Chinese Court Decides on Method of Service in Arbitration
By Patrick Zheng | Charles Qin
National arbitration laws generally provide for the methods of serving or delivering written communications in arbitration proceedings. For example, the English Arbitration Act 1996 provides that the parties are free to agree on the manner of service of any notice or other document required or authorized to be given or served in pursuance of the arbitration agreement or for the purposes of the arbitral proceedings. [1]
When determining whether notice is properly given, national courts generally do not apply the formalities of service of summons used in domestic court proceedings. The reason for this is that by agreeing to arbitration, the parties should be regarded as having waived judicial formality requirements. Courts look to the parties’ agreement or institutional rules and consequently many different forms of service have been deemed adequate, such as simple mail, registered mail, fax, courier, service agent or even email.
The LCIA Arbitration Rules (2014) go one step further and have replaced the wording “service” by “delivery”, emphasizing the difference between arbitration and litigation and further relaxing the stringent requirements of service.[2]
PRC Arbitration Law is silent on the appropriate method of service in arbitration, leaving it to the arbitral institution to prescribe under the Chinese Civil Procedure Law. As a result, it is unclear whether the formalities of service of summons in litigation proceedings should also apply in arbitration.
In a recent Chinese case[3], the Yichang Intermediate Court (the “Court”) ruled that for service in arbitration to be effective, it must follow the rules of service under Chinese civil procedure and, on that ground, set aside an arbitral award rendered by a tribunal of the Yichang Arbitration Commission (the “Tribunal”). In that case the Court held that the notice of arbitration effected through service by publication had been improperly served. This case illustrates some unique aspects of service in Chinese arbitration and how the Chinese courts address the issue of service of a notice of arbitration.
Background
Xu Xin (the “Applicant” in the court procedure seeking setting aside of an arbitral award) entered into a contract for the sale and transportation of vehicles (the “Contract”) with Shennongjia Wantong Logistics Co., Ltd. (the “Respondent”). They agreed to settle disputes arising between them by arbitration before the Yichang Arbitration Commission (the “Commission”). In the arbitration process, the Commission served the notice through service by publication to the Applicant. (Service by publication refers to an official notification published in the newspaper.) The applicant did not appear, so the Tribunal continued the proceedings in the absence of him and rendered a default award.
The Court Proceedings
The Applicant brought the case to the Court arguing that the arbitral award should be set aside since it did not follow the rules of service of notice and thus violated due process.
The Applicant alleged that the Respondent deliberately provided a wrong home address for him, making it impossible for the Commission to serve him the notice to his home address. Although his identity information, including ID card, driver's license and telephone number were clearly stated in the notice of arbitration, the Applicant did not receive any telephone or SMS notice. Instead, the Commission served the notice by way of publication, which did not constitute a valid service of the notice.
The Court observed that the PRC Arbitration Law provides that an Arbitration Commission must serve the notice of arbitration in accordance with arbitration rules formulated pursuant to the arbitration law and the PRC Civil Procedure Law.[4] Therefore, the Court held that the relevant provisions on service in the Civil Procedure Law can also apply to arbitration procedure.
Service by publication is permitted when a legal action is initiated against a defendant, and that defendant cannot be found to accept delivery of legal documents. Under Chinese law, service by publication is provided for in Article 92 of the Civil Procedure Law, stating that if the defendant to be served is unknown or cannot be served by other means specified, service by publication shall be applied.
Judicial interpretation by the Supreme People’s Court further provides that service by publication can only be applied when the defendant to be served is unknown or cannot be served by other means as stipulated in the Civil Procedure Law. [5]
Based on the above, the Court held that the circumstance in this case did not merit service by publication because the Tribunal could have served the arbitration notice to the Applicant using his identifying information. Therefore, the Arbitration Commission's manner of service was defective and thus the Court set aside the arbitral award on the ground for violation of due process.
Comment
Service by publication or public notice is quite unusual in international arbitration practice, but affected by Chinese judicial practice, some domestic arbitration commissions still adopt this method as one of the ways of serving a notice of arbitration.[6]
But leaving this unique mode of service aside, the more important issue is that the distinction between litigation and arbitration in respect of service has not yet been firmly established in China and courts not infrequently apply civil procedure rules to the service of arbitration notice, as shown in this case. This is an important issue which needs to be taken into account when conducting arbitration in China.
【Endnote】
[1] Article 76(1), Arbitration Act 1996.
[2] Article 4, LCIA Arbitration Rules (2014).
[3] (2018)鄂05民特46号.
[4] Article 75, the PRC Arbitration Law.
[5] Article 15, the Several Opinions of the SPC on Further Strengthening the Work on Service of Notice in Civil Procedure.
[6] Article 57, Weifang Arbitration rules.
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