The Chinese have traditionally preferred mediation to resolve their disputes; litigation is often frowned-upon and the desire to save-face often outweighs the bickering of who’s right and who’s wrong. If mediation fails, the disputing parties can also arbitrate. Parties often will prefer to agree to arbitration for its privacy and economy. According to the Chinese Civil Procedure Code, Article 257, parties are also prohibited from litigation if there is an arbitration agreement in a contract.
There are both domestic and international arbitration organizations in China. Under the Chinese Arbitration Law, domestic commissions must be independent of any administrative agencies and may form their own procedural rules consistent with the national Arbitration Law.
Domestic commissions are permitted to accept foreign-related disputes provided that the parties consented to the jurisdiction of the commission. However, these commissions are not the best choice as forums for resolving disputes involving foreign entities. They are often inexperienced and require the Chinese language be the official language for the proceedings. These commissions are also only required to preserve matters for appeal to the basic level people’s court.
The China International Economic and Trade Arbitration Commission (“CIETAC”), is a much more appealing choice for a foreign entity doing business in China. It is required to preserve matters to the intermediate people’s court, which is much more experienced with international disputes. CIETAC also approves a large number of foreign professionals from the U.S., Canada, Australia, and many European countries as arbitrators. It allows parties to agree to an official language other than Chinese for the proceedings and it provides translation support for hearings and documentation. CIETAC is also designated by the Chinese Securities Committee of the State Council to resolve disputes involving securities between institutions and trading centers.
CIETAC also vigorously acclimatizes to market demands. Recently, it revised its Arbitration Rules furthering its internationalization efforts. The new amendments took effect on May 1, 2012. By these amendments, CIETAC clarified its jurisdiction over non-contractual disputes, permitted consolidated proceedings, allowed the Arbitral Tribunal to order interim measures, increased flexibility for offshore arbitration seat, increased threshold amount for summary proceedings, and provided a new provision that allowed CIETAC the discretion to choose a language “in light of the actual circumstances of the case.”
For more information on the “CIETAC 2012 Rules” please see Jun He Law Offices Legal Updates: http://www.junhe.com/uploadpic/news/201272164543334.pdf