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Brief of Commercial Arbitration in China: Domestic and International

I. 1994 Arbitration Legislation: Chinese Arbitration Act

Chinese special culture has fostered a good tradition of resolving disputes through arbitration, one of non-adversial measures. The Chinese law endorses arbitration as a useful method for resolving international commercial and investment disputes. Practice also exhibits a strong preference for arbitration of disputes arising out of business transactions.

The Arbitration Act of the People’s Republic of

China

, the first arbitration act in the history of the PRC, was enacted on 31 August 1994 by the National People’s Congress, the legislative body of the PRC. The Act came into effect on 1 September 1995 (the CAA 1994). The CAA 1994 applies to both domestic and international (foreign-related) arbitration in

China

. It embodies many of the principles of modern arbitration and also clarifies the basic principles of

China

’s arbitration. Under the CAA 1994, arbitration agreement is the basis for arbitration. A valid arbitration agreement is the prerequisite for arbitration bodies to accept the cases. Arbitration agreement between the parties excludes the jurisdiction of courts unless it is void. Arbitration shall be conducted independently and not be subject to any interference from administrative authorities, social organizations or individuals. An arbitral award shall be final and binding on both parties, and has res judicata effect. Such awards can be enforced by courts. During arbitral proceedings, the arbitral tribunal may carry out conciliation in accordance with the parties’ free will. Arbitration is combined with conciliation. In case a valid arbitration agreement exists, the court shall refer the parties to arbitration and thus ensure the enforceability of arbitration agreement. Upon the request of the parties, the court shall rule on the effect of the arbitration agreement and offer property preservative measures or interim measures of protection of evidence. Courts may, as the case may be, grant or reject the application for setting aside or, stay the setting aside procedure and remit the award to the arbitral tribunal for re-arbitration in order to eliminate the grounds for setting aside. Courts may also grant or refuse the enforcement of an award in accordance with the grounds for refusal prescribed by the law or the Convention which the PRC has acceded to. Thus, the principle of the maximum amount of court assistance with the least interference has also been affirmed by the Act. Traditionally, arbitration in

China

is a two-pronged regime: domestic arbitration and international arbitration. The dividing line between them is that the latter involves the foreign elements. One of the salient features of the CAA 1994 is that it accords the international arbitration a special treatment. Before we move to the topic of international arbitration, the domestic arbitration will be dealt with first.

II. Domestic arbitration

Before the CAA 1994, there existed no uniform arbitration law to regulate the arbitration activities taking place in

China

. The domestic arbitration was conducted under numerous domestic arbitration institutions that were attached to the State Administration of Industry and Commerce and its subordinate agencies at various levels of government. These arbitration institutions exercised their arbitration jurisdictions over the parties pursuant to the administrative jurisdictions of different regions and levels. No arbitration agreement was required. The arbitral award is also not final. The domestic arbitration, therefore, is of mandatory nature and is just an administrative method to settle economic disputes. Such arbitration is far from the proper concept of arbitration, and, in fact, just a mixture of arbitration, administration and adjudication. The CAA 1994 has brought fundamental changes to

China

’s domestic arbitration. The former domestic arbitration bodies subordinate to administrative organs ceased to exist on 1 September 1996. They must be reorganized in accordance with the Act. All reorganized arbitration bodies shall be independent from administrative authorities and there shall be no subordinate relationship between arbitration bodies and administrative authorities as well as between arbitration bodies themselves. Up to now, more than 160 arbitration institutions have been set up pursuant to the CAA 1995. In addition to domestic cases, they can also handle foreign-related cases that the parties submit to them by agreement.

III. International arbitration

As far as the international commercial arbitration is concerned, since the 1950s,

China

has, by international practice, adopted the voluntary arbitration and the final award system. As early as 1956 and 1959, the first two international arbitration institutions, China International Economic and Trade Arbitration Commission (CIETAC) and the China Maritime Arbitration Commission (CMAC) were founded under the auspices of the China Council for the Promotion of International Trade (CCPIT) /China Chamber of International Commerce (CCOIC). All the international arbitration cases were submitted to CIETAC and CMAC for arbitration. Therefore, before the CAA 1994, the international arbitration in

China

means no more than the arbitral proceedings conducted by CIETAC and CMAC. After the CAA 1994, although other arbitration institutions may also accept international cases, almost all the international arbitration cases are still filed to CIETAC for arbitration by the parties. CIETAC, pursuant to the autonomy of the parties and the practical need of the business, extended its jurisdiction further to all domestic cases the parties submit by agreement in its Arbitration Rules 2000 (effective as from 1 October 2000). Both CIETAC and CMAC are always the leading arbitration institutions in

China

IV. CIETAC and its business

China International Economic and Trade Arbitration Commission (CIETAC), also called the Arbitration Court of China Chamber of International Commerce, was established in 1956 with its original name of Foreign Trade Arbitration Commission. In 1980 the Arbitration Commission was renamed as the Foreign Economic and Trade Arbitration Commission, later in 1988 changed to its current name, and then in the year 2000 adopted the name of the Arbitration Court of China Chamber of International Commerce while keeping the name of CIETAC. CIETAC established its Shenzhen Sub-Commission and Shanghai Sub-Commission respectively in 1989 and 1990, and five offices in Chongqing,Chengdu, Changsha, Fuzhou and Dalian in 1999 within local branches of CCPIT as professional liaison and promotion institutions, which are not able to take cognizance of or deal with cases by any means. The Beijing Headquarters of the Arbitration Commission, its Shenzhen Sub-Commission and its Shanghai Sub-Commission are one institution. They use the same Arbitration Rules and Panel of Arbitrators and they exercise the same arbitration jurisdiction.

CIETAC has formulated its own rules of arbitration procedure. The Provisional Rules of Arbitration Procedure were formulated when the Arbitration Commission was established. To meet the demands of its development, the Arbitration Commission amended its arbitration rules respectively in 1988,1994,1995,1998 and 2000. The current Arbitration Rules were adopted on October 1, 2000. According to the current Arbitration Rules, CIETAC takes cognizance of cases over international, foreign-related and domestic disputes of a contractual or non-contractual nature in accordance with an arbitration agreement between the parties to submit their dispute to CIETAC for arbitration.

CIETAC has a team of arbitrators and secretaries with professional knowledge and ethics. The current Panel of Arbitrators contains a total of 518 arbitrators, among which 174 arbitrators are from Hong Kong, Macao,

Taiwan

and foreign countries. CIETAC resolves by means of arbitration disputes arising from economic and trade transactions of a contractual or non-contractual nature. Along with the constant perfection of CIETAC rules, the annual growth of CIETAC’s caseload is phenomenal. In 1985 CIETAC only handled 37 cases. In 1992, the figure jumped to 267. In 1993, 486 new cases were received and in 1994, the number is approaching 829. In 1995, the cases admitted reached a record number of nearly 1000. The following year 1996 saw 778 new cases, 1997 saw 723 cases, 1998 saw 678, 1999 saw 669, 2000 saw 633 and 2001 saw 731. The recent statistics showed that in half 2002 CIETAC has accepted xxx new applications for arbitration. These cases involved the disputes over general sales of goods, equity and contractual joint ventures, processing and compensation trade, construction contracts, real estate, loans, insurance, barter trade and trademark transfer and so on. The number of cases in respect of equity and contractual joint ventures and real estate had a remarkable increase. In 1992, the number of international cases admitted by CIETAC outstripped for the first time LCIA, SCC and AAA and ranked second, just behind the ICC Court of International Arbitration. Since 1993, the number of cases taken cognizance of by CIETAC has ranked the first among arbitration institutions in the world. Up to 2001, CIETAC has concluded nearly 8000 cases, the parties of which covered over 40 countries and regions. Currently, the arbitral award made by CIETAC can be enforced by the competent courts of more than 140 countries and regions, and the impartiality of its awards has been recognized unanimously both at home and abroad.

CIETAC established in 2000 its Domain Name Dispute Resolution Center, which, by the authorization of China Internet Network Information Center (CNNIC), to resolve .CN domain name disputes as well the keyword disputes managed by CNNIC. In 2001, CIETAC further created jointly with Hong Kong International Arbitration Center (HKIAC) the Asian Domain Name Dispute Resolution Center (ADNDRC), which, as approved by Internet Corporation for Assigned Names and Numbers (ICANN), to resolve the disputes arising out of gTLDs for the parties in Asia-Pacific region and even throughout the world. ADNDRC has become the fourth gTLDs dispute resolution service provider in the world, and the first in Asia as well. Its Beijing Office is located in CIETAC. CIETAC has continuously developed cooperation with other international arbitration institutions. It signed arbitration cooperation agreement with nearly 30 international arbitration institutions such as the Arbitration Institute of the Stockholm Chamber of Commerce, the American Arbitration Commission and the Chartered Institute of Arbitrators, to develop the international status of CIETAC.

(Edited By:

China

West Lawyer)

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