Doubts over mainland China arbitrations
Jiangsu court's ruling means parties face risks that arbitral awards may not be enforceable
The refusal of a court in Jiangsu province to enforce a Shanghai arbitral award spells risks for firms seeking arbitration on the mainland, according to lawyers.
The court's ruling weakened the competitiveness of the mainland's arbitration system against its counterparts in Hong Kong and Singapore, they said.
"This confirms the risk parties face that awards may be unenforceable where Shanghai or Shenzhen is stipulated in the arbitration clause. Parties who have chosen to resolve their disputes should manage their risks by reviewing and revising, if necessary, their arbitration clauses," said James Kwan, an international arbitration and dispute resolution partner at law firm Baker & McKenzie.
The ruling would undermine the attempts of the mainland's arbitration system to be a viable alternative to that in Hong Kong and Singapore, a report by US law firm Paul Hastings said.
In May, the Suzhou Intermediate People's Court refused to enforce an arbitral award by the former Shanghai branch of the China International Economic and Trade Arbitration Commission (Cietac), the country's oldest and best-known arbitration body.
On December 7, in arbitration between Jiangxi LDK Solar Hi-Tech and Suzhou Artes Sunshine Power Technology, Cietac Shanghai found in favour of LDK.
Listed on the New York Stock Exchange, LDK is the world's second-biggest maker of wafers used in making solar cells. Artes is a mainland subsidiary of Nasdaq-listed Canadian Solar, one of the world's biggest makers of solar panels. LDK was seeking 60 million yuan (HK$75 million) from Canadian Solar in a dispute over wafer supply contracts.