Overview of Arbitration in China in 2022
Overview of Arbitration in China in 2022
Arbitration is a significant part of China’s diversified dispute resolution mechanism. An increasing number of Chinese enterprises, especially those engaging in cross-border businesses, are choosing arbitration to resolve contractual disputes considering its autonomy, confidentiality, high efficiency, convenience for cross-border enforcement, and other advantages. In recent years, in order to create a law-based and internationalised business environment and expand high-level opening-up, the Chinese government has attached great importance to constructing a mature arbitration regime and has taken “improving the arbitration regime and enhancing the credibility of arbitration” as a task of reform. The Chinese government has promulgated a series of policies and measures in this respect to support the development of arbitration. Benefiting from that, the number of cases accepted by China’s leading arbitration institutions and the value of the claims in dispute have kept growing. Since the global economic recovery has yet to stabilise and China’s domestic economy is facing downward pressure, we can expect that the number of commercial disputes will remain high in China, and the number of arbitration cases and the value of claims will keep its rapid growth in 2022.
Amendments to the Arbitration Law
The current Arbitration Law of China was implemented in 1995, more than 20 years ago. It was slightly amended in 2009 and 2017, while many of its provisions can no longer adapt to the development and requirements of arbitration in China. In 2021, the Ministry of Justice of China released the proposed revisions to the Arbitration Law for public consultation (the “Draft for Comments”). The Draft for Comments aims to make systematic amendments to the current arbitration system and align the Chinese arbitration system with international standards. In summary, the Draft for Comments proposes the following critical revisions:
(a) simplifying the factors to determine the validity of an arbitration agreement: parties are no longer required to specify an arbitration institution to make the arbitration agreement valid. Instead, the revisions have provided the rules as to how to decide the competent arbitration institution if the arbitration agreement is silent or unclear on this point;
(b) reforming the route of confirming the validity of an arbitration agreement: the revisions have adopted the competence-competence principle in arbitration. Parties are not allowed to go straight to the court asking for the ruling on the validity of the arbitration agreement before they obtain the tribunal’s decision on the validity or jurisdiction issue;
(c) introducing the concept of seat of arbitration: this is in line with the international practice;
(d) unifying the provisions on setting aside domestic and foreign-related arbitral awards, refining the grounds for setting aside an arbitral award, and shortening the time limit for applying for setting aside an arbitral award from 6 months to 3 months commencing from the date of receipt of the award;
(e) specifying the arbitral tribunal’s power to grant interim relieves such as property preservation, evidence preservation, behaviour injunction, etc.;
(f) deleting the concept of non-enforcement of arbitral awards: There will be no concept of “non-enforcement of arbitral awards” as it is basically of the same grounds as the “set-aside of arbitral awards”. The courts shall limit their scope of review to whether the enforcement of the award would be contrary to the public interest when a party applies for enforcing the award;
(g) granting reliefs to the non-party to the arbitration: the non-party can raise written objections in the course of the award enforcement proceedings if its property is subject to enforcement and sue the parties if it has the evidence to prove the error in the arbitral award has damaged its rights and interests; and
(h) allowing ad hoc arbitration for foreign-related commercial disputes.
These revisions are rich in content and have significant implications. However, as the industries still have different opinions on various aspects, it is expected that time will be needed before the legislative authority decides on and passes the revisions.
Courts’ Support and Supervision of Arbitration
Bearing the concept of supporting and supervising arbitration, the Chinese courts have provided strong support for the efficient operation of the arbitration system. In recent years, many judiciary measures have been improved to support arbitration. Many local courts and arbitration institutions have begun to establish the connection mechanism to facilitate arbitration preservation and enforcement of arbitral awards more efficiently. At the end of 2021, the Supreme People’s Court (the “SPC”) released the Minutes of the Symposium on the Trial of Foreign-related Commercial and Maritime Cases at National Courts to clarify the rules and unify the judicial practice regarding a few arbitration related issues, such as the determination of the validity of arbitration agreements, the scope of review as to confirm the validity of arbitration agreements, the determination of the jurisdiction issue where a master contract and its ancillary contract agree on litigation and arbitration respectively, the application for revoking a mediation agreement reached in arbitration, and the grounds for setting aside and non-enforcing an arbitral award. In addition, the SPC has established and improved the reporting and review system for arbitration judicial review cases to prevent local courts from improperly denying the validity of arbitration agreements or wrongfully setting aside or refusing to enforce arbitral awards. The achievements are fruitful. The courts have developed and promoted the trend to recognise the validity of arbitration agreements as much as possible and limit the scope of review when enforcing arbitral awards. All these have contributed to making China a more arbitration-friendly jurisdiction.
The COVID-19 pandemic has brought a severe impact on offline arbitration. As a response, China's major arbitration institutions have formulated rules and guidelines for online arbitration to facilitate parties' participation in arbitration and improve the efficiency of arbitration proceedings through online hearings and electronic services. These rules and guidelines have taken into account both the legality of the arbitration procedure and the parties' autonomy. China's arbitration institutions continue to explore the approach of online arbitration and actively learn the rules, hardware and software associated with online arbitration.