Wicor v Haopu: The Chinese Courts Denied Enforcement of an ICC Award on the Ground of Public Policy

Author
Dr Shu Zhang (Post-Doctoral Fellow, UNSW Law)

Recently, the Taizhou Intermediate People's Court applied the public policy ground in denying the recognition and enforcement of an ICC award in Wicor Holdings AG v Taizhou Haopu Investment Co Ltd ( (2015)Tai Zhong Shang Zhong Shen Zi No.00004, 2 June 2016). It became the second case in which the Chinese courts reject the enforcement of a foreign award on the ground of public policy, following the 2008 decision of the Hemofarm Case. It is presumed that such a decision is confirmed by the Chinese Supreme People's Court in accordance with the Prior Reporting System. The major reason of this decision is that, the arbitration agreement on which the ICC award was based, was declared invalid earlier by the Chinese courts in dealing with another matter between the same parties. The unique features of this case raise doubts on whether Chinese courts still hold their pro-enforcement position and adopt a narrow interpretation of the “public policy” concept in the enforcement of international arbitral awards.

A rejection of the enforcement of the ICC award in the Wicor Case followed the logic of its ruling on the Castel Case 2015: when an arbitration agreement is declared invalid by the Chinese court, an arbitral award made prior to such declaration is not against China’s public policy and enforceable, while an arbitral award made after such declaration would violate China’s public policy and not enforceable. Yet this rationale creates controversies as to whether a previous court ruling on the validity of arbitration agreement would enjoy an absolute res judicata effect, and raises concerns as to whether it is consistent with the Chinese courts’ pro-enforcement position.