The Arbitration Clause in the Administrative Agreement Shall Be Void, Subject to Exceptions

On the morning of December 10, 2019, the Supreme People’s Court held a press conference to promulgate the Provisions of the Supreme People’s Court on Several Issues Concerning the Trial of Administrative Agreement Cases (the “Provisions”). The Provisions has 29 articles in total. It is stated in the Provisions that when an administrative litigation is filed due to certain Administrative Agreements, the people’s court shall process the litigation in accordance with the law. The Administrative Agreements could be government franchise agreement, compensation agreement for expropriation and requisition of land and houses, right of use transfer agreement on state-owned natural resources including mining rights, leasing and sales agreement of government-funded indemnificatory housing, and the public-private partnership agreement in conformity with the Provisions, etc. Article 26 of the Provisions, which determines the effectiveness of relevant arbitration clauses, has provided that where an administrative agreement stipulates an arbitration clause, the people’s court shall find such clause as invalid, unless otherwise provided by laws, administrative regulations or international treaties concluded or acceded to by China.

At present, it is still argued in practice that whether administrative agreements are arbitrable. Henceforth, to judge whether an arbitration clause is valid in an Administrative Agreement, or whether the agreed arbitration method shall be used to resolve the relative administrative dispute, Article 26 of the Provisions should be referred to at first.

Beijing No. 4 Intermediate People’s Court issued Guidelines on the Trying Cases of Arbitration-Related Judicial Review

On December 10, 2019, Beijing No. 4 Intermediate People’s Court held a press conference to brief their judicial review of arbitration trials in the past five years, publicly released the Guidelines on the Trying Cases of Arbitration-Related Judicial Review and representative cases. Also, the Court, together with the Arbitration Research Institute of the China University of Political Science and Law, jointly released the Study Report on Big Data Cases Involving Judicial Review of Arbitration.

At the press conference, Yuan Yuchi, vice president of the No. 4 Intermediate People’s Court of Beijing, briefed basic situation regarding to trying cases involving the judicial review of arbitration over the past five years. From January 2015 to October 2019, Beijing No. 4 Intermediate People’s Court has accepted 1278 cases involving judicial review of arbitration, including 401 applications for determination of the validity of arbitration agreements and 877 applications for revocation of arbitration agreements. There were 242 foreign-related arbitration review cases, including 64 cases involving determination of the validity of arbitration agreements and 178 cases involving revocation of arbitration awards. Among all the cases, 4 cases were re-arbitrated, 3 cases were confirmed the invalidity of the arbitration agreement, and 3 cases were dismissed. Therefore, the proportion of cases supporting the original arbitration awards has reached 99.2%. Yuan said that in the past five years, Beijing No. 4 Intermediate People’s Court has studied and formulated a series of institutional measures to regulate the exercise of the right of judicial review of arbitration, so as to guarantee and promote the improvement of the credibility of arbitration and provide high-quality judicial guarantee for the development of the arbitration industry.

HKIAC Published Its Practices in Applying the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region

In light of the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (“Arrangement”), the Hong Kong International Arbitration Center (“HKIAC”) published its relevant practices on handling applications for arbitration preservation under the Arrangement this month. The contents thereof cover the following aspects: the way of submitting applications to the people’s courts in the Mainland; how to request the HKIAC to issue the Letter of Certification for accepted cases; and the way of issuing the Letter of Certification by the HKIAC.

At the same time, the HKIAC has published following documents on its official website including, but not limited to the full Chinese and English translations of the Arrangement, relevant Hong Kong and Mainland Chinese laws, and links to publications on the Arrangement, to be reviewed by the parties.

The Supreme People’s Court Officially Launched the Unified Platform for Identification of Foreign Law

On the morning of November 29, 2019, the Supreme People’s Court launched its platform for the identification of foreign laws on the website of international commercial tribunals (http://cicc.court.gov.cn), meaning that a unified platform for the ascertainment of foreign laws has been officially established for the courts nationwide. 

In order to further improve the platform, the Supreme People’s Court signed the Cooperation Framework Agreement with five institutions, which are the China-ASEAN Legal Research Center, Benchmark Chambers International & Benchmark International Mediation Center, the Foreign Law Ascertainment and Research Center of CUPL, ECUPL Center for Proof of Foreign Law and Wuhan University Foreign Law Ascertainment Center.

The foreign law identification platform of the Supreme People’s Court is open to people’s courts at all levels, parties and attorneys of litigations, enterprises of cross-border trade investment or cross-border disputes where foreign laws need to be identified, and legislative organs, administrative organs, arbitration agencies or other entities in need of understanding foreign laws.

Hong Kong High Court:

The Limitation of Action of Hong Kong Shall Not Be Interrupted Due to The Litigation, Arbitration And Execution In The Mainland

Relevant Provision:

Article 4 (1) (c) of the Limitation Ordinance provides, “Limitation of actions of contract and tort, and certain other actions, (1) the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say: … (c) actions to enforce an award.”

Claimant Wang Peiji and respondent Wei Zhiyong filed an arbitration application with the Guangzhou Arbitration Commission for the loan dispute, requesting the respondent to repay the loans. After the arbitration award was made in April 2009, the claimant applied for mandatory enforcement of the arbitration award. respondent Wei Zhiyong’s property in the mainland China has been fully enforced, but he still has properties in Hong Kong eligible to be enforced. As a result, the claimant Wang Peiji applied to the Hong Kong High Court for enforcement in April 2019. The core dispute of the case was that whether the application submitted to the Hong Kong High Court has passed the limitation period.

Court’s View:

The court rejected the enforcement of the original arbitration award for the following reasons:

a)In accordance with the laws of Hong Kong, the limitation of action shall be from June 2009 (i.e. the expiry of the time limit for payment determined by the arbitral award) to June 2015, and the limitation of action for the execution of this case has expired;

b)Neither Hong Kong law, nor the arbitration award arrangements in mainland or Hong Kong, has provided for the suspension of limitation period in Hong Kong during the application for enforcement in the Mainland was filed;

c)The application has lapsed the statute of limitations and shall be dismissed.

The Shangqiu Intermediate People’s Court:

Operation of the Internet Financial Services Platform Beyond Its Scope of Business, the Court Shall Not Enforce the Arbitral Award Between the Lending Parties

Relevant Provision:

Article 237(3) of the Civil Procedure Law of the People’s Republic of China provides, “Where the People’s Court rules that enforcement of the arbitral award is against the public interest, a ruling of non-enforcement shall be made.” 

Article 19 of the Law of the People’s Republic of China on Banking Regulation provides, “No entity or individual may establish a financial institution in the banking industry or engage in the business activities of financial institutions in the banking industry without the approval of the banking regulatory authority of the State Council.”

On November 26, 2015, the respondent Zhao Xiuying signed a Loan Agreement with the claimant Liang Xiaowei, via Shoushan Asset Management (Shanghai) Co., Ltd. (the Internet Financial Services Platform). The parties agreed on the following matters: the amount of loan was CNY 56,943.92, the repayment term was 24 months, starting from December 30, 2015 and ending on November 30, 2017. Since the respondent failed to repay the debt on schedule, the claimant applied arbitration to the Beihai Arbitration Commission in January 2019, in accordance with arbitration clauses in the signed Loan Agreement. After the Beihai Arbitration Commission rendered an arbitral award in March 2019, the claimant Liang Xiaowei applied to the Shangqiu Intermediate People’s Court for enforcement. The core dispute over the application for enforcement [(2019) Yu 14 Zhi No.483] was that whether the original arbitration award shall be enforced.

Court’s View:

The court rejected the enforcement of the original arbitration award for the following reasons:

a)P2P lending information intermediaries (Internet Financial Services Platform) shall neither raise funds illegally nor damage national interests and public interests;

b)Shoushan Asset Management (Shanghai) Co., Ltd. has engaged in business beyond its business scope, and has engaged in internet lending information intermediary business without a license. These behaviors violated compulsory national law regulations and disturbed the order of internet finance administration;

c)The enforcement of people’s courts based on such arbitration awards would give wrong guidance to market players, which may legalise illegal financial business and damage public interests.

Meanwhile, this case shows that the Chinese court is reluctant to recognise the validity of the financing activities conducted through illegal Internet financial platforms, the arbitration clauses in the financing contracts, and the arbitration triggered by such clauses.