There has recently been much speculation about whether a decision rendered by the Ningbo Intermediate Court (the "Ningbo decision") in Zhejiang Province, China may signal the start of a trend towards recognition by the PRC courts of arbitrations seated in China administered by international institutions such as the ICC rather than mainland Chinese arbitration commissions such as CIETAC or the Beijing Arbitration Commission. For further information on this decision please see our in-depth e-bulletin here.

The underlying issue is that it is abundantly clear that Chinese law does not recognise ad hoc (non-institutional) arbitration where the seat is in mainland China. However there is some uncertainty over whether the type of institutional arbitration required by Chinese law in cases with a mainland seat includes arbitration administered by non-mainland Chinese institutions such as the ICC, HKIAC or SIAC.

The majority view amongst Chinese arbitration lawyers remains that arbitration agreements providing for arbitration in mainland China by anyone or anything other than a mainland arbitration commission are invalid and that Chinese courts are therefore unlikely to enforce awards issued pursuant to such agreements. In our view, the Ningbo decision does not signify a major change on this issue. The decision turned on a case-specific procedural point and it appears unlikely that future respondents seeking to resist enforcement will often fall into the same procedural trap.

However, we would suggest the following:

  1. If parties wish to agree to arbitration hearings in mainland China but not to agree to a mainland arbitration commission, then the best course of action is to specify very clearly in the arbitration agreement for the seat to be somewhere outside mainland China (such as Hong Kong or Singapore) but for hearings to be in mainland China (perhaps in a specified city).
  2. If the parties wish to agree for the seat to be in mainland China then the only secure option is to agree for arbitration by a mainland arbitration commission.

For guidance on drafting arbitration clauses for use in China-related contracts, see our Introductory guide to the subject here.

(Duferco S.A. v. Ningbo Arts & Crafts Import & Export Co., Ltd. (2009))