Shanghai Jwell Machinery Co., Ltd. and Retech Aktiengesellschaft, Switzerland, An Enforcement Reconsideration Case on an Arbitral Award

Transcription

1 Shanghai Jwell Machinery Co., Ltd. and Retech Aktiengesellschaft, Switzerland, An Enforcement Reconsideration Case on an Arbitral Award Guiding Case No. 37 (Discussed and Passed by the Adjudication Committee of the Supreme People s Court Released on December 18, 2014) CHINA GUIDING CASES PROJECT English Guiding Case (EGC37) March 24, 2015 Edition * * The citation of this translation of the Guiding Case is: 上海金纬机械制造有限公司与瑞士瑞泰克公司仲裁裁决执行复议案 (Shanghai Jwell Machinery Co., Ltd. and Retech Aktiengesellschaft, Switzerland, An Enforcement Reconsideration Case on an Arbitral Award), CHINA GUIDING CASES PROJECT, English Guiding Case (EGC37), Mar. 24, 2015 Edition, available at This document was primarily prepared by Oma Lee, LIU Shuo, LUO Min, Jeremy Schlosser, Weizi Zhang, and Xin Zhang. The document was finalized by Alyssa King, Jordan Corrente Beck, and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and boldfacing the headings to correspond with those boldfaced in the original Chinese version, was done to make the piece more comprehensible to readers. The following text, otherwise, is a direct translation of the original text and reflects formatting of the Chinese document released by the Supreme People s Court. The following Guiding Case was discussed and passed by the Adjudication Committee of the Supreme People s Court of the People s Republic of China and was released on December 18, 2014, available at See also 最高人民法院关于发布第八批指导性案例的通知 (The Supreme People s Court s Notice Concerning the Release of the Eighth Batch of Guiding Cases), Dec. 18, 2014, available at

2 2 Keywords Civil Litigation Foreign-Related Arbitral Award Enforcement Reconsideration Enforcement Jurisdiction The Time from Which the Enforcement Application Period [should be] Calculated Main Points of the Adjudication Where a party applies to a court of [the People s Republic of] China 1 to enforce a foreignrelated arbitral award that has come into legal effect 2 and discovers 3 that the party against whom the enforcement application is filed 4 or its property is [located] within the territory of China, 5 the PRC court thereupon has enforcement jurisdiction over the case. The limitation period for a party to apply to a [PRC] court for compulsory enforcement should be calculated from the date on which the party against whom the enforcement application is filed or its property is discovered to be [located] within the territory of China. Related Legal Rule(s) Article 239 and Article 273 of the Civil Procedure Law of the People s Republic of China 1 Translators note: all subsequent references to China or PRC refer to the People s Republic of China. Given the context of this case, any reference to a PRC court or PRC courts here should be understood to mean court(s) in mainland China only, excluding courts in Hong Kong and Macau. 2 Translators note: the original text reads 发生法律效力的涉外仲裁裁决 ( a foreign-related arbitral award that has come into legal effect ). According to Article 57 of the Arbitration Law of the People s Republic of China, arbitral awards come into legal effect on the date when they are issued. This provision also applies to foreign-related arbitral awards because: first, Article 65 states that where a matter concerning foreign-related arbitration is not addressed in Chapter 7 (Specific Provisions on Foreign-related Arbitration) of the Arbitration Law, other relevant provisions of the law shall apply; and second, Chapter 7 is silent on this issue. See 中华人民共和国仲裁法 (Arbitration Law of the People s Republic of China), adopted on Aug. 31, 1994, effective as of Sept. 1, 1995, amended on and effective as of Aug. 27, 2009, available at and 3 Translators note: the sentence structure here and the context of this case suggest that it is the party who discovers, but it is discovered is likely the phrase meant. 4 Translators note: the term 被申请执行人, translated throughout this guiding case as the party against whom the enforcement application is filed, can refer to either an individual or a legal person. 5 Translators note: the term 我国领域, translated throughout this Guiding Case as territory of China, has the more precise meaning of the territory of the People s Republic of China. It is, however, unclear from the Guiding Case whether the term is meant to refer to the territory of mainland China only.

3 3 Basic Facts of the Case [With respect to] the sale and purchase contract dispute [between] Shanghai Jwell Machinery Co., Ltd. 6 ( 上海金纬机械制造有限公司 ) (hereinafter referred to as Jwell Company ) and Retech Aktiengesellschaft, Switzerland 7 (hereinafter referred to as Retech AG ), the China International Economic and Trade Arbitration Commission rendered an arbitral award on September 18, On August 27, 2007, Jwell Company applied to the Lenzburg Court of the Swiss Confederation (hereinafter referred to as the Lenzburg Court ) for the recognition and enforcement of that arbitral award. [Jwell Company] also submitted a translation of the arbitral award translated by the China Central Translation Agency and certified by the Foreign Affairs Office of the Shanghai Municipal People s Government 8 and the Consulate General of the Swiss Confederation in Shanghai. 9 On October 25 of the same year, the Lenzburg Court rejected the application of Jwell Company on the grounds that the translation of the arbitral award submitted by Jwell Company did not satisfy the provision of Article IV, Paragraph 2 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 10 (hereinafter referred to as the New York Convention ), [which provides that] the translation shall be certified by an official or sworn translator or by a diplomatic or consular agent. 11 Subsequently, Jwell Company submitted on two different occasions translations of the arbitral award to the Lenzburg Court to apply for enforcement. [One copy of the award] was 6 Translators note: the name 上海金纬机械制造有限公司 is translated here as Shanghai Jwell Machinery Co., Ltd. in accordance with the translation used on the company s website, at 7 Translators note: the name Retech Aktiengesellschaft is used here, instead of RETECH Aktiengesellschaft as used in the Chinese version of this Guiding Case, in accordance with the name used on the company s website, at It should also be noted that Retech AG, the literal translation of the shorter form used in the Chinese version of this Guiding Case, merely refers to the Switzerland branch of the company. 8 Translators note: the name 上海市外事办公室 is translated here as Foreign Affairs Office of the Shanghai Municipal People s Government in accordance with the translation used on the government s website, at 9 Translators note: the name 瑞士驻上海总领事 is translated here as Consulate General of the Swiss Confederation in Shanghai in accordance with the translation used on the website of the Ministry of Foreign Affairs of the People s Republic of China, at _602308/t shtml. 10 Translators note: the name 承认及执行外国仲裁裁决公约 is translated here as Convention on the Recognition and Enforcement of Foreign Arbitral Awards in accordance with the name used on the website of the United Nations Commission on International Trade Law, at 11 Translators note: the sentence 译文由公设或宣誓之翻译员或外交或领事人员认证 is translated here as the translation shall be certified by an official or sworn translator or by a diplomatic or consular agent in accordance with the original English version, available at The corresponding Chinese version provided in the official Chinese text of the New York Convention is: 译本应由公设或宣誓之翻译员或外交或领事人员认证之 (converted here from traditional Chinese characters), available at According to Article XVI of the Convention, the Chinese, English, French, Russian, and Spanish texts of the Convention are equally authentic. It is not clear why the official Chinese text is not used in this Guiding Case.

4 4 translated by a local translation institution in Switzerland and [the other] was translated by the Shanghai SISU Translation Service Co. 12 and certified by the Foreign Affairs Office of the Shanghai Municipal People s Government and the Consulate General of the Swiss Confederation in Shanghai. [However, Jwell Company s] application was again rejected by that court on March 17, 2009 and August 31, 2010, respectively, on the grounds that the translations of the arbitral award did not, in a strict sense, comply with the provision of Article IV, Paragraph 2 of the New York Convention. On July 30, 2008, Jwell Company discovered that a batch of machinery and equipment belonging to Retech AG was on exhibition in Pudong New Area of Shanghai Municipality and thus, on that day, applied to the No. 1 Intermediate People s Court of Shanghai Municipality (hereinafter referred to as the Shanghai No. 1 Intermediate Court ) for enforcement. On the same day, the Shanghai No. 1 Intermediate Court registered the case for enforcement and sealed up 13 and distrained Retech AG s exhibited machinery and equipment. Retech AG raised an objection on the ground that Jwell Company s application for enforcement had already exceeded the time limit set forth in the Civil Procedure Law of the People s Republic of China 14 (hereinafter referred to as the Civil Procedure Law ). [Retech AG] demanded that the Shanghai No. 1 Intermediate Court not accept the case, as well as unseal [its machinery and equipment] and cease the enforcement. 12 Translators note: the name 上海上外翻译公司 likely refers to 上海上外翻译总公司 and is translated here as Shanghai SISU Translation Service Co. in accordance with the translation used on the company s website, at 13 Translators note: the original text reads 查封 ( seal up ). According to Article 9 of the Provisions of the Supreme People s Court on the Sealing up, Distrainment, and Freezing of Properties by People s Courts in Civil Enforcement, when a people s court seals up an immovable property, it should attach a strip of sealing or issue an announcement and may obtain and keep relevant certificates of the property rights. See 最高人民法院关于人民法院民事执行中查封 扣押 冻结财产的规定 (Provisions of the Supreme People s Court on the Sealing up, Distrainment, and Freezing of Properties by People s Courts in Civil Enforcement), issued on Nov. 4, 2004, effective as of Jan. 1, 2005, amended on Dec. 16, 2008, effective as of Dec. 31, 2008, available at 14 Translators note: as the arbitral award in this case was rendered on September 18, 2006, Retech AG likely referred to Article 219 of the then effective Civil Procedure Law, which essentially provided that the time limit for applying for enforcement was one year, if both or one of the parties were citizens, and six months, if both parties were legal persons or other organizations. In addition, the provision stated that the aforementioned periods were calculated from the last day of the performance period specified in the legal document. See 中华人民共和国民事诉讼法 (Civil Procedure Law of the People s Republic of China), adopted on and effective as of Apr. 9, 1991, available at Article 219 was amended and renumbered as Article 215 in 2007, which was further renumbered as Article 239 in The amended provision essentially provides that the time limit for applying for enforcement is two years. See 中华人民共和国民事诉讼法 (Civil Procedure Law of the People s Republic of China), adopted on and effective as of Apr. 9, 1991, amended on Oct. 28, 2007, effective as of Apr. 1, 2008, available at and 中华人民共和国民事诉讼法 (Civil Procedure Law of the People s Republic of China), adopted on and effective as of Apr. 9, 1991, amended two times, most recently on Aug. 31, 2012, effective as of Jan. 1, 2013, available at

5 5 Results of the Adjudication On November 17, 2008, the No. 1 Intermediate Court of Shanghai Municipality rendered the (2008) Hu Yi Zhong Zhi Zi No Civil Ruling, rejecting Retech AG s objection. After the ruling was served, Retech AG applied to the Higher People s Court of Shanghai Municipality for enforcement reconsideration. On December 20, 2011, the Higher People s Court of Shanghai Municipality rendered the (2009) Hu Gao Zhi Fu Yi Zi No. 2 Enforcement Ruling, rejecting the application for reconsideration. Reasons for the Adjudication In the effective ruling, the court opined: 15 the focal points of the dispute in this case were, [first,] whether PRC courts had jurisdiction over the case and, [second,] from which time the enforcement application period should begin to be calculated. 1. On the issue [concerning] the enforcement jurisdiction of PRC courts According to the [relevant] provision of the Civil Procedure Law, 16 where a foreignrelated arbitral institution in China renders an arbitral award, if the party subject to enforcement or its property is not [located] within the territory of the People s Republic of China, the [enforcing] party should directly apply to the foreign court with jurisdiction for the recognition and enforcement [of the arbitral award]. Given that when the arbitral award for this case became effective, neither Retech AG, the party subject to enforcement, nor its property were [located] within the territory of China, the people s courts did not have jurisdiction over the enforcement of the award when it became effective. On July 30, 2008, Jwell Company discovered that Retech AG, the party subject to enforcement, had property on exhibition in Shanghai Municipality. At this point, the fact that Retech AG, the party against whom the enforcement application was filed, had property [located] within the territory of the People s Republic of China caused PRC courts to have enforcement jurisdiction over this case. Based on the fact that the party subject to enforcement did not perform its obligations under the arbitral award, [Jwell Company,] the enforcement applicant, exercised its right to request civil compulsory enforcement and applied to the Shanghai No. 1 Intermediate Court for enforcement in accordance with the provision of the Civil Procedure 15 Translators note: the Chinese text does not specify which court opined. Given the context, this should be the Higher People s Court of Shanghai Municipality. 16 Translators note: it is not clear whether the court was referring to the original or the 2007 version of the Civil Procedure Law. The provision, which was numbered as Article 266 (original version) and Article 264 (amended in 2007), is currently numbered as Article 280. The content of the provision was not amended. See 中华人民共和国民事诉讼法 (Civil Procedure Law of the People s Republic of China), supra note 14.

6 6 Law, 17 [which provides that] where one party does not perform [his obligations under] an arbitral award, the opposing party may apply to the intermediate people s court of the place where the entity against whom the application is filed is domiciled or where [that entity s] property is located for enforcement [of the award]. This was in compliance with the requirements of China s Civil Procedure Law that a people s court should meet to [exercise] jurisdiction over a case concerning the enforcement of a foreign-related arbitral award, [and accordingly,] the Shanghai No. 1 Intermediate Court had jurisdiction over the enforcement application. [The court] did consider the principle [underlying] the provisions of the New York Convention, which is that as long as an arbitral award complies with the basic conditions set forth in the convention, [it] may be recognized and enforced in any contracting state. The objective of the New York Convention is to facilitate the smooth enforcement of arbitral awards in each contracting state. Therefore, it does not bar parties from applying to multiple member states of the convention for the recognition and enforcement of related arbitral awards. The party subject to enforcement may raise a defense by adducing evidence [proving] that [it] has already performed [its] obligations under the arbitral award and submit to the court of the place of enforcement evidence that it has already cleared [its] debt. This can immediately eliminate the problem of a party subject to enforcement being forced to perform more than once or otherwise over-perform [its obligations under an arbitral award]. Therefore, the People s Court s exercise of [its] enforcement jurisdiction over this case complied with the spirit of the provisions in the New York Convention, and did not cause the problem that the party subject to enforcement would be [subject to] repeated performance of its obligations under an effective arbitral award. 2. On the issue [concerning the time] from which the enforcement application period in this case [should be] calculated According to Article 215 of the Civil Procedure Law (amended in 2007), the period [in which] to apply for enforcement is two years. The period provided in the aforementioned paragraph shall be calculated from the last day of the performance period specified in the legal document; where the legal document provides for performance in stages, [the enforcement application period] shall be calculated from the last day of each performance period as specified; where the legal document does not provide for a performance period, [the enforcement application period] shall be calculated from the date on which the legal document comes into effect. 18 The laws of China regarding the calculation of the enforcement application period are provisions that target general situations where the party subject to enforcement or his property is [located] within the territory of China when an effective legal document is rendered. The 17 Translators note: it is not clear whether the court was referring to the original or the 2007 version of the Civil Procedure Law. The provision, which was numbered as Article 259 (original version) and Article 257 (amended in 2007), is currently numbered as Article 273. The content of the provision was not amended. See id. 18 Article 215 was renumbered as Article 239 in See supra note 14.

7 7 specific situation in this case was one where at the time the arbitral award became effective, PRC courts did not have enforcement jurisdiction over the case. The party applied, in accordance with law, to a foreign court for the recognition and enforcement of the award, but [the award] was not enforced. [Therefore, in this case] there was no issue of [the enforcement applicant being] idle in exercising [its] right to apply for enforcement. The party subject to enforcement continuously refused to perform [its] legal obligations as confirmed by the award. After the enforcement applicant discovered that the party subject to enforcement had property [located] within the territory of China, [it] immediately applied to a people s court for enforcement. Considering that under this type of circumstance there is a relatively large [degree] of uncertainty as to when a foreign party subject to enforcement or his property will again fall within the territory of China, [the court] should, therefore, reasonably determine the point from which the application enforcement period [should be] calculated to fairly protect the legal rights and interests of the enforcement applicant. After a creditor obtains an effective legal document which [requires] payment, if the debtor does not perform the obligations as confirmed by the effective document, the creditor may apply for the court s exercise of [its] authority of compulsory enforcement to realize his right to request [enforcement] as provided under substantive law. This right is the [so-called] right to request civil compulsory enforcement. The existence of the right to request civil compulsory enforcement depends on substantive rights, its acquisition depends on the basis of enforcement, [and] its exercise depends on the enforcement jurisdiction. Enforcement jurisdiction is the basis and premise for the right to request civil compulsory enforcement. In judicial practice, the enforcement jurisdiction of a people s court and the right of a party to request civil compulsory enforcement cannot be abstract or uncertain, but should rather be specific and operational. When Retech AG, the obligor, did not perform [its] obligations as confirmed by the award, Jwell Company, the obligee, 19 thereupon had the right to request civil compulsory enforcement. However, according to the provision of the Civil Procedure Law, 20 with respect to an application for enforcement of an arbitral award rendered by a foreign-related arbitral institution, if the party subject to enforcement or its property is not [located] within the territory of the People s Republic of China, the [enforcing] party should directly apply to the foreign court with jurisdiction for the recognition and enforcement [of the arbitral award]. At this point, because neither the party subject to enforcement nor its property were [located] within the territory of China, PRC courts did not have enforcement jurisdiction over that case. Enforcement applicant Jwell Company was not subjectively unwilling to exercise its rights or idle in [doing so]. Rather, it was because objectively the dispute itself did not give rise to [any] connecting point [through which] the people s court [could exercise] enforcement jurisdiction [that Jwell Company] was unable to apply to the people s court for enforcement. 19 Translators note: the terms 义务人 ( obligor ) and 权利人 ( obligee ) are used here, in contrast to the terms 债务人 ( debtor ) and 债权人 ( creditor ) as used in the general statement of law given in the preceding paragraph. There is no clear reason for this switch. 20 Translators note: see supra note 16 and accompanying text.

8 8 After accepting an application for compulsory enforcement, a people s court should review the application [to determine] whether [it] was made within the limitation period provided by the law. Having enforcement jurisdiction is a necessary prerequisite for a people s court to review the enforcement applicant s related application. Therefore, an enforcement applicant s time limit [within which he must] apply for enforcement should be calculated from the date on which [such] enforcement jurisdiction is confirmed, that is, the date on which the property available for enforcement [belonging to] the party subject to enforcement is discovered.