China: Lawyer or arbitrator: a problem in China - should the restriction be revoked?

Last Updated: 28 July 2013
Article by Ariel Ye, Harry Liu and Qiu Yue

PRC law sets forth specific requirements for individuals who serve as arbitrators in China. Article 13 of the PRC Arbitration Law requires arbitrators to be "fair and honest." Arbitrators must also meet at least one of the following qualifications: (1) have a minimum eight years work experience in arbitration; (2) have a minimum eight years experience as a lawyer or as a judge; (3) be engaged in legal research and teaching with a senior academic title; or (4) be engaged as a professional focused on economic and trade matters with a senior academic title or equivalent professional title also having legal knowledge.

Despite these specific criteria, PRC law did not initially place restrictions on lawyers who also act as arbitrators. The PRC Lawyers Law first promulgated in 1996 did not impose such restrictions nor did its 2002, 2007 and 2012 amendments. In 2010, however, the Ministry of Justice issued the Measures for Penalties of Lawyers and Law Firms for Illegal Acts ("Punitive Measures") which expressly prohibit lawyers who act or have acted as arbitrators from representing clients in disputes before the same institution where he or she is listed on the panel of arbitrators. Under Article 7.5 of the Punitive Measures, a lawyer who also acts as arbitrator before the same institution is considered a conflict of interest under Article 47.3 of the Lawyers Law which prohibits lawyers from "representing both parties in a same case, or representing a client in a legal affair that has conflict of interest with himself or his close relative." As set forth below, we believe that Article 7.5 is unwarranted, contrary to international arbitration practice, and serves little more than a vehicle for meritless challenges to the enforcement of arbitral awards and should be revoked.

Article 7.5 does not address intended concerns

It appears that Article 7.5 is intended to address concerns that a lawyer who acts as lawyer before the institution where he or she is listed as an arbitrator creates an opportunity for partiality and bias due to his or her relationship with the institution, thus impacting confidence and trust in arbitration proceedings. Given the attenuated relationship between arbitrators and institutions, however, we believe this concern is misplaced.

To begin, arbitrators and arbitral institutions maintain a fairly distant relationship. Unlike judges, arbitrators are not full time employees of arbitration institutions. They are appointed by a party or the institution to resolve one of many disputes at hand. The vast majority of arbitrators maintain full time professional careers outside of the arbitration institution, especially those who are practicing attorneys, and have limited communication with the arbitral institution in their role as arbitrator. Most communication between arbitrators and institutions is in writing, with arbitrators appearing before the institution only when hearings are conducted.

In addition, the institution's role during the arbitral proceedings is primarily limited to case administration. It is the tribunal, not the institution, who hears and reviews the merits of the dispute and determines and writes the award. The arbitral institution has no bearing on the outcome of the dispute.

While Article 7.5 may in theory be intended to prevent partiality and bias due to a litigant's relationship with the arbitration institution, we believe it is misplaced. Certainly there may be other relationships which give rise to justified concern, but we do not believe that the attenuated nature of the arbitrator-institution relationship creates an opportunity for a lawyer who is also listed as an arbitrator to impact other proceedings administered by that institution.

Article 7.5 restricts lawyers from acting as arbitrators and hinders development of commercial arbitration in China

As noted above, China, unlike many other countries, sets forth specific criteria for the inclusion of individuals in an institution's list of arbitrators. As a result, lawyers who serve as arbitrators in China are legal experts with extensive expertise in a wide array of fields and industries. Practicing lawyers occupy a significant percentage of domestic and international arbitrator lists. For example, one-third of arbitrators listed with the China International Economic and Trade Arbitration Commission (CIETAC) are practicing attorneys. Their involvement and insight in the resolution of commercial disputes have made an important and valuable contribution to the development of commercial arbitration in China.

Given the nature of arbitrator appointments, most of these lawyers maintain separate professional careers and derive their income primarily from private practice. Due to restrictions on the number of arbitration institutions which may exist in each municipality, most cities only have one arbitration institution and institutions capable of resolving foreign-related disputes are even more limited. For lawyers listed as arbitrators in institutions in the locality in which they practice, Article 7.5 is likely to have a significant impact on their ability to represent clients before those institutions.

Being listed as an arbitrator is a symbol of prestige and often a valuable qualification for litigators in China. Nonetheless, we believe that continued application of Article 7.5 will force most lawyers to walk away from their role as arbitrators in order to maintain their professional careers and their livelihood, thus depleting the pool of qualified arbitrators in China and potentially stalling or even diminishing the development of commercial arbitration in China. It turns out to be especially worse for over hundreds of local arbitration commissions. Lawyers take up a substantial portion of arbitrators in local arbitration commissions, because the number of qualified legal professionals is relatively small due to geographical restrictions. The restriction of Article 7.5 on lawyers will definitely have a more profound negative impact on the developments of local arbitration commissions.

Article 7.5 is inconsistent with international arbitration practice

In international practice, a lawyer who appears before an arbitration institution where he or she is listed as an arbitrator is generally not deemed a conflict of interest. The rules of most international arbitration institutions also do not restrict this practice. Indeed, many leading international arbitration practitioners are listed as arbitrators with the very same institutions before which they litigate cases.

Nor has the international arbitration community determined a lawyer's dual capacity as litigator and arbitrator before a single institution to be a conflict of interest. In 2004, the International Bar Association published the IBA Guidelines on Conflicts of Interest in International Arbitration ("IBA Guidelines"). The IBA Guidelines are the product of leading international arbitration practitioners and scholars who set forth a list of scenarios deemed to constitute waivable and non-waivable conflicts of interest. The restrictions set forth in Article 7.5 are not included in this list. In fact, the only situation addressed by the IBA Guidelines that is remotely similar to Article 7.5 is where an arbitrator and counsel have previously served together as arbitrators or co-counsel, and the IBA Guidelines do not consider this alone to be a conflict.

Article 7.5 increases the likelihood that enforcement of an arbitral award will be challenged

While Article 7.5 does not expressly address arbitration procedure or rules, it creates a basis to challenge enforcement of an arbitral award. For example, after the Punitive Measures were issued, a single PRC intermediate court was faced with three cases in which the parties applied to set aside arbitral awards based on alleged violations of Article 7.5. In 2011, the court agreed with the applicant and set aside the award because it viewed violation of Article 7.5 to constitute a violation of arbitration procedure. In 2012, however, the same court overruled two applications to set aside arbitral awards on the same grounds because it considered the Punitive Measures to be a departmental decree and not binding legislation. Accordingly, it is unclear whether a violation of Article 7.5 amounts to a violation of arbitral procedure warranting refusal to recognize or enforce an award or whether Article 7.5 is merely an ethics rule governing lawyer conduct. We expect that other PRC courts adopt similar inconsistent approaches thus injecting further uncertainty to the finality and enforceability of an arbitral award in China.

Closing remarks

In practice, Article 7.5 is seldom applied. The Punitive Measures only bind lawyers and law firms, not arbitration institutions, though they may be referenced by institutions. Only a few arbitration institutions, such as the Beijing Arbitration Commission and the Shenzhen Arbitration Commission, have issued rules consistent with Article 7.5. The majority of institutions do not have such rules. Unless an objection is raised by the other side, lawyers rarely withdraw from their representation of clients when Article 7.5 scenarios arise. Even if an objection is raised, arbitration institutions are not in a position to compel a lawyer to withdraw as counsel. Article 7.5 also has no impact on offshore arbitration institutions. Because Article 7.5 does not distinguish between domestic and offshore arbitrations, however, it is unclear whether it applies to a PRC lawyer listed as an arbitrator before an offshore institution.

Some members of local bar associations point out that the initial purpose of Article 7.5 was to avoid potential challenges to arbitral awards based on alleged conflicts of interest resulting from the lawyer's role as a listed arbitrator. They suggest that the Ministry of Justice is aware that the impact of Article 7.5 may have resulted in the opposite effect and accordingly Article 7.5 has not been strictly enforced. Nevertheless, Article 7.5 remains valid and binding. This inconsistency between practice and legislation has created additional legal uncertainty, with many lawyers uncertain as to the scope and application of the restrictions imposed by Article 7.5. To align China with international arbitration practice and restore certainty to arbitration practice in China, Article 7.5 should be immediately revoked.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
DeHeng Law Offices
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
DeHeng Law Offices
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions