Judicial interpretations & arbitration

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partial screenshot from SPC website of the most recently issued judicial interpretations

While Supreme People’s Court (SPC) judicial interpretations are unquestionably binding on the lower courts, one of the many questions that Chinese legislation does not answer clearly is the broader extent to which they are binding.  [2007 SPC regulations state that “the judicial interpretations issued by the Supreme People’s Court have the force of law (具有法律效力).  The issue poses both theoretical and practical questions and is one that I had been exploring earlier this week offline with several blog followers (and some others in the Chinese legal community), in relation to Chinese law governed arbitration.

Coincidentally on 5 April Wang Jun, former dean of the Law School of the University of International Business and Economics and senior consultant to Cyan Law (采安律师事务所) posted his analysis of a recent Chinese court case on the firm’s Wechat account that raises the issue of whether judicial interpretations are binding in a Chinese law governed arbitration (court cases, of course lack binding precedential value, as I wrote in my Tsinghua China Law Review last year).

The court case was a ruling in response to an application to cancel (set aside) an arbitral award of the Shangrao [Jiangxi] Arbitration Commission, one of the 250 or so domestic arbitration commissions, in a private lending dispute. The parties that applied to cancel  the award alleged that the arbitral tribunal’s failure to apply the cap on interest in the Supreme People’s Court 2015 interpretation on private lending evidenced that the arbitral tribunal had twisted the law in arbitration.

The court ruled:

the arbitral award is the result of the independent judgment of the arbitration tribunal. If it finally determines that there is a gap between the principal and interest of the loan owed by …[the debtor] and the judicial interpretation, that is within the scope of the arbitral tribunal’s understanding and application of law, not an act of twisting the law in arbitration. Moreover…[the applicants] did not provide this Court with evidence that the arbitrators had sought or accepted bribes, committed malpractices for personal benefits or perverted the law in the arbitration. Therefore, [the applicants] application ton cancel the arbitral award lacks a factual and legal basis. This Court does not support it according to law.

 Wang Jun (and his team) commented:

Whether the judicial interpretations of the Supreme People’s Court as a matter of course apply to arbitration cases has always been a controversial matter. We believe that judicial interpretations are what the Supreme People’s Court has promulgated regarding how specifically to apply the laws in the courts’ trial [adjudication] work. It is limited to court trials [adjudication] and does not necessarily apply in arbitration cases. And Article 7 of the Arbitration Law expressly provides that arbitration should be based on facts, in line with the law, fair and reasonable settlement of disputes. Therefore, it can be argued that arbitral tribunals do not necessarily have to be bound by the judicial interpretation of the Supreme People’s Court when hearing cases.

On the issue of applying judicial interpretations in arbitration

The initial response to my question of whether judicial interpretations are binding was that views differ among (Chinese) arbitrators, but that it is an issue arbitrators keep in mind because of the power of courts to review arbitral awards. A number of senior Chinese arbitrators, who have heard cases both inside and outside China, further shared their views with me.  One commented that because judicial interpretations in China serve as an important source of interpretation of law, as more detailed and convincing guidance on how Chinese legislation should be applied, that he usually followed (applied) judicial interpretations of Chinese substantive law in arbitration. He distinguished the rare case where he might think that the judicial interpretation was wrong.  Another arbitrator commented that in his experience in Chinese law governed arbitrations, judicial interpretations were considered binding.  A third prominent arbitrator sought to distinguish domestic arbitrations from foreign-related and international arbitrations, where the standards of review were different.

Is practice any different when non-Chinese arbitrators are sitting as arbitrators? Does it make a difference if the arbitration is seated outside of [mainland] China, or does it depend?  Those with further information, please share what you know through the comment function or by Wechat or email.