How to Recognize and Enforce a Foreign Arbitral Award Against an Offshore Company?
Addtime:2020-05-12     Browse:65     Author:admin

Recently, we successfully applied for recognition of a London arbitral award before the Tianjin Maritime Court. The respondent of the arbitration award was a company registered in British Virgin Islands (hereinafter referred to as “BVI”), and it raised an objection to jurisdiction on the ground that its domicile was outside the territory of China. Finally, the two courts of first and second instances supported our claim, holding that Beijing was the place of main administrative office of the BVI company, and ruled that the Tianjin Maritime Court had jurisdiction over the case.

Usually, the place of actual business of an offshore company in which Chinese citizen serves as shareholder or director is in China. However, when applying for recognition and enforcement of foreign arbitral awards against an offshore company, the applicant is often refused or rejected by the court on the grounds that the domicile of the offshore company is not in China or the offshore company has no enforceable property in China. Even if the applicant argues that the place where offshore company’s main administrative office is located in China, some Chinese courts still consider that the place of main administrative office is an office registered by industry and commerce departments, and reject the application on this basis.

Art.63 of the General Provisions of Civil Law provides “A legal person’s domicile shall be the place of its main administrative office. If a legal person needs to be registered in accordance with the law, it shall register the place of its main administrative office as its domicile.” Art.39 of the General Principles of the Civil Law of PRC, Art.10 of the Company Law of PRC as well as Art.12 of the Regulations of PRC on the Registration Administration of Companies provide that A legal person's domicile shall be the place where its main administrative office is located. “Place where administrative office is located” means the place where business activities of the legal person are enforced and where organizational matters of such legal person are decided on and handled.  “Place where main administrative office is located” should be construed as the place where the unit that commands the business of the legal person is located.

In order to accurately determine the domicile of a legal person, Art.3 of the Interpretations of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China provides that “…… The domiciles of legal persons or other organizations shall refer to the places where the main administrative offices of the legal persons or other organizations are located. The domiciles of legal persons or other organizations shall be the places of registration of the legal persons or other organizations if the locations of their main administrative offices cannot be ascertained.” We hold that when the court determines the jurisdiction of litigation, it should first examine and confirm the location of the main administrative office of the legal person, and only when relevant evidence is not enough to determine the location of the main administrative office, can the place of registration of the legal person be deemed as its domicile, which is only a miscellaneous clause set up to protect the bona fide counterpart in a transaction with the legal person. It should be the legal person's obligation to register the place where its main administrative office is located as its domicile, rather than the legal person's right to defend itself based on place of registration when the place of registration is inconsistent with the place of operation.

The registration system of offshore companies in BVI is different from that in China. Under Chinese law, the registration system of enterprise legal person is based on the complete system of enterprise information registration publicity, and the establishment of the registration publicity system of legal person domicile in China is intended to rely on the publicity and credibility of the place of registration of legal person to take the registration information as effective evidence to confirm the domicile of legal person, but if the counterpart maliciously chooses the place of company registration, or there is enough evidence to refute it, the probative force of the registration information can be overruled. Art.65 of the General Provisions of Civil Law provides “the inconsistency between the actual circumstances of a legal person and the registered information on the legal person shall not be set up against bona fide opposite parties”. BVI’s registration procedures and examination requirements for offshore companies are very simple and the company’s registration information is not publicized. However, the BVI Business Companies Act provides that an offshore company shall not engage in business with a BVI resident or have an interest in real property located in BVI or conduct banking and trust business in the BVI, and shall not carry out business of company management in BVI. Therefore, BVI only provides convenience for the registration of offshore companies, BVI is not the place where the main administrative office of an offshore company is located.

In our case, we found that the actual business address of the respondent was an enterprise registered in Beijing by its sole director. We proved to the court that the location of the main administrative office of the respondent was located in Beijing by demonstrating the following links to the court:

1.  The guarantee letter for cargo release issued by the respondent and the e-mail used by it for communication are consistent with the e-mail address of the company registered in Beijing;

2.   The address used by the respondent to pay the hire under the involved charter party is the same as the correspondence address of the such company registered in Beijing;

3.   The sole shareholder and director of the Respondent are the same as the legal representative of the company registered in Beijing, and he is a Chinese citizen;

4.   The Beijing Changan Notary Public Office notarized the process of serving the notice of arbitration involved in the case, and there is a nameplate of the respondent on the hung on outdoor wall of the room;

5.   Upon receipt of the notice of arbitration, the respondent entrusted a lawyer to participate in the arbitration in London.

It should be noted that although our case is of certain significance for the establishment of jurisdiction links between offshore companies, such as those registered in BVI, and Chinese courts, our case is not universal for establishing jurisdiction over offshore companies with main administrative offices located in China. The particularity of our case is that the we have found and enumerated exhaustively many links between the BVI-registered company and Beijing during the process of handling the case, and more importantly, at the beginning of the London arbitration, we have intervened in and requested Beijing Changan Notary Public Office to notarize the process of serving the notice of arbitration.

It is our view that the opinion of Chinese lawyer shall be sought as early as possible before the initiation of foreign arbitration, so as to lay a good foundation for the recognition and enforcement of future foreign arbitral awards in China. Please feel free to contact us if you have any question regarding the filing of a lawsuit against an offshore company such as BVI-registered company or the application for recognition of a foreign arbitral award, or if you, as an offshore company, have concerns about circumventing possible legal risks under Chinese law.

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