Chinese Arbitration Law

The Arbitration Law 1994

The Arbitration Law of the People’s Republic of China, adopted in 1994 and effective from 1995, is the principal legislation governing domestic and foreign-related arbitration in China. The Law replaced the earlier system of administrative arbitration and established a unified framework for commercial arbitration. The Arbitration Law is divided into eight chapters covering general provisions, arbitration commissions and the arbitration association, the arbitration agreement, the arbitration procedure, the application for setting aside arbitral awards, enforcement, and supplementary provisions. The Law reflects China’s integration into the international arbitration community and its commitment to the New York Convention, which China ratified in 1987.

Scope of Application and Arbitrability

Article 2 of the Arbitration Law defines the scope of arbitrable disputes: “contractual disputes and other disputes over rights and interests in property between citizens, legal persons, and other organisations with equal status.” This definition encompasses most commercial disputes but excludes certain categories. Article 3 expressly excludes from arbitration: disputes concerning marriage, adoption, guardianship, inheritance, and administrative disputes that are required by law to be handled by administrative organs. The exclusion of administrative disputes reflects the principle that arbitration is reserved for private law relationships between parties of equal status and does not extend to public law matters or disputes involving the exercise of state power.

The Arbitration Agreement

Articles 16 through 20 govern the validity and effect of the arbitration agreement. Article 16 requires three essential elements: the expression of intention to apply for arbitration, the matters to be arbitrated, and the designated arbitration commission. The requirement that the parties must designate a specific arbitration commission is a distinctive feature of Chinese law and has been a source of litigation — an agreement that merely refers disputes to arbitration without naming a commission, or that names a non-existent commission, may be invalid. The agreement must be in writing, a requirement satisfied by a clause in a contract, a separate arbitration agreement, or an exchange of written communications. Article 19 establishes the separability of the arbitration agreement: the validity of the arbitration clause is independent of the main contract and is assessed separately. Article 20 provides that a challenge to the validity of the arbitration agreement may be brought before the arbitration commission or the Intermediate People’s Court, with the court having priority.

Arbitration Commissions

Articles 10 through 15 govern the establishment and organisation of arbitration commissions. Arbitration commissions are established in municipalities directly under the central government, in cities that are the seats of provincial or autonomous regional people’s governments, and in other cities with need. The commissions are independent of administrative organs and are not subject to administrative supervision. The China International Economic and Trade Arbitration Commission (CIETAC), headquartered in Beijing with sub-commissions in Shanghai, Shenzhen, and other cities, is the leading institution for international and foreign-related arbitration. The China Maritime Arbitration Commission (CMAC) specialises in maritime and shipping disputes. The China Arbitration Association oversees the self-regulation of arbitration commissions.

Arbitration Procedure and the Award

The arbitration procedure under Articles 21 through 57 begins with the application and acceptance by the arbitration commission. The arbitral tribunal is composed of three arbitrators by default, though the parties may agree on a sole arbitrator. Each party has the right to choose one arbitrator, and the two party-appointed arbitrators or the arbitration commission appoint the presiding arbitrator. Hearings are conducted in camera unless the parties agree otherwise. The tribunal is encouraged to conduct mediation (tiaojie) during arbitration, and a settlement agreement reached through mediation may be embodied in an award. The award must be in writing, signed by the arbitrators, and state the reasons for the decision. The award is final and binding (res judicata) from the date of its making.

Setting Aside and Enforcement

Article 58 sets forth the limited grounds for setting aside an arbitral award by the Intermediate People’s Court: the absence of a valid arbitration agreement; the party was not given proper notice of the appointment of an arbitrator or of the proceedings; the composition of the tribunal or the procedure did not conform to legal requirements; the evidence on which the award is based was fabricated; evidence sufficient to affect the impartiality of the award was concealed; or the award violates the public interest. The application to set aside must be made within six months of receipt of the award. Enforcement of the award under Article 62 requires the leave of the Intermediate People’s Court, and the grounds for refusing enforcement mirror the grounds for setting aside. China’s adherence to the New York Convention since 1987 has made it a significant destination for the enforcement of foreign arbitral awards, though enforcement in practice has been uneven, with the public interest ground occasionally used to refuse enforcement.