China has a long history of mediation and conciliation. [5] However, before the mid-1950s, there was no independent international commercial arbitration in China. As a result, when a dispute arose between a Chinese party and a foreign party, the parties typically referred the arbitration to a tribunal outside China, notwithstanding that Chinese parties were concerned about arbitrating in a foreign tribunal.[6] The former Government Administration Council of the Central People’s Government established the Foreign & Trade Arbitration Commission which is the former name of today’s Chinese International Economic & Trade Arbitration Commission  (“CIETAC”).[7]

However, the organization developed very slowly. By the end of the next 20 years, the CIETAC only accepted about 100 arbitral cases.[8] The development of international commercial arbitration in China grew dramatically after China began to implement its open-door policy in the late 1970s.[9] By the middle of 1990s, CIETAC filings were averaging more than 700 cases per year. CIETAC has thus become the world’s busiest international arbitration tribunal.[10] The evaluation on CIETAC competency was overwhelmingly positive. The American Chamber of Commerce in Beijing conducted a survey among American companies and found that companies having experience with the organization had positive feedback on the competency of CIETAC. [11]

The primary law regulating arbitration today is the Chinese Arbitration Law (“CAL”). In addition, the Civil Procedure Law and other laws contain some provisions concerning arbitration or enforcement of arbitral agreements and awards.[12] The CAL was adopted and promulgated in 1994, as China began to implement a market economy.[13]

The CAL has the characteristics which are essential to modern international commercial arbitration law. [14] First, the CAL considers promoting party autonomy as one of its primary goals. Parties must agree to arbitrate of their own will before an arbitration institution can exert jurisdiction unless parties agree to arbitrate “of their own record”; Chinese courts cannot assert jurisdiction over the dispute. And an arbitration provider cannot accept a dispute if there is no valid agreement to arbitrate.[15] Second, the CAL provides that arbitration institutions shall be independent from the government. For example, Article 8 provides that arbitration shall be conducted independently according to the law and shall not be subject to interference from government entities. Article 14 further provides that “all arbitration committees are independent from the administrative organs.”

Enacted in 1991, the Civil Procedure Law is another law containing provisions related to arbitration.[16] It separates arbitral awards into domestic, foreign-related and foreign awards with each receiving a different standard of judicial review. For domestic awards, courts may conduct a substantive review. Foreign awards that are arising from arbitrations made by an international arbitration tribunal enjoy deferential treatment from the courts – courts only conduct a procedural review. The Civil Procedural Law categorizes awards resulting from arbitrations, involving foreign parties and arbitrated by a Chinese arbitration tribunal, as foreign-related awards. [17]

In December 2003, the Chinese Supreme People’s Court promulgated a draft judicial interpretation, clarifying that the more deferential standard of review should apply to all awards with foreign parties or elements, regardless of whether the awards were issued from a domestic or international arbitration institution. The more deferential standard of judicial review afforded to foreign awards and foreign-related awards is based on Article V(1) of the New York Convention.[18]

With regard to the enforcement of awards, the Supreme People’s Court took steps to avoid the local protectionism by setting up a reporting system to monitor the lower courts’ refusals to enforce foreign arbitral awards.[19]

In general, the Chinese commercial arbitration system is in conformity with the international standard. In addition, with deferential treatment from the courts, enforcement of foreign and foreign-related awards in China becomes predictable. With its development over the past decades, Chinese commercial arbitration deserves to be the first choice in resolving international commercial disputes in China.

[1] Fiona D’Souza, The Recognition and Enforcement of Commercial Arbitral Awards in the People’s Republic of China, 30 Fordham Int’l L.J. 1318, 1318 (April, 2007); see Joseph Kahn, Dispute Leaves U.S. Executive in the Chinese Legal Netherworld, N.Y. Times, Nov. 1, 2005 at A1 (reporting U.S. Business executive deprived of liberty in P.R.C. and coerced into signing documents transferring property).

[2] No Dispute About It, Econ. Intelligence Unit (Bus. China), Apr. 24, 2006.

[3] Id.

[4] Id.

[5] Xiuwen Zhao, Reforming Chinese Arbitration Law and Practices in the Global Economy, 31 U. Dayton L. Rev. 421, 421 (Spring, 2006).

[6] Id. at 423.

[7] Id.

[8] Id. at 424.

[9] Id.

[10] Id. at 425.

[11] Benjamin O. Kostrzewa, China International Economic Trade Arbitration Commission in 2006: New Rules, Same Results, 15 Pac. Rim L. & Pol’y J. 519, 531 (June 2006).

[12] Zhao, supra note 5, at 427-28.

[13] Id. at 428.

[14] Id.

[15] Id.; see also CAL Article 1.

[16] Jian Zhou, Judicial Intervention in International Arbitration: A Comparative Study of The Scope of the New York Convention in U.S. and Chinese Courts, 15 Pac. Rim L. & Pol’y J. 403, 410 (June 2006).

[17] According to a 1992 SPC interpretation implementing the 1991 Civil Procedure Law, a case is a foreign-related case” if (1) one or both parties are foreign nationals, stateless persons, or foreign companies or organizations; (2) the legal actions leading to formation, change, or termination of the legal relationship occurred in a foreign country; or (3) the subject matter of the dispute is located in a foreign country.

[18] Zhao, supra note 5, at 443.

[19] Zhou, supra note 16, at 415.