In a recently published case, the Supreme People’s Court (the “SPC“) of the People’s Republic of China has confirmed that the two-year limitation period for a party to apply to a PRC court for enforcing a foreign-related arbitral award shall start to run from the date on which the award creditor discovers that a foreign counterparty has property located within the territory of China (Shanghai Jwell Machinery Co., Ltd. v Retech Aktiengesellschaft, Switzerland, SPC Guiding Case No. 37).
Shanghai Jwell Machinery Co., Ltd. (“Shanghai Jwell“) obtained a CIETAC arbitral award against Retech Aktiengesellschaft (“Retech“) on 18 September 2006, which ordered Retech to make certain payments to Shanghai Jwell within 30 days from the date of the award. From August 2007, Shanghai Jwell started to seek enforcement of the award in Switzerland. However, the Swiss Court rejected the application, on the grounds that the translations of the arbitral award did not satisfy the requirements under the New York Convention. On 30 July 2008, Shanghai Jwell discovered that certain machinery belonging to Retech was in Shanghai for an exhibition. It immediately filed an application before the Shanghai Court seeking enforcement of the award. On the same day, the Shanghai court accepted the application and seized the machinery.
Retech argued that the application had exceeded the time limit for enforcement proceedings provided under Article 219 of the PRC Civil Procedure Law adopted on 9 April 1991 (the “CPL“). Article 219 originally provided that, where both parties are legal persons or organisations, the time limit for bringing enforcement proceedings was six months from the last day of the specified performance period. On 28 October 2007, the CPL was amended to extend the limit to two years from the last day of the performance period or, in the absence of such a period, the date of the award. Although this amendment had come into effect at the time Shanghai Jwell made its enforcement application, Retech argued that the six-month time limit under Article 219 of the CPL should apply instead and that this time limit had already expired before the limit had been amended.
The Shanghai court rejected Retech’s argument. It held that the time limit for the enforcement application should start to run on 30 July 2008, when Shanghai Jwell discovered that had assets in the territory of China. Therefore, the application was not out of time. The SPC confirmed the Shanghai court’s finding and clarified that, where the party subject to enforcement or its property is located within China at the time when the award or judgment is rendered, the limitation period for commencing enforcement proceedings starts to run from the last day of the period for performance or, in the absence of such a period, from the date of the award or judgment. Where neither the party nor its assets are located in China when the award or judgment is rendered, in order to protect the applicant’s interests, the time limit shall run from the date on which the applicant discovers that the counterparty or its property is located within the territory of China.
For further information, please contact:
Jessica Fei, Partner, Herbert Smith Freehills
jessica.fei@hsf.com
Brenda Horrigan, Partner, Herbert Smith Freehills
brenda.horrigan@hsf.com
May Tai, Partner, Herbert Smith Freehills
may.tai@hsf.com
Simon Chaman, Partner, Herbert Smith Freehills
simon.chapman@hsf.com
Weina Ye, Herbert Smith Freehills
weina.ye@hsf.com
Briana Young, Herbert Smith Freehills
briana.young@hsf.com
