is a form of alternative dispute resolution
(ADR) outside the legal courts. The parties in a dispute agree to be bound by the arbitration
decision, while a third party reviews the evidence in the case and imposes a legally binding decision on both sides and enforceable in the courts.
Arbitration is often used in commercial disputes' resolution, particularly in the context of international commercial transactions. Arbitration in China is a fast-growing industry as there are over 200 arbitration institutions established here (arbitration commissions).
Our lawyers in China
will offer further information on the matter, if you are interested.
The validity of arbitration agreements under Chinese law
An arbitration agreement should be valid, according to the requirements of the People’s Republic of China Arbitration Law. The most important requirements in this matter are:
• a description of the issues that will be arbitrated;
• a clear expression of the parties' intention to submit disputes to an arbitration procedure;
• the identification of the arbitration institution selected by the parties to administer arbitrations.
Advantages and disadvantages of arbitration procedure in China
In general, arbitration has the following advantages over Chinese litigation:
• Flexibility. Arbitration procedure is conducted on a basis agreed between the parties. They are therefore free to formulate a dispute resolution that suits their preferences/circumstances. Local Chinese arbitration that involves Chinese parties has a distinctly local character, such as non-adversarial hearings, no document production or negligible witness evidence. An arbitration agreement which has been drafted well can include more familiar procedures for foreign parties and also incorporate international best practice. In comparison with the rigidity of Chinese court procedures, the arbitration procedure in China is more flexible.
• Impartiality and transparency. If the proceedings take place outside the major commercial cities of China, foreign parties may be concerned over potential influence and bias in the Chinese courts. But it’s not the case, since the freedom to agree the terms of the arbitration procedure means that parties can ensure the appointment of an experienced and independent tribunal.
Our Chinese law firm will offer specific guidance in this matter if you are interested.
The main disadvantages regarding Chinese arbitration, when it incorporates a modified procedure agreed by the parties are:
• weak enforcement regime in China for domestic awards in comparison to foreign ones;
high supervisory power of the Chinese courts
over domestic arbitration procedure and restrictions on the administration of China-seated arbitrations
by foreign arbitral institutions.