International Arbitration 2022 Comparisons

China is a pro-arbitration jurisdiction, and its arbitration landscape is undergoing rapid development and adaptation. Today, arbitration has become the most popular method of alternative dispute resolution in China.

Although China’s first arbitration law did not come into effect until 1995, statistics of the Ministry of Justice showed that more than 4 million cases were resolved by arbitration as of September 2021. In 2021 alone, approximately 415,900 arbitration cases were registered in China, one of the largest numbers in all jurisdictions, as reported at a seminar convened by the Chinese People’s Political Consultative Conference National Committee in May 2022.

Beijing, Shanghai and Hong Kong SAR are among the world’s most favoured seats of arbitration, according to the 2021 International Arbitration Survey published by Queen Mary University of London and White & Case in May 2021 (“2021 International Arbitration Survey”).

Business entities, including Chinese ones, are becoming more inclined to choose international arbitration over litigation as the method of dispute resolution in cross-border transactions. In this regard, China’s growing presence in international trade and investment has boosted the popularity of international arbitration among Chinese companies doing business globally. The increasing prevalence of international arbitration in China underlies a shared understanding that arbitration is an efficient, confidential and flexible method of dispute resolution, and arbitral awards are easier to enforce around the world.

The COVID-19 pandemic has presented tremendous challenges to Chinese arbitral institutions, arbitrators, parties and the conduct of arbitration. In particular, some arbitration activities that require the parties to sit together are hindered by travel restrictions and work-from-home requirements due to the COVID-19 pandemic. At times, some Chinese arbitral institutions had to close their offices temporarily, and in-person hearings or meetings had to be postponed.

On the other hand, COVID-19 is also reshaping the way arbitration is conducted. Arbitral institutions, arbitrators and parties have adapted to virtual hearings, meetings or events, e-filing, etc to mitigate the impact of COVID-19.

In response, major arbitral institutions in China have published guidance on the conduct of arbitral proceedings during the pandemic. Some arbitral institutions even offer discounted fee standards to relieve the financial distress of litigants during the pandemic. Despite the pandemic, however, the number and value of arbitration cases administered by several major arbitral institutions in China hit records in 2021. For example, the Beijing Arbitration Commission (BAC) registered 7,737 new arbitration cases in 2021, a 37.74% increase as compared to 2020, according to its annual report of 2021.

Statistics published by major arbitral institutions in China show that most of the new cases registered in 2021 arose out of disputes over trade in goods, investment and financing, share transfer, construction, financial products and capital market. In particular, the number of cases relating to innovative financial products, construction, franchise, culture and entertainment grew significantly in 2021.

We have not observed a notable decrease in international arbitration activity in any particular industry lately. Instead, quite a number of cases have emerged due to defaults in performance of commercial contracts caused by the COVID-19 pandemic.

China has over 270 arbitral institutions across the country, according to statistics of the Ministry of Justice.

The China International Economic and Trade Arbitration Commission (CIETAC), established in 1956 under the name of a predecessor entity, is China’s first arbitral institution and one of the largest of its kind. CIETAC is headquartered in Beijing, China, with sub-commissions in multiple locations across Mainland China and Hong Kong SAR. According to the 2021 International Arbitration Survey, CIETAC is among the five most preferred arbitral institutions in the world.

According to CIETAC’s 2021 Work Report, CIETAC hit a record high of 4,071 new arbitration cases registered in 2021, among which 636 cases were “foreign-related cases”. Other major Chinese arbitral institutions, including BAC, Shanghai International Arbitration Center (SHIAC) and Shenzhen Court of International Arbitration (SCIA), also administer a significant number of foreign-related arbitration cases.

Outside Mainland China, Hong Kong International Arbitration Centre (HKIAC), Singapore International Arbitration Centre (SIAC) and the International Chamber of Commerce (ICC) are among the most favoured arbitral institutions by Chinese parties. Notably in the past decade, quite a number of parties to arbitration cases administered by HKIAC, SIAC and ICC were Chinese.

The past decade has witnessed a growing number of international arbitral institutions setting up representative offices in China, including WIPO (2019), ICC (2016), SIAC (2015), HKIAC (2015), etc. In 2018, Shanghai International Dispute Resolution Center was established, aimed at empowering domestic and international arbitral institutions to provide high-quality dispute resolution services in China.

In China, interactions between arbitration and Chinese court proceedings may cover the full cycle of an arbitration case. In the context of PRC law, court intervention in arbitration cases is governed by the “judicial review” mechanism.

Generally, Chinese courts at the intermediate level are vested with the statutory power to hear disputes over the existence or validity of an arbitration agreement, to take interim measures such as property preservation, and to recognise, enforce or set aside arbitral awards. Since 2017, the Supreme People’s Court (SPC) has required courts at various levels to set up special divisions tasked with judicial review of arbitration cases.

In certain circumstances, the China International Commercial Court, a special division of the SPC established in 2018, is designated to take interim measures, and to enforce or set aside arbitral awards, in certain high-profile international arbitration cases.

General

PRC law distinguishes among the following three types of arbitral proceedings, to which different legal provisions may apply:

• domestic arbitration – arbitration conducted in Mainland China that involves domestic parties and domestic subject matter;
• foreign-related arbitration – arbitration conducted in Mainland China that has one or more “foreign-related elements” (as elaborated below), such as a foreign party, a foreign subject matter, etc; and
• international arbitration – arbitration conducted outside Mainland China, including arbitration conducted in Hong Kong SAR, Macau SAR and Taiwan Region.

“Foreign-related elements” refer to the criteria outlined in Article 1 of the SPC Interpretation of Several Issues Relating to Application of the PRC Law on the Application of Laws to Foreign-related Civil Relations (I) (amended in 2020), including the following:

• one or more of the parties are foreign persons or stateless persons;
• the habitual residence of one or more of the parties is outside Mainland China;
• the subject matter is outside Mainland China;
• the civil relation or its change or termination originates from a fact that took place outside Mainland China; or
• any other circumstance identified as a foreign-related civil relation.

Foreign-related Arbitration

Foreign-related arbitration is treated as a special form of domestic arbitration and is subject to the following legal framework:

• PRC Arbitration Law (amended in 2017; “Arbitration Law”);
• PRC Civil Procedure Law (amended in late 2021; “Civil Procedure Law”);
• Law of the PRC on the Application of Laws to Foreign-related Civil Relations (effective in 2011, “Law on Application of Laws”);
• judicial interpretations and guidelines, such as the SPC Interpretation of the Application of the Arbitration Law (amended in 2008; “SPC Interpretation of Arbitration Law”), the SPC Interpretation of the Application of the PRC Civil Procedure Law (amended in 2022; “SPC Interpretation of Civil Procedure Law”), the SPC Provisions on Several Issues Concerning the Review of Cases of Enforcement of Arbitral Awards by People’s Courts (effective in 2018; “SPC Provisions on Enforcement of Arbitral Awards”), etc.

The Arbitration Law constitutes the primary legal basis of China’s domestic and foreign-related arbitration, and assimilates some of the fundamental principles of the UNCITRAL Model Law, such as party autonomy and separability of arbitration agreements. However, the UNCITRAL Model Law has not been incorporated into PRC law as a whole. In particular, the provisions regarding ad hoc arbitration and emergency arbitrators are not available in the current Arbitration Law.

International Arbitration

To the extent that an international arbitration is subject to judicial review or recognition or enforcement in China, the following legal framework will apply:

• Civil Procedure Law;
• Law on Application of Laws;
• Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”);
• judicial interpretations and guidelines, such as the SPC Interpretation of Civil Procedure Law, the SPC Notice on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China (effective in 1987), etc; and
• special arrangements governing the recognition and enforcement of awards made in Hong Kong SAR, Macau SAR and Taiwan Region.

The Arbitration Law is the first national law on arbitration and remains the cornerstone of China’s arbitration legal framework. It was first enacted in 1994 and slightly amended in 2009 and 2017. In July 2021, a draft amendment to the Arbitration Law was published by the Ministry of Justice for public comments, which includes, among others, the following major proposed changes:

• expanding the scope of arbitrable matters, which may potentially include intellectual property, sports and antitrust disputes;
• introducing ad hoc arbitration as a new means of conducting foreign-related arbitration;
• allowing for a higher level of party autonomy by, for example, removing the requirement for “a chosen arbitration commission” as a necessary component for a valid arbitration agreement, and conferring parties with the freedom to choose the seat of arbitration;
• introducing the notion of “seat of arbitration” as a new nexus for determining the competent courts to exercise judicial review powers or take interim measures in aid of arbitral proceedings; and
• recognising the “competence-competence” doctrine.

The above changes are widely recognised as a positive signal that China’s arbitration legislation is embracing the best practice of international arbitration. As of 5 July 2022, however, the draft amendment is still pending further review and approval by the National People’s Congress, which is China’s supreme legislative authority.

For an arbitration agreement to be enforceable under PRC law, it must prescribe the following items in writing, according to Article 16 of the Arbitration Law:

• an express intention to refer to arbitration;
• matters to be referred to arbitration; and
• a chosen arbitration commission.

Besides the above specific requirements, an arbitration agreement shall also conform to the following overarching norms, according to Article 17 of the Arbitration Law:

• the matters referred to arbitration shall be arbitrable;
• the parties to the arbitration agreement have full capacity to enter into such agreement; and
• the arbitration agreement is not concluded under duress.

As noted in 2.2 Changes to National Law, the draft amendment to the Arbitration Law aims to remove or change some of the above requirements.

If the proper law governing the arbitration agreement is not PRC law, however, the above requirements will not apply. In that case, the enforceability of the arbitration agreement will be examined under the proper law of the arbitration agreement.

Under the current legal framework and practice, the following arbitration agreements may be unenforceable, among others:

• a dispute resolution clause providing that any party may choose to resolve any disputes arising from the contract either by arbitration or lawsuit (lack of express intention to refer to arbitration);
• an agreement on submitting purely domestic disputes (disputes without any “foreign-related elements”) to arbitration outside Mainland China; or
• the name of the arbitration commission designated by the arbitration agreement is unknown or equivocal (lack of a chosen arbitration commission).

In general, disputes that arise out of commercial contracts may be referred to arbitration. Matters that are subject to mandatory jurisdiction of Chinese courts or administrative authorities cannot be referred to arbitration, including for example those concerning marriage, adoption, guardianship, family support, inheritance and administrative disputes, according to Article 3 of the Arbitration Law. Consequently, even if the parties agree to resolve any of the above disputes by arbitration, such agreement would be unenforceable.

Apart from the above, disputes arising from employment contracts may not be referred to arbitration either. Instead, such disputes shall be adjudicated by the competent “labour and personnel dispute arbitration commission”, a group of quasi-judicial institutions across Mainland China with the statutory power to adjudicate labour disputes.

As noted in 2.2 Changes to National Law, the draft amendment to the Arbitration Law will potentially expand the scope of arbitrable matters.

The general approach to determining whether a dispute is arbitrable is to examine its subject matter. For example, a dispute may easily be identified as non-arbitrable if its subject matter fits into any of the non-arbitrable matters outlined in Article 3 of the Arbitration Law. In a few cases, the subject matter of a dispute is less discernible, and a split of courts’ views may arise. For example, the SPC has decided differently on the arbitrability of antitrust civil disputes that arose from horizontal or vertical monopoly agreements.

Article 18 of the Law on Application of Laws allows the parties to choose by agreement the governing law of the arbitration agreement, provided that a foreign-related civil relation exists between them. In the absence of a foreign-related civil relation, PRC law shall be the exclusive governing law of the arbitration agreement. The term “foreign-related civil relation” means a civil relation that has any of the “foreign-related elements” as explained in 2.1 Governing Law.

The substantive rules for determining the law governing the foreign-related arbitration agreement are quite straightforward, as provided in Article 18 of the Law on Application of Laws and Article 16 of the SPC Interpretation of Arbitration Law. As a general rule, a foreign-related arbitration agreement shall be governed by:

• the law chosen by the parties to govern the arbitration agreement; or
• in the absence of such choice, the law at the place of the chosen arbitral institution or seat of arbitration; or
• in the absence of any choice of the arbitral institution or seat of arbitration, PRC law.

Further, “the law chosen by the parties to govern the arbitration agreement” is defined narrowly as an explicit choice of law for the determination of the validity of the arbitration clause, according to Article 13 of the SPC Provisions on Several Issues relating to the Trial of Cases Concerning Judicial Review of Arbitration (effective in 2018). Therefore, the parties’ choice of the governing law in the main contract or the law chosen to resolve disputes arising from the contract does not automatically become the governing law of the arbitration agreement.

If the parties disagree as to the enforceability of an arbitration agreement, either party may request either the chosen arbitral institution (if any) or the competent court to decide on its enforceability. If, however, one of the parties so requests the arbitral institution while the other party so requests the court, the court shall have the exclusive jurisdiction to determine the enforceability of the arbitration agreement, according to Article 20 of the Arbitration Law.

Chinese courts are required to adhere to the “validation principle” when determining the validity of arbitration agreements. Before declaring an arbitration agreement invalid, the lower court must report its decision to a higher court for further review and approval. In the case of a foreign-related arbitration agreement, courts would have to seek final approval from the SPC before denying its validity.

Statistics show that among all public cases for determining the validity of arbitration agreements decided by Chinese courts in 2021, more than 80% of the disputed arbitration agreements were declared valid.

The rule of separability is codified in Article 19 of the Arbitration Law. Consequently, any revision, rescission, termination or invalidation of the contract which contains the arbitration clause will not affect the validity of an arbitration agreement.

If the parties agree to constitute a tribunal of three arbitrators, each party will select or request the chairperson of the chosen arbitral institution to appoint one arbitrator. The third arbitrator must be selected jointly by the parties or be appointed by the chairperson for the parties. The third arbitrator shall be the presiding arbitrator.

If the parties agree to constitute a tribunal of a sole arbitrator, the arbitrator will be selected jointly by the parties or be appointed by the chairperson of the arbitral institution for the parties.

As a default rule, parties shall select arbitrators from the panel list of the chosen arbitral institution that administers the arbitral proceeding. Exceptions are allowed under the arbitration rules, which vary from one another. For example, CIETAC Arbitration Rules (2015) and SHIAC Arbitration Rules (2014) allow parties to select arbitrators beyond their panel lists if the parties so agree, and BAC Arbitration Rules (2022) allow the parties to select arbitrators beyond the panel list in an international commercial arbitration.

The Arbitration Law allows an arbitral tribunal to be composed of three arbitrators or a sole arbitrator, depending on the choice of the parties. If the parties agree to have three arbitrators, each party shall select or request the arbitral institution to select one arbitrator. The third arbitrator (acting as the presiding arbitrator) or the sole arbitrator shall be the same choice of both parties or the choice of the chairperson of the arbitral institution as requested by both parties.

If the parties’ chosen method of selecting arbitrators fails, the default procedure for selecting and appointing arbitrators is found in the arbitration rules of arbitral institutions rather than the PRC law. For example, under CIETAC Arbitration Rules, if a tribunal shall be composed of three arbitrators:

• the chairperson of CIETAC will appoint an arbitrator for either party if that party neither selects nor requests the chairperson to select an arbitrator within 15 days of its receipt of the arbitration notice; and
• the chairperson of CIETAC will appoint the third arbitrator (acting as the presiding arbitrator) if the parties neither reach an agreement on the third arbitrator nor jointly request the chairperson to select an arbitrator within 15 days of the respondent’s receipt of the arbitration notice.

If a tribunal shall be composed of a sole arbitrator, the default procedure shall be the same as the above procedure for the appointment of the third arbitrator.

In case of multiparty arbitrations, the CIETAC Arbitration Rules require each group of parties to jointly select, or request the chairperson of the arbitral institution to select, the arbitrator for that group. The chairperson of CIETAC will appoint all three arbitrators, including the presiding arbitrator, if either group neither selects an arbitrator nor requests the chairperson to select an arbitrator within 15 days of its receipt of the arbitration notice.

Chinese courts are not allowed to intervene in the selection of arbitrators. If an arbitral tribunal is not properly constituted, however, the competent court may set aside or refuse to enforce the award made by it.

An arbitrator shall withdraw or be removed, according to Article 34 of the Arbitration Law, if he/she:

• is a party in the case or a close relative of a party or its representative;
• has any stake in the case;
• has some other relationship with a party or its representative that may affect his/her impartiality; or
• has a private meeting with a party or its representative, or accepts entertainment or gifts from a party or its representative.

A party may also request that an arbitrator be removed, subject to the decision of the chairperson of the arbitral institution. If the challenged arbitrator happens to be the chairperson, the arbitral institution shall decide his/her withdrawal by a collective decision. The request for withdrawal shall be made before the first hearing, or at the latest before the conclusion of the last hearing if the requesting party becomes aware of the conflict of interest only after the first hearing.

Decisions on the removal of arbitrators cannot be reviewed immediately by Chinese courts. If the challenged arbitrator is not removed as requested, the aggrieved party may request the competent court to set aside or challenge the enforcement of the arbitral award based on the ground that the tribunal was not properly constituted.

An arbitrator shall be honest and impartial, according to Article 13 of the Arbitration Law, and free from any conflict of interest outlined in 4.4 Challenge and Removal of Arbitrators. Apart from these general requirements imposed by PRC law, major arbitral institutions also require arbitrators to comply with their arbitration rules and code of conduct.

As explained in 3.2 Arbitrability, disputes concerning marriage, adoption guardianship, family support and inheritance, and administrative disputes, may not be referred to arbitration under PRC law.

The principle of competence-competence has not been fully adopted by the current arbitration legal framework. The arbitration rules of major arbitral institutions in China, on the other hand, allow the arbitral institutions to rule on a party’s challenge to the tribunal’s jurisdiction. In practice, arbitral institutions may delegate such power to the tribunal pursuant to their arbitration rules.

As noted in 2.2 Changes to National Law, the above position is likely to change in light of the draft amendment to the Arbitration Law, which grants the tribunal the power to decide its own jurisdiction.

The issue of jurisdiction of an arbitral tribunal may be reviewed by courts in judicial review cases.

As explained in 3.3 National Courts’ Approach, the issue of jurisdiction may be addressed when a party requests the court to determine the validity of the arbitration agreement. If such arbitration agreement is declared valid, the arbitral institution chosen by the parties in the arbitration agreement will have jurisdiction, and vice versa.

Further, if a party requests for setting aside an arbitral award or seeks recognition or enforcement of an award, the court may also review and determine the existence or validity of the underlying arbitration agreement that allegedly empowered the tribunal to make the award.

In practice, Chinese courts adhere to the “validation principle” and show a general reluctance to invalidate an arbitration agreement, which would deprive the arbitral tribunal of its jurisdiction. After all, a court may decide on its own that the arbitration agreement is valid, but will have to report the case to a higher court for review and approval if it decides negatively.

However, once the arbitral institution has accepted a request for determining the validity of the arbitration agreement before the court does, and has made a negative decision on jurisdiction, the court will not further review it.

The jurisdiction of the arbitral tribunal depends largely on the existence and validity of the underlying arbitration agreement. In practice, therefore, a party normally challenges the jurisdiction of an arbitral tribunal by requesting the court or arbitral institution to examine the existence or validity of the underlying arbitration agreement.

Either party may request the competent court to review and determine the existence or validity of the arbitration agreement:

• anytime before an arbitral proceeding is initiated; or
• once an arbitral proceeding is initiated, before the first hearing of the tribunal.

After the award is made, a party may also request the court to set aside the award or to deny enforcement of the award on the ground that the arbitration agreement did not exist or was invalid.

Courts will review admissibility and jurisdiction issues on a de novo basis pursuant to the statutory standards outlined in 3.1 Enforceability and 3.2 Arbitrability. In particular, the courts will focus on whether the parties agreed to refer the dispute to arbitration.

When a party commences a court proceeding, the court will first conduct a prima facie examination of a case before deciding whether it is acceptable. If, upon examination, the court finds a valid arbitration agreement, it will decide not to accept the case.

If, however, the court has accepted the case, the defendant may challenge the court’s jurisdiction by invoking the arbitration agreement before the first hearing. The court will dismiss the plaintiff’s claims if it finds the arbitration agreement valid. If the defendant fails to file the challenge before the first hearing, the arbitration agreement will be deemed forfeited, and the court will continue reviewing the substantive aspects of the case.

As explained in 5.3 Circumstances for Court Intervention, the judicial review framework requires Chinese courts to be cautious when they decide to invalidate an arbitration agreement.

As a general rule, only parties to an arbitration agreement may become parties to an arbitral proceeding. However, in judicial practice, a third party may become a party to an arbitral proceeding in exceptional circumstances, for example, if the third party is:

• the successor or heir of a party to an arbitration agreement that has undergone a division or merger, or has deceased;
• the assignee of a contract with an arbitration agreement; or
• the principal whose agent entered into an arbitration agreement on his/her/its behalf.

Apart from the above, there may be a few other cases in which the courts decided that a third party should be bound by an arbitration agreement. However, such cases are insufficient to establish concrete and widely recognised rules.

In China, neither an arbitral tribunal nor an arbitral institution is authorised by PRC law to award preliminary or interim relief. Although the arbitration rules of some arbitral institutions (such as CIETAC and BAC) provide that the arbitral tribunal may order interim relief as it deems appropriate, such order may be unenforceable unless the parties execute it willingly.

Interim Relief in Arbitral Proceedings

Currently, Chinese courts are vested with the exclusive authority to order interim relief in aid of arbitral proceedings.

Specifically, a party may file a written application for interim relief with the arbitral institution either before or during the arbitral proceeding. The application shall include the interim relief sought, and the necessity and reasons for such interim relief. The arbitral institution will forward such application to the competent court for its review and execution.

Three types of interim relief may be granted by courts to support the arbitral proceedings, namely:

• property preservation – applicable when the enforcement of the future award may be impossible or difficult;
• evidence preservation – applicable when the evidence may perish unless immediately preserved; and
• injunction – applicable when the continuation of the debtor’s conduct is likely to increase practical difficulties in enforcing the future award or cause further damages to the creditor.

Please note, however, that the draft amendment to the Arbitration Law would allow the tribunals to order interim measures.

Interim Relief in Aid of Foreign-seated Arbitration

Generally, Chinese courts are not authorised to grant interim relief in aid of foreign-seated arbitral proceedings, with the following exceptions:

• any party to arbitral proceedings seated in Hong Kong SAR and administered by a qualified arbitral institution may apply to a competent Chinese court for interim measures, pursuant to the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and the Hong Kong SAR (effective in 2019); and
• any party to maritime arbitral proceedings seated outside Mainland China may also apply to Chinese maritime courts for interim relief specified in the Special Maritime Procedure Law (effective in 2000).

Emergency Arbitrators

The current PRC law does not allow for an emergency arbitrator procedure. The draft amendment to the Arbitration Law, on the other hand, would recognise the legality of emergency arbitrators and the emergency relief ordered by them.

Although the arbitration rules of some arbitral institutions (such as CIETAC and BAC) provide emergency arbitrator procedures whereby the emergency arbitrator may order interim relief, such order may be unenforceable unless the parties execute it willingly.

Security for costs is neither required nor allowed by PRC law. Therefore, neither courts nor arbitral tribunals may order security for costs. In practice, all arbitration fees are prepaid by the claimant once the arbitral proceeding is initiated, and will be allocated between the parties as awarded by the tribunal pursuant to the “loser pays” rule, unless the parties agree otherwise with respect to the cost allocation.

Nevertheless, a party to the arbitral proceeding may apply to the court for preservation of the other party’s property as security for future performance of the award.

The legal framework governing the conduct of arbitral proceedings in China primarily consists of the Arbitration Law, the SPC Interpretation of Arbitration Law, the Civil Procedure Law and the SPC Interpretation of Civil Procedure Law.

The arbitration rules of arbitral institutions also apply to the conduct of arbitral proceedings in China by virtue of the parties’ choice.

The Arbitration Law provides general procedural steps in the conduct of arbitral proceedings, including application, composition of tribunal, hearing, settlement, mediation and award.

Application

Arbitral proceedings in China start from a party’s application for arbitration to the competent arbitral institution. The application shall be in writing and include claims, supporting facts, legal basis, evidence, and information of the claimant and the respondent.

The arbitral institution shall, within five days of receipt of the application, decide whether the application is acceptable and notify the claimant of its decision. If the arbitral institution accepts the application, it shall serve the respondent with its arbitration rules, panel list of arbitrators, and claimant’s application, within the timeframe set out in its arbitration rules.

After receiving the application, the respondent shall file a written statement of defence with the arbitral institution within the period provided in the applicable arbitration rules. The respondent may also file counterclaims.

Composition of Tribunal

The arbitral tribunal may be composed of three arbitrators (including one presiding arbitrator) or a sole arbitrator.

Hearing

As a default rule, the tribunal shall hear the case, after it notifies the parties of the hearing date. The parties may, nevertheless, agree that the arbitral proceedings shall be conducted in writing and without any hearing.

At the hearing, the parties will be invited to exchange evidence and cross-examine the evidence of the other party, and present arguments that cover both factual and legal issues of the dispute.

Settlement, Mediation and Award

After the application for arbitration is filed, the parties are still free to settle the case. If the parties reach a settlement agreement, they may request the tribunal to issue an award based on the settlement agreement, or the claimant may withdraw the application for arbitration.

The tribunal may also mediate the case before issuing the award. If the mediation is successful, the tribunal shall issue a mediation statement or an award, depending on the choice of the parties.

If the mediation is unsuccessful, the tribunal shall issue an award within the applicable period. The award is final but may be subject to further review by courts in a set-aside or enforcement proceeding. See 11. Review of an Award for details.

The Arbitration Law delegates the following powers to arbitrators:

• managing the arbitral proceedings; and
• collecting and appraising evidence, if necessary.

Arbitrators are bound by the Arbitration Law and the applicable arbitration rules with respect to their duties, including in particular, to:

• conduct the arbitral proceedings independently and impartially;
• exercise their powers with diligence and efficiency;
• avoid conflict of interest; and
• keep the particulars of the arbitral proceedings confidential.

No qualification requirements are imposed on legal representatives that appear in arbitral proceedings in China. Chinese lawyers, nationals or even foreign lawyers may act as legal representatives in arbitral proceedings.

Generally, there is no limit on the number of legal representatives in arbitral proceedings. However, some arbitral institutions may limit the number of legal representatives in a case pursuant to their arbitration rules. For example, SHIAC allows up to five legal representatives in one case, and any legal representatives beyond that number will be subject to approval.

The collection and submission of evidence in arbitral proceedings are primarily governed by a few general provisions of the Arbitration Law and Civil Procedure Law, and by detailed rules in the arbitration rules of arbitral institutions.

Submission of evidence may be required at different stages of the arbitral proceeding, including at the time of filing the application for arbitration and before, during and after the hearing, depending on the applicable arbitration rules and the instructions of tribunals. Evidence is most likely, but not necessarily, cross-examined at the hearing.

In arbitral proceedings, the collection and submission of evidence depend largely on the parties that are charged with the burden of proof. For instance, the claimant shall collect and submit evidence in support of its claims or alleged facts, and the respondent shall collect and submit evidence to support its defence or counterclaims. If a party fails to submit sufficient evidence to prove a fact, the tribunal may draw an adverse inference as to the alleged fact.

Even if Article 43 of the Arbitration Law provides generally that tribunals may collect evidence on their own, the reality is quite different because such power is not mandatory. In practice, arbitral tribunals do not have the authority to compel a party or a non-party to produce evidence, depose or give testimony.

In practice, tribunals exercise a broad discretion in relation to the collection, submission and admission of evidence. For example, a tribunal may require a party to submit evidence in its custody within a specified period, if the tribunal deems necessary. If the requested party fails to comply with the tribunal’s instructions, it will not be subject to any sanction or penalty other than that an unfavourable conclusion may be inferred.

Witness statement is an acceptable form of evidence in arbitral proceedings. A party may apply to the tribunal for a witness to appear, testify and be cross-examined at the hearing. In China’s arbitration practice, however, witness statement is generally less persuasive than documentary evidence, which is the primary form of evidence. In particular, a mere witness statement in writing is given little weight unless the witness is cross-examined.

There are no uniform and systematic rules of evidence applicable to domestic or foreign-related arbitration in China. In practice, apart from a few evidence rules in the Arbitration Law and Civil Procedure Law, tribunals may refer to the applicable arbitration rules and seek guidance from the Several Provisions of the SPC on Evidence for Civil Actions (amended in 2019). However, if the parties choose to apply specific evidence rules by agreement (such as IBA Rules on the Taking of Evidence in International Arbitration; “IBA Rules”), such evidence rules shall prevail.

Although some arbitral institutions such as CIETAC have adopted guidelines on evidence that mirror the international best practice (such as IBA Rules), such guidelines are not applicable without the explicit consent of the parties.

In China, arbitrators generally do not have the power to compel a party or a non-party to produce documents, depose or give testimony. Nor are they allowed to request courts to assist with the enforcement of document production.

If, however, the evidence rules chosen by the parties so provide, the tribunal may require a party to produce documents it considers necessary. In any event, non-parties are not bound to produce documents requested by arbitrators.

Arbitration is confidential unless the parties agree otherwise. Generally, the parties, arbitrators, witnesses, translators, experts and all other parties participating in the arbitration are subject to the confidentiality obligation.

Information relating to arbitral proceedings may be disclosed in a few circumstances, including:

• in court proceedings, such as the review of validity of the arbitration agreement, granting of interim measures, or enforcement or set-aside of awards;
• in criminal or civil proceedings where the judicial authorities collect such evidence that is part of arbitral proceedings; and
• limited disclosure of arbitration cases by a listed company to fulfil its duty of information disclosure.

An arbitral award shall be based on the majority opinion of the tribunal, while the dissenting opinion may be entered into record. If the tribunal fails to deliver a majority opinion, the award shall be based on the presiding arbitrator’s opinion.

An arbitral award shall specify the claims, facts at issue, reasons for the decision, reliefs granted, allocation of cost and date of the award, according to Article 54 of the Arbitration Law. The parties may dispense with the facts at issue and reasons for the decision in the award by agreement. The award shall bear the signature of both the arbitrators and the arbitral institution. The dissenting arbitrator may choose to sign the award or not. More detailed requirements of an award may be found in the institutional arbitration rules.

PRC law does not provide any timeframe within which the award shall be delivered. However, arbitrators in China shall adhere to the applicable arbitration rules that provide the time limit on delivery of the award. For example, the CIETAC Arbitration Rules require an award to be made within six months for an international commercial arbitration, four months for a domestic arbitration and even sooner for summary proceedings, starting from the date of composition of the tribunal. Such timeframe may be extended upon the decision of the president of the arbitral institution.

In 2021, BAC reported an average of 101.72 days from the date of composition of the tribunal to the date of the award, according to its annual report of 2021.

Remedies that may be awarded by an arbitral tribunal are not expressly provided in PRC law, but in practice they may include damages, specific performance, injunctive relief, declaratory relief, costs and interest.

There are limitations on the types and scope of damages in the substantive provisions of contract-related laws, such as the PRC Civil Code (effective in 2021). For example, damages that can be awarded are mostly compensatory in nature, whereas punitive damages are rarely awarded.

Costs

In China, arbitral tribunals may decide the cost allocation between the parties and award costs pursuant to the applicable arbitration rules, or according to the parties’ agreement. Such costs usually include arbitration fees, legal fees, appraisal fees, notary fees, translation fees, etc, provided that they are reasonable. When deciding the cost allocation, tribunals generally apply the “costs follow the event” approach, taking into account the outcome and complexity of the case, the workload of the winning party in the case, the amount in dispute, etc.

Interest

Parties are entitled to recover interest as agreed in their contracts and pursuant to the applicable provisions in PRC law. Arbitral tribunals will examine and decide the parties’ claims for interest. As a default rule, the losing party may be ordered to pay the winning party interest up to the date of actual payment for the former’s default in payment.

The applicable interest rate shall normally be subject to the agreement of the parties, unless the agreed rate is beyond the cap that is protected by PRC law. In China’s arbitration practice, the tribunal exercises a broad discretion when awarding interest, but would normally limit the interest rate to four times the loan prime rate (LPR) of the People’s Bank of China.

An arbitral award cannot be appealed in China. A party may, however, challenge the arbitral award by (a) applying for refusal of enforcement with the enforcing court, within 15 days after receiving the notice of enforcement, or (b) applying to the competent court for setting aside the award.

Application for Refusal of Enforcement

Depending on the type of arbitral award, a party to the enforcement proceeding may apply for refusal of enforcement pursuant to the following legal authorities:

• domestic award (an award made in a domestic arbitration): Article 244 of the Civil Procedure Law;
• foreign-related award (an award made in a foreign-related arbitration): Article 281 of the Civil Procedure Law and Article 71 of the Arbitration Law;
• Convention award (an award of an arbitration seated in another contracting state of the New York Convention): Article V of the New York Convention; and
• awards made in Hong Kong SAR, Macau SAR and Taiwan Region: special arrangements providing for grounds of refusal, which largely resemble Article V of the New York Convention.

A third party that is not the award debtor but has a stake in the enforcement of the award may also apply for refusal of enforcement of domestic or foreign-related awards, according to Article 9 of the SPC Provisions on Enforcement of Arbitral Awards, if all of the following criteria are met:

• the underlying arbitration was filed in bad faith or by fraudulent means, prejudicing the third party’s legitimate rights and interests;
• the enforcement of the property disputed by the third party is pending; and
• an application for refusal of enforcement is filed within 30 days from the date on which the enforcement is known or ought to have been known.

Application for Setting Aside

A domestic award may be set aside upon a party’s request to the intermediate people’s court at the place of the arbitral institution making such award, pursuant to Article 58 of the Arbitration Law (similar to Article 244 of the Civil Procedure Law, providing for grounds of refusal of enforcement).

According to Article 70 of the Arbitration Law, a foreign-related award may be set aside by the court in any of the circumstances provided by paragraph 1 of Article 258 of the Civil Procedure Law (now revised as paragraph 1 of Article 281 of the Civil Procedure Law).

Parties are neither allowed to opt in nor opt out the scope of judicial review in relation to arbitration matters, because PRC law provides mandatory grounds for such judicial review.

Generally, the judicial review of arbitral awards in China focuses on the procedural issues. Depending on the type of arbitral award, the standards of judicial review also differ.

A domestic award may be set aside or refused for enforcement if:

• the parties failed to enter into an arbitration clause in the contract, or have not subsequently reached an arbitration agreement in writing;
• matters proposed for arbitration are beyond the scope of the arbitration agreement or the competence of the arbitral tribunal;
• the composition of the arbitral tribunal or the procedure for arbitration is inconsistent with the legal procedure;
• the evidence underlying the award was falsified;
• the counterparty concealed evidence that was sufficient to affect the impartiality of the award;
• the arbitrator(s) committed acts of malpractice for personal benefits and perverted the law when adjudicating the case; or
• the enforcement of the award would be contrary to social and public interests.

A foreign-related award may be set aside or refused for enforcement if:

• the parties failed to enter into an arbitration clause in the contract, or have not subsequently reached an arbitration agreement in writing;
• the respondent was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings, or the respondent was unable to make representation due to any reason that was not attributable to the respondent;
• the composition of the arbitral tribunal or the arbitration procedure was inconsistent with the arbitration rules;
• matters proposed for arbitration were beyond the scope of the arbitration agreement or the competence of the arbitral tribunal; or
• the enforcement of the award would be contrary to the social public interest.

A Convention award may not be enforced if:

• there was not an effective arbitration agreement;
• a party was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings;
• the award was made beyond the terms of reference of the tribunal;
• the composition of the tribunal or the arbitral procedure was not in accordance with the parties’ arbitration agreement or the laws where the arbitration took place;
• the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made;
• the subject matter of the difference was not capable of settlement by arbitration under the PRC laws; or
• the recognition or enforcement of the award would be contrary to the public policy of the PRC.

For the enforcement of awards made in Hong Kong SAR, Macau SAR and Taiwan Region, the grounds for refusal are provided in special arrangements, which largely resemble Article V of the New York Convention.

China acceded to the New York Convention in 1986, and ratified the New York Convention in 1987, with certain reservation on its application, including:

• reciprocity reservation – China will apply the New York Convention only on the basis of reciprocity to the recognition and enforcement of arbitral awards made in the territory of another contracting state; and
• commercial reservation – China will apply the New York Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the PRC laws.

As China resumed the exercise of sovereignty over Hong Kong SAR and Macau SAR in 1997 and 1999, respectively, the New York Convention with the reservation made by China would also apply to the Hong Kong and Macau SARs since 1997 and 2005, respectively.

Process of Enforcing Domestic and Foreign-related Awards

A party to a domestic award or foreign-related award may apply to an intermediate court at the place of the award debtor’s residence or assets. Under certain circumstances provided by the laws, the intermediate court may also designate a primary court to review the application.

An application for the enforcement of a domestic or foreign-related award shall be submitted within two years from:

• the last day of the period of performance set forth in the award;
• the last day of each period of performance, if the performance is required in phases by the award; or
• the effective date of the award, if the award does not provide the period of performance.

Such period may be interrupted or restarted according to the provisions of the Civil Procedure Law.

Process of Enforcing Foreign Awards

A foreign award (an award made in an international arbitration) must be recognised by a competent Chinese court before it is enforced, according to Article 544 of the SPC Interpretation of Civil Procedure Law. Moreover, only the party to the foreign award is eligible to seek recognition and enforcement of such award.

The party seeking recognition and enforcement of a foreign award shall submit an application to the intermediate people’s court where:

• the award debtor has its registered domicile or place of residence, if the counterparty is a natural person;
• the award debtor’s principal place of business is located, if the award debtor is a juridical person; or
• the award debtor’s asset is located, if neither of the above is applicable.

If none of the above is applicable, but the foreign award is related to a court proceeding in Mainland China, such court shall have jurisdiction to review the application for enforcement of the award. If such court is a primary court, then its superior intermediate court shall assume jurisdiction; if such court is a high court or the SPC, it may decide to review the application on its own or refer the application to an intermediate court.

An application for the recognition and enforcement of a foreign award shall be submitted within two years from:

• the last day of the period of performance set forth in the award;
• the last day of each period of performance, if the performance is required in phases by the award; or
• the effective date of the award, if the award does not provide the period of performance.

Such period may be interrupted or restarted according to the provisions of the Civil Procedure Law.

If a party applies only for the recognition of a foreign award without applying for its enforcement at the same time, the time limitation for enforcement restarts on the date when the court’s decision on the application for recognition takes effect.

Reconciliation of Conflicting Procedures

If a domestic or foreign-related award is subject to set-aside proceedings pending before a competent Chinese court, the court of enforcement shall suspend the enforcement proceedings until the set-aside proceedings are concluded, according to Article 7 of the SPC Provisions on Enforcement of Arbitral Awards.

In the case of a foreign award, Chinese courts may invoke Article V, paragraph 1(e) of the New York Convention to deny recognition and enforcement of a foreign award on the ground that the award “has been set aside or suspended by a competent authority in which, or under the law of which, that award was made”. In practice, Chinese courts may decide to continue the enforcement proceedings if the set-aside proceedings are still pending before the foreign court.

State Immunity

As China clarified in Democratic Republic of the Congo and Others v FG Hemisphere Associates LLC [2011] HKCFA 43, “the position of China in maintaining absolute immunity has not been changed”. Therefore, currently, states and state organs are immune from enforcement proceedings in China.

General Approach

Both domestic and foreign-related awards can be enforced directly upon an application to the competent court in China. In contrast, a foreign award must be recognised by a competent Chinese court before it is enforced.

See 11. Review of an Award for grounds and procedures for judicial review of arbitral awards, including the application for setting-aside or refusal of enforcement of domestic awards, foreign-related awards or foreign awards (if applicable).

Chinese courts are generally supportive with respect to enforcement of arbitral awards, which is reinforced by the following statistics:

• less than 5% of all set-aside requests were approved by Chinese courts in 2021; and
• no foreign awards were denied for recognition or enforcement by Chinese courts in 2021.

The SPC maintains an internal reporting mechanism to supervise negative decisions made by courts in this regard. Before deciding to refuse to enforce an arbitral award, the lower court must report its decision to a higher court for review and approval. Before refusing to enforce a domestic award, approval from the high court is sufficient. Before refusing to enforce a foreign award or foreign-related award, final approval from the SPC is needed. The purpose of this mechanism is to ensure that every decision to refuse the enforcement of an arbitral award is fully and seriously examined.

Public Policy

In practice, Chinese courts rarely invoke the ground of public policy to deny enforcement of foreign awards. In the past two decades, only a handful of foreign awards were refused for recognition and enforcement in China. Chinese courts will only find a violation of public policy if the award is contrary to the fundamental principles of law, national or public security, social and public interests or good morals.

It is worth noting that a violation of public policy may be found if the recognition and enforcement of a Convention award would be in conflict with an effective decision made by a Chinese court that the underlying arbitration agreement is invalid or unenforceable.

Class action arbitration or group arbitration is not provided in PRC law.

Counsel

Counsels who are licensed Chinese lawyers are bound by the PRC Lawyers’ Law (amended in 2017), ethical standards or code of conduct for lawyers issued by the lawyers’ associations at national and local levels.

Arbitrators

There is no self-disciplinary organisation for arbitrators or arbitral institutions in China. As a result, China does not have any ethical standards or code of conduct at the national level. Nevertheless, each arbitral institution has its own code of conduct applicable to arbitrators appointed in administered cases.

Third-party funding is an emerging practice in China. However, as of today, China does not have any legislation or guidelines to regulate such practice.

Some Chinese arbitral institutions, on the other hand, have started exploring the approach to third-party funding. For example, CIETAC’s International Investment Arbitration Rules (2017) provide for third-party funding in investment arbitration cases, including the definition, disclosure, etc of third-party funding.

The PRC law does not provide for the consolidation of separate arbitral proceedings. Major arbitral institutions in China, on the other hand, allow their tribunals to consolidate arbitral proceedings conducted under their auspices.

The criteria for consolidation, as prescribed by their respective arbitration rules, are slightly different. For example, while the rules of CIETAC, BAC, SHIAC and SCIA unexceptionally require a consensus of the parties to consolidate separate proceedings, the consolidation criteria of BAC, SHIAC and SCIA rules focus on the subject matter of the same kind, whereas the CIETAC rules focus on the same arbitration agreement and legal relationship.

Chinese courts lack the authority to intervene in the consolidation of arbitral proceedings.

As a general rule, only parties to an arbitration agreement or award may be bound by it. However, a domestic or foreign third party may be bound by an arbitration agreement, arbitral proceeding and its resultant award in exceptional circumstances as outlined in 5.7 Jurisdiction Over Third Parties. Additionally, in some cases, non-parties, such as the shareholder of the award debtor, may be bound by the award in the enforcement proceeding.