2024 marked the 30th anniversary of the PRC Arbitration Law, a significant milestone characterised by innovative revisions proposed by legislators to update the existing law, as well as breakthroughs in modernising and internationalising China’s arbitration framework. This article explores two major aspects:

• the pro-arbitration judicial environment; and
• the evolving regulatory framework.

Pro-Arbitration Judicial Environment

The SPC report on arbitration

On 9 September 2024, the Supreme People’s Court released the 2023 Annual Report on Judicial Review of Commercial Arbitration (the “SPC Report”). The key statistics are as follows.

Judicial review of arbitration

2023 marked another period in which Chinese courts demonstrated a pro-arbitration stance. During 2023, Chinese courts accepted over 16,000 arbitration-related cases. Of these, 25% were applications to confirm the validity of arbitration agreements, 64% were applications to set aside arbitral awards and 11% were related to the non-enforcement of arbitral awards. Notably, only 5.11% of the applications to set aside arbitral awards were granted. Additionally, Chinese courts made rulings for 69 applications to enforce foreign arbitral awards, with only three cases being rejected. These rejections were due to the expiration of the application time limit, the inability to identify the respondent or ongoing applications to set aside awards at the award's seat. In their judgments, Chinese courts consistently emphasised the high threshold for challenging arbitral awards, particularly foreign ones. This practice reflects a clear trend of judicial support for arbitration and adherence to China’s commitments under the New York Convention.

Judicial support of arbitration

In 2023, Chinese courts concluded over 5,100 cases where parties applied for preservation of assets, evidence or conduct before or during arbitration. Notably, more than 4,900 or 95.73% of these cases were successfully upheld by the courts. Additionally, some courts established online platforms to offer one-stop shop services for arbitration-related preservation. These platforms allow arbitration institutions to transmit party applications directly to the courts through an online system connected to the National Online Inquiry and Control System, thereby enhancing the efficiency of the court preservation process.

Enforcement of interim measures made by arbitral tribunal

While the current Arbitration Law does not address the arbitral tribunal's authority to issue interim measures, Chinese courts have actively responded to parties’ needs in this area. On 28 November 2024, the Beijing No 4 Intermediate People's Court released ten model cases to support the establishment of an international commercial arbitration centre in China. Case No 9 illustrates the Court's mandatory enforcement of an interim measure issued by an arbitral tribunal of the Beijing Arbitration Commission (BAC), marking the first court action of this kind. According to available information, the BAC administered a case related to technology development and service. One party applied for interim asset preservation to ensure the final enforcement of the award and the tribunal issued an interim measure order in favour of the applicant.

Ad hoc arbitration in China

In 2024, there was significant progress in the development of ad hoc arbitration in China. The current PRC Arbitration Law does not explicitly address ad hoc arbitration and it was not permitted in mainland China until 2016. That year, the Supreme Court issued the Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones, allowing companies registered within these zones to conduct ad hoc arbitration. Several local governments issued regulations to enhance the economic, social and legal appeal of their regions through ad hoc arbitration in response. For example, in June 2024, the Shanghai Municipal Bureau of Justice implemented the Measures for Promoting Ad Hoc Arbitration of Foreign-Related Commercial and Maritime Disputes (the “Shanghai Measures”), following the Regulations on Promoting the Construction of an International Commercial Arbitration Centre in Shanghai issued by the Standing Committee of the People’s Congress of Shanghai. The Shanghai Measures provide detailed guidance for conducting ad hoc arbitration in Shanghai.

In or around August 2024, China's first foreign-related maritime ad hoc arbitration case was administered and concluded. The case involved a crew management service contract for international routes. Seeking a swift resolution to their dispute, the parties agreed to ad hoc arbitration in Shanghai, following the guidelines set out in the Shanghai Measures.

The Evolving Regulatory Framework

The current Arbitration Law, enacted in 1994, has been in effect for 30 years. In July 2021, responding to the significant growth of arbitration activities in China over the last two and a half decades, the Ministry of Justice published the first Draft Amendment (the “2021 Draft”). The 2021 Draft proposed extensive revisions and sparked considerable debate. Three years later, on 8 November 2024, the Standing Committee of the 14th National People's Congress released the second Draft Amendment (the “2024 Draft”), which adopted a more conservative approach than the 2021 Draft. The 2024 Draft was published to solicit public feedback.

Key changes in the 2024 Draft

According to the Ministry of Justice's explanatory notes, the 2024 Draft aims to enhance the credibility of arbitration, align with prevailing international standards and practices and ultimately foster economic growth and deepen opening up. To achieve these goals, the 2024 Draft proposes the following key changes.

The 2024 Draft introduces the concept of the “seat of arbitration” in place of the traditional notion of the “place of arbitration institution”, demonstrating a positive move towards aligning with international practices. Under the current Arbitration Law, the absence of the “seat” concept has led to ambiguities in judicial practices concerning issues such as the nationality of awards and the legality of ad hoc arbitration. Article 78 of the 2024 Draft specifies that the law of the seat governs arbitral proceedings, providing judicial support and oversight. This proposed amendment reflects China’s more open attitude towards cross-border arbitration, reducing legal uncertainty for parties and boosting confidence among users of arbitration in China.

Building on this conceptual change, the 2024 Draft incorporates several common international practices. Article 28 empowers arbitral tribunals to rule on their own jurisdiction for example. Article 42 mandates that arbitrators disclose any information that may lead parties to reasonably question their independence and impartiality. Article 79 permits parties to opt for ad hoc arbitration in maritime disputes or disputes between companies in free trade zones that involve foreign-related elements. Additionally, Article 83 allows foreign arbitration institutions to be established within free trade zones and manage arbitration cases with foreign-related elements.

Issues to be further addressed

These legislative efforts are positive and have been widely recognised. However, certain provisions in the 2024 Draft raise concerns, leaving several issues that need further consideration before the final law is enacted.

For example, some Articles in the 2024 Draft do not adequately align with the fundamental principles of arbitration, particularly the parties' autonomy in resolving civil disputes without resorting to judicial governance. Article 2 includes a political declaration, which could raise concerns among international users. Article 23 subjects arbitration institutions and their staff to administrative supervision. Furthermore, Article 87 stipulates that the fee standards for arbitration should be determined in line with a fee scheme approved by government authorities. To enact a modern Arbitration Law that adapts to the evolving landscape of commerce and international transactions, it is crucial for legislators to reconsider these Articles. These revisions are essential to ensure that the amended Arbitration Law effectively supports China's ambition to become a leading international arbitration hub.

Conclusion

In conclusion, while a new Arbitration Law was not successfully enacted in 2024, arbitration activities in China have flourished. Significant milestones have been achieved, new practices established and positive trends toward international common practices have emerged. The Chinese courts have become increasingly supportive of arbitration and the government is keen to develop this field further to create a more business-friendly environment for entrepreneurs. These developments underscore China’s commitment and ambition to establish an international arbitration environment and offer high-quality arbitration services for both domestic and international users.