International Arbitration 2021 Comparisons

Last Updated August 17, 2021

Contributed By AnJie Law Firm

Law and Practice

Authors



AnJie Law Firm is a full-service comprehensive law firm with offices in Beijing, Shanghai, Shenzhen, Haikou and Hong Kong SAR. The dispute resolution team consists of more than 20 partners and 50 associates who are based at all the five offices. The AnJie dispute partners have substantive experience in dealing with both domestic and international commercial disputes. AnJie appears before different levels of the Chinese courts and the world’s major arbitration institutions. Several leading partners have been appointed as arbitrators of renowned international arbitration institutions. The firm represents leading multinational corporations, major state-owned enterprises, private companies and financial institutions in complex and high-value litigation and arbitration proceedings. AnJie's legal service covers a wide spectrum of industries, including finance, insurance, energy, oil and natural resources, manufacturing, aerospace, automobiles, consumer electronics, fashion, information technology, media, pharmaceutical, semiconductors and chemicals.

Based on the statistics announced by the Ministry of Justice of China for 2019, the number of arbitration cases handled by all Chinese arbitration commissions in 2019 was around 487,000. Although there was a slight decline compared to the number of cases accepted in 2018, the increase was 103% compared to 2017.

Although the total number of arbitration cases for 2020 has not been announced yet, in view of the influence of the pandemic of the COVID-19, the caseload in 2020 for the leading Chinese arbitration commissions has increased compared to 2019. Particularly, the number of foreign-related arbitrations administered by these arbitration institutions has risen.

For example, in 2020, the China International Economic and Trade Arbitration Commission (CIETAC) administrated 739 foreign-related arbitration cases, up 20% year-on-year compared to 2019. As for the Beijing Arbitration Commission (BAC)/Beijing International Arbitration Center (BIAC), it has handled 215 foreign-related arbitration cases in 2020, which is an increase of approximately 31.9% on the figures for 2019.

It is obvious that arbitration has become a popular way to resolve commercial disputes in China. Please note: for the purpose of this article, "China" refers to "Mainland China" and excludes Hong Kong, Macau and Taiwan.

Arbitration in China has undergone rapid development in the last few years. During 2020, changes and improvements were made to arbitration practice in China with a strengthened pro-arbitration judicial environment.

On 27 July 2019, the State Council established the Notice on Issuing the Overall Plan for the Lin-gang Special Area of the China (Shanghai) Pilot Free Trade Zone (Guo Fa [2019] No 15) (Lin-gang Plan). Renowned foreign arbitration centres and dispute resolution agencies are allowed to develop their arbitration businesses upon registering and filing a record with the judicial administration department of Shanghai and the State Council.

In addition to the Lin-gang Plan, on 21 September 2020, the State Council issued the Overall Plan for the China (Beijing) Pilot Free Trade Zone (Guo Fa [2020] No 10) (Beijing Plan). Beijing will be the second city after Shanghai to allow foreign arbitration institutions to conduct arbitration in China.

The COVID-19 pandemic has impacted arbitration proceedings in China. In early 2020, almost all Chinese arbitration commissions asked their staff to work from home and suspended face-to-face hearings. Some of the arbitration hearings have been held online, and the parties have adapted to virtual hearings as they have become used to the videoconference software and technology.

In the meantime, Chinese arbitration commissions have made efforts to effectively mitigate the negative influence of the COVID-19 pandemic. For example, CIETAC has implemented several measures for remote working, such as online case filing, electronic service of documents, documents-only case examination, audio-video conference and virtual hearing, etc. On 10 September 2020, Guangzhou Arbitration Commission (GAC) announced that it would publish its Recommendatory Standard for Internet Arbitration for arbitration institutions and arbitration users with respect to online hearings, such as technical specifications, rules of hearing, evidence submission and authentication, etc.

Since the Belt and Road Initiative (BRI) was launched in 2013, it has stimulated an increase in the number of connections and transactions between China and foreign entities – whether individuals, enterprises or states. The BRI official website shows that several industries have seen more international collaborations, including infrastructure, international transportation/trade/construction, and finance and investment. 

Meanwhile, due to the impact of COVID-19, the number of international arbitration cases involving Chinese parties in the commodities and international trading industries has experienced a significant increase during 2020-21.

In addition, as the Chinese government promotes the opening up of the Chinese financial market, we note from the statistics published by the relevant arbitration institutions that the number of international arbitrations involving Chinese parties arising from equity investment, equity transfer, corporate disputes, innovative financial products, etc has grown in 2020-21.

In terms of international arbitration, CIETAC is traditionally the predominant arbitration commission in China which administers substantial numbers of foreign-related arbitrations.

In addition, BAC, the Shanghai International Arbitration Center (SHIAC) and the Shenzhen Court of International Arbitration (SCIA) are other commissions that have in recent years amended their rules to adapt to the needs of international users. The updated arbitration rules incorporate new provisions regarding arbitrators' remuneration, emergency arbitrators, consolidation, joinder of additional parties, multiple contracts, etc.

In 2020, CIETAC set up the Hainan Arbitration Center to promote the development of Hainan Free Trade Port and Xiong’an Sub-Commission to serve the Millennium Plan of Xiong'an New Area.

Pursuant to the Lin-gang Plan, in October 2019, the World Intellectual Property Organization (WIPO) established an arbitration and mediation centre in Shanghai, providing arbitration and mediation services for foreign-related intellectual property disputes. This centre marks the first international dispute resolution organisation established in the PRC that conducts arbitration and mediation.

Basically, arbitral awards can be divided into three categories in China: 

  • foreign awards (awards made outside of China, but inclusive of awards made in Hong Kong/Macau/Taiwan);
  • foreign-related awards (awards made by Chinese arbitration institutions with foreign elements and inclusive of Hong Kong/Macau/Taiwan-related awards); and 
  • domestic awards (awards made by Chinese arbitration institutions with no foreign element).

There are no specific national courts for the foreign-related arbitration.

Normally, the intermediate people’s courts have jurisdiction over disputes related to arbitration. For example, the intermediate people’s court at the place where the arbitration commission is domiciled has exclusive jurisdiction over the setting aside of the arbitral awards made by the relevant arbitration commission (Article 58 of the Chinese Arbitration Law).

On 22 May 2017, the Supreme People’s Court of China (SPC) issued the Notice of the Supreme People's Court on the Centralized Handling of Relevant Issues in Arbitration Judicial Review Cases (Fa [2017] No. 152), under which the relevant PRC courts should set up special divisions to hear cases on arbitration agreements’ validity, setting aside of domestic/foreign-related arbitral awards, and recognition and enforcement of foreign arbitral awards, including awards seated in Hong Kong, Macau and Taiwan.

In 2018, the SPC established the China International Commercial Court (CICC) which accepts applications for interim relief in support of arbitration, setting aside or enforcement of arbitral awards under certain circumstances.

In 2018 and 2021, the SPC directed that the Shanghai Financial Court, established in 2018, and the Beijing Financial Court, established in 2021, assume jurisdiction over judicial review of arbitration cases with respect to financial disputes at first instance which were originally heard by the relevant intermediate people’s courts in the respective regions.

Foreign-related arbitrations are subject to the Arbitration Law of the People’s Republic of China (Chinese Arbitration Law) and various judicial interpretations issued by the SPC, the Civil Procedure Law of the People’s Republic of China (CPL) and the Law on Application of Laws to Foreign-Related Civil Relations. These legislations and judicial interpretations are not based on the UNCITRAL Model Law.

The Chinese Arbitration Law has not significantly changed since its issuance in 1994, with only two slight amendments in 2009 and 2017.

However, on 30 July 2021, the Ministry of Justice of the People’s Republic of China issued a draft amendment of the Chinese Arbitration Law for wide comments from the public, which includes substantial material changes to the current version, such as:

  • expanding the scope of arbitrability;
  • introducing ad hoc arbitration in foreign-related arbitrations;
  • narrowing the requirements for a valid arbitration agreement;
  • empowering the arbitral tribunal to grant interim relief;
  • recognising the “competence-competence” doctrine; and
  • reducing the period for application for setting-aside arbitral awards from six months to three months.

However, these proposed amendments are still pending further discussion and approval by the National People’s Congress of the People’s Republic of China.

On 2 April 2019, the SPC and the Hong Kong government signed an Arrangement concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (Arrangement). This Arrangement came into effect on 1 October 2019 and provides the legal basis for a party in an arbitration seated in Hong Kong to seek interim relief from the court in Mainland China or vice versa. The Arrangement only applies to institutional arbitrations administered by the specific arbitration institutions in Hong Kong.

On 27 November 2020, the SPC and the Hong Kong government signed the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (Supplementary Arrangement). The Supplementary Arrangement, which became effective from 19 May 2021, clarifies that:

  • the “enforcement” referred to in the original arrangement signed on 21 June 1999 between Mainland China and Hong Kong includes both “recognition” and “enforcement”;
  • the relevant court may, before or after accepting the application for enforcement of an arbitral award, impose preservation or mandatory measures pursuant to an application by the party concerned and in accordance with the law of the place of enforcement; and
  • the applicant may file applications for enforcement with the courts of Mainland China and Hong Kong simultaneously, subject to certain conditions.

According to the Chinese Arbitration Law, an arbitration agreement shall be in written form, either as an arbitration clause incorporated in any contract, or as a separate arbitration agreement. A valid arbitration agreement shall include:

  • an express intention to arbitrate;
  • matters for arbitration; and
  • a designated arbitration commission.

In addition, in order for an arbitration agreement to be enforceable, it is required that:

  • the disputed matters shall be arbitrable;
  • the arbitration agreement was executed by persons with full civil capacity; and
  • parties shall have voluntarily entered into the arbitration agreement without coercion.

Pursuant to Article 3 of the Chinese Arbitration Law, the following disputes shall not be subject to arbitration:

  • disputes concerning marriage, adoption, custody, fostering and succession; and
  • administrative disputes which shall, in accordance with the law, be dealt with by administrative bodies.

In addition, labour disputes shall be filed with labour arbitration commissions, which are administrative bodies and are different from commercial arbitration commissions.

There is also controversy as to whether antitrust disputes are arbitrable in China. The SPC held in 2019 that an antitrust dispute is not arbitrable because of the public law character of antitrust law.

The general approach in China to determine whether a dispute is arbitrable mainly depends on the subject matter of the dispute. According to Article 2 of the Chinese Arbitration Law, any contractual dispute or other disputes concerning property rights between equal parties may be subject to arbitration.

PRC law provides that parties to a foreign-related arbitration may agree on the law applicable to their arbitration agreement. In the absence of the parties’ agreement, the law of the domicile of the arbitration commission or the law of the seat of arbitration will be applied. If the arbitration commission or the seat of arbitration is unclear, PRC law will be deemed the governing law of the arbitration agreement, whereas in domestic arbitration, PRC law shall be the exclusive governing law for the arbitration agreement.

Under Chinese law, where the validity of an arbitration agreement is questioned, a party may request that either an arbitration commission or a judicial court should rule on the issue. Under Article 20 of the Chinese Arbitration Law, if one party applies to an arbitration commission for determination while the counterparty applies to a court, the court prevails to determine the validity of the arbitration agreement.

Under Article 18 of the Chinese Arbitration Law, if the arbitration agreement does not provide or is unclear regarding the subject matter to be arbitrated and/or the designated arbitration commission, the parties are allowed to reach a supplementary agreement. In the absence of such supplementary agreement, the arbitration agreement shall be deemed invalid.

Several recent cases have illustrated that the Chinese courts have taken a pro-arbitration approach in deciding on the validity of an arbitration agreement. Chinalight Tri-Union International Trade Company Ltd v Tata International Metals (Asia) Ltd (the No 4 Intermediate People’s Court of Beijing, (2017) Jing 04 Min Te No 23, 14 December 2018) is such a case where the Chinese court held that the pathological arbitration clause in the case was valid and binding while another similar arbitration clause was found invalid by the relevant Chinese court about ten years ago. (See Reply of the Supreme People's Court to Request for Instructions re Arbitration Clause Validity in the Agency Contract Dispute in the Case of Mashan Group Co., Ltd. v Korea Sungdong Shipbuilding Ocean Co., Ltd. and Rongcheng Chengdong Shipbuilding Ocean Co., Ltd., (2008) Min Si Ta Zi No 26, 30 October 2008.)

The Chinese Arbitration Law adopts the rule of separability with regard to arbitration clauses. Under Chinese law, an arbitration clause might be considered valid even if the rest of the contract in which it is contained is invalid.

Article 13 of the Chinese Arbitration Law provides that “an arbitration commission shall set up panels of arbitrators according to different specialities”. For many years, this article has been interpreted as requiring that parties can only select and appoint arbitrators from the panel list set up by arbitration commissions. In other words, the parties’ autonomy in selecting arbitrators is limited to the pool established by the specific arbitration commissions. Very few commissions out of the 260 arbitration commissions (the number of arbitration commissions in China by the end of 2019) endeavoured to reform this practice in their arbitration rules, in order to recognise the parties’ right to autonomy in selecting an arbitrator from outside the panel list.

Article 64 of BAC Arbitration Rules (2019) includes special provisions concerning the composition of an arbitral tribunal for international commercial arbitrations. Arbitrators may be selected by the parties from among arbitrators who are not on BAC’s panel of arbitrators. Parties who wish to select arbitrators off panel shall submit their candidates’ resumes and contact details to BAC. A candidate selected from off-panel arbitrators may act as an arbitrator with the approval of BAC.

Similarly, under Article 26 of CIETAC Arbitration Rules (2015), where the parties have agreed to nominate arbitrators from outside CIETAC’s panel of arbitrators, an arbitrator so nominated by the parties, or nominated according to the agreement of the parties, may act as an arbitrator subject to confirmation by the chairperson of CIETAC.

The Chinese Arbitration Law recognises the parties’ autonomy in agreeing on the procedure to constitute an arbitral tribunal. However, if the parties fail to constitute the arbitral tribunal according to their agreed procedure, the Chinese Arbitration Law stipulates a default procedure on the method of arbitrator selection. 

Where parties agree to form an arbitral tribunal of three arbitrators, each party shall select or entrust the chairperson of the arbitration commission to appoint an arbitrator. The third arbitrator shall be selected jointly by the parties or be appointed by the chairperson of the arbitration commission. 

Where the parties agree to have a sole arbitrator tribunal, the arbitrator shall be selected jointly by the parties or be appointed by the chairperson of the arbitration commission.

Although it is not explicitly stipulated in the Chinese Arbitration Law, some arbitration commissions, such as CIETAC, have included a default procedure regarding multi-party arbitration.

According to Article 29 of CIETAC Arbitration Rules (2015), where there are two or more claimants and/or respondents in an arbitration, the group of claimants and/or respondents shall, after discussion, each jointly nominate one arbitrator for its side, or jointly entrust the chairperson of CIETAC to appoint one arbitrator. Where either the claimant side or the respondent side fails to jointly nominate or jointly entrust the chairperson of CIETAC to appoint an arbitrator, the chairperson of CIETAC shall appoint all three members of the tribunal and designate one of them to act as the presiding arbitrator.

Under the Chinese Arbitration Law, there is no rule that permits the court to intervene in the selection of arbitrators.

Nonetheless, an arbitral award could be set aside or not be enforced by a competent court if the arbitral tribunal is not constituted properly.

Articles 34 to 37 of the Chinese Arbitration Law stipulate provisions regarding the challenge and removal of arbitrators.

According to Article 34 of the Chinese Arbitration Law, an arbitrator may be challenged and removed under the following circumstances:

  • the arbitrator is a party in the case or an immediate relative of a party or its representative in the case;
  • the arbitrator has a personal interest in the case;
  • the arbitrator has some other relationship with a party or its representative in the case which may affect the impartiality of the arbitrator; or
  • the arbitrator has a private meeting with a party or its representative, or accepts an invitation for entertainment or a gift from a party or its representative.

If any of the foregoing circumstances arises, the relevant arbitrator is required to withdraw and a party shall challenge the arbitrator prior to the first hearing. If the circumstances giving rise to the challenge are known only after the first hearing, the challenge may be filed before the final hearing of the case.

The decision on challenge and removal of an arbitrator will be decided by the chairperson of the arbitration commission. If the chairperson is an arbitrator in the case, the decision will be collectively made by the arbitration commission.

Besides the requirements stated in 4.4 Challenge and Removal of Arbitrators, Article 13 of the Chinese Arbitration Law requires that arbitrators shall be honest and just.

In addition to the general requirements stipulated by the Chinese Arbitration Law, the principal arbitration commissions have their own more detailed ethical codes to regulate the conduct of arbitrators. Details in this regard can be found in 13.2 Ethical Codes

See 3.2 Arbitrability.

The principle of competence-competence is not recognised in the Chinese Arbitration Law. In this regard, it is the arbitration commission rather than the arbitral tribunal which may rule on the tribunal’s jurisdiction. However, in practice, arbitration commissions may delegate their power to decide on the jurisdiction to the tribunal, pursuant to their arbitration rules. For instance, Article 6.1 of CIETAC Arbitration Rules (2015) provides that “CIETAC has the power to determine the existence and validity of an arbitration agreement and its jurisdiction over an arbitration. CIETAC may, where necessary, delegate such power to the arbitral tribunal.”

Upon an application by either party, the Chinese court will decide on the validity of an arbitration agreement. Details in this regard can be found in 3.3 National Courts’ Approach.

In addition, after the issuance of the arbitral award by the tribunal, the parties may still request the Chinese court to review the validity of the arbitration agreement and the jurisdiction of the tribunal, if they request the court to:

  • set aside the award made in China; or
  • refuse recognition and enforcement of the award. 

According to Article 13 of the SPC judicial interpretation of the Chinese Arbitration Law (2006), where a relevant arbitration commission has ruled on the validity of the jurisdiction, and a party then applies to the court to determine the validity of such an arbitration agreement or to set aside the ruling of the arbitration commission, the court shall not accept such a case. In other words, the Chinese court will not review negative rulings on jurisdiction made by relevant arbitration commissions.

Either party may request the competent Chinese court to rule on the validity of an arbitration agreement without initiating an arbitration proceeding. 

If an arbitration proceeding is initiated, the challenging party shall request either the arbitration commission or the competent court to decide on the tribunal’s jurisdiction prior to the first hearing of the arbitration. However, if the arbitration commission has already ruled on the tribunal’s jurisdiction, the parties are no longer entitled to submit the challenge to the competent court.

Chinese courts review the issue of jurisdiction and admissibility on a de novo basis and are independent from the arbitration commission’s views.

Where a party commences court proceedings in breach of an arbitration agreement, the Chinese court will either: (i) refuse to accept such a case at the filing stage, if it discovers a valid arbitration agreement; or (ii) dismiss an existing case, if the other party challenges the court’s jurisdiction by invoking a valid arbitration agreement. 

Generally, as long as there is a valid arbitration agreement, the Chinese court will respect the parties’ choice of arbitration without judicial intervention.

In China, there are three scenarios where an arbitration agreement may bind a third party who is neither party to the arbitration agreement nor a signatory to a contract containing the arbitration agreement. They are explicitly stipulated in Articles 8 and 9 of the SPC judicial interpretation of the Chinese Arbitration Law (2006) as follows:

  • where there is a change to a company’s structure involving mergers and acquisitions, then the successor of that company shall be bound by the previous arbitration agreement;
  • where a party died after concluding an arbitration agreement, that person's heirs shall be bound by the arbitration agreement; or
  • where a contract is partially or entirely assigned to an assignee, the arbitration agreement shall be binding upon the assignee, unless the parties concerned have otherwise agreed, or the assignee explicitly objects to or is unaware of the separate arbitration agreement.

The first two circumstances above shall not apply if the parties have agreed otherwise in the arbitration agreement.

Although it is not explicitly stated, these Articles are generally applicable to both domestic and foreign third parties.

In China, neither an arbitral tribunal nor an arbitration commission is empowered to order interim relief in the process of arbitration proceedings.

Interim Relief in Arbitration Proceedings

Chinese courts play a very important role in interim relief in arbitration proceedings since the power to grant interim relief is solely the preserve of the courts, rather than any arbitration commission or arbitral tribunal.

Typically, a party may apply for interim relief prior to or in the process of the arbitration proceedings. The arbitration commission is then required to forward the application to the competent court in accordance with the Chinese Arbitration Law and CPL.

Accordingly, the Chinese Arbitration Law and CPL provide three kinds of interim relief, known as property preservation, evidence preservation and prohibitory injunction.

Regarding evidence preservation, a party may seek an order where there is a possibility that the evidence concerned will be destroyed or lost, or subsequently be difficult to obtain. 

Similarly, a party may file an application for a property preservation order where a party believes that:

  • the execution of a judgment may become impossible or difficult because of the actions made by the opposing party; or
  • a party may suffer irretrievable damages without an immediate property preservation order. 

Interim Relief in Foreign-Seated Arbitrations

For arbitration seated outside of Mainland China, parties to the arbitration generally cannot apply to the court of Mainland China for interim relief according to CPL.

However, in maritime arbitration seated outside of Mainland China, regardless of whether the arbitration is institutional or ad hoc, parties may apply to the maritime courts of Mainland China for maritime interim relief under the Special Maritime Procedure Law of China. The types of interim relief include property preservation and evidence preservation. Specifically, the scope of property preservation is limited to the vessel, the cargo, fuel and other vessel-related property.

In addition, as introduced in 2.2 Changes to National Law, the Arrangement made between the SPC and the Hong Kong government has enabled parties in an arbitration seated in Hong Kong and administered by the specific arbitration institutions to seek for interim reliefs from the court of Mainland China. The Arrangement is considered as a substantive advantage of Hong Kong-seated arbitrations for arbitration claimants who require interim relief against the counterparty’s assets in Mainland China.

According to public information, there have been more than 47 applications for interim relief submitted to People’s Courts in Mainland China by parties in Hong Kong-seated arbitrations since the implementation of the Arrangement. Among these applications, at least 30 applications have been granted by the relevant People’s Court.

Emergency Arbitrators

No emergency arbitrator (EA) procedure is stipulated in the Chinese Arbitration Law. 

However, some arbitration commissions, such as CIETAC and BAC, have included an EA procedure as part of their arbitration rules. For example, under CIETAC Arbitration Rules (2015), a party may apply for an EA procedure pursuant to the CIETAC Emergency Arbitrator Procedure (Appendix III). The EA order made by the emergency arbitrator shall be binding upon both parties. Interim relief ordered by the EA is not enforceable before Chinese courts because the power of granting interim relief belongs exclusively to the Chinese courts, rather than arbitral tribunals. 

Nonetheless, this does not mean that there is no chance for the parties concerned to enforce an EA order in other jurisdictions where the law thereof allows the enforcement of EA orders. In this regard, Chinese arbitration commissions (ie, CIETAC and BAC) are attempting to help the parties increase the possibility of enforcing an EA order, thereby protecting their lawful rights and interests in a better and timelier way. 

The first known EA case was administered by BAC in 2017. The EA order rendered by a Chinese arbitrator was thereafter enforced by the Hong Kong High Court. Based on this, BAC has revised the EA procedure in BAC Arbitration Rules (2019), which specify the requirements in an application for EA procedure and the priority of delivery by electronic means in EA procedure.

China does not have legislation or a practice on security for costs. In practice, the claimant pays all the arbitration fees in advance to the arbitration institutions. After that, in accordance with the principle of "costs follow the event", it is a general rule that the losing party will finally bear the arbitration fees provided that there is no agreement between the parties concerning the allocation thereof.

As to arbitration seated in Mainland China, whether domestic or foreign-related, the procedure of arbitration is mainly governed by the Chinese Arbitration Law, the SPC judicial interpretation of the Chinese Arbitration Law (2006), the CPL and the SPC judicial interpretation of the CPL (2020).

In addition, the relevant rules of the arbitration commission will also be adopted in the arbitration proceedings, as they are deemed to be incorporated into the parties’ agreement.

The Chinese Arbitration Law provides general procedural steps that the parties are required to comply with when they commence arbitration proceedings. 

Threshold and Acceptance of an Arbitration Case

As the basis for arbitration, the parties shall have a valid and enforceable arbitration agreement. Where a party, as a claimant, files a request for arbitration, it shall include the facts, reasons and the arbitration agreement involved. 

The arbitration commission shall, within five days of receipt of the request for arbitration, notify the claimant that the case is filed on record if the documents provided by the claimant are in accordance with the Chinese Arbitration Law. 

The arbitration commission will then deliver copies of its arbitration rules, the panel list of arbitrators and the claimant’s request for arbitration to the respondent. 

Upon receipt of the above documents, the respondent shall submit a statement of defence to the arbitration commission within the time limit under the rules of the arbitration commission. The respondent is also entitled to submit counterclaims.

Hearing

After the arbitral tribunal has been constituted, the tribunal notifies the parties of the date of the hearing. 

At the hearing, the parties have the right to produce evidence to support their claims. The tribunal also has the power to obtain evidence if necessary. Both parties have the right to examine the authenticity of the evidence submitted by the other party and both parties are entitled to submit their oral arguments during the hearing.

Settlement, Mediation and Award

The parties may settle the dispute after a request for arbitration has been filed. If a settlement agreement has been reached, the parties may either apply to the arbitral tribunal for an award based on the settlement agreement or withdraw the request for arbitration. 

The tribunal may conduct mediation before the award is given. It is stipulated by the Chinese Arbitration Law that the arbitral tribunal shall conduct mediation if both parties so wish. In practice, arbitrators are encouraged by the arbitration institutions to resolve the disputes through mediation. 

Where no settlement agreement is reached through mediation, the tribunal shall render an arbitral award within the time limit stipulated by the rules of the arbitration commission. This award cannot be appealed to the courts.

Possible Judicial Review of an Arbitral Award

As stipulated under the Chinese Arbitration Law and the CPL, there are two chances for the losing party to challenge the award:

  • the parties are entitled to challenge the award by applying to the intermediate court in the area where the arbitration commission is located to set aside the award within six months after receiving the award; or
  • the losing party could also apply to the court to refuse to enforce the award on limited and prescribed grounds, which are stated in 11.3 Standard of Judicial Review.

It is worth noting that there is a different standard of judicial review for domestic awards and foreign-related awards. Domestic arbitral awards may be set aside due to some substantial matters such as forging or hiding evidence, but this does not apply to foreign-related arbitral awards. Details in this regard can be found in 11.3 Standard of Judicial Review

Powers of Arbitrators

Power of managing arbitration proceedings

Under the Chinese Arbitration Law, arbitrators as members of a tribunal have the power to organise and conduct arbitration proceedings, and decide a case independently in a fair and reasonable manner based on the facts and laws. 

For example, an arbitral tribunal could decide whether to resume a proceeding if an arbitrator is replaced or removed. Similarly, a tribunal has the power to decide whether to approve an application to postpone a hearing.

Power of collecting evidence and appraisal

The arbitral tribunal has the power to collect evidence by itself if necessary. As for specific issues, the arbitral tribunal may appoint appraisers if it considers this necessary.

Power of approval for extension

Arbitrators have the power to decide whether to accept the parties’ application for an extension of the time limit for submitting the statement of defence or counterclaims, and documents submitted after the expiration of the time limit.

Power of allocation of fees

The tribunal has the power to determine the arbitration fees and other expenses to be paid by the parties. In addition, upon a party’s request, arbitrators also have the power to decide in an arbitral award, having regard to the circumstances of the case, that the losing party shall compensate the winning party for the expenses reasonably incurred by it in pursuing/defending the case. 

Several factors, such as the outcome and complexity of the case, the workload of the winning party and/or its representatives and the amount in dispute, etc, may be taken into consideration by the arbitrators when deciding whether or not the expenses incurred by the winning party in pursuing the case are reasonable.

Duties of Arbitrators

Under Chinese law, the provisions stipulating arbitrators’ duties can be found in several articles of the statute. 

Additionally, Chinese arbitration commissions have also imposed duties on arbitrators through codes of conduct, which provide more details to regulate arbitrators’ behaviour in an arbitration proceeding. These are summarised as follows.

Duty of being independent and impartial

Arbitrators shall conduct arbitration independently and impartially based on the facts and governing laws. In general, an arbitrator shall treat the parties equally and shall not represent either party. The parties concerned shall enjoy reasonable and fair opportunity to present their case. 

An arbitrator shall withdraw from the arbitration, and the parties concerned shall have the right to challenge and remove the arbitrator, in the circumstances stated in 4.4 Challenge and Removal of Arbitrators

Duty of confidentiality

Arbitrators shall not disclose any information about a case, either substantial or procedural, to any third parties.

Duty to conduct mediation

Where the parties agree to mediation, the arbitral tribunal shall conduct mediation accordingly before making an arbitral award.

Duty of rendering an arbitral award in time

Arbitrators shall respect the time limit as required by the arbitration rules and render an arbitral award within the time limit required.

Under the Chinese Arbitration Law, a party may appoint lawyers or other representatives to attend arbitration proceedings on behalf of the party concerned. In this case, a power of attorney shall be signed by the parties and submitted to the arbitration commission. There is no limitation preventing foreign lawyers and/or foreign individuals from acting as legal representatives before Chinese arbitration commissions.

In general, there is no limit on the number of legal representatives in arbitration proceedings, which is in line with the UNCITRAL Model Law. However, a few arbitration commissions, such as SHIAC, only allow one to five legal representatives in one case. It is suggested the parties check the specific arbitration rules beforehand.

The underlying rule is that each party shall bear the burden of proving the facts on which it relies to support its claim, defence or counterclaim.

Article 45 of the Chinese Arbitration Law requires that evidence be presented during the hearings and the authenticity of the evidence may be examined by the parties. There is no specific provision in the Chinese Arbitration Law empowering the tribunal to determine the admissibility, relevance, materiality and weight of the evidence. In practice, however, the tribunal usually has broad discretion regarding collection, submission and admission of evidence.

China does not have the practice of discovery or disclosure in legal practice. Unless otherwise agreed in advance, the parties lack the explicit power to request the production of documents. 

The use of witness statements and cross-examination are permitted, but rarely used, since traditionally, litigation and arbitration in China are to a great extent reliant on documentary evidence. 

Article 43 of the Chinese Arbitration Law gives the tribunal power to collect evidence on its own, as it considers necessary. However, this power is quite impractical without the support of judiciary powers and is rarely used in arbitration practice. 

There are no unified rules of evidence applicable to commercial arbitration, and institutional arbitration rules provide limited reference to the collection and submission of evidence. Some arbitral tribunals resort to the Provisions on Evidence in Civil Litigation published by the SPC for guidance. 

In March 2015 CIETAC published its Guidelines on Evidence (CIETAC Guidelines on Evidence) to assist the parties in dealing with issues of evidence in arbitration proceedings. Like the IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules), the application of the CIETAC Guidelines on Evidence is subject to the consent of the parties in each case.

In international cases administered by Chinese arbitration institutions, it is common for the parties to agree to adopt the IBA Rules.

Arbitrators in China do not have powers of compulsion to order the production of documents or to require the attendance of witnesses. 

However, if the parties agree to adopt the CIETAC Guidelines on Evidence, the arbitral tribunal may require a party to produce any evidence that the tribunal considers necessary. Meanwhile, the tribunal shall ensure that the opposing party has the opportunity to express opinions on the evidence submitted by the other party.

Article 40 of the Chinese Arbitration Law provides that arbitral proceedings shall be conducted in camera. This provision lays out the foundation of the principle of confidentiality in arbitration practice.

Many arbitration commissions provide provisions for confidentiality, such as Article 26 of BAC Arbitration Rules (2019) and Article 38 of CIETAC Arbitration Rules (2015). To be specific, not only the parties concerned but also their representatives, arbitrators, witnesses, interpreters and experts shall not disclose information to any third party concerning the arbitration, whether substantive or procedural. 

Nonetheless, information in arbitration may be disclosed when judicial courts get involved. A party may apply to the courts to confirm the validity of the arbitration agreement during the initial stage, which may result in publication of information of the arbitration agreement or the existence of the arbitration. This is the case in the stage of enforcement of the arbitration award as well. In addition, if a party in the arbitration procedure is a listed company, its performance of its statutory disclosing obligation may also lead to the disclosure of relevant arbitration information.

Article 54 of the Chinese Arbitration Law requires that an arbitral award shall set forth the claims, the facts in dispute, the grounds upon which an award is rendered, the reliefs granted by the award, the allocation of arbitration fees and the date of the award. The facts in dispute and the grounds may be excluded from the award, however, if this has been agreed by the parties. The award shall be signed by the arbitrators and affixed with the stamp of the arbitration commission.

In addition, an arbitral award must be signed by the majority of arbitrators if there is one dissenting arbitrator. An arbitrator who has a dissenting opinion may or may not sign their name on the award. CIETAC and BAC Arbitration Rules additionally require that an award must state the place where it was made. 

The Chinese Arbitration Law does not specifically stipulate the time limit during which an arbitral award should be given. However, all arbitration commission rules have articles specifying the length of time during which a tribunal shall deliver an award.

For international cases, as stipulated in Article 68 of BAC Arbitration Rules (2019) and Article 48 of CIETAC Arbitration Rules (2015), an arbitral tribunal shall render its award within six months of the tribunal's constitution, unless there are special circumstances justifying an extension.

The time limit for domestic cases is four months. The time limit will be even shorter if Summary Procedure is adopted, in which case, it will be within three months from the date on which the arbitral tribunal was formed, as stipulated in Article 62 of CIETAC Arbitration Rules (2015).

Under Chinese legislation, a tribunal has broad discretion to award remedies, including monetary damages, declaratory reliefs and specific performance. 

According to Chinese law, a party is generally liable for the actual loss caused to other parties. Therefore, the concept of punitive damages is seldom used or upheld, unless it is explicitly stipulated by law. 

In addition, an arbitral tribunal may also make a ruling on the expected profit which shall be compensated by the breaching party, to meet the reasonable anticipation of the non-breaching party. 

In respect of liquidated damages under the Civil Code of the People’s Republic of China (Chinese Civil Code), an arbitral tribunal may adjust the amount of liquidated damages previously stipulated in a contract, when these are compared with the actual damages incurred. When requested by one party, supported by evidence to prove the actual losses of the non-breaching party, an arbitral tribunal may properly reduce or increase the amount of the liquidated damages where the amount is significantly higher or lower than the actual damages. 

Under the Chinese Civil Code, an arbitral tribunal may also require the breaching party to carry out specific performance in compliance with the contract concerned, which is deemed an effective way to protect the non-breaching party’s expected interest.

In China, as in many other jurisdictions, an arbitral tribunal has broad discretion to award costs. Generally speaking, the "costs follow the event" principle applies in arbitration in China. As provided in Article 52 of BAC Arbitration Rules (2019) and Article 52 of CIETAC Arbitration Rules (2015), a party may recover "reasonable costs and expenses" from another party to cover the arbitration process if so determined by the tribunal. This means, however, that if the arbitration costs/expenses of the winning party are considered unreasonable, the tribunal might not uphold the recovery of those costs. 

Factors to be considered by the tribunal for allocation of costs can be found in 7.3 Powers and Duties of Arbitrators. With regard to the disputed issue of in-house counsel fees, different tribunals will take different approaches. If, however, a party manages to convince the arbitral tribunal that the costs are "closely connected" to the arbitration proceedings, then the arbitral tribunal is more likely to uphold the recovery of those costs. 

There is no mandatory rate of interest. The parties can agree on the applicable rate of interest. The pertaining provisions in the contract will firstly be examined by the tribunal to award interest.

However, even if the parties concerned have agreed otherwise, there is a ceiling to the interest that a party can be awarded. Recently, the Provisions of the SPC on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases have been amended and came into effect on 1 January 2021. According to Article 29 thereof, when an arbitral tribunal is deciding the amount of interest, the interest rate on an overdue loan may not exceed four times the loan prime rate (LPR) quoted for a one-year loan at the time of conclusion of the contract.

According to Article 9 of the Chinese Arbitration Law, an arbitral award is final and binding. Therefore, no appeal of an arbitral award is allowed in China.

However, there are two chances for the losing party to challenge the award, which are stated in detail in 7.2 Procedural Steps.

There are statutory grounds (“judicial review”) to set aside the award or refuse to enforce the award, as stipulated in the Chinese Arbitration Law and the CPL. Parties are not empowered to expand the scope of judicial review.

At present, China adopts a "dual-track" judicial review system for foreign-related arbitration and domestic arbitration. 

For arbitration awards with foreign-related factors, only procedural issues can be examined by a judicial court, according to Article 70 of the Chinese Arbitration Law and Article 274 of the CPL. These are identical to the stipulations of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the 1958 New York Convention). To be specific, in the process of judicial review, competent Chinese courts may consider the following factors as to whether:

  • the arbitration agreement does not exist or is invalid; 
  • the respondent is not notified to appoint an arbitrator, or about the arbitration procedure, or fails to present its case;
  • the composition of the arbitral tribunal, or the arbitration procedure itself, does not conform with arbitration rules;
  • the matters arbitrated are outside the scope of an arbitration agreement, or the matters are not arbitrable; or
  • enforcing the arbitration award is contrary to public interest.

For domestic arbitration, according to Article 58 of the Chinese Arbitration Law and Article 237 of the CPL, in addition to the procedural issues listed above, the judicial court can, upon the request of one of the parties, also examine the evidence-related issues of the arbitral awards, which means wider discretion to review the merits of the case. 

The relevant conditions considered include: 

  • whether the evidence as the basis of the award is forged; and
  • whether the opposing party has hidden evidence, which is sufficient to affect the fairness of the award.

The court will also set aside the award, or refuse to enforce the award, if it finds that the arbitrator has committed embezzlement, accepted bribes, practised favouritism for personal gains, or rendered the award by bending the law.

China ratified the 1958 New York Convention in 1987, with reciprocity and commercial reservations – ie, China only recognises and enforces arbitral awards dealing with commercial disputes, whether contractual or not, and on the basis of reciprocity with other contracting states. 

The recognition and enforcement of arbitral awards between Mainland China and Hong Kong/Macau are subject to separate and respective arrangements between Mainland China and Hong Kong/Macau.

For the purpose of this article, only the enforcement procedure of foreign awards and foreign-related awards is discussed.

Foreign Awards

Parties seeking to enforce a foreign award shall apply to the intermediate People's Court in the domicile of the party subject to enforcement, or at the place where the property subject to enforcement is located. 

Upon receipt of the application, the competent court shall examine the award in accordance with the CPL and the relevant judicial interpretations which establish the mechanism to implement the 1958 New York Convention. Where the enforced party is not from a contracting state of the 1958 New York Convention, the Chinese court may enforce the award based on other applicable treaties or reciprocity.

In addition, arbitral awards made in Hong Kong/Macau are enforced in Mainland China according to the respective special arrangements between Mainland China and those areas. Arbitral awards made in Taiwan are enforced in Mainland China according to the Provisions of the SPC on Recognition and Enforcement of the Arbitral Awards of the Taiwan Region (effective as of 1 January 2015).

A two-tier “prior reporting system” is applied if an intermediate People’s Court proposes to dismiss an application to recognise and enforce a foreign arbitral award. In this case, it must first report its proposal to refuse the enforcement to the higher People’s Court in the same province. Furthermore, if the higher People’s Court agrees with the proposal of the intermediate People’s Court not to enforce the foreign award, the higher People’s Court must report its opinion to the SPC for final decision. Eventually, the intermediate People’s Court will make a ruling in light of the instruction issued by the SPC.

This prior reporting system aims to avoid any local protectionism over the refusal of enforcement of foreign awards. This also indicates the highly pro-arbitration attitude of the SPC. However, it has been criticised for not being transparent enough and for uncertainty regarding the time limit that the review process will take.

When a foreign award is subject to ongoing set-aside proceedings at the seat of the arbitration, the PRC court follows the rule under Article VI of the 1958 New York Convention, namely the relevant PRC court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.

Foreign-Related Awards

The grounds for refusing enforcement of a foreign-related award are very similar to those for refusing enforcement of a foreign award under the 1958 New York Convention. If an enforcing court intends to refuse the enforcement of a foreign-related award, it has to go through the same prior reporting system as in the enforcement of a foreign award.

The court in charge of enforcement of a foreign-related award shall suspend the enforcement proceedings when the award is subject to ongoing set-aside proceedings before the relevant People’s Court (Article 7 of the Provisions of the Supreme People's Court on Several Issues Concerning the Handling of Cases by People's Courts to Enforce Arbitration Awards).

According to the Notice of the SPC on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China (effective as of 10 April 1987), Chinese courts shall dismiss the application or refuse recognition and enforcement of an arbitral award if the arbitral award has been set aside by the courts in the seat of arbitration. 

A state or state entity may successfully raise a defence of state immunity at the enforcement stage, as Chinese law has traditionally held the position of absolute immunity for a state and its property.

The recognition and enforcement of a foreign award is subject to the courts’ judicial review pursuant to Article V of the 1958 New York Convention. The grounds for refusing recognition and enforcement of an arbitration award are summarised as follows:

  • incapacity of a contracting party or an invalid arbitration agreement;
  • no proper notice regarding appointment of arbitrators and arbitration proceedings, or the inability of a party to present its case;
  • the arbitral award contains a decision beyond the tribunal’s jurisdiction;
  • the composition of the tribunal or the arbitral proceedings were not in accordance with the parties’ agreement or the applicable law;
  • the award has not yet become binding or has been set aside or suspended;
  • the subject matter of the dispute is non-arbitrable; or
  • the recognition and enforcement of the arbitral award would be contrary to the public policy of China.

The SPC is greatly supportive of the recognition and enforcement of foreign arbitral awards. Accordingly, the vast majority of foreign arbitral awards have been recognised and enforced in China. The limited number of foreign arbitral awards which were not recognised or enforced is mainly due to irregularities in the composition of the tribunal or the arbitration proceedings, in breach of the parties’ arbitration agreement.

It is extremely rare for the Chinese courts to refuse to enforce a foreign arbitral award based on the grounds of public policy. As illustrated in the Reply of the Supreme People's Court to the Request for Instructions on the Non-Recognition of No 07-11 (Tokyo) Arbitral Award issued by the Japan Commercial Arbitration Association dated 29 June 2010, a strict interpretation of public policy could be seen. Public policy can only be the grounds for non-enforcement provided that the recognition and enforcement of the award would violate China’s basic principles of law and would harm China’s fundamental public interests.

In practice, the violation of laws and administrative regulations by the award does not itself necessarily constitute a violation of public policy.

Chinese legislation does not provide for class-action arbitration or group arbitration. However, some Chinese academics have suggested the introduction of class-action arbitration to China for air crash or product liability disputes, etc. However, nothing has yet come into being.

Chinese lawyers are generally governed by the PRC Lawyers' Law and the ethical codes issued by the All China Lawyers Association, for their conduct in arbitration proceedings in China. However, this national legislation and Chinese lawyers’ self-regulatory rules are not applicable to foreign lawyers who conduct arbitration proceedings in China. 

With respect to arbitrators, each arbitration institution has its own code of ethics for arbitrators appointed in administered cases. For example, BAC published its code of ethics for arbitrators in 2006, which provides that arbitrators shall be honest, independent and impartial, and shall not represent either party or have any private relationship which may lead to reasonable doubt regarding an arbitrator’s independence or impartiality. Also, an arbitrator shall treat each party equally and render an award based on the facts and applicable laws.

As of 6 July 2021, there has been no specific Chinese legislation or administrative regulation governing third-party funders’ activities in China. However, some institutional arbitration rules have incorporated provisions regarding third-party funding.

For example, Article 27 of the CIETAC International Investment Arbitration Rules (2017) provides that a funded party shall notify the other party, the tribunal and the arbitration commission immediately after the third-party funding agreement is concluded. The funded party is required to disclose the existence and nature of the third-party funding arrangement, as well as the name and address of the third-party funder.

The tribunal has the power to order the funded party to disclose any relevant information regarding the third-party funding arrangement. The tribunal may take such an arrangement and compliance with the above disclosure requirement by the funded party into account when ruling on the costs of arbitration.

The Chinese Arbitration Law does not provide specific rules regarding the consolidation of different arbitral proceedings. However, the latest arbitration rules of leading Chinese arbitration institutions, such as CIETAC, BAC and SHIAC, have all adopted provisions regarding the consolidation of separate arbitral proceedings. 

For example, according to CIETAC Arbitration Rules (2015), CIETAC may, at the request of a party, consolidate two or more arbitrations pending under the rules into a single arbitration, if:

  • all arbitrations are made under the same arbitration agreement;
  • the claims in the arbitrations are made under multiple arbitration agreements that are identical or compatible, and the arbitrations involve the same parties and legal relationships of the same nature;
  • the claims in the arbitrations are made under multiple arbitration agreements that are identical or compatible and the multiple contracts involved consist of a principal and its ancillary contract(s); or
  • all the parties to the arbitrations agree to consolidation.

The arbitrations shall be consolidated into the arbitration that commenced first, unless otherwise agreed by the parties.

The Chinese courts are not empowered under the Chinese law to consolidate separate arbitral proceedings.

Generally, a third party is not bound by an arbitration agreement if it is not a signatory to the arbitration agreement. However, under Chinese law, a third party may be bound by an arbitration agreement in some circumstances as stated in 5.7 Third Parties.

Besides, although Chinese statutes do not provide any rules concerning the joinder of third parties, many Chinese arbitration commissions have adopted the joinder of additional parties in their arbitration rules. For example, under CIETAC Arbitration Rules (2015), the joinder of additional parties is possible where the arbitration agreement prima facie binds the additional party. Under BAC Arbitration Rules (2019), an additional party may join the arbitration under the same arbitration agreement, subject to approval by BAC. Following that, no application for joinder will be accepted once the arbitral tribunal has been constituted, unless the claimant, the respondent and the additional parties agree.

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Law and Practice in China

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AnJie Law Firm is a full-service comprehensive law firm with offices in Beijing, Shanghai, Shenzhen, Haikou and Hong Kong SAR. The dispute resolution team consists of more than 20 partners and 50 associates who are based at all the five offices. The AnJie dispute partners have substantive experience in dealing with both domestic and international commercial disputes. AnJie appears before different levels of the Chinese courts and the world’s major arbitration institutions. Several leading partners have been appointed as arbitrators of renowned international arbitration institutions. The firm represents leading multinational corporations, major state-owned enterprises, private companies and financial institutions in complex and high-value litigation and arbitration proceedings. AnJie's legal service covers a wide spectrum of industries, including finance, insurance, energy, oil and natural resources, manufacturing, aerospace, automobiles, consumer electronics, fashion, information technology, media, pharmaceutical, semiconductors and chemicals.