More Chinese parties are using legal means to resolve disputes, while foreign parties are becoming increasingly receptive to using China as a dispute resolution platform. Why are more parties agreeing to disagree, both at home and away? Vanessa Ip reports.
Times are busy for litigators and arbitrators. China’s dispute resolution market is evolving and internationalising at a feverish pace, owing to the sheer volume of China-related business around the world and the country’s maturing economy, now the second-largest in the world. Both domestic and international arbitration institutions have been busy updating their rules to stay abreast of market trends. The Supreme People’s Court (SPC) has also been proactive in addressing public and investor concerns through a number of new initiatives designed to bring the country’s legal system further in line with international standards.
More business, more disputes
Observers agree that China’s increasing influence as an economic power is a key driver behind the growth of China’s dispute resolution market. According to Yang Ing Loong, a partner at Latham & Watkins in Hong Kong, “the PRC market is generally maturing, which means that the Western companies doing business in China, the Chinese companies doing business in China, and also Chinese companies doing business outside of China, are all maturing and internationalising at a very quick pace,” he says. Flowing from the increase in China inbound and outbound investments, it’s perhaps inevitable that “there will be more disputes, and those disputes would end up being resolved in China”, says Thomas So, a partner at Mayer Brown JSM in Hong Kong who sits on the council of the Hong Kong Institute of Arbitrators.
May Tai, a dispute resolution partner at Herbert Smith Freehills in Hong Kong, comments: “The number of contracts that were signed with Chinese parties has increased so significantly that only a small percentage of that needs to go to dispute before everyone is very busy with dispute work.”
But it’s not just lawyers who are busy. Arbitration centres and local courts are seeing their dockets fill up with a growing number of cases initiated by Chinese and foreign parties. The Beijing Arbitration Commission (BAC) reported an increase in new filings of over 1,500 per year in the past 10 years. This can be attributed to recent efforts made to internationalise service offerings, which have led to “more investors being prepared to use China as the dispute resolution platform than before, as the standard of dispute resolution service providers has improved over the years,” observes So.
Yang Guang, a partner at Lantai Partners in Beijing, adds: “Some international companies may still not be confident about China’s judicial environment, but an increasing number of international companies have changed their opinions. The judicial justice of China has been recognised by the international community. The courts and arbitration centres in China are fair and reliable.”
Home and away-from-home advantages
But not all agree. The main concern for international companies involved in disputes arising from cross-border deals or business co-operation “remains the perceived lack of efficiency and independence of the judicial system in China and Chinese arbitration bodies,” says Keith Brandt, a partner in Dentons’ litigation and dispute resolution practice in Hong Kong. “Their preference is often international arbitration in a neutral jurisdiction, such as Hong Kong or London.