FOCUS: The use of arbitration is growing in China, both in terms
of the number of cases and the value of the claims involved. The
country is working hard to improve the quality of its arbitration
system to keep up, moving to adopt international standards wherever
There were 235 arbitration commissions in mainland China in 2014
and these administered a total of 113,660 cases, a rise of 9% from
the previous year. The total value of claims was 265 billion yuan
(US$42 billion), a 61% increase from 2013 and five times the value
of claims in 2004.
The Supreme People's Court (SPC) and major Chinese
arbitration institutions are now making determined efforts to
improve the legal environment for arbitration cases and to clear up
some issues that have arisen in the past year.
In July, the SPC issued a 'reply' giving guidance on the
jurisdiction of the China International Economic and Trade
Arbitration Commission (CIETAC) and its former South China and
Shanghai sub-commissions. The two former sub-commissions had
declared themselves independent in 2012 and 2013, and renamed
themselves the Shenzhen Court of International Arbitration (SCIA)
and the Shanghai International Arbitration Centre (SHIAC),
respectively. This raised questions over the jurisdiction that new
cases would fall under.
The SPC ruled that cases emanating from arbitration agreements
agreeing to submit their disputes to the "CIETAC South China
Sub-Commission" or the "CIETAC Shanghai
Sub-Commission" for arbitration that were concluded before
SCIA and SHIAC changed their names will fall under the jurisdiction
of the new bodies.
However, cases from agreements that concluded after the name
change but before the SPC ruling became effective on 17 July 2015
will be under the jurisdiction of CIETAC, unless they have already
been referred to SCIA or SHIAC and the parties did not object to
the jurisdiction of SCIA or SHIAC in the arbitral proceedings. All
cases whose agreements concluded after the ruling will be under
The ruling cleared up uncertainty caused by the split-off and
was welcomed by the arbitration community.
In another reply, the SPC said that an arbitral clause for
arbitration administered by the International Chamber of Commerce
(ICC) in Shanghai was valid. This was welcomed by foreign
arbitration institutions, as it opened up the possibility of
running arbitrations under foreign rules within mainland China.
However, the reply did not address enforcement, so we have yet to
see whether an arbitration run by a foreign institution, seated in
China, can be enforced by a Chinese court.
Another area open to question is the right of foreign
arbitration organisation to set up branches in the Shanghai free
trade zone (FTZ). The State Council issued a notice on the reform
and opening of the FTZ in April which said that it supports foreign
arbitration bodies "entering into" the FTZ. However, it
did not define "entering into", and the institutions
involved are keen to discover whether this gives them a solid legal
basis to administer arbitrations in the FTZ. The Hong Kong
International Arbitration Centre has filed an application, and many
other organisations are keeping a close eye on the result.
Chinese organisations, meanwhile, have been trying to improve
their own rules and give clearer procedural guidance. For example,
CIETAC, SHIAC and the China Maritime Arbitration Commission all had
new rules become effective on 1 January 2015, followed by the
Beijing Arbitration Commission (BAC) on 1 April. All of these
bodies took international practice into consideration when updating
BAC, for example, introduced an "Arbitration Fee Schedule
for International Commercial Arbitration" under which, in
arbitrations with a foreign element, the parties and arbitrators
may agree that the arbitrators' remunerations should be
calculated either on an hourly basis or as a percentage of the
amount in dispute.
BAC and CIETAC also now include provisions to allow a
stenographer to record proceedings, to increase transparency.
With the size and power of the Chinese economy, the growth of
foreign-related arbitrations in mainland China is inevitable. It
will be interesting to see how the Chinese government continues to
open the arbitration market to foreign institutions, and also to
watch Chinese arbitration commissions improve their own services in
order to compete.
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.
We discuss Robinson Helicopter Company Incorporated v McDermott  HCA 22 .
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”
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).