DeHeng Assisted a Chinese Company on Having the CIETAC's Arbitration Decision Recognized and Enforced in France

2021-09-29

The Judicial Court of Paris, France, after hearing the case, recently made a judgment in favor of the recognition and enforcement in France of the arbitration award No.1872 made by China International Economic and Trade Arbitration Commission (CIETAC) in Beijing in December 2020. The above court held that, according to the French Code of Civil Procedure, the procedure of the arbitration was appropriate, and the recognition and enforcement of the arbitration decision did not violate the public order in France. This case is one of the few successful cases in which an award made by a Chinese arbitral institution are recognized and enforced abroad.

Case summary:

An electromechanical equipment company in Shanghai (hereinafter referred to as the "Chinese Company") and the French company CHEMIN entered into a purchase contract in January 2020. In February 2020, the Chinese Company, as the seller, arranged to ship the goods to the destination (Lomé, Togo) specified by the buyer CHEMIN. In accordance with the contract, CHEMIN should pay the full amount by March 21, 2020. The goods arrived at the port of Togo on April 9 and were picked up from the port on April 20, but the Chinese Company has never received any payment from the buyer CHEMIN. Therefore, according to the specific provisions of the dispute settlement clause in the contract signed by both parties, the Chinese Company filed an application for arbitration of the contract dispute to the CIETAC in Beijing, demanding the buyer CHEMIN to pay full amount of the goods to the claimant.

In accordance with its arbitration rules in force, CIETAC applied the applicable law chosen by the prior agreement of the parties. The arbitration was heard by a sole arbitrator, and an award was made in favor of the Chinese Company within a reasonable due time.

Comments:

In this case, the facts were clear, the law was clearly applicable, and the absence of the other party has relatively simplified the make of the arbitral award, on the premise of abiding by the established rules of CIETAC. The difficulty lies in the recognition and enforcement of the award made by the Chinese arbitral institution in foreign countries. As contracting parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), China and France, in principle, recognize and enforce valid commercial arbitral awards made in each other's territory. According to the Article 1516 of the French Code of Civil Procedure and the practical experience of our firm, however, the key to the recognition and enforcement of such rulings lies in the competence and experience of lawyers, in applying for an writ of enforcement to a court of competent jurisdiction, based on the specific requirements of French law. The application process involves many steps, such as notarization, translation, application, registration, preparation and submission of application documents, etc. The respondent may also appeal against the application for the writ of enforcement.

Meanwhile, given the nature of default award of the arbitral award, although effectivly served to the respondent, its international recognition and enforcement will still be more difficult. Among the recognition and enforcement cases of China's arbitration awards in US courts in 2000-2016 included in the WestlawNext database, there were five cases in which the respondent was absent and four cases were refused to be recognized and enforced (80%); only one case was recognized and enforced (20%), and it was successful only after the supplementary evidence was provided. Thus the first-instance recognition rate was zero*. Therefore, this case is a hard-won success achieved by the close cooperation and joint efforts between DeHeng's Beijing and Paris's Office.

As trade and economic exchanges between China and France become increasingly frequent, in the post-Covid era, international commercial arbitration will increase in numbers and domestic arbitration institutions will become more and more international. But in judicial practice, due to various reasons, such as judicial environment, judicial sovereignty and cross-border judicial assistance, the proportion of domestic arbitral awards recognized and enforced by foreign arbitration institutions remains still relatively low. Under this circumstance, the French-speaking team of DeHeng Law Offices, led by Dr. Frank Wu from the Beijing office, worked closely with Director Mr. Shi Renlin from our Office in Paris, and provided high-quality, professional and efficient legal services to the client. During the execution of the case, the DeHeng lawyers carefully studied the case and international commercial arbitration rules, reviewed a large number of materials in Chinese and French, referenced legal documents including the New York Convention and the French Code of Civil Procedure, and finally supported the Chinese company to obtain a satisfactory result.

* Note: Yang Yuwen. Recognition and Enforcement of Chinese Arbitral Awards in US Courts (2000-2016): Problems and Countermeasures. Chinese Review of International Law. Issue No.1, 2018.