In cases of applying for setting aside China’s domestic arbitral awards and requesting non-enforcement of domestic and foreign arbitral awards, the parties are likely to put forward all possible grounds and public policy is the most common one. However, in fact, Chinese courts rarely support requests made by the parties on the grounds of public policy.
So, how do Chinese courts view public policy in judicial review of arbitration? The article titled “Application of Public Policy in the Judicial Review of Arbitration” (公共政策在仲裁司法审查中的适用) by Judge Song Jianli (宋建立) from the Supreme People’s Court (SPC) answers this question.  The article was published in the “People’s Judicature” (人民司法) (No. 1, 2018), a journal affiliated to the SPC.
I. Legal Provisions as to Public Policy
At present, in the legal provisions applied by Chinese courts, those with public policy involved mainly include:
i. Article V(2)(b) of the New York Convention.
ii. Articles 237 and 274 of the Civil Procedure Law of China (CPL) stipulate that if the court finds that the enforcement of an arbitral award is contrary to the public interest, it shall rule against the enforcement thereto.
iii. The SPC has also indicated in the rules concerning the recognition and enforcement of arbitral awards of Hong Kong, Macao and Taiwan that if the Chinese mainland court finds that the enforcement of the Hong Kong/Macao/Taiwan arbitral award in mainland China is contrary to the public interest of mainland China, it may not enforce such award. 
Judge Song believes that public policy is expressed as public interest in the context of Chinese law. However, the said provisions do not give a precise definition of “public policy” or “public interest”. In fact, the attitude of Chinese courts towards public policy is mainly reflected in relevant judgments.
II. Several Dimensions for Examining Public Policy
1. Public policy correlated with the times
In different times, the views of Chinese courts on public policy vary. In 1997, the SPC held in a case that the performance of rock and roll music under a performance contract was not in conformity with China’s national conditions, and accordingly found that the arbitration award violated public policy.  However, rock and roll music has been very popular in China’s TV shows and concerts nowadays, which means that performing rock and roll music is obviously no longer contrary to China’s current public policy.
2. Public policy correlated with national conditions
Chinese courts limit the application of public policy to a narrow range correlated with China’s national conditions. For example, if an arbitral award infringes upon China’s sovereignty (including territorial, economic and judicial sovereignty), it will be deemed as contrary to public policy.
In 2008, the SPC in the case of Hemofarm (Case of Application of Hemofarm DD, MAG International Trading Co., Ltd., and Surah Media Co., Ltd. for recognition and enforcement of an arbitral award made by the ICC International Court of Arbitration) held that given the Chinese court had already rendered a judgment for a certain lease dispute, while the arbitral award made by the ICC International Court of Arbitration with respect to a joint venture contract dispute still covered the lease dispute, therefore, the arbitral award infringed on China’s judicial sovereignty and jurisdiction of the Chinese court, and thus found that the arbitral award violated China’s public policy. 
3. Public policy correlated with jurisdictions
In China, different public policy standards may be adopted for the recognition of arbitral awards in jurisdictions of mainland China, Hong Kong, Macao and Taiwan.
In 2016, the SPC held in a case that given the arbitration clause had been found invalid by the court in mainland China, although the arbitration award made by the ICC International Court of Arbitration in Hong Kong was valid and did not violate Hong Kong’s public policy, it violated the public policy of mainland China. 
4. Public policy correlated with basic social values
In 2017, the SPC held in a case that although the sham arbitration award only damaged the legitimate rights and interests of specific parties, and did not seem to violate the public interest, in fact, this act can be categorized as the parties manipulating arbitration to obtain illegal interests by improper means. If the court enforces such arbitral awards, it will mislead the public and pose a serious threat to the credibility of the judiciary, as well as violate the basic legal principles and social morality of honesty, fairness and integrity. Therefore, sham arbitration is contrary to the public interest. 
III. Under What Circumstances Will Public Policy Not Be Violated
1. Violation of the general mandatory rules in Chinese law is not contrary to public policy
Not all mandatory rules in Chinese law involve public policy, but only those that represent the basic values and legal principles of the whole society.
The SPC has stated that:
i. Violation of China’s legal provisions on the approval and registration of foreign debt shall not be deemed as contrary to public policy (The Case of an Arbitral Award of London Sugar Association in 2003);
ii. Violation of China’s legal provisions on the examination and approval of foreign futures trading shall not be deemed as contrary to public policy (The Case of an Arbitral Award of Arbitration Institute of the Stockholm Chamber of Commerce in 2001); 
iii. Violation of China’s filing system on foreign investment access shall not be deemed as contrary to public policy (The Case of an Arbitral Award of London Court of International Arbitration in 2010). 
However, the violation of the mandatory rules of the Anti-monopoly Law, the Anti-Unfair Competition Law, as well as those concerning currency control, price control, environmental protection and protection of consumers’ rights and interests, will directly or indirectly violate China’s basic legal system, basic economic and social principles, basic social morality and ethics. Therefore, the arbitral awards related thereto will be considered to be in violation of China’s public policy.
2. Misapplication of Chinese law by the arbitral tribunal is not contrary to public policy.
In 2017, the SPC held in a case that the misapplication of Chinese law by the arbitral tribunal only affected the amount of compensation and did not violate China’s public policy. 
3. An unfair arbitration award is not contrary to public policy
In 2012, the SPC held in a case that the unconscionability of the arbitral award shall not be the grounds for its violation of China’s public policy. 
4. Misinterpretation or improper evaluation of Chinese law by the arbitral award is not contrary to public policy.
In China, it has been argued that arbitral awards’ misinterpretation or improper evaluation of Chinese laws will undermine the authority of Chinese laws and regulations, which means it is contrary to public policy. However, in 2010, the SPC held in a case that although a foreign arbitral award held that the provisions of Chinese laws and regulations were obviously different from their application in practice, this misconception did not lead to a violation of China’s public policy when it comes to the recognition and enforcement of the arbitral award. 
IV. Overall Attitudes of Chinese Courts to Public Policy
Judge Song pointed out that up to now, there are only three or four cases in which Chinese courts set aside foreign-related arbitral awards or refuse to enforce foreign arbitral awards on the public policy grounds. It is thus can be seen that Chinese courts have always been strictly applying the ground of public policy.
Generally speaking, Chinese courts have long been prudent as to the application of public policy. As far as recognition and enforcement of foreign arbitral awards are concerned, to my knowledge, there are only two cases in which Chinese courts refuse to enforce foreign arbitral awards on the grounds of public policy which is related to judicial sovereignty.
The first one is the case of Hemofarm (2008), in which the award made by the ICC International Court of Arbitration denied the Chinese court’s jurisdiction and infringed upon China’s judicial sovereignty, which thus constituted a violation of public policy.
The second one is the case of Palmer Maritime Inc. (Case of Palmer Maritime Inc.’s application for recognition and enforcement of an arbitral award made by Patrick O’Donovan in London) recently occurred, which has been briefly introduced by our previous post “2018 CJO Report: Recognition and Enforcement of Foreign Arbitral Awards in China”. The court refused to recognize and enforce the arbitral award in accordance with Article V(2)(b) of the New York Convention on the grounds that the arbitration agreement involved therein has been found invalid by the Chinese judgment, therefore, the recognition of the arbitral award will infringe upon China’s judicial sovereignty and thus violate China’s public policy.
 最高人民法院在关于申请人韦斯顿瓦克(Western Bulk Pte. Ltd.)申请承认和执行英国仲裁裁决请示案的复函(最高法院民四他字第12号复函)
The views and opinions expressed are solely those of the authors and do not necessarily reflect the official policy or position of China Justice Observer.
Contributors: Meng Yu 余萌