Business law

[Basic Facts]

Zhengqi Company (the Buyer) and Brentwood Industries, Inc. (U.S.A) (hereinafter referred to as "Brentwood Company," the Seller) signed a Contract and the Supplementary Agreement in Guangzhou City. For the method for settling disputes, Article 16 of the Contract stipulates that "Any dispute arising out of or in connection with this Contract shall be resolved by both parties through friendly consultation. If such dispute fails to be resolved through consultation, it shall be submitted to the Arbitration Commission under the International Chamber of Commerce for arbitration at the place where the project is located according to international practice. The arbitral award entered by the Arbitration Commission shall be final and binding upon both parties. Unless otherwise provided by the Arbitration Commission, the arbitration fees shall be borne by the losing party. The arbitration shall be conducted in both Chinese and English." The "project" as mentioned in the arbitration clause was "Guangzhou Liede Sewage Treatment Plant (Phase IV)" as listed in Article 3 of the Supplementary Agreement, and located in Guangzhou City, China. Due to dispute arising in the performance of the Contract, Brentwood Company filed an arbitration application with the secretariat of the International Court of Arbitration under the International Chamber of Commerce ("ICC"). The sole arbitrator of the ICC made the Final Arbitral Award in Guangzhou City. Brentwood Company then filed an application with the Intermediate People's Court of Guangzhou City for recognizing and enforcing the aforesaid arbitral award.

[Judgment]

After examination, the Intermediate People's Court of Guangzhou City held that the arbitral award involved was made by a foreign arbitration institution in the Chinese mainland and it may be regarded as a foreign-related arbitral award in China. Where the respondent failed to perform the arbitral award, Brentwood Company may file an application for enforcement with the intermediate people's court at the place where the respondent's domicile or property was located in accordance with the provisions of the Civil Procedure Law on the enforcement of a foreign-related arbitral award. As Brentwood Company filed an application for recognizing and enforcing the arbitral award in accordance with the New York Convention or the Arrangement concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region, the legal basis was obviously erroneous. Therefore, the Intermediate People's Court of Guangzhou City ruled to conclude the examination. Brentwood Company may separately file another application for enforcement in accordance with the law.

[Significance]

With approval of the Supreme People's Court, the rules for recognizing nationality of an arbitral award made by a foreign arbitration institution in the Chinese mainland are specified for the first time and such arbitral award is treated as a foreign-related arbitral award in China. The aforesaid arbitral award is confirmed to be enforced in the Chinese mainland upon direct application, which is conducive to making China's arbitration system more internationalized and establishing the "arbitration-friendly" image of China's justice. This case is a landmark in the opening-up of China's arbitration business and internationalized development of arbitration.