Answer ... The principal legislation applicable to arbitration in China includes:

• the Arbitration Law of the People’s Republic of China (PRC) (2017);
• the Civil Procedure Law of the PRC (2017);
• the Civil Code of the PRC (2021) (repealing, among other things, the General Principles of Civil Law (2017) and the Contract Law of the PRC (1999) as of 1 January 2021); and
• the Law on the Applicable Law to Foreign-Related Civil Relations (2011).

In applying and interpreting these laws, Chinese courts often refer to the Supreme People’s Court (SPC) Interpretation of the Arbitration Law (2006) and various other documents issued by the SPC, including replies to lower courts that had sought guidance with respect to particular issues. However, neither court decisions nor SPC interpretations or replies are precedential under Chinese law.

There are limitations on the statutory regime governing arbitration in China. For example, oral arbitration agreements are not enforceable under Article 16 of the Arbitration Law, which stipulates that an arbitration agreement must be in writing. Under Chinese law, the requirement of ‘writing’ may be satisfied by a contract, letter or electronic message that is capable of expressing its contents in a tangible form (Article 469 of the Civil Code). In addition, the Arbitration Law and relevant judicial opinions do not apply to arbitration of labour disputes (Article 77).

Answer ... The Arbitration Law and the Civil Procedure Law distinguish purely ‘domestic’ arbitrations from ‘foreign-related’ Chinese arbitrations. One important legal implication of this distinction is that parties may choose a seat of arbitration outside of mainland China only if their dispute is considered ‘foreign-related’ under Chinese law (Article 16 of the Arbitration Law; Article 271 of the Civil Procedure Law). In addition, awards resulting from purely domestic arbitrations and those resulting from foreign-related arbitrations are enforced under different legal regimes (see question 13.1).

Whether an arbitration is ‘foreign-related’ is defined by the Interpretation (I) of the SPC on Several Issues Concerning the Application of the Law on the Applicable Law to Foreign-related Civil Relations (amended effective 1 January 2021), according to which a civil relation is foreign-related under any of the following circumstances:

• One or both parties are:
• • foreign citizens;
  • foreign legal persons or organisations; or
  • stateless person(s);
• The habitual residence of one or both parties concerned is located outside the territory of China;
• The subject matter of the dispute is located outside the territory of China;
• The legal facts that trigger, change or terminate the civil relation take place outside the territory of China; or
• Any other circumstances exist that can be determined as foreign-related civil relations.

Recent court practice and judicial opinions provide guidance as to which factors may be relevant to a finding of ‘foreign-related’ elements pursuant to the ‘other circumstances’ prong of the ‘foreign elements’ test. For example, in Siemens v Golden Landmark (Belt and Road Typical Case 12 [2013] Hu Yi Zhong Min Ren No 2), although both parties were Chinese entities, the subject matter of the dispute was in China, and the agreement was entered into and expected to be performed in China. The SPC thus determined that a foreign-related civil relationship existed in light of ‘other circumstances’. The SPC based this determination on the fact that the case involved contractual performance that took place in part in a free trade zone within China and the two companies were wholly foreign-owned enterprises (WFOEs) (Reply of SPC Re: Request for Instructions on Application filed by Siemens International Trading (Shanghai) Co, Ltd for Recognition and Enforcement of a Foreign Arbitral Award [2015] Min Si Ta Zi 5). Subsequently, in the SPC’s Opinions on Providing Judicial Safeguards for the Construction of Pilot Free Trade Zones (2016), the SPC confirmed what was decided in Siemens v Golden Landmark and broadened its scope by expressly permitting WFOEs registered in pilot free trade zones to refer their disputes to foreign-seated arbitration. However, the SPC’s opinions, while highly persuasive, are not binding under Chinese law.

Answer ... No, China has not adopted the UNCITRAL Model Law on International Commercial Arbitration. However, the Arbitration Law has adopted certain concepts from the UNCITRAL Model Law. For example, Article 19 of the Arbitration Law is generally considered to be based on the separability principle stipulated in the UNCITRAL Model Law.

Among the important principles of the Model Law that have not been incorporated in the Arbitration Law are:

• the kompetenz-kompetenz principle;
• the concept of ad hoc arbitration; and
• the arbitral tribunal’s power to grant interim measures.

In addition, unlike the Model Law, the PRC Arbitration Law expressly allows arbitrators to act as mediators during an arbitration proceeding (Article 51).

Answer ... Not every provision in the Arbitration Law is mandatory, but arbitrations seated in China must meet certain mandatory requirements (from which the parties may not derogate), including:

• the arbitrability requirements (Articles 2 and 3);
• the requirement that an arbitration agreement be in writing (Article 16);
• the requirement that an arbitration agreement contain:
• • the parties’ expression of intent to arbitrate;
  • the matters to be arbitrated; and
  • a designated arbitral institution (with the effect that domestic ad hoc arbitrations are generally considered to be prohibited in China) (Article 16);
• the powers of a court in relation to an arbitration (Articles 20, 28, 46 and 68);
• the qualification requirements of arbitrators (Article 13); and
• the grounds for setting aside an award (Articles 58 and 70).

Answer ... Yes, plans are underway to amend the Arbitration Law. Specifically, on 30 July 2021, the Ministry of Justice published a draft amended Arbitration Law for public consultation. The draft proposes extensive revisions aimed at bringing Chinese arbitration practice into line with international norms and standards. The most significant of the changes proposed in the draft, from the perspective of the practice of international arbitration in mainland China, include the following:

• allowing foreign arbitration institutions to establish their operations in mainland China and “conduct foreign-related arbitration business” (Article 12);
• recognising the concept of the ‘place of arbitration’ (Articles 27 and 91);
• recognising that an arbitral tribunal has the power to independently rule on its own jurisdiction (competence-competence), including “any objections with respect to the existence or validity of the arbitration agreement” (Article 28);
• permitting an arbitral tribunal to order interim measures (Article 43); and
• allowing ad hoc arbitration in ‘foreign-related’ commercial disputes (Article 91).

Answer ... Yes. China is a contracting state to the New York Convention. When acceding to the convention, China made two reservations: the commercial reservation and the reciprocity reservation.

Under the commercial reservation, China limited its recognition and enforcement obligations under the convention to disputes arising from legal relationships that are considered ‘commercial’ under its national law (Article 2 of the Notice of the SPC on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China). The SPC has clarified that ‘commercial’ relationships refer to:

Disputes between a foreign investor and the host state government (ie, investor-state disputes) are expressly excluded (id). Accordingly, under current law, Chinese courts are not permitted to enforce investment treaty awards under the New York Convention.

Under the reciprocity reservation, China limited its recognition and enforcement obligations to “arbitral awards made in the territory of another Contracting State” (Article 1 of the Notice of the SPC on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China).

Application of the New York Convention in China was extended to the Special Administration Regions of Hong Kong and Macao in 1997 and 2005, respectively. By virtue of this extension, China’s reservations to the New York Convention were also extended to Hong Kong and Macao.

Answer ... In addition to the New York Convention, China is a party to a number of other treaties and conventions relevant to arbitration, including:

• the Statute of the Hague Conference on Private International Law (1951) (as amended in 2007);
• the Vienna Convention on the Law of Treaties (1969);
• the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965); and
• the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (1970).

As of February 2021, China had also concluded 127 bilateral investment treaties and 24 other treaties with investment provisions, which contain arbitration provisions.

The Ministry of Foreign Affairs lists on its website all of the treaties to which China is a party at present (http://treaty.mfa.gov.cn/Treaty/web/index.jsp).