Meaning
Judicial interventions that nullify the legal effect of a final decision by an arbitration tribunal occur only under strictly defined statutory conditions. Setting aside arbitral awards is a remedy available to a party that has suffered from a fundamental procedural error or a lack of jurisdiction during the arbitration process. In the Chinese legal system, the power to set aside an award is held by the intermediate people’s court in the city where the arbitration commission is located.
The boundary of this power is the non-interference principle, which means the court cannot review the merits of the case or the tribunal’s interpretation of the facts. It is a separate process from the refusal of enforcement, although the grounds for both are often similar. A successful application results in the award being declared void, which allows the parties to start a new arbitration or, in some cases, to take the matter to court.
This mechanism ensures that the private nature of arbitration does not bypass the essential requirements of the rule of law.
Legal Basis
The authority for the court to intervene in the arbitration process is found in the national Arbitration Law and the Civil Procedure Law. For setting aside arbitral awards, the law distinguishes between domestic cases and foreign related cases. For domestic awards, the grounds include a lack of a valid arbitration agreement, procedural violations, or the discovery of forged evidence.
For foreign related awards, the grounds are more limited and are mostly restricted to procedural due process and public policy. The Supreme People’s Court has issued several interpretations to clarify these grounds and to ensure that courts do not use them to reopen the facts of the case. This legal framework provides a predictable environment for both domestic and international business.
Procedural Error
Mistakes in the administration of the case can lead to the total cancellation of the tribunal’s work. When a party applies for setting aside arbitral awards, they often focus on whether they were given proper notice of the proceedings or an opportunity to present their case. If an arbitrator had a conflict of interest that was not disclosed, this is a strong ground for a challenge.
The court will also check whether the tribunal exceeded the authority granted to it by the parties in their contract. For example, if the tribunal decides on a matter that was not part of the original claim, that part of the award can be set aside. These procedural checks ensure that the arbitration remains a consensual and fair process.
Enforcement Denial
While setting aside an award is a proactive move by the losing party, the refusal to enforce an award is a defensive move made when the winning party tries to collect. The process of setting aside arbitral awards is more final because it destroys the award at its source. If an award is set aside, it cannot be enforced anywhere else in the world.
However, if a court merely refuses to enforce an award, the award may still be valid and enforceable in other jurisdictions. The decision to set aside an award must be reported to higher courts in certain cases to ensure that local judges are not being overly protective of local companies. This centralized oversight has significantly reduced the number of awards that are cancelled without good reason.
The finality of the court’s decision provides the ultimate resolution to the procedural dispute.
