We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
05 August 2010
The New York Convention provides that a foreign arbitral award may be refused recognition and enforcement if the subject matter of the award is not arbitrable under the law at the place of the enforcing court. Article V(2)(a) states that:
"Recognition and enforcement may also be refused if the competent authority in the country where recognition and enforcement is sought finds that... the subject matter of the difference is not capable of settlement by arbitration under the law of that country."
Under Chinese law, inheritance disputes cannot be settled by arbitration.
In Wu Chunying v Zhang Guiwen the Supreme People's Court issued a direction to Shandong Higher People's Court that an arbitral award issued by the Mongolian National Arbitration Centre should be refused recognition and enforcement in accordance with the exception under Article V(2)(a) of the convention. The Supreme People's Court stated that the subject matter of the award was an inheritance dispute and that such disputes are not arbitrable under Article 3 of the Arbitration Law.
Zhao Xinshuang, the husband of the claimant, entered into a contract with respondent Zhang Guiwen in January 2002. They established a limited liability company in Mongolia with Zhao and Zhang as its two shareholders. The contract contained an arbitration clause providing for arbitration before the Mongolian National Arbitration Centre. Zhao died of a sudden illness in February 2006. In November 2006 his wife filed arbitration proceedings with the centre. Among other things, she sought (i) the dissolution of the company as a result of her husband's death, and (ii) a declaration that she owned 50% of the equity in the company.
An award was issued which confirmed Wu's title to a 50% equity share in the company, but dismissed the claim for dissolution of the company. The award cited Article 520 of the Mongolian Civil Code and confirmed Wu's status as her late husband's legal heir.
Shandong Higher People's Court stated that Wu had presented one of her claims in the arbitral proceedings as being "to inherit [Zhao's] 50% investment in the company". In the enforcement proceedings Wu had described the arbitration as relating to "disputes between the claimant and the respondent in relation to corporate operations and inheritance". Moreover, the tribunal's final award had confirmed Wu's status as Zhao's heir in accordance with the code. Therefore, the subject matter of the arbitration was an inheritance dispute.
This case involved subtle issues in relation to the definition of the term 'inheritance dispute'. Such disputes usually involve parties who are heirs or purported heirs. It is unclear from the limited material available whether Wu's status as her husband's heir was challenged in the arbitral proceedings. Depending on the way in which a case is presented, a request for a declaration of title to a 50% equity share in a company by way of succession is not necessarily an inheritance matter for the purpose of the Arbitration Law; rather, it might be characterized as a commercial dispute.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.