Jurisdiction

Are there any subject matters that may not be referred to arbitration under the governing law of China? What is the general approach used in determining whether or not a dispute is "arbitrable"? 

Non-Arbitrable Disputes: Under the PRC Arbitration Law, certain types of disputes are non-arbitrable:

(a) Marital, adoption, guardianship, support and succession disputes; and,

(b) Administrative disputes that are required by law to be handled by administrative authorities (Articles 3 of the PRC Arbitration Law).

Under Article 2 of the CIETAC Arbitration Rules, CIETAC does not accept cases over the following disputes:

(a)    Marital, adoption, guardianship, support and succession disputes;

(b) Administrative disputes that laws require to be handled by administrative authorities; and,

(c) Labor disputes and disputes within the agricultural collective economic organizations over contracted management in agriculture. 

Disputes Subject to Arbitration: Article 2 of the PRC Arbitration Law provides that “contractual and other disputes concerning property rights and other disputes concerning property rights and obligations between citizens, legal persons and other organizations of equal status may be subject to arbitration”. Article 2 of the CIETAC Arbitration Rules provides that the Arbitration Commission will resolve “disputes arising from economic and trade transactions of a contractual and non-contractual nature”, including:

(a)    International or foreign-related disputes;

(b) Disputes related to the Hong Kong SAR or the Macao SAR or the Taiwan region;

(c) Disputes between foreign investment enterprises or between a foreign investment enterprise and a Chinese legal person, physical person and / or economic organization;

(d) Disputes arising from project financing invitations to tender and bidding submissions, project construction or other activities conducted by a Chinese legal person, natural person and / or other economic organization which utilize capital, technology or services from foreign countries, international organizations or from the Hong Kong SAR, the Macao SAR and the Taiwan region;

(e) Disputes that may be taken cognizance of by the Arbitration Commission in accordance with special provisions of, or upon special authorization from, the laws or administrative regulations of the People’s Republic of China; and,

(f) Any other domestic disputes that the parties have agreed to submit to the Arbitration Commission for arbitration.

Is an arbitrator permitted to rule on the question of his or her own jurisdiction? Article 20 of the PRC Arbitration Law provides that where there is a dispute over the validity of an arbitration agreement, such dispute may be ruled upon by the Arbitration Commission or the Court. However, if one party wishes to have the matter resolved by the Arbitration Commission and the other wishes the Court to rule upon this issue, the latter shall prevail. Article 4 of the CIETAC Arbitration Rules has similar effect.

Although both the PRC Arbitration Law and the CIETAC Arbitration Rules stipulate that it is the Arbitration Commission that has the power to rule on the validity of the arbitration agreement (if the parties agree), this does not mean that the arbitral tribunal has no say on this issue. When making a decision in this regard, CIETAC will consider the issues raised and may seek the views of the tribunal especially if an investigation into the relevant facts or law is required.

Under what circumstances can a Court address the issue of the jurisdiction and competence of the arbitral tribunal? As to the circumstances in which a Court can address the issue of validity of an arbitration agreement, see above. As mentioned above, arbitrators in China have to satisfy certain minimum requirements as to qualifications and experience and have to be on the panel of arbitrators of the respective Arbitration Commissions. Challenges based on partiality of arbitrators in the circumstances set out below (“What are the requirements (if any) as to arbitrator independence, neutrality and/or impartiality?”) are made to the Arbitration Commission. For domestic arbitration cases, the Court may decide to set aside or not to enforce an award based on lack of partiality of the tribunal (see below, “What is the approach of the national courts in China towards the enforcement of arbitration awards in practice?”).

Selection of Arbitral Tribunal

Are there any limits to the parties’ autonomy to select arbitrators? Pursuant to Article 16 of the PRC Arbitration Law, a valid arbitration agreement must include a designated Arbitration Commission. Therefore, it is implied that only institutional arbitrations are recognized in China. As mentioned, CIETAC and all the local Arbitration Commissions currently require arbitrators to be selected from their respective panels of arbitrators.

Both the PRC Arbitration Law and the CIETAC Arbitration Rules are silent as to whether parties are entitled to agree on the nationalities or other attributes of arbitrators to be appointed. In this regard, Mr. Wang Sheng Chang, a Vice-Chairman of CIETAC, at an event sponsored by the Chartered Institute of Arbitrators in Hong Kong in April 2003, stated that the parties to CIETAC arbitration are free to agree on the nationalities of arbitrators, provided that they are listed on the CIETAC Panel of Arbitrators. By analogy, the parties should also be free, for example, to stipulate that the arbitrators ought to have a certain specialized knowledge or experience.

As to the procedure for selection of arbitrators, both the PRC Arbitration Law and the CIETAC Rules lay down provisions concerning how arbitrators are to be selected. Basically, in arbitration cases, excluding those subject to summary procedure because of the size of the claim (CIETAC and other Arbitration Commissions have special rules concerning cases subject to summary procedure), where there is one claimant and one respondent and there is no agreement that there should be a sole arbitrator, each party shall appoint an arbitrator and the presiding arbitrator shall be appointed by agreement of the parties or by the chairman of the Arbitration Commission. It is also provided that where the parties fail to decide upon the composition of the tribunal or fail to choose an arbitrator within the prescribed time limit, the chairman of the Arbitration Commission shall make the choice.

If the parties’ chosen method for selecting arbitrators fails, is there a default procedure? As indicated above, generally speaking, the chairman of the Arbitration Commission shall make a decision where the parties fail to decide upon the composition of the arbitral tribunal or fail to choose an arbitrator within the prescribed time limit. It is unclear whether the parties are entitled to add to or vary the selection procedure for arbitrators laid down in the PRC Arbitration Law and the CIETAC Rules. It is submitted that the parties are free to do so provided they do not contradict the said rules. According to this theory, parties would be free, for example, to stipulate that a designated outside party should decide the identity of the presiding arbitrator and such decision shall be deemed to be the decision of the parties. However, it would appear that the parties would not be entitled to contradict the rules by, for example, ousting the default power of appointment vested in the chairman of the Arbitration Commission.

Can a court intervene in the selection of arbitrators? There are no provisions in the PRC Arbitration Law or in any other legislation in China which allow the Court to intervene in the selection of arbitrators. The Court may, however, refuse to enforce an arbitration award where the arbitral tribunal is not properly constituted

What are the requirements (if any) as to arbitrator independence, neutrality and/or impartiality? Article 34 of the Arbitration Law provides that an arbitrator must withdraw from the tribunal if:

(a) The arbitrator is a party in the case or a close relative of a party in the case or its agent;

(b) The arbitrator has a personal interest in the case;

(c) The arbitrator has some other relationship with a party or its agent which may affect his ability to act fairly; or,

(d) The arbitrator has privately met with a party or its agent, or has accepted gifts or an invitation to entertainment from the party or its agent.

Article 28 of the CIETAC Rules provides that any appointed arbitrator having a personal interest in the case has to disclose such interest to the Arbitration Commission and request to be withdrawn from his office.

(Edited By: China West Lawyer)