Supreme People’s Court, Zhi Jian Zi [1999] No. 174-1, June 20, 2002.

To the High People's Court of Guangdong Province:

This is to acknowledge receipt of your Report on the Request for Instruction on “the Enforcement of an Arbitral award ([1996] Hangzhou Economic Contract Arbitration Commission, Arbitration, No. 80) filed by the Hangzhou Yan'an Road Sub-branch of the Agricultural Bank of China” ([1999] Guangdong HPC Zhi Jian Zi No. 65-2). After discussion, we reply as follows:

On October 25, 1996, the Hangzhou Economic Contract Arbitration Commission made Arbitral award “[1996] Hangzhou Economic Contract Arbitration Commission, Arbitration, No. 80” with respect to a dispute over a guarantee for a cooperation contract between the applicant, Zhejiang Trust Investment Co., Ltd. of the Agricultural Bank of China (which is now renamed to Hangzhou Yan'an Road Sub-branch of the Agricultural Bank of China, hereinafter “Agricultural Bank”) and the respondents, Shenzhen Zhenghua Industrial Co., Ltd. (hereinafter “Zhenghua”) and Shenzhen Futian Sub-branch of the China Merchants Bank (hereinafter “Merchants Bank”). The Award stated that Zhenghua shall repay the loans to the Agricultural Bank and the interests thereof amounting to approximately RMB 6.17 million within 10 days after the Award became effective, and the Merchants Bank shall bear the several and joint liability for the repayment of the loans. In the enforcement of that Award, the party subject to the enforcement (Merchants Bank) applied with the Intermediate People's Court of the Shenzhen Municipality to deny the enforcement of the Award. The said court held that the parties concerned only agreed on the place of arbitration, but failed to either designate an arbitration institution not to reach a supplementary agreement thereafter; therefore, the arbitration agreement shall be deemed invalid and the Hangzhou Economic Contract Arbitration Commission had no jurisdiction over this case for arbitration. Thus, the Award is decided not to be enforced. The decision is issued in the Civil Decision ([1997] Shen Zhong Fa Zhi Zi No. 10-15).

We are of the opinions that the arbitration agreement involved in this case should be deemed invalid because it only specified the place of arbitration, and failed to designate an arbitration institution. However, the invalidity of an arbitration agreement is not equivalent to the absence of an arbitration agreement. The invalidity of an arbitration agreement would lead to the non-preclusion of the court's jurisdiction. The parties may elect to be subject to a competent court's jurisdiction, thereby precluding the jurisdiction of arbitration. If the parties do not file an action with a court, but choose instead to respond to the suit through arbitration, the parties shall be deemed to have accepted the jurisdiction of the relevant arbitral tribunal. The Merchants Bank did not file an action with a court before the arbitral tribunal was rendered. Instead, the party attended the arbitration and responded to the suit. The Merchants Bank should be deemed to have accepted the award made by the arbitral tribunal regarding the parties' jurisdiction-related dispute. From a procedural perspective, the arbitral award involved in this case, which was rendered after the party's objection on the jurisdiction issue was decided to be dismissed, conformed to the Arbitration Law and the Civil Procedure Law, and thus denial to enforce the award lacked a legal basis. The enforcement court should not examine the validity of the arbitration agreement, nor should it deem the invalidity of the arbitration agreement as the absence of an arbitration agreement and use it as a basis to decide to deny the enforcement of the award. Therefore, the Decision of the Intermediate People's Court of the Shenzhen Municipality on denying the enforcement is incorrect, and the arbitral award involved in this case shall be enforced.

You are required to supervise the enforcement court to handle the case in accordance with the said opinions, complete the case within two months, and file the relevant report with us.

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最高人民法院关于仲裁协议无效是否可以裁定不予执行的处理意见

*The original text is Chinese and has been translated into English for reference only. If there is any inconsistency or ambiguity between the Chinese version and the English version, the Chinese version shall prevail.