Notice of the Supreme People’s Court on Issuing the Thirty-Sixth Group of Guiding Cases – Svensk Honungsförädling AB’s Application for Recognition and Enforcement of a Foreign Arbitral Award

February 2023

Lihui Jiang and Teresa Huang

On December 27, 2022, the Supreme People’s Court issued the thirty-sixth group of guiding cases, a total of six cases and all of them were related to arbitration.  This article will focus on one of the cases involving an application for recognition and enforcement of a foreign arbitral award.

Key Points of Judgment 

If the arbitration agreement only agrees to resolve disputes through expedited arbitration without explicitly agreeing on the arbitration institution, and the award is made by an ad hoc arbitral tribunal, such case does not fall under the circumstances stipulated in Paragraph 1 of Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and the People’s Court shall not support the claim of the respondent for not recognizing and enforcing the ad hoc arbitral award on the ground that the use of ad hoc arbitration is not in conformity with the arbitration agreement.

Basic Facts 

The Seller, Nanjing Changli Bees Product Co., Ltd. (“Seller”) and the Buyer, Svensk Honungsförädling AB (“Buyer”) signed a honey sales contract in English, agreeing a dispute resolution clause as follows: “in case of disputes governed by Swedish law and that disputes should be settled by Expedited Arbitration in Sweden.”  Its Chinese literal translation: Disputes shall be resolved by expedited arbitration in Sweden where governed by Swedish law.  Thereafter, the two parties had a dispute over the quality of honey.  The Buyer applied to the Arbitration Institute of the Stockholm Chamber of Commerce in Sweden for arbitration of the contract involved in this case, but the Arbitration Institute rejected the application for arbitration on the grounds that it had no jurisdiction.

One year later, the Buyer applied for ad hoc arbitration over the contract involved in this case in Sweden.  The Seller sent two e-mails to the ad hoc arbitral tribunal stating that the contract did not contain an arbitration clause and that Swedish law should not be applied, and its counsel submitted a legal opinion on objecting to the tribunal’s jurisdiction and extending the deadline for the submission of its statement of defence, but the Seller and its representatives did not raise any further objections to the tribunal’s jurisdiction during the hearing.  The ad hoc arbitral tribunal eventually ruled in favor of the Buyer.  The Buyer later applied to the Nanjing Intermediate People’s Court of Jiangsu Province for recognition and enforcement of the aforementioned arbitral award, which was upheld by the Court.

Reasons for Judgment 

The effective judgment of the Court held that as the award rendered by the ad hoc arbitral tribunal did not fall under the circumstances under which the recognition and enforcement of the award may be refused as stipulated in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, nor did it violate the reservation declaration made by China upon its accession to the Convention, or violate any public policy of China or fall under the circumstances under which the disputed matters could not be resolved by arbitration, the award should be recognized and enforced.

As for the dispute between the two parties on whether expedited arbitration could be resolved through ad hoc arbitration, the Court held that expedited arbitration is for the efficient and economical resolution of a dispute, and that an ad hoc arbitral tribunal has the characteristics of being efficient, convenient and economical.  In this case, as both parties agreed to resolve the dispute through expedited arbitration, which did not exclude ad hoc arbitration, and no party objected to the ad hoc arbitration during the arbitration hearing, the award rendered by the ad hoc arbitral tribunal was in conformity with both parties’ consensus.  Therefore, the Court should rule that for the resolution of the dispute involved in the case by the ad hoc arbitral tribunal, there was no unconformity with the arbitration agreement.

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