Arbitration in China: An Overview

Arbitration is an alternative dispute resolution (ADR) mechanism in which parties submit their dispute to a neutral third party, known as an arbitrator, who makes a binding decision. Arbitration is often preferred over litigation due to its speed, confidentiality, and flexibility.

Legal Basis of Arbitration in China

Arbitration in China is governed by the Arbitration Law of the People's Republic of China (hereinafter referred to as the Arbitration Law). The Arbitration Law provides the legal framework for domestic and international arbitration.

Types of Arbitration in China

Domestic Arbitration: Disputes between Chinese entities or between Chinese entities and foreign entities with a registered place of business in China. International Arbitration: Disputes involving entities from different countries, or disputes involving a foreign element, such as a contract governed by foreign law.

Arbitration Agreement

An arbitration agreement is a written agreement between the parties to submit their dispute to arbitration. The arbitration agreement must be in writing and signed by the parties. It typically specifies the governing law, the rules of arbitration, and the number of arbitrators.

Arbitral Tribunals

Arbitration in China can be conducted by either an arbitration commission or an ad hoc tribunal.

Arbitration Commissions: Government-established bodies that provide arbitration services. Ad Hoc Tribunals: Arbitral tribunals created specifically for a particular dispute. The parties can appoint the arbitrators and determine the rules of arbitration.

Arbitration Process

The typical arbitration process in China involves the following steps:

Initiation of Arbitration: One party files a request for arbitration with the arbitration commission or ad hoc tribunal. Response to Request: The other party files a response to the request. Formation of Tribunal: The arbitration commission or parties appoint the arbitrators. Evidence and Hearing: The parties present their evidence and arguments at a hearing. Arbitral Award: The arbitrators issue a binding arbitral award, which is generally final and enforceable.

Enforceability of Arbitral Awards

Arbitral awards are generally binding on the parties and enforceable in China. However, courts may refuse to enforce an arbitral award if it:

Violates the Arbitration Law or public policy Was obtained through fraud, corruption, or coercion Concerns a subject matter not subject to arbitration

Advantages of Arbitration in China

Speed: Arbitration is generally faster than litigation. Confidentiality: Arbitration proceedings are confidential. Flexibility: The parties can customize the arbitration process to suit their needs. Expertise: Arbitrators are often experts in the relevant field of dispute. Enforceability: Arbitral awards are generally binding and enforceable in China.

Disadvantages of Arbitration in China

Cost: Arbitration can be expensive, especially international arbitration. Limited Appeal: Arbitral awards are typically final and not subject to appeal. Lack of Transparency: Arbitration proceedings are generally not open to the public. Potential Bias: Arbitrators may be biased towards the appointing party. Execution of Awards: Enforcement of arbitral awards can sometimes be difficult, especially against foreign entities.

Conclusion

Arbitration is an important ADR mechanism in China, providing parties with an alternative to litigation. While arbitration offers certain advantages, such as speed and confidentiality, it also has certain limitations. Parties should carefully consider the advantages and disadvantages of arbitration before agreeing to submit their dispute to arbitration.