From: Ten Typical Enforcement Cases for Recognition and Enforcement of Extraterritorial Arbitral Awards and Court Judgments

[Information of the parties involved]

Applicant: AAA Insurance Co., Ltd.

Respondant: BBB International Group, CCC International Group Capital Co., Ltd.

Basic Information of the Case

BBB International Group and CCC International Group Capital Co., Ltd. have signed an Equity Purchase Agreement with Company J, which is established abroad. Company J raises funds in China to purchase the equity of a subsidiary of BBB International Group, and an insurance company provides corresponding funds to Company J. Afterwards, BBB International Group, CCC International Group Capital Co., Ltd., Company J, AAA Insurance Co., Ltd., and M International Bank signed a "Fund Custody Agreement", which stipulated that AAA Insurance Co., Ltd. would deposit the equivalent of over 470 million US dollars in RMB with M International Bank, the custodian bank, for J Company to purchase equity. The payment of custody funds requires BBB International Group, CCC International Group Capital Co., Ltd., and Company J to jointly issue a joint instruction letter to the custody bank M International Bank, and make payments in accordance with the instructions of the joint instruction letter. Later, due to J Company's failure to complete the relevant approval procedures, and BBB International Group and CCC International Group Capital Limited having sold their shares to a third party at a higher price, the Equity Purchase Agreement could not be fulfilled. AAA Insurance Company's request for the return of funds was unsuccessful, so the dispute was submitted for arbitration. After the Hong Kong International Chamber of Commerce Arbitration Court heard the case, an arbitration award was made, ruling that BBB International Group and other companies should pay AAA Insurance Co., Ltd. an amount equivalent to over 470 million US dollars in RMB and accrued interest in full custody funds. During the arbitration award, Company J was cancelled. After the arbitral award was made, BBB International Group and CCC International Group Capital Co., Ltd. did not perform it, and AAA Insurance Co., Ltd. applied to the Fourth Intermediate people's court of Beijing for recognition and enforcement. During the execution process, M International Bank refused to automatically assist in the execution of the arbitration award and court ruling, citing the need for a joint instruction letter from BBB International Group, CCC International Group Capital Limited, and J Company to release funds. After studying, the Fourth Intermediate people's court of Beijing City believed that Company J had been cancelled and it was no longer objectively possible to issue a certificate of consent to the loan. If the arbitration award has come into force, Bank M International should perform the arbitration award. After repeated communication and consultation, the Fourth Intermediate people's court of Beijing issued a notice of assistance in execution and a ruling to M International Bank, requiring it to perform its loan obligations. Finally, M International Bank paid the corresponding funds to AAA Insurance Co., Ltd.

Enforcement Results

In the process of implementation, the Fourth Intermediate people's court of Beijing Municipality served the notice of implementation on BBB International Group and CCC International Group Capital Co., Ltd., and BBB International Group and CCC International Group Capital Co., Ltd. sent a payment order to Bank M International after receiving it. At the same time, the Fourth Intermediate people's court of Beijing Municipality also sent a notice of assistance in implementation to Bank M International, M International Bank ultimately paid all the corresponding funds to AAA Insurance Co., Ltd. in accordance with the court's enforcement notice, and the arbitration award has been enforced.

Typical significance

In this case, according to the arbitration award made by the Hong Kong International Chamber of Commerce Arbitration Court, which has already taken effect, M International Bank should pay all the custody funds to AAA Insurance Co., Ltd. However, M International Bank believes that the payment instruction does not comply with the provisions of the Fund Custody Agreement and refuses to make payment to AAA Insurance Co., Ltd. However, according to the arbitration award made by the Hong Kong International Chamber of Commerce Arbitration Court, M International Bank has the obligation to perform corresponding actions, and there is also a clause in the Fund Custody Agreement that payment must be subject to the effective final award, so M International Bank's defense reasons are not based. After the arbitral award made by the Arbitration Court of the Hong Kong International Chamber of Commerce is recognized by the Fourth Intermediate people's court of Beijing, the arbitral award has absolute enforcement effect, and all subjects, including M International Bank, shall be bound by the arbitral award. The Arrangement of the Supreme People's Court on the Mutual Enforcement of Arbitral Awards between the Mainland and the Handover of Hong Kong Special Administrative Region is an arrangement to resolve the interregional conflict of laws between the Mainland and Hong Kong after the return of Hong Kong. It is an important achievement of judicial assistance between the two places. In practice, the "Arrangement" effectively solves the execution of arbitration awards between the two places, but due to differences in judicial systems and customs between the two places, there are some connection issues. Although the subject of the contract in this case was not listed as a party to the arbitration award and did not explicitly require it to fulfill its corresponding obligations, the effectiveness of the effective arbitration award is higher than that of the contract agreement. The parties involved in the contract should fulfill their corresponding assistance obligations in accordance with the arbitration award.

Expert comments

This case should recognize and enforce the award made by the International Chamber of Commerce Arbitration Court in Hong Kong, and effectively implement the "Arrangement of the Supreme People's Court on Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region". In the handling of this case, the Beijing Fourth Intermediate People's Court placed equal emphasis on both entity and procedure, affirmed the absolute validity of the effective arbitration award, and found a clause in the contract that payment must be subject to the effective award, properly handling the assistance and enforcement obligations of non arbitration award parties. It has effectively maintained the effectiveness of effective arbitration awards and the credibility of the arbitration system, and ensured the effective implementation of the "Arrangement of the Supreme People's Court on Mutual Enforcement of Arbitration Awards between the Mainland and the Hong Kong Special Administrative Region".