Judicial Intervention in International Arbitration: A Comparative Study of the Scope of the New York Convention in U.S. and Chinese Courts

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Abstract: The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards has been praised as one of the most efficient and powerful multilateral legal instruments in promoting international commercial arbitration. The implementation of the Convention, however, depends heavily on the domestic legal mechanisms of contracting states. By strategically adjusting its scope, local courts may expand or limit the benefits of the Convention in a significant way. The comparison between the practices of United States and Chinese courts present two extreme examples of this scope issue. There is considerable room to improve the domestic implementation of the Convention in both countries. Comparison of the two countries also reveals that appropriate domestic judicial intervention on the scope of application is required in order to secure the benefits offered by the Convention.

I. INTRODUCTION

Arbitration has become a popular alternative dispute resolution avenue, both domestically and globally. Arbitration is praised for its speed, the autonomy it provides to parties, the arbitrators' technical expertise, the confidentiality of proceedings, and its relatively low cost.1 When the setting for commercial dispute resolution is international, arbitration precludes the uncertainty of procedures in foreign courts. This is especially attractive for Western investors in commercial disputes involving developing countries of different cultures and conflicting political ideologies, such as Communist China.2 Enforcing arbitral awards in a foreign country is also much more practical than enforcing a court judgment due in large part due to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention" or "Convention").3

The New York Convention offers a powerful instrument for enforcing arbitration agreements and arbitral awards among its 130 plus contracting parties.4 It requires each contracting state to recognize and enforce arbitral awards entered in the territory of another state, as well as those awards that a contracting state considers non-domestic awards.5 It also requires contracting states to recognize written arbitration agreements.6 To benefit from the Convention, an arbitration proceeding must fall within the Convention's scope. Although the Convention's drafters strove for an unambiguous compromise among different legal systems, the implementation of the Convention in domestic courts differs dramatically from one country to another and, in some cases, from one court to another within the same country.7

In recognizing and enforcing awards that fall under the scope of the Convention, contracting states are required to apply the criteria set forth therein.8 Unfortunately, as a result of compromises among nations, the scope of the Convention is not clearly defined. Ambiguity of language in the Convention, discrepancies in legal concepts, and judicial discretion give rise to complexity in the Convention's coverage. Moreover, because it is impossible to require universal procedural protections in different legal systems, each contracting state must determine the implementation procedures of the Convention within its jurisdiction. In order to understand its application, one must put the Convention in the context of each contracting state's legal system.

Both China and the United States are members of the New York Convention.9 However, because of differences in court systems, sources of law, and legal methodology, the Convention's application differs dramatically between the two countries.

This article compares the effects of domestic court interventions on the scope of the New York Convention, in both China and in the United States. Most significantly, if a claim is not within the scope of the Convention, the purported substantive benefits provided in the Convention become meaningless to the claiming party. Local court interpretations are therefore crucial to achieving the Convention's goals. …