CHINA Law and Practice Contributed by: Elsie Shi, George Yu, Eleanor Gu and Zach Xu, Jincheng Tongda & Neal Law Firm
ests, the court may issue an enforcement order to give effect to the judgment. 9.5 Enforcement of Arbitration Clauses Under Article 2 of the Arbitration Law, arbitration clauses contained in commercial insurance and rein- surance contracts are legally enforceable. However, a valid arbitration clause shall incorporate the following essential elements: • an expression of intent for an application for arbi- tration; • a clearly defined subject matter for arbitration; and • a chosen arbitration commission. Where an arbitration agreement fails to specify, or unclearly specifies, the arbitrable matters or the arbi- tration institution, the parties may conclude a supple- mentary agreement. If no such agreement is reached, the arbitration agreement shall be void. 9.6 Enforcement of Awards Under Article 248 of the Civil Procedure Law, a party may apply to enforce a domestic arbitration award when the other party fails to comply, unless the award falls within the special circumstances enumerated therein. On 2 December 1986, China acceded to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), subject to two reservations: the reciprocity princi- ple and the commercial reservation. PRC courts are accordingly bound to recognise and enforce arbitral awards rendered in other contracting states in compli- ance with the Convention’s provisions. For enforcement of foreign arbitral awards, Article 304 of the Civil Procedure Law permits a party to file a direct application to the intermediate court in the place of the domicile of the person against whom the application is made or where the property of that per- son is located. Where the respondent’s domicile or the subject property is situated outside China, the appli- cant may alternatively petition the intermediate court at their own domicile or at a venue bearing a proper connection to the dispute. The court shall adjudicate the matter in accordance with international treaties to
which China is a party, or based on the principle of reciprocity. 9.7 Alternative Dispute Resolution Alternative dispute resolution (ADR), particularly medi- ation, is integral to settling insurance disputes in Chi- na. According to Article 9 of the Civil Procedure Law, courts handling civil cases shall conduct mediation based on the principles of voluntariness and legal- ity. In practice, mediation is commonly organised by judges or specially invited mediators. The position is not different with respect to consumer contracts or reinsurance contracts. 9.8 Penalties for Late Payment of Claims Pursuant to Article 23 of the Insurance Law, upon receiving a claim from the insured or beneficiary, the insurer must assess it promptly or within 30 days for complex cases (unless the contract provides other- wise) and should notify them. For claims within cover- age, payment should be made within ten days after an agreement is reached. Where the insurance contract provides for a time limit for compensation or payment, the insurer must fulfil its obligations within such time limit. If the insurer fails to provide timely compensation, it must not only pay the insurance monies but must also compensate for any losses caused by the delay. Additionally, the insurance regulatory authorities may impose a fine ranging from CNY50,000 to CNY300,000 on the insurer. 9.9 Insurers’ Rights of Subrogation Under Article 60 of the Insurance Law, where an insured event is caused by a third party’s damage to the subject matter of insurance, the insurer shall, from the date it pays compensation to the insured, exercise subrogation rights against the third party within the limits of the amount paid. However, if after the occurrence of the insured event the insured has already obtained compensation from the third party, the insurer may make a corresponding deduction from the insurance money payable to the insured. In addition, the insurer may not claim against the insured’s family members or the insured’s constituent
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