A Study On The Legal Issues Of Domestic Disputes Submitted To Foreign Arbitration Institutions

The dissertation originated from the case of SIEMENS's application for recognition and enforcement of the arbitration award by Singapore International Arbitration Centre(hereinafter referred as the “SIEMENS case”).Through the comparison between SIEMENS case and the case of Chaolaixinsheng's application for recognition and enforcement of the arbitration award by Korean Commercial Arbitration Court(hereinafter referred as the Chaolaixinsheng case),the author intends to investigate some relevant legal issues when the parties submit the dispute with no foreign factors to a foreign arbitration institutions.And the key points author will focus on is jurisdiction of foreign arbitration institution,judging standard of “foreign factors”,validity of arbitration agreement and feasibility of the arbitration award by the foreign arbitration institution.In judicial practice,this kind of cases has sprung up like mushrooms.After submit the dispute to the foreign arbitration institution and get the arbitration award,the parties will face the issue of applying for recognition and enforcement of the arbitration award.However,since the fuzziness and hysteresis of current laws and regulations and conservative attitude of judicial practitioners and legal scholar,some sentence phenomenon is rising and parties are facing great potential legal risks.To have a look at domestic current effective laws and regulation,Article 128 of Contract Law of PRC provides that parties to a foreign-related contract may apply to a Chinese arbitration institution or another arbitration institution for arbitration.From the literal meaning of this article,it does not expressly prohibit parties from submitting the dispute with no foreign factors to a foreign arbitration institution.Although,the Supreme People's court issued Provisions of the People's Court on Handling Foreign-related Arbitration and Foreign Arbitration Cases(Draft for Comment)on 30 Dec 2003,and the 7th paragraph of Article 20 provides that if domestic parties agree to submit the dispute with no foreign factors to any foreign arbitration institution,the people's court shall determine that the arbitration agreement shall be invalid after the application by one party of the contract,this Draft for Comment document is still invalid yet.Besides,Article 1 of Interpretations of the Supreme People's Court on Several Issues Concerning Application of the Law of the People's Republic of China on Choice of Law for Foreign-Related Civil Relationships(I)provides for the identification of foreign-related factors,which is as follows.Where a civil relationship falls under any of the following circumstances,the people's court may determine it as foreign-related civil relationship: 1.where either party or both parties are foreign citizens,foreign legal persons or other organizations or stateless persons;2.where the habitual residence of either party or both parties is located outside the territory of the People's Republic of China;3.where the subject matter is outside the territory of the People's Republic of China;4.where the legal fact that leads to establishment,change or termination of civil relationship happens outside the territory of the People's Republic of China;or 5.other circumstances under which the civil relationship may be determined as foreign-related civil relationship.As to this standard,there has not been unified view in our country's judicial practice.Firstly,this legal provisions and judicial practice of our country in the past have set the inherent limitations and obstacles for the determination of foreign factors.Secondly,the Item 5 of this Clause “other circumstances under which the civil relationship may be determined as foreign-related civil relationship” is hard to be defined.All the above facts are not only the reason for judicial practice problems caused by this kind of cases,but also the significance and value promoting us to investigate this legal issue.4 Municipality determined that the arbitration agreement submitted by the parties was invalid,based on Chinese law and also refused the recognition and enforcement of the arbitration award by Korean Commercial Arbitration Court which was based on 5th Article of the New York Convention providing that the arbitral award violated the public policy of China.The second intermediate people's Court of Beijing Municipality believed that the parties to the dispute are both limited liability company registered in Beijing.Although one party's investor was Korean citizen,in terms of the legal status of the parties,both parties were Chinese legal persons.In addition,the legal relationship to the dispute and the subject matter of litigation both occurred in China.Therefore,the dispute between the parties contained no foreign-related factors.The second intermediate people's Court of Beijing Municipality also believed that the arbitration agreement provided that parties agreed to submit the dispute with no foreign-related factors to a foreign arbitral institution is invalid,for current Chinese law only allowed the parties submit the dispute with foreign-related factors to a foreign arbitral institution instead of expressly allowing the parties to submit the disputed with no foreign-related factors to a foreign arbitral institution.In “Chaolaixinsheng” case,the second intermediate people's Court of Beijing Municipality determined the case did not have any foreign factors after strict inspection of the subject of the legal relationship,legal facts and attributes of the subject matter,without “other circumstances under which the civil relationship may be determined as foreign-related civil relationship”.Different from “Chaolaixinsheng” case,in SIEMENS case,First Intermediate People's Court of Shanghai Municipality recognized the validity of arbitration agreement,determine recognizing and enforcing the arbitration award by SIAC,which is a major breakthrough in this issue.On Sep 2015,Shanghai Gold Co.,Ltd.(“Shanghai Gold”)and SIEMENS International Trading(Shanghai)Co.,Ltd.(“SIEMENS”)signed a contract about high(low)voltage distribution system supply engineering which is located in Gold Building,B2-5 block,Lujiazui Trade Zone,Pudong New Area,Shanghai,China.The parties agreed that SIEMENS would provide the contractual equipment,and contractual related disputes should be submitted to SIAC for arbitration procedure.A dispute occurred in the process of the performance of the contract between As to “Chaolaixinsheng case”,the second intermediate people's Court of Beijing the parties and afterward Shanghai Gold applied to SIAC for arbitration.SIAC finally made a favorable arbitration award to SIEMENS on the validity of the arbitration agreement and the principle of Estoppel.In this case,it showed that First Intermediate People's Court of Shanghai Municipality held an open attitude on the implementation of the New York Convention.The judgment of foreign factors was not rigidly stick to the tradition standard that is parities and subject of the dispute and the establishment,change and termination of the legal relationship.Instead,“other circumstances under which the civil relationship may be determined as foreign-related civil relationship” was applied.The court made a judgment on the recognition and enforcement of international arbitral award and this was worth attention and welcome.From my point of view,the First Intermediate People's Court of Shanghai Municipality found that the case had foreign factors after the comprehensive investigation of the characteristics of SIEMENS case.This broke through the inherent limit of judicial practice on the identification of foreign-related factors,which was of great significance.On the one hand,it reflected the spirit of the rule of law that the court respected the autonomy of the parties.On the other hand,just as the reasons the court explained in the ruling,since Shanghai Gold violated the accepted legal principles of estoppel,good faith and fair and reasonable,etc.The court's judgment on the validity of the arbitration agreement not only conducive to the maintenance of the basic principles of fairness and justice an good faith,but also reflected its open attitude on legal principles and theory recognized by international community,setting a model for similar cases in the future.In addition to the validity of arbitration agreement,Shanghai Gold's second defense was based on the violation of public policy,corresponding to the Article 5th(b)of New York Convention,that is “the recognition of enforcement of the award is contrary to the public policy of the country.For this issue,the invalidation theory of Chinese courts doesn't prevent the implement of the ruling in the future,the arbitration agreement that domestic parties shall submit the dispute with no foreign-related factors to a foreign arbitral institution is invalid based on Chinese law although.The major legal ground of the above conclusion is Article 5 Paragraph 1(a)of New York Convention which provides relevant contents about arbitration agreement's invalidity in accordance with laws of place of arbitration award.The minor legal ground is the provisions about public policy in Article 5 Paragraph(b)of New York Convention.