China

Key developments

The PRC Ministry of Justice publishes revised draft PRC Arbitration Law

On 31 July 2021, the PRC Ministry of Justice published a draft of the revised PRC Arbitration Law (Revised Draft) for public consultation, along with an explanatory note. The Arbitration Law of the People’s Republic of China (PRC Arbitration Law) was first promogulated in 1994 and has not been substantially changed since then. The bRevised Draft introduced the following series of ground-breaking changes to the current arbitration legal regime in the PRC:

• Recognition of seat of arbitration: While the concept and legal effect of the seat of arbitration were not explicitly recognised in the current PRC Arbitration Law, it is now explicitly acknowledged in the Revised Draft. According to the Revised Draft, if the parties fail to agree on the seat of the arbitration, the seat should be “the location of the arbitral institution” (Article 27); In case of a foreign-related arbitration, the seat may be determined by the arbitral tribunal having regard to the circumstances of the case (Article 91).
• Allowing foreign arbitral institutions to conduct foreign related arbitration business: Article 12 of the Revised Draft provides that foreign arbitral institutions may establish their presence in Mainland China to “conduct foreign-related arbitration business”, provided they set up the office in accordance with the mechanism formulated by PRC State Council.
• Recognition of ad hoc arbitration: While ad hoc arbitrations in China are not permissible under the current PRC Arbitration Law, they are now permissible in “foreign-related” commercial disputes under Article 91 of the Revised Draft.
• Recognition of the Kompetenz-Kompetenz doctrine: The position under the current PRC Arbitration Law is that if one party submits its jurisdictional challenge to the arbitration institution and another applies to the court, the court’s decision shall prevail. The Revised Draft seeks to reverse the current position and accepts the Kompetenz-Kompetenz doctrine. Under Article 28 of the Revised Draft, an arbitral tribunal is empowered to determine its own jurisdiction, subject to review by a competent PRC court. A court shall decline to decide on the jurisdictional challenge if a party bypasses the arbitral tribunal and submits a jurisdictional challenge to the court directly. Before the constitution of an arbitral tribunal, the arbitration institution may make a prima facie determination as to whether the arbitration shall proceed.
• Recognition of the arbitral tribunal’s power to grant interim measures: The power to order interim measures is entirely reserved by PRC courts under the current PRC Arbitration Law. As another ground¬breaking feature, Articles 43 to 49 of the Revised Draft give arbitral tribunals and emergency arbitrators the power to order interim measures. The PRC courts are required to enforce or provide assistance in the enforcement of the interim measures ordered by arbitral tribunals or emergency arbitrators.
• Unification of the grounds for setting aside and challenging arbitral awards: The current PRC Arbitration Law and PRC Civil Procedural Law provide for different set-aside grounds for domestic awards and foreign awards. Article 77 of the Revised Draft unifies the provisions on the setting aside of domestic and foreign arbitral awards by the courts. Article 77 also introduces some new grounds for setting aside the arbitral award: the award shall be set aside if it was obtained through “fraudulent conduct including malicious collusion and falsifying evidence”. Further, under Article 82 of the Revised Draft, the court may only refuse to enforce a domestic or foreign-related arbitral award if it is against “social public interest”. Even though this appears to be inconsistent with the New York Convention, it is suggested that the Revised Draft intends to avoid duplicative review of arbitral awards by the PRC courts in set-aside proceedings and non-enforcement proceedings.

The Revised Draft is a big step forward for the arbitration practice in Mainland China and reflects the legislative intent to liberalise the PRC Arbitration Law.

Full implementation of Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between Mainland China and Hong Kong

The Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (the Supplemental Arrangement) was concluded on 27 November 2020. It modifies and supplements the existing Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and Hong Kong which was signed on 21 June 1999 and came into effect on 1 February 2000 (the Original Arrangement). While Article 1 and Article 4 of the Supplemental Arrangement took effect on the date of signing, Article 2 and 3 of the Supplemental Arrangement were to take effect after relevant amendments in the Hong Kong Arbitration Ordinance (Cap 609).

On 18 May 2021, the PRC Supreme People’s Court and the Department of Justice of the Hong Kong Government announced separately that the Supplemental Arrangement will be implemented in full by both sides. Subsequently, on 19 May 2021, the Hong Kong Arbitration Ordinance (Cap. 609) was amended to accommodate Articles 2 and 3 of Supplemental Arrangement:

• Article 2 of the Supplemental Arrangement expands the scope of awards recognisable to all Mainland Chinese arbitral awards. Under the Original Arrangement, the Hong Kong Courts enforce awards made pursuant to the Arbitration Law only by certain recognised Mainland Chinese arbitral authorities. The Supplemental Arrangement extends the enforcement regime such that all arbitral awards made in Mainland China can be recognised and enforced. This extends the reach of the Original Arrangement and brings the regime in line with international practice under the New York Convention.
• Article 3 of the Supplemental Arrangement allows concurrent enforcement proceedings to occur in both in Hong Kong and Mainland China. Article 2(3) of the Original Arrangement currently provides that, if the party against whom the enforcement application is filed has assets in both the Mainland
• China and Hong Kong, the applicant “shall not file applications with relevant courts of the two places at the same time.” The removal of this restriction is significant as award creditors will no longer have to choose between Hong Kong and the Mainland China to file the enforcement application and can seek recourse against assets in both jurisdictions at the same time.

The PRC Supreme People’s Court launched “one-stop” diversified international commercial dispute resolution platform On 21 July 2021, the PRC Supreme People’s Court launched its “one-stop” platform under a pilot operation for diversified resolution of international commercial disputes on the website of the China International Commercial Court (the Platform). The Platform serves as an integrated tool to provide various kinds of dispute resolution mechanisms that are easily accessible with user-friendly technology. The Platform is facilitated bilingually, allowing cross-border litigants to resolve their disputes either through litigation, mediation, or arbitration, or using the platform to ascertain foreign law.

Amongst other things, five leading arbitration institutions and two mediation institutions have been listed on the Platform, namely: China International Economic and Trade Arbitration Commission (CIETAC), Shanghai International Economic and Trade Arbitration Commission (SIETAC)/Shanghai International Arbitration Center (SHIAC), Shenzhen Court of International Arbitration (SCIA), Beijing Arbitration Commission (BAC), China Maritime Arbitration Commission (CMAC), the Mediation Center of China Council for the Promotion of International Trade (CCPIT Mediation Center) and Shanghai Commercial Mediation Center (SCMC).

The Platform intends to enable both Chinese and foreign parties to participate in the whole process of dispute resolution online, such as case filing, mediation, evidence exchange, and court trials. Parties can log into the Platform either through the official website of CICC or the WeChat app, “China Mobile Mini Court” on mobile phones.