Salient Issues in Arbitration in China

Arbitration in China has experienced a major increase over the past ten years,1 and Chinese companies have progressively recognized the advantage of submitting their contractual disputes to arbitration. Accompanying the rapid development are several salient issues worth discussion.I. PRE-ARBITRATION PHASEA. ARBITRATION AGREEMENTThe effectiveness of agreements is the essence of and also the key target of many judicial reviews in China. This section will briefly discuss the legal of an and other elements needed for the effectiveness of agreements under PRC laws.1. Written FormThe Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)2 recognizes agreements in form, and an agreement in writing shall include an arbitral clause in a contract or an agreement, signed by the parties or contained in an exchange of letters or telegrams.3 Such definition is echoed in Article 16 of the Chinese Arbitration Law (CAL),4 which stipulates [a]n for shall include the clauses stipulated in the contracts or other agreements for reached before or after a dispute occurs.Hence in China, agreements shall take form. However, written form shall not be interpreted in the traditional manner - digital telecoms such as fax, emails, and online messages are also acceptable under PRC law in the sense of being written.5Until now, PRC law has not given effect to agreements reached via verbal or behavioral manners. In this respect, a new development may be underlined in the CIETAC (2011),6 which in principle requires agreements to be in writing and an exception recognizes the effect of other forms of agreements as permitted by the law applicable to the agreements.7 The application of this new development will be tested upon the publication of the new Rules.2. Effectiveness of Arbitration AgreementThe Chinese legal requirement that an must designate an institution to become valid8 has drawn enormous criticisms from the international community.9 Indeed, denying the effect of an that does not designate an institution blatantly ignores the parties autonomy and free choice, and it has become a particularity of in China. Under such circumstances, the ICC International Court of Arbitration has to amend its recommended arbitral clause from All disputes arising out of or in connection with the present contract shall be finally settled under the of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules to All disputes arising out of or in connection with the present contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce and shall be finally settled under the of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules to facilitate Chinarelated contracts and for the future enforcement of final awards in China.10Another notable issue is the definition of arbitration commission as contained in Article 16 of CAL.11 It is not any random commission, but rather commissions registered in China under the CAL.12 A direct consequence becomes that foreign/international institutions are erased from the list of institutions available to parties seeking in China. By metaphor, the Great Wall of China for foreign institutions was created.13 Contrary to the common belief that open competition could nourish the growth of Chinese arbitration, some Chinese scholars believe that international commercial is by nature a legal service and China has no obligation to open up its market to foreign competitors since China made no commitment toward the WTO and its member states. …