Commerce & Finance Law Offices on China building a pro-arbitration jurisdiction
As one of the largest economies, China has been dedicated to building a pro-arbitration jurisdiction. Especially in recent years, the Chinese arbitration system is gradually geared to international practice, promoted by a favourable policy environment. The creditworthiness and attractiveness of Chinese jurisdiction have also been increased as an international arbitration centre.
Promote pro-arbitration legislation
The current arbitration law of the PRC was promulgated in 1994 and amended twice, respectively in 2009 and 2017. It has been practiced for 27 years and will be amended for the third time. On 30 July 2021, the Ministry of Justice of the PRC released the arbitration law of the PRC (amended) (draft for comments) (the ‘draft amendment’), which is supportive of the leapfrog development of pro-arbitration in China. The proposed revisions in the draft amendment, especially those that allow foreign arbitration institutions to establish branches, entitle the tribunal to decide on provisional measures, omit the mandatory requirement of unambiguous arbitration institution in the arbitration agreement, extend the parties to an arbitration to those with unequal status, adopt the concept of the seat of arbitration, recognise the ad hoc arbitration regarding commercial disputes, etc, have released positive signals, ie, China is taking a pro-arbitration stance for international arbitration.
Strengthen cross-border cooperation of preservation in arbitral proceedings
The Supreme People’s Court of the PRC (‘SPC’) adopted the arrangement on mutual assistance in preservation in arbitral proceedings by the courts of the mainland of China and of the Hong Kong special administrative region in 2019, and the arrangement on mutual assistance in preservation in arbitral proceedings by the courts of the mainland of China and of the Macao special administrative region in 2021 (‘arrangements’). The arrangements enable the parties to arbitration in Hong Kong and Macao to apply for preservation to the courts of the mainland of China, which makes arbitral proceedings in the aforesaid places have great advantages in such matters over other jurisdictions. It also reveals the attitude shift of China towards cross-border judicial assistance in arbitral proceedings.
Strong judicial safeguards for foreign arbitral awards’ recognition and enforcement in China
China acceded to the Convention on the recognition and enforcement of foreign arbitral awards (‘Convention’) in 1987. To comply with the Convention, the arbitration law of the PRC provides that the recognition and enforcement of foreign arbitral awards are governed by an Intermediate People’s Court rather than a basic-level court. Since 1995, moreover, the SPC has established the internal reporting system, which requests the Intermediate People’s Courts to report to the SPC level-by-level if a foreign arbitral award may be refused to be recognised and enforced and the decision can not be made until the SPC replies. If a court thinks the foreign arbitral award should be recognised and enforced during the level-by-level reporting process, it may stop reporting and directly make the decision. In other words, only if the award is to be refused to be recognised and enforced, should the court report level-by-level. Such a reporting system ensures the recognition and enforcement of foreign arbitral awards in China to the maximum degree. In 2017, the reporting system, no longer being an extrajudicial measure, is legally stipulated in the provisions of the Supreme People’s Court on issues concerning the reporting of cases involving judicial review of arbitration for examination and approval.
If a court thinks the foreign arbitral award should be recognised and enforced during the level-by-level reporting process, it may stop reporting and directly make the decision.
Talent reserve expansion in the field of international arbitration
Many multinational law firms have established branches in China for tens of years. Chinese legal practitioners accumulate extensive experience in international arbitration through working at Chinese branches of multinational law firms as well as working and studying in countries with well-developed arbitration systems. Many Chinese lawyers serve as arbitrators at international arbitral institutions such as ICC, LCIA, SIAC, etc. The reasons behind this phenomenon are twofold. For one thing, such institutions attach importance to the Chinese market. They would like to invite Chinese lawyers to serve as arbitrators and even compile a version of the panel of arbitrators according to Chinese customs. For the other thing, Chinese legal practitioners’ professional level has been increasing, which gains general recognition.
Enhance arbitral institutions’ international competitiveness
It is shown that Beijing and Shanghai are respectively no. six and no. eight of the most preferred seats of arbitration while CIETAC is one of the five most preferred arbitral institutions in the 2021 International Arbitration Survey released by Queen Mary University of London in May 2021. Under the influence of the Covid-19 pandemic, the administrative/logistics support to online hearings and diversification of arbitrators are critical factors that make CIETAC more attractive. It is learned that CIETAC has more than 400 arbitrators from Hong Kong, Macao, Taiwan, and foreign countries with a 62-year history of development, which forms an internationalised group of outstanding arbitrators.
In the annual report on International Commercial Arbitration in China (2020-2021) released by CIETAC in September 2021, it is shown that CIETAC accepted 739 foreign-related cases involving 76 countries and regions in 2020, which is approximately 20% of the cases accepted by CIETAC in total. The increasing number of overseas people who choose Chinese arbitral institutions indicates that the fairness and neutrality of Chinese arbitral institutions receive worldwide recognition.
Mr. Cui Qiang is a partner of Commerce & Finance Law Offices. He is also an arbitrator of CIETAC, CMAC and Qingdao Arbitration Commission. He has concentrated his practice on commercial dispute resolution with extensive experience in equity and bond investment, real estate, international trade and intellectual property.