There has long been uncertainty over whether an International Chamber of Commerce (ICC) award made in the PRC will be recognised and enforced by the PRC courts. The reason for this uncertainty is that, under the PRC Arbitration Law, the prevailing view is that an arbitration agreement is valid only if it provides for arbitration under the auspices of one of the PRC’s "arbitration commissions". Well-known PRC arbitration commissions include the China International Economic and Trade Arbitration Commission (CIETAC), the Beijing Arbitration Commission and the Shanghai Arbitration Commission.

Conversely, the above requirement has been widely interpreted to mean that PRC law does not recognise the validity of arbitration agreements designating a foreign arbitration institution (such as the ICC, the Hong Kong International Arbitration Centre (HKIAC) or the Singapore International Arbitration Centre (SIAC)), to administer an arbitration seated in the PRC.

Despite the above difficulties, ICC arbitrations have, in the past, been seated in the PRC. Similarly, the ICC, while recognising the uncertainty over whether foreign arbitration institutions qualify as "arbitration commissions" under PRC law, also has a recommended clause for use where parties wish to have an ICC arbitration in the PRC.

As a result of the above, there has long been interest over whether the PRC courts, when confronted with an ICC award made in the PRC, would recognise and enforce it.

Until recently, there has been no reported instance where enforcement has been granted in the PRC of an ICC (or other foreign arbitration) award made in the PRC. In a recent (and unpublished order) made in April 2009, however, the PRC courts granted enforcement of such an ICC award. This case has now been reported in domestic PRC publications. It is therefore now in the public domain and is the subject of this note.

The case concerned ICC award 14006/MS/JB/JEM. The Claimant commenced the ICC arbitration against the Respondent (a Chinese company) for breach of a sale and purchase contract. The contract provided that disputes should be submitted to the arbitration commission of the ICC located in Beijing, China. The ICC appointed a sole Singaporean arbitrator to adjudicate the case in Beijing. The Respondent objected to the ICC's jurisdiction, by arguing that the arbitration agreement in fact provided for CIETAC, not ICC, arbitration. The objection was unsuccessful and the ICC arbitrator eventually rendered an award in Beijing in favour of the Claimant, in the amount of US$234,568.23, on 21 September 2007.

The Claimant applied to the Ningbo Intermediate Court for recognition and enforcement of the ICC award. According to the PRC publications, one of the objections raised by the Respondent was that the conduct of ICC arbitration inside the PRC violates PRC laws. However, the Ningbo court viewed the ICC award as an award "not considered as [a] domestic award.." under Article I of the New York Convention. On this basis, the court reportedly recognised and enforced the ICC award, by applying the New York Convention.

This case is noteworthy for being the first reported instance where a PRC court has apparently enforced an ICC award made in the PRC. It also stands in contrast to earlier problematic decisions, such as one made in 2004 which suggested that such an arbitration agreement was invalid.

There may be some debate over whether the basis for the court's decision is entirely correct. The court reportedly relied on the second limb of Article I(1) of the New York Convention, which provides that:

In contrast to the first sentence of Article I(1) – which applies the territorial criteria to the applicability of the New York Convention – the second sentence is more obscure, and has resulted in some confusion in the past. Adopting a traditional interpretation of Article I(1), based on the travaux preparatoires, it might be argued that the reference to "not considered as [a] domestic award" does not apply in the present case.

Nonetheless, the actual decision of the Ningbo Intermediate Court does at least suggest a pro-enforcement bias.

It remains to be seen if the decision of the Ningbo Intermediate Court represents the start of a helpful trend towards future recognition of such awards by other PRC courts, or if it is an aberration. In particular, it is not clear how closely the PRC court considered the question of the legitimacy of ICC arbitrations in the PRC. In addition, it is noteworthy that the decision was rendered at the level of the intermediate people's court; under the PRC court hierarchy, the intermediate people's court is inferior to the higher people's court and the Supreme People's Court. It is therefore by no means certain that other PRC courts will take a similarly sympathetic view towards such enforcement applications.

However, if it becomes clear that ICC awards (and awards of other foreign arbitral institutions) made in the PRC are enforceable in the PRC, this would be a very significant development.

There are several reasons for this:

In summary, therefore, the recent decision of the Ningbo Intermediate Court is a helpful step in the right direction. However, it is not clear if future PRC courts will take a similarly progressive approach in dealing with such enforcement applications.