Enforcement of foreign arbitral awards and foreign judgments in China.

• Author: Ye, Ariel

AS ONE of the four most powerful economies in the world, China has attracted significant amount of international businesses. China is not only a major supplier of various raw materials and industrial goods but is also a rapidly growing market for international goods, services, and technology. As China continues to grow in the international business realm, international investors and businesses working in China are addressing the issue of how to avoid, prevent, and resolve commercial disputes.

Nevertheless, given the differences in languages, legal background, and practices, resolving commercial disputes in China has not been an easy task.

In China, arbitration has been the preferred method for resolving commercial disputes by international investors when they encounter problems with their Chinese counterparts. Litigation in Chinese courts, which used to be regarded as the last resort, however, is increasingly attaining the attention of international investors who are operating in China because Chinese courts have gained enormous traffic over the past two decades. Nevertheless, despite the improvements made in many aspects of the Chinese judicial system, enforcement continues to be of utmost concern. This article provides a brief update on the enforcement of foreign arbitral awards and foreign court judgments.

Arbitration in China

Today, China has over 200 arbitration institutions handling international and domestic commercial disputes, although the majority of cases handled by these arbitration institutions involve domestic commercial disputes. The Chinese International Economic and Trade Arbitration Commission and the Hong Kong International Arbitration Center are two well-known arbitration institutions in mainland China and Hong Kong that handle foreign related disputes.

In recent years, the International Chamber of Commerce ("ICC") has also been active in China while the Arbitration Institution of the Stockholm Chamber of Commerce remains attractive to many companies for China-related dispute resolution, as well.

Court Systems

Arbitration used to be the preferred method for resolving disputes in China; however, in recent years, Chinese courts have gained popularity. Chinese courts are becoming viable alternatives, particularly for intellectual property related matters, debt recovery, product liability and labor disputes. These types of cases now involve more and more foreign litigants in Chinese courts. In 2006, approximately 23,000 court cases involved foreign parties. (This statistic does not include court cases involving subsidiaries incorporated in China but invested by foreign companies as such subsidiaries are regarded as Chinese legal entities). (1)

China's court system primarily consists of the Supreme People's Court, the Provincial High Courts, Intermediate People's courts, and local district courts. The highest court in the Chinese judicial system is the Supreme People's Court located in Beijing, which is directly responsible to the National People's Congress and its Standing Committee. It supervises the administration of justice by the people's courts at various levels.

Nevertheless, under China's Rules of Civil Procedure, foreign-related disputes are usually handled by the Intermediate People's courts. (2) Around the country, China has approximately eighty Intermediate People's Courts which have gained experiences in handling foreign-related disputes.

Cases are decided within two instances of trial in the people's courts. (3) This means that, for a judgment or order of first instance of a local people's court, a party may bring an appeal only once to the people's court at the next level, and the...