On 29 June 2018, China launched two International Commercial Courts. One International Commercial Court (ICC) is in Shenzhen and the other is in Xi’an. The ICCs will handle disputes concerning the Belt and Road Initiative (BRI).

Why have the courts been established?

The BRI is an ambitious project to connect China with 65 countries across several land and maritime “roads". The establishment of these ICCs is one of a series of measures to encourage foreign investors to participate in the BRI. The Xi’an ICC will handle disputes concerning the “Land Silk Road", and the Shenzhen ICC will handle disputes concerning the “Maritime Silk Road". An international commercial tribunal will be established in Beijing to coordinate between the two ICCs.

When might the ICCs be used?

In order for a dispute to be referred to one of the ICCs, it must be considered “international", which requires it to (i) involve one or more foreign parties that reside outside China, (ii) concern a subject outside of China, and (iii) involve legal facts, which occurred outside China, creating, changing or eliminating relations.

The dispute must also be one that either:

  • the parties have agreed to refer to the Supreme People’s Court and the disputed amount exceeds RMB 300 million;
  • the parties have agreed to refer to the Higher People’s Court, and that court transfers it to the Supreme People’s Court;
  • the Supreme People’s Court has decided it should be heard by one of the ICCs; or
  • concerns interim measures in support of domestic arbitration or the enforcement or setting aside of a domestic or foreign arbitral award.

Procedural rules

The procedural rules of the ICCs share similarities with procedural rules of other international commercial courts. For example, there will be no requirement for English documents to be translated into Chinese if all parties agree, and the judges will apply the law agreed by the parties. “Expert Committees" of foreign nationals will be established to assist the judges to apply foreign laws. The first committee was appointed in August 2018, and consists of leading arbitration specialists from Europe, Asia and America, and former judges from Hong Kong, Australia, the UK, and South Africa.

There are, however, significant differences between the procedural rules of the ICCs and other international commercial courts. In particular, the proceedings must be conducted in Chinese and parties must be represented by Chinese lawyers. The judges who will sit in the ICCs are all existing judges in the Supreme People’s Court, and whilst foreign judges might feature in the “expert committees", they will not be invited to sit as judges in the ICCs.

Analysis

The establishment of the ICCs is a step towards improving access to justice in China. However, it is unclear how widely used they will be. Only permitting limited involvement by foreign professionals may lead to questions over the discernible differences between the ICCs and domestic courts. For these reasons, International businesses may be more attracted to arbitration, where they may appoint foreign arbitrators, engage foreign counsel and conduct proceedings in English.

However, ICCs have one significant advantage over arbitration, which is that their judgments will have the status of judgments of the Supreme People’s Court. Successful parties will therefore have recourse to the court’s armoury of enforcement measures, whereas successful parties in arbitrations must obtain court orders in respect of awards before they can be enforced. Whether this will be enough to sway international businesses remains to be seen.