1. May the foreigner be appointed to act as arbitrator in China?

As pointed out in the above, in the CIETAC present Panel of Arbitrators, 158 arbitrators are from foreign countries, Hong Kong SAR and Macao SAR as well as Taiwan region. The parties have the freedom to appoint foreigners from the Panel to act as arbitrators in China

. In fact, in quite a few arbitration cases accepted by the Arbitration Commission, two of the three arbitrators are foreigners, including the presiding arbitrator.   

2. Should the presiding arbitrator be the personage whose nationality is different from those of the parties?

According to Chinese norms, even under the circumstances that the arbitrators are appointed by the parties, they must remain neutral and act independently and impartially. Arbitrators shall not represent either party, and shall treat each party equally. The nationality of the arbitrator should not be deemed as the reason to determine whether or not the arbitrator could act independently and impartially. Even if the three arbitrators of the Tribunal are from the same country, they shall conduct the case independently and impartially with respect to the party who appointed them as arbitrators. Otherwise, the arbitrator shall be requested to withdraw. Hence, in China, it is not required that the presiding arbitrator must be the personage who is from the third country other than those of the parties.

3. Which rules shall be applied to decide the case?

According to the Arbitration Act 1994, arbitrators must decide the case in accordance with the rules of law. In light of Chinese arbitration practice, arbitrators shall, under the precondition that the decision is in compliance with law, fairly and reasonably make the award on the basis of respecting the contractual agreement of the parties and with reference to the international practice. Arbitration ex equae et bono is not allowed in China.

4. May the arbitration proceedings be conducted in the place other than the place where the arbitration body sits or abroad?

By virtue of CIETAC Arbitration Rules 2000, the arbitral proceedings may be conducted in any other places (including foreign country) other than the places where CIETAC and its Sub-Commissions are located, i.e. Beijing, Shenzhen and Shanghai. Nonetheless, up to now no arbitration proceedings have taken place in the places other than the three places above-mentioned.

5. How is the practical setting-aside situation of the arbitral award in China?

In accordance with the CAA 1994, an international award can not be set aside on merits, while a domestic award may be set aside on the basis of statutory substantial mistakes. As far as CIETAC award is concerned, up to now, only one award has been set aside by the court. However, some awards do have been remitted to the tribunal for re-arbitration. In order to strictly implement the CAA 1994 and the CCPL 1991, and to ensure legitimacy of litigious and arbitral activities, the Supreme People’s Court on 23 April 1998 issued the official document concerning setting aside of the award The Supreme People’s Court Notice on the Relevant Issues Concerning Setting-Aside by the People’s Court of the Foreign-Related Arbitral Awards, No. FA/40/1998 (“Notice 40/1998”). By issuing this judicial interpretation, the PRC has established an internal control mechanism—the pre-reporting system, by which the actions for setting-aside of the foreign-related award is effectively monitored. Any People’s Court seeking to set aside the foreign-related award must first obtain approval from the superior people’s court in the same jurisdiction. Any superior court that decides to uphold a lower court’s decision to set aside the foreign-related award must, in turn, report its decision to the Supreme People’s Court prior to finalizing the decision to set aside. As such, the Notice 40/1998 is actually a supplement to the CAA 1994.

6. How is the practical enforcement situation of the arbitral award in China?

Enforcement of an international arbitration award is a popular problem involved with many countries in the world, East or West. As I know, Singapore, one of the Asian countries, is doing well in this respect. In China, similar to the situation of setting aside of the award, an international award can not be refused enforcement on merits, while enforcement of a domestic award may be denied on statutory merit ground. Moreover, in order to avoid the undue refusal for enforcement, the Supreme People’s Court of the P. R. China in 1995 has issued the corresponding judicial interpretation, by which the pre-reporting system concerning the enforcement of the international award has been established. According to this official document, any People’s Court seeking to refuse enforcement of an international award or a foreign award must first obtain approval from the superior people’s court in the same jurisdiction. Any superior court that decides to uphold a lower court’s refusal to enforce an international award or a foreign award must, in turn, report its decision to the Supreme People’s Court prior to finalizing the decision to refuse enforcement. By issuing this official document, the PRC has established an internal control mechanism by which undue refusal for enforcement has also been effectively controlled. Before the pre-reporting system was established, some CIETAC awards and foreign awards did be refused enforcement by the courts. The Arbitration Research Institute (ARI) of China Chamber of International Commerce, in August to September 1997, conducted an investigation concerning the practical enforcement situation of CIETAC awards and foreign awards in China. As far as the enforcement of CIETAC awards is concerned, up to the end of 1996, 164 applications were brought to the Intermediate People’s Court for enforcement. Among these, 127 awards were enforced and only 37 applications for enforcement were rejected. The number of the applications for enforcement actually denied by the courts only amounts to 1.04 percent of CIETAC’s total caseload in the same period (3,571 cases in total). From 1990 to the end of August 1997, 15 foreign awards in total were filed to the People’s Courts for enforcement. Of these, only 2 applications for enforcement were rejected. The ratio of non-enforcement of foreign awards is only 13.33 percent (two out of 15 awards sought to be enforced). The refusal for enforcement of the CIETAC and foreign awards above-mentioned all took place before the establishment of the enforcement pre-reporting system. Most of the arbitral awards could be enforced in China even before the pre-reporting system, though the situation is not so good. Since the pre-reporting system was established, no award has been reported to be unduly refused enforcement by the court.

7. May ad hoc arbitration take place in China?

Ad hoc arbitration never happened in China. Before the CAA 1995, the Chinese law was silent on ad hoc arbitration and the validity of an ad hoc arbitration agreement. According to Article 16 and 18 of the CAA 1995, no designated arbitration commission in the arbitration agreement suffices to invalidate the agreement unless the parties reach a supplementary agreement to that effect. Therefore, an ad hoc arbitration agreement is void. In fact, ad hoc arbitration is excluded in China. China favors institutional arbitration so that the parties can get the best assistance from the arbitration institutions. However, on the other hand, the narrow criteria for the interpretation of and rigid stipulation requiring the written form of the arbitration agreement have in practice become an undue limitation on the development of commercial arbitration.

8. May ICC Arbitration take place in China?

Chinese law keeps silent with regard to foreign arbitration institutions’ conducting arbitral proceedings in China. In theory, ICC International Arbitration Court may conduct its arbitration proceedings in China. On the other hand, the arbitral proceedings of ICC Arbitration must be in compliance with the compulsory provisions of Chinese Law. Under Chinese Arbitration Act, some procedural aspects concerning the validity of the arbitration agreement and the appointment of the arbitrators are different from the counterpart of the ICC Arbitration Rules. If ICC Arbitration takes place in China, its arbitration proceedings would directly violate the compulsory provisions of Chinese Arbitration Act. The present Arbitration Act could not be applied to ICC Arbitration in China unless it is amended accordingly.

Responding to the rapid development in the field of international commercial arbitration, China, by enacting its first arbitration act-the CAA 1994, confirmed and established the proper concept of arbitration as well as the corresponding mechanisms for setting aside and enforcement of arbitral awards, followed by the internal control mechanism-the pre-reporting system, so as to ensure the enforcement of international arbitral awards can be founded upon the solid and reliable basis. It may be said, under Chinese current arbitration system, all arbitration activities can be conducted on a uniform and more reliable basis. However, with the China’s entry into WTO, efforts still need to be undertaken by the Chinese government and judicial authorities to offset the negative effects of some obstacles to hamper arbitration such as protectionism so that we may create a more favorable arbitration environment for international traders and investors. In addition, the CAA 1994 is also necessary to be revised so that it may further embody the usual practice and principles of modern arbitration and also further clarify the basic principles of Chinese arbitration.

(Edited By: China West Lawyer)