Arbitration in China - Lexology Navigator Q&A

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Legal framework

National arbitration laws
What legislation applies to arbitration in your jurisdiction?

The Arbitration Law, which was adopted on August 31 1994 and came into force on September 1 1995, governs commercial arbitration proceedings conducted in China and applies to both domestic and international arbitration. Other regulations and laws, such as the Civil Procedure Law 2007, also contain provisions on arbitration. 

Reference should further be made to the various interpretations and statements of the Supreme People’s Court of China regarding specific arbitration issues.  These provide important clarifications on various aspects of arbitration law and practice.  For example, the Interpretation of the Supreme People’s Court Concerning Some Issues on Application of the Arbitration Law of China, which came into force on September 8 2006, provides guidance on issues relating to the validity of arbitration agreements and challenges to arbitral awards.  

Mandatory laws
Are there any mandatory laws?

Mandatory laws apply directly to arbitration proceedings in China, even if the proceedings involve a foreign element (Article 4 of the Law of the Application of Laws for Foreign-Related Civil Relations). The parties must therefore comply with mandatory rules, such as those set forth in the Arbitration Law and the Contract Law, which was adopted on March 15 1999 and came into force on October 1 1999. Under the Contract Law, for example, joint venture contracts for Chinese-foreign equity joint ventures will always be subject to Chinese law. 

New York Convention
Is your country a signatory to the New York Convention? If so, what is the date of entry into force?

China acceded to the 1958 New York Convention on December 2 1986; the convention became effective with respect to China as of April 22 1987. 

Are there any reservations to the general obligations of the convention?

China adopted both the reciprocity reservation, which provides that China will recognise and enforce only arbitral awards made in other signatory states; and the commercial reservation, which limits recognition and enforcement to awards delivered in commercial cases.

Treaties and conventions
What other treaties and conventions in relation to arbitration is your jurisdiction party to?

China is a signatory to the 1965 Washington Convention, which entered into force for China on February 6 1993. China is also an observer of, although not a signatory to, the Energy Charter Treaty. China has further entered into special bilateral arbitration arrangements with Taiwan, Hong Kong and Macau. 

China is party to more than 130 bilateral investment treaties (BITs), approximately 100 of which are currently in force.  Many of these allow for the arbitration of investment disputes between investors and the host state (although under a number of the older BITs, only disputes over the amount of compensation for an expropriated investment may be arbitrated). 

China is also party to a number of free trade agreements and other international trade promotion agreements which contain provisions on investment protection (including recourse to arbitration).

UNCITRAL
Has your jurisdiction adopted the UNCITRAL Model Law?

While the drafting of the Arbitration Law was influenced by the UNCITRAL Model Law, this has not been adopted in China and there are significant differences between the UNCITRAL Model Law and the Arbitration Law. For example, the Arbitration Law does not recognise ad hoc arbitration proceedings with a seat in mainland China (ie, arbitration agreements must identify an arbitration institution to be enforceable, and only “foreign-related” arbitration proceedings may specify a seat outside mainland China).

Reform
Are there any impending plans to reform the arbitration laws in your jurisdiction?

Despite China’s increasingly pro-arbitration approach, there are no plans for legal reform in this area.

Arbitration agreements

Validity
What are the validity requirements for an arbitration agreement?

The requirements for a valid arbitration agreement are set out in Article 16 of the Arbitration Law, which stipulates that it must include:

• an expression of intent to apply for arbitration;
• the matters to be arbitrated; and
• the designated arbitration institution.

The parties may reach a supplementary agreement regarding the matters to be arbitrated and the arbitration institution if the original agreement does not deal with these issues. However, the arbitration agreement is null and void if no such supplementary agreement is reached (Article 18 of the Arbitration Law).

Arbitration agreements must be in writing (which is not limited to formal contracts and may include agreements formed, for example, by email), and may take the form of an arbitration clause contained in the underlying contract or a standalone arbitration agreement entered into before or after the dispute has arisen (Article 16).

While not strictly necessary under the Arbitration Law, it is prudent for an arbitration agreement to specify the seat of arbitration, the language and the governing law.

Enforcement of agreements
How are arbitration agreements enforced in your jurisdiction? What is the attitude of the national courts towards arbitration agreements?

The Chinese courts generally tend to enforce arbitration agreements.  If a party attempts to institute court proceedings after concluding an arbitration agreement, the court will not accept the case, unless the arbitration agreement is null and void (Article 5 of the Arbitration Law).

Similarly, if a party has concluded an arbitration agreement and subsequently seeks to institute court proceedings without declaring the existence of the agreement, the court will dismiss the court proceedings if the other party to the arbitration agreement submits the dispute to arbitration before the first court hearing, unless the agreement is null and void. However, if the other party fails to raise an objection to the court proceedings prior to the first hearing, it is deemed to have renounced the arbitration agreement and the court will continue to hear the case (Article 26).  

Consolidation
Can an arbitral tribunal with its seat in your jurisdiction consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances?

The Arbitration Law does not expressly regulate the consolidation of arbitration proceedings, but this issue is addressed under the rules of several Chinese arbitration institutions, including the China International Economic and Trade Arbitration Commission (CIETAC). Arbitration proceedings may be consolidated under CIETAC’s rules at the request of one party and with the consent of the other parties and the tribunal, or where the tribunal considers it necessary and all parties consent (Article 12 of the 2012 CIETAC Rules). However, as the consent of all parties is required, a recalcitrant party may easily impede the consolidation of proceedings by refusing to provide such consent. 

Choice of law
How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

Parties involved in a dispute under a ‘foreign-related’ contract are free to choose the substantive law governing any dispute arising out of the contract and are not obliged to choose Chinese law unless mandatory laws apply (Article 3 of the Law of the Application of Law for Foreign-Related Civil Relations and Article 126 of the Contract Law). Where the parties fail to choose the substantive law or the substantive law is unclear, the law with the closest relationship to the contract or the law of the habitual residence of the party whose performance of its obligations best reflects the characteristics of the contract shall apply.

Separability
Are there any provisions on the separability of arbitration agreements?

Arbitration agreements exist independently from the rest of the contract and are not affected by the amendment, rescission, termination or invalidity of the main contract (Article 19 of the Arbitration Law).

Multiparty agreements
Are multiparty agreements recognised?

The Arbitration Law is silent as to the recognition of multi-party agreements. However, some of China’s most prominent arbitration institutions - including the China International Economic and Trade Arbitration Commission and the China Maritime Arbitration Commission - provide clear rules on the subject. In order to avoid potential disputes, it is therefore advisable that parties drafting an arbitration clause in a multi-party agreement either include clear rules on how multi-party arbitrations are to be conducted or select an arbitration institution that provides clear guidelines on this issue.

Arbitral tribunal

Criteria for arbitrators
Are there any restrictions?

Under Chinese legislation, arbitration institutions must appoint their arbitrators from among “righteous, upright persons” who meet one of the following conditions:

• They have been engaged in arbitration work for at least eight years;
• They have worked as a lawyer for at least eight years;
• They have been a judge for at least eight years;
• They are engaged in legal research or legal education at a senior level; or
• They are knowledgeable about the law and work in a senior position in a field related to the economy or trade (Article 13 of the Arbitration Law).

As the Arbitration Law stipulates that a valid arbitration agreement must specify a designated arbitration institution, parties arbitrating in China will also need to consider the relevant arbitration institution’s criteria for appointing arbitrators. The Arbitration Law provides that domestic arbitration institutions must provide a list of registered arbitrators and parties will often be limited to choosing arbitrators from the official list of the relevant arbitration institution.

Pursuant to the 2012 China International Economic and Trade Arbitration Commission (CIETAC) Rules, parties can agree to nominate arbitrators from outside CIETAC’s panel of arbitrators, but such nominations are still subject to confirmation by the chairman of CIETAC according to the law.

Contractual stipulations
What can be stipulated about the tribunal in the agreement?

Article 30 of the Arbitration Law provides that the tribunal may be comprised of either three arbitrators or one arbitrator.  If parties wish to choose arbitrators outside of the China International Economic and Trade Arbitration Commission panel of arbitrators, it is recommended that they specifically stipulate this in the agreement. 

Default requirements
Are there any default legal requirements as to the selection of a tribunal - for example, concerning the number of arbitrators or their characteristics?

According to Article 30 of the Arbitration Law, the parties can agree to have a tribunal comprised of either one or three arbitrators.  If the parties fail to agree on the method of appointment or fail to appoint the arbitrators within the time limit specified in the applicable arbitration rules, the arbitrators shall be appointed by the chair of the arbitration institution (Article 32 of the Arbitration Law).

The Arbitration Law has no express provision regarding the default number of arbitrators in the absence of the parties’ agreement on this issue.  Under the 2012 China International Economic and Trade Arbitration Commission Rules, in the absence of any agreement between the parties regarding the number of arbitrators, the default rule is three arbitrators.

Article 13 of the Arbitration Law sets out the criteria required of persons whom a Chinese arbitration institution can appoint as an arbitrator.  These largely focus on the kind of experience required before someone can be appointed as an arbitrator.  Also, the Arbitration Law requires arbitrators to be impartial and not related to the dispute or the parties to such dispute (Article 3).

Challenging the appointment of an arbitrator
Can the appointment of an arbitrator be challenged? Can an arbitrator be disqualified? What is the procedure for this?

The Arbitration Law imposes restrictions on the appointment of arbitrators, who must withdraw from the proceedings in any of the following circumstances:

• The arbitrator is a party in the case or a close relative of a party or an agent in the case;
• The arbitrator has a personal interest in the case;
• The arbitrator has other relationships with a party or an agent in the case which may affect the impartiality of the arbitration; or
• The arbitrator has privately met with a party or agent or accepted an invitation to entertainment or gift from a party or agent (Article 34).

Parties may challenge the appointment of an arbitrator by submitting a challenge to the arbitrator’s appointment, along with a statement setting out the reasons for the challenge, prior to the first hearing. If the matter giving rise to the challenge arises or becomes known after the first hearing, the challenge must be made before conclusion of the final hearing (Article 35).

Jurisdictional objections
How should an objection to jurisdiction be raised?

Chinese courts are not permitted to accept claims brought by a party to which an arbitration agreement relates, unless it can be shown that the arbitration agreement is invalid.

An arbitration agreement may be invalidated on any of the following grounds set out in Article 17 of the Arbitration Law:

• The subject matter to be arbitrated is beyond the scope of arbitration as prescribed by law;
• One of the parties to the agreement has no, or limited, capacity for civil conduct; or
• One party coerced the other to conclude the arbitration agreement.

Pursuant to Article 20 of the Arbitration Law, the tribunal’s jurisdiction will be determined by the arbitration institution or the court. If both the arbitration institution and the court have been requested to rule on the effectiveness of an arbitration agreement, the court will make the decision (which will prevail). However, the China International Economic and Trade Arbitration Commission (CIETAC) does allow CIETAC to delegate the power to determine the jurisdiction of the tribunal to the arbitrators themselves. Under the 2012 CIETAC Rules, the tribunal has clearer powers to decide on its own jurisdiction, either during the arbitration proceedings or in the final award. 

Replacement of an arbitrator
Why and how can an arbitrator be replaced?

An arbitrator may be removed where it can be demonstrated that he lacks impartiality or independence. Similarly, arbitrators must withdraw from the proceedings in any of the following circumstances:

• The arbitrator is a party in the case or a close relative of a party or an agent in the case;
• The arbitrator has a personal interest in the case;
• The arbitrator has other relationships with a party or its agent in the case which may affect the impartiality of the arbitration; or
• The arbitrator has privately met with a party or agent or accepted an invitation to entertainment or gift from a party or agent (Article 34 of the Arbitration Law).

Whether an arbitrator should be withdrawn from the proceedings is a question decided exclusively by the chairman of the designated arbitration institution and the Chinese courts are not permitted to engage in the process (Article 36).  If, for whatever reason, an arbitrator withdraws or is no longer to serve in the proceedings, a substitute arbitrator will be appointed (Article 37). The appointment of a substitute arbitrator must follow the same procedure that governed the appointment of the original arbitrator.

Powers and obligations
What powers and obligations do arbitrators have?

The powers granted to arbitrators under the Arbitration Law are somewhat limited - for example:

• the arbitration institution - rather than the tribunal - decides any challenges to the validity of an arbitration agreement/clause (Article 20);
• not only must the award be signed by the arbitrator(s), but the official seal of the arbitration institution must also be affixed (Article 54); and
• an arbitrator is not permitted to award preliminary or interim relief, which falls within the remit of the court.

Liability of arbitrators
Are arbitrators immune from liability?

Arbitrators may be held liable for their actions in arbitration proceedings in certain circumstances. The Arbitration Law stipulates that an arbitrator may be held liable if he:

• meets a party or its agent in private;
• accepts an invitation for dinner from a party or its representative;
• demands or accepts gifts from a party;
• demands or accepts a bribe; or
• commits graft or, in extreme circumstances, perverts the law in making the arbitral award (see Articles 34, 38 and 58).

In serious cases, arbitrators may attract criminal liability - for instance, where an arbitrator intentionally rules counter to the facts of the proceedings (Article 399 of  the Criminal Law).  

Communicating with the tribunal
How do the parties communicate with the tribunal?

The Arbitration Law does not expressly regulate how parties communicate with the tribunal in arbitration proceedings, although communications between the parties and tribunal referenced in the Arbitration Law are said to be “in writing” (eg, see Articles 24 and 33).  In addition, the Arbitration Law prohibits an arbitrator from having private communications with just one party or the agent of one party; such ex parte communications constitute sufficient grounds to require the arbitrator’s withdrawal (Article 34(e)) and may also trigger the legal liability of the arbitrator concerned (Article 38).

The parties should therefore have regard to the specific rules of the arbitration institution designated in the arbitration agreement. 

Reaching decisions
Is unanimous agreement of the tribunal required? If there is disagreement, does the will of the majority suffice? What are the implications of this?

The tribunal is not required to reach a unanimous agreement and may reach a decision based on the opinion of the majority of the arbitrators (Article 53 of the Arbitration Law). If the tribunal does not reach a majority opinion, the decision of the presiding arbitrator will prevail. An arbitrator with a dissenting opinion may elect not to sign the award (Article 54).

Arbitrability
Are there any disputes incapable of being referred to arbitration?

The following disputes are expressly stated as not being arbitrable (Article 3 of the Arbitration Law):

• marital, adoption, guardianship, support and succession disputes; and
• administrative disputes (which must be handled by administrative organs as prescribed by law).

Can the arbitrability of a dispute be challenged?

The Arbitration Law is geared towards the resolution of commercial disputes by arbitration (Article 1).  As such, contractual disputes and disputes over rights and interests in property are clearly arbitrable (Article 2).

The general approach taken in determining whether a dispute is arbitrable vests the authority with the arbitration institution. That said,  if one party requests the arbitration institution and the other party requests the court to determine whether the dispute is arbitrable, the court’s decision will prevail (Articles 17 and 20).

The Supreme Court recently ruled that the dissolution of a company pursuant to Article 181 of the Company Law (2005) is not arbitrable.

Jurisdiction and competence-competence
Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence?

The tribunal cannot rule on its own jurisdiction.  Pursuant to Article 20 of the Arbitration Law, where a challenge arises as to the validity of the arbitration agreement, a party may request the arbitration institution to make a decision or apply to court for a ruling. If one party requests the arbitration institution to make a decision and the other party applies to court for a ruling, the court will decide the issue. Any challenge to the validity of an arbitration agreement must be raised prior to the tribunal’s first hearing.

Arbitral proceedings

Starting an arbitration proceeding
What is needed to commence arbitration?

Under Articles 22 and 23 of the Arbitration Law, in order to commence arbitration proceedings the applicant must submit an application for arbitration along with a copy of the arbitration agreement to the selected arbitration institution.  The Arbitration Law requires the application for arbitration to specify details which are often not required under other laws.  For example, Article 23 of the Arbitration Law requires that the application of arbitration specify, among other things, the evidence, the source of evidence and the names and domiciles of witnesses.

Limitation periods
Are there any limitation periods for the commencement of arbitration?

Under Chinese legislation, parties generally have two years to commence arbitration proceedings for domestic disputes (Article 135 of the General Principles of Civil Law) and four years for disputes involving international sales and technology imports and exports (Article 129 of the Contract Law), commencing from the date on which the party discovered or should have discovered the harm. The four-year limitation period does not apply to disputes arising from joint venture agreements, which are subject to the two-year limitation period. A one-year limitation period applies in relation to disputes connected with personal injury, product liability, late rent payments and damage to property in the care of another (Article 136 of the General Principles of Civil Law).

The limitation period may be suspended during the final six months if:

• the applicant is prevented from exercising its right to commence a claim by force majeure or other obstacles; or
• one party makes a claim for or agrees to the fulfilment of obligations (Articles 139 and 140 of the General Principles of Civil Law).

If a party is prevented from exercising its rights, the limitation period will resume on the date that the grounds for suspension are eliminated.  In the latter case a new limitation period will commence from the date of the interruption. 

Procedural rules
Are there any procedural rules that arbitrators must follow?

The procedural rules governing arbitration in China are largely set out in the Arbitration Law, which applies to domestic and foreign-related proceedings alike. The Arbitration Law contains various provisions governing general procedures, including:

• commencement of arbitration;
• appointment of the tribunal;
• filing of defences;
• interim (court-ordered) measures;
• conduct of hearings; and
• evidence.

To commence arbitration proceedings, the claimant must submit the written arbitration agreement/clause and a written application for arbitration to the appropriate arbitration institution (Article 22 of the Arbitration Law), accompanied by sufficient copies of the written arbitration agreement and the application, as stipulated by the rules of the relevant arbitration institution.  Where the arbitration institution accepts an application, it must inform the claimant of its decision within five days of receipt of the application (Article 24) and deliver copies of its arbitration rules and its list of arbitrators to the claimant and the respondent, together with a copy of the application. If the arbitration institution considers that the application does not comply with the required formalities and should be rejected, it shall inform the claimant of its decision and state the reasons for rejection in writing within five days of receipt of the application.

Upon receipt of a request for arbitration, the respondent must submit a written defence to the arbitration institution within the time limit specified in the arbitration rules (Article 25). Upon receipt of the respondent’s defence, the arbitration institution shall serve a copy on the claimant within the time limit specified in the arbitration rules. Article 27 of the Arbitration Law provides that the claimant may amend its claim, and the respondent may acknowledge or refute the claim and has the right to raise a counterclaim.

The Arbitration Law provides that arbitration proceedings shall be conducted by means of oral hearings (Article 39) and prescribes how these hearings should be conducted. For example, it sets out rules on:

• the method of conducting a hearing;
• the burden of proof;
• the method of presenting evidence;
• the way in which arguments are presented by the parties;
• the preservation of evidence;
• mediation in the course of the arbitration proceedings; and
• the issuance of the arbitral award (Articles 39 to 57).

The Arbitration Law requires arbitrations to be conducted in camera (ie, in confidence), unless the parties agree otherwise (Article 40).

Dissenting arbitrators
Are dissenting opinions permitted under the law of your jurisdiction?

As the award may be based on the opinion of the majority of the arbitrators, dissenting opinions are permitted. The opinion of the dissenting minority may be entered in the record (Article 53 of the Arbitration Law). While the tribunal must sign and seal an award handed down, dissenting arbitrators may choose whether to sign it (Article 54).

Judicial assistance
Can local courts intervene in proceedings?

The courts have a very limited role in arbitration, except in relation to challenging and enforcing awards and ordering interim measures. In the event of a dispute over the validity of an arbitration, either the court or the arbitration institution shall issue a ruling; if one party requests the court to rule and the other requests the arbitration institution to do so, the court shall issue the ruling.

Can the local courts assist in choosing arbitrators?

The courts play no role in the selection of arbitrators, cannot compel parties to arbitrate and cannot issue subpoenas to third parties. 

What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration? Can they compel parties to arbitrate? Can they issue subpoenas to third parties?
China Vinson & Elkins LLP

Under Article 42 of the Arbitration Law, if the respondent fails to appear before the arbitration tribunal without justified reasons after receiving notification in writing, or leaves the hearing prior to its conclusion without the permission of the tribunal, a default award may be made.

Third parties
In what instances can third parties be bound by an arbitration agreement or award?

A third party cannot be bound by an arbitration agreement or award under Chinese law without its consent, and may not be joined to arbitration proceedings without the consent of the parties to the proceedings unless, as per Article 8 of the Interpretation of the Supreme People’s Court Concerning Some Issues on Application of the Arbitration Law of China:

• a party to the arbitration is merged or divided after the arbitration agreement has been concluded, in which case the arbitration agreement will bind the successor which assumes the original party’s rights and obligations; or
• a party to the arbitration dies following the conclusion of an arbitration agreement, in which case the arbitration agreement will bind the successor who assumes the original party’s rights and obligations in the matter.

Default language and seat
Unless agreed by the parties, what is the default language and location for arbitrations?

Although individual arbitration institutions usually provide rules regarding the default language and seat, these are not expressly addressed under the Arbitration Law.

The parties’ choice of language will generally be upheld by the arbitration institution administering proceedings. For instance, the 2012 China International Economic and Trade Arbitration Commission Rules provide that the commission will designate the language of the proceedings only in the absence of an express choice by the parties, in which case the default language will be Chinese.

Similarly, there is no default location for arbitrations in China. It is up to the parties to select the arbitration institution and the seat of arbitration. 

Gathering evidence
How is evidence obtained by the tribunal?

The Arbitration Law sets out only general rules of evidence. It provides that parties must provide evidence in support of their arguments and empowers the tribunal to collect evidence on its own initiative as it considers necessary (Article 43). In practice, a tribunal rarely initiates the collection of evidence, as it lacks effective powers to do so. 

Confidentiality
Is confidentiality ensured?

Generally speaking, arbitration proceedings located in China have the advantage of being private, Cases are not heard in open session unless the parties agree to the proceedings being heard in public (except where they involve state secrets) (Article 40 of the Arbitration Law).

Can information in arbitral proceedings be disclosed in subsequent proceedings?

More specific guidelines on confidentiality are provided by the various arbitration institutions. However, as provisions such as those under the 2012 China International Economic and Trade Arbitration Commission Rules arguably do not cover the confidentiality of exchanges, if confidentiality is likely to be an important issue for the parties, they should address this in the arbitration agreement. 

Ethical codes
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?

The Law on Lawyers is the main source of ethical standards for lawyers in China. The conduct of arbitrators is further circumscribed by the mandatory rules set out in Article 34 of the Arbitration Law.

The codes of conduct of various arbitration institutions may also include more comprehensive rules than those set out in the Arbitration Law. For example, the China International Economic and Trade Arbitration Commission’s Code of Ethics requires that arbitrators conduct proceedings with impartiality, independence and fairness. It further provides guidance on situations where:

• arbitrators should not accept an appointment;
• arbitrators should make disclosures or apply for withdrawal; and
• the arbitration institution may replace the arbitrator.

Costs

Estimation & allocation
How are the costs of arbitration proceedings estimated and allocated?

Costs generally awarded include the arbitration fees and other expenses payable to the arbitration institution by the parties (including the tribunal’s fees), together with the fees, charges and expenses incurred by the parties for engaging legal counsel and other professional advisers.  The losing party must usually pay the arbitration costs, but whether it must also pay the winning party’s legal costs is left to the discretion of the tribunal.  

Security for costs
Can the national court or tribunal order security for costs under the law in your jurisdiction?

The prevailing party in arbitration proceedings is permitted to seek indemnification from the losing party for all reasonable expenses incurred during the arbitration. However, there is no effective measure, such as security for costs, to ensure the effectiveness of such indemnification. That said, where a party applies for an order of attachment or preservation of evidence, the court can require the applying party to provide security for damages of the party against which the relief is sought, if it considers this appropriate (Article 92 of the Civil Procedure Law). 

The award

Requirements
What legal requirements are there for recognition of an award? Must reasons be given for the award? Does the award need to be reviewed by any other body?

The Arbitration Law sets out the requirements for a valid arbitration award, stating that it must include:

• the arbitration claim;
• the facts of the dispute;
• the reasons for the decision;
• the results of the award;
• the allocation of arbitration fees; and
• the date of the award (Article 54).

If the parties object to the inclusion of the facts in dispute and the reasons for the ruling, these  may be omitted from the award. The award will be signed by the arbitrators and sealed by the arbitration institution, although an arbitrator with dissenting opinions may elect whether to sign the award (Article 54). 

Timeframe for delivery
Are there any time limits on delivery of the award?

Article 57 of the Arbitration Law states that the arbitration award shall be legally effective as of the date on which it is made. No specific time limits on delivery of the award are specified in the Arbitration Law.  However, most of China’s arbitration institutions expressly specify time limits, in their own rules, for arbitrators to render an award. For example, the China International Economic and Trade Arbitration Commission and China Maritime Arbitration Commission both provide that in any foreign-related arbitration, the tribunal must render the award within six months of the date on which it is constituted, unless the chairman of the respective arbitration institution considers an extension necessary and justified. 

Remedies
Does the law impose limits on the available remedies? Are some remedies not enforceable by the court?

The Arbitration Law and the Interpretation of the Supreme People’s Court Concerning Some Issues on Application of the Arbitration Law of China do not specify the types of remedies (including damages) that are available in arbitration (eg, punitive damages). Under Chinese law, compensation for actual loss is the statutory principle governing contractual obligations for remedies (including damages). Punitive damages normally are not normally supported, unless product liability or consumer protection is involved.

What interim measures are available? Will local courts issue interim measures pending constitution of the tribunal?

The Arbitration Law prescribes two types of interim measures, both of which may be issued prior to constitution of the tribunal:

• Article 28 of the Arbitration Law allows the parties concerned to apply for property preservation as an interim measure; and
• Article 46 of the Arbitration Law allows an application to be made for the preservation of evidence where the evidence may be destroyed or lost or difficult to obtain at a later time. 

Interest
Can interest be awarded?

The tribunal will examine the relevant provision(s) stipulating the interest rate in the contract concluded between the parties. 

At what rate?

Where the parties have not specified the interest rate for delayed payment, the tribunal has the authority to determine the interest rate.

Finality
Is the award final and binding?

Under Article 57 of the Arbitration Law, an arbitral award is legally effective from the date on which it is issued and is not subject to appeal. This rule of law is reiterated in the rules of the various arbitration institutions, such as those of the China International Economic and Trade Arbitration Commission, which provide that the award is final and binding, and that parties are prohibited from seeking to appeal the decision in the courts or before any other arbitration institution.

What if there are any mistakes?

Article 56 of the Arbitration Law provides that the parties may have recourse where there are ‘literal or calculation errors’ in the award. The tribunal should thus correct errors involving context or computation and add anything that has been omitted from the rulings in the arbitral award. The parties may apply for correction with the tribunal within 30 days of receipt of the award. 

Can the parties exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

The  Arbitration Law allows parties to foreign-related arbitration agreements to choose the applicable arbitration rules. Although some Chinese arbitration institutions - such as the  China International Economic and Trade Arbitration Commission - permit the parties to supplement or change the arbitration rules, these cannot be inconsistent with mandatory rules such as the Arbitration Law.  According to Article 52.5 of the Contract Law, any agreement that is inconsistent with the mandatory laws of China is null and void. Therefore, any agreement between the parties which excludes the right of appeal will be inconsistent with the Arbitration Law and thus will be null and void.

Appeal
On what grounds can parties appeal an award?

Neither party is entitled to appeal an arbitral award in China. However, according to Article 58 of the Arbitration Law, if a party has evidence of the following, it may apply for cancellation of the award to the intermediate people’s court at the place where the arbitration institution resides:

• There is no arbitration agreement in place;
• The matters ruled on are beyond the scope of the arbitration agreement or the limits of authority of the arbitration institution;
• The composition of the tribunal or the arbitration proceedings violated legal processes;
• The evidence on which the ruling is based was forged;
• Matters that have an impact on the impartiality of the ruling have been found to be concealed by the other party; or
• The arbitrators accepted bribes, resorted to deception for personal gain or perverted the law in the ruling.

What is the procedure for challenging awards?

An arbitral award is binding and final upon its issuance (Article 57). There is no appeal procedure as such. Instead, the cancellation procedure through a competent court applies if any of the parties elects to challenge the award on the grounds mentioned above.

Enforcement
What steps can be taken to enforce the award if there is a failure to comply?

If a party fails to comply with the arbitration award, under Article 62 of the Arbitration Law the other party may apply to court for enforcement in accordance with the relevant provisions of the Civil Procedure Law.

Can awards be enforced in local courts?

Yes.

How enforceable is the award internationally?

The New York Convention has been ratified by China. Chinese awards may thus be enforced in all states that have ratified the convention.

To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

Although there is no law or regulations that directly confirm China’s position on state immunity, it is understood that the absolute immunity doctrine applies in mainland China. This means that China and other foreign states are immune from being sued, and that state assets cannot be enforced against without the prior consent and waiver of immunity of the relevant government.

Are there any other bases on which an award may be challenged, and if so, by what?

Further to the grounds for challenging and/or setting aside an award as prescribed in the New York Convention, Articles 70 and 71 of the Arbitration Law provide that enforcement of an award concerning a foreign-related dispute and issued by an arbitral tribunal in China may be refused in any of the following circumstances, as per Article 274 of the Civil Procedure Law 2012:

• The parties neither  included an arbitration clause in their contract nor subsequently entered into a written arbitration agreement;
• The party applying to set aside the award was not requested to appoint an arbitrator or to participate in the arbitration proceedings, or was unable to present its case for reasons beyond its control;
• The constitution of the tribunal or the proceedings did not accord with the relevant arbitral rules; or
• The matters decided in the award exceed the scope of the arbitration agreement or are beyond the authority of the arbitration institution.

Article 283 of the Civil Procedure Law  provides that the court shall deal with awards made by foreign arbitration institutions in accordance with the relevant provisions of international treaties executed by China or on the principle of reciprocity. Foreign arbitral awards will therefore be treated as provided for in the New York Convention should an award be challenged.

If the court determines that the arbitral award violates the public interest, it shall also set aside the award under Article 58 of the Arbitration Law.

According to Article 9 of the Arbitration Law, if a court decides to set aside or not enforce a ‘foreign-related’ arbitral award, such ruling is final and cannot be appealed.

How enforceable are foreign arbitral awards in your jurisdiction?

In accordance with Article 4 of the New York Convention, an application to the Chinese courts for the recognition and enforcement of an arbitral award made within the territory of another contracting state must be filed by a party to the arbitration award. The application will be accepted in the following places:

• if the person subject to enforcement is a natural person, the place where he resides or his domicile is located;
• if the person subject to enforcement is a legal person, the place where its principal executive office is located; or
• if the person subject to enforcement has no residence, domicile or principal executive office in China, but has property in China, the place where that property is located.

After receiving the application, the court will examine the relevant award. If it believes that the circumstances listed in Article 5 of the New York Convention are not applicable, the court will recognise and enforce the award according to the Civil Procedure Law. However, if the court finds that any of the circumstances listed in Article 5.1 or 5.2 of the New York Convention exist, it must dismiss the application and refuse to recognise and enforce the arbitration award.

According to the Notice of the Supreme People’s Court on Handling Relevant Issues about Foreign-Related Arbitration and Foreign Arbitration Matters by the People’s Court, effective August 28 1995, if a court intends to refuse to recognise or enforce a foreign award, it must report to the next higher court (usually the competent high people’s court) for review before making its decision. If the competent high people’s court agrees, it will submit its opinion to the Supreme People’s Court; no decision will be made until the Supreme People’s Court has issued its concluding opinion. As a public policy point, this review process is designed to address concerns that the enforcement of foreign arbitral awards may be hindered by local protectionism.

Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

This will depend on the merits of the case.

Third-party funding

Rules and restrictions
Are there rules or restrictions on third-party funders?

Article 22 of the Regulations for the Administration of Lawyers’ Charges provides that legal service fees must be paid directly to the law firm to which the lawyer is attached; the lawyer cannot charge the client privately. No known funding claims arrangements are permitted in China.

However, while third-party funding is non-existent, subject to certain restrictions, contingency fee arrangements are permitted in China (as between the solicitor and client). Contingency fee arrangements are not permitted in cases concerning divorce, estate, social insurance or minimum allowance, criminal, administrative, state compensation and class actions (Article 11 of the Regulations for the Administration of Lawyers’ Charges). Contingency fee arrangements must be made in writing and the maximum fee charged by a law firm for a contractual dispute must not exceed 30% of the contractual amount.

Class-action or group arbitration

Concept
Is there a concept in your jurisdiction providing for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated?

There is nothing to suggest that class-action arbitration proceedings would be allowed in China.

Hot topics

Emerging trends
Are there any hot topics or trends emerging in arbitration in your jurisdiction?

Recent  decisions suggest that China may be revising its traditionally conservative approach to foreign institutions administering arbitration proceedings in China.  In March 2013, in Longlide Anhui Packaging Co Ltd v BP Agnati SRL, the Supreme People’s Court upheld an arbitration agreement between  Chinese company Anhui Longlide Package Printing and Italian company BP Agnati on the basis that it complied with the requirements set out in Article 16 of the Arbitration Law, despite the fact the agreement provided for International Chamber of Commerce-administered arbitration in Shanghai. The court found that the agreement showed a clear intention to arbitrate, defined the issues subject to arbitration and designated an arbitration institution, as required.

Although the Arbitration Law does not explicitly state that the chosen arbitration institution should be Chinese, it had been widely understood that Chinese arbitration proceedings must be administered by domestic institutions.

The decision has been  welcomed as an example of an increasingly international and arbitration-friendly approach, and comes on the back of another recent case (Invista v Zhejiang Yishen) in which the Supreme People’s Court directed a court in mainland China to rule that a ‘hybrid’ clause providing for an arbitration to be administered by the China International Economic and Trade Arbitration Commission under UNCITRAL rules was valid and enforceable, despite arguments that the agreement allowed for the type of ad hoc proceedings expressly prohibited under the Arbitration Law.