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Commercial Arbitration

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China

Jacob Grierson
McDermott Will & Emery LLP

    Infrastructure

  1. 1.The New York Convention
    Is your state a party to the New York Convention? Are there any noteworthy declarations or reservations?
    1. Yes. On 2 December 1986 China elected to accede to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). The New York Convention became effective in China on 22 April 1987.

      In acceding to the New York Convention, China adopted both the reciprocity reservation and the commercial reservation. The former provides that China will recognise and enforce only those arbitral awards made in other states that are signatories to the Convention. The commercial reservation limits the scope of recognition and enforcement only to arbitral awards that have been rendered in commercial cases.

      It is noteworthy that article V(2)(b) of New York Convention provides that signatory states may refuse to recognise and enforce arbitral awards that are contrary to the state’s ‘public policy.’ For purposes of the this ‘public policy exception,’ the Chinese courts have generally accepted the terminology in article 274 of Civil Procedural Law of PRC (adopted April 9, 1991; revised October 28, 2007 and August 31, 2012), which provides that a court may refuse the enforcement of an arbitral award if it determines that the award is against the ‘social and public interest’ of China. As the definition and scope of this term are somewhat ambiguous, it is important to be aware of this restriction, and consult your lawyers for more detailed advice, when seeking the recognition and enforcement of an arbitral award in China. 

  2. 2.Other treaties
    Is your state a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards?
    1. China is also a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention or Washington Convention). China has notified the Centre, pursuant to Article 25(4) of the ICSID Convention, that it would consider submitting to the jurisdiction of ICSID only for disputes concerning compensation for expropriation and nationalisation.

      While the New York Convention covers China’s relationship with most foreign countries, China has also entered into special bilateral arbitration arrangements with Taiwan, Hong Kong and Macau.

      On 24 January 2000, the Supreme People’s Court of PRC (the SPC) gave effect to the Arrangement for the Reciprocal Enforcement of Arbitral Awards between the Mainland and Hong Kong (the 2000 Arrangement). The 2000 Arrangement provides that the recognition and enforcement of arbitral awards rendered in Hong Kong may be refused by courts in Mainland China only on the grounds identical to those listed in article V of the New York Convention. It also obligates the Hong Kong courts to enforce any arbitral awards made by one of the recognised 180 China arbitration commissions (thus excluding arbitral awards rendered in ad hoc arbitration proceedings). Practically speaking, the effect of the 2000 Arrangement is that arbitral awards rendered in Hong Kong are treated just like arbitral awards rendered in any signatory to the New York Convention, and thereby makes Hong Kong a comparatively safe place to arbitrate against Chinese parties.

      Since it is unclear whether ad hoc arbitral awards made in Hong Kong are included in the 2000 Arrangement, the SPC issued a Notice Regarding the Enforcement of Hong Kong Arbitral Award in Mainland China on 30 December 2009. This Notice clarifies that the courts in Mainland China will recognise and enforce both ad hoc arbitral awards rendered in Hong Kong and awards made by the International Chamber of Commerce (ICC) or other foreign institutions in Hong Kong.

      SPC’s Provisions on the People’s Courts’ recognition of Civil Judgments Made By Courts in Taiwan Area, issued by the SPC on 22 May 1998, provides that arbitral awards rendered by Taiwanese arbitration institutions shall be recognised and enforced in China. Likewise, the Arrangement for the Reciprocal Recognition and Enforcement of Arbitral Awards between the Mainland and Macau, which came to effect on 12 December 2007, sets the rules for mutual recognition and enforcement of arbitral awards made in Mainland China and Macau.

  3. 3.National law
    Is there an arbitration act or equivalent and, if so, is it based on the UNCITRAL Model Law? Does it apply to all arbitral proceedings with their seat in your jurisdiction?
    1. Yes. The Arbitration Law of People’s Republic of China became effective on 1 September 1995, and was followed by a series of judicial interpretations of the law by the SPC. The Interpretation of the Supreme People’s Court concerning Some Issues on Application of the Arbitration law of the PRC (the 2006 Interpretation), effective as of 8 September 2006, is the most important interpretation.

      China’s arbitration law is substantially different from the UNCITRAL Model Law, and generally provides for a lower level of party autonomy. Among other things:

      • an ad hoc arbitration, with its seat in Mainland China, will not be recognised according to China’s arbitration law (in other words, an arbitration provision is invalid under the law unless it identifies an arbitration institution to administer the arbitration);

      • China’s arbitration law only allows ‘foreign-related’ arbitrations to have their seats outside Mainland China. (See Q18 for the definition of ‘foreign-related’); and

      • China’s arbitration law generally requires parties to choose arbitrators from lists provided by one of Chinese designated arbitration commissions.

  4. 4.Arbitration bodies in your jurisdiction
    What arbitration bodies relevant to international arbitration are based within your jurisdiction? Do such bodies also act as appointing authorities?
    1. The China International Economic and Trade Arbitration Commission (CIETAC) and China Maritime Arbitration Commission (CMAC) used to be the two principal arbitration bodies that handle foreign-related arbitrations in China. (See Q18 for the definition of ‘foreign-related’.)

      It is noteworthy that two regional sub-commissions of CIETAC in Shanghai and Shenzhen declared their secession from the organization in 2012.  CIETAC ’s central body in Beijing announced the termination of its authorisation for the Shanghai and South China sub-commissions to accept and administer arbitration proceedings.  Soon after, the South China sub-commission announced its official separation from CIETAC on October 22, 2012, as well as announcing that it would be officially known either as the South China International Economic and Trade Arbitration Commission or as the Shenzhen Court of International Arbitration (SCIA).  In addition, the Shanghai sub-commission announced its official separation from CIETAC on April 11, 2013, as well as announcing that it would be officially known either as the Shanghai International Economic and Trade Arbitration Commission (SIETAC) or as the Shanghai International Arbitration Center (SIAC).

      After these events, there are currently four bodies that handle foreign-related arbitrations in China: CIETAC, CMAC, SCIA, and SIETAC/SIAC.

      In addition to CIETAC, CMAC,  SCIA, and SIETAC/SIAC, there are approximately 180 other arbitration commissions in China established according to Arbitration Law of PRC, including the Shanghai Arbitration Commission (SHAC) and the Beijing Arbitration Commission (BAC). These other arbitration commissions traditionally handled only domestic (as opposed to ‘foreign-related’) cases. However, according to Circular of the General Office of the State Council Regarding Some Problems Which Need to Be Clarified for the Implementation of the Arbitration Law of the People’s Republic of China, effective as of 8 June 1996, any arbitration commission established according to the Arbitration Law of PRC may accept foreign-related cases if the parties make such a choice. As a result, it is not uncommon today for parties to agree to SHAC or BAC as the arbitration body for their foreign-related disputes.

      A China (Shanghai) Pilot Free Trade Zone Arbitration was established on October 22, 2013, and China (Shanghai) Pilot Free Trade Zone Arbitration Rules were officially released on April 8, 2014 and came into effective on May 1, 2014.   The China (Shanghai) Pilot Free Trade Zone Arbitration Rules are tailored for the free trade zone and purport to be consistent with international standards.  The rules have been innovative in that the handling time limit is shortened from the previous 45 or 20 days to 20 days.

      According to article 31 of the Arbitration Law of PRC, all arbitration commissions are entitled to act as the appointing authority when parties cannot come to agreement on the choice of an arbitrator.

  5. 5.Foreign institutions
    Can foreign arbitral providers operate in your jurisdiction?
    1. According to current laws and regulations, there is no express prohibition against foreign arbitral providers operating in China.

      That said, the validity of an arbitration clause in which the parties choose a foreign arbitral provider to administer their disputes within Mainland China is still unsettled. Likewise, the process for the recognition and enforcement of arbitral awards made in Mainland China by foreign arbitral providers is vague and uncertain in China’s current legal system.

      Take the ICC, for example: if parties contract to arbitrate their disputes according to the Arbitration Rules of the ICC, and agree to any city in Mainland China as the seat of arbitration, the arbitration clause will likely be invalidated by a Chinese court. This is because China’s arbitration law does not recognise the ad hoc arbitration, and such an agreement might be deemed insufficient for failing to identify what China considers a qualified institution.

      Even if such an agreement is valid, obtaining recognition and enforcement of an ICC arbitral award rendered in Mainland China will likely be problematic in the China’s courts. Determining whether such an award is foreign or foreign-related is still a controversial issue among China’s courts. And because the Chinese courts are still uncertain as to what legal provisions apply to such awards, they are reluctant to recognise and enforce such awards.

      Although recent cases demonstrate an increasing tendency of China’s courts to be friendlier to ICC arbitral awards made in Mainland China, the view of the courts and academics are far from certain and unified. Considering the continuing controversy on this issue, we strongly recommend that you consult with your local lawyers before you choose a foreign arbitral provider to arbitrate a controversy in Mainland China.

  6. 6.Courts
    Is there a specialist arbitration court? Is the judiciary in your jurisdiction generally familiar with the law and practice of international arbitration?
    1. There is no specialist arbitration court per se in China. However, it should be noted that different Chinese courts are assigned to handle ‘foreign-related’ and ‘foreign’ arbitrations.

      According to article 12 of The Interpretation of the Supreme People’s Court concerning Some Issues on Application of the Arbitration Law of the PRC (the’2006 Interpretation’), the determination of the validity of a ‘foreign-related’ arbitration agreement (ie, an agreement involving a foreign interest, see Q18 for the definition of ‘foreign-related factors’) shall be subject to the jurisdiction of the Intermediate People’s Court in either the location of the arbitration institution designated in the arbitration agreement, the location where the arbitration agreement was executed or the location where the applicant or party against whom the arbitral award is enforced resides. And, according to article 257 of Civil Procedural Law of PRC, the recognition and enforcement of foreign-related arbitral awards is subject to the jurisdiction of the Intermediate People’s Court in either the place where the party against whom the arbitral award is enforced resides or where the awarded property is located.

      In contrast, for the recognition and enforcement ‘foreign’ arbitral awards (ie, awards made by foreign arbitration institutions, including arbitration institutions in Hong Kong), articles 1 and 3 of The Provisions of the Supreme Court on Some Issues Concerning the Jurisdiction of Civil and Commercial Cases Involving Foreign Elements provides subject matter jurisdiction to the following courts:

      • the people’s court of an economic and technological development zone (established under the approval of the State Council);
      • the Intermediate People’s Court in the provincial or autonomous regional capital city or a municipality directly under the Central Government;
      • the Intermediate People’s Court in a special economic zone or a city directly under the state planning;
      • any other Intermediate People’s Court designated by SPC; and
      • the Higher People’s Court in every province or autonomous region.

      Moreover, in order to avoid protectionism and bias in the local courts, the SPC has imposed important restrictions on the ability of the local courts to set aside foreign and foreign-related arbitral awards. According to the Notice Regarding the Local People’s Court Setting Aside the Foreign-related Arbitral Award, issued on 23 April 1998 by the SPC, and the Notice Regarding the Local People’s Court Handling Foreign-related Arbitral Awards and Foreign Arbitral Awards, issued on 28 August 1995 by the SPC, if any intermediate court decides to set aside or refuse to enforce a foreign-related or foreign arbitral award, it must obtain the approval of both the Higher People’s Court located in its province and China’s SPC. In this way, China’s SPC has the final say as to whether foreign and foreign-related arbitral awards should be enforced.

      The aforementioned courts are normally familiar with the relevant law and practice in this area.

    Agreement to arbitrate

  7. 7.Formalities
    What, if any, requirements must be met if an arbitration agreement is to be valid and enforceable under the law of your jurisdiction? Can an arbitration agreement cover future disputes?
    1. According to article 16 of the Arbitration Law of PRC, an arbitration agreement must include three elements to be valid: an expression of the parties’ wishes to submit to arbitration; the scope of the matter to be arbitrated; and the selection of an arbitration commission to administer the arbitration.

      According to article 17 of the Arbitration Law of PRC, an arbitration agreement may be invalidated for any of the following reasons: the subject matters agreed upon to be arbitrated is beyond the scope of arbitration prescribed by law (see Q8 for the scope of arbitration permissible under PRC law); the arbitration agreement was executed by a person without, or with limited, capacity for civil acts; and one party coerced the other party to sign the arbitration agreement by means of duress.

      An arbitration agreement can cover future disputes arising under a contract.

  8. 8.Arbitrability
    Are any types of dispute non-arbitrable? If so, which?
    1. According to article 3 of the Arbitration Law of PRC, two categories of disputes are non-arbitrable: disputes concerning marriage, adoption, guardianship, child maintenance and inheritance; and administrative disputes falling within the jurisdiction of relevant administrative organs according to law. If you have any confusion about this, we recommend you consult Chinese counsel.

  9. 9.Third parties
    Can a third party be bound by an arbitration clause and, if so, in what circumstances? Can third parties participate in the arbitration process through joinder or a third-party notice?
    1. Under China’s law, a third party cannot be bound by the arbitration clause without its express consent. Moreover, a third party can only join an arbitral proceeding by obtaining the consent of all parties to the arbitration.

      For example, article 50 of the arbitration rules of the China Maritime Arbitration Commission (CMAC) expressly provides that when a person considers that he or she has a legal interest in the outcome of the existing arbitration, he or she may participate as a party to the arbitration only with the consent of the tribunal and parties to the arbitration.

      For a discussion of the ‘alter ego’ and ‘piercing corporate veil’ doctrines under Chinese law, please see Q11.

  10. 10.Consolidation
    Would an arbitral tribunal with its seat in your jurisdiction be able to consolidate separate arbitral proceedings under one or more contracts and, if so, in what circumstances?
    1. China’s arbitration law does not expressly cover this issue.

      That said, some Chinese arbitration commissions expressly provide for consolidation in their rules. For example, article 22 of the CMAC Arbitration Rules provide that ‘the arbitral tribunal may, upon the agreement made in writing by both parties, decide to hear in combination two or more than two cases of which the subject matters are the same or related to each other.’

      On February 3, 2012, the China Council for the Promotion of International Trade and the China Chamber of International Commerce revised and adopted the China International Economic and Trade Arbitration Commission ("CIETAC") Arbitration Rules, which came into effect on May 1, 2012.

      Article 17(1) of the new CIETAC rules allows CIETAC to consolidate two or more pending arbitrations into a single arbitration where (a) it is requested by a party and all the parties agree, or (b) CIETAC believes it is necessary and all the parties agree. Therefore, unlike the new consolidation provisions in the ICC rules, CIETAC can order consolidation only if the parties agree. This has the unfortunate consequence that one party can prevent consolidation.

      In deciding whether to consolidate the arbitrations, Article 17(2) of the new CIETAC rules allow CIETAC to take into account any factors it considers relevant in respect of the different arbitrations, including whether (i) all of the claims in the different arbitrations are made under the same arbitration agreement, (ii) the different arbitrations are between the same parties, or (iii) one or more arbitrators have been nominated or appointed in the different arbitrations.

      In any event, when parties are entering into several interrelated agreements with a Chinese entity, it is generally recommended that the arbitration clauses in each agreement expressly provide that any arbitrations commenced under the various agreements may be consolidated in one arbitral proceeding.

  11. 11.

    Groups of companies
    Is the 'group of companies doctrine' (or any other basis for piercing the corporate veil) recognised in your jurisdiction?

    1. China’s arbitration law does not provide for the ‘group of companies doctrine,’ and tends to bind only those parties who expressly sign on to an arbitration agreement.

      As a matter of substantive law, however, China’s corporation law does recognise the ‘piercing corporate veil’ doctrine, making shareholders severally and jointly liable for the debts of a company if the shareholders abuse the independent status of corporation or the shareholder’s limited liability status (see article 20 of Corporation Law of PRC). However, individual shareholders cannot be dragged into an arbitration against their company if they are not personally parties to the underlying arbitration agreement. Instead, the prevailing party in such an arbitration would be required to initiate a separate judicial action against the shareholders in question, and seek to hold the shareholders liable for the debts of their company under the ‘piercing corporate veil’ doctrine .

  12. 12.Separability
    Are arbitration clauses considered separable from the main contract?
    1. According to article 19 of the Arbitration Law of PRC and article 57 of Contract Law of PRC, an arbitration agreement is independent from the rest of the contract. Accordingly, the amendment, rescission, termination and nullity of the contract will not affect the validity of the arbitration agreement.

  13. 13.Competence-competence
    Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence?
    1. Although China’s arbitration law provides that arbitration tribunals have the authority to determine their own jurisdiction and competence, this right, generally speaking, is subject to the supervision and review of the courts. This is quite different from the practice in most western countries.

      Article 20 of the Arbitration Law of PRC provides that if any party objects to the validity of an arbitration agreement – and, thus, to the jurisdiction of the arbitrators – such objecting party may apply to either the arbitration tribunal or a people’s court for a ruling. However, the Reply to Several Problems Concerning the Validity of the Arbitration Agreement issued by China’s SPC in 1998, provides that if one party submits the question of validity of an arbitration agreement to an arbitration tribunal while the other party submits the question to the people’s court, the people’s court should inform the arbitration tribunal to stop all work on the case pending the court’s decision.

      According to article 13 of the Interpretation of the Supreme People’s Court concerning Some Issues on Application of the Arbitration law of the PRC (the 2006 Interpretation), an objecting party will lose the right to apply to the people’s court for a ruling on the validity of an arbitration agreement or the jurisdiction of the arbitration tribunal in two scenarios: if the objecting party fails to object to the jurisdiction of the tribunal before the tribunal’s first hearing; or if the objecting party fails to apply to the court before the arbitration tribunal has rendered a decision on validity of the arbitration agreement and its own jurisdiction.

  14. 14.Drafting
    Are there particular issues to note when drafting an arbitration clause where your jurisdiction will be the seat of arbitration or the place where enforcement of an award will be sought?
    1. We generally recommend that non-Chinese parties avoid agreeing to arbitration in Mainland China, since the Chinese courts have greater authority to review and overturn an arbitral award rendered inside Mainland China than outside Mainland China. If the Chinese party will not agree to conduct arbitration in the US or Europe, a reasonable compromise is arbitration in Singapore or Hong Kong. As noted in our answer to Q2 above, arbitral awards rendered in Hong Kong are treated like arbitral awards rendered in any signatory to the New York Convention, thereby making Hong Kong a comparatively safe place to arbitrate against Chinese parties.

      If the seat of arbitration has to be in Mainland China, we generally recommend that the parties choose arbitration administered by, and under the Rules of, the China International Economic and Trade Arbitration Commission (CIETAC). However, non-Chinese parties are well advised to demand certain protective provisions when drafting a CIETAC arbitration clause. Among other things:

      • The CIETAC rules mandate that the arbitration will be conducted in the Chinese language unless the parties agree otherwise. Accordingly, it is advisable that a CIETAC arbitration clause expressly provide that the arbitration be conducted in English or whatever other language you may prefer.
      • Unlike certain other arbitration rules, the CIETAC rules do not mandate that the chairperson of an arbitration panel be of a neutral nationality (ie, a nationality shared by neither party to the contract). Accordingly, it is advisable that you include a provision in your CIETAC arbitration clause expressly providing that the chairperson of the arbitration panel be of a neutral nationality. Otherwise, you may end up arbitrating against a Chinese entity where the chairperson of the panel is also a Chinese national.
      • The CIETAC rules mandate that the parties must select arbitrators from the CIETAC arbitrator list unless they agree otherwise. Therefore, if you want the freedom to choose arbitrators outside the official CIETAC list, it is recommended that you draft this right into your arbitration agreement.
      • We recommend you to carve out and specify that disputes relating to intellectual property infringement (including trademark, patent and copyright issues) be resolved by the Chinese courts rather than by the CIETAC arbitration panel. This is because the Chinese courts have the authority to grant pre-trial injunctions in favor of those parties whose intellectual property rights have been infringed. On the contrary, pre-arbitration injunctions are not available for Chinese domestic arbitration proceedings.
      • It might be helpful to add a provision specifically fixing the interest rate to be applied on any arbitral award.
      • If you are especially concerned that the Chinese party may not be willing or able to satisfy a future arbitral award, you may consider trying to add a security provision to the arbitration clause.

      Finally, if the seat of arbitration has to be in Mainland China, we strongly recommend that parties do not seek arbitration according to the rules of the ICC or any other foreign arbitral provider. This is because, as discussed above, it is still unsettled as to whether Chinese courts are obligated to recognise and enforce arbitral awards administered by foreign arbitration institutions within Mainland China, both in practice and in academia. Thus, such an arbitration clause could be quite risky.

  15. 15.Institutional arbitration
    Is institutional international arbitration more or less common than ad hoc international arbitration? Are the UNCITRAL Rules commonly used in ad hoc international arbitrations in your jurisdiction?
    1. As discussed above, it is a mandatory requirement of China’s arbitration law that an arbitration agreement must select and specify an arbitration commission to administer any dispute. Indeed, if an arbitration agreement fails to provide for institutional arbitration, it is likely invalid under Chinese law.

      Accordingly, China’s arbitration law does not allow for ad hoc arbitration, and it would be very risky for parties to choose ad hoc arbitration to resolve their disputes. For more details, please see our answers to Q5 and Q14.

      In light of the foregoing, there is no record available concerning how often the UNCITRAL Rules have been used in China.

  16. 16.Multi-party agreements
    What, if any, are the particular points to note when drafting a multi-party arbitration agreement with your jurisdiction in mind? In relation to, for example, the appointment of arbitrators.
    1. While China’s arbitration law is silent on the appointment of arbitrators in multi-party arbitrations, some of the leading Chinese arbitration commissions, like China International Economic and Trade Arbitration Commission (CIETAC) and China Maritime Arbitration Commission (CMAC), provide clear rules on this issue. When drafting an arbitration clause in a multi-party agreement, parties can avoid potential controversies by selecting an arbitration commission with clear guidelines on multi-parties issues.

    Commencing the arbitration

  17. 17.Request for arbitration
    How are arbitral proceedings commenced in your jurisdiction? Are there any key provisions under the arbitration laws of your jurisdiction relating to limitation periods of which the parties should be aware?
    1. According to articles 22 and 23 of the Arbitration Law of PRC, a party must commence an arbitration by submitting an application for arbitration, along with a copy of the arbitration agreement, to the selected arbitration commission.

      There are no specific procedural time-limits on filing a request for arbitration. Instead, the relevant statute of limitations will follow the requirements of the applicable substantive laws. The most common statute of limitation in Chinese law is two years. Claims for breach of contract are covered by this two-year statute of limitation.

      According to article 129 of Contract Law of PRC, the statute of limitations for controversies arising from the international sale of goods or the export and import of technologies is four years. However this special statute of limitation does not cover controversies arising from joint venture contracts, which are still subject to two-year statute of limitation.

    Choice of law

  18. 18.Choice of law
    How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?
    1. China has special rules for the choice of law to apply to a ‘foreign-related’ civil relationship. According to article 304 of the Several Opinions concerning the Implementation of the Civil Procedure Law of the People’s Republic of China and the Interpretation of the Supreme People's Court on Certain Issues Concerning the Application of the Law of the People's Republic of China on the Application of Laws to Foreign-Related Civil Relations (I), a foreign-related relationship can be established by one of five factors: either or both of the parties are of foreign nationality, or stateless, or a company or an organization domiciled in a foreign country; the habitual residence of either or both of the parties is outside the territory of the PRC; the legal facts that established, changed, or terminated the civil legal relationship between the parties occurred in a foreign country; the subject matter of the dispute between the parties is situated in a foreign country; or other situations that may be recognized as foreign-related civil relations.

      According to article 145.1 of the General Principles of the Civil Law of the PRC and article 126.1 of the Contract Law of the PRC, the parties to a foreign-related contract have the right to freely choose the governing substantive law for any controversy arising under their contract. The parties are not obligated to choose Chinese law as the law governing their contract.

      If the parties to a foreign-related civil relationship fail to choose or specify the governing law in their agreement, article 41 of the Law of the Application of Law for Foreign-Related Civil Relations of the People’s Republic of China provides as a general rule, that the applicable law is either the law of country of the party whose performance of the contract best reflects the characteristics and nature of the contract in question, or the law of the country that has the closest relation with the contract.

      In addition to this general rule, articles 42 to 47 of the same statute and the Interpretation of the Supreme People's Court on Certain Issues Concerning the Application of the Law of the People's Republic of China on the Application of Laws to Foreign-Related Civil Relations (I) designate the applicable laws that must be applied in certain specific situations, such as controversies involving the protection of public interests related to labor, food, public health safety, environmental safety, financial safety such as foreign exchange administration, anti-monopoly, or anti-dumping.  For each of these specific controversies, the court should apply the specifically-designated laws if parties fail to choose or specify the governing law in their agreement.

      More specifically, Article 126 of the Contract Law of PRC provides that Chinese law must apply  the contracts to be performed in the territory of the People's Republic of China on Chinese-foreign equity joint ventures, on Chinese-foreign contractual joint ventures and on Chinese-foreign cooperation in exploring and exploiting natural resources.  

    Appointing the tribunal

  19. 19.Choice of arbitrators
    Does the law of your jurisdiction place any limitations in respect of a party’s choice of arbitrator?
    1. According to article 34 of the Arbitration Law of PRC, an arbitrator cannot be selected, and must withdraw from adjudicating an arbitration, if he or she: is a close relative to one of the parties to the arbitration or to one of the party’s representatives; has a stake or interest in the outcome of the case; has some other relationship with a party to the arbitration, or to a party’s agent, which could possibly affect the impartiality of the arbitration; and meets a party or his agent in private, accepts a dinner invitation from a party or his representative, or accepts other gifts from a party.

      China’s arbitration law requires that domestic arbitration institutions must provide a list of registered arbitrators to the parties to an arbitration. In practice, parties to a domestic arbitration can only choose arbitrators from the official list of the arbitration commission. For example, the arbitration rules of the Shanghai Arbitration Commission (SHAC) only allow parties to choose arbitrators from its list.

      Some domestic arbitration commissions, however, provide more flexibility on this issue. For example, article 24.2 of the CIETAC arbitration rules provides that parties can agree to nominate arbitrators from outside the CIETAC’s official panel of arbitrators, subject to the confirmation of the CIETAC chairman.

  20. 20.Foreign arbitrators
    Can non-nationals act as arbitrators where the seat is in your jurisdiction or hearings are held there? Is this subject to any immigration or other requirements?
    1. Yes. Article 67 of the Arbitration Law of PRC expressly provides that foreigners with professional knowledge in such fields as law, economics, trade, science and technology may be appointed as arbitrators for arbitrations in China.

  21. 21.Default appointment of arbitrators
    How are arbitrators appointed where no nomination is made by a party or parties or the selection mechanism fails for any reason? Do the courts have any role to play?
    1. For arbitrations taking place in Mainland China under the administration of a domestic arbitration commission, article 32 of the Arbitration Law of PRC provides that if the parties fail to select the arbitrators within the time limit prescribed by the arbitration rules, the arbitrators shall be appointed by the chairman of the arbitration commission.

      The Chinese courts play no role in the appointment of arbitrators.

  22. 22.Immunity
    Are arbitrators afforded immunity from suit under the law of your jurisdiction and, if so, in what terms?
    1. According to articles 34, 38, and 58 of the Arbitration Law of PRC, an arbitrator can be held legally liable if he or she engages in any of the following activities: meets a party or his agent in private; accepts an invitation for dinner by a party or his representative; demands or accepts gifts from a party; demands or accepts a bribe; or commits graft or, in extreme circumstances, perverts the law in making the arbitral award.

      According to article 399 of the Criminal Law of PRC (added by the sixth amendment), in the most serious circumstances arbitrators can even be criminally liable if they intentionally rule counter to the facts and/or twist the law in making a ruling in an arbitration. The maximum penalty for such crime is seven years of imprisonment.

      While China’s law expressly provides that arbitrators are legally liable in the above-mentioned scenarios, it is silent as to whether arbitrators are immune from liability in other scenarios. However, it is reasonable to conclude, by negative implication, that arbitrators are immune from liability for their actions so long as they do not engage in the aforementioned prohibited activities.

  23. 23.Securing payment of fees
    Can arbitrators secure payment of their fees in your jurisdiction? Are there fundholding services provided by relevant institutions?
    1. China’s arbitration law does not expressly provide any rules with respect to securing payment for arbitrator fees or fundholding services.

      However, it is the common practice in almost all arbitration commissions in China that the party filing for arbitration must advance the filing fees to the arbitration commission, which includes fees for the arbitrators. If such filing fees are not paid in full, the arbitration commission will usually not accept the case or start any work incurring expenses.

      The ‘loser pays’ rule applies to the allocation of such filing fees when the arbitration is concluded. According to article 9 of the Arbitration Fee Collection Measures of Arbitration Commission (issued by the State Council on 28 July 1995), fees paid to the arbitration commission shall, in principle, be borne by the losing party. See answer to Q39 for more details of the application of ‘loser pays’ rule.

    Challenges to arbitrators

  24. 24.Grounds of challenge
    On what grounds may a party challenge an arbitrator? How are challenges dealt with in the courts or (as applicable) the main arbitration institutions in your jurisdiction? Will the IBA Guidelines on Conflicts of Interest in International Arbitration generally be taken into account?
    1. According to article 34 of the Arbitration Law of PRC, an arbitrator cannot be selected, and must withdraw from adjudicating an arbitration, if he or she: is a close relative to one of the parties to the arbitration or to one of the party’s representatives; has a stake or interest in the outcome of the case; has some other relationship with a party to the arbitration, or to a party’s agent, which could possibly affect the impartiality of the arbitration; and meets a party or his agent in private, accepts a dinner invitation from a party or his representative, or accepts other gifts from a party.

      China’s arbitration law requires that domestic arbitration institutions must provide a list of registered arbitrators to the parties to an arbitration. In practice, parties to a domestic arbitration can only choose arbitrators from the official list of the arbitration commission. For example, the arbitration rules of the Shanghai Arbitration Commission (SHAC) only allow parties to choose arbitrators from its list.

      Some domestic arbitration commissions, however, provide more flexibility on this issue. For example, article 2 4.2 of the CIETAC arbitration rules provides that parties can agree to nominate arbitrators from outside the CIETAC’s official panel of arbitrators, subject to the confirmation of the CIETAC chairman.

    Interim relief

  25. 25.

    Types of relief
    What main types of interim relief are available in respect of international arbitration and from whom (the tribunal or the courts)? Are anti-suit injunctions available where proceedings are brought elsewhere in breach of an arbitration agreement?

    1. According to article 272 of the Civil Procedural Law of PRC and article 68 of the Arbitration Law of PRC, parties to a foreign-related arbitration can apply directly to the arbitration tribunal for an order of attachment and/or the preservation of evidence. The tribunal is then required to submit such applications to the Intermediate People’s Court in the place where the applicant resides or where the property or evidence in question is located. Although the tribunal does not have any power to enforce such orders for interim relief, it is a procedural requirement that the application must be submitted to the court by the arbitral tribunal. Moreover, in the event the arbitral tribunal has not yet been formed, it is a procedural requirement that the secretariat or chairman of the selected arbitration commission receive and submit such application to the courts. Either way, parties to an arbitration cannot themselves submit applications for orders attachments or preservation of evidence directly to the courts.

      Article 100 of  the Civil Procedural Law of PRC provides for the remedy of a preliminary injunction.  In addition, the Patent Law of PRC, Copyright Law of PRC and Trademark Law of PRC allow parties whose intellectual property rights have been infringed to seek such pre-trial injunctions in judicial proceedings. However, pre-arbitration injunctions were not available for arbitration proceedings taking place in Mainland China.

      Recent changes in the Chinese Civil Procedure Law (effective as of January 1, 2013) and the CIETAC Arbitration Rules (effective as of May 1, 2012) have resulted in a greater availability of interim relief in a timely and effective manner. An amendment to the Civil Procedure Law now also allows people’s courts to grant injunctive order to secure assets or evidence even before commencement of the arbitration. Furthermore, under the new CIETAC Rules, a request for interim relief may now be decided upon by the arbitral tribunal itself (in addition to the national courts), and interim relief is no longer limited to preservation of assets or evidence. It remains to be seen which additional kinds of interim relief will be granted directly by arbitral tribunals under the new CIETAC Rules (e.g., compelling attendance of witnesses or security for costs).

      It is noteworthy that, according to articles 13, 14, 18 and 25 of the Special Maritime Procedural Law of PRC, parties to an arbitration agreement in a maritime controversy can seek an order of attachment from the maritime courts in the location of the property to be attached, even before filing for arbitration. The maritime court will decide whether to grant such relief, although the applying party needs to initiate the arbitration within certain time limits (15 days for attachment of goods or other properties, 30 days for attachment of ships). This rule, however, is unique to maritime arbitration.

      Such pre-filing judicial orders are not available in non-maritime arbitrations.

      The anti-suit injunction has not yet been recognised under Chinese law. In China, if one party to an arbitration agreement initiates a court action in breach of the arbitration agreement, the court will have the opportunity to determine the validity of the arbitration agreement. If the court finds that the agreement is valid, it should reject the action. If the court finds the agreement is invalid, this determination will prevail over any subsequent determination of validity by the arbitration tribunal.

      For more information relevant to this question, please see the answer to Q13 above.

  26. 26.Security for costs
    Does the law of your jurisdiction allow a court or tribunal to order a party to provide security for costs?
    1. In arbitrations in Mainland China, the prevailing party in an arbitration may seek indemnification from the losing party for all reasonable expenses incurred during the arbitration (see Q39 for details). However, there is no effective mechanism – like a procedure to obtain ‘security for costs’ – to ensure such indemnification under China’s arbitration law. As a result, other than advancing the arbitration fees to the arbitral institution, a claimant does not need to provide any security before initiating an arbitration.

      That said, according to article 100 of Civil Procedural Law of PRC and article 23 of Some Provisions of Supreme People’s Court on Evidence in Civil Procedures, if a party applies for order of attachment or preservation of evidence (see Q25 for the related procedures), the court can require the applying party to provide security for damages of the party against whom the relief is sought, if the court considers it appropriate.

      It is noteworthy that Chinese law generally does not require the party to prove ‘a probability of success in the merits’ when applying for interim relief. This is different from the practice in some western countries.

       

    Procedure

  27. 27.

    Procedural rules
    Are there any mandatory rules in your jurisdiction that govern the conduct of the arbitration (eg, general duties of the tribunal and/or the parties)?

    1. China’s arbitration law allows parties to a foreign-related arbitration agreements to choose whatever arbitration rules they want. Some Chinese arbitration commissions, like CIETAC, also permit the parties to supplement or change the arbitration rules at their will.

      That said, the arbitration rules selected cannot be inconsistent with the mandatory rules in China’s laws, such as those set forth in the Arbitration Law of PRC. Some mandatory rules are listed below:

      • arbitrability (see Q8 for a discussion of what types of disputes are not arbitrable under Chinese law);
      • limitations in respect of a party’s choice of arbitrator (see Q19);
      • institutional requirements for arbitration agreement (that is, parties cannot agree to ad hoc arbitration);
      • ‘orders of attachment’ can only be granted by the courts and not be arbitrators; and
      • a court’s ruling on the validity of arbitration agreement prevails over the arbitration tribunal’s decision.
  28. 28.Refusal to participate
    What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration?
    1. According to article 42 of the Arbitration Law of PRC, if the respondent has been served with a notice of arbitration in writing, but then fails to appear before the tribunal without due cause, or leaves the tribunal room during a hearing without the permission of the arbitration tribunal, the tribunal may grant an award in favour of the claimant by default. If a respondent defaults, this means the respondent has voluntarily waived all legal rights in the proceeding and, provided the claimant is able to prove its case to the arbitrators in the respondent’s absence, the award will satisfy the ‘due process’ requirement.

  29. 29.Admissible evidence
    What types of evidence are usually admitted, and how is evidence usually taken? Will the IBA Rules on the Taking of Evidence in International Commercial Arbitration generally be taken into account?
    1. China’s arbitration law does not specify what types of evidence that may be admitted in an arbitration. In practice, the arbitration tribunal will usually refer to, and rely upon, the evidence rules in China’s civil procedure law, although arbitrators tend to be more flexible i n admitting evidence than are the Chinese courts. Witness testimony, written evidence and expert evidence are the most common evidence allowed in Chinese arbitration. The tribunal has broad discretion on determining the admissibility of evidence.

      Parties may agree to apply the IBA Rules on the Taking of Evidence in arbitration to the extent the rules are not inconsistent with China’s mandatory evidence rules. In recent years, CIETAC has expressed an increasing willingness to accept and apply the IBA rules, with the purpose of improving its own evidence rule system.

  30. 30.Court assistance
    Will the courts in your jurisdiction play any role in the obtaining of evidence?
    1. According to article 68 of the Arbitration Law of PRC, when one party to a domestic arbitration applies to the tribunal for the preservation of evidence during an arbitration, the tribunal must submit the application to the Intermediate People’s Court in the place where the evidence is located. The court will then decide whether to take action to preserve the evidence.

  31. 31.Document production
    What is the relevant law and prevailing practice relating to document production in international arbitration in your jurisdiction?
    1. Article 43 of the Arbitration Law of PRC requires parties to produce documentary evidence in support of their claims and defences. It also allows the arbitration tribunal to demand and collect evidence itself whenever it considers it necessary.

      Article 45 of Arbitration Law of PRC requires all evidences to be produced at the beginning of the hearing. The parties may then challenge the validity of each other’s evidence.

      According to China’s arbitration law and other rules concerning evidence in judicial proceedings, parties to an arbitration do not have the right to request documents from the other parties. Parties are put to their own proof, and a recalcitrant party’s failure or refusal to produce relevant documents will be held against the party.

  32. 32.Hearings
    Is it mandatory to have a final hearing on the merits?
    1. According to article 39 of the Arbitration Law of PRC, it is mandatory for the tribunal to hold a hearing on the merits, unless the parties agree otherwise. If the parties agree not to have a hearing, the tribunal may render an award in accordance with the arbitration claim, the answer to the claim and documentary evidence and other pleadings submitted by the parties.

  33. 33.Seat or place of arbitration
    If your jurisdiction is selected as the seat of arbitration, may hearings and procedural meetings be conducted elsewhere?
    1. China’s arbitration law does not prohibit parties to a foreign-related arbitration with the seat in China from agreeing to conduct hearings or meetings outside China.

      The arbitration rules of the selected arbitration commissions will normally provide some guidelines as to where parties can choose to hold hearings and procedural meetings. For example, article 3 4.2 of the CIETAC rules provides that if both parties agree, and the tribunal considers it necessary, the case may be heard in other places with the approval of the secretary general of CIETAC.

    Award

  34. 34.Majority decisions
    Can the tribunal decide by majority?
    1. According to article 53 of the Arbitration Law of PRC, an arbitral award must be based on the opinion of the majority of arbitrators. It also permits the opinion of the dissenting arbitrator to be recorded in writing.

  35. 35.Limitations to awards and relief
    Are there any particular types of remedies or relief that an arbitral tribunal may not grant?
    1. There is no express prohibition on the type of remedies that an arbitral tribunal can grant. The arbitral tribunal is free to grant any kind of final remedy or relief available under substantive law, as long as it does not violate social and public interest (see article 58 of Arbitration Law of PRC). Note, however, that arbitration tribunals operating in Mainland China are not permitted to order requests for interim relief (see Q25 above). Such requests must be submitted to the courts.

      Despite the restrictions under Chinese law on the order by a tribunal of any interim measure, the current arbitration rules of CIETAC (which took effect from May 1, 2012) nonetheless allow any interim measures. Article 21.2 of the current CIETAC rules provide that a tribunal “may order any interim measure it deems necessary or proper in accordance with the applicable law, and may require the requesting party to provide appropriate security in connection with the measure. The order of an interim measure by the arbitral tribunal may take the form of a procedural order or an interlocutory award”, which, however, created significant problems with enforcement. These problems stem from the Chinese Arbitration Law and the Civil Procedure Law, which require applications for property or evidence preservation to be forwarded to the courts (as was previously provided for in the old CIETAC rules).

  36. 36.Dissenting arbitrators
    Are dissenting opinions permitted under the law of your jurisdiction? If so, are they common in practice?
    1. Yes. According to articles 53 and 54 of the Arbitration Law of PRC, the award only needs to be based on the opinion of the majority of arbitrators, but the minority’s opinions shall be recorded in writing. The arbitrators who disagree with the award may select to sign or not to sign the award.

      Dissenting opinions are not uncommon.

  37. 37.Formalities
    What, if any, are the legal and formal requirements for a valid and enforceable award?
    1. According to article 54 of the Arbitration Law of PRC, a valid arbitral award must be in writing and must set forth: a recitation of the arbitration claims; a summary of the matter in dispute; the grounds upon which an award is given; the results of the arbitration; the allocation of the arbitration fees between the parties; and the date of the award.

      The award must be signed by a majority of the arbitrators and sealed by the arbitration commission.

  38. 38.Time frames
    What time limits, if any, should parties be aware of in respect of an award? In particular, do any time limits govern the interpretation and correction of an award?
    1. China’s arbitration law does not specify any time limit for arbitrators to render awards in a foreign-related arbitration.

      However, most of China’s arbitration commissions expressly set the time limits, in their own rules, for arbitrators to render an award. For example, China International Economic and Trade Arbitration Commission (CIETAC), China Maritime Arbitration Commission (CMAC); Shanghai Arbitration Commission (SHAC) and Beijing Arbitration Commission (BAC) all provide that, in any foreign-related arbitration, the arbitral tribunal needs to render the award within six months from the date on which the arbitral tribunal is formed. This time limit, however, is subject to extension if the chairman of the respective arbitration commission considers an extension necessary and justified.

      Article 56 of the Arbitration Law of PRC provides that the parties may, within 30 days of the receipt of the award, request the arbitration tribunal to correct any typographical errors or calculation errors in the award, or to address matters that had been decided but omitted from the paper award.

      According to article 59 of the Arbitration Law of PRC, if a party wants to apply for the cancellation of an award, the application must be submitted to the relevant court within six months after receipt of the award.

    Costs and interest

  39. 39.

    Costs
    Are parties able to recover fees paid and costs incurred? Does the 'loser pays' rule generally apply in your jurisdiction?

    1. Yes, the ‘loser pays’ rule generally applies in China.

      According to article 9 of the Arbitration Fee Collection Measures of Arbitration Commission (issued by the State Council on 28 July 1995), fees paid to the arbitration commission shall, in principle, be borne by the losing party. However, if a party only partially wins, the arbitration tribunal can determine the proportion of arbitration fees to be borne by each party. If the parties reconcile, or the case is settled through conciliation by the arbitral tribunal, the parties can reach an agreement as to the proportion of fees to be borne by each party. Most arbitration commissions in China adopt this principle in their rules.

      As to the costs incurred by the parties during the arbitration, including legal fees, one must refer to the rules of the arbitration commission. For example, article 50.2 of the CIETAC arbitration rules provides that the arbitral tribunal has the power to order the losing party to compensate the winning party for some or all of the expenses reasonably incurred. When determining the reasonableness of expenses incurred by the winning party, the tribunal is required to consider factors such as the outcome and complexity of the case, the workload of the winning party and/or its representatives, the amount in dispute, etc.

  40. 40.Interest on the award
    Can interest be included on the principal claim and costs? Is there any mandatory or customary rate?
    1. There are no rules in China’s arbitration law that mandate interest rates applicable to arbitral awards. In practice, the arbitrator must refer to China’s substantive laws in determining the applicable interest rate.

      According to Supreme People’s Court’s judicial interpretation ([2000]#34), issued on 15 November 2000, the mandatory interest rate for due payment in a judicial proceeding is ‘the standard interest rate approved by the People’s Bank of China, which is the central bank of China, and charged by financial institution for past due loans.’ This rate varies from time and time and may be checked on the website of People’s Bank of China.

    Challenging awards

  41. 41.Grounds for appeal
    Are there any grounds on which an award may be appealed before the courts of your jurisdiction?
    1. The grounds for appeal and review of an arbitral award in the Chinese courts depends on whether the award is ‘foreign-related’ or ‘foreign.’

      With respect to ‘foreign-related’ arbitral awards (ie, awards rendered in Mainland China by China’s arbitration institutions with foreign-related factors, see Q18 for the definition of ‘foreign-related factors’), articles 70 and 71 of the Arbitration Law of PRC provide for appeal of an arbitral award if there is sufficient evidence that the arbitral award involves any of the four scenarios prescribed in article 260 of Civil Procedural Law of PRC (after the first amendment in 2007, article 258 in the new Civil Procedural Law of PRC replaced article 260 in the old law; after the second amendment in 2012, article 274 of the newest Civil Procedure Law replaced the previous article 258), which are:

      • the parties did not agree to submit to arbitration in their contract or did not subsequently reach a written agreement to submit their dispute to arbitration;
      • the respondent was not duly notified of the appointment of the arbitrators or the arbitration proceeding, or the respondent was prohibited from expressing its defense due to the reasons for which it is not responsible;
      • the formation of the arbitration tribunal or the arbitration procedure was not in conformity with the applicable rules of arbitration; or
      • the matters decided by arbitration exceed the scope of the arbitration agreement or the authority of the arbitration institution.

      Any party to a foreign-related arbitration can apply to a court to set aside an arbitral award based on the foregoing four factors, provided such application is made within six months of receipt of the arbitral award. Moreover, when one party applies to a court for an order enforcing the arbitral award, the party against whom enforcement is sought can also seek a judicial ruling that the award is not enforceable.

      According to article 9 of the Arbitration Law of PRC, if a court decides to set-aside or not enforce a ‘foreign related’ arbitral award, such ruling is final and cannot be appealed by either party.

      With respect to ‘foreign’ arbitral awards (ie, awards made by foreign arbitration institutions), article 283 of Civil Procedural Law of PRC provides that the People’s Court shall deal with the matter in accordance with the relevant provisions of international treaties executed by China on the principle of reciprocity. Thus, foreign arbitral awards will be treated by the Chinese courts as provided for in the New York Convention treaty. In theory, then, foreign arbitral awards should be respected and upheld by the Chinese courts subject only to the reciprocity, public policy and commercial reservations in the New York Convention.

      It should be noted that China’s Supreme People’s Court (SPC) has imposed significant restrictions on the power of the local courts to set aside a foreign and foreign-related arbitral award. According to the Notice Regarding the Local People’s Court Setting Aside the Foreign-Related Arbitral Award, issued on 23 April 1998 by SPC, and the Notice Regarding the Local People’s Court Handling Foreign-Related Arbitral awards and Foreign Arbitral Awards, issued on 28 August 1995 by SPC, if a local court wants to set aside a foreign or foreign-related arbitral award, approvals from China’s SPC and the highest court of the province where the local court is located are required. In this way, China’s SPC is endeavoring to monitor the local courts and, hopefully, ensure their compliance with the New York Convention.

  42. 42.Other grounds for challenge
    Are there any other bases on which an award may be challenged, and if so what?
    1. There are no other grounds to challenge a foreign or foreign-related arbitral award. Note that domestic arbitration awards (awards issued in arbitrations between two Chinese companies) are subject to greater oversight.

  43. 43.Modifying an award
    Is it open to the parties to exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?
    1. No. The provisions in the Arbitration Law of PRC, which allows the judicial supervision of the arbitration process, are mandatory rules. According to article 52.5 of the Contract Law of PRC, any agreement inconsistent with the mandatory laws of China is null and void.

      In addition, the judicial review of arbitration awards is deemed to be the ‘last resort’ for parties to a controversy. The deprivation of such a last resort would likely be deemed a violation of the social and public interests in China. According to article 52.4 of the Contract Law of PRC, any contract provision jeopardising the social and public interest is also null and void.

    Enforcement in your jurisdiction

  44. 44.Enforcement of set-aside awards
    Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?
    1. With respect to ‘foreign-related’ arbitral awards, articles 70 and 71 of the Arbitration Law of PRC provide the same conditions for the court to set aside a foreign-related arbitral award and to reject the award. Thus, a foreign-related arbitral award that is set aside pursuant to the Arbitration Law of China will not be enforced by the Chinese courts.

      With respect to ‘foreign’ arbitral awards made outside of Mainland China, article 283 of Civil Procedural Law of PRC provides that the recognition and enforcement of such foreign arbitral awards in China will be determined in accordance with the New York Convention. Article V(1)(e) of the New York Convention states that the recognition and enforcement of an arbitral award may be refused, at the request of the party against whom it was invoked, if that party furnishes proof that the award has been set aside or suspended by a competent authority of the country in which, or under the law of the country in which, that award was made. Therefore, it is unlikely that China’s courts would recognise or enforce a foreign arbitral award that has been set aside by a foreign court of competent authority, if the arbitral award is made in a New York Convention signatory country.

  45. 45.Trends
    What trends, if any, are suggested by recent enforcement decisions? What is the prevailing approach of the courts in this regard?
    1. In recent years, China’s Supreme People’s Court (SPC) has taken definite steps to monitor the lower courts’ compliance with the New York Convention and, thereby, to increase the recognition and enforcement of foreign arbitral awards in China. Among other things, and as mentioned in our answer to Q6 above, the SPC issued a formal notice on 28 August 1995 that requires the lower courts to obtain the SPC’s approval in order to refuse to recognise or enforce a foreign arbitral award.

      According to a speech by Wan E’xiang, a deputy chief justice of the SPC, in 2008, the lower courts of China refused to enforce foreign arbitral awards on the ground of violation of public policy seven to eight times between 2000 and 2008. However, according to the same deputy chief justice, the SPC did not uphold any of these lower court decisions.

      Although the deputy chief justice’s remarks cannot be verified due to the lack of available statistics on judicial decisions in China, it seems clear that China’s courts are showing an increasing willingness to enforce foreign arbitral awards in line with the New York Convention. We believe this trend can only continue as China continues to integrate its economy with the rest of the world.

  46. 46.State immunity
    To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
    1. Although there is no legislature or regulations that directly confirms China’s position on ‘state immunity’, China’s government has openly claimed its holding of ‘absolute immunity doctrine’ on a number of diplomatic occasions. It is generally believed that ‘absolute immunity doctrine’ applies in Mainland China, which means that China and other foreign states are immune from being sued and that state assets are immune from being attached in China without the prior consent of the affected government.

      Some laws indirectly touch upon this area. For example, the Law of PRC on Judicial Immunity from Compulsory Measures Concerning the Assets of Foreign Central Bank, issued on 25 October 2005, provides immunity from the order of attachment and judicial enforcement against the assets of a foreign central bank in China.

      On 26 August 2011, the Standing Committee of the National People’s Congress (SCNPC) issued an interpretation of articles 13.1 and 19 of the Basic Law of Hong Kong Special Administrative Region. In this interpretation, the SCNPC, the supreme legislative body in China, confirmed that the ‘state immunity’ rule adopted in Mainland China also applies in the jurisdiction of Hong Kong. In the press conference releasing this interpretation, Li Fei, the vice director of the Commission of Legislative Affairs of SCNPC, stated that state immunity will be applied to states rather than to state-owned companies. This, however, has not yet been tested as far as we are aware.

    Further considerations

  47. 47.Confidentiality
    To what extent are arbitral proceedings in your jurisdiction confidential?
    1. China’s arbitration commissions provide guidelines as to the confidentiality of arbitrations. For example, article 36 of the CIETAC arbitration rules provides that the parties to any arbitration – as well as the lawyers, witnesses, interpreters, arbitrators, experts and staff member of the secretariat of the CIETAC – may not disclose any substantive or procedural matters of the arbitration to the outside world. Other foreign-related arbitral institutions in China have similar rules, but we recommend you consult the rules to be certain.

      In addition to confidentiality, arbitrations in China are also private. In this regard, article 40 of the Arbitration Law of PRC provides that, unless the parties agree otherwise, arbitral proceedings are not open to the public. If the parties to an arbitration agree to a public hearing, the arbitration may proceed in public, except for those aspects concerning state secrets.

  48. 48.Evidence and pleadings
    What is the position relating to evidence produced and pleadings filed in the arbitration? Are these confidential? Is there any way that they might be relied on in other proceedings (whether arbitral or court proceedings)?
    1. As mentioned in our answer to Q47, China’s arbitration law requires that, unless the parties agree otherwise, arbitrations are not to be conducted in public. As also mentioned in our answer to Q47, most Chinese arbitration commissions expressly provide for confidentiality. Article 36 of the CIETAC rules, for example, prohibits any ‘substantive and procedural matters’ of the arbitration case to be disclosed to any outsiders. The evidence and pleadings of an arbitration fall in the category of ‘substantive and procedural matters’ and should not be disclosed.

      According to article 9 of Some Provisions of the Supreme People’s Court on Evidence in Civil Procedure, the Chinese courts can rely on the facts ascertained by an effective and valid arbitral award made by an arbitration commission. But these ascertained facts are not conclusive and the other party can challenge them by providing sufficient evidence.

  49. 49.Ethical codes
    What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?
    1. For lawyers, the Law of the People’s Republic of China on Lawyers is the major source of ethical codes governing their conduct.

      The conduct of arbitrators is circumscribed by the mandatory rules in the Arbitration Law of PRC (see Q24 above). In addition, arbitrators also need to comply with the arbitrator conduct codes issued by the arbitration commission in which they are sitting, which are usually more detailed and comprehensive.

  50. 50.Procedural expectations
    Are there any particular procedural expectations or assumptions of which counsel or arbitrators participating in an international arbitration with its seat in your jurisdiction should be aware?
    1. Although most of the Chinese arbitration commissions set a six-month time period for the arbitral tribunal to render an award for foreign-related arbitration, the commissions routinely grant extensions of this deadline. Thus, in practice, arbitrations in China are often not completed in six months.

      It is noteworthy that unless both parties agree otherwise, the language used in arbitrations administered by China’s foreign-related arbitral commission will be Chinese. Thus, foreign parties are well advised to demand that any arbitration agreement with a Chinese entity specifically provide that the arbitration be conducted in English, or whatever other language you prefer.

      Foreign parties are also well advised to demand that any arbitration agreement with a Chinese entity specifically provide that at least the chairperson of the arbitration panel be of a neutral nationality. This is because China’s arbitration law and the rules of some major arbitral institutions, like CIETAC, do not require the chairman of an arbitral panel to be of a neutral nationality in an arbitration between a Chinese entity and a foreign entity.

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GAR know-how provides reliable cross-jurisdictional insight to help cement the building blocks of international practice. In this section, select experienced practitioners answer commonly asked questions for key jurisdictions so allowing readers to be better-placed to solve the challenges of their working days.

Questions

    Infrastructure

  1. 1.The New York Convention
    Is your state a party to the New York Convention? Are there any noteworthy declarations or reservations?
  2. 2.Other treaties
    Is your state a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards?
  3. 3.National law
    Is there an arbitration act or equivalent and, if so, is it based on the UNCITRAL Model Law? Does it apply to all arbitral proceedings with their seat in your jurisdiction?
  4. 4.Arbitration bodies in your jurisdiction
    What arbitration bodies relevant to international arbitration are based within your jurisdiction? Do such bodies also act as appointing authorities?
  5. 5.Foreign institutions
    Can foreign arbitral providers operate in your jurisdiction?
  6. 6.Courts
    Is there a specialist arbitration court? Is the judiciary in your jurisdiction generally familiar with the law and practice of international arbitration?
  7. Agreement to arbitrate

  8. 7.Formalities
    What, if any, requirements must be met if an arbitration agreement is to be valid and enforceable under the law of your jurisdiction? Can an arbitration agreement cover future disputes?
  9. 8.Arbitrability
    Are any types of dispute non-arbitrable? If so, which?
  10. 9.Third parties
    Can a third party be bound by an arbitration clause and, if so, in what circumstances? Can third parties participate in the arbitration process through joinder or a third-party notice?
  11. 10.Consolidation
    Would an arbitral tribunal with its seat in your jurisdiction be able to consolidate separate arbitral proceedings under one or more contracts and, if so, in what circumstances?
  12. 11.

    Groups of companies
    Is the 'group of companies doctrine' (or any other basis for piercing the corporate veil) recognised in your jurisdiction?


  13. 12.Separability
    Are arbitration clauses considered separable from the main contract?
  14. 13.Competence-competence
    Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence?
  15. 14.Drafting
    Are there particular issues to note when drafting an arbitration clause where your jurisdiction will be the seat of arbitration or the place where enforcement of an award will be sought?
  16. 15.Institutional arbitration
    Is institutional international arbitration more or less common than ad hoc international arbitration? Are the UNCITRAL Rules commonly used in ad hoc international arbitrations in your jurisdiction?
  17. 16.Multi-party agreements
    What, if any, are the particular points to note when drafting a multi-party arbitration agreement with your jurisdiction in mind? In relation to, for example, the appointment of arbitrators.
  18. Commencing the arbitration

  19. 17.Request for arbitration
    How are arbitral proceedings commenced in your jurisdiction? Are there any key provisions under the arbitration laws of your jurisdiction relating to limitation periods of which the parties should be aware?
  20. Choice of law

  21. 18.Choice of law
    How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?
  22. Appointing the tribunal

  23. 19.Choice of arbitrators
    Does the law of your jurisdiction place any limitations in respect of a party’s choice of arbitrator?
  24. 20.Foreign arbitrators
    Can non-nationals act as arbitrators where the seat is in your jurisdiction or hearings are held there? Is this subject to any immigration or other requirements?
  25. 21.Default appointment of arbitrators
    How are arbitrators appointed where no nomination is made by a party or parties or the selection mechanism fails for any reason? Do the courts have any role to play?
  26. 22.Immunity
    Are arbitrators afforded immunity from suit under the law of your jurisdiction and, if so, in what terms?
  27. 23.Securing payment of fees
    Can arbitrators secure payment of their fees in your jurisdiction? Are there fundholding services provided by relevant institutions?
  28. Challenges to arbitrators

  29. 24.Grounds of challenge
    On what grounds may a party challenge an arbitrator? How are challenges dealt with in the courts or (as applicable) the main arbitration institutions in your jurisdiction? Will the IBA Guidelines on Conflicts of Interest in International Arbitration generally be taken into account?
  30. Interim relief

  31. 25.

    Types of relief
    What main types of interim relief are available in respect of international arbitration and from whom (the tribunal or the courts)? Are anti-suit injunctions available where proceedings are brought elsewhere in breach of an arbitration agreement?


  32. 26.Security for costs
    Does the law of your jurisdiction allow a court or tribunal to order a party to provide security for costs?
  33. Procedure

  34. 27.

    Procedural rules
    Are there any mandatory rules in your jurisdiction that govern the conduct of the arbitration (eg, general duties of the tribunal and/or the parties)?


  35. 28.Refusal to participate
    What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration?
  36. 29.Admissible evidence
    What types of evidence are usually admitted, and how is evidence usually taken? Will the IBA Rules on the Taking of Evidence in International Commercial Arbitration generally be taken into account?
  37. 30.Court assistance
    Will the courts in your jurisdiction play any role in the obtaining of evidence?
  38. 31.Document production
    What is the relevant law and prevailing practice relating to document production in international arbitration in your jurisdiction?
  39. 32.Hearings
    Is it mandatory to have a final hearing on the merits?
  40. 33.Seat or place of arbitration
    If your jurisdiction is selected as the seat of arbitration, may hearings and procedural meetings be conducted elsewhere?
  41. Award

  42. 34.Majority decisions
    Can the tribunal decide by majority?
  43. 35.Limitations to awards and relief
    Are there any particular types of remedies or relief that an arbitral tribunal may not grant?
  44. 36.Dissenting arbitrators
    Are dissenting opinions permitted under the law of your jurisdiction? If so, are they common in practice?
  45. 37.Formalities
    What, if any, are the legal and formal requirements for a valid and enforceable award?
  46. 38.Time frames
    What time limits, if any, should parties be aware of in respect of an award? In particular, do any time limits govern the interpretation and correction of an award?
  47. Costs and interest

  48. 39.

    Costs
    Are parties able to recover fees paid and costs incurred? Does the 'loser pays' rule generally apply in your jurisdiction?


  49. 40.Interest on the award
    Can interest be included on the principal claim and costs? Is there any mandatory or customary rate?
  50. Challenging awards

  51. 41.Grounds for appeal
    Are there any grounds on which an award may be appealed before the courts of your jurisdiction?
  52. 42.Other grounds for challenge
    Are there any other bases on which an award may be challenged, and if so what?
  53. 43.Modifying an award
    Is it open to the parties to exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?
  54. Enforcement in your jurisdiction

  55. 44.Enforcement of set-aside awards
    Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?
  56. 45.Trends
    What trends, if any, are suggested by recent enforcement decisions? What is the prevailing approach of the courts in this regard?
  57. 46.State immunity
    To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
  58. Further considerations

  59. 47.Confidentiality
    To what extent are arbitral proceedings in your jurisdiction confidential?
  60. 48.Evidence and pleadings
    What is the position relating to evidence produced and pleadings filed in the arbitration? Are these confidential? Is there any way that they might be relied on in other proceedings (whether arbitral or court proceedings)?
  61. 49.Ethical codes
    What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?
  62. 50.Procedural expectations
    Are there any particular procedural expectations or assumptions of which counsel or arbitrators participating in an international arbitration with its seat in your jurisdiction should be aware?