Arbitrating in China – What Interim Measures are Available from the Courts?

• By Stuart Dutson, Eversheds

The recent revisions to the Chinese Civil Procedure Law (the “CPL”) made some significant amendments to the arbitration law in China. In particular, the new CPL for the first time provides for pre-arbitration preservation measures to be available from the Chinese courts. The revisions will come into force on 1 January 2013.

Under the existing CPL, only parties to potential court litigation are entitled to apply directly to the Chinese courts prior to the commencement of litigation proceedings for pre-litigation preservation of assets (Articles 93). If, however, the parties have agreed in their contract to resolve any disputes arising out of the transaction by arbitration, under the current regime neither of them will be able to apply for conservatory measures until after they have commenced the arbitration. This means that they would be likely to have missed the best opportunity for imposing conservative measures on the evidence or assets which are in the possession of the opposing side. New Articles 81 and 101 of the CPL 2012, when they take effect next year, will fill in this major gap by providing parties to potential arbitration proceedings with the opportunity to apply directly to the Chinese courts (either on an ex parte or on notice basis) for pre-arbitration preservation of evidence and preservation of assets respectively.

These new articles will therefore considerably alleviate what has been criticised as a significant disadvantage of arbitration in China as compared with court litigation, i.e. the lack of effective interim measures as a safeguard to any final arbitral awards. The effectiveness of any available interim measures is, therefore, likely to become less important when parties are considering whether to select arbitration as the dispute resolution method in their China-related contracts.

Although introducing the pre-arbitration preservation measures will provide a solution to one of the major problems surrounding the issue of interim measures for arbitration in China, there remain a few unresolved concerns which are worth noting.

First, under the current regime, parties to arbitration are not able to apply directly to the court for a conservatory measure both beforeand during arbitral proceedings. Although the new law addresses the former, allowing pre-arbitration applications made directly to the court, position during arbitration proceedings is unchanged. According to Article 256 of the current CPL (also Articles 28, 46 and 68 of the Chinese Arbitration Law), parties to arbitration will have to initially submit an application for preservation measures to the relevant arbitral institution, such as the China International Economic and Trade Arbitration Commission (“CIETAC”), and it is that institution who would then forward this application onto the competent court. The court may finally make an order if it considers it appropriate.

Such a “two step” approach to conservatory measures where the arbitral institution acts as a middle-man may not achieve the desired effect in practice. Conservatory measures, by their nature, usually require swift action. Although most applications for conservative measures in China are made on an ex parte basis, the current application process inevitably takes more time than a direct application to the court. This may allow the opposing side an opportunity to hide, transfer or dissipate the evidence or assets concerned, before a court order is obtained. This outdated practice has long been subject to criticism in the Chinese arbitration community.

While the new provisions in respect of pre-arbitration measures will greatly alleviate the issue (this will no doubt become a further advantage of taking pre-action conservatory measures for arbitration in China), this “two step” relay approach will still be applicable to any applications for conservatory measures made during arbitral proceedings according to new Article 272 of the CPL (also Articles 28, 46 and 68 of the Chinese Arbitration Law). This rather awkward procedure is mirrored in Article 21 (1) of the CIETAC rules 2012 which states:

“Where a party applies for conservatory measures pursuant to the laws of the People’s Republic of China, the secretariat of CIETAC shall forward the party’s application to the competent court designated by that party in accordance with the law.”

Therefore, an application for conservatory measures in relation to arbitral proceedings in China will be subject to different procedural requirements depending on whether the application is made during or prior to arbitral proceedings. Such a distinction may result in further complication of the issue of interim measures. In a potential CIETAC arbitration, therefore, in order to avoid triggering the application of the procedural rules set out in Article 21 (1) of the CIETAC Rules 2012 and to achieve the best possible result, parties are well advised to make any application for conservatory measuresbefore filing a request for arbitration to CIETAC.

Secondly, it is questionable whether the pre-arbitration conservatory measures provided for in Articles 81 and 101 would be equally applicable to an application made in advance of a prospective “foreign” arbitration to be held outside China and administered by a non-Chinese institution. With some optimism, one may expect that the pre-arbitration conservatory measures may also benefit parties to potential offshore arbitrations. This view draws support from the very similar procedures provided for under the Chinese Maritime Special Procedure Law where pre-arbitration conservatory measures have been applied by Chinese maritime courts to international arbitration for many years.

However maritime matters are treated differently in China as a special area of law and are dealt with by specialised maritime courts and judges who are prone to follow international practice based on the Special Procedure Law. By contrast, the general pre-arbitration conservatory measures will be dealt with before ordinary civil courts where judges tend to adhere to the traditional interpretation of the law and procedure. In this regard, it is notable that Chinese courts have previously shown their reluctance to enforce interim measures ordered by foreign arbitral tribunals (Hemofarm DD, et al. v. Jinan Yongning Pharmaceutical Co. Ltd. [2008] Min Si Ta Zi No. 11). They have also previously refused to issue interim measures for the purpose of enforcing an foreign arbitral award, on the basis that the interim measures provided under Chinese law were only available to domestic arbitrations. Furthermore, foreign related arbitrations are dealt with in the CPL under a separate section which only provides for preservation of assets made during arbitral proceedings, as discussed above in respect to new Article 272.

One would not therefore be surprised to see Chinese courts being prepared only to narrowly apply the new pre-arbitration conservatory measures to applications in connection with domestic arbitrations. Even if they were willing to grant an order for interim measures, the court may subsequently refuse to recognise any arbitral proceedings that are administered by a foreign arbitral institution, meaning that such an interim order would be likely to be revoked by the court upon a challenge from the other side. That said, we must wait for this issue to be clarified in judicial practice or through a judicial interpretation from the Chinese Supreme People’s Court in the future.

Finally, Article 100 of the revised CPL will introduce some new interim measures into the general civil procedure in China. Under the existing regime, Chinese law only allows three types of interim measures: preservation of evidence, preservation of assets and advance execution. Therefore, Chinese courts are not empowered to grant other interim measures having an effect of compelling or prohibiting a party to perform certain actions (arguably advance execution may include court prohibitive orders, but its scope of application is very limited and unclear (Art 106 of the new CPL)), which courts in many other jurisdictions have the power to order. The new Article 100 will rectify this major omission in the CPL and explicitly provide Chinese courts with the power to order, upon the request of a party, specific performance or injunctive measures.

This reform is no doubt a significant step forward in Chinese civil procedure. However, on the face of the new Article 100, no express reference is made to arbitration which indicates that these new interim measures will not be available to parties to arbitration. This will unfortunately create a further disadvantage to arbitration in China, and will become an important factor to consider in deciding whether to choose to arbitrate or litigate any China-related disputes.

Through the revisions to the CPL, Chinese regulators have once again shown their commitment to putting in place a pro-arbitration legal regime in China. The reform made in respect of arbitral interim measures will considerably facilitate the resolution of disputes by arbitration in China and make it a more attractive dispute resolution method. However, these revisions do not yet go far enough and many issues remain to be resolved. Compared with the regimes in other major jurisdictions, it may be fair to say that the reform of the Chinese arbitral regime still has a long way to go; but this is nonetheless an encouraging first step.

Stuart Dutson, Neil Newing and Yang Zhao, Eversheds LLP

Fonte:http://kluwerarbitrationblog.com/blog/2012/11/26/arbitrating-in-china-what-interim-measures-are-available-from-the-courts/

Dubai Court of Cassation confirms enforcement of foreign awards under New York Convention: The end of a beginning – Inshallah!

• By Gordon Blanke, Habib Al Mulla & Co.

In a recent ruling of 18 October 2012, the Dubai Court of Cassation, the highest court in the Emirate of Dubai, against whose judgments lies no further appeal, confirmed the enforcement of a trilogy of DIFC-LCIA awards – one on liability and two on costs (all forming part of the same reference) – rendered by a Sole Arbitrator in London under the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards (see Appeal for Cassation No. 132/2012 Commercial – Airmec Dubai, LLC v. Maxtel International, LLC). As a result, Airmec Dubai’s attempts at setting aside the awards in its capacity as award debtor before the Dubai Court of Appeal finally failed.  As I reported in a previous post on the Blog, “despite the positive outlook provided by more recent UAE supervisory court case law, there remains some measure of uncertainty in the UAE judiciary’s proper commitment to the terms of the New York Convention” in the enforcement of foreign awards. The Dubai Courts’ take on the Maxtel cases at first instance (see Action No. 268/2010 Commercial Full Jurisdiction, ruling of the Dubai Court of First Instance of 12 January 2011) and on appeal to the Court of Cassation (see Appeal No. 126/2011 Commercial, ruling of the Dubai Court of Cassation of 22^nd February 2012) in the wake of Fujairah Court of First Instance’s ruling of 27 April 2010 (see Case No. 35/2010, ruling of the Fujairah Federal Court of First Instance), the first UAE court judgment ever to enforce a New York Convention award by reference to the Convention, inspired a modicum of hope that the UAE courts and in particular the Dubai judiciary would at long last own up to their enforcement obligations under the New York Convention, of which the UAE has been a member since 2006 (see Federal Decree No. 43 of 13 June 2006), and discard antiquated practices of enforcement of foreign awards by reference to the formalistic requirements of Article 235 read together with Article 236 of the UAE Civil Procedures Code.

In brief, in its ruling, the Dubai Court of Cassation found that the various reasons adduced by Airmec Dubai as grounds for the nullification of the awards – including in particular a combination of grounds based on Article 216 of the UAE Civil Transactions Code, as detailed in our previous blog – were of no avail given that Airmec Dubai had failed to meet the requisite burden of proof under the prevailing provisions of UAE law and the New York Convention itself. Instead, the Court of Cassation confirmed that it had no reason to doubt the findings of the previous courts on the subject-matter, no new evidence having been presented for consideration before it. More importantly for present purposes, the Dubai Court of Cassation was explicit in rejecting the application of the domestic ratification process in the terms of Article 215 of the UAE Civil Procedures Code and made express reference to Article 212(4) of the Code, according to which an arbitral award issued outside the UAE “shall be subject to the rules applicable to awards issued in a foreign country”. The Court of Cassation continued its reasoning in the following terms:

            ‘… it is … established pursuant to Article 238 of the UAE Civil Procedures Code that the international conventions that come into full force and effect in the United Arab Emirates by ratification shall be construed as internal law applicable in the State and as such, the judge shall be required to apply the provisions thereof to the disputes brought before him concerning the execution of judgments made by foreign courts and foreign arbitral awards. As it is established in Federal Decree No. 43 of 2006 … that the [UAE] approved to accede to the New York Convention …, thus its provisions shall be applicable to the dispute.’ (author’s translation)

Following explicit reference to Articles I through to V of the New York Convention, which are set out in full text in their corresponding counterparts in Federal Decree No. 43 of 2006, the Dubai Court of Cassation quoted with approval the following passages of the ruling of the Dubai Court of Appeal under scrutiny in toto:

          ‘ … whereas on the subject-matter of the original action, the arbitral awards which have been issued by the Sole Arbitrator are required to be recognized and enforced … are two foreign awards issued outside the [UAE]  … in London, pursuant New York Convention  … , which was ratified by the [UAE] by virtue of Federal Decree No. 43 of 2006 … whereas the court’s jurisdiction over the foreign arbitral awards shall, upon considering the request to recognize and enforce the same, be limited to ensure that such award does not involve breach of the Federal Decree under which the State had acceded to the New York Convention …, through complying with the award’s legal requirements in terms of form and subject-matter as dictated by Articles 4 and 5 of the said Decree [equivalent to Articles IV and V of the New York Convention]. Whereas the arbitral awards – subject-matter of this action – are duly authenticated, and since the original defendant (petitioner) failed to submit to the court evidence that contradicts and precludes the recognition of the arbitral awards – subject-matter of this action – as per the cases set forth in Article 5 of the aforesaid Decree … the arbitral awards – subject-matter of this action – have fulfilled the conditions set forth in the Decree and may not be undermined by the argument raised by the original plaintiff to invalidate the same, since it is established in law that the arbitration proceedings are deemed to have been observed, and any party alleging that the same are violated shall be required to provide evidence that what it is alleging is true, while due regard shall be given, in such a case, to the information recorded in the arbitral award. As such, the court hereby rules in favour of the plaintiff in the original action (respondent) to recognize the arbitral awards subject-matter of this action. … ’(author’s translation)

The Dubai Court of Cassation’s ruling now clearly marks the end of a beginning of Dubai supervisory court’s previously fledgling and uncertain enforcement practice of foreign awards under the New York Convention. Even though the Dubai Court of Cassation’s ruling in Airmec does not form binding precedent (remember that the UAE is a civil law jurisdiction, to which rules of stare decisis are alien), it will have persuasive force in the lower courts, in particular the Dubai courts of first instance and the courts of appeal. It can be expected that award creditors in other Emirates will also seek to rely on the Dubai Court’s precedents to convince the supervisory courts there to follow suit (in particular in light of corresponding enforcement obligations of supervisory courts in other Emirates in their capacity as emanations of the UAE under the New York Convention). It will be interesting to see how the case law on enforcement of foreign awards under the New York Convention will further develop at the hands of the UAE courts in the near future: Inshallah!

Fonte: http://kluwerarbitrationblog.com/blog/2012/11/21/dubai-court-of-cassation-confirms-enforcement-of-foreign-awards-under-new-york-convention-the-end-of-a-beginning-inshallah/

Recognition of international arbitration in Ukraine in figures

By Konstantin Pilkov, CAI & Lenard

Arbitration practitioners often put Ukraine below the average ranking of countries in terms of recognition of arbitration. Ukraine’s image of a not entirely arbitration-friendly jurisdiction is “promoted” with common thought about problematic enforcement of arbitral awards in Ukraine.

In well-known case “Regent Company v. Ukraine”, the European Court of Human Rights (in its decision of April 3, 2008) found violations by Ukraine of Part 1 of Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms and Article 1 of the First Protocol due to the failure of the Ukrainian state authorities to enforce an arbitral award. There have been also Ukrainian court decisions where courts narrowed the jurisdiction of the arbitration, pointing out that the law does not grant any international commercial arbitration court the power to recognize agreements void. We hope that sort of decisions would never become a common judicial practice.

However, in general Ukrainian legal system demonstrated significant progress in adherence to the arbitration-friendly approach. That progress had been measured during the study resulted in the research paper “Ukraine. Arbitration-friendly jurisdiction: statistical report, 2011-2012”. The paper has been prepared by the Arbitration team of Cai & Lenard Law firm and issued in English, Ukrainian and Russian. It was the first statistical report with the focus on recognition of international arbitration in Ukraine ever made.

In general, as shown by the practice analyzed in the study, Ukrainian courts (they are the bodies authorized to decide on enforcement of arbitral awards) do not create barriers for arbitration agreements to be recognized and arbitral awards to be recognized and enforced.

Despite the dominance of the share of the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry in the number of cases involving Ukrainian entities, local courts also deal with the awards rendered by other arbitration institutions or in ad hoc arbitration.

Ukrainian local common courts rarely refuse to grant the leave for enforcement of arbitral award (about 10% of the requests in 2011 and 6% of the requests in 2012). Compared to the refusal of the enforcement of arbitral awards, more common are situations in which a request for enforcement is left without consideration because required documents have not been provided, or because of the provision of documents which do not comply with the law or other procedural mistakes.

Usually Ukrainian courts do not interfere in arbitration. In 2011 – 2012, some claims were filed to Ukrainian courts in order to compel arbitration institutions to resume arbitral proceedings. The vast majority of these claims have been submitted due to the difficult situation for the parties, in whose favor awards were rendered, when the awards were set aside or courts refused the enforcement. Arbitral tribunals refuse to restore proceedings as the restoration is not envisaged by the rules. The courts also believe that they have no legal grounds for interference with arbitration.

On the other hand, Ukrainian common courts are not inclined to help in securing the enforcement of arbitral awards. In the period covered by the study, there was not any court decision on interim measures found (either before or during arbitral proceedings or pursuant to an order of an arbitral tribunal on interim measures, or at a stage of enforcement).

Another important aspect of arbitration-friendliness of a particular jurisdiction is the attitude to setting aside arbitral awards. It has to be said that the quantity of applications for setting aside arbitral awards considered by courts is insignificant if we compare it to the quantity of the awards of the ICAC at the UCCI left for enforcement (1 arbitral award set aside per 49 awards left for enforcement). Ukrainian courts generally refuse to set aside awards, which are challenged on grounds of violation of the public policy, and inconsistencies of arbitration proceedings with an arbitration agreement (improper notification of the party). However, in most cases such claims were not met. Setting aside an arbitral award occurs in exceptional cases. Even if a local court sets aside an award the court of appeal carefully reviews the case and usually cancels the decision on setting aside the award.

Thus, Ukraine significantly developed its attitude to the enforcement of arbitral awards during recent years, though the approach of economic courts (these courts consider commercial cases and often take formalistic approach in matters related to recognition of arbitration agreements) still remains rather unfriendly to arbitration.

While preparing the report, we did not tend to provide any guidance or recommendations to arbitration practitioners. We believe our colleagues are aware of the risks and specific aspects of the enforcement procedure in Ukraine. The data presented in the report may only help in assessment of the materiality of those risks.

Fonte:http://kluwerarbitrationblog.com/blog/2012/11/06/recognition-of-international-arbitration-in-ukraine-in-figures/