2021) Yu 04 Zhi No. 162 Youxiang Financial Leasing (Guangzhou) Co., Ltd v. XW (2021) Yu 02 Zhi No. 23.

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Chapter 5 5.1 Criminal and Civil Intersection Cases and Suspension of Arbitration Proceedings Li v. Shenzhen Fucheng Asset Management Co., Ltd. (2021) Gui 05 Min Te No. 135 Shanghai Juliang Retirement Management Consulting Co., Ltd. v. Jin (2021) Hu 01 Min Te No. 307.

5.2 Who Can Suspend the Proceedings Involving Criminal Issues Zhejiang Jindun Fans Holding Co., Ltd. v. ZXY (2018) Zhe 06 Min Te No. 10 Xiangxiang Transmission and Transformation Company v. Hangzhou Jiangnan Cable Co., Ltd. (2017) Zhe 01 Min Te No. 51 Inner Mongolia Shengli Resource (Group) Co., Ltd., Inner Mongolia Yidong Coal Group Co. Ltd. and China Huarong Financial Leasing Co., Ltd. (2017) Zui Gao Fa Min Zhong No. 17.

5.3 The Same Facts Hengfuhuitong Investment Management Co., Ltd. v. Chen, China Merchants Bank Co., Ltd. Foshan Branch (2020) Yue 06 Min Te No. 328 Ping An Bank Co., Ltd. Chengdu Branch v.Luo (2022) Jing 74 Min Te No. 17 CITIC Securities Company Limited v. Qian (2022) Jing 04 Min Te No. 187 Zhenjian Yingye Co., Ltd. v. Dadi Shichuang Film Distribution (Beijing) Co., Ltd. (2022) Jing 04 Min Te No. 242.

5.4 Application for Revoking Arbitral Awards Beijing Sunshine Freight Int’l Co., Ltd. v. SUMSTAR GROUP CORP. (2018) Jing 04 Min Te No. 184 Reply on Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Fujian Group Co., Ltd for Revocation of [2015] Shen

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Zhong Cai No. 2475 Arbitral Award Rendered by Shenzhen Arbitration Commission (2018) Zui Gao Fa Min Ta No. 34 China Gold Group Liaoning Co., Ltd. v. LQF (2021) Jing 04 Min Te No. 383 XW v. Shanghai Heijunma Equity Investment Partnership (L.P.) (2021) Hu 02 Min Te No. 400.

5.5 The Crime of Illegally Absorbing Public Deposits Fujian Group Co., Ltd. v. Sun (2018) Zui Gao Fa Min Ta No. 34 Guangxi Guangtou Financing Guarantee Co., Ltd. v. Yang (2021) Yue 01 Min Te No. 535 Hengfuhuitong Investment Management Co., Ltd. v. Chen, China Merchants Bank Co., Ltd. Foshan Branch (2020) Yue 06 Min Te No. 328.

5.6 Forgery of Seals Minsheng Securities Co., Ltd. v. Wang (2018) Jin 01 Min Te No. 10 Shandong Lihua Chunqiu Real Estate Co., Ltd. v. Qian (2020) Lu 08 Min Te No. 36.

Chapter 6 6.1 Nationality of Arbitral Awards Brentwood Industries, Inc. (U.S.A) v. Guangdong Fa’anlong Machinery Complete Set Equipment Engineering Co., Ltd. et al. (2015) Sui Zhong Fa Min Si Chu Zi No. 62 Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Validity of the Arbitration Agreement between LD Intelligent Technology Corp., Ltd. and BP Agnati S.R.L, (2013) Min Si Ta Zi No. 13 Daesung Industrial Gases Co., Ltd. v. Daesung (Guangzhou) Gases Co., Ltd. (2020) Hu 01 Min Te No. 83.

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6.2 Competent Court ORIENTAL PRIME SHIPPING CO., LIMITED v. HONG GLORY INTERNATIONAL SHIPPING COMPANY LIMITED (2020) Hu 72 Xie Wai Ren No. 1; (2020) Hu Min Xia Zhong No. 110 China Merchants Bank Co., Ltd. Xiamen Branch v. MK Offshore Pte Ltd. and DBS BANK Ltd. (2019) Min 72 Min Te No. 1042 International Shoe Co. v. Washington, 326 U. S. 310,326 (1945).

6.3 Incapacity IM GLOBAL, LLC v. Tianjin Beifang Dianying Jituan Co. Ltd. (2018) Jin 01 Xie Wai Ren No. 2.

6.4 Validity of Arbitration Agreement IHS Global Limited v. Xinjiang Markor Chemical Industry Co. Ltd. (2018) Hu 01 Xie Wai Ren No. 23 Insigma Technology Co Ltd v. Alston Technology Ltd [2009] 3SLR (R) ArcSoft Corporation Limited v. Spreadtrum Communications (Shanghai) Co., Ltd. (2021) Zui Gao Fa Zhi Min Xia Zhong No. 90 Glencore Ltd. v. Kunshan Lily Textile Co., Ltd. (2019) Su 05 Xie Wai Ren No. 2.

6.5 Lack of Proper Notice Oue Lippo Healthcare Limited v. Lin (2019) Hu 01 Xie Wai Ren No. 5 Zhi Yi Louis Dreyfus Commodities Suisse SA v. Qingdao Free Trade Zone Cotton Exchange Market Co., Ltd (2021) Lu 02 Xie Wai Ren No. 5 IM GLOBAL, LLC v. Tianjin Beifang Dianying Jituan Co. Ltd (2018) Jin 01 Xie Wai Ren No. 2.

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6.6 Beyond the Scope of Arbitration Emphor FZ Co. v. Guangdong Yuexin Ocean Engineering Co., Ltd. (2020) Yue 72 Xie Wai Ren No. 1 Triton Container International Limited v.Yangpu Economic Development Zone Construction Investment Development Co., Ltd. and Hainan PAN Ocean SHIPPING Co., Ltd. (2015) Qiong Hai Fa Ta Zi No. 1.

6.7 Scope of the Judicial Review of the Validity of the Arbitration Agreement Farenco Shipping Pte. Ltd.v. Eastern Ocean Transportation Co., Ltd (2018) Yue 72 Ren Gang No. 1 Zhi Yi, (2019) Yue 72 Ren Gang No. 1 Luck Treat Ltd. v. Shenzhen Zhongyuancheng Commercial Investment Holdings Co., Ltd. (2019) Zui Gao Fa Min Te No. 1.

6.8 Service Procedure Bensley Design Group International Consulting Co., Ltd v. Chengdu Mind River Land Company Limited and Chengdu Chenchuan Industrial Co., Ltd. (2019) Chuan 01 Ren Gang No. 1 TS Haimalu Co Ltd v. Daqing PoPeyes Food Co., Ltd. [2005] Min Si Ta Zi No. 46 CLY v. HZL HCMP 3203/2013.

6.9 The Bankruptcy or Winding up of the Parties Pacific Bulk Supramax Comany Limited v. Bintan Mining Corporation (2021) Lu 72 Ren Gang No. 2 Canadian Solar Manufacturing (Luoyang) Inc. v. Lvneng Technology Co., Ltd Civil Adjudication No. 1 Lu Zhong Xu Zi Year 110 of Taipei District Court of Taiwan region Triton Container International Limited v.Yangpu Economic Development Zone Construction Investment Development Co., Ltd. and Hainan PAN Ocean SHIPPING Co., Ltd. (2015) Qiong Hai Fa Ta Zi No. 1.

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6.10 Parallel Proceedings Keep Bright Limited Co., Ltd. v. Super Auto Investments Limited Co., Ltd., Four Treasure Limited Co. Ltd., Four Treasure Limited (ZhuHai) Co., Ltd. (2013) Min Si Zhong No. 3 NomuraHoldings, Inc. v. ShangHai Jiu You Equity Investment Fund Management L.P. (2020) Hu74 Ren Gang No. 1 WesternBulkPte Ltd. v. Beijing Zhonggang Tiantie Steel Trading Co., Ltd (2012) Min Si Ta Zi No. 12 AutomotiveGateFEZO v. Hebei Zhongxing Automobile Manufacturing Co., Ltd. (2015) E Yi Chang Zhong Min Ren Zi No. 00003 Zhi Yi TCL Air Conditioner (Zhongshan) Co., Ltd. v. Castel Electronics Pty Ltd. (2013) Min Si Ta Zi No. 46.

Official Replies by the Supreme People’s Court Concerning Arbitration in China1

1. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Objection to Jurisdiction over Voyage Charter Party Dispute between Shanghai Jiexi International Freight Transportation Agency Co., Ltd. and Shanghai Hengxin Shipping Co., Ltd. February 23, 2017, (2017) Zui Gao Fa Min Ta No. 4. To the High People’s Court of Shanghai: The Request for Instructions on the Case Concerning the Objection to Jurisdiction over Voyage Charter Party Dispute between Shanghai Jiexi International Freight Transportation Agency Co., Ltd. and Shanghai Hengxin Shipping Co., Ltd. [(2016) Hu Min Ta No. 17] submitted by your court has been received. After deliberation, the replies are as follows. Based on the facts that your court has found out, Article 23 of the lease in question in this case provides that “ARBITRATION IF ANY, AT HONG KONG AND ENGLISH LAW TO APPLY”. This Article is a special agreement made by both parties on the place of arbitration and the applicable law when arbitrating the dispute involved, which does not constitute the only dispute resolution method between both parties and does not exclude litigation jurisdiction. This case is a voyage charter party dispute, which falls into the scope of the jurisdiction of the maritime court. Since the port of departure of the cargo involved is Shanghai Port, and the domicile of the defendant, Shanghai Hengxin Shipping Co., Ltd., is Shanghai, this case is under the jurisdiction of Shanghai Maritime Court. Shanghai Jiexi International Freight Transportation Agency Co., Ltd. filed this case to Shanghai Maritime Court. Shanghai Maritime Court exercised its jurisdiction upon this case is in accordance with the law. The opinion of your court is agreed. It is so replied. 1

This section is co-translated with Lulu Cai and Yini Chen, counsel and associate of Yi & Partners Law Firm, and Huaizhi Lin, law student at Macau University of Science and Technology.

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 Y. Lin, China Arbitration Yearbook (2022), China Arbitration Yearbook, https://doi.org/10.1007/978-981-99-7165-7

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2. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of RAFFLES INTERNATIONAL LIMITED for Recognition and Enforcement of a Hong Kong Arbitral Award March 28, 2017, (2017) Zui Gao Fa Min Ta No. 16 To the High People’s Court of Tianjin: The Request for Instructions on the Case Concerning the Application of RAFFLES INTERNATIONAL LIMITED for the Recognition and Enforcement of a Hong Kong Arbitral Award [(2016) Jin Min Ta No. 9] submitted by your court has been received. After deliberation, the replies are as follows. Since the present case concerns the application for enforcement of an arbitral award made in Hong Kong, the review shall be conducted in accordance with the Arrangements of the Supreme People’s Court on the Mutual Enforcement of Arbitral Awards. The question that your court submitted is whether the arbitral award involved in this case exists the circumstance that the dispute settled in the arbitral award falls out of the scope of the arbitration agreement. Article 12.1 of the Licensing Agreement involved provides that “Any disputes arising from or in connection with this Agreement shall be submitted to Hong Kong International Arbitration Center for arbitration in accordance with the arbitration rules in force at the time. In present case, since the arbitration request made by RAFFLES INTERNATIONAL LIMITED is the dispute concerning the execution of the Licensing Agreement and the arbitral award also made a corresponding decision upon the dispute concerning the Licensing Agreement based on the request of arbitration, the dispute settled in the arbitral award falls within the scope of the arbitration agreement by both parties. Although there is a close connection between the Licensing Agreement and the Hotel Management Contract, and the arbitral award refers to the relevant circumstances of the Hotel Management Contract in the parts of fact-finding and reasoning, no specific award has been made upon the dispute of the Hotel Management Contract, and therefore, it does not constitute the settlement of the dispute concerning the Hotel Management Contract. The arbitral award involved does not exist in the circumstance under Item (3), Paragraph 1 of Article 7 of the Arrangements on Mutual Enforcement of Awards. In conclusion, your court’s preferred opinion that the arbitral award shall be enforced is agreed. It is so replied.

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3. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shanghai on the Case Concerning the Application of GUANGSHA MIDDLE EAST CONSTRUCTION LLC for Revocation of the (2015) Hu Mao Zhong Cai No. 318 Arbitral Award made by Shanghai International Economic and Trade Arbitration Commission March 29, 2017, (2017) Zui Gao Fa Min Ta No. 3 To the High People’s Court of Shanghai: The Request for Instructions on the Case Concerning the Application of GUANGSHA MIDDLE EAST CONSTRUCTION LLC for Revocation of the (2015) Hu Mao Zhong Cai No. 318 Arbitral Award made by Shanghai International Economic and Trade Arbitration Commission [(2016) Hu Min Ta No. 20] submitted by your court has been received. After deliberation, the replies are as follows. This is a case in which GUANGSHA MIDDLE EAST CONSTRUCTION LLC (“GUANGSHA MIDDLE EAST”) applied for the revocation of the foreign-related arbitral award made by Shanghai International Economic and Trade Arbitration Commission (“SHITAC”). This case shall be reviewed in accordance with Article 70 of Arbitration Law and Article 274 of Civil Procedure Law. Regarding whether the arbitral award in this case is valid, since there is no difference between the two opinions submitted by your court, the decision of your court is agreed. As for the issue on whether the arbitral proceeding complies with the arbitration rules: (1) The issue on whether the appointment of arbitrators conforms to arbitration rules. Based on the facts in the submission, SHITAC issued the notice of arbitration on November 27, 2012. GUANGSHA MIDDLE EAST sent two letters of relevant objection to SHITAC respectively on December 26, 2012 and March 1, 2013. However, it did not select an arbitrator within the time limit under Article 22 of the Arbitration Rules dated May 1, 2012 by SHITAC (“Arbitration Rules”). Therefore, the Director of SHITAC appointed the arbitrator and the presiding arbitrator does not violate the Arbitration Rules. (2) There is no legal basis for requesting the revocation of arbitral award on the ground of alleged conflict of interest in the appointment of arbitrators. In present case, there is no proof that Wang acted as the arbitrator in the case and as a consultant in ALLBRIGHT LAW OFFICES. However, Wang has voluntarily withdrawn from the arbitral tribunal. Since the arbitral award was made eventually by the newly formed arbitral tribunal, the fact that Wang used to act as an arbitrator does not constitute material impact on the arbitral award. (3) The issue is whether the hearing that Wang involved as an arbitration shall be reconducted. Under Article 27 of the Arbitration Rules, after replacing the arbitrator, it is within the discretion of the arbitral tribunal to decide whether the pervious hearing shall be reconducted. After the composition of the new arbitral tribunal, both parties have been informed in writing that the previous procedure would not be reconducted, GUANGSHA MIDDLE EAST did not raise any objection. Therefore, the newly arbitral tribunal’s decision on not reconducting the previous hearing procedure does not breach the Arbitration Rules. (4) The issue on whether the arbitral tribunal not accepting the overdue counterclaim complies with arbitration rules. Under Article

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14 of the Arbitration Rules, the arbitral tribunal has the power to decide whether to accept the overdue counterclaim. Since GUANGSHA MIDDLE EAST did not file the counterclaim within the time limit prescribed by the Arbitration Rules, the decision of the arbitral tribunal to reject the overdue counterclaim does not violate the Arbitration Rules. In conclusion, this case does not exist the legal circumstances concerning the revocation of arbitral awards prescribed by Article 274 of the Civil Procedure Law. We agree with the majority opinion in your court’s request that the arbitral award shall not be revoked. It is so replied. 4. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Zhang and Guan for Confirmation of the Validity of an Arbitration Agreement May 23, 2017, (2017) Zui Gao Fa Min Ta No. 36 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of Zhang and Guan for Confirmation of the Validity of an Arbitration Agreement [(2016) Yue Min Ta No. 134] submitted by your court has been received. After deliberation, the replies are as follows. According to the materials that submitted by your court, the dispute of this case is whether the Ou’s act of signing the Housing Stock Purchasing Contract and expressing the intention to submit disputes to arbitration on behalf of Zhang and Guan is binding on Zhang and Guan. The Housing Stock Purchasing Contract which contains the arbitration clause involved in this case was signed on September 19, 2012. Before signing the agreement, Ou did not obtain the general authorization or specific authorization of signing the Housing Stock Purchasing Contract. After signing the Housing Stock Purchasing Contract, Zhang and Guan did not make ratification on Ou’s expression of intention to arbitrate. The Agreement and Receipt of Payment issued by Zhang and Guan on September 20, 2012 only referred to the intention to sell the house, price, deposit delivery, etc., and there was no intention to settle disputes by arbitration. Besides, by reviewing the literal expression of the Agreement and Receipt of Payment, it did not make ratification on Ou expressing the intention to submit contractual disputes to arbitration on behalf of Zhang and Guan. Based on the contract signing information of this case, the present evidence could not proof that there exists any circumstance that would sufficiently satisfy Pan to believe that Ou was authorized to act as a representative to express the intention to arbitrate. In summary, Zhang and Guan are not the parties of the arbitration clause involved in this case. We agree with your court’s opinion. Even though this case only seems to refer to the judgment of binding force of the arbitration clause, the arbitration clause exists as a contractual clause, so when judging the binding force of the arbitration clause, it shall be avoided to make prior judgment on the binding force of the contract in order to avoid dealing with issues

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of substance during the period of disputes over competence. Therefore, as for the analysis on the binding force of the arbitration clause, the issue of whether Ou has the authorization to sign the Housing Stock Purchasing Contract on behalf of Zhang and Guan shall not be involved, but only referred to whether Ou was authorized to express the intention to submit the disputes to arbitration. It is so replied. 5. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Yantai Moon Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement May 23, 2017, (2017) Zui Gao Fa Min Ta No. 41 To the High People’s Court of Shandong Province: The Request for Instructions on the Case Concerning the Application of Yantai Moon Co., Ltd for Confirmation of the validity of an Arbitration Agreement [(2017) Lu Min Si Ta No. 1] submitted by your court has been received. After deliberation, the replies are as follows. As for the Case Concerning the application of confirming the validity of arbitration agreement, the court shall review whether the arbitration agreement is valid and whether it is binding on the disputes between the parties, which means that whether the disputes between the parties shall be solved by arbitration. Based on the ground that there was no arbitration agreement between Yantai Moon Co., Ltd. (“Yantai Moon”) and Superfoods Professional (M) Co., Ltd. (“Superfoods”), Yantai Moon applied to the court to confirm that the arbitration clause System and Service Procurement Contract involved in this case (“the involved Contract”) has no binding force on Yantai Moon. The people’s court shall accept this case as the Case Concerning the confirmation on the validity of the arbitration agreement and shall make decision on whether the arbitration clause in the involved Contract is binding on Yantai Moon. As for whether the arbitration clause in the involved Contract is binding on Yantai Moon, the involved Contract was signed between YANTAI MOON (HK) CO., LIMITED (“HK MOON”) and Superfoods. Yantai Moon is not the party of the involved Contract. There is no evidence to prove that HK MOON would transfer the rights and obligations under the involved Contract to Yantai Moon. HK MOON and Yantai Moon denied the existence of principal-agent relationship, and the current evidence could not prove that HK Moon is the representative of Yantai Moon. In conclusion, the arbitration clause of the involved Contract has no binding force upon Yantai Moon. Regarding the issue on clarifying the parties of the involved Contract related to the Qualification Certificate issued by Yantai Moon to Malaysian government mentioned in the minority opinion of your court, based on the detailed statement of the Qualification Certificate, the document is in substance a unilateral qualification certificate issued by Yantai Moon to the relevant government, not a clear agreement on rights and obligations among all the parties. HK MOON denied Yantai Moon as a party of the involved Contract. Therefore, the minority opinion of your court is unsustainable.

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In summary, the preferred opinion of your court that the arbitration clause of the involved Contract does not bind Yantai Moon and there exists no valid arbitration agreement between Yantai Moon and Superfoods is agreed. It is so replied. 6. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Jiangsu Province on the Case Concerning the Application of Plexus Cotton Limited for Recognition and Enforcement of an Arbitral Award Made by ICA May 25, 2017, (2016) Zui Gao Fa Min Ta No. 31 To the High People’s Court of Jiangsu Province: The Request for Instructions on the Case Concerning the Application of Plexus Cotton Limited for Recognition and Enforcement of an Arbitral Award Made by International Cotton Association [(2015) Su Shang Wai Zhong Shen Xiao Ta No. 00003] submitted by your court has been received. After deliberation, the replies are as follows. This case is on the application for recognition and enforcement of foreign arbitral award. The arbitral award involved in this case was made by International Cotton Association in UK. China and UK are the contracting parties of the New York Convention. Under Article 283 of the Civil Procedure Law, the recognition and enforcement of the arbitral award involved in this case shall be reviewed in accordance with the relevant provisions under the New York Convention. According to the request of your court, the respondent Jiangsu Jin Fang Enterprise Co., Ltd. (“Jin Fang”) claimed that the arbitral award involved in this case shall be rejected to recognize and enforce based on the ground that there was no arbitration agreement between Jin Fang and Plexus Cotton Limited (“Plexus”). The premise of validity of the arbitration agreement is whether the arbitration agreement is established, which falls within the scope of reviewing the validity of arbitration agreement. The invalidity of arbitration agreement prescribed under Article V of the New York Convention includes the circumstance that the arbitration agreement has not been established. Therefore, in this case, it shall be reviewed that whether there exists the circumstance that satisfies Item (a), Paragraph 1 of Article V of the New York Convention. Since both parties did not reach an agreement on the applicable law of designating the validity of the arbitration agreement, the issue on whether the arbitration agreement involved in this case has been established shall be reviewed in accordance with the law of the place of arbitration, i.e., the law of UK. Based on the facts described by your court, EASTERN LINKAGE LIMITED Sales Confirmation (“Sales Confirmation”) was unilaterally made by EASTERN LINKAGE LIMITED. After Jin Fang signing the Sales Confirmation and sending it back, Plexus drafted No. 404988 Sales Contract, in which the arbitration clause is different from that in the Sales Confirmation. The arbitration clause in the Sales Confirmation noted that “Rule/Arbitration ICA Arbitration”, while the arbitration clause in Sales Contract noted that “This contract shall be governed by the provisions of Chinese-spun cotton. However, in case of technical disputes, the disputes

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shall be solved by arbitration in accordance with the rules of International Cotton Agreement. This clause constitutes a substantial alternation of the arbitration clause in Sales Confirmation. Jin Fang and Plexus had been negotiating the content of the Sales Contract, but never signed on the Sales Contract. Therefore, Jin Fang did not sign the Sales Contract and did not accept the arbitration clause therein. As a result, the facts regarding the signature of the contract involved in this case could not sufficiently prove that Jin Fang and Plexus had reached consensus on the arbitration agreement. According to the law of UK, the consensus of both parties to submit the dispute to arbitration is the prerequisite of the establishment and validity of the arbitration agreement. In present case, Jin Fang and Plexus did not reach the arbitration agreement. Therefore, the present case exists the circumstance under Item (a) of Paragraph 1 of Article V of the New York Convention that the arbitral award shall not be recognized and enforced. In conclusion, we agree with your court’s opinion that the arbitral award involved in this case falls within the scope of Item (a) of Paragraph 1 of Article V of the New York Convention that it shall not be recognized and enforced. It is so replied. 7. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Jiangsu Province on the Case Concerning the Application of Bright Morning Limited for Recognition and Enforcement of the 2011 No. 130 (ARB130/11/MJL) Arbitral Award Made by SIAC July 23, 2017, (2017) Zui Gao Fa Min Ta No. 44 To the High People’s Court of Jiangsu Province: The Request for Instructions on the Rejection of Recognition and Enforcement of the 2011 No. 130 (ARB130/11/MJL) Arbitral Award Made by SIAC submitted by your court has been received. After deliberation, the replies are as follows. This case is on the application for recognition and enforcement of the arbitral award made within the territory of Singapore. Since China and Singapore are the member states of New York Convention, under Article 283 of Civil Procedure Law, this case shall be reviewed in accordance with the relevant rules under the New York Convention. As for the issue of whether the arbitral award involved in this case exceeds the scope of arbitration agreement. According to the materials sent by your court, the scope of arbitration agreement in the joint venture contract between Bright Morning Limited (“BM”) and Yixing Lucky Textiles Group Co., Ltd. (“Lucky Group”) is “Any dispute, controversy, claim arising from or in connection with this contract …… could be submitted to arbitration. The claim for arbitration submitted by both parties focuses on the dispute that relates to the breach of contract and the liability for damages due to the breach of contract, etc. However, the fourth item in the arbitral award in this case sets limitation on the disposal of BM shareholders’ rights, which exceeds the scope of the arbitration agreement and the claims of arbitration submitted by both parties. Meanwhile, since the second item of the award is limited by the fourth

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item, the second item is in connection with the fourth item. Your court’s opinion on the second and fourth items exceed the scope of arbitration agreement is agreed. As for the issue on whether the second item and the fourth item could be separated from other items, the first item affirms that Lucky Group has breached the contract, the third item designates that Lucky Group shall pay compensation on the damage to BM for breach of contract. The main part of the award does not reveal that the second and fourth items have inseparable connection with the first and third items. As a separate ruling, the third item is the designation of the amount of compensation of damage that Lucky Group should bear for the breach of contract. It is inappropriate to affirm that the third item cannot be separated from the second and the fourth item as a result of connecting the compensation of damage for breach of contract with the limitation of shareholders’ rights in the reasoning part of the award. The arbitral tribunal’s analysis and elaboration on the ground of the award refers to the substantial issue of the case, which falls out of the scope of the reviewing content under the New York Convention. Therefore, the second and the fourth items can be separated from the first and the third items. The fifth and the sixth items can also be separated from the second and the fourth items, since they refer to the sharing of arbitration fees and other expenses. As for the issue on whether recognizing and enforcing the arbitral award in this case violates the public policy of China, whether the application of the PRC law by the arbitral tribunal is appropriate only affects the amount of compensation and it does not constitute a breach of public policy of China. Therefore, your court’s opinion that recognizing and enforcing the arbitral award in this case does not violate the public policy of China is agreed. In conclusion, under the Article 283 of the Civil Procedure Law and Item(c) of Paragraph 1 of Article V of the New York Convention, the second and the fourth items of the arbitral award shall not be recognized and enforced, the first, third, fifth, sixth items of the arbitral award shall be recognized and enforced. It is so replied. 8. Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Application of Noble Resources Internationa1 Pte. Ltd. for Recognition and Enforcement of a Foreign Arbitral Award June 26, 2017, (2017) Zui Gao Fa Min Ta No. 50 To the High People’s Court of Shanghai: The Request for Instructions on the Case Concerning the Application of Noble Resources Internationa1 Pte. Ltd. for Recognition and Enforcement of a Foreign Arbitral Award [(2016) Hu Xie Ta No. 1] submitted by your court has been received. After deliberation, the replies are as follows. This case is on the application for recognition and enforcement of a foreign arbitral award. The arbitral award in this case was made by SIAC within the territory of Singapore. Since China and Singapore are the member states of the New York Convention, under Article 283 of the Civil Procedure Law, this case shall be reviewed in accordance with the relevant rules in the New York Convention.

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According to your request, the core issue of the dispute in this case is whether the arbitral award in this case exists the circumstance under Item (d) of Paragraph 1 of Article V of the New York Convention that “the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties”. First, the Iron Ore Sales Contract signed by both parties stipulates that it shall invoke the terms and conditions of the second part of the Standard Agreement L2.4. However, the second part of the Standard Agreement L2.4 contains the arbitration clause. Therefore, the arbitration clause has been effectively incorporated into the Sales Contract and both parties have the valid written form of arbitration clause. Article 16.1 of the arbitration clause provides that dispute and claim shall be submitted to arbitrate in Singapore in accordance with the SIAC Arbitration Rules in force at the time, and the arbitral tribunal shall be formed by three arbitrators. Therefore, the arbitral procedure and the composition of the arbitral tribunal shall comply with the aforementioned agreement by both parties in the arbitration clause. Second, as for the issue on whether the expedited procedure is in conformity with the agreement by both parties, the arbitration rules applicable to the submission of the dispute in this case are the ARBITRATION RULES OF THE SINGAPORE INTERNATIONAL ARBITRATION CENTRE (2013, fifth edition) (“SIAC Rules (2013)”). Article 5 of SIAC Rules (2013) stipulates the “Expedited Procedure”. Paragraph (a) of Article 5.1 of SIAC Rules (2013) provides that “prior to the constitution of the Tribunal, a party may file an application with the Registrar for the arbitral proceedings to be conducted in accordance with the Expedited Procedure under this Rule, provided that any of the following criteria is satisfied: a. the amount in dispute does not exceed the equivalent amount of S$6,000,000, representing the aggregate of the claim, counterclaim and any defence of set-off; b. the parties so agree; or c. in cases of exceptional urgency.” The amount of subject matter of this case is less than SGD 5 million and both parties did not exclude the application of “Expedited Procedure” in the arbitration clause. Therefore, the act of SIAC applying the “Expedited Procedure” to arbitration based on the written application by Noble Resources Internationa1Pte. Ltd. complies with the SIAC Rules (2013), which does not violate the agreement between the parties. Third, as for the issue on whether the composition of the arbitral tribunal is in conformity with the agreement by both parties, Article 5.2 of SIAC Rules (2013) stipulates that “Where a party has filed an application with the Registrar under Rule 5.1, and where the President determines, after considering the views of the parties, and having regard to the circumstances of the case, that the arbitral proceedings shall be conducted in accordance with the Expedited Procedure, the following procedure shall apply: ……b. the case shall be referred to a sole arbitrator, unless the President determines otherwise; ……” From the abovementioned provision, SIAC Rules (2013) does not preclude the application of other forms of the composition of the arbitral tribunal in the “Expedited Procedure”. SIAC Rules (2013) also have no stipulation that the Chairman of the SIAC shall still have the power to compel the application of Paragraph (b) of Article 5.2 of SIAC Rules (2013) when the parties have agreed to apply another form of composition of the arbitral tribunal. The autonomy of the parties’ will is the cornerstone of the operation of arbitration system, and the

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composition of the arbitral tribunal belongs to the basic procedural rules of arbitration. Therefore, “unless the President determines otherwise” stipulated in Paragraph (b) of Article 5.2 of SIAC Rules (2013) shall not be interpreted as the Chairman of the SIAC has the power to decide arbitrarily on the composition of the arbitral tribunal. On the contrary, when exercising his power of decision, the Chairman should fully respect the consent of both parties on the composition of the arbitral tribunal, and guarantee the autonomy of the parties. Since both parties in this case has explicitly agreed in the arbitration clause that the arbitral tribunal shall be formed by three arbitrators and did not preclude the application of such composition method in the “Expedited Procedure”, the application of the “Expedited Procedure” does not affect the parties to obtain the basic procedural rights to form the tribunal with three arbitrators under the arbitration clause. Under the circumstance that the arbitration clause agrees that the arbitral tribunal is composed of three arbitrators and Shanghai Xintai International Trade Co., Ltd. explicitly opposed to adopt the sole arbitrator mode, SIAC still adopted the panel mode of sole arbitrator based on Paragraph (b) of Article 5.2 of SIAC Rules (2013), which breaches the arbitration clause in this case, and constitutes the circumstance under Item (d) of Paragraph 1 of Article V of the New York Convention that “the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties”. In conclusion, your court’s opinion on objection to recognition and enforcement of the arbitral award involved in this case is agreed. It is so replied. 9. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Hebei Province on the Case Concerning the Application of Hebei Puxing Electronic Technology Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement September 13, 2017, (2017) Zui Gao Fa Min Ta No. 70 To the High People’s Court of Hebei Province: The Request for Instructions on the Case Concerning the Application of Hebei Puxing Electronic Technology Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement [(2017) Ji Min Ta No. 2] submitted by your court has been received. After deliberation, the replies are as follows. Since CSD Epitaxy Asia Ltd. (“CSD”) is a HK company, this case shall by determined with reference to the relevant provisions applicable to foreign-related cases. The parties have not agreed on the applicable law of the arbitration agreement. Pursuant to Article 18 of the Law of Choice of Law, the applicable law of this case shall be the law of mainland China. According to the facts revealed by the materials sent by your court, the arbitration agreement is contained in the No. 11PX/01021US written contract, which was signed by Zhao on behalf of Hebei Puxing Electronic Technology Co., Ltd. (“Puxing”) and CSD. Zhao is the Chief Technology Officer and Deputy General Manager of Puxing. On November 11, 2010, she signed the No. 10PX/01012US Contract with CSD on

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behalf of Puxing. Besides the name and price of the goods in No. 10PX/01012US Contract is different from that in the No. 11PX/01021US Contract, other content and forms including the arbitration clause of the aforementioned two contracts are fundamentally the same. The aforementioned two contracts are both signed by Zhao on behalf of Puxing without the official seal of Puxing. Puxing has actually executed the contract and did not raise objection to the arbitration clause. Therefore, CSD has grounds to believe that Zhao has the authority to sign the arbitration agreement on behalf of Puxing. According to Article 49 of Contract Law, if an actor has no power of agency, oversteps the power of agency, or the power of agency has expired and yet concludes a contract in the principal’s name, and the counterpart has reasons to trust that the actor has the power of agency, the act of agency shall be effective. Puxing’s claim on the invalidity of arbitration agreement in this case based on the ground that Zhao had not obtained the authorization, cannot be supported. Article 3 of the Arbitration Law Interpretation stipulates that, “Where the name of the arbitration agency provided in the arbitration agreement is inaccurate but identifiable, the arbitration agency shall be deemed selected.” The parties agreed in the arbitration agreement involved in this case that the arbitration shall be governed by Beijing Foreign Trade Arbitration Commission of China Council for the Promotion of International Trade. The name of “Beijing Foreign Trade Arbitration Commission of China Council for the Promotion of International Trade” is the former name of CIETAC. Therefore, it shall be affirmed that the parties had designated CIETAC to govern the arbitration. Puxing’s claim that the arbitration institution was unclear, cannot be supported. In conclusion, Puxing’s application on confirming the invalidity of the arbitration agreement shall not be supported. It is so replied. 10. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application for Confirmation of Validity of the Arbitration Clause in the Carriage of Goods by Sea Contract between the Claimant FUJIAN YUAN CHENG BEAN CO., LTD and the RespondentFuxing Shipping Limited September 30, 2017, (2017) Zui Gao Fa Min Ta No. 109 To the High People’s Court of Fujian Province: The Request for Instructions on the Case Concerning the Application for Confirmation of Validity of the Arbitration Clause in the Carriage of Goods by Sea Contract between the Claimant FUJIAN YUAN CHENG BEAN CO., LTD and the Respondent Fuxing Shipping Limited [(2017) Min Min Ta No. 53] submitted by your court has been received. After deliberation, the replies are as follows. The Respondent Fuxing Shipping Limited filed objection of jurisdiction on the ground that the bill of lading in this case was incorporated into the arbitration clause of the charter party. Fuxing Shipping Limited shall first prove that the charter party that the bill of lading had incorporated into is the charter party that it unilaterally mentioned, which is the one that signed by two parties uninvolved in this case,

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CHINA NATIONAL CHARTERING (HONG KONG) CORPORATION LIMITED and Louis Dreyfus Company Freight Asia Pte. Ltd. However, the obverse side of the bill of lading in this case does not note the parties’ name, signing date and other detailed information of the incorporated charter party. Fuxing Shipping Limited’s claim that the bill of lading had been incorporated into the charter party is lacks factual basis. The objection of jurisdiction cannot be supported. As the court of the destination of goods and maritime claim preservation, Xiamen Maritime Court has jurisdiction over this dispute in accordance with law. In conclusion, your court’s review opinion is agreed. It is so replied. 11. Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Application of Li and Han for Revocation of an Arbitral Award October 31, 2017, (2017) Zui Gao Fa Min Ta No. 100 To the High People’s Court of Jilin Province: The Request for Instructions on the Case Concerning the Application of the Applicant Li and Han and the Respondent Jilin Jidian Real Estate Development Co., Ltd for the Revocation of an Arbitral Award [(2017) Ji Min Ta No. 3] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts sent by your court, the Applicant Li is the permanent resident of Macau Special Administrative Region. Therefore, the arbitral award in this case is a Macao-related arbitral award and it shall be reviewed under the relevant provisions on foreign-related arbitral award. Pursuant to Article 70 of the Arbitration Law, whereas the claimant has produced evidences to substantiate one of the cases as provided for in Paragraph 1 of Article 258 of the Civil Procedure Law, the People’s court shall form a collegiate bench to verify the facts and order the cancellation of the award (the Civil Procedure Law hereby should be the Civil Procedure Law amended in 2007, and the provision mentioned hereby should be Article 274 of the Civil Procedure Law amended in 2017). Changchun Intermediate People’s Court’s act of applying Article 58 of the Arbitration Law to this case is inappropriate and shall be rectified. According to the facts sent by your court, Article 66 of the Changchun Arbitration Commission Arbitration Rules stipulates that “(1) The provisions of this Chapter shall apply to international (foreign-related) commercial cases, except as otherwise agreed by the parties, where there are no provisions in this Chapter, other relevant provisions of these Rules shall apply. (2) In cases involving the Hong Kong Special Administrative Region, the Macao Special Administrative Region and the Taiwan Region, the provisions of this Chapter shall apply by reference.” Under the eighth chapter on special provisions on international (foreign-related) commercial arbitration, as for the composition of arbitral tribunal, notice of trial, applicable law, etc., are regulated differently from the general rules on non-foreign related commercial

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arbitration. If pursuant to the Paragraph 1 Article 67 of the Changchun Arbitration Commission Arbitration Rules, the time limit for both parties to select arbitrators is 20 days. However, according to the Notice of Counterclaim issued by the Changchun Arbitration Commission on September 15, 2016, the time limit set by the Changchun Arbitration Commission for both parties to select arbitrators is 15 days, which breaches the Changchun Arbitration Commission Arbitration Rules. Under Paragraph 1 Article 70 of the Changchun Arbitration Commission Arbitration Rules, the Arbitration Commission shall notify the trial date to the parties 30 days before the trial. However, according to the Notice of Trial issued by the Changchun Arbitration Commission on October 26, 2016, the Changchun Arbitration Commission notified both parties 20 days before the trial, which also violates the Changchun Arbitration Commission Arbitration Rules. Therefore, in the process of hearing the Chang Zhong Cai (2016) No. 334 Arbitration Case, the Changchun Arbitration Commission did not comply with the special provisions of the hearing procedure on international (foreign-related) commercial arbitration. During the hearing of Changchun Intermediate People’s Court upon this case, Jilin Jidian Real Estate Development Co., Ltd claimed that under Article 5 of the Changchun Arbitration Commission Arbitration Rules “If a party knows or should have known that any of the terms or conditions stipulated in the arbitration agreement stipulated in these Arbitration Rules has not been observed, but nevertheless participates or continues to participate in the arbitration proceedings and does not promptly submit a written objection to the aforesaid non-compliance, it shall be deemed to have waived its right to object”, Li did not file objection during the arbitration proceeding and shall be regarded as waiving his right to file objection. Therefore, the provisions on foreign-related arbitration procedure shall not be applied to this case. The relevant determination upon this case shall be made on the basis of ascertaining the relevant facts. If there exists the circumstance that Li or his representative knew or should have known the arbitration rules involved in this case was had been breached but he still participated or continued to participate the arbitration proceeding and did not file written objection in time, he shall be regarded as waiving his rights to file objection. Under such circumstances, even though the arbitration proceeding of Chang Zhong Cai (2016) No. 334 Arbitration Case did not apply the special provisions on foreign-related commercial arbitration, since the parties waived their rights to file objection, Li and Han’s application for revocation of the arbitral award cannot be supported. According to the facts submitted by your court, in present case, the only representative authorized by Li is Han. Although the Chang Zhong Cai (2016) No. 334 Arbitral Award noted that the three representative s delegated by Han were those who had been sub-entrusted by Li, no proof of sub-entrustment was filed during the arbitration proceeding. Li and Han denied the circumstance that Li delegated an representative to attend the trial or Han delegated an representative based on the sub-entrustment of Li in the arbitration proceeding. The arbitral award in this case also indicates that Li and Han did not attend the two hearings held by the arbitral tribunal, and there was no evidence to prove that Li had authorized any representative to attend the arbitration. Jilin Jidian Real Estate Development Co., Ltd’s claim that Li waived his rights on filing objection lacks factual basis and cannot be supported.

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Your court’s opinion in the Request is agreed. The arbitration proceeding of Chang Zhong Cai (2016) No. 334 Arbitral Award rendered by the Changchun Arbitration Commission violates the arbitration rules and the arbitral award shall be revoked. It is so replied. 12. Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Contractual Dispute between Wacai Network Technology Co., Ltd, Hangzhou Wacai Internet Finance Service Co., Ltd. and Miao, WACAI HOLDINGS LIMITED November 17, 2017, (2017) Zui Gao Fa Min Ta No. 116 To the High People’s Court of Zhejiang Province: The Request for Instructions on the Case Concerning the Contractual Dispute between Wacai Network Technology Co., Ltd, Hangzhou Wacai Internet Finance Service Co., Ltd. and Miao, WACAI HOLDINGS LIMITED [(2017) Zhe Min Ta No. 7] submitted by your court has been received. After deliberation, the replies are as follows. The two pieces of WACAI HOLDINGS LIMITED Stock Option Certificate do not contain any arbitration clauses. WACAI HOLDINGS LIMITED China Stock Option Grant Notice (2015 Stock Incentive Plan) incorporates China Stock Option Agreement and as its Appendix I and Appendix II. The arbitration clause is noted in the Appendix II 2015 Stock Incentive Plan. But Miao did not sign on the WACAI HOLDINGS LIMITED China Stock Option Grant Notice (2015 Stock Incentive Plan). The current evidence of this case could not prove that Miao knew the arbitration clause noted in the 2015 Stock Incentive Plan and accepted to be bound by the arbitration clause. Therefore, the arbitration clause in the 2015 Stock Incentive Plan is not binding on Miao. Miao now files a lawsuit to Hangzhou Xihu District People’s Court based on the WACAI HOLDINGS LIMITED Stock Option Certificate. As the court of the signing place of the two pieces of WACAI HOLDINGS LIMITED Stock Option Certificate, Hangzhou Xihu District People’s Court has the jurisdiction over this dispute. It is so replied. 13. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Beijing on the Case Concerning the Application of Guangzhou Huashangmao Lands Development Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement November 17, 2017, (2017) Zui Gao Fa Min Ta No. 78 To the High People’s Court of Beijing: The Request for Instructions on the Case Concerning the Application of Guangzhou Huashangmao Lands Development Co., Ltd. to confirm the validity of arbitration agreement in the Loan Contract [(2017) Jing Gao Fa No. 180] submitted by your court has been received. After deliberation, the replies are as follows. This case is on the confirmation of validity of foreign-related arbitration agreement. Article 16 of the Arbitration Law Interpretation stipulates that “The governing

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law for a determination of validity of a foreign related arbitration agreement shall be the governing law as agreed between the parties; where the parties have agreed on the place of arbitration but not the governing law, the law of the place shall apply to the arbitration; where the parties have not agreed on both the governing law and the place of arbitration or where agreement on the place of arbitration is unclear, the law of the place where the court is located shall apply.” As stated by your court in the Request, Article 6 of the Zhai (Wai) No. 25042005 Amended Agreement on Loan Contract signed on April 26, 2005 (“2005 Agreement”) provides that “…… the disputes should be finally decided by CIETAC……” The abovementioned dispute resolution clause does not mention the applicable law and place of arbitration. Therefore, this case shall apply the law of the forum to review the validity of the arbitration agreement involved in this case. According to the materials sent by your court, 2005 Agreement was signed by Guangzhou Huashangmao Lands Development Co., Ltd. (“Huashangmao”), WA SON TAT LAND INVESTMENT COMPANY LIMITED (“WA SON TAT”), and Harvest Trade Investments Limited (“Harvest”). 2005 Agreement provides that the disputes regarding the loan of three parties shall be submitted to CIETAC for arbitration. Even though Huashangmao raised objection to the authenticity of the arbitration clause in 2005 Agreement, no prima facie evidence had been provided to prove the 2005 Agreement was fake or fell within the scope of the invalidity circumstances under Article 17 and Article 18 of the Arbitration Law. It cannot be concluded that the arbitration clause in 2005 Agreement does not exist or is invalid. Upon signing 2005 Agreement, Harvest and Huashangmao signed Zhai (Zhan) No. 001 Amended Agreement (2) on Loan Contract in 2006 (“2006 Agreement”), which noted that the disputes between both parties shall be submitted to Guangzhou Arbitration Commission for arbitration. Therefore, even though 2005 Agreement had been real, Harvest and Huashangmao had obtained new consensus on the arbitration institution to solve the disputes between the two parties. To Harvest and Huashangmao, arbitration clause in 2005 Agreement was no longer binding on the both parties for it had been altered by the arbitration clause in 2006 Agreement. It is so replied. 14. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Confirmation of Validity of the Arbitration Clause in the Sino-Foreign Cooperation Contract among EAGLE FAITH LIMITED, Dongguan Xietong Enterprise Service Co., Ltd and Dongguan Villas November 30, 2017, (2017) Zui Gao Fa Min Ta No. 132 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Confirmation of Validity of the Arbitration Clause in the Sino-Foreign Cooperation Contract among EAGLE FAITH LIMITED, Dongguan Xietong Enterprise Service Co., Ltd and Dongguan

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Villas [(2017) Yue Min Ta No. 27] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts stated in your court’s Request, since this case has Hong Kong related factor, and the Cooperation Contract provides that the place of arbitration is mainland, the law of mainland shall be applied to confirm the validity of the Hong Kong related arbitration clause. Paragraph 2 of Article 16 of the Arbitration Law stipulates that “An arbitration agreement shall contain the following particulars: (1) an expression of intention to apply for arbitration; (2) matters for arbitration; and (3) a designated arbitration commission.” The Cooperation Contract was signed in 1985. The arbitration institution agreed in the Cooperation Contract “Guangdong Foreign Economic Arbitration Committee for the Promotion of International Trade” does not exist. Therefore, it shall be affirmed that the parties had no explicit agreement on the arbitration institution. Under the circumstance that both parties could not reach supplementary agreement on arbitration institution, pursuant to Article 18 of the Arbitration Law, “If an arbitration agreement contains no or unclear provisions concerning the matters for arbitration or the arbitration commission, the parties may reach a supplementary agreement. If no such supplementary agreement can be reached, the arbitration agreement shall be null and void.” Therefore, the arbitration clause in this case shall be confirmed as invalid. Your court’s opinion that the arbitration clause is invalid is agreed. It is so replied. 15. Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Dispute on Loan and Guarantee Contract among NANYANG COMMERCIAL BANK, LIMITED and BEST SYSTEM (HK) LIMITED, Zhu, Dongguan Jieweixun Electronics Co., Ltd December 5, 2017, (2016) Zui Gao Fa Min Ta No. 71 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Dispute on Loan and Guarantee Contract among NANYANG COMMERCIAL BANK, LIMITED and BEST SYSTEM (HK) LIMITED, Zhu, Dongguan Jieweixun Electronics Co., Ltd [(2015) Yue Gao Fa Min Si Ta No. 16] submitted by your court has been received. After deliberation, the replies are as follows. Article 29 of the Provisions on the Foreign Exchange Administration of Crossborder Guarantees which came into force on June 1, 2014, stipulates that “The approval, registration, or recording by the Foreign Exchange Administration of the cross-border guarantee contract, and other administrative matters or requirements specified in these Provisions, shall not constitute the essential element for the effectiveness of the cross-border guarantee contracts.” The aforementioned provision indicates that the current foreign exchange management system no longer regards the approval, registration or filing of cross-border guarantee contracts as the requirement of validity. Upon the enforcement of the Foreign Exchange Administration of Cross-border Guarantees, Article 6 of the Interpretation of the Supreme People’s

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Court on Certain Issues Regarding the Application of the Guarantee Law of the People’s Republic of China, which stipulates the validity of the external guarantee contract shall be determined by approval or registration of the relevant competent department of the State, shall no longer be applied. A cross-border guarantee contract shall not be invalid due to the failure to go through the approval, registration or filing procedure. According to the facts found by your court, the two Guarantee Contracts in this case were signed on January 4, 2012. The guarantor Dongguan Jieweixun Electronics Co., Ltd is registered in mainland China, while the debtor and creditor are registered in Hong Kong. The guarantee contracts in this case are cross-border guarantee contracts on providing domestic guarantee for offshore financing. At the time of signing the contracts in this case, the Provisions on the Foreign Exchange Administration of Cross-border Guarantees had not yet been implemented. The People’s Court shall require the parties to apply supplementary registration to foreign exchange administration department. If the foreign exchange administration department grants the supplementary registration, the People’s Court shall apply Article 6 of the Guarantee Law Interpretation to designate the validity of the contracts. It is so replied. 16. Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Validity of the Foreign-Related Arbitration Clause in the Carriage of Goods by Sea Contract between the Claimant Suzhou Branch of China Pacific Life Insurance Co., Ltd. and the Respondent RIZZO BOTTIGLIERI DE CARLINI ARMATORI S.P.A. December 14, 2017, (2017) Zui Gao Fa Min Ta No. 127 To the High People’s Court of Hubei Province: The Request for Instructions on the Case Concerning the Validity of the ForeignRelated Arbitration Clause in the Carriage of Goods by Sea Contract between the Claimant Suzhou Branch of China Pacific Life Insurance Co., Ltd. and the Respondent RIZZO BOTTIGLIERI DE CARLINI ARMATORI S.P.A. [(2017) E Min Ta No. 84] submitted by your court has been received. After deliberation, the replies are as follows. The respondent RIZZO BOTTIGLIERI DE CARLINI ARMATORI S.P.A. filed objection over jurisdiction based on the ground that the bill of lading had been incorporated into arbitration clause in the charter party. The respondent shall first prove that the charter party that the bill of lading had incorporated into is the charter party that it mentioned, which is the one that signed on October 2, 2013 by two parties uninvolved in this case, KABEIERLAITE Company and Weiduo Company. The respondent shall also prove the authenticity of the text of the charter party. However, RIZZO BOTTIGLIERI DE CARLINI ARMATORI S.P.A. only provided the copies of the aforementioned charter party. The authenticity of the copies cannot be ascertained. Meanwhile, although the obverse side of the bill of lading noted the content of “use in conjunction with the charter party”, it did not explicitly indicate

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that which charter party had been incorporated into the bill of lading and whether the arbitration clause incorporated into the bill of lading. The statement of “the freight shall be paid in accordance with the charter party signed on October 2, 2013” on the obverse side of bill of lading only indicates that the payment of freight shall be made pursuant to the charter party, but it does not refer to the incorporation of the arbitration clause. Even though the reverse side of the bill of lading noted that “all the terms and conditions, privilege and exemptions, applicable law and arbitration clause of the charter party dated on the other side are incorporated into this bill of lading”, the arbitration clause in this clause is not explicitly stated on the obverse side of the bill of lading. The arbitration clause in the charter party stated by RIZZO BOTTIGLIERI DE CARLINI ARMATORI S.P.A. cannot be validly incorporated into the bill of lading. The claim of RIZZO BOTTIGLIERI DE CARLINI ARMATORI S.P.A. that the bill of lading had been incorporated into the arbitration clause of the charter party lacks factual basis. The objection over jurisdiction cannot be supported. As the cargo underwriter in this case, Suzhou Branch of China Pacific Life Insurance Co., Ltd. exercised the right of subrogation of insurance and claimed against RIZZO BOTTIGLIERI DE CARLINI ARMATORI S.P.A., the registered owner of the carrier ship, to compensate the cargo salvage fee and shortage loss of goods pursuant to the bill of lading in this case. The cargo salvage fee claimed by Suzhou Branch of China Pacific Life Insurance Co., Ltd. belongs to the loss of goods in the carriage of goods by sea between the two parties. The dispute in this case is not the dispute regarding the salvage expenses between the parties involved in salvage at sea. Therefore, the provisions on maritime salvage expenses litigation jurisdiction under Article 31 of the Civil Procedure Law shall not be applied in this case. As the maritime court of transport destination (Zhangjiagang, Jiangsu) of the goods involved, Wuhan Maritime Court has the jurisdiction over the dispute involved in this case. In conclusion, we agree with your court’s opinion. It is so replied. 17. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shandong Province on the Case Concerning the Jurisdiction Over the Confirmation of Validity of Contract Between S.M.ENTERTAINMENT and Huang December 18, 2017, (2017) Zui Gao Fa Min Ta No. 123 To the High People’s Court of Shandong Province: The Request for Instructions on the Case Concerning the Jurisdiction over the Confirmation of Validity of Contract between S.M.ENTERTAINMENT and Huang [(2017) Lu Li Han No. 107] submitted by your court has been received. After deliberation, the replies are as follows. The issue submitted by your court refers to the confirmation of validity of foreignrelated arbitration agreement. According to the facts stated by your court, the arbitration agreement was signed on December 18, 2010, which was signed before the

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enforcement of the Law on Choice of Law. Article 2 of the Choice of Law Interpretation stipulates that “For any foreign-related civil relationship happening before the implementation of the Law on Choice of Law for Foreign-Related Civil Relationships, the people’s courts shall determine the applicable laws in accordance with relevant laws and regulations at the time of the occurrence of such foreign-related civil relationship; in case there were no applicable laws at that time, the applicable laws may be determined with reference to the Law on Choice of Law for ForeignRelated Civil Relationships.” Therefore, this case shall confirm the applicable law of arbitration agreement based on Article 16 of the Arbitration Law Interpretation. The arbitration agreement involved in this case provides that “1. Party A and Party B shall endeavor to resolve all disputes arising from this Agreement by themselves. 2. If the disputes cannot be solved by the method stated in Paragraph 1, the parties could file a lawsuit to the competent court under the law of civil procedure of South Korea, or submit to KCAB for arbitration under arbitration law.” Even though the parties have different opinions on whether the “arbitration law” refers to the Arbitration Law of the People’s Republic of China or the arbitration law of South Korea, combined with the context of “the law of civil procedure of Korean”, “KCAB”, etc., the “arbitration law” in the agreement shall be confirmed as the arbitration law of South Korea. The validity of arbitration agreement in this case shall be confirmed under the law of South Korea. Based on the statement in your court’s Request, pursuant to current South Korean law, if both parties agree on the arbitration clause and the jurisdiction clause in the same time, the parties shall be deemed as having the right to choose. The parties have the right to choose to initiate arbitration in accordance with the agreed arbitration clause or file a lawsuit in a court to the competent court. But the statement of “could file a lawsuit to the competent court under the law of civil procedure of Korean” in the agreement shall be considered as the consent of both parties on the jurisdiction of the South Korean court. The aforesaid consent of both parties precludes the jurisdiction over the dispute herein of the court of the People’s Republic of China. Therefore, Qingdao Intermediate People’s Court has no jurisdiction over the dispute in this case. It is so replied. 18. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Zhejiang Province on the Case Concerning the Application of Louis Dreyfus Commodities Suisse SA for Recognition and Enforcement of Foreign Arbitral Award December 19, 2017, (2017) Zui Gao Fa Min Ta No. 96 To the High People’s Court of Zhejiang Province: The Request for Instructions on the Case Concerning the Application of Louis Dreyfus Commodities Suisse SA for Recognition and Enforcement of Foreign Arbitral Award [(2017) Zhe Xie Ta No. 5] submitted by your court has been received. After deliberation, the replies are as follows. This is a case involving the parties applied the court of the People’s Republic of China to recognize and enforce the arbitral award rendered by the International Cotton

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Association within the territory of UK. Since China and UK are the contracting states of the New York Convention, according to Article 283 of the Civil Procedure Law and the provisions of the New York Convention, the arbitral award in this case shall be reviewed under the relevant provisions of the New York Convention. According to the facts stated in your court’s Request, the International Cotton Association arbitrated the dispute on 22 raw cotton sales contracts based on the application of Louis Dreyfus Commodities Suisse SA (“Louis Dreyfus”). From the negotiation proceeding of the aforesaid 22 contracts by both parties, Louis Dreyfus issued Notice of Contract Termination to Ningbo FUTURE IMP. & EXP. Co., Ltd. (“FUTURE”) on October 8, 2012, attached by a list of all contract numbers including the numbers of the 22 contracts. FUTURE did not raise objection on the establishment of the 22 contracts in its Reply on October 26, 2012, but only required to further negotiation in light of its difficulty in execution. The Reply of FUTURE not only stated that the 22 contracts had been established, but also proved that the both parties had agreed on the arbitration clause in the contracts. No. S1043, 1044, 1045 contracts constitute a part of the 22 raw cotton sales contracts. FUTURE and Louis Dreyfus did use to negotiate on the deposit issue of 40,000 tons raw cotton sales contracts including No. S1043, 1044, 1045 contracts. The negotiation also referred to the issues on the applicable law and jurisdiction upon the return of deposit. But no evidence proves that both parties had reached consensus on the abovementioned issues. Besides, the deposit agreement is only the result of separate negotiation of the deposit execution issue in the raw cotton sales contracts by both parties. Based on the current evidence, the deposit agreement is separate from the raw cotton sales contracts. Even though the jurisdiction clause is established, it is only binding on the issue of return of deposit. It does not generate any effects on the validity of the arbitration clause in the raw cotton sales contracts. Your court’s opinion of denying the existence of the arbitration clause in No. S1043, 1044, 1045 contracts for FUTURE and Louis Dreyfus had negotiated on the issue of deposit execution but failed to reach consensus on the arbitration agreement, lacks factual basis. In conclusion, the 22 raw cotton sales contracts have been established. The International Cotton Association has the jurisdiction over the arbitration based on the arbitration clause. The arbitral award in this case does not fall within the scope of ArticleV(1)(c) of the New York Convention. The No. AO1/2012/222 Arbitral Award rendered by the ICA on October 28, 2014 shall be recognized and enforced. It is so replied. 19. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Yang for Revocation of an Arbitral Award December 19, 2017, (2017) Zui Gao Fa Min Ta No. 117 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of Revocation of the Arbitral Award between the Applicant Yang and the Respondent Shenzhen

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Lianma Real Estate Management Co., Ltd. [(2015) Yue Gao Fa Zhong Fu No. 7] submitted by your court has been received. After deliberation, the replies are as follows. The arbitral award applied to be revoked by Yang was rendered by Shenzhen Arbitration Commission in Shenzhen, Guangdong. Yang is the resident of Hong Kong. Therefore, this is a case on application for revocation of foreign-related arbitral award, and the ground of revocation stated by Yang shall be reviewed under Article 70 of the Arbitration Law and Article 274 of the Civil Procedure Law. According to the facts ascertained by your court, Article 34 of the Property Management Entrustment Contract provides that “Any dispute arising from the performance of this Contract shall be settled by both parties through negotiation or submitted to the competent property management department for mediation. If the dispute fails to be solved by negotiation or mediation, both parties agree to submit the dispute to Shenzhen Arbitration Commission for arbitration. Accordingly, Shenzhen Arbitration Commission has the jurisdiction over the disputes arising from the performance of the Contract. Upon signing the Property Management Entrustment Contract on February 5, 2010, Shenzhen Arbitration Commission decided on the property service management fee, late payment fee, special maintenance fund and other expenses from November 1, 2005 to March 31, 2014, which exceeds the scope of the arbitration clause. The excess part of the award cannot be separated from other parts of the award, which falls into the scope of Item (4) of Paragraph 1 of Article 274 of the Civil Procedure Law. According to Article 19 of the Arbitration Law Interpretation, the arbitral award in this case shall be revoked. Your court’s opinion in the Request of Instructions is agreed. It is so replied. 20. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Zhejiang Province on the Case Concerning the Application of MASPAL INVESTMENT CORPORATION for Recognition and Enforcement of a Foreign Arbitral Award December 20, 2017, (2017) Zui Gao Fa Min Ta No. 67 To the High People’s Court of Zhejiang Province: The Request for Instructions on the Case Concerning the Application of MASPAL INVESTMENT CORPORATION for Recognition and Enforcement of a Foreign Arbitral Award [(2017) Zhe Xie Ta No. 4] submitted by your court has been received. After deliberation, the replies are as follows. This is case on applying recognition and enforcement of arbitral award made in UK. It shall be reviewed under the relevant provisions of the New York Convention and shall be confirmed whether the arbitral award shall be recognized and enforced under Article V of the New York Convention. First, as for the issue on whether there exists arbitration agreement between MASPAL INVESTMENT CORPORATION (“MASPAL”) and TAIZHOU STAR LIMITED (“TAIZHOU”) and, whether the part of the award that relates to TAIZHOU shall be recognized and enforced, even though Article IV of the New York

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Convention stipulates arbitration agreement shall be filed in the application of recognition and enforcement of arbitral award, failing to file arbitration agreement does not fall into the scope of Article V of the New York Convention on non-recognition and non-enforcement of arbitral award. The party did not file the arbitration agreement in accordance with Article IV of the New York Convention. The People’s Court shall reject its application instead of denying the recognition and enforcement of the arbitration award. Furthermore, the People’s Court shall only conduct formal examination upon the arbitration agreement submitted by the party based on the aforementioned provision. The arbitration case herein involves two respondents, EAST SUNRISE (GROUP) CO., LIMITED (“EAST”) and TAIZHOU. According to the facts stated in your court’s Request, there is an arbitration agreement between MASPAL and EAST. The arbitral tribunal accepted the case and rendered arbitral award based on the arbitration agreement. MASPAL had submitted the arbitration agreement to the People’s Court. Its application complies with Article IV of the New York Convention. In case the arbitration agreement is invalid or the arbitration matters fall out of the scope of the arbitration agreement, the parties could file the application of non-recognition and non-enforcement of the arbitral award based on Article V of the New York Convention. Pursuant to Paragraph 1 of Article V of the New York Convention, only when the application of non-recognition and non-enforcement of the arbitral award is submitted in accordance with the provision, the People’s Court shall review the existence of the relevant circumstances under the provision. The People’s Court shall no review it proactively. Your court’s opinion in the Request that the part of the award in connection with TAIZHOU shall not be recognized and enforced based on Paragraph 1 of Article IV of the New York Convention, cannot be supported. Second, regarding the issue on the duration of applying recognition and enforcement of foreign arbitral award, the application in this case exceeded the statutory duration. The excess of duration does not fall within the circumstances of not recognizing or enforcing the arbitral award under Article V of the New York Convention. Even assuming the circumstance exists, the People’s Court shall also reject the application instead of denying the recognition and enforcement of the arbitral award. Where the respondent does not contest the issue, the People’s Court shall not take the initiative to review and rule the non-recognition and non-enforcement of the arbitral award based on the ground the application has exceeded the statutory duration. In the absence of an explicit defence made by the respondent to MASPAL’s application of recognition and enforcement of the arbitral award had exceeded the statutory duration, your court review the issue proactively and proposed to rule that the arbitral award shall not be recognized and enforced based on the ground of the excess of duration. The review opinion of your court cannot be upheld. In conclusion, we disagree with your court’s opinion in the Request on nonrecognition and non-enforcement of the arbitral award. It is so replied.

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21. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Go1den Wind Hot Stamping Company for Revocation of Hua Nan Guo Zhong Shen Cai [2014] No. 146 Arbitral Award Rendered by CIETAC South China Sub-Commission December 22, 2017, (2017) Zui Gao Fa Min Ta No. 139 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of Go1den Wind Hot Stamping Company for the Revocation of Hua Nan Guo Zhong Shen Cai〔2014〕No. 146 Arbitral Award Rendered by CIETAC South China Subcommission [(2017) Yue Min Ta No. 17] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for revocation of Hong Kong related arbitral award made by arbitration institution in the People’s Republic of China. According to the facts stated in the Request, the Supplementary Agreement contains the arbitration clause. The Supplementary Agreement was signed by Lu on behalf of Go1den Wind Hot Stamping Company (“Golden Wind”).However, at the time of signing the Supplementary Agreement, Lu had quit from Golden Wind. Golden Wind is a Partnership Enterprise registered in Hong Kong. According to Article 14 of the Law on Choice of Law, the issue on whether Lu is authorized to sign the Supplementary Agreement on behalf of Golden Wind shall be determined under the law of Hong Kong. According to the relevant provisions under the Partnership Ordinance of Hong Kong, Lu has no authorization to act on behalf of Golden Wind after quitting from Golden Wind. Golden Wind also denied the signature of Lu on the Supplementary Agreement. Therefore, the arbitration clause in the Supplementary Agreement is not binding on Golden Wind. The seventh item in the arbitral award noted that Golden Wind shall bear the relevant liability, which falls within the situation stipulated by Item 1, Paragraph 1 of Article 274 of the Civil Procedure Law. Since the seventh item could be separate from other items, according to Article 19 of the Arbitration Law Interpretation, part of the Hua Nan Guo Zhong Shen Cai〔2014〕No. 146 Arbitral Award shall be revoked. Your court’s opinion in the Request is agreed. It is so replied. 22. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Beijing on the Case Concerning the Application of IP Cathay II, L.P. for Recognition and Enforcement of an Arbitral Award in Hong Kong December 25, 2017, (2017) Zui Gao Fa Min Ta No. 131 To the High People’s Court of Beijing: The Request for Instructions on the Case Concerning the Application of IP Cathay II, L.P. for Recognition and Enforcement of an Arbitral Award in Hong Kong [(2017) Jing Gao Fa No. 425] submitted by your court has been received. After deliberation, the replies are as follows.

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This is a case on the application for the recognition and enforcement of an arbitral award in Hong Kong, which shall be reviewed under the Arrangements on Mutual Enforcement of Awards. According to the facts ascertained by your court in the Request, there are 21 respondents in the arbitral award. When IP Cathay II, L.P. (“Cathay II”) initiated the arbitration proceeding, it only required China Vocational Education Co., Ltd., 5 “founders” and Beijing Ruiming Co., Ltd (“BVII”) to undertake redemption and repurchase obligation. However, the first and second items of the arbitral award noted that all the respondents shall undertake repurchase obligation, which exceeds the scope of the submission to arbitration made by Cathay II. It falls within the scope of the circumstance under Paragraph 1(3) of Article 7 of the Arrangements on Mutual Enforcement of Awards, i.e. “the award contains items on matters beyond the scope of the submission to arbitration” The arbitral award regards all respondent as a whole and the items in the award are inseparable. According to the Arrangements on Mutual Enforcement of Awards, the whole arbitral award shall not be recognized. The application of Cathay II for recognizing and enforcing the arbitral award does not indicate China Vocational Education Co., Ltd. and BVII as respondents. In summary, we disagree with your court’s opinion on “the undertaking of redemption and repurchase obligation of the Company, founders and BVII shall be recognized and enforced”. Besides, Cathay II only applied the 12 out of 21 arbitration respondents for recognition and enforcement. However, once the arbitral award is ruled by the People’s Court to be recognized, the ruling is legally binding on all the arbitration parties in mainland. To protect relevant rights of all the parties, other respondents in the arbitration shall be added to participate in the arbitration judicial review. It is so replied. 23. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shandong Province on the Case Concerning the Application of the Dragon Project (China) Limited for Recognition and Enforcement of an Arbitral Award in UK December 26, 2017, (2017) Zui Gao Fa Min Ta No. 114 To the High People’s Court of Shandong Province: The Request for Instructions on the Case Concerning the Application of The Dragon Project (China) Limited for Recognition and Enforcement of the Arbitral Award in London, UK on January 9, 2014 referring to No. QDZ471 Hull and No. SB200704 Contract [(2017) Lu Min Ta No. 2] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for the recognition and enforcement of an arbitral award rendered in UK. The relevant provisions of the New York Convention shall be applied to revise this case. According to the facts stated by your court in the Request for Instructions, Article 13 “Dispute and Arbitration” in the Contract is an agreement by both parties on arbitration procedure. The issue on whether the arbitration procedure complies with the arbitration agreement shall be determined based on Article 13 of the Contract.

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The part “Notice of award” of Article 13 of the Contract provides that “Notice of any award shall immediately be given by fax or email confirmed in writing to the Seller and Buyer”. The arbitrator sent an email on notice of award issuance to Shang email on January 9, 2014. On January 21, 2014. The arbitrator sent the unsigned arbitral award to dragon email, c.c. to Shang email and Cheng email at the same time. Accordingly, it can be affirmed that the arbitrator had sent the arbitral award pursuant to the agreement on arbitration procedure of both parties. There exists no circumstance in this case that the arbitration proceeding breaches the arbitration agreement. Article 17 of the Contract is an agreement on the notification between the two parties, not on arbitration proceedings, which shall not be applied to the notification of arbitral award in the arbitration proceedings. Your court’s opinion that, based on stipulation the notification sent by email shall be deemed served upon receipt under Article 17 of the Contract, considering The Dragon Project (China) Limited did not file any evidence to prove the email sent by the arbitrator on January 9 and January 21, 2014 had been opened, which does not generate the effect of notifying the award to Qingdao Shipyard Co., Ltd., and therefore the arbitrator did not sent the notification of award in conformity of the agreement by both parties, cannot be supported. In conclusion, we disagree with your court’s preferred opinion on non-recognition and non-enforcement of the Arbitral Award in London, UK on January 9, 2014 referring to No. QDZ471 Hull and No. SB200704 Contract based on Article V (1)(d) of the New York Convention. It is so replied. 24. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Guangdong Sanmao Railway Industry Development Co., Ltd. for Non-Enforcement of an Arbitral Award December 26, 2017, (2017) Zui Gao Fa Min Ta No. 115 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of Guangdong Sanmao Railway Industry Development Co., Ltd. for Non-enforcement of an Arbitral Award [(2015) Yue Gao Fa Min Si Shen No. 111] submitted by your court has been received. After deliberation, the replies are as follows. First, the third and fourth items of the arbitral award involved in this case was rendered based on the situation that the cooperation contract had been terminated and the cooperative enterprise shall be legally liquidated. The arbitral tribunal decided the distribution of property upon the external debt payment and the assumption of liabilities among the parties during the liquidation, and the assumption of liabilities on the loss generated during the establishment and existence of the cooperative enterprise before the cancellation. The decided matter falls into the scope of the arbitration agreement. The arbitral tribunal has the competence to arbitrate the dispute. The opinion of Zhuhai Intermediate People’s Court stated in the (2013) Zhu Zhong Fa Min Si Zhi Zhong No. 4 ruling that “is the affirmation based on the rights and

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obligations of the parties upon the dissolution of the cooperation contract, which does not refer to the specific liquidation matters of the cooperative enterprise” is correct. Your court’s opinion on non-enforcement of the third and fourth item of the arbitral award based on Item (4), Paragraph 1of Article 274 of the Civil Procedure Law, cannot be supported. Second, Shenzhen Intermediate People’s Court and Zhuhai Intermediate People’s Court rendered the rulings respectively that denied the application of BEST FAIR ASIA LIMITED for revocation of the arbitral award and the application of Guangdong Sanmao Railway Industry Development Co., Ltd. for non-enforcement of the arbitral award. The People’s Court shall not accept an application for a retrial or appeal made by the parties to the ruling of an arbitration judicial review case. In conclusion, your court’s opinion in the Request for Instruction is disagreed. It is so replied. 25. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Tianjin on the Case Concerning the Application of Palmer Maritime Inc for Recognition and Enforcement of a Foreign Arbitral Award March 9, 2018, (2017) Zui Gao Fa Min Ta No. 140 To the High People’s Court of Tianjin: The Request for Instructions on the Case Concerning the Application of Palmer Maritime Inc for Recognition and Enforcement of a Foreign Arbitral Award [(2017) Jin Min Ta No. 4] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for the recognition and enforcement of an arbitral award rendered in UK. China and UK are the contracting states of the New York Convention. According to Article 283 of the Civil Procedure Law and Notice of the Supreme People’s Court on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China, the relevant provisions of New York Convention shall be applied to revise the arbitral award in this case. According to the facts stated in your court’s Request, China Animal Husbandry Industry Co., Ltd. filed a lawsuit in Guangzhou Maritime Court regarding the dispute in this case on May 20, 2016, which claimed that Palmer Maritime Inc shall bear the liability of the loss of goods. Palmer Maritime Inc filed an objection over the jurisdiction based on the ground that both parties had an arbitration agreement. This Court replied the High People’s Court of Guangdong Province in the (2017) Zui Gao Fa Min Ta No. 83 Reply that the arbitration clause in the charter party had not been incorporated in the bill of lading and the arbitration clause on the reverse side of the bill of lading was invalid. Based on the Reply, Guangzhou Maritime Court issued the (2016) Yue 72 Min Chu No. 705 judgment that the arbitration clause is invalid and denied the objection over jurisdiction by Palmer Maritime Inc. Upon the appeal by Palmer Maritime Inc, the High People’s Court of Guangdong Province rendered

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the (2017) Yue Min Xia Zhong No. 857 judgment on January 30, 2018 to deny the appeal of Palmer Maritime Inc. Combined with the People’s Court’s review on the judgment of the Case Concerning validity of the arbitration clause, the recognition and enforcement of the arbitral award under the New York Convention, implies the positive attitude of the court of the place of enforcement towards the existence and validity of the arbitration clause which is the basis of the award. On the premise that the China’s Court has made a negative judgment on the existence and validity of the arbitration clause between the parties, the result of recognizing and enforcing the arbitral award based on the above-mentioned arbitration clause is the opposed judgments are made on the same facts in the same jurisdiction. Such contradiction in the judicial conclusions is a breach of the unity and consistency of national legal values. Therefore, no matter what restrictive interpretation of “public policy” stipulated in the New York Convention, the unity of national legal notions and judicial conclusions shall not be excluded from the scope of “public policy”. In conclusion, the recognition and enforcement of the arbitral award in the case constitutes a circumstance under Article V(2)(b) of the New York Convention, and the arbitral award issued by the arbitral tribunal in London on September 9, 2016 shall not be recognized and enforced. It is so replied. 26. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangxi Zhuang Autonomous Region on the Case Concerning the Application of Li for Recognition and Enforcement of a Foreign Arbitral Award March 20, 2018, (2018) Zui Gao Fa Min Ta No. 9 To the High People’s Court of Guangxi Zhuang Autonomous Region: The Request for Instructions on the Case Concerning the Application of Li for the Recognition and Enforcement of a Foreign Arbitral Award [(2017) Gui Min Ta No. 8] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on application for the recognition and enforcement of an arbitral award rendered by Vietnam International Arbitration Center in Socialist Republic of Vietnam (“Vietnam”). China and Vietnam are the contracting states of the New York Convention. According to Article 283 of Civil Procedure Law and Notice of the Supreme People’s Court on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China, the relevant provisions of New York Convention shall be applied to revise the arbitral award in this case. According to Article V(1)(b) of the New York Convention, an arbitral award may be rejected to recognition and enforcement if it “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” Therefore, in the circumstance that Beihai Xinzhongli Trade Co., Ltd. (“Xinzhongli”) raised a defense

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on the ground that it has not received proper notice based on the abovementioned provision, the court shall focus on examining whether the method of service adopted by the arbitral tribunal achieves the effect of proper notice and whether it affects the exercise of Xinzhongli’s right to defend. According to the facts stated in your court’s Request, Article 3 of the Rules of Arbitration of Vietnam International Arbitration Center provides that “Notice and document; calculation of periods of time; …… 2. Any notice and document shall be sent by the Centre to the parties at the addresses provided by the parties and can be sent by delivery against receipt, registered mail, facsimile, email or any other means of communication that provides a record of the sending thereof. 3. Any notice or document sent by the Centre to the parties shall be deemed to have been received on the day it was received by the parties, or would have been received on the day of delivery if the notice or document has been sent in accordance with paragraph 2 of this Article.” Although the mailing method is permitted by the arbitration rules, the result of mailing should actually meet or be presumed to meet the standard of “proper notice” for the party receiving the mailing. The registered address of Xinzhongli and the address stated in the disputed contract are the same, i.e. No. 57 Beijing Road, Beihai City, Guangxi Zhuang Autonomous Region. The arbitral tribunal may and is possible to serve to the correct address. At the first time, the arbitral tribunal sent notice of commencement of arbitration proceedings by mail to Newzhongli, but there was no evidence to prove that the abovementioned materials had been properly served to the correct address. The second, third and fourth delivery addresses were “No. 50 Beijing Road, Beihai City, Guangxi Zhuang Autonomous Region”, all of which are wrong. The available evidence indicates that the arbitral tribunal only correctly wrote the address of the respondent, Xinzhongli, in the fifth delivery of the award. In view of the fact that the second and third delivery on July 19, 2013 were the notice of hearing and the arbitral tribunal composition. The fourth delivery on July 23, 2013 was to require the parties to submit case materials. The abovementioned sending contents are to protect important procedural rights of the parties in the arbitration proceedings and directly affect the exercise of their right to defend. Combined with the fact that the respondent in this case did not respond to the lawsuit and did not select an arbitrator in the arbitration proceeding, the arbitral tribunal failed to exercise due diligence in terms of service and actually resulted in the deprivation of the parties’ right to defend. Although the address of the fifth service is correct, it cannot constitute an effective remedy for the abovementioned material procedural defects, for the arbitration proceedings had been terminated. In conclusion, the arbitral award in question falls into the scope of the circumstances stipulated in Article V (1)(b) of the New York Convention, and the arbitral award issued by the arbitral tribunal of the Vietnam International Arbitration Center on September 13, 2013 shall not be recognized and enforced. It is so replied.

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27. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shandong Province on the Case Concerning the Application of Lanhai Ecological Agriculture Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement March 26, 2018, (2018) Zui Gao Fa Min Ta No. 25 To the High People’s Court of Shandong Province: The Request for Instructions on the Case Concerning the Application of Lanhai Ecological Agriculture Co., Ltd for Confirmation of the Validity of an Arbitration Agreement [(2018) Lu Min Ta No. 3] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for confirmation of the validity of an arbitration agreement. According to the facts described in your court’s report, both parties accepted that the “Beijing Foreign Trade Arbitration Commission of China Council for the Promotion of International Trade” as CIETAC, and the “China Shandong Dongying Arbitration Institution” as the Dongying Arbitration Commission agreed in the contract. But the two parties could not reach an agreement on the selection of the arbitration institution. Article 18 of the Law on Choice of Law provides: “The parties concerned may choose the laws applicable to arbitral agreement by agreement. If the parties do not choose, the laws at the locality of the arbitral authority or of the arbitration shall apply.” In this case, Lanhai Ecological Agriculture Co., Ltd (“Lanhai”) and Golden Eagle Fisheries (HK) Limited (“Golden Eagle”) did not stipulate the applicable law of the arbitration agreement in the contract. Since the “location” of two arbitration institutions agreed by the two parties was mainland China, the review of the validity of the arbitration agreement shall be governed by the law of mainland China. Article 18 of the Arbitration Law provides: “If an arbitration agreement contains no or unclear provisions concerning the matters for arbitration or the arbitration commission, the parties may reach a supplementary agreement. If no such supplementary agreement can be reached, the arbitration agreement shall be null and void.” Article 5 of the Arbitration Law Interpretation provides that “Where an arbitration agreement provides for two or more arbitration agencies, the parties may agree on the selection of one agency for arbitration; where the parties are unable to agree on the choice of an arbitration agency, the arbitration agreement shall be invalid. “According to the above provisions, the arbitration agreement in the contract signed between Lanhai and Golden Eagle is unclear about the arbitration institution, and the parties cannot reach an agreement on the choice of arbitration institution. The arbitration agreement in this case should be considered as invalid. In conclusion, your court’s opinion is agreed. It is so replied.

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28. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of E-Welly Advance Technology Co., Ltd. for Confirmation of the Invalidity of an Arbitration Agreement March 29, 2018, (2018) Zui Gao Fa Min Ta No. 14 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of E-Welly Advance Technology Co., Ltd. for Confirmation of the Invalidity of the Arbitration Agreement [(2014) Yue Gao Fa Zhong Fu No. 10] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for confirmation of the validity of the arbitration agreement. The parties did not agree on the applicable law of the arbitration agreement, but agreed that the place of arbitration was Seoul, South Korea. According to Article 16 of Arbitration Law Interpretation, the validity of the arbitration agreement shall be determined in accordance with the relevant laws of South Korea. According to the South Korean Arbitration Law, the arbitration agreement involved in this case is valid, but E-Welly Advance Technology Co., Ltd. is not the signing party of the arbitration agreement. The arbitration agreement is not binding on E-Welly Advance Technology Co., Ltd. We agree with your court’s opinion. It is so replied. 29. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province on the Case Concerning the Application of Pixelplus Co., Ltd. for Recognition and Enforcement of an Arbitral Award Rendered by KCAB March 29, 2018, (2018) Zui Gao Fa Min Ta No. 15 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of Pixelplus Co., Ltd for the Recognition and Enforcement of an Arbitral Award Rendered by KCAB [(2014) Yue Gao Fa Zhong Fu No. 11] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for the recognition and enforcement of a foreign arbitral award. The arbitral award herein was made by KCAB in South Korea, and both China and South Korea are contracting states of the New York Convention. According to Article 283 of Civil Procedure Law, the recognition and enforcement of the arbitral award shall be reviewed in accordance with the relevant provisions of the New York Convention.

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KCAB exercised jurisdiction over the arbitration case in accordance with the arbitration agreement in the Distribution Agreement signed between Pixelplus Co., Ltd (Shanghai) (in the name of Pixelplus Co., Ltd) and E-Welly (Hong Kong) Company Limited. E-Welly Advance Technology Co., Ltd. is not the signing party of the Distribution Agreement, so it is not bound by the arbitration clause in the Distribution Agreement. The arbitration award involves the payment liability of E-Welly Advance Technology Co., Ltd., which is not the party of the arbitration agreement. The award exceeded the scope of the arbitration agreement, which constituted the circumstance stipulated in Article V(1)(c) of the New York Convention. According to Article V(1)(c) of the New York Convention, the arbitral award shall not be recognized and enforced. It is so replied. 30. Reply of the Supreme People’s Court to the Request for Instructions of the Application of Law on Placing the “Advance Arbitral” Awards or Mediations of Arbitration Institutions on File and Enforcement (Adopted by the Judicial Committee of the Supreme People’s Court on May 28, 2018 at the 1740th session, came into force on June 12, 2018. Fa Shi〔2018〕 No. 10). To the High People’s Court of Guangdong Province: The Request for Instructions of Whether the “Advance Arbitral” Awards Shall Be Filed for Enforcement [Yue Gao Fa〔2018〕No. 99] submitted by your court has been received. After deliberation, the replies are as follows. Where a party applies to the people’s court for enforcement of an arbitral award or mediation agreement made by an arbitration institution in accordance with the Arbitration Law, and the people’s court shall, upon review, comply with the relevant provisions of the Civil Procedure Law or the Arbitration Law, promptly accept it in accordance with law and file the case for enforcement. However, according to Article 2 of Arbitration Law, the arbitration institution can arbitrate a contractual dispute and other disputes over property rights and interests that have already occurred between the parties. Therefore, if a party of an online loan contract applies for the enforcement of an arbitral award or mediation agreement made by an arbitration institution before the dispute arises, the people’s court shall rule that it is not accepted. If it has already been accepted, it shall reject the application for enforcement. The following circumstances mentioned in your court’s Request shall be deemed as “the composition of the arbitral tribunal or the arbitration procedure did not conform to statutory procedure “as stipulated in Item (3) of Paragraph 2 of Article 237 of the Civil Procedure Law: 1. The arbitration institution fails to hear the dispute or preside over mediation in accordance with the procedures stipulated in the Arbitration Law, and directly renders an arbitral award or arbitration mediation agreement based on the settlement or mediation agreement signed by the parties of the online loan contract before the dispute occurs.

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2. The arbitration institution fails to protect the basic procedural rights provided in the Arbitration Law, such as applying for challenge on arbitrator, providing evidence, and defending during the arbitration proceeding. In the circumstances mentioned in the preceding paragraph, if the parties of an online loan contract claim that the arbitration proceeding does not violate legal procedures on the grounds that they have agreed on a waiver clause, the people’s court shall not support it. This Reply shall apply to other contractual disputes, property rights and interests disputes, or mediation agreement enforcement cases managed by the people’s courts. It is so replied. 31. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Guangdong Province of the Application of Fujian Group Limited for the Revocation of [2015] Shen Zhong Cai No. 2475 Arbitral Award Rendered by Shenzhen Arbitration Commission June 20, 2018, (2018) Zui Gao Fa Min Ta No. 34 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of Fujian Group Limited for the Revocation of [2015] Shen Zhong Cai No. 2475 Arbitral Award Rendered by Shenzhen Arbitration Commission [(2017) Yue Min Ta No. 10] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts stated in your court’s Request, the investigation results of the public security organ, the prosecution opinion of the procuratorate, and the effective criminal judgment of the people’s court fully prove that the facts involved in the arbitration case accepted by the Shenzhen Arbitration Commission are part of the criminal facts of Fujian Group Limited’s illegal absorption of public deposits. The case is a criminal case. Article 2 of the Arbitration Law stipulates that “Contractual disputes and other disputes over rights and interests in property between citizens, legal persons and other organizations that are equal subjects may be arbitrated.” According to the abovementioned provision, an arbitration institution has no competence to accept criminal cases. This court agrees with your court’s opinion in the Request to revoke the arbitral award in accordance with the provision of Item (2) of Paragraph 1 of Article 58 of the Arbitration Law. It is so replied. 32. Reply of the Supreme People’s Court to the Request for Instructions of the Case Concerning the Application of Hu for Confirmation of the Validity of an Arbitration Agreement June 20, 2018, (2018) Zui Gao Fa Min Ta No. 38 To the High People’s Court of Hubei Province: The Request for Instructions on the Case Concerning the Application of Hu for Confirmation of the Validity of an Arbitration Agreement [(2018) E Min Ta No.

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17] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for confirmation of the validity of the arbitration agreement. According to the facts described in your court’s Request, Zing Mechanical Equipment Technology Co., Ltd. (Party A, “Zing”) and Hu (Party B) signed the Product Agency Contract. Article 10 of the Contract stipulates that “the settlement of disputes: All disputes arising from or related to the execution of this agreement, shall first be settled by Party A and Party B through friendly negotiation. If the dispute cannot be resolved by negotiation, mediation can be carried out. If the mediation fails, the dispute can be submitted to arbitration. The arbitration award the shall be final and binding on both Party A and Party B. The arbitration institution under this Contract is: Arbitration Commission.” According to Article 16 of the Arbitration Law, an arbitration agreement shall have three contents: the expression of intention to apply for arbitration, the arbitration matters, and the selected arbitration commission. Although the parties in this case agreed that the arbitration institution was “arbitration commission”, they did not designate a specific “arbitration commission”. The context “arbitration commission” could not explicitly refer to any existing arbitration institution, which falls into the scope of “no agreement on arbitration commission” as stipulated in Article 18 of Arbitration Law. Hu applied to Wuhan Intermediate People’s Court to confirm that the arbitration clause is invalid. It can be affirmed that the parties did not reach a supplementary agreement on the arbitration institution. According to Article 18 of the Arbitration Law, the arbitration clause in this case shall be considered as invalid. In conclusion, your court’s opinion in the Request for Instructions is agreed. It is so replied. 33. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Beijing on the Case Concerning the Application of Tebon Fund Management Company Limited for Revocation of (2016) Zhong Guo Mao Zhong Jing (Hu) Cai No. 193 Arbitral Award June 21, 2018, (2018) Zui Gao Fa Min Ta No. 43 To the High People’s Court of Beijing: The Request for Instructions on the Case Concerning the Application of Tebon Fund Management Company Limited for Revocation of (2016) Zhong Guo Mao Zhong Jing (Hu) Cai No. 193 Arbitral Award [Jing Gao Fa (2018) No. 100] submitted by your court has been received. After deliberation, the replies are as follows. Whether an arbitral award violates the public interest shall be determined in conjunction with the specific award. The detailed operation stipulated in the Asset Plan Management Contract signed by the parties in this case violated the relevant provisions of the Securities Law of the People’s Republic of China and the Securities Investment Fund Law of the People’s Republic of China. It was not inappropriate for Tebon Fund Management Company Limited (“Tebon Fund”) to freeze the relevant accounts and refuse to execute the trading instructions of investment adviser Beijing Fubang Bairui Investment Management Co., Ltd. However, due to the freezing of

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the relevant accounts by Tebon Fund, Shanghai Huilei Investment Management Center L.P. (“Huilei Investment”) could not trade with the capital allocation of Tebon Fund. Tebon Fund should no longer charge interest on such allocation during the restricted trading period. Therefore, the arbitral tribunal ruled that it was not improper for Tebon Fund to pay 1.2 million yuan of interest to Huilei Investment. In addition, although it is not inappropriate for Tebon Fund to freeze the relevant accounts and refuse to execute the trading instructions of Beijing Fubang Bairui Investment Management Co., Ltd, the arbitral tribunal believes that Tebon Fund, as an asset manager, should take prudent and reasonable investment measures to obtain guaranteed cash returns during the restricted trading period in accordance with the provisions of the Asset Plan Management Contract and industry practices. While Tebon Fund adopted a laissez-faire attitude and failed to fulfill the reasonable duty of care of an asset manager, resulting in the further losses of Huilei Investment. Therefore, it is not improper rule the Tebon Fund bear the corresponding loss compensation. The arbitral award does not affirm the conduct of breaching the Securities Law of the People’s Republic of China and the Securities Investment Fund Law of the People’s Republic of China. There exists no violation of the public interest in the arbitral award of this case. Your court’s opinion in the Request for Instructions to revoke the arbitral award in accordance with Paragraph 3 of Article 58 of the Arbitration Law on the ground that it is contrary to the public interest, cannot be supported. It is so replied. 34. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of the Inner Mongolia Autonomous Region on the Case Concerning the Application of ADM ASIA–PACIFIC TRADING PTE. LTD. for Recognition and Enforcement of the No. 4440 Arbitral Award Rendered by FOSFA June 22, 2018, (2018) Zui Gao Fa Min Ta No. 33 To the High People’s Court of the Inner Mongolia Autonomous Region: The Request for Instructions on the Case Concerning the Application of ADM ASIA– PACIFIC TRADING PTE. LTD for the Recognition and Enforcement of the No. 4440 Arbitral Award Rendered by FOSFA [(2017) Nei Xie Wai Ren No. 1] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for the recognition and enforcement of a foreign arbitral award. The arbitral award in this case was rendered by FOSFA in UK. It shall be reviewed under Article V of the New York Convention.

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First, as for the issue of whether Inner Mongolia Mengjia Cereal & Oil Industry Group Co., Ltd.(“Mengjia”) had been properly notified of the arbitration, the ground of rejection to recognition and enforcement under Article V (1)(b) of the New York Convention is that “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.” Mengjia argued that it had not been properly notified of the arbitration and was unable to defend. According to the information ascertained in your court’s Request and the attached case file materials, ADM ASIA– PACIFIC TRADING PTE. LTD (“ADM”) and Mengjia connected by email during the signing and performance of the contract involved in the case. After the arbitration materials were delivered to the above email address, the staff of Mengjia replied that it had been received. The method of service by e-mail does not violate the provisions of Arbitration and Appeal Rules of FOSFA. According to the law of the seat of arbitration, Article 76 of the UK Arbitration Act, the parties are free to agree on the method of service of notice or other documents, if there is no such agreement, the notice or other documents may be served on the individual in any valid way. The arbitration materials involved in this case had been actually delivered to Mengjia by email, so the service of email does not violate the UK Arbitration Act. This court agrees with your court’s opinion that the arbitration had been duly notified of Mengjia. Second, as for the issue on whether the arbitral tribunal’s acceptance of ADM’s application for arbitration constituted a discrepancy between the arbitration proceeding under Article V (1)(d) of the New York Convention and the arbitration rules. When ADM applied for arbitration on November 11, 2014, although it exceeded the provision in Article 2.2.2 of the Arbitration and Appeal Rules of FOSFA that states that if a party owes money to the other party, it shall apply for arbitration within 60 consecutive days after the dispute arises, Pursuant to Article 2.4 of the Arbitration and Appeal Rules, if the party fails to comply with any of the provisions of the Rules relating to the application for arbitration proceedings and the Respondent raises a defence, the Applicant shall be deemed to have waived the Application for Arbitration and shall be completely barred from applying for arbitration, unless the arbitrator, umpire or the Board of Appeal referred to in the Rules exercise their absolute discretion to decide otherwise. The time limit for applying for arbitration as the ground of defense shall be raised by the respondent, and the arbitral tribunal has discretion upon the admissibility of the case. Since Mengjia did not defend against ADM’s application for arbitration within the time limit upon receiving the notice of arbitration. The arbitral tribunal did not violate the arbitration rules to accept this case. Your court’s intention to refuse to recognize and enforce the award in question on the ground that the arbitration proceeding violated the arbitration rules cannot be supported. In conclusion, No. 4440 Arbitral Award Rendered by FOSFA shall be recognized and enforced. It is so replied.

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35. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Hubei Province on the Case Concerning the Application for Confirmation of the Validity of the Arbitration Clause of the Carriage of Goods by Sea Contract Between the Claimant Xiamen ITG Group Corp., Ltd. And the Respondent King Navigation Co. June 22, 2018, (2018) Zui Gao Fa Min Ta No. 52 To the High People’s Court of Hubei Province: The Request for Instructions on the Case Concerning the Application for Confirmation of the Validity of the Arbitration Clause of the Carriage of Goods by Sea Contract between the Claimant Xiamen ITG Group Corp., Ltd. and the Respondent King Navigation Co. [(2018) E Min Ta No. 37] submitted by your court has been received. After deliberation, the replies are as follows. As for the issue on whether the arbitration clause in the charter party was incorporated into the bill of lading. The bill of lading in question was a 1994 version of the Kangjin format bill of lading, with “Use with the lease” printed in the upper right corner of the front and upper left corner of the back of the bill of lading, and the terms of carriage on the back of the bill of lading stipulate that “all the terms, conditions, rights and exceptions of the lease agreement on the date indicated on the back of this page, including the application of law and arbitration clause, are incorporated into this bill of lading”. The front side of the bill of lading states “the freight is in accordance with the lease signed on April 20, 2016”. Based on the content of the bill of lading, it does not specify the names of the parties of the lease, the lease number, and other information that can determine the accurate information of the lease. It cannot be determined which specific lease is incorporated on this basis. In this case, there is insufficient evidence to prove that the lease mentioned in the bill of lading was the lease claimed by King Navigation Co. Since the lease was uncertain, Xiamen ITG Group Corp., Ltd. was unable to know the arbitration clause contained in the lease alleged by King Navigation Co. through the facts of holding the bill of lading. No arbitration agreement was reached between the parties in this case. The arbitration clause of the lease is not binding on the holder of the bill of lading, Xiamen ITG Group Corp., Ltd. The determination of the validity of the arbitration clause by the English court and the injunction issued by the English court shall not affect Xiamen ITG Group Corp., Ltd. from filing a lawsuit in China in accordance with the law. The shipping destination of Carriage of Goods by Sea Contract in this case was Nantong, Jiangsu, which fell within the jurisdiction of Wuhan Maritime Court. Wuhan Maritime Court had jurisdiction over this dispute. In conclusion, your court’s opinion in the Request for Instructions is agreed. It is so replied.

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36. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shandong Province on the Case Concerning the Application of Beijing Guofeng Jianye Door and Window Manufacturing Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement June 22, 2018, (2018) Zui Gao Fa Min Ta No. 54 To the High People’s Court of Shandong Province: The Request for Instructions on the Case Concerning the Application of Beijing Guofeng Jianye Door and Window Manufacturing Co., Ltd for the Confirmation of the Validity of an Arbitration Agreement [(2018) Lu Min Ta No. 9] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for confirmation of the validity of the arbitration agreement, and shall be reviewed under Arbitration Law and its relevant Judicial Interpretation. Paragraph 2 Article 16 of the Arbitration Law provides that “An arbitration agreement shall contain the following particulars: (1) an expression of intention to apply for arbitration; (2) matters for arbitration; and (3) a designated arbitration commission.” Article 18 of the Arbitration Law provides that “If an arbitration agreement contains no or unclear provisions concerning the matters for arbitration or the arbitration commission, the parties may reach a supplementary agreement. If no such supplementary agreement can be reached, the arbitration agreement shall be null and void.”Article 6 of the Arbitration Law Interpretation provides that “Where an arbitration agreement provides for arbitration to be submitted with an arbitration agency at a fixed locality and only one arbitration agency exists at that locality, that arbitration agency shall be deemed as the arbitration agency stipulated under the arbitration agreement. Where there are two or more arbitration agencies at that locality, the parties may agree on the selection of one of the agencies for arbitration; where the parties concerned are unable to agree on the choice of an arbitration agency, the arbitration agreement shall be invalid.” In this case, Article 24.1 of Qingdao Shimao New City Project 4# Phase I Plastic Steel Door and Window Project Contract signed by Beijing Guofeng Jianye Door and Window Manufacturing Co., Ltd and Qingdao Shimao New City Real Estate Development Co., Ltd provides that “during the execution of this contract, if a dispute arises between the employer and the contractor, it shall be resolved through negotiation promptly. If the negotiation fails, the dispute may be submitted to the Shanghai Arbitration Commission for arbitration.” At the time of the dispute in this case, there were more than two arbitration commissions in Shanghai. Afterwards, the parties did not reach an agreement on the choice of arbitration institution. The arbitration agreement involved in the case shall be considered as invalid based on Article 6 of the Arbitration Law Interpretation. In conclusion, this Court agrees with your court’s opinion in the Request for Instructions that the arbitration clause in this case is invalid. It is so replied.

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37. Reply of the Supreme People’s Court to the Request for Instructions from the High People’s Court of Guangdong Province on the Centralized Jurisdiction of the Guangzhou Municipal Basic People’s Court Over ForeignRelated Civil and Commercial Cases Involving Hong Kong, Macao and Taiwan June 28, 2018, (2018) Zui Gao Fa Min Ta No. 58 To the High People’s Court of Guangdong Province: The Request for Instructions on the Centralized Jurisdiction of the Guangzhou Municipal Basic People’s Court over Foreign-Related Civil and Commercial Cases Involving Hong Kong, Macao and Taiwan [Yue Gao Fa (2018) No. 128] submitted by your court has been received. According to Notice of the Supreme People’s Court on Clarifying Relevant Matters Concerning the Standards for Hierarchical Jurisdiction over and Centralized Handling of Foreign-related Civil and Commercial Cases of First Instance, after deliberation, the replies are as follows. The first-instance civil and commercial cases involving foreign affairs in Hong Kong, Macao and Taiwan, which had been originally accepted by the Guangzhou Municipal Basic People’s Court, shall be adjusted to be uniformly governed by Yuexiu District People’s Court and Nansha District People’s Court. Yuexiu District People’s Court has centralized jurisdiction over the first-instance foreign-related civil and commercial cases involving Hong Kong, Macao and Taiwan within the area of Yuexiu District, Haizhu District, Liwan District, Baiyun District, Huadu District and Conghua District. Nansha District People’s Court has centralized jurisdiction over first-instance foreign-related civil and commercial cases involving Hong Kong, Macao and Taiwan within the area of Tianhe District, Huangpu District, Panyu District, Nansha District and Zengcheng District. It is so replied. 38. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Pizibao Kangning (Yantai) Insulation Materials Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement September 11, 2018, (2018) Zui Gao Fa Min Ta No. 99 To the High People’s Court of Shandong Province: The Request for Instructions on the Case Concerning the Application of Pizibao Kangning (Yantai) Insulation Materials Co., Ltd for Confirmation of the Validity of an Arbitration Agreement [(2018) Lu Min Ta No. 10] submitted by your court has been received. After deliberation, the replies are as follows. Article 40.1 of the Design-Construction General Contracting Agreement signed by Pizibao Kangning (Yantai) Insulation Materials Co., Ltd (“Pizibao Company”) and SHANGHAI JIELIAN CONSTRUCTION CO., LTD (“JIELIAN”) on July 30, 2013 provides that: “In the event of a dispute, the two parties shall seek solution through friendly negotiation. If the negotiation fails, a neutral third party can be requested to mediate. If mediation or negotiation fails, all unresolved disputes arising out of

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or in connection with the Agreement shall be submitted to HKIAC for arbitration in accordance with the arbitration rules of HKIAC in force at the time. Arbitration is the only way for the parties to resolve their disputes. The parties shall abide by the award rendered by HKIAC and the arbitrators’ decision shall be deemed binding. The costs of arbitration shall be borne by the losing party. Place of arbitration: Hong Kong. Language of arbitration: English.” For the filing record of the project involved in this case, Article 37.1 of the Project Construction Contract signed by both parties on January 23, 2014 provides that: “In the event of a dispute arising during the performance of this contract, the parties shall resolve it through negotiation. If the negotiation fails, the dispute shall be submitted to HKIAC for arbitration. See Article 40.1 of the Design-Construction General Contracting Agreement (Disputes).” The two parties to the dispute in this case, Pizibao Company and JIELIAN are enterprise registered in mainland China. Both parties signed the Design-Construction General Contracting Agreement and the Project Construction Contract. Pizibao Company contracted the construction of its production plant in Yantai Economic Development Zone, Shandong Province to JIELIAN for survey, design and construction. The project involved in this case was located in mainland China and the two contracts involved in this case were also concluded and performed in mainland China. According to Article 1 of the Choice of Law Interpretation, Article 522 of the Civil Procedure Law Interpretation, the civil relationship in this case does not include international or interregional commercial interests, and does not belong to foreign-related or Hong Kong, Macao and Taiwan civil relations. The validity of the arbitration clause in this case should be determined by the law of mainland China. Although arbitration jurisdiction arises on the basis of the autonomy of the parties, arbitration has the function of alternative judicial dispute resolution. The existence and exercise of arbitration jurisdiction also depend on the permission and protection of law. Therefore, arbitration jurisdiction cannot exceed the scope permitted by law. According to Paragraph 2 of Article 128 of the Contract Law and Article 271 of the Civil Procedure Law, Chinese law does not permit parties to submit disputes that do not involve foreign affairs, Hong Kong, Macao and Taiwan to arbitration institutions other arbitration institutions in mainland China or to arbitrate outside mainland China. The arbitration clause that the parties agreed to submit the dispute to HKIAC for arbitration in Hong Kong is invalid. It is so replied. 39. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Shanghai on the Case Concerning the Application of Song for Revocation of (2015) Hu Zhong An No. 0347 Arbitral Award Rendered by Shanghai Arbitration Commission October 12, 2018, (2018) Zui Gao Fa Min Ta No. 186 To the High People’s Court of Shanghai: The Request for Instructions on the Case Concerning the Application of Song for the Revocation of (2015) Hu Zhong An No. 0347 Arbitral Award Rendered by Shanghai

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Arbitration Commission [(2018) Hu Min Ta No. 15] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for the revocation of an arbitral award. According to the facts stated in your court’s Request of Instructions, the arbitral tribunal ruled on the dispute over the Guarantee Contract between Song and Shanghai Tongyue Leasing Co., Ltd based on the arbitration clause in the Guarantee Contract. But the signature of the guarantor Song in the Guarantee Contract containing the arbitration clause was not signed by Song himself. There was no arbitration agreement between Song and Shanghai Tongyue Leasing Co., Ltd. The item concerning Song’s liability in the arbitral award shall be revoked according to Item (1) of Paragraph 1 of Article 58 of the Arbitration Law. Your court’s opinion in the Request for Instructions is agreed. It is so replied. 40. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Shanghai Haosheng Hotel Management Co., Ltd. for Enforcement of an Arbitral Award November 9, 2018, (2018) Zui Gao Fa Min Ta No. 176 To the High People’s Court of Shanxi Province: The Request for Instructions on the Case Concerning the Application of Shanghai Haosheng Hotel Management Co., Ltd. for Non-enforcement of an Arbitral Award [(2018) Jin Zhi Ta No. 1] submitted by your court has been received. After deliberation, the replies are as follows. This case shall be governed by Paragraph 2 of Article 80 “Service” of the China (Shanghai) Pilot Free Trade Zone Arbitration Rules (2015), which provides that “Documents, notices and written materials in relation to arbitration to a party and/ or its representative(s) shall be deemed to have been properly served on the party if delivered to the parties in person or delivered at its place of business, registration, domicile, habitual residence or mailing address, or where, after reasonable inquiries by the other party, none of the aforesaid addresses can be found, the written correspondence is sent by the Secretariat to its last known place of business, domicile, habitual residence or mailing address by registered mail or by any other means that provides a record of the attempt of deliver.”Both of the registered address in the business registration information of the respondent, Datong SME Credit Guarantee Co., Ltd (“Datong Company”), and the legal address stated in the Datong Jindi Haosheng Hotel Entrustment Management Contract signed with Shanghai Haosheng Hotel Management Co., Ltd. are “Yanbei Hotel, No. 1, Yuhe North Road, Datong City”. There is no evidence that “No. 88 Pingcheng Street, Datong City” is the place of business, domicile, habitual residence or mailing address of Datong Company. After the Secretariat of the Shanghai International Economic and Trade Arbitration Commission mailed the arbitration materials to the address of “Yanbei Hotel, No. 1A Yuhe North Road, Datong City” for the first time, the relevant materials for arbitration were returned by mail, and then delivered by mail to the address of “No. 88 Pingcheng

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Street, Datong City”, which did not comply with the provisions of the abovementioned arbitration rules and may affect the fair adjudication of the case. According to Paragraphs 1 and 2 of Article 14 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Enforcement Cases of the People’s Award by the People’s Courts, Fa Shi [2018] No. 5, it can be determined that this case exists the circumstance under Item (3) of Paragraph 2 of Article 237 of the Civil Procedure Law that “the composition of the arbitral tribunal or the arbitration procedure did not conform to statutory procedure”. The people’s court shall reject enforcement of (2016) Hu Mao Zhong Cai No. 267 Arbitral Award made by Shanghai International Economic and Trade Arbitration Commission based on Article 63 of the Arbitration Law and Paragraph 2 of Article 237of the Civil Procedure Law. This court agrees with your court’s opinion in the Request for Instructions. It is so replied. 41. Reply of the Supreme People’s Court to the Request for Instructions of on the Case Concerning the Application of Tianjin Haotai Labor Service Co., Ltd. for Revocation of an Arbitral Award November 19, 2018, (2018) Zui Gao Fa Min Ta No. 187 To the High People’s Court of Hubei Province: The Request for Instructions on the Case Concerning the Application of Tianjin Haotai Labor Service Co., Ltd. for the Revocation of an Arbitral Award [(2018) E Min Ta No. 120] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts indicated in your court’s Request for Instructions, Tianjin Haotai Labor Service Co., Ltd. (“Haotai”) applied to revoke (2017) Wu Zhong Cai No. 000001241 Arbitral Award rendered by Wuhan Arbitration Commission based on the ground that there was no arbitration agreement in the Engineering Construction Labor Subcontract Agreement and the arbitrated matters fell out of the scope of the arbitration agreement. Although Haotai raised objections to the existence of the arbitration agreement, after applying for arbitration by China First Metallurgical Group Co., Ltd. (“First Metallurgical”), Haotai not only participated in the arbitration proceeding but also expressly agreed to submit the dispute involved in this case to arbitration for settlement. During the review of Haotai’s application for revoking the arbitration award by Wuhan Intermediate People’s Court, Haotai once again expressly agreed to submit the dispute to Wuhan Arbitration Commission for arbitration. Its conduct should be deemed as a separate arbitration agreement reached with First Metallurgical besides the Engineering Construction Labor Subcontract Agreement. Whether the authenticity of the Engineering Construction Labor Subcontract Agreement is recognized by the arbitral tribunal does not affect the validity of the dispute resolution method separately reached by the parties.

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First Metallurgical filed an arbitration application to Wuhan Arbitration Commission, claiming Haotai Company to refund the project amount of RMB 4006,830.06 and interest of RMB 285,486.6 (tentatively calculated until March 20, 2017) and to bear the arbitration fee. The rejection of Wuhan Arbitration Commission upon First Metallurgical’s arbitration application and its award on the sharing of arbitration fees does not constitute circumstance that the arbitrated matters are not within the scope of the arbitration agreement. However, the arbitral award confirms that the amount of RMB 1.88 million paid by First Metallurgical to Haotai constituted the unjust enrichment of Haotai. Since the above amount was not a disputed matter under the Engineering Construction Labor Subcontract Agreement, Wuhan Arbitration Commission’s decision that the return of the above amount by Haotai exceeded the scope of the arbitration agreement. Article 19 of the Arbitration Law Interpretation provides that: “Where a party applies for an arbitral award to be overturned by reason that the subject matter of the arbitral award is outside the scope of the arbitration agreement, the People’s Court shall overturn that specific content part in the arbitral award that is outside the scope of the agreement where the claim is verified to be true. Where the specific content part in the arbitral award that is outside the scope of the arbitration agreement cannot be severed from other matters in the arbitral award, the People’s Court shall overturn the arbitral award.” Since the first item of the arbitral award can be separated from other items, only the first item of the arbitral award involved in the case can be revoked. This court agrees with your court’s opinion in the Request for Instructions. It is so replied. 42. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Chifeng City Yuanbaoshan District Bureau of Land and Resources for Revocation of (2017) Chi Zhong Cai No. 86 Arbitral Award Rendered by Chi Feng Arbitration Commission December 28, 2018, (2018) Zui Gao Fa Min Ta No. 204 To the High People’s Court of the Inner Mongolia Autonomous Region: The Request for Instructions on the Case Concerning the Application of Chifeng City Yuanbaoshan District Bureau of Land and Resources for the Revocation of (2017) Chi Zhong Cai No. 86 Arbitral Award Rendered by Chi Feng Arbitration Commission [(2018) Nei Min Ta No. 6] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts indicated in your court’s Request for Instructions, this case is on the dispute between Chifeng City Yuanbaoshan District Bureau of Land and Resources and Chifeng Baoshan Shijia Real Estate Development Co., Ltd. concerning the performance of the Transfer of Right to the Use of State-owned Construction Land Contract. After the arbitral award was made, Chifeng City Yuanbaoshan District Bureau of Land and Resources, as the party of the contract, shall bear the corresponding liability for the cost of financial expenditure. Although the abovementioned situation will “lead to an increase in fiscal expenditure” to a certain extent and indirectly “involve an unspecified majority of people”, it only involves

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the increase in financial expenditure of a specific administrative department within a specific administrative region, which is insufficient to determine that it violates the “social public interest”. If there are no other statutory circumstances in this case that should revoke the arbitral award, the arbitral award in this case shall not be revoked. It is so replied. 43. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of the Inner Mongolia Autonomous Region on the Case Concerning the Application of Wang for Revocation of an Arbitral Award December 28, 2018, (2018) Zui Gao Fa Min Ta No. 288 To the High People’s Court of the Inner Mongolia Autonomous Region: The Request for Instructions on the Case Concerning the Application of Wang for Revocation of an Arbitral Award submitted by your court has been received. After deliberation, the replies are as follows. Regarding whether the lawyer Yang, the entrusted agent of Wang, during the arbitration stage, did not accept the parties’ entrustment and participated in arbitration activities, breached legal procedure of arbitration. Although handwriting had been verified that the signature on letter of authorization was not signed by Wang himself. However, Yang knew the time of the arbitral tribunal and attended the trial, and submitted a copy of Wang Moupei’s ID card and relevant evidence of Wang, which is inconsistent with common sense. The issue on hether Yang’s participation in the arbitration proceedings was actually authorized or recognized by Wang is a matter of fact and should be ascertained by the court governing the case. Therefore, the court governing the case shall organize an inquiry to ask Wang himself and lawyer Yang, a third party of the case, to find out whether the authorization procedure submitted by Yang to the arbitral tribunal were the true intention of Wang. If it is found that lawyer Yang is not authorized to represent Wang, since his behavior deprives Wang’s right to participate in the arbitration proceeding and the right to state corresponding opinions, and may affect the correct adjudication of the case, the arbitral award shall be revoked based on the provisions of Item (3) of Paragraph 1 of Article 58 of the Arbitration Law. If it is found that although the signature of the letter of authorization is fake, Wang’s intention to authorize Yang to represent in the arbitration proceeding is real or there is a subsequent act of recognition, Wang’s application for revocation shall be rejected. It is so replied.

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44. Reply of the Supreme People’s Court to the Request for Instructions of the High People’s Court of Heilongjiang Province on the Case Concerning the Application of SuZhou GaoFeng Starch Technology Co., Ltd. for Revocation of an Arbitral Award February 27, 2019, (2019) Zui Gao Fa Min Ta No. 20 The High People’s Court of Heilongjiang Province: The Request for Instructions on the Case Concerning the Application of SuZhou GaoFeng Starch Technology Co., Ltd for the Revocation of an Arbitral Award [(2018) Hei Min Ta No. 10] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts indicated in your court’s Request for Instructions, the arbitral tribunal did not organize a hearing at the time specified in the announcement, and then did not legally serve the notice of hearing and the application for modification of arbitration to Tongliao Wanshunda Starch Co., Ltd, Chifeng Runyang Biotechnology Co., Ltd. and Sun. The arbitral tribunal’s failure to notify the parties in accordance with the law violated the arbitration procedure in law. The arbitral award involved in the case should be revoked in accordance with the law. This court agrees with your court’s opinion in the Request for Instructions. It is so replied. 45. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Zhao for Non-enforcement of an Arbitral Award April 29, 2019, (2019) Zui Gao Fa Min Ta No. 56 To the High People’s Court of Jilin Province: The Request for Instructions on the Case Concerning the Application of Zhao for Non-enforcement of an Arbitral Award [(2018) Ji Zhi Ta No. 10] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for non-enforcement of an arbitral award. The main issue shall be reviewed is whether the arbitration procedure violates the legal provisions, and whether the evidence on which the arbitral award was based in this case is forged. First, as for the issue on whether the arbitration procedure violates the legal provisions, Paragraph 2 of Article 14 of the Arbitration Enforcement Provision provides that, where the arbitral tribunal serves the arbitration legal documents in accordance with the Arbitration Law or the Arbitration Rules and the manner agreed upon by the parties, if the parties claim that the service does not comply with the provisions of the Civil Procedure Law, the people’s court shall not support the claim. According to the facts stated in your court’s Request for Instructions, after the mail sent by the arbitral tribunal based on the address noted on Zhao’s ID card provided by Caterpillar (China) Financing Lease Co., Ltd. (“Caterpillar”) was returned, the arbitral tribunal once again required Caterpillar to provide Zhao’s delivery address. Caterpillar indicated that the address on Zhao’s ID card was its last contact address. In

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such situation, the arbitral tribunal served the notice of arbitration, the notice of the composition of the arbitral tribunal and the notice of hearing to Zhao under the notarization of the Beijing CITIC Notary Office. The Beijing CITIC Notary Public issued a notarial certificate certifying that the arbitral tribunal had sent the above email to Zhao’s contact address. The above service procedure complies with Article 8 of the Arbitration Rules of CIETAC and shall be deemed to have been effectively served. There was no violation of legal provisions in the arbitration procedure. Second, regarding the issue on whether the evidence on which the arbitral award was based in this case is forged, according to the facts stated in your court’s Request for Instructions, Zhao’s signature and fingerprints exist on the Letter of Guarantee, the Variation Agreement I and Variation Agreement II. Zhao denied that the signature was signed by himself, but he did not deny the authenticity of the fingerprints. Zhao also made it clear that he would not apply for handwriting authentication. Moreover, in order to prove that Zhao should bear the guarantee liability, Caterpillar submitted Zhao’s ID card, his spouse’s ID card, household registration booklet, marriage certificate, real estate certificate and other evidence materials in addition to submitting relevant contracts and agreements. Therefore, the available evidence in this case is insufficient to conclude that the evidence on which the arbitral award is based is forged. In conclusion, there exists the circumstance that falls within the scope of Items (3) and (4), Paragraph 2 of Article 237 of the Civil Procedure Law. The arbitral award shall be enforced. This court disagrees with your court’s opinion in the Request for Instructions. It is so replied. 46. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Sinopec Petroleum Engineering Machinery Co., Ltd. Third Machinery Factory for Confirmation of the Validity of an Arbitration Agreement June 14, 2019, (2019) Zui Gao Fa Min Ta No. 296 To the High People’s Court of Hubei Province: The Request for Instructions on the Case Concerning the Application of Sinopec Petroleum Engineering Machinery Co., Ltd. Third Machinery Factory for Confirmation of the Validity of an Arbitration Agreement [(2019) E Min Ta No. 75] submitted by your court has been received. After deliberation, the replies are as follows. Based on the provisions of Article 13 of Part II and Article 7 of Part I of the Mother Station Filling Station CNG Compressor Procurement Contract, there are two places of arbitration in the arbitration clause involved in the case. The parties in this case did not reach a further supplementary agreement on the selection of the arbitration institution, which indicates that there is no clear agreement on the arbitration institution.

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In conclusion, this Court agrees with your court’s opinion that to confirm the invalidity of the arbitration agreement between the applicant Sinopec Petroleum Engineering Machinery Co., Ltd. Third Machinery Factory and the respondent Shanxi Compressed Natural Gas Group Xinzhou Co., Ltd. Ningwu Branch, Shanxi Compressed Natural Gas Group Xinzhou Co., Ltd based on Article 18 of the Arbitration Law. It is so replied. 47. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Qinshui Haokun Coalbed Methane Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement June 17, 2019, (2019) Zui Gao Fa Min Ta No. 33 To the High People’s Court of Shanxi Province: The Request for Instructions on the Case Concerning the Application of Qinshui Haokun Coalbed Methane Co., Ltd for the Confirmation of the Validity of an Arbitration Agreement [(2018) Jin Min Ta No. 70] submitted by your court has been received. After deliberation, the replies are as follows. First, the disputing issue in this case is the legal relationship between Qinshui Haokun Coalbed Methane Co., Ltd (“Haokun”) and Sichuan Kongfen Group Engineering Co., Ltd (”Kongfen Group”) under the Natural Gas Liquefaction Engineering EPC General Contracting Contract (“EPC General Contracting Contract”). Article 20.1 of the Agreement provides that in the event of a dispute, the parties may apply to the Beijing Arbitration Commission for arbitration. This agreement is in accordance with the law and the parties shall be bound by it. Second, although after Haokun signed the EPC General Contracting Contract with Kongfen Group, Kongfen Group and Sichuan Air Separation Low Temperature Engineering Installation Co., Ltd. (“Cryogenic”) signed the Haokun 50 × 104 SM3/d Coalbed Methane Liquefaction Project Construction and Installation Engineering Contract (“Construction and Installation Engineering Contract”). Under the contract, Kongfen Group subcontracted the installation works and civil engineering projects in the EPC General Contracting Contract to Cryogenic. Kongfen Groupand Cryogenic made an agreement in the Construction and Installation Engineering Contract that the dispute shall be resolved by arbitration or litigation. However, Haokun is not a party to the Construction and Installation Engineering Contract, and the arbitration or litigation clause stipulated in the Construction and Installation Engineering Contract is not binding on Haokun.

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Third, the Supplementary Agreement signed by Haoku, Kongfen Group and Cryogenic refers to the content that Cryogenic the general contractor of the project involved in the case, which is responsible for the civil and installation construction of the project, as well as the corresponding payment and invoice issuance issues. The Supplementary Agreement provides “This Supplementary Agreement is an integral part of the original contract and has the same legal effect as the original contract. In the event of a conflict between this Agreement and the original contract, this Agreement shall prevail. “Since the Supplementary Agreement does not stipulate an agreement on new dispute resolution method, there is no conflict between the Supplementary Agreement and the EPC General Contracting Contract in terms of dispute resolution methods, and the arbitration clause stipulated in the EPC General Contracting Contract is still valid between Haoku, and Kongfen Group. Therefore, the arbitration clause stipulated in the EPC General Contracting Contract shall apply to the disputes arising between Haoku, and Kongfen Group on the performance of the EPC General Contracting Contract. In conclusion, your court’s opinion that the arbitration clause in the EPC General Contracting Contract is invalid on the grounds that the dispute resolution method is arbitration or litigation, or has not been agreed specifically in the Construction and Installation Engineering Contract, cannot be supported. It is so replied. 48. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Cai for Revocation of an Arbitral Award June 17, 2019, (2019) Zui Gao Fa Min Ta No. 110 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of Cai for Revocation of an Arbitral Award [(2018) Yue Min Ta No. 122] submitted by your court has been received. After deliberation, the replies are as follows. It was identified that the signature of Cai in the Maximum Mortgage Contract and its annex List of (Real Estate) Collateral was not written by Cai, and the red fingerprint on the signature was not Cai’s own fingerprint. At the same time, when the branch staff of China CITIC Bank Co., Ltd. went to the land and resources management department to go through the mortgage registration procedures, Cai did not show up. Therefore, the parties have the right to apply for the revocation of the arbitral award within the statutory time limit. This Court agrees with your court’s opinion that the evidence on which the fourth item of the arbitral award in question made by Zhaoqing Arbitration Commission is based is forged and the award should be revoked in accordance with Article 58 of the Arbitration Law.

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It is so replied. 49. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Objection of SuZhou MiTac Precision Technology Co., LTD over the Non-Enforcement of an Arbitral Award June 21, 2019, (2019) Zui Gao Fa Min Ta No. 72 To the High People’s Court of Jiangsu Province: The Request for Instructions on the Case Concerning the Objection of SuZhou MiTac Precision Technology Co., LTD over the Non-enforcement of an Arbitral Award [(2018) Su Zhi Ta No. 31] submitted by your court has been received. After deliberation, the replies are as follows. Paragraph 2 of Article 2 of the Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review provides that “In the handling of non-foreign-related or non-Hong Kong, Macao, or Taiwan-related arbitration cases under judicial review, where, upon review, any intermediate people’s court or special people’s court is to determine the invalidity of an arbitral award, or not enforce or revoke an arbitral award rendered by an arbitration institution in the Chinese mainland, the intermediate people’s court or special people’s court shall file an application for verification with the higher people’s court within the jurisdiction; Upon review of the higher people’s court, the intermediate people’s court or special people’s court may render a ruling based on the review opinions of the higher people’s court.”In present case, the residence address of both parties are in Jiangsu Province, without crossing provincial administrative regions. This case also does not have the issue of refusing to enforce or revoke the arbitral award of arbitration institutions in mainland China on the grounds of violating the public interest. It does not fall within the scope of cases reported to this Court. This case should be reviewed and handled by your Court according to law. It is so replied. 50. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Shenzhen Aoyu Energy-Saving Technology Co., Ltd. for Revocation of an Arbitral Award June 27, 2019, (2019) Zui Gao Fa Min Ta No. 115 To the High People’s Court of Anhui Province: The Request for Instructions on the Case Concerning the Application of Shenzhen Aoyu Energy-saving Technology Co., Ltd. for Revocation of an Arbitral Award [(2019) Wan Min Ta No. 4] submitted by your court has been received. After deliberation, the replies are as follows. Fuyang People’s Hospital (“Fuyang Hospital”) filed an arbitration application to claim the revocation of Energy Management Service Contract based on the ground of obvious unfairness. It also claimed that Shenzhen Aoyu Energy-saving Technology Co., Ltd. (“Aoyu”) should return the energy-saving benefit sharing fund. Based on the appraisal conclusion submitted by Fuyang Hospital, Fuyang Arbitration Commission

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considered the contract breached the principle of fairness and equivalence, and made an award to set aside the contract and decide Aoyu to return the energy-saving benefit sharing fund. However, the abovementioned appraisal conclusion was unilaterally commissioned by Fuyang Hospital to the laboratory on special issues. Aoyu also clearly raise objection against the appraisal conclusion to the arbitral tribunal. Under such circumstances, Fuyang Arbitration Commission’s adoption of the appraisal conclusion violates Article 37 of the Fuyang Arbitration Commission Arbitration Rules, which stipulates that, “If the Arbitral Tribunal deems that an appraisal is necessary for a special issue, it may submit it to the appraisal department agreed upon by the parties or the statutory appraisal department, or it may have the appraisal department entrusted by the Arbitral Tribunal for appraisal.” Therefore, it should be determined that the arbitral award involved in the case has “violated legal procedures” as stipulated in Item 3 of Paragraph 1 of Article 58 of the Arbitration Law. The arbitral award shall be revoked. Your court’s opinion in the Request of Instruction is agreed. It is so replied. 51. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Zhejiang Wanda Construction Group Co., Ltd. for Confirmation of the Validity of an Arbitration Award August 23, 2019, (2019) Zui Gao Fa Min Ta No. 168 To the High People’s Court of Anhui Province: The Request for Instructions on the Case Concerning the Application of Zhejiang Wanda Construction Group Co., Ltd. for the Confirmation of the Validity of an Arbitration Award [(2019) Wan Mi Zhong No. 607] submitted by your court has been received. After deliberation, the replies are as follows. According to your court’s Request for Instructions, on July 1, 2013, the parties agreed in the General Contracting Agreement for the Construction of Maanshan Jianhua Building that “during the performance of this contract, if a dispute arises between the two parties, the two parties shall communicate promptly, and resolve it through friendly negotiation, and shall not affect the progress of the project. If the negotiation fails, a lawsuit shall be filed to the people’s court where the project is located in accordance with the law. “Although the parties stipulated an arbitration clause in the Construction Project Contract signed on August 10 of the same year, however, on October 27 of the same year, the parties specifically agreed in the Supplementary Amendment Agreement on the General Contracting of the Construction of Maanshan Jianhua Building that “The Construction Project Contract is only for the purpose of contract filing, and the specific terms of the contract are the same as the General Contracting Agreement for the Construction of Maanshan Jianhua Building and the Supplementary Amendment Agreement on the General Contracting of the Construction of Maanshan Jianhua Building. In the event of conflict, the two parties shall prevail and perform in accordance with the General Contracting Agreement for the Construction of Maanshan Jianhua Building and the Supplementary

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Amendment Agreement on the General Contracting of the Construction of Maanshan Jianhua Building. “Therefore, the settlement of disputes through litigation is an expression of the true intention of the parties. In the event of a dispute arising from the project involved in the case, both parties shall settle it through litigation in accordance with the provisions of the General Contracting Agreement for the Construction of Maanshan Jianhua Building. We agree with your court’s opinion. It is so replied. 52. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Wuhan Zhongheng Property Management Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement September 23, 2019, (2019) Zui Gao Fa Min Ta No. 169 To the High People’s Court of Hubei Province: The Request for Instructions on the Case Concerning the Application of Wuhan Zhongheng Property Management Co., Ltd for Confirmation of the Validity of an Arbitration Agreement [(2018) E Min Ta No. 176] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts stated in your court’s Request for Instructions, the arbitration clause involved in the case stipulates that “if a dispute arises during the performance of this agreement, the two parties shall resolve it through friendly negotiation, or apply to the property management administrative department for mediation. If the negotiation or mediation is invalid, they may apply to Wuhan Arbitration Commission for arbitration, or file a lawsuit with the people’s court where the contract is performed.” According to Article 7 of the Arbitration Law Interpretation, “Where the parties agree that a dispute may be submitted for arbitration with an arbitration agency or filed with the People’s Court for commencement of legal proceedings, the arbitration agreement shall be invalid.” The arbitration clause involved in the case shall be invalid. We agree with your court’s opinion. It is so replied. 53. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of BEIJING HOMYEAR CAPITAL HOLDINGS CO., LTD. for Confirmation of the Validity of an Arbitration Agreement September 27, 2019, (2019) Zui Gao Fa Min Ta No. 221 To the High People’s Court of Beijing: The Request for Instructions on the Case Concerning the Application of BEIJING HOMYEAR CAPITAL HOLDINGS CO., LTD for Confirmation of the Validity of an Arbitration Agreement [Jing Gao Fa (2019) No. 470] submitted by your court has been received. After deliberation, the replies are as follows.

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According to your court’s Request for Instructions, the last paragraph of the BEIJING HOMYEAR CAPITAL HOLDINGS CO., LTD 2017 First Short-Term Financing Bond Offering Prospectus (“Prospectus”) provides that “the issuer issuing the current debt financing instruments, the lead underwriter underwriting the current debt financing instruments, and the holder subscribing for or purchasing the current debt financing instruments, are deemed to have agreed to the above agreements and recognize that such agreements constitute relevant contractual obligations that are legally binding on them. If the issuer violates the above agreement, the investor has the right to arbitrate in Beijing with the CIETAC in accordance with its arbitration rules in force at the time of the application for arbitration. “The entire text of the arbitration clause points to “the current debt financing instrument”, so the “above agreements” in the arbitration clause should refer to the full text of the Prospectus. The Prospectus has agreed on different dispute resolution methods, which shall be subject to the last expression of intention of the parties. The arbitration clause involved in the case meets the formal requirements stipulated in Article 16 of the Arbitration Law and therefore is valid. It is inappropriate to consider the arbitration agreement under the Prospectus as invalid. It is so replied. 54. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Shanghai Shengdanna Electronic Technology Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement September 27, 2019, (2019) Zui Gao Fa Min Ta No. 239 To the High People’s Court of Guangdong Province: The Request for Instructions on the Case Concerning the Application of Shanghai Shengdanna Electronic Technology Co., Ltd for Confirmation of the Validity of an Arbitration Agreement [(2019) Yue Min Ta No. 54] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts stated in your court’s Request, Shanghai Shengdanna Electronic Technology Co., Ltd (“Shengdanna”) and Zhongke Scientific And Technical Co., Ltd. (“Zhongke”) signed a contract on June 30, 2015, which stipulates that all disputes arising out of or related to the execution of the contract shall be settled by friendly negotiation between the three parties, and if cannot be resolved through negotiation, they shall be submitted to the International Economic and Trade Arbitration Commission for arbitration in accordance with the arbitration rules of the Commission, and the place of arbitration shall be Shenzhen. Article 3 of the Arbitration Law Interpretation provides that “Where the name of the arbitration agency provided in the arbitration agreement is inaccurate but identifiable, the arbitration agency shall be deemed selected.” At the time of signing the arbitration agreement involved in the case, there were two arbitration institutions in Shenzhen with “International Economic and Trade Arbitration Commission” in their names. Namely, one is the South China International Economic and Trade Arbitration Commission (“CIETAC South China”), also known as Shenzhen Court

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of International Arbitration, and the other is the South China Sub-Commission of the China International Economic and Trade Arbitration Commission (“CIETAC South China Sub-Commission”). The CIETAC has numerous branches across the country and a South China branch in Shenzhen. Although the “International Economic and Trade Arbitration Commission” agreed in the arbitration clause did not specifically mark the word “China”, it specifically stipulated that the place of arbitration was Shenzhen. If the parties do not mean CIETAC South China Sub-Commission but CIETAC South China, generally speaking, the words “South China” will not be omitted. There is no need to emphasize that the place of arbitration is Shenzhen. Therefore, it can be determined that the arbitration institution agreed upon by the parties is CIETAC South China Sub-branch. In fact, Zhongke also submitted the dispute to CIETAC South China Sub-Commission for arbitration. In conclusion, the arbitration agreement involved in the case clearly indicates the arbitration institution. This case does not fall within the circumstances stipulated in Article 18 of Arbitration Law where the agreement on the arbitration commission is not clear. The arbitration agreement involved in the case should be deemed valid. It is so replied. 55. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Huadian Power International Corporation Limited for Confirmation of the Validity of an Arbitration Agreement December 14, 2019, (2019) Zui Gao Fa Min Ta No. 137 To the High People’s Court of Chongqing: The Request for Instructions on the Case Concerning the Application of Huadian Power International Corporation Limited for Confirmation of the Validity of an Arbitration Agreement [(2019) Yu Min Ta No. 17] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts stated in your court’s Request, the review of this case focuses on: (1) whether the arbitrator has acted in violation of the law; (2) whether the service procedure and trial time limit violate legal procedures; (3) whether the conduct of the lawyer acting as an agent to undertake the case of the arbitration institution where he is currently employed as an arbitrator constitutes a procedural violation. The first two grounds found by your court do not constitute the grounds for revocation. But the arbitral award in this case shall be revoked based on the third ground. Regarding whether the procedure was illegal for the current arbitrator to represent the arbitration institution as a lawyer, after this court solicited the opinion of the Ministry of Justice, the Ministry of Justice replied that “In accordance with the relevant provisions of Article 92 of the Legislation Law and Article 62 of the Measures for the Administration of Lawyers’ Practice, Paragraph 3 of Article 28 of the Measures for the Administration of Lawyers’ Practice shall apply to lawyers’ representation in arbitration cases and related legal affairs. A lawyer who is still serving as an arbitrator may represent the case of the arbitration institution where he

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currently works if he or she does not violate the provisions on conflicts of interest under Paragraph 3 of Article 28 of the Measures for the Administration of Lawyers’ Practice and the arbitration rules of the arbitration institution.” Therefore, the issue on whether the representation of the current arbitrator in this case constitutes a procedural violation, shall be governed by Paragraph 3 of Article 28 of the Measures for the Administration of Lawyers’ Practice and the provisions on conflicts of interest in the Arbitration Rules of Chongqing Arbitration Commission. During the review process, your court did not review and determine whether the conduct of representation violated the aforementioned Measures for the Administration of Lawyers’ Practice and the provisions on conflicts of interest in the arbitration rules. Upon discussion by the Civil Judicial Committee of this court, if the agent’s conduct does not violate the provisions on conflict of interest, it is inappropriate for your court to hold the opinion that the arbitral award in this case should be revoked only on the ground that the agent represented the case of the arbitration institution where he currently works that constitutes procedural violations. It is so replied. 56. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Lianyungang Highway Administration Office for Revocation of an Arbitral Award December 17, 2019, (2019) Zui Gao Fa Min Ta No. 278 To the High People’s Court of Jiangsu Province: The Request for Instructions on the Case Concerning the Application of f Lianyungang Highway Administration Office for Revocation of an Arbitral Award [(2019) Su Min Ta No. 33] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for revocation of an arbitral award. According to the facts indicated in your court’s Request for Instructions, GBQ-01 Project Supervision Report and GQSP-01 Project Supervision Report were accepted by the arbitral award involved in the case and used as the main evidence to determine the basic facts of the case. The two Project Supervision Reports were signed by the supervision engineer Li and affixed with the seal of the supervision team, which are authentic in form. There is relevant evidence to prove that China Construction Eighth Engineering Division. Corp. Ltd. had built a steel bridge and a temporary roadway, and the project involved was delayed in the start of construction due to the failure to hand over the construction site in time. Therefore, the matters recorded in the two Construction Supervision Reports are authentic and not fabricated, but the specific amount of losses in the reports is not supported by other evidence. The matters recorded in the two reports took place on February to June 2009. Li settled at the construction site in July 2009, not long after the occurrence of the matters recorded

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in the Project Supervision Report. Li later told the public security organ that he was unaware of the matters recorded in the Project Supervision Reports and it was only his personal statement. Li’s subsequent statement is not sufficient to negate his prior act of sealing and signing. Even if the Project Supervision Reports were signed after the occurrence of the abovementioned matters, it is not sufficient to show that the report is forged. Therefore, the form of the Project Supervision Reports is authentic, and the matters recorded in the reports are also true. As for whether the amount of loss was shall be determined on the basis of the reports is within the discretion of the Arbitral tribunal. The current evidence is insufficient to affirm that the evidence on which the arbitral award is based is forged. We do not agree with your court’s review opinion. It is so replied. 57. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Nanchang Stall Food Company for Revocation of an Arbitral Award December 23, 2019, (2019) Zui Gao Fa Min Ta No. 298 To the High People’s Court of Jiangxi Province: The Request for Instructions on the Case Concerning the Application of Nanchang Stall Food Company for Revocation of an Arbitral Award [(2019) Gan Min Te No. 16] submitted by your court has been received. After deliberation, the replies are as follows. First, as for the issue on whether the matters in the arbitral award falls into the scope of arbitration agreement, the parties explicitly agreed in the Arbitration Agreement that “As shareholders of Jiangxi Huachang Special Feed Co., Ltd, both parties have a dispute over the confirmation of the equity of the target company and related matters. Therefore, both parties unanimously accepted the one-time final award of the abovementioned equity dispute made by Nanchang Arbitration Commission in accordance with Arbitration Law and the arbitration rules of the Commission. “The Arbitration Agreement is true intention of the parties, which is legal and valid. Huitongyue Company’s claim on the termination the equity transfer agreement and other claims are all agreed matters in the Arbitration Agreement. The award made by the arbitral tribunal ruling does not exceed the scope of the Arbitration Agreement. Second, regarding the issue of whether the arbitral award in this case is contrary to the public interest. It is a substantial issue for the arbitral tribunal to decide on the compensation based on the equity transfer agreement signed by both parties. The arbitral award does not violate public order, moral, the basic system and norms of Chinese law, the basic principles of social and economic life, and the public interest. In conclusion, the arbitral award shall not be revoked. It is so replied.

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58. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Huaxi Staff Sanatorium of Guizhou Federation of Trade Unions for Non-Enforcement of an Arbitral Award December 24, 2019, (2019) Zui Gao Fa Min Ta No. 321 To the High People’s Court of Guizhou Province: The Request for Instructions on the Case Concerning the Application of Guiyang Intermediate’s People’s Court for Non-enforcement of (2018) Hang Zhong Cai No. 319 Arbitral Award made by Hangzhou Arbitration Commission [(2019) Qian Zhi Ta No. 54] submitted by your court has been received. After deliberation, the replies are as follows. This is a case on the application for non-enforcement of a domestic arbitral award. According to the facts indicated in your court’s Request for Instructions, first, Beijing Yuancheng Shijie Company (“Yuancheng Company”) is not a party to the arbitration agreement on which the arbitral award is based and should not be bound by the arbitration agreement. There is no legal basis for Huaxi Staff Sanatorium of Guizhou Federation of Trade Unions (“Staff Sanatorium”) to apply for adding Yuancheng Company to participate in the arbitration. Although the Finance Lease Contract and the Leased Property Sale and Purchase Contract are related and both stipulate that the arbitration should be governed by Hangzhou Arbitration Commission, they involve different legal relationships. There is no legal basis for your court to hold the opinion that the arbitral tribunal should add Yuancheng Company as a party in order to ascertain the performance of the relevant obligations. The arbitral tribunal’s failure to add parties upon application is not an illegal circumstance in the arbitration proceeding. Second, under Article 6 “Delivery and Acceptance of the Leased Property” of Finance Lease Contract, if the seller fails to perform its obligations under the sales contract, Staff Sanatorium could exercise its right to claim compensation against the seller. Such circumstance does not affect the agreement of the obligation of Staff Sanatorium to pay rent to Hailiang Company, which does not violate Article 240 of the Contract Law and Article 6 of the Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Financial Lease Contract Dispute Cases. There is no legal basis for your court to consider that the arbitral tribunal treated the agreement in this case as a finance lease contract would disrupt social and economic order and violate the public interest based on the ground that the abovementioned Finance Lease Contract referred to lending relationship in essence. Moreover, the enforcement of the arbitral award may affect the operation of hospital, but it shall not be the ground to affirm that it will harm the public interest. Staff Sanatorium may also seek alternative relief. In conclusion, the arbitral award does not fall within the scope of Article 237 of the Civil Procedure Law on non-enforcement. It is so replied.

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59. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of Hangzhou Baihe Real Estate Development Co., Ltd. for Confirmation of the Validity of an Arbitration Agreement December 27, 2019, (2019) Zui Gao Fa Min Ta No. 308 To the High People’s Court of Zhejiang Province: The Request for Instructions on the Case Concerning the Application of Hangzhou Baihe Real Estate Development Co., Ltd for Confirmation of the Validity of an Arbitration Agreement [(2019) Zhe Min Ta No. 138] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts indicated in your court’s Request for Instructions, the arbitration clause involved in this case provides that “If the negotiation and mediation fails, the two parties agree that the arbitration shall be conducted by the Hangzhou Xiaoshan District Arbitration Commission.” Although the “Hangzhou Xiaoshan District Arbitration Commission” does not exist, there is only one arbitration institution in Hangzhou, which is Hangzhou Arbitration Commission. And it has a branch in Xiaoshan District, Hangzhou. Based on such facts, combined with the explicit agreement between the parties to submit the dispute to arbitration and settle it in Xiaoshan District, it can be understood that the parties actually agreed arbitrate in the arbitration commission in Xiaoshan District, Hangzhou. Article 6 of the Arbitration Law Interpretation stipulates that “Where an arbitration agreement provides for arbitration to be submitted with an arbitration agency at a fixed locality and only one arbitration agency exists at that locality, that arbitration agency shall be deemed as the arbitration agency stipulated under the arbitration agreement. “Therefore, Hangzhou Arbitration Commission can be regarded as an arbitration institution agreed by both parties. In conclusion, the arbitration agreement in this case is valid. It is so replied. 60. Reply of the Supreme People’s Court to the Request for Instructions on the Case Concerning the Application of xi’an Fangzhou Construction Labor Service Co., Ltd. for Confirmation of the Invalidity of an Arbitration Agreement December 27, 2019, (2019) Zui Gao Fa Min Ta No. 296 To the High People’s Court of Shaanxi Province: The Request for Instructions on the Case Concerning the Application of Xi’an Fangzhou Construction Labor Service Co., Ltd for Confirmation of Invalidity of an Arbitration Agreement [(2019) Shaan Min Ta No. 63] submitted by your court has been received. After deliberation, the replies are as follows. According to the facts indicated in your court’s Request for Instructions, the arbitration institution agreed by the parties in the contract involved in the case is the “arbitration commission of the place where the project is located”. The project involved is located in the Yangling Demonstration Zone of Shaanxi Province, but

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there is no arbitration commission in the Yangling Demonstration Zone. Since the Yangling Demonstration Zone belongs to the administrative region directly administered by Shaanxi Province, and there are multiple arbitration commissions in Shaanxi Province, the arbitration commission where the project is agreed by the two parties cannot correspond to a specific arbitration commission. Article 6 of the Arbitration Law Interpretation stipulates that “Where an arbitration agreement provides for arbitration to be submitted with an arbitration agency at a fixed locality and only one arbitration agency exists at that locality, that arbitration agency shall be deemed as the arbitration agency stipulated under the arbitration agreement. Where there are two or more arbitration agencies at that locality, the parties may agree on the selection of one of the agencies for arbitration; where the parties concerned are unable to agree on the choice of an arbitration agency, the arbitration agreement shall be invalid. “If an arbitration agreement stipulates that arbitration shall be conducted by an arbitration institution in a certain place and there is only one arbitration institution in that place, the arbitration institution shall be regarded as the agreed arbitration institution.” The parties in this case did not reach a supplementary agreement on the selection of the arbitration commission, so it should be deemed that the parties have not expressly agreed on the arbitration institution, and the arbitration clause involved in the case is invalid. Your court’s opinion in the Request is agreed. It is so replied.