Report on “Recognition and Enforcement of Foreign Civil and Commercial Judgment and Arbitral Awards”

　　 From May 31, 2009 to June 11, 2009, the Committee appointed staff to participate in a delegation organized by the Ministry of Justice, “Recognition and Enforcement of Foreign Civil and Commercial Judgment and Arbitration Award”, traveling to the UK, France, Belgium, and Sweden to inspect the enforcement status of foreign civil and commercial judgments and arbitration awards. During this period, the visiting delegation successively visited the Bar Association of England and Wales, the Directorate-General for Justice, Freedom and Security of the European Commission, the Bar Association of Brussels, the EU Lawyer Committee and Law Society, French Ministry of Justice, French Huissier Association, Swedish Ministry of Justice, and other government departments and associations. The Committee created the following report based on the information obtained through this visit.It concerns the recognition and enforcement of foreign arbitration awards in the above-mentioned countries and it may provide useful reference material for improving the Chinese arbitration system.

I. Legal regulations of reported countries concerning the enforcement of foreign arbitral awards

　　  With regard to the recognition and enforcement of foreign civil and commercial arbitral awards, the following countries all have joined the Recognition and Enforcement of Foreign Arbitral Awards, passed in New York in 1958. The UK, Belgium and France made a reservation of reciprocity, which Sweden did not follow.

　　  In terms of the specific recognition procedure and the enforcement of foreign arbitral awards, all four have incorporated it into their domestic legal system, e.g., the implementation/application of the statute of limitations and review of procedures and methods.

II. The circumstances of the Recognition and Enforcement of the foreign arbitral in the specified countries

i. England

　　  According to the 1996 English "Arbitration Law", if the arbitration situs is the United Kingdom, the party may request that the English courts accept jurisdiction and enforce the award. According to the "New York Convention", the party should apply for arbitration first. If the arbitration is not in English, the party needs a notorized translation and an affidavit, which must be submitted to the court. The primary judge will review this, which will be registered if it conforms to the procedural requirements.

　　  The judges of the High Court generally take six weeks to accept a registration. If there are challenges from the executee, procedures will continue in the High Court. Depending upon the nature of debate; the complexity of the case; and the evidence, the time of the registration may range from a year to a year and a half. Additionally, the decision of the High Court can be appealed, which may take another 12 months. If the dispute is quite large, it may be transferred to a specialized court, such as the commercial court. Once the court permits the enforcement, the arbitral award transforms to a judgment, which has the same legal effect as a court's ordinary decision or determination.

　　 The role of the court in review of arbitral awards has been limited by the "Arbitration Law" as far as possible. Since 1996, there have been numerous cases which defined the border of the courts’ intervention. When we communicated with the local lawyers of the United Kingdom, two main reasons were identified for the change in attitude of the English courts’ regarding the recognition and enforcement of foreign arbitral award. First, for historical reasons, many in the arbitration community criticized the intervention of the court. For example, the courts considered a lengthy trial necessary to deal with the finer details of the case, even after extended arbitration. Second, the court's attitude towards arbitration can help create an active arbitration market in London, which would be a great economic boon.

　　  For the issues of arbitrability, such as the amenability of anti-trust disputes and bankruptcy disputes to arbitration, Britain's legal practices are as follows: First, it depends on whether there is an arbitration clause in the contract or agreement. Additionally, given that the attitude of the courts is increasingly flexible, it is increasingly likely that cases such as long-term fraud disputes can be arbitrated, providing both parties agree on it. However, the court often debate individual cases.

ii. France

　　 The recognition and enforcement of arbitral awards is very simple in France. There are two conditions for the recognition: First, the arbitral award must be made under the New York Convention. Second, the arbitral award may not explicitly violate the public policy of France. In particular, to enforce the foreign commercial arbitral award, the applicant should first obtain an execution permission from the court. If the arbitral award exists and does not violate the public policy of France, the judge should make a determination to confirm the enforceability of the award. If the judge refuses to recognize or execute an arbitration award, the applicant has the right to appeal to a higher court. If the decision of enforcement is made based on the absence of the arbitration agreement; inappropriate constitution of the tribunal; failure to arbitrate on the basis of the parties’ trust; or if it was contrary to public policy and due process, the respondent has the right to appeal. The appeal should be filed within one month of the delivery of respective notices.

 　　 When we communicated with the peers of French Ministry of Justice and the Bar Association, they believed that, although France has joined the New York Convention, the impact of the Convention to France is limited. Because French law is more conducive to the recognition and enforcement of awards than the New York Convention, France does not need to apply the New York Convention to a certain extent. This is reflected in two ways:

 　　 First, with regard to the understanding and application of a public order, the French courts distinguish between international and domestic public orders. For foreign commercial arbitral awards, disputants apply for the international public order, which is narrower in scope than the domestic public order. For example, under French domestic law, there are special laws and institutions instead of arbitration to deal with a competition law dispute. However, in international arbitration cases, domestic competition institutions can be put aside. Accordingly, it is legal to use arbitration to deal with disputes over competition law.

 　　 Second, the French courts generally recognize and enforce foreign arbitral awards that have been revoked. This is difficult for the investigation group to understand. When French experts were asked about the basis of execution, they assumed that although the foreign arbitral awards were revoked in foreign countries, the French court has not therefore considered that they should be treated as withdrawn in France. So arbitral awards that have been revoked in foreign countries doesn’t hinder enforcement in French.

 　　 The French courts enforced 35 foreign awards from 2006 to 2007, including 14 which went to the appeal stage. Foreign arbitral awards that were recognized yet went unenforced were quite rare.The main reasons concerned the award violating the country public policy, a lack of statement and/or debate, or manifest injustice.

iii. Belgium

　　 The procedures on the Recognition and Enforcement of Foreign Arbitral Awards in Belgium are same as those in France. They take foreign arbitral awards as domestic ones, and expand the rules that apply to the enforcement of domestic arbitral awards to foreign ones. As the host country of the EU headquarters, in recent years, the government of Belgium has began paying more attention to the development and expansion of the arbitration market. The court’s examination of foreign arbitral awards in Belgium has been very loose thus far.

　　 During the discussion with experts from the Bar Association and the Law Society of the European Union, the experts said the overall amount for the European Union refusals to acknowledge and enforce foreign arbitral awards is low, amounting to no more than five percent. The main reason of refusal to recognize and enforce awards is excessively short notice time or inadequate service leading to default judgments. The service time primarily depends on the provisions of the Members States, but for cross-border disputes, the time is often too short. The Bar Association of the EU has committed itself to extending the service time available. This principle is primarily applied to the protection of fundamental rights, not to enacting public policy.

iv. Sweden

　　 There are specialized provisions for recognition and enforcement of foreign awards in the Swedish Arbitration Act of 1999. The application for the enforcement of foreign arbitration (including original award, a certified copy of the award and Swedish translation version) should be submitted to the Svea Court of Appeal in Stockholm. Once the Court reviews the application, the award involved will be implemented as the final judgment of the Swedish Court. An Applicant can subsequently submit the award to a professional executive officer and the award can be implemented without further review. Additionally, the applicant can appeal adverse decisions. According to article 58 of the Swedish Arbitration Act, if the opposing party challenges the award, stating that he has submitted an application for the revocation of an arbitral award or proposal for the suspension of the implementation, the Court of Appeal can postpone judging and can order the opposing party to offer a reasonable guarantee. If no guarantee is offered, the Court of Appeal can order the enforcement of the award.

 　　 Arbitration in Sweden is well developed, and the Stockholm Chamber of Commerce Court of Arbitration is the world's leading international arbitration institutions. When discussing arbitration with the leaders of the Swedish Ministry of Justice and the Stockholm Chamber of Commerce Court of Arbitration, it became clear that arbitration may be the only means available to comprehensively address and solve international commercial disputes. When talking about the development of arbitration in Sweden, the Swedish Minister of Justice highlighted the need to increase the number of sources and the volume of cases.

III. Reactions to the Visit

　　 Viewed from the situation of this visit, the development of European arbitration is relatively mature and the recognition and enforcement of foreign arbitration award is comparatively relaxed. The government and court systems spare no effort to support arbitration, attempting to maintain or improve the position of the country in the international arbitration market.

　　 In our country, through the judicial interpretation of the Supreme Court, a reporting system with Chinese characteristics has been established in China, requesting that the People’s Courts at all levels must report to the next Supreme People’s Court progressively for review and determination before refusing recognition or implementation of a foreign arbitration award. On February 25, 2002, the “Provisions on Some Issues Concerning the Jurisdiction of Civil and Commercial Cases Involving Foreign Elements” published by the Supreme People’s Court, concentrated the application for recognition and enforcement of foreign arbitration award cases in several Intermediate People’s Courts with better judgment and higher professional skill. These measures effectively ensure the recognition and enforcement of foreign arbitration awards in China and maintain our international reputation.

　　 However, we noticed from this visit that we lag far behind European countries in the development of arbitration, management of arbitration institutions, the concept of judicial supervision, and many other aspects. The state of these features in the Chinese arbitratal instituations is unfavorable our position in the international arbitration market and our ambition to play a major role in alternative dispute resolution in the context of economic globalization. It is hoped that this visit can provide a basis for improvement of China’s arbitration system in the future.

(By Jianyong Ding)

Where the Real Fun Begins: Mediation within Arbitration

　　 My favorite moment during an arbitration hearing at the Beijing Arbitration Commission is when the arbitrator leans back, smiles, and asks, "Are both parties willing to participate in mediation at this point?" Yes, it's true: almost every arbitrator I've met here does the lean-back-and-smile move when the hearing reaches this stage. Because the same arbitrator of a case is permitted by the arbitration rules to be the case mediator, the mediation segment of an arbitration hearing is often a golden opportunity for a law student to learn what the parties and the arbitral tribunal actually believe to be a reasonable resolution of the dispute.

　　 On a recent trip with the arbitrator and BAC secretary to the outskirts of Beijing to supervise the appraisal of the goods at issue in the case, I witnessed a mediation-within-arbitration that exemplified its best advantages. After three years and three arbitral hearings, including medications within those hearings, the final mediation effort resulted in both parties relinquishing their arbitral claims. Mediation after the arbitrator has heard all the evidence that the parties are able to bring forward without further investigation by a third party appraiser allows the arbitrator/mediator to have a solid preliminary assessment of the likelihood of the claimant prevailing in arbitration. After repeated arbitration hearings and medications, the arbitrator was able to give a detailed analysis of the strength of each party's legal footing during the final mediation hearing. It was precisely this analysis, delivered by the arbitrator directly to the claimant, that effectively persuaded the parties to settle the case. Without knowledge of each party's evidentiary strength or freedom afforded by mediation rules, the arbitrator faced at least one lengthy appraisal and several arbitration hearings before arriving at a final ruling.

　　 While I was awed by the efficiency and effectiveness of the arbitrator/mediator, I was also struck by the relatively passive roles of the each party's attorneys in the process. The legal analysis that ultimately led to settlement should have been explained to the parties by their counsel long before the final mediation. One of the key advantages of mediation-within-arbitration is that it allows the attorneys to arrive at their own informed conclusions about the strength and weaknesses of their argument as well as those of the opposing party. Yet, having access to the same set of evidence and arguments as the arbitrator, the attorneys themselves could not help their clients arrive at a settlement amount without the arbitrator's participation. When both attorneys are competent and informed, two possible explanations emerge: first, the claimant and respondent did not want to settle without having heard the arbitrator/mediator's "true" thoughts. Second, the attorneys simply did not believe settlement was possible based on their previous participation in the arbitral proceedings. It seems that in both instances the knowledge advantage that greatly enhances a mediator's role doesn't positively impact the attorney's effectiveness in representation to the same degree.

　　 My final impression of mediation-within-arbitration is perhaps a reconciliation of its shortcoming with its usefulness. When mediation fails, the arbitrator/mediator must disregard what was said in the mediation and only wear the hat of the arbitrator in rendering his or her decision. Is it possible to completely take off a theoretical hat? Bias cannot be completely eliminated from any adjudicatory process. Through mediation, an arbitrator can often achieve a fairer outcome than through issuing an arbitral decision. a party may have the truth on their side, but lack evidence to prove it. A party may have the right to enforce the contract, but enforcement would essentially be the arbitrator giving a legal yet hollow shell to the prevailing party without possibility of actual relief. Mediation-within-arbitration, where all the cards are on the table, is an arena in which the arbitrator/mediator can propose creative solutions that compensate for the law's inflexibility and address the realistic feasibility of each party's performance of the settlement agreement. In a way, mediation-within-arbitration exemplifies the philosophy behind alternative dispute resolution-that while the process guarantees the legal rights and remedies that the parties are entitled to under the judicial system, it also brings the law closer to the reality of doing business.

(By Jenny Ma, intern from Hastings College of the Law of California University)