Preparatory Office of the International Organization for Mediation Established in Hong Kong Special Administrative Region
On February 16, 2023, the inauguration ceremony of the Preparatory Office of the International Organization for Mediation (hereinafter referred to as "IOMed") was held in Hong Kong Special Administrative Region (hereinafter referred to as "HKSAR") and was attended virtually and on-site. Wang Yi, a member of the Political Bureau of the Communist Party of China Central Committee and Chinese State Councilor, sent a congratulatory letter to the inauguration ceremony of the office, while Chief Executive of HKSAR, Li Jiachao, Chinese Foreign Minister Qin Gang and ministerial officials of the signatories to the Joint Statement on the Establishment of the IOMed delivered speeches via video in succession.
The Preparatory Office of the IOMed is an organization established in accordance with the Joint Statement on the Establishment of the IOMed signed by China and many other relevant countries in 2022 to organize intergovernmental negotiations on an international convention for the establishment of IOMed, and other matters, with a view to establishing an international intergovernmental organization specialising in the provision of mediation services. The location of the Preparatory Office of the IOMed in HKSAR is mainly due to its advantageous geographical location and convenient business environment, especially the mature legal system of HKSAR, which is unique in providing legal services, including mediation, and is conducive to the preparation, future operation and promotion of the IOMed. The establishment of the Preparatory Office marks the substantive creation stage of the IOMed.
About 200 representatives from the Ministry of Foreign Affairs, the Hong Kong and Macao Affairs Office of the State Council, the Liaison Office of the Central People's Government in HKSAR, the Department of Justice of the HKSAR Government, the Legislative Council of the HKSAR, legal organizations in HKSAR and signatories to the Joint Declaration attended the inauguration ceremony.
Timor-Leste Accedes to Conventions on the Recognition and Enforcement of Foreign Arbitral Awards
According to the official website of the United Nations, Timor-Leste acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) on January 17, 2023, becoming the 172nd State Party to the Convention. The Convention will enter into force for Timor-Leste on April 17, 2023.
The New York Convention, the most important convention in the field of international commercial arbitration, regulates the validity of arbitration agreements and the recognition and enforcement of foreign arbitral awards, and is the legal basis and important guarantee that national arbitral awards can be recognized and enforced abroad.
International Arbitration Institute at Queen Mary, University of London Released the Report of the International Arbitration Survey 2022
On January 24, 2023, the International Arbitration Institute at Queen Mary, University of London, in partnership with a firm, released the Report of the International Arbitration Survey 2022: The Future of International Energy Arbitration. The survey was launched in July 2022. The survey participants consisted of arbitration users, practitioners, arbitrators, experts, intermediaries, arbitration institutions and academics from a variety of common law and civil law jurisdictions. Participants were asked to respond to questions around two themes: Theme 1 is the prevailing drivers of disputes in the short to medium term; Theme 2 is how international arbitration can adapt to this environment to best serve the needs of the energy sector. The main points of the report are as follows:
1. The main issue facing the energy sector is the fluctuating cost of the necessary inputs (raw material costs and energy unit prices) to develop, operate and maintain energy projects, leading to commercial uncertainty and more disputes;
2. The impact of international sanctions on the ability to perform pre-existing contracts would cause a rise in force majeure and hardship claims, while suspensions and terminations have been and will continue to be on the increase due to sanctions;
Most energy transition disputes will arise in the areas of "oil and gas (and other fossil fuels)" and
1. "generation, transmission and supply of electricity", with regulatory changes and infrastructure changes resulting from the energy transition most likely to give rise to disputes;
2. Arbitration is seen as the most suitable forum for resolving energy disputes;
3. London is the most popular seat for arbitration, with Singapore in second seat and more popular in Asia;
4. Energy users like arbitration because they see it as neutral, enforceable and benefitting from the technical expertise of arbitrators, but they want to see innovation driving more efficiency;
5. The widespread adoption of virtual hearings and meetings brought on by the COVID-19 pandemic has changed the nature of international arbitration practice for the foreseeable future, and arguably allows for more diversified and global participation in international arbitration;
6. There will be an increase in third party funding of international energy disputes, citing large amounts in dispute, increasing turmoil in energy markets leading to parties needing funds/cashflow, and the lucrative nature of these disputes;
Avoiding disputes being resolved by the local courts is seen as a main benefit of investor-State arbitration, the modernisation of the Energy Charter Treaty is the major development most likely to influence their view on the suitability of investor-State arbitration for energy disputes.
Beijing Fourth Intermediate People's Court:
The "【Beijing】Arbitration Court" can Refer to the "Beijing Arbitration Commission", Therefore the Arbitration Clause is Valid
An arbitration agreement shall include arbitral clauses stipulated in the contract and other written agreements which request arbitration to be made prior to or following the occurrence of a dispute.
An arbitration agreement shall include the following:
(1) the expression of an application for arbitration;
(2) items for arbitration;
(3) the chosen arbitration commission.
Where an arbitration agreement has not specified or has not specified clearly items for arbitration or the choice of an arbitration commission, the parties concerned may conclude a supplementary agreement. If a supplementary agreement cannot be reached, the arbitration agreement shall be void.
Interpretation of the Supreme People's Court on Certain Issues relating to Application of the Arbitration Law of the People's Republic of China
Where the name of the arbitration agency provided in the arbitration agreement is inaccurate but is nevertheless identifiable, the arbitration agency shall be deemed to have been selected.
Where an arbitration is agreed to be conducted by an arbitration agency at a fixed locality and only one arbitration agency exists at that locality, that arbitration agency shall be deemed as the arbitration agency stipulated under the arbitration agreement. Where there are two or more arbitration agencies at that locality, the parties may negotiate to select one of the agencies for arbitration; where the parties concerned are unable to agree on the choice of an arbitration agency, the arbitration agreement shall be deemed invalid.
On 8 December 2020, Moping Architectural Design Consultants (Beijing) Co., Ltd. (hereinafter referred to as the " Moping Design Company ") and Beijing Kaixunteng Technical Services Co., Ltd. (hereinafter referred to as "KXT Company") entered into the Design Contract on the Pre-construction Scheme of the Interior Design, Landscape Design, Architectural Design of Sino-Ocean LAVIE (hereinafter referred to as the "Design Contract") in Beijing, which stipulates that: "Dispute settlement method, disputes arising in the course of the performance of this contract shall be settled through negotiation and mediation between the parties. If negotiation or mediation fails, the dispute shall be submitted to the 【Beijing】 Arbitration Court for arbitration" (hereinafter referred to as the "Arbitration Agreement").
Moping Design Company stated that although the Arbitration Agreement referred to the name of the arbitration institution as "【Beijing】Arbitration Court", which was slightly different from the name of the "Beijing Arbitration Commission", the true intention of the parties was to select the BAC as the arbitration institution. However, the name of the jointly selected arbitral institution is not accurate and standardised. The content in the symbol 【】should be the name of the arbitral institution, and "【Beijing】 Arbitration Court" refers to the "Beijing Arbitration Court". There are only three arbitral institutions in Beijing, namely the "Beijing Arbitration Commission", the China International Economic and Trade Arbitration Commission(hereinafter referred to as the "CIETAC") and the China Maritime Arbitration Commission(hereinafter referred to as the "CMAC"). The term "Beijing Court of Arbitration" is highly similar to the term "Beijing Arbitration Commission" according to the context and common perception, neither the "CIETAC" nor the "CMAC" contains the word "Beijing", and therefore the expression "Beijing Arbitration Court" would not be confused with the "CIETAC" and the "CMAC". According to the Arbitration Agreement, the 【Beijing】Arbitration Court" would clearly and exclusively refer to the "Beijing Arbitration Commission" as the arbitration institution chosen by both parties.
As the Design Contract was not drafted by a professional lawyer, it is understandable that the parties to the contract did not express the name of the chosen arbitration institution accurately. According to Article 3 of the Interpretation of the Supreme People's Court on Certain Issues relating to Application of the Arbitration Law of the People's Republic of China (hereinafter referred to as the "Interpretation of the Arbitration Law"), although the name of the arbitration institution was not accurately stated in the Arbitration Agreement, it could be confirmed that the arbitration institution chosen by the parties was the Beijing Arbitration Commission. At the same time, the Arbitration Agreement was very clear as to the submission to arbitration and the matters to be arbitrated. Therefore, in accordance with Article 16 of the Arbitration Law of the People's Republic of China (hereinafter referred to as the "Arbitration Law"), Moping Design Company requested the Beijing Fourth Intermediate People's Court (hereinafter referred to as the "Court") to confirm that the Arbitration Agreement was legally valid in accordance with the law.
The KXT Company argued that the Arbitration Agreement was unclear and that no specific arbitration institution had been selected, and that the application of Moping Design Company should be rejected. In the Arbitration Agreement, Beijing is marked with the symbol 【】, and the true intention of both parties was to submit the arbitration to "an arbitration institution in Beijing", not "to an arbitration institution called the Beijing Arbitration Court". Moreover, there is no arbitration institution in Beijing with the full name "Beijing Arbitration Court", there are only three commercial arbitration institutions in Beijing, namely the Beijing Arbitration Commission, the "CIETAC" and the "CMAC", and the name of the "Beijing Arbitration Court" is not the same as the "Beijing Arbitration Commission". The Arbitration Agreement did not identify the specific arbitral institution. According to Article 6 of the Interpretation of the Arbitration Law, the two parties did not agree on the choice of arbitration institution and therefore the Arbitration Agreement was invalid. Moreover, the Design Contract was a standard contract provided by Moping Design Company, which is a professional design company and in case of dispute over the interpretation of the terms, it should give an unfavorable interpretation.
The court found that the two parties differed on the negotiation of the contract. Moping Design Company claimed that the terms of the contract were determined after repeated negotiations between the two parties, while KXT Company claimed that Moping Design Company proposed the text of the contract and KXT Company signed directly to confirm it. However, both parties agreed that there was no specific negotiation on the dispute settlement clause at the time of signing the contract, nor was there any further negotiation after the dispute arose.
This is a case in which the parties applied for confirmation of the validity of an arbitration agreement. Based on the parties' dispute, the Court should examine the validity of the arbitration agreement in question in accordance with the provisions of Articles 16 and 18 of the Arbitration Law and the relevant judicial interpretations.
In this case, the name of the arbitration institution agreed upon by both parties is "【Beijing】Arbitration Court", which obviously did not correspond to the actual name and was not accurate. Therefore, the validity of the Arbitration Agreement depended on whether a specific arbitration institution could be identified in relation to the "【Beijing】 Arbitration Court". In the customary expression, the Arbitration Commission is also known as the Arbitration Court, and there is no doubt that the Arbitration Court can thus refer to the Arbitration Commission. The key question is how "【Beijing】" is to be understood and whether "【】" refers to the name or location of the arbitral institution. Moping Design Company argued that the content of "【】" was the name of the arbitration institution, while KST Company argued that "【】" pointed to the location of the arbitration institution. In reviewing the contracting process between the parties, there was no dispute between the parties regarding the arbitration agreement in question, and after Moping Design Company proposed the clause Kaisenteng did not ask for negotiation, and the parties' intention to choose arbitration for their dispute was clear and unambiguous. At the same time, according to the social life scenario, "【】" is used not only for the delimitation of the location, but also for the emphasis of the name. Moreover, of the three arbitral institutions in Beijing, neither "CIETAC" nor "CMAA" contains the word "Beijing", and only "Beijing Arbitration Commission" contains the word "Beijing", so that "【Beijing】 Arbitration Court" can point to "Beijing Arbitration Commission ". Considering that the Arbitration Agreement did not involve a professional lawyer, it was not appropriate to be harsh on the terms of the Arbitration Agreement, which was also in line with the legislative spirit of the Arbitration Law to respect the parties' intention to choose arbitration. The "【Beijing】 Arbitration Court" was able to identify the specific arbitration institution and the Arbitration Agreement had the intention to request arbitration and the matters to be arbitrated. Therefore, the Arbitration Agreement meets the legal conditions and is legally valid. The Court did not accept the KXT Company’s claim that the Arbitration Agreement could not specify a specific arbitration institution. The KXT Company's argument that the "【Beijing】 Arbitration Court" should be interpreted to the disadvantage of Moping Design Company on the grounds that the Design Contract was a formal contract was also not valid because the Design Contract was clearly specific and had been negotiated between the parties.
In the end, the Court ruled that the Arbitration Agreement in the Design Contract on the Pre-construction Scheme of the Interior Design, Landscape Design, Architectural Design of Sino-Ocean LAVIE signed by Moping Architectural Design Consultants (Beijing) Co., Ltd. and Beijing Kaixunteng Technical Services Co., Ltd. is valid.
Federal Court of Australia:
Australia First Recognizes and Enforces the Award of the Beijing Arbitration Commission
In April 2014, Guoao Holding Group Co., Ltd. (hereinafter referred to as "Guoao Holding Company"),Beijing Jubaoyang Asset Management Co., Ltd. (hereinafter referred to as "Jubaoyang Company"), Ms.Xue, Beijing Shanshuilin Ecological Farm Co., Ltd.(hereinafter referred to as "Shanshulin Company") jointly entered into the Cooperation and Development Agreement, agreeing to the following main matters: 1. Beijing Guoao Village Industrial Development Co Ltd. (hereinafter referred to as "Guoao Village Company"), was jointly established by Guoao Holding Company and Jubaoyang Company; 2. After the establishment of the Guoao Village Company, it signed an equity transfer agreement with Ms.Xue for the transfer of 49% of the equity interest in Shanshulin Company held by Ms.Xue, while Jubaolin Company and Ms.Xue signed an equity transfer agreement for the transfer of the remaining 51% of the equity interest in Shanshulin Company held by Ms.Xue; 3. Guoao Holding Company provided a shareholder's loan of RMB160 million to Guoao Village Company as equity acquisition payment, intermediary service fee and the overall construction of the Ligong project, with an interest rate of RMB 100 million on the loan, which will not be increased by any factors such as the loan amount or the number of years. Article 8 Dispute Resolution Clause of the Agreement, which reads: All disputes arising out of or in connection with the performance of this Agreement shall be settled by the parties through amicable negotiation. If the dispute cannot be settled by amicable negotiation, either party may submit the dispute to the Beijing Arbitration Commission (hereinafter referred to as the "BAC") for arbitration.
On 21 June 2019, Ms.Xue, Jiubaoyang Company and Shanshulin Company (hereinafter collectively referred to as the " Applicants ") filed an application for arbitration with the BAC in relation to a dispute with Guoao Holding Companyover the Cooperation and Development Agreement, , requesting: 1. to confirm that some clause of the Cooperative Development Agreement are null and void; 2. to request an award to terminate the Cooperative Development Agreement ... Guoao Village Company is not a signatory to the Cooperative Development Agreement, has no arbitration agreement with the parties and cannot be a party to the arbitration in this case. Then Guoao Holding Company filed an application for a counter-claim for arbitration: (i) requesting the applicant to jointly and severally repay the amount of RMB 240 million (including the principal amount of the loan of RMB 140 million and interest of RMB 100 million) to Guoao Holding Company ......
On January 26, 2021, the BAC issued (2019) BAC Award No. 0385 (hereinafter referred to as "Award No. 0385"): (i) Terminate the Cooperation and Development Agreement; (ii) The applicant shall jointly pay the principal of RMB 140 million and interest of RMB 58 million to Guoao Holding Company ......
The applicant considered that the second item of Award No. 0385 had ruled on the loan and equity transfer dispute between the parties and the outsider Guoao Village Company, which had not signed the arbitration agreement, and had seriously exceeded the scope of the arbitration clause to resolve the dispute in this case; moreover, Guoao Village Company had not participated in the arbitration in this case, and the second item of Award No. 0385 had disposed of the rights and obligations of Guoao Village Company without authorization, in violation of the statutory procedures of the arbitration law. In addition, the Award No. 0385 infringes the interests of the creditors of the Ligong Manor Project and is contrary to the social public interest. The applicant therefore applied to the Beijing Fourth Intermediate People's Court (hereinafter referred to as the "Beijing Court") to revoke the second item of Award No. 0385 in accordance with the law.
Guoao Holding Company argued that: The arbitral tribunal addressed the issue of shareholder loan and the source of repayment funds as well as the applicant's joint and several repayment obligations under the Cooperative Development Agreement, which were all under the Cooperative Development Agreement and did not exceed the arbitration, and the arbitral tribunal did not award the liability of Guoao Village Company , while the result of the award did not involve the disposition of the rights of parties other than the Applicants.
The Beijing Court held that whether the request for arbitration, the counterclaims of the parties or the specific content of the award revolved around the issue of the termination of the Cooperation and Development Agreement and the assumption of responsibility after the termination, the content of the Award No. 0385 did not exceed the scope of the rights and obligations of the parties to the Cooperation and Development Agreement. Secondly, the award did not contain any non-arbitrable matters in accordance with the law or the arbitration rules chosen by the parties, and the award did not exceed the scope of the parties' request for arbitration, and BAC was the arbitration institution agreed to in the arbitration agreement, which means that there was no situation of "arbitration committee not having the right to arbitrate" in this case. In addition, the arbitral tribunal in this case dealt with the dispute between the parties arising from the Cooperation and Development Agreement, and the result of the award only concerned the rights and obligations between the parties to the contract, which did not fall within the scope of social public interests. Therefore, the Beijing Court rejected the applicant's application.
Guoao Holding Company applied to the Beijing Third Intermediate People's Court (hereinafter referred to as "Beijing Third Court") for the enforcement of Award No. 0385. After the Beijing Third Court had enforced part of the amount, it terminated this enforcement due to lack of property. Guoao Holding Company applied to the Federal Court of Australia (the "Court") for enforcement of the award. Ms.Xue again argued that the enforcement of the award was contrary to public policy and therefore should not be enforced pursuant to Article 8(7)(b) (public policy) of the International Arbitration Act.
Ms.Xue’s case is that the arbitral award produced a real unfairness because the Cooperation and Development Agreement was rescinded and the award debtors were ordered to repay the shareholder loans and what had been paid by Guoao Holding Company for the shares, but there was no award for the re-conveyance of the shares from Guoao Holding Company. Ms.Xue argued that there was discussion about the re-conveyance of the shares in the proceedings, but that the tribunal made no award in that regard. The result, it is contended, is that contrary to what the notion of “jie chu”, or rescission, in Chinese law contemplates, the parties were not put back in the position that they were in before entering into the contract. The court held that Ms. Xue’s complaints about the award do not rise to the level of the award being contrary to fundamental norms of justice and fairness in Australia within the context of international commercial arbitration such as to enliven the public policy ground for resisting enforcement. There are a number of reasons for that:
First, it will generally be inappropriate for the enforcement court of a Convention country to reach a different conclusion on the same question of asserted defects in the award as that reached by the court at the seat of the arbitration. Only in exceptional cases such as where the powers of the supervisory court are so limited that they cannot intervene even where there has been an obvious and serious disregard for basic principles of justice by the arbitrators or where for unjust reasons, such as corruption, may the enforcing court review and reach a different conclusion from the court of the place of arbitration.
Ms Xue did contend before the PRC courts that the award should be set aside because of the imbalance of rights and obligations that it creates, that is essentially the same argument that she had raised before the Australian court. The Beijing court's award stated that under Art 58 of the Arbitration Law of the PRC an award can be set aside, which include being contrary to the public interest. There is no basis to conclude that the powers of the PRC supervisory courts are so limited that they cannot intervene even where there has been an obvious and serious disregard for basic principles of justice by the arbitrators.
Secondly, it is apparent from the review of the transcript of the arbitration proceedings that Ms Xue agreed to the rescission of the Cooperation and Development Agreement. However, she did not seek any orders with regard to the re-conveyance of the shares, and Guoao Holding Company contended that it could not do so because Guoao Village Company was not a party to the arbitration.
Thirdly, the Chinese law expert witness for Guoao Holding Company pointed out that the award debtors could still apply to the people’s court in the relevant Chinese jurisdiction seeking an order or determination as to whether any demand by them for restitution of the shares should be allowed. That is to say, not only was there no prayer by the claimants in the arbitration for return of the shares, but the arbitration does not have the effect on foreclosing the claimants from still pursuing that remedy under Chinese law.
Thus, a declaration of rescission without consequential orders restoring the parties to their pre-contractual positions was not only not contrary to public policy but was held to conform with the public policy in Australia because there remained processes of the law available to the parties to ensure an equitable outcome.
Fourthly, and even aside from the fact that it was not sought, it is not obvious that the tribunal made any error in not providing for the re-conveyance of the shares. That is because such a re-conveyance would involve the interests of a third party (Guoao Village Company) and possibly the dissolution of the separate Equity Transfer Agreements to which Guoao Holding Company was not a party. It would appear that such relief would in any event have had to have been sought by a different process.
Ultimately, The Federal Court of Australia rejected Ms.Xue's application for non-enforcement on the grounds that it was contrary to public policy and recognized and enforced the (2019) BAC Award No. 0385.