Preventing Evasion of Enforcement of a Foreign Arbitration Award
By Nico Min
A recent case in Shanghai highlights how Chinese authorities may suspend a company's deregistration when outstanding obligations under a valid arbitral award remain unresolved.
The matter involved a foreign creditor holding an international arbitration award rendered outside of China. Before the award could be recognized or enforced domestically, the debtor company initiated deregistration procedures in an apparent attempt to dissolve before fulfilling its confirmed payment obligations. The competent authority, upon review, suspended the deregistration process, preventing both dissolution and capital reduction until the debt issue was addressed.
This outcome demonstrates that Chinese administrative authorities may intervene to preserve creditors' rights where there is evidence of pending liabilities, even before formal enforcement of a foreign arbitral award. It provides a practical reference for foreign companies seeking to safeguard claims in China while recognition and enforcement proceedings are pending.
For award creditors, this case underscores the importance of early local action — including monitoring the debtor's corporate status and engaging with authorities — rather than relying solely on recognition or enforcement procedures, which may take considerable time.
For assistance with enforcement, debt recovery, or corporate compliance in China, please contact [email protected] or reach out to your trusted contact at R&P.