How the New York Convention affects Chinese companies in California

| Mar 18, 2021 | Business Law, Enforcing Foreign Judgments |

Some Chinese companies might be wary of doing business in California. These worries often stem from their fear that a judgment from an American court will not be favorable to them. Luckily, there are certain situations in which judgments from Chinese courts would control even in California.

Chinese arbitration awards in California

The full, official title of the New York Convention is the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The United Nations created the Convention in 1959. The United States signed onto the Convention in 1970, and China signed on in 1987.

Normally, a nation is not required to recognize a judgment from a court in a different country. Judges in the United States often see foreign judgments as optional, and can choose to enforce them unless they violate American or state public policy.

However, since the United States and China are both parties to the New York Convention, both nations are required to recognize and enforce arbitration awards made in the other.

This means that a Chinese company and a Californian company might include in their contract an arbitration clause which binds any disputes arising out of the contract to arbitration by a Chinese court. If this is the case, then Californian courts must recognize and enforce any judgment that the Chinese court establishes for the parties.

Exceptions to enforceability

There are certain events that can invalidate a California court’s obligation to enforce a Chinese arbitration award. For example, if the court finds that the arbitration agreement violates American or Californian public policy, or if the parties did not legally enter into the contract, then the Convention will not bind the court to enforce the judgment.

If you have doubts as to whether your company’s arbitration agreement would be enforceable under the New York Convention, it is a good idea to consult with an attorney who has experience in international business dealings between California and China. They will be able to assist you in ensuring that your agreement meets all the legal requirements to be enforceable.