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Will Chinese Courts Set Aside Consent Awards?

Sun, 08 Aug 2021
Categories: Insights
Contributors: Meng Yu 余萌

Key takeaways:

• Under PRC Arbitration Law, a consent award and an arbitral award have the same legal effect.

• Neither the legislation nor the judicial interpretations address the setting aside of consent awards.

• Due to the lack of unified rules, the practices vary among Chinese local courts. Even views from the SPC’s different divisions diverge on whether a consent award can be set aside.

 

Chinese courts have divergent views on whether they have competent authority to review the consent awards and how to do so.

The divergent views among Chinese courts are well presented in an article titled, “An Empirical Analysis of Setting aside the Consent award by Courts: Based on the Sample of 42 Cases” (法院撤销仲裁调解书的实证分析——以42个案例为样本), which was published in “Tianjin Legal Science” (天津法学), (No.4 2019) in December 2019, whose author is Li Haitao (李海涛) from China University of Political Science and Law.

1. What is a consent award? 

Pursuant to the PRC Arbitration Law (“Arbitration Law”, 中国仲裁法), the arbitral tribunal may carry out mediation before granting an award. If a settlement agreement is reached through mediation, the arbitral tribunal shall make a consent award or an award based on the settlement results. A consent award and an arbitral award shall have the same legal effect.

2. Setting aside of the consent award

Do the parties concerned have the right to apply for setting aside the consent award? Does the court have the authority to review the consent award? Are the grounds for setting aside the consent award the same as those for setting aside the arbitral award?

Article 58 of the Arbitration Law stipulates the grounds for setting aside an arbitral award, however, it does not cover the setting aside of a consent award.

In terms of judicial review of arbitration, China’s Supreme People’s Court (SPC) has issued a number of judicial interpretations in order to unify judicial views and decisions throughout the country on such cases. However, none of them deals with the issue of setting aside of consent awards.

In judicial practices, there exist in vast quantities cases in which the parties apply to set aside the consent awards. Due to the lack of unified rules, the understandings and practices vary among local courts, and even between the court and its higher or lower court.

3. Cases of setting aside consent awards

As of the first half of 2019, the author searched a total of 42 cases involving the setting aside of consent awards on the website ‘China Judgments Online’.

In these cases, the issues at stake and the Court's views are as follows:

(1) Do the parties have the right to apply for setting aside a consent award?

In 20 cases, the courts held that the parties concerned had the right to apply for setting aside the consent award, while in other 20 cases the courts held the opposite opinion, and in the rest two cases, the court did not present a clear opinion.

(2) The grounds for setting aside a consent award

Of the 20 cases in which the court recognized the parties’ rights to set aside the mediation documents, there were eight cases where the court finally supported the parties’ application of setting aside.

In these eight cases, the different grounds for setting aside are as follows:

(1) The matters decided in the arbitral award were beyond the arbitral authority of the arbitration institution (in one case).

(2) The matters decided in the arbitral award exceeded the scope of the arbitration agreement (in one case).

(3) The consent award violated the principle of voluntary settlement (in one case).

(4) The requirements of statutory procedures were violated (in three cases).

(5) There was no arbitration agreement (in three cases).

(6) The consent award was unenforceable (in one case).

4. The SPC’s opinions

The SPC, in its judicial interpretations and other norms, does not directly mention whether the consent award can be set aside or whether the court can review the consent award, but has mentioned such issue in its handling of specific cases.

However, views from the SPC’s different divisions diverge on this issue.

(1) The answer of the 4th Civil Division of the SPC: Yes

In 2013, the 4th Civil Division of the SPC issued “Re the Request for Instruction on whether the People's Court May Accept the Application for Setting aside the Arbitration Consent award” (“the Reply”, (2013) Min Si Ta Zi No. 39, 关于人民法院应否受理撤销仲裁调解书申请的复函), which clarifies that: “According to Paragraph 1 of Article 58 of the Arbitration Law, a party concerned may apply to the court for setting aside an arbitral award. Paragraph 2 of Article 51 of the Arbitration Law also provides that a consent award shall have the same legal effect as an arbitral award, which means that a consent award shall also be subject to judicial review. Therefore, where a party concerned applies to a court for setting aside the consent award in accordance with Article 58 of the Arbitration Law, the court shall accept such application.”

Therefore, it can be inferred that the 4th Civil Division of the SPC upholds the practice of judicial review of a consent award by reference to the judicial review of arbitral awards.

The 4th Civil Division of the SPC is responsible for guiding the judicial review of arbitration cases handled by courts throughout the country.

(2) The answer of the Research Office of the SPC: No

In 2012, the Research Office of SPC issued the “Opinions of the Research Office of the Supreme People's Court on Whether the People's Court Shall Accept the Parties’ Application for Setting aside the Arbitration Consent award” (“the Opinions”, 最高人民法院研究室关于人民法院应否受理当事人提起的申请撤销仲裁调解书之诉问题的研究意见). In its opinion, the court should not accept the application of the parties to set aside the consent award (including awards on both the domestic and the foreign-related settlement agreement), except in the case involving the violation of the public interest. Otherwise, the judicial power will penetrate deeper into the arbitration field and weaken the advantages and authority of arbitration.

Therefore, it can be seen that the Research Office of SPC is against the judicial review of the consent award, and thus the parties have no right to apply for judicial review of such statement.

The Research Office of SPC is mainly in charge of drafting judicial interpretations and answering questions on application of law raised by courts at lower levels and relevant departments.

5. Conclusion

Neither the Reply nor the Opinions can be regarded as a judicial interpretation and does not have uniform legal effect in judicial practice. Therefore, the views and practices of courts across the country on this issue are still not uniform at present.

 

Photo by zhang kaiyv on Unsplash

 

Contributors: Meng Yu 余萌

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