China continues to improve arbitration process efficiency and effectiveness

CIETAC, the China International Economic and Trade Arbitration Commission, based in Beijing, introduced new arbitration rules containing new and amended provisions aimed at enhancing the effectiveness and efficiency of the arbitration process. China also continues to work towards a new arbitration law and the expansion of its arbitration network. 

CIETAC’s new arbitration rules

CIETAC is one of the leading arbitration institutions in the People’s Republic of China (PRC). The latest revisions to its rules, effective from 1 January 2024, are the first in 10 years.

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Under article 6, the tribunal now has the power to determine its own jurisdiction after constitution, a shift from the previous default position where CIETAC made such determinations. Articles 14 and 19 allow for more opportunities to consolidate different proceedings, while zrticle 27 provides that party-nominated arbitrators can now jointly appoint the presiding arbitrator, a role previously nominated by CIETAC.

Under zrticle 48, new rules for third-party funding in proceedings have been introduced, implicitly recognising this practice.

Important changes include provisions that allow CIETAC to accept or forward conservatory applications to courts outside Mainland China, provided these courts are willing to make conservatory measures in aid of a CIETAC arbitration – as per article 23. Previously such applications could only be forwarded to a court in Mainland China.

These updates to the CIETAC rules mark a welcome improvement and set a benchmark for Chinese arbitration institutions looking to keep in step with other international institutional rules. It is expected that there will be an increase in their use by both foreign and Chinese entities alike.

PRC Arbitration Law draft amendments

Public Consultation on the Arbitration Law (Draft Revision), released in November 2024, represents a notable step in China’s efforts to modernise its arbitration framework. 

The draft, which follows extensive public commentary and legislative review, proposed several important changes aimed at aligning China’s arbitration practices with international standards while maintaining certain conservative elements.

The 2024 draft includes provisions to improve international arbitration mechanisms. For instance, under article 75, the application of special provisions addressing foreign-related arbitration has been expanded to include disputes “involving any foreign elements”, rather than disputes “arising from economic, trade, transportation, and maritime activities involving a foreign element” as defined in the current Arbitration Law.

Article 79 of the 2024 draft allows ad-hoc arbitration in two types of foreign-related disputes: (a) arising from maritime matters and (b) between enterprises registered in pilot free trade zones. Under the current Arbitration Law, ad hoc arbitration is generally only permitted in limited pilot free trade zones. Further, the concept of the “seat of arbitration” has been introduced as the basis for determining the applicable law and the competent court for oversight and judicial review. The draft also provides guidance to determine the seat of arbitration therefore again aligning with international approaches.

The draft introduces measures to improve the internal governance and management systems of arbitration institutions, increasing transparency and consistency, and expands arbitrator appointment channels. It also clarifies the roles of judicial administrative departments in guiding and supervising arbitration work and introduces penalties for violations by arbitration commissions and their personnel.

The period for applying to set aside an award has been shortened from six months to three months, enhancing the certainty and enforceability of arbitration awards, while legal validity of online arbitration has been confirmed. The draft emphasises respecting party autonomy in arbitration proceedings.

Further amendments include changes to the validity and enforcement of arbitration agreements, aiming to ensure clarity and specificity to avoid disputes over the validity of arbitration agreements. This includes adding “invalid arbitration agreement” as a ground for setting aside an award. The draft also extends the authority to determine the validity of an arbitration agreement to the arbitral tribunal once formed. The draft does not specifically address the authority to determine questions over “jurisdiction”. However, some PRC arbitration commissions include provisions in their rules to empower an arbitral tribunal to determine jurisdictional issues – for instance, CIETAC article 6 as referred to above.

Expansion of China’s arbitration network

Following a recent expansion, China now has 282 registered arbitral institutions, according to the Ministry of Justice, and 2024 saw a marked increase in institutions establishing international divisions and attracting talented practitioners and arbitrators who are experienced in international arbitration, thus deepening the quality and consistency of their offering.

After a rapid growth in numbers, the focus is now on enhancing the connections between institutions and consolidating the overall offering. It is promising to see more interaction between local and foreign practitioners within the community to exchange experience and grow together.

Judicial review and further legislative changes

A recent report on Chinese commercial arbitration judicial review cases has highlighted the underlying support and enforcement of arbitration awards in China.

Notably, out of 10,600 applications only 552 arbitral awards were revoked, reflecting China’s pro-arbitration stance. The courts also enforced 69 overseas arbitral awards. More than 3,100 foreign-related arbitration cases were handled by arbitration institutions representing an 8.28% increase on the previous year. The number of arbitration judicial review cases handled by the Supreme People’s Court has dropped in recent years, from 350 cases in 2021 to just 29 cases in 2023.

The revised Civil Procedure Law, which took effect from 1 January 2024, also includes certain amendments intended to align enforcement criteria with international practices.

Previously when the Civil Procedure Law addressed both the enforcement within China of an arbitral award rendered outside of China and the enforcement outside China of an arbitral award rendered within China, reference was made to “an arbitral award made by an arbitral institution”.  The revised Civil Procedure Law Article 297 and 304 now refer to “a valid arbitration award made [inside/outside] the territory of the People’s Republic of China”.  As with the proposed amendments to the Arbitration Law, this aligns with the test relating to the “seat of arbitration” as found in the New York Convention and therefore widens the scope of enforcement.   

The Foreign State Immunity Law, effective 1 January 2024, specifies that foreign states do not enjoy jurisdictional immunity in Chinese courts for arbitration-related matters arising from commercial activities or investment disputes with other states or individuals, including China. This includes the validity of arbitration agreements, the recognition and enforcement of arbitration awards, and the setting aside of arbitration awards. This aligns with the Washington Convention, ensuring such disputes are subject to judicial review in China.

Additionally, the Supreme People’s Court’s recently implemented a “one-stop” diversified resolution mechanism for international commercial disputes. This is expected to play a critical role to enable parties to seek a neutral evaluation from an expert committee before proceeding to formal dispute resolution proceedings.  It applies to certain high value or important disputes. Whilst participation in this process is subject to agreement by the parties, it permits them to obtain an independent view on their dispute which could then lead to mediation with an expert member of the committee who has been involved in the neutral evaluation. As China continues to grow as a global economic powerhouse, its arbitration institutions are likely to play an increasingly important role in resolving international commercial disputes. These changes reflect a broader trend of modernisation and internationalisation in China’s legal and arbitration frameworks, positioning the country as a key player in the global arbitration arena.