Time Limits in Arbitration Rules: What Happens if an Award is Delayed? Lessons from the Jiangsu Skyrun Case in China.

Japanese Attorney at Law - Bengoshi L.L.

• 10 min read

International arbitration is often chosen for its perceived efficiency and the expertise of its arbitrators. Key to this efficiency is the adherence to procedural timelines, including those for rendering an arbitral award. Most institutional arbitration rules set forth expected, and sometimes extendable, periods within which a tribunal should issue its award after the close of proceedings. But what are the consequences if these time limits are exceeded? Can a party successfully resist the enforcement of an otherwise valid award solely on the basis that it was delivered late, in alleged contravention of the agreed-upon institutional rules? A notable decision from the Nantong Intermediate People's Court in China, dated March 24, 2008 (following guidance from the Supreme People's Court dated March 3, 2008), in a case often referred to as the Jiangsu Skyrun matter, provides a stark illustration of how such procedural lapses can, in certain jurisdictions, lead to the refusal of recognition and enforcement under the New York Convention.

I. The JCAA Arbitration: A Dispute Over Prices and a Significantly Delayed Award

The underlying dispute involved a Japanese company (Claimant in the arbitration) and a Chinese company (Respondent) concerning the price of goods under a long-term sales contract. The contract provided for arbitration in Tokyo, Japan, under the Commercial Arbitration Rules of the Japan Commercial Arbitration Association (JCAA).

The arbitral proceedings unfolded with a critical sequence of events related to timelines:

  1. Initial Closure of Proceedings: On April 5, 2005, at an oral hearing, the arbitral tribunal decided to close the proceedings on May 31, 2005.
  2. Reopening and Re-closure: The Japanese Claimant later sought to amend its claim, leading the tribunal to reopen the proceedings. On July 7, 2005, the tribunal permitted the Claimant's amendment and again formally declared the proceedings closed, notifying both parties.
  3. Anticipated Award Date and First Extension: On July 29, 2005, the tribunal informed the parties that it expected to issue its award by the end of August 2005. Subsequently, on August 31, 2005, the tribunal notified the parties of a 20-day extension, stating that the award would now be rendered by September 20, 2005.
  4. Missed Deadline and Further Delay: The award was not issued on September 20, 2005. There appears to have been no further formal notification from the tribunal to the parties explaining this additional delay or setting a new anticipated date.
  5. Award Finally Issued: The arbitral award was eventually rendered on February 23, 2006. This was approximately five months after the extended deadline of September 20, 2005, and over seven months after the formal re-closure of proceedings on July 7, 2005.

The award ordered the Chinese Respondent to pay the Japanese Claimant approximately USD 15 million. The Chinese company did not voluntarily comply with the award.

II. The Enforcement Attempt in China and the Respondent's Objections

The Japanese company subsequently applied to the Nantong Intermediate People's Court in Jiangsu Province, China, for the recognition and enforcement of the JCAA award under the New York Convention (to which both Japan and China are signatories).

The Chinese Respondent raised several objections to enforcement, focusing primarily on the tribunal's significant delay in issuing the award and its alleged failure to properly notify the parties of this extensive delay. The Respondent argued that these actions contravened the JCAA Rules (which the parties had expressly agreed would govern their arbitration) and potentially Japanese arbitration law. These breaches, it contended, fell under specific provisions of Article V of the New York Convention, namely:

  • Article V(1)(d): This article allows refusal of enforcement if "the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place."
  • Article V(1)(b): This article allows refusal if the party against whom the award is invoked "was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case." (The relevance of this ground to a delay in issuing an award after proceedings closed is debatable, but it was cited in the Supreme People's Court's guidance).

III. The Chinese Courts' Decisions: Enforcement Refused

In China, when an intermediate court considers refusing enforcement of a foreign or foreign-related arbitral award, it must follow an internal reporting system. The decision is escalated to the relevant Provincial High People's Court, and if that court also agrees with refusal, the matter is reported to the Supreme People's Court (SPC) for final approval or direction. This system is intended to ensure consistency and adherence to China's obligations under the New York Convention.

In the Jiangsu Skyrun case:

  1. The Nantong Intermediate People's Court was inclined to refuse enforcement.
  2. It reported its view to the Jiangsu Provincial High People's Court, which concurred.
  3. The matter was then reported to the SPC.

A. The Supreme People's Court (SPC) Reply (March 3, 2008)
The SPC, in its reply (Min Si Ta Zi No. 26 (2007)), agreed that enforcement should be refused. Its reasoning was as follows:

  • Breach of JCAA Rules on Time Limits for Award:
    • The SPC cited the then-applicable JCAA Commercial Arbitration Rule 53(1), which stipulated that an arbitral tribunal must render its award within five weeks from the date of closing the proceedings. This period could be extended by the tribunal if deemed necessary due to the complexity of the case or other circumstances, but such an extension should not exceed eight weeks.
    • The SPC calculated that, from the closure of proceedings on July 7, 2005, even the maximum eight-week period (including extensions allowable under Rule 53(1)) would have expired well before the award was actually issued on February 23, 2006. The notified extension to September 20, 2005, was within this initial framework, but the subsequent five-month delay was not.
    • Since the parties had explicitly agreed to the JCAA Rules, these rules formed part of their arbitration agreement. The tribunal's failure to adhere to these time limits was, therefore, a failure to conduct the arbitral procedure in accordance with the agreement of the parties, falling under Article V(1)(d) of the New York Convention.
  • Breach of Notification Duty / NY Convention Article V(1)(b):
    • The SPC also referred to JCAA Rule 53(2) (requiring the tribunal to inform parties of the timing of the award upon closing proceedings) and implicitly to Rule 12(2) (allowing the tribunal to extend time periods prescribed by the Rules, with a duty to promptly notify parties of such extensions).
    • It found that after notifying the parties of the September 20, 2005, award date, the tribunal failed to issue any further notifications regarding the subsequent extensive delay until the award was finally rendered in February 2006.
    • The SPC somewhat contentiously linked this failure to notify of the further delay to Article V(1)(b) of the New York Convention, which concerns a party not being given proper notice of the proceedings or being otherwise unable to present its case.

B. Nantong Intermediate People's Court Decision (March 24, 2008)
Following the SPC's directive, the Nantong Intermediate People's Court formally issued its ruling refusing recognition and enforcement of the JCAA award. Its reasoning largely mirrored that of the SPC, focusing on the violations of JCAA Rules 53(1) (time limit for award) and 12(2)/53(2) (notification of extensions/award timing) as constituting a failure to follow the agreed arbitral procedure under Article V(1)(d) of the New York Convention.

IV. Analyzing the Jiangsu Skyrun Decision: A Strict Interpretation?

The Jiangsu Skyrun decision is noteworthy for its strict, formalistic application of institutional rules concerning award timelines as a basis for refusing enforcement under the New York Convention. Several aspects of this reasoning warrant closer examination:

A. Mandatory vs. Directory Time Limits in Institutional Rules:
A key question is whether time limits for rendering awards in institutional rules, like JCAA Rule 53(1), are "mandatory" (meaning strict compliance is essential, and breach leads to invalidity) or "directory" (meaning they are guidelines or targets, and non-compliance does not automatically vitiate the award, especially if no prejudice results).

  • International arbitration practice and commentary generally lean towards interpreting such time limits as directory, unless the rules themselves or the parties' agreement explicitly state they are mandatory and link non-compliance to a loss of the tribunal's jurisdiction or the invalidity of the award.
  • The JCAA Rules themselves, particularly the then-Rule 12(2), provided the tribunal with a general power to extend "any period prescribed in these Rules (including periods set by the arbitral tribunal)," with the notable exception of specific time limits for expedited procedures (under then-Rule 65), which was not the type of proceeding in Jiangsu Skyrun. This suggests that the JCAA Rules framework itself viewed most timelines, including for award issuance, as extendable by the tribunal. If the tribunal had the power to extend, then exceeding an initial estimate, even an extended one, might be seen as a further exercise (or failure to formally document an exercise) of that power, rather than a fundamental breach rendering the procedure non-compliant with the parties' agreement for Article V(1)(d) purposes.

B. The Relevance of New York Convention Article V(1)(b):
The SPC's reliance on Article V(1)(b) ("unable to present his case") seems misplaced in the context of a delay in issuing an award after the proceedings have been declared closed. This provision is fundamentally about ensuring due process during the adversarial phase of the arbitration—the opportunity to know the case against you and to respond with your own evidence and arguments. A delay in the tribunal's deliberations and award drafting, while potentially frustrating, does not typically prevent a party from having presented its case.

C. The Missing Elements of Waiver and Prejudice:
A significant aspect often considered by courts in other jurisdictions when faced with procedural defect arguments under Article V(1)(d) is whether the objecting party waived its right to complain and whether the alleged defect caused any actual prejudice.

  • Waiver: Did the Chinese Respondent raise any objection to the JCAA tribunal about the ongoing delay after September 20, 2005, before the award was issued? If a party is aware of a procedural irregularity (like a delay) but continues without protest, it may be deemed to have waived its right to object later. The Jiangsu Skyrun decisions do not appear to discuss any such objections or the lack thereof.
  • Prejudice/Materiality: Did the delay in issuing the award cause any tangible prejudice to the Chinese Respondent? For example, did it affect its ability to comply, or did circumstances change materially during the delay to its detriment in a way that an earlier award would have avoided? Many arbitration-friendly jurisdictions are reluctant to refuse enforcement for procedural defects unless those defects are serious and have caused, or are likely to have caused, prejudice to the objecting party or impacted the outcome of the award. The Chinese courts' analysis in Jiangsu Skyrun did not seem to engage with this question of prejudice.

D. Comparison with International Approaches:
The approach in Jiangsu Skyrun can be contrasted with that in some other jurisdictions. For instance, a German Higher Regional Court (Bavaria, September 23, 2004), faced with an award rendered more than four months late under the parties' agreed time limit, refused to deny enforcement under Article V(1)(d). The German court reasoned that the objecting party had failed to raise the issue of delay during the proceedings (waiver) and, importantly, there was no indication that an earlier award would have been different in substance (no prejudice). Similarly, U.S. courts applying domestic law (e.g., Laminoirs-Trefileries-Cableries de Lens, S.A. v. Southwire Co. (N.D. Ga. 1980)) have often held that award delays are not fatal unless there is demonstrable prejudice and a timely objection was made.

However, it is also true that some jurisdictions can take a very strict line. A French Court of Appeal decision (Paris, September 22, 1995) refused enforcement where a tribunal breached a party-agreed deadline for the award, viewing the deadline as a fundamental component of the parties' consent and its breach as an excess of authority potentially contrary to international public policy. The Jiangsu Skyrun outcome, therefore, while perhaps stricter than in some other major arbitral jurisdictions, is not entirely without parallel if time limits are seen as absolutely fundamental to the procedural compact.

V. Implications for Businesses Arbitrating with Chinese Parties or Enforcing in China

The Jiangsu Skyrun decision, particularly the SPC's guidance, offers several important, if cautionary, lessons for international businesses:

  1. Potentially Strict Adherence to Rules by Chinese Courts: The case signals that Chinese courts, when reviewing applications to enforce foreign arbitral awards under the New York Convention, may adopt a very strict and formalistic approach to assessing compliance with the agreed-upon institutional arbitration rules. Even seemingly directory time limits or procedural steps might be treated as essential components of the "agreement of the parties" for the purpose of Article V(1)(d).
  2. Importance of Tribunal Diligence and Record-Keeping: For arbitral tribunals conducting arbitrations where enforcement in China is a possibility, this case underscores the need for meticulous observance of all rule-based timelines and notification requirements. Any extensions of time should be formally decided, reasoned (if required by the rules), and promptly communicated to the parties, with a clear record kept.
  3. The SPC Reporting System: The involvement of the SPC through its internal reporting and pre-approval system for decisions refusing enforcement of foreign or foreign-related awards means that such decisions are subject to central oversight. While this aims to ensure consistency and compliance with China's treaty obligations, it also means that lower court decisions are not independent and may reflect broader judicial policies or interpretations favored by the SPC.
  4. Risk Assessment for Enforcement in China: While China, on the whole, has a reasonably good track record of enforcing New York Convention awards, cases like Jiangsu Skyrun highlight potential pitfalls. Parties should be aware that arguments based on procedural non-compliance, even if they might be overlooked or excused in other jurisdictions (e.g., due to lack of prejudice or waiver), could find a more receptive ear in Chinese enforcement proceedings.
  5. Party Conduct (Waiver/Objection): Although not a focus in the Jiangsu Skyrun court reasoning, parties facing procedural delays or other irregularities in an arbitration should always consider making timely and formal objections to the tribunal to preserve their rights, rather than waiting until the enforcement stage. Had the Chinese company done so, and the JCAA tribunal had either rectified the situation or formally ruled on the objection, the enforcement landscape might have been different.

Conclusion

The Jiangsu Skyrun case serves as a significant cautionary tale regarding the critical importance of procedural diligence and adherence to agreed rules in international arbitration, especially when the enforcement of an award may ultimately be sought in China. While international arbitration practice in many jurisdictions tends to treat time limits for rendering awards as directory rather than mandatory, and often requires a showing of prejudice or a lack of waiver before refusing enforcement for procedural breaches, the Chinese courts in this instance adopted a notably stricter interpretation of Article V(1)(d) of the New York Convention.

The decision emphasizes that parties and arbitral tribunals alike should pay scrupulous attention to all agreed procedural requirements, including timelines for award issuance and any associated notification duties. For businesses involved in arbitrations where China is a likely place of enforcement, this means that ensuring the arbitral process meticulously follows the chosen institutional rules is not just a matter of good practice, but potentially a crucial factor in the ultimate enforceability of a favorable award. While the New York Convention aims for uniformity, local judicial interpretations and approaches, as seen in Jiangsu Skyrun, can still present significant challenges.