NOTES ON RECENT DEVELOPMENT OF
INTERNATIONAL ARBITRATION IN CHINA
AS cross-border transactions and direct foreign investment increase, foreign companies have been continuing to use arbitration as a favored option for dispute resolution in China for
complicated, bilingual and big-ticket commercial cases.
The China International Economic and Trade Arbitration
Commission (“CIETAC”) is the long-standing and leading
arbitration institution in China to handle foreign-related
cases with a caseload of 1,352 filings in 2010. In
response to this growing demand for arbitration, China
has taken significant steps to improve its arbitration
system. In October 2010, China promulgated the Law on
Application of Laws to Foreign-related Civil Relations
(the “Law”). Meanwhile, CIETAC is also in the process of
adopting a set of new rules to replace the current rules
of 2005 that are expected to come out around the year
end (the “New Rules”). This article is to share with the
readers these and other new developments of
international arbitration in China.
THE LAW
The Law is implemented to systemize the rules
governing application of laws to foreign-related civil
relations in China. As a result, the Law also has an
effect on international arbitration in China.
1. Governing Law on Arbitral Agreement
Article 18 of the Law provides that: “[T]he parties
concerned may agree upon the laws governing an
arbitral agreement, failing which the laws of the
domicile of the arbitral institution or laws of the place of
arbitration shall apply.”
The Law enshrines the notion of party autonomy in
determining applicable law on an arbitral agreement.
Meanwhile, the Law also makes it clear on how to
determine the governing law on an arbitral agreement
in the absence of agreement by the parties. The law of
the domicile of the arbitration institution or the law of
the place of arbitration will be taken into consideration,
as they are sometimes not the same.
2. Ascertainment of Foreign Laws
Article 10 of the Law provides that: “[F]oreign laws
governing foreign-related civil relations shall be
ascertained by the people’s court, arbitration institution
or administrative organ. The party choosing a foreign
law as the governing law shall provide the law of the
foreign country. If the foreign law cannot be
ascertained or there are no respective provisions in the
law of that foreign country, the law of the People’s
Republic of China shall apply.”
The Law lays down the general rule that a foreign
law that governs foreign-related arbitration shall be
ascertained by an arbitration institution. If a party
chooses a foreign law as the governing law, it has the
obligation to provide such a law. The Law clarifies the
rules regarding the ascertainment of foreign laws under
different circumstances.
NEW CIETAC RULES
CIETAC started to amend its rules since late 2009. The
contemplated New Rules are expected to incorporate
many of the practices in modern arbitration and to
address specific procedural issues that are faced by
CIETAC. Although the draft of the New Rules is yet to be
finalized, some of the proposed new changes are said to
include the follows:
1. Governing Law on Arbitral Agreement
In compliance with Article 18 of the Law, the New Rules
will provide the option that the parties may choose the
governing law on the validity of an arbitral agreement.
2. Nationality of Presiding and Sole Arbitrators
Where the presiding or sole arbitrator shall be
appointed by the Chairman of CIETAC, the New Rules
require that the Chairman in making an appointment
shall take into consideration the nationalities of the
candidates based on the circumstances of a particular
case. This new change adds transparency and neutrality
to the arbitration proceedings when parties of different
nationalities fail to jointly agree upon the presiding or
sole arbitrator.
3. Consolidation of Cases
For efficiency and cost saving, the New Rules will allow the
tribunal to consolidate two or more pending cases into
one single proceeding if the cases are substantially similar.
