On October 21, 2019, the Shanghai Municipal Bureau of Justice (the “Shanghai BOJ”) passed the Administrative Measures for Business Offices Established by Overseas Arbitration Institutions in Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone (the “Measures”). The Measures for the first time confirm that foreign arbitration institutions are permitted to administer foreign-related arbitrations in Mainland China (at the Lin-gang of the Shanghai FTZ). Previously, foreign arbitration institutions in Mainland China were only allowed to conduct liaison activities through their representative offices.
According to Articles 3 and 6 of the Measures, eligible foreign arbitration institutions are non-profit arbitral institutions established outside of Mainland China, as well as institutions established by international organizations that China has joined. In order to establish its operating office in the Lin-gang area of the Shanghai FTZ, the foreign arbitration institution must satisfy the following requirements:
- it is duly established in a foreign country and has existed for more than five years;
- it is globally well-known and has substantial arbitration operations outside of Mainland China;
- the principal of the operating office to be established has not committed any criminal offense.
Further, according to Articles 4 and 19 of the Measures, the Shanghai BOJ is in charge of the registration and supervision of the operating offices established by foreign arbitration institutions through an annual reporting mechanism.
More importantly, according to Articles 14 and 18 of the Measures, the registered operating office of a foreign arbitration institution is only allowed to administer “foreign-related” arbitration for civil and commercial disputes in areas including international commerce, maritime, and investment. In this connection, according to Article 24 of the Measures, “foreign-related” means a dispute with a “foreign element,” which is defined under PRC Law.
Although the Measures mark a significant pro-arbitration move after the issuance of the Overall Plan for Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone by the PRC State Council in August 2019, several issues still remain to be clarified. First, the Measures do not clarify whether arbitrations administered by foreign arbitration institutions in the Lin-gang area will be considered as arbitration seated in Mainland China. Second, the Measures are silent on whether the awards rendered by these foreign arbitration institutions in Lin-gang area will be considered as foreign awards or domestic awards to which different procedures for enforcement apply. Third, the Measures do not touch on the power of the foreign arbitration institutions in Lin-gang area in issuing interim measures. It is expected that these questions will be further clarified on the legislative or judicial level soon after foreign arbitration institutions start their operations in the Lin-gang area.