Arbitration (whether offshore or onshore) remains, with good reason, the dispute resolution mechanism of choice in most Sino-foreign contracts. One issue which is often overlooked, or at least assumed to be relatively unimportant, is the language to be adopted in any arbitration. This month's newsletter provides an overview of the practical implications of this issue from the perspective of the non-Chinese party.
Ignoring the issue
It is rarely advisable to leave an arbitration clause silent as to the applicable language. Unless the parties are able to agree on which language(s) to use after the dispute has arisen:
- Where the arbitration is taking place in China under (for example) the auspices of CIETAC, the arbitration will take place in Chinese (see, for example, Article 67 of the CIETAC Rules).
- Outside China, the language of the arbitration will typically be left for the tribunal to decide (see, for example, Articles 17 and 19 of the UNCITRAL Rules and SIAC Rules respectively). This can lead to uncertainty and to increased cost and delay whilst the tribunal makes its decision.
It therefore makes sense to include a "language" clause in any arbitration agreement.
Bilingual clauses – the problems in practice
A "bilingual" arbitration clause, providing for any arbitration to be conducted in Chinese and English, is a common compromise in Sino-foreign contracts, but has significant practical consequences which are often not appreciated.
Bilingual arbitrations are almost always more expensive and slower moving than single language arbitrations. In a typical bilingual arbitration (assuming the parties are unable to agree any practical compromises to mitigate these problems):
- All submissions and witness statements will have to be translated.
- Hearings will typically need to be much longer to allow for everything said to be translated. Longer hearings are obviously more expensive and generally speaking need to be scheduled further in advance.
- Transcripts may need to be bilingual, which can be particularly problematic if the local providers in the place of arbitration are not competent in the relevant languages, particularly as used in legal contexts.
- Correspondence may need to be bilingual, which in addition to the extra costs involved may prevent urgent issues being addressed quickly.
- Documentary exhibits and legal authorities may need to be translated, which can be prohibitively expensive in complex cases.
Moreover, time will often be taking at the hearing dealing with debates as to the proper translation of submissions made, questions asked and answers given.
Bilingual arbitrations also raise a question as to whether it is necessary or desirable to appoint an arbitrator fluent in both languages. Whilst it is possible to specify in the arbitration clause that the arbitrators must be bilingual, such a requirement significantly reduces the pool of potential arbitrators.
The bottom line is that bilingual English-Chinese arbitrations are workable, but should be regarded as a last resort.
English only – wide pool of international arbitrators and counsel
Providing for an arbitration to be conducted exclusively in English to large extent avoids these problems and, crucially, allows access to a wide pool of counsel and potential arbitrators. It should accordingly be the preferred option for the vast majority of non-Chinese parties.
To give effect to such a choice, a simple clause providing that the arbitration shall be in English will typically be sufficient where the arbitration is taking place offshore.
If the arbitration is taking place before a Chinese arbitration commission, it would also be prudent to provide expressly that the hearing will be conducted in English only and that all documents (including submissions, witness evidence, documentary evidence, legal authorities and correspondence) must be submitted in English or accompanied by English translations paid for by the party submitting the documents.
Chinese only – limited pool of international arbitrators and counsel
Opting for Chinese only arbitration significantly reduces the availability of counsel and arbitrators. There are not many top quality international arbitrators who speak and read Chinese to a sufficient standard to enable them to sit in Chinese only arbitrations. Foreign parties seeking a first rate international dispute resolution mechanism would be well advised to avoid Chinese only arbitration clauses.