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Chinese Courts Embrace Supervisory Role in Foreign-Seated Arbitrations
Chinese Courts Embrace Supervisory Role in Foreign-Seated Arbitrations
In the realm of international arbitration, it is well-established that curial courts those at the seat of arbitration hold supervisory jurisdiction over local arbitral proceedings. However, Chinese courts have historically been hesitant to assume this role for arbitrations administered by foreign institutions within China. Recent judicial developments signal a significant shift towards embracing this supervisory function, aligning Chinese practice with international standards.
Historical Reluctance and Initial Changes:
Chinese courts' reluctance to accept supervisory jurisdiction over foreign-administered arbitrations in China has been well-documented. About half a decade ago, the Brentwood v. Guangdong Fa’anlong (2020) case suggested a potential shift. The court implied that an ICC award seated in China should be enforced as a Chinese award, hinting at a future where Chinese courts might embrace supervisory jurisdiction over such awards. However, this change was slow, primarily due to the non-precedent-setting nature of the Brentwood decision.
Post-Brentwood Judicial Developments:
2022: Supreme People's Court Clarifications
In January 2022, the Supreme People's Court (SPC) published the Minutes of the National Symposium on Foreign-related Commercial and Maritime Trial Work of Courts. The Minutes stated that an award made by a foreign arbitral institution seated in Mainland China should be deemed a foreign-related Mainland Chinese award. Although the Minutes are not binding, they reflect a consensus among SPC judges that Chinese courts should supervise arbitrations administered by foreign institutions in China.
2023: Heavy Industries Case
The Beijing Fourth Intermediate People’s Court’s decision in the China First Heavy Industries v. Aktiebolaget Sandvik Materials Technology case marked a significant step. The court adopted the “seat standard” to determine the nationality of an ICC award rendered in Beijing, thereby asserting its supervisory jurisdiction. This case highlighted the court’s commitment to international standards, as it referenced the IBA Rules on the Taking of Evidence in International Arbitration and the IBA Guidelines on Conflicts of Interest in International Arbitration, demonstrating a sophisticated understanding of international arbitration norms.
2024: Daesung Case Endorsement
In January 2024, the SPC included the Daesung Industrial Gases Co., Ltd. case as a "typical case," further solidifying the application of the “seat standard.” The Shanghai First Intermediate People’s Court exercised supervisory jurisdiction over an SIAC arbitration seated in Shanghai, despite objections. The court’s decision underscored the need to align Chinese arbitration law with global trends and fill legislative gaps through judicial practice.
Implications and Future Outlook:
The willingness of Chinese courts to embrace their supervisory role and align with international standards is evident in these cases. Notably, the Heavy Industries and Daesung cases demonstrate a commitment to due process, detailed reasoning, and appropriate scope of review. These developments indicate that Chinese arbitration law is moving towards greater alignment with international norms, potentially increasing the confidence of international practitioners and parties in choosing China as an arbitration seat. However, these cases are still limited in number, and consistency across Chinese courts remains to be seen. Future developments will be closely monitored by the international arbitration community to assess whether a consistent standard of review is maintained. Overall, these judicial clarifications and the SPC’s endorsement of the “seat standard” suggest a promising trend towards a more internationally aligned Chinese arbitration practice.
- Chinese courts' reluctance to accept supervisory jurisdiction over foreign-administered arbitrations in China has been well-documented.
- This case highlighted the court’s commitment to international standards, as it referenced the IBA Rules.
- The court’s decision underscored the need to align Chinese arbitration law with global trends and fill legislative gaps through judicial practice.
