Recently, Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC) announced the latest amendment of its arbitration rules. The new rules mark the dawning of a new age for arbitration in China, bringing about striking improvements in the industry’s credibility and sparking high hopes for its global ambitions. Some scholars have even commended the Chinese arbitration community for realizing such groundbreaking change. Their compliments are echoed here.
The new rules, which will come into effect on 1 September 2019, mainly focus on the reform of the arbitration fees schedule. Case acceptance fees and handling fees are no longer two categories of arbitration fees. Instead, arbitration fees comprise two separate parts, namely, arbitrator remunerations and institutional fees.
The BAC/BIAC states in its explanatory notes on the new rules that “such division is conducive to clarifying arbitration fees for the parties. It will elevate the arbitrators’ performance by allowing equivalent remunerations of the arbitrators’ professional contribution to a specific arbitration case.”
Prior to the new rules, the allocation of remuneration had already been made transparent internally for BAC/BIAC’s arbitrators. Nearly half of the arbitration fees are the tribunal’s remunerations and the allocation of fees among the three arbitrators are well controlled by BAC/BIAC’s internal norms. The new rules take further initiative of formalizing such internal norms and publicizing them. This reform, with its far-reaching impact, may be a giant step forward for the Chinese arbitration community.
New rules institutionalize the Chinese arbitration practice and emphasize its non-profit quality. Gone are the times when most arbitration institutions, apart from few, such as BAC/BIAC, would keep their profit margins under wraps while simultaneously boasting about the number of cases they were handling. The new rules eliminate the arbitration community’s opacity when it comes to reporting income, rendering the arbitration practice in China more institutionalized and transparent.
Further, alongside active discussions amongst the Chinese arbitration community about the rising credibility of arbitration, authorities have also come to define Chinese arbitration institutions as non-profit legal persons. The new rules augment the non-profit nature of arbitration by increasing the minimum amount of arbitrators’ remunerations as well as the proportion of such remunerations in the total arbitration fees, without increasing the cost borne by the parties involved.
New rules propel the internationalization of Chinese arbitration to new heights. Internationalization is an ambition in the eyes of many industries in China. This is no exception for the arbitration community. In pursuit of this, many arbitration institutions have adopted international names and set up international branches in recent years.
Yet, the internationalization of Chinese arbitration is not a matter of name, or of how many foreign arbitrators there are on a panel. True internationalization occurs when foreign arbitration users embrace the Chinese arbitration practice, the crux of which lies in aligning Chinese arbitration principles and practices with international standards.
In this light, BAC/BIAC’s new rules reconcile the longstanding difference between Chinese and international arbitration practice regarding arbitration fees by encouraging institutions to look beyond self-interest and prioritize the quality of service they provide. Such a reform enhances China’s status in the international arena, attracting the recognition of foreign enterprises, lawyers and arbitrators.
New rules provide solid groundwork for promoting the professionalization of arbitration in China. This is crucial as the quality of arbitration services rely upon the professionalism and moral integrity of arbitrators. Yet, China has long suffered from a shortage of professional arbitrators who treat arbitration as their full-time career, which has proven to be a struggle for Chinese arbitration institutions seeking high-caliber arbitrators.
Meanwhile, international arbitrators have long regarded arbitration as their main career, and are much more committed to maintaining an excellent reputation by working diligently and providing impeccable service. What is it, then, that keeps China from having such professional arbitration teams?
One of the most prominent limitations is the flawed remuneration system for arbitrators, a problem which the new rules tackle. A more transparent allocation of arbitration fees encourages the development of professionals in the field, providing fertile ground for the nurturing of professional arbitration teams in China.
The new rules also pose challenges to BAC/BIAC’s practice. BAC/BIAC will be faced with questions such as how it will maintain the high quality of institutional case management with less institutional fees, as well as how it will balance institutional quality control with arbitrators’ independent decision-making.
Concluding with a quote by French novelist Honoré de Balzac, who once said “there is no such thing as a great talent without great willpower”, I pay tribute to the BAC/BIAC’s unwavering determination in pursuing innovative reforms.
Wen Jie is a listed arbitrator of BAC/BIAC. Odessa Ng, from the University of Oxford, and BAC/BIAC’s senior manager, Terence Xu, also contributed to the article.