Arbitration in China
September 7, 2008
China’s law system allow disputes to be resolved in mechanism of arbitration. Â Here you can read the basics of arbitration in China :
The Basics of Arbitration in China    (Source: China Briefing Magazine)
Arbitration on contracts involving a Chinese party is a concern for international counsel and overseas-based lawyers. Chinese parties will usually insist upon the clause in contracts, which can be a good thing, as no one wants to see disputes end up in courts if there is another way to resolve matters.
Moreover, arbitration is advantageous regarding the possibility for the parties to choose a judicial body with trusted arbitrators. The dispute can be solved by a simplified procedure on which the parties have influence. The chosen arbitrators can be experts, a competence ordinary courts sometimes lack. Arbitration is also less time consuming than court procedures and cases are normally resolved within 6 to 9 months.
An arbitration award once issued is considered final. It becomes enforceable and stable; subject to recourse only by court action. Arbitration is not restricted to national jurisdictions and gives the parties the possibility to avoid the disadvantages and expenses of going abroad.
It also has the advantage of being confidential which avoids souring relations between two parties and helps maintain good business relations given that they both submitted to this type of dispute settlement voluntarily.
Not surprisingly, some overseas lawyers have a marked distrust for Chinese based arbitration and want to see cases resolved in overseas jurisdictions instead. It is difficult to obtain the Chinese side’s mandate for this but there are also legal difficulties. Following the Chinese law, contracts in certain industries that involve a Chinese party must be heard by a specific Chinese arbitration body experienced in the field.
There are no exceptions to the rule. Parting from Chinese jurisdiction will be equal to breaking the law and will have far more serious consequences for the rest of the contractual agreement.
Some overseas lawyers are afraid that Chinese arbitration cannot be trusted and lacks impartiality. That attitude, although historically correct, is already outmoded. In the past five years, China’s arbitration courts have been filling with both lawyers and industry experts familiar with the field, thus dramatically improving basic dispute resolution. Disputes will arise as a matter of business and China’s arbitration mechanism has been coping well.
That said, there is still the question of dealing contractually with standard arbitration clauses – where should the hearings be based and who should hear them?
The settlement of a dispute via arbitration between domestic parties must be held in China. Under Chinese law, foreign-invested enterprises, even wholly foreign-owned one, are considered domestic. Therefore a dispute between FIEs or between a FIE and a domestically invested Chinese company is a domestic one and has to be arbitrated in the country.
A foreign arbitration clause in a contract between such entities will be deemed invalid and the award unenforceable in China. The People’s Courts will still have jurisdiction over the dispute.
While foreign parties prefer to arbitrate abroad; a compromise might be arbitration in Hong Kong instead with its reliable reputation among foreign and Chinese investors. Another alternative could be the International Chamber of Commerce (ICC) or the Beijing Arbitration Commission (BAC).
The ICC will be able to assist as it is an organization recognized by Beijing with an affiliate office in the city. In addition, the ICC has an Arbitration Commission, which is governed by dispute mediation protocols laid down according to international law.This arrangement can satisfy both ways: Chinese parties wanting arbitration based in the country and the foreign parties wanting an impartial internationally recognized body out of reach from perceived political interference.
On the other hand, the BAC is a permanent organization providing a forum for arbitration of disputes associated with contractual and other property rights based on its Arbitration Rules. It is established in accordance with the Arbitration Law of the People’s Republic of China and accepts domestic and foreign-related disputes.
China is also signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards which requires the courts of the contracting states to give effect to agreements to arbitrate and accordingly recognize and enforce arbitration awards from other contracting states.
The convention applies awards which are not considered to be domestic ones in the state where recognition and enforcement is sought. Although enforcement in China is not easy, a refusal to enforce a foreign arbitral award by a lower court requires the confirmation by the Supreme People’s Court to be effective. As for the special administrative regions of Hong Kong and Macau, awards are enforceable under special bilateral agreements similar to the latter.
The common arbitration route for foreign investors seeking to solve a domestic dispute is through the China International Economic and Trade Arbitration Commission (CIETAC). The CIETAC has headquarters in the capital and sub-commissions in Shanghai and Shenzhen while also being officially affiliated with the Chinese government.
CIETAC offers domestic, foreign-related and international arbitration. It administrates a panel of more than 250 approved foreign arbitrators including arbitrators from Taiwan, Hong Kong and Macau. Majority of them are experienced in China and their respective fields. Arbitration may be conducted in Chinese, English, or another language, although it might be difficult to convince a Chinese party to agree to conduct the process in another language other than Chinese.
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Privately-Owned Companies in China Plans to Enter Overseas Markets
September 5, 2008
Here is interesting survey conducted by Fudan University on behalf of HSBC. According to the Survey, more than 40 percent of private companies in China are planing to enter overseas markets by exporting their products:
Overseas markets a lure
MORE than 40 percent of Chinese privately-owned enterprises are planning to break into overseas markets in the next three years, an industry survey found yesterday.
Fudan University, on behalf of HSBC, surveyed 1,000 of these firms, mainly in the Yangtze River Delta and Pearl River Delta in the first half, HSBC said yesterday.
Based on survey data and related models, the research indicated that 700,000 POEs nationwide had overseas expansion plans.
The respondents are from manufacturing, wholesale and retail, and information technology industries.
The research showed that among the 43 percent surveyed POEs with overseas expansion plans, 63 percent intended to establish sales networks.
The survey also found 55 percent of respondents had overseas economic and trade activities, including exporting their own products, selling products overseas via trade agents and setting up joint ventures with overseas firms.
POEs still depend on domestic banks for lending needs when seeking finance.
The survey found about 60 percent of the respondents had no contact with foreign banks.
Respondents also showed increasing interest in foreign banks’ services, such as short-term yuan loans, hedging and merger and acquisition advice, the survey found.
The deciding factors for POEs when choosing a bank for international business are rates for services offered and borrowing costs, the bank’s global reach, brand reputation and specialist expertise.
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Slowest growth for India in 4 years
August 30, 2008
India’s economy in big trouble due to inflation and slowing growth caused by higher oil and food prices.An article written by Cherian Thomas publidhed in Shanghai Daily takes a look at India’s economic outlook :
INDIA’S economy grew at the slowest pace last quarter since 2004 as the fastest inflation in a decade and increased borrowing costs damped consumer spending.
Asia’s third-largest economy expanded 7.9 percent in the three months to June 30 from a year earlier, following an 8.8 percent gain in the previous quarter, the Central Statistical Organisation said in a statement in New Delhi yesterday. Analysts expected gross domestic product to increase 8 percent.
Inflation has almost tripled this year to 12.4 percent amid higher fuel and food prices, forcing the central bank to raise interest rates three times since June.
While growth is almost double, the average pace since India’s independence in 1947, it is slowing along with the other so-called BRIC economies of Russia, Brazil and China.
“We don’t expect India’s slowdown to be too dramatic,” said Philip Wyatt, a senior economist at UBS AG in Hong Kong. “There will be a gradual slowdown in GDP growth throughout this year – the industrial side of GDP is already slowing.”
India’s benchmark sensitive index, which has declined by a third this year, rose 3.7 percent to 14564.53 yesterday in the Bombay Stock Exchange. The rupee gained 0.4 percent to 43.935 against the US dollar. Finance Minister Palaniappan Chidambaram said yesterday that growth for the year to March 31, 2009, will be close to 8 percent.
India risks being overtaken by Russia as the world’s fastest expanding major economy after China this year. Russia’s economy may grow 7.1 percent in 2008, surpassing India’s 7-percent expansion this year, according to World Bank estimates.
Industry concerns
“High inflation and interest rates are issues that are bothering the industry as they have an impact on consumer demand and hurt corporate profitability,” said KV Kamath, chief executive officer at ICICI Bank Ltd, India’s second-largest lender. “Until we see inflation easing, it would be unrealistic to expect an easing of monetary policy.”
Services including banking, transportation and hotels grew 10 percent in the second quarter from a year earlier, slowing from an 11.2-percent gain in the previous three months, according to yesterday’s report. Agriculture increased 3 percent from an earlier advance of 2.9 percent.
Inflation can win or lose elections in India, where about 456 million people live below the World Bank’s poverty line of US$1.25 a day. Prime Minister Manmohan Singh’s Congress Party lost ground in nine of 11 state elections since January 2007 because of rising prices. General elections are scheduled to be held before May.
Singh said this month he doesn’t want growth to suffer in the battle against inflation.
In February, Singh wrote off US$17 billion of farm loans and this month increased salaries of about 5 million government employees by 21 percent to spur consumer demand.
The central bank’s forecast of 8-percent economic growth in the year to March 31 will be weakest expansion since 2003 and comes after Singh presided over record average annual growth of 8.9 percent since 2004.
The June-September monsoon, which accounts for four-fifths of the nation’s annual rainfall, was 39 percent below average in the week ended August 27, according to the weather office. A normal monsoon will help the country’s 234 million farmers harvest a bigger crop and boost rural incomes.
“Agriculture will hold the key for both industry and overall growth,” said Tushar Poddar, a Mumbai-based economist at Goldman Sachs.
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