19 April 2016
On 18 September 2006, China International Economic and Trade Arbitration Commission rendered an arbitral award in a sales contract dispute case between Shanghai Jwell Machinery Co., Ltd (Jwell Ltd) and Retech Aktiengesellschaft (Retech) from Switzerland. Jwell Ltd subsequently filed an application for enforcement of the award with a Swiss court. However, the application was rejected in 2007, 2009 and 2010 on the grounds that the translations of the award do not comply with section 4(2) of the New York Convention.
On 30 July 2008, one batch of machinery equipment belonging to Retech was found on display in Shanghai by Jwell Ltd. The company applied to the Shanghai No.1 Intermediate People's Court for enforcement of the award. Retech opposed on the ground that the application had exceeded the six-month time-bar prescribed under Article 219 of the then PRC Civil Procedure Law (1991) which governed the time limit an enforcement action should be taken. Retech's opposition was dismissed by the court.
On appeal, the Shanghai High People's Court held that while Shanghai's courts do not have enforcement jurisdiction over the case on the effective date of the award i.e., 18 September 2006, since Retech was not domiciled, or had no property, in China at the time [see Article 217 of the then PRC Civil Procedure Law (1991)1], the time-bar for the application should be calculated as from the date when the court had jurisdiction over the matter (i.e., the date when it was discovered that Retech has property in China i.e., 30 July 2008). Subsequently, the Judicial Committee of the Supreme People's Court also upheld this, and issued it as a guiding case on 18 December 2014.
This guiding case confirms the general principle that Chinese courts do not have the power to execute a foreign-related award unless the person subject to enforcement of the award, or the property of that person, is in mainland China at the material time.
Pursuant to Article 239 of the PRC Civil Procedure Law (2012 Amendment), the period for applying for enforcement of an award has been extended to two years. It shall start from the last day of the performance period specified in a legal instrument, or the effective date of a legal instrument if it does not specify a period of performance. The court, however, takes the view that this time-bar provision is subject to the normal condition where a court has seized jurisdiction over the enforcement matter.
Hence, where a person subject to execution of a foreign-related award either does not domicile, or has no property, in China on, or after, the date of the award, the Court would have no jurisdiction over the matter, and the two-year time-bar does not start to run. According to Article 239, the two-year period would be calculated from the date when it is discovered that either the person is, or has property, in China. This interpretation enables a winning party of a foreign-related award to take enforcement action against a losing foreign party at a later stage if it subsequently discovers that the losing foreign party has property in mainland China. This is on the condition that there is no delay on the part of the winning party in taking enforcement actions.
1. Article 237 of PRC Civil Procedure Law (2012 Amendment)