Arbitration

What are the requirements for the arbitration in China?

The arbitration is an alternative form of dispute resolution where, rather than using the public court system, the parties’ dispute is heard before a private arbitrator. The parties’ submission to arbitration to resolve their dispute shall be on the basis of both parties’ free will and an arbitration agreement reached between them. If a party applies for arbitration in the absence of an arbitration agreement, the arbitration commission shall not accept the case. If the parties have concluded an arbitration agreement and one party institutes an action in a people's court, the people's court shall not accept the case, unless the arbitration agreement is null and void.

In accordance with China’s Arbitration Law, the following disputes cannot be put to arbitration: a. Disputes arising from marriage, adoption, guardianship, bringing up of children and inheritance; and b. Disputes that have been stipulated by law to be settled by administrative organs.

What are the key differences between the arbitration and the litigation in China?

Some of the key differences between these two forms of dispute resolution are as follows:

a. In respect of arbitration, the parties have the right to take appointment an arbitrator from the selected list. While for the litigation, judges are appointed by the state and cannot be designated by the parties.

b. In respect of arbitration, the parties concerned have the right to choose the arbitration body, the arbitration rules applied and the arbitration location, while the litigation procedure must be strictly in accordance with the law and the regulations.

c. In principle, the arbitration hearing is not open and the decisions/judgments are not made publicly available. Civil cases adjudicated by people's courts shall usually be heard publicly, except for the cases that involve state secrets or the private affairs of individuals, or are otherwise provided by law. A divorce case or a case involving trade secrets may not be heard publicly if a party so requests. People's courts shall publicly pronounce their judgments in all cases regardless if the cases were tried publicly or privately.

d. Generally speaking, an arbitration award is final. After the award is given, the arbitration commission or the People's Courts shall not accept the re- application of the suit concerning the same dispute by any of the parties concerned.

e. In trying civil cases, the People's Courts shall, according to the provisions of the law, follow the systems of panel hearing, withdrawal, public trial and the court of second instance being that of last instance.

Which is better for foreigners: litigation or arbitration?

Generally speaking, litigation is not a poorer option as a dispute resolution mechanism compared with the arbitration. The main problem with litigation is that the process, whilst improving, is still more susceptible than it ought to be to improper influence and to the risks of incompetent adjudication. In addition, where "foreign elements" are involved, a Court is not required to complete the adjudication of a case within a specified time. That does not mean that the time period for handling foreign-related civil cases can be delayed indefinitely. But normally the time period of litigation is longer than arbitration.

The single biggest advantage of arbitration is that it is far easier to enforce arbitral award in foreign countries than it is to enforce court judgments. To the best of the authors' knowledge few Chinese judgments have ever been registered as a judgment in foreign countries and vice versa.