Can Default Interest Awarded by the Foreign Arbitral Tribunal Be Enforced in China?

If the arbitration rules grant the arbitral tribunal the right to award the default interest at its discretion, such foreign arbitral awards can be enforced in China.

1. What is the default interest awarded by the foreign arbitral tribunal?

It occurs when you and the debtor have not agreed on the default interest in the contract. When you submit your dispute to the arbitral tribunal, you ask the debtor to pay the default interest.

The arbitration rules authorize the arbitral tribunal to make an award on the default interest, and the arbitral tribunal also recognizes that the default interest is impartial in your case, so it supports your request for awarding the default interest in the arbitral award.

Then, you bring the foreign arbitral award to China and hope that it can be enforced in China.

2. Will the Chinese court support such a request for awarding default interest?

The Chinese court has clarified in a recent case that it will support such a request because the decision on awarding default interests is made by the arbitral tribunal pursuant to the arbitration rules.

On 17 June 2020, in the case for recognition and enforcement of foreign arbitral awards of Emphor FZCO v. Guangdong Yuexin Offshore Engineering Equipment Co., Ltd. ([2020] Yue 72 Xie Wai Zhi No. 1, [2020]粤72协外认1号), Guangzhou Maritime Court, which is located in Guangdong Province, made the above statement.

In this case, the sole arbitrator appointed by the Singapore Chamber of Maritime Arbitration (SCMA), at the request of the Applicant, ordered the Respondent to pay the outstanding debt as well as the accrued interest at the rate of 6% per annum.

The Respondent stated to the Chinese court that the arbitral award was beyond the scope of the arbitration agreement.

The Chinese court notes that the arbitration rules applicable to the arbitration case stipulates that the tribunal may award simple or compound default interest on any amount awarded at such rate or rates as the Tribunal deems just.

Therefore, the Chinese court holds that the SCMA arbitral tribunal is entitled to award the default interest, even though there is no clause about default interest payment in the original contract.