Arbitration practice keeps evolving

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Chinese arbitration has its own development track. Riding high on the goals and undertakings of making home-grown arbitration practices more international, the country also charts its course of introducing “China’s experience” and “Oriental wisdom” onto the international arbitration stage. We asked the region’s major player for their views − and their wisdom. Read the full interview with the leaders of six arbitration centres here.

While the chinese arbitration law has not been amended for 24 years, arbitration practice in mainland China has not stopped evolving. Changes in practice are usually reflected in rulings and notifications issued by the Supreme People’s Court (SPC) and new rules promulgated by mainland arbitral institutions.

Arbitration
Joe Liu

Arbitration practice in mainland China evolves in a way that reflects its local characteristics, and develops carefully within the ambit of the Chinese Arbitration Law. This is how I understand the concept of “localization of international arbitration law and practice in China”.

Over the decades-long course of development of Chinese commercial arbitration, the new “China experience” has come into focus in the arbitration community. There appears to be a growing tendency in mainland China to apply legislative text and related practice in a manner that aligns with international practice in the closest possible way, provided that mandatory provisions under Chinese law are complied with.

This is what I understand to be the new “China experience” in international arbitration. One example is the conclusion of the Arrangement Concerning Mutual Assistance in Court-Ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region in April 2019. The arrangement came into force on 1 October 2019, and for the first time provides a legal basis for the Chinese courts to issue interim relief in support of arbitral proceedings in a jurisdiction outside of mainland China.

Hong Kong is the only such jurisdiction that benefits from this arrangement. As Hong Kong is a Special Administrative Region that operates under China’s “one country, two systems” framework, the issuance of interim relief by the mainland courts in support of Hong Kong arbitrations brings the mainland arbitration regime one step closer to international norms, while not contravening any provisions of the Chinese Arbitration Law.

As China charts the course of internationalizing its arbitration law and practice, some arbitration-related practices in mainland China are worth adopting in some cases seated outside of mainland China. The combination of mediation and arbitration (known as “Med-Arb” or “Arb-Med-Arb”) is one such practice that has been used to resolve disputes effectively on the mainland for decades.

Parties may refer their dispute to mediation first. If they are not able to reach a settlement, they can then submit the dispute to arbitration. Alternatively, a party may commence an arbitration first, and seek the other party’s agreement to refer the dispute to mediation during the arbitration. Depending on the outcome of the mediation, the parties may either terminate the arbitration or resume it to turn any settlement agreement into an arbitral award so it becomes enforceable in 161 countries under the New York Convention.

The use of Med-Arb or Arb-Med-Arb can help parties narrow down their areas of disagreement and focus on those areas, as well as preserve their commercial relationship. However, such practice also carries some risks, particularly where the same individual acts as both mediator and arbitrator. It is considered that his or her knowledge of confidential and possibly privileged information during mediation may affect his or her impartiality and independence as arbitrator.

The practice of Med-Arb or Arb-Med-Arb was initially viewed with scepticism by the Hong Kong judiciary, but have now been recognized in sections 32 and 33 of the Hong Kong Arbitration Ordinance, with some caveats. The 2018 HKIAC Administered Arbitration Rules have also introduced a new provision to expressly allow the parties to pursue alternative means of settling disputes after the arbitration commences.

If the parties agree to do so, the arbitral tribunal or emergency arbitrator may, at the request of any party, suspend the arbitration or emergency arbitrator procedure. The arbitration or emergency arbitrator procedure shall resume at the request of any party.

Joe Liu is the deputy secretary-general of the Hong Kong International Arbitration Centre (HKIAC)