Creditor Rights and Enforcement of International Commercial Arbitral Awards in China

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This Note examines the problem of debtor insolvency in the People’s Republic of China through the lens of enforcement of international commercial arbitral awards and existing means by which award creditors may enforce credit rights prior to actual bankruptcy of an arbitral award debtor. While many court judgments and arbitral awards are uncollectible in other countries, a number of factors may exacerbate the problem in China by enabling award debtors to dispose of assets that might become subject to seizure. In addition, some Chinese companies have significant paper assets in the form of receivables, but few tangible assets that can readily be used to satisfy an award. However, certain means exist under current law by which an award creditor might prevent the artificial insolvency of an award debtor or pursue enforcement of an arbitral award against an apparently insolvent debtor. The Chinese government strengthened protections for creditors by enacting the 1999 Contract Law and actively promoting its implementation. This Note suggests certain legislative and regulatory changes that might further improve China’s system of creditor protections. These recommendations also reveal gaps in the current commercial legal framework that might be addressed through contracting or other private arrangements.