China’s arbitration quid pro quo

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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.

In recent years, as Chinese companies embark on an overseas journey and the national policy of the Belt and Road Initiative gets off the ground, more and more Chinese enterprises are going global to engage in investments abroad.

According to statistics, Chinese parties rank third in terms of the number of parties involved in cases commenced at the International Court of Arbitration of the International Chamber of Commerce (ICC), and fourth in terms of the number of parties involved in cases commenced at the Singapore International Arbitration Centre (SIAC). In the past three years, parties from the Chinese mainland have come in second in terms of the number of parties participated in the arbitrations commenced at the Hong Kong International Arbitration Centre (HKIAC), next only to parties from Hong Kong.

Arbitration
Ma Yi

The growing demand from Chinese parties for international arbitration, on the one hand, promotes the fine-tuned international arbitration practices to be better accepted by Chinese practitioners. On the other hand, it also increases the chances of “Chinese elements”, including Chinese law, language, lawyers and arbitrators, appearing on the international arbitration stage.

This can be said to be how the concept of “Sinicization of international arbitration” manifests itself externally. As arbitration is known to be a dispute resolution mechanism, whether it could be given full play relies on how the design of this mechanism integrates with legal culture accepted by the parties to the dispute. From this point of view, for arbitral institutions in mainland China, the goal of the Sinicization of international arbitration is to make the case management practices and dispute resolution culture of our own gradually accepted by the international arbitration community.

In fact, with years-long arbitration practices and external exchanges, some arbitral institutions in mainland China with a higher degree of internationalization, such as the Shanghai International Economic and Trade Arbitration Commission (also known as Shanghai International Arbitration Centre, or SHIAC), have already shared their sophisticated ideas and experience on how to strike a balance between quality and efficiency.

This also has an impact on the recent practices of their global counterparts, to a certain extent. For example, arbitral institutions like the London Court of International Arbitration (LCIA) and the Hong Kong International Arbitration Centre (HKIAC) have successively taken a leaf from mainland arbitration institutions’ books in terms of case management, beginning to allow the parties to select and employ the tribunal secretary.

In terms of legal culture in arbitration, “arbitration-mediation” is being increasingly accepted by the international arbitration community. In Asia, apart from mainland China, arbitration legislation in Hong Kong and Singapore both allow an arbitrator to act as a mediator if all parties consent in writing. Arbitral institutions in European countries like Germany, Switzerland and Austria also stipulate that arbitrators have the obligation to actively assist the parties in reaching an amicable settlement of the dispute.

The International Bar Association’s Guidelines on Conflicts of Interest in International Arbitration also clearly state that the arbitrator may qualify to act as mediator in the arbitration proceedings with the express agreement of the parties. Such agreement shall be considered to be an effective waiver of any potential conflict of interest.

The Sinicization of international arbitration is, in effect, at the same time the internationalization of Chinese arbitration. In recent years, by exercising the institutional functions of designating arbitrators, the SHIAC has consistently increased the proportion of arbitrators from Hong Kong, Macau, Taiwan and foreign countries attending the hearings.

In these cases, the SHIAC has worked with international arbitral tribunals to: adopt the procedural rules of Chinese arbitration institutions and the United Nations Commission on International Trade Law Arbitration Rules (UNCITRAL); employ methods like a combination of the adversarial and the inquisitorial approach in hearing the cases; and apply international conventions such as United Nations Convention on Contracts for the International Sale of Goods, and laws already agreed upon by the parties, to decide the cases.

This enables these experts to gain knowledge of the Chinese arbitration system and legal culture in arbitration through their own experiences. By amending the arbitration rules, the SHIAC seeks to break down barriers between the legal ideas of international arbitration and Chinese arbitration practices. For example, the China (Shanghai) Pilot Free Trade Zone Arbitration Rules of SHIAC, implemented in 2014, set out a separate mediation procedure, available before the composition of the arbitral tribunal, to avoid bias or the appearance of bias, which may arise from the conflicting dual roles as mediator and arbitrator – effectively solving the issue that has worried the international arbitration community for quite a time.

Furthermore, under the structures of the BRICS (Brazil, Russia, India China and South Africa) Legal Forum, and the Forum on China-Africa Cooperation (FOCAC) Legal Forum, the SHIAC has established BRICS Dispute Resolution Centre Shanghai, and China-Africa Joint Arbitration Centre Shanghai, respectively, to set up a new mode of co-operation on international arbitration that integrates the mixed characteristics of legal cultures at home and abroad.

Based on the experience above, while learning from advanced international notions and experiences, arbitration institutions in mainland China should also seek to introduce the “China experience”, which conforms to international practices and fits in well with the fundamental realities of the country, to their global counterparts, essentially promoting the integration of the “internationalization of Chinese arbitration” and “Sinicization of international arbitration” via dialogues and exchanges.

Dr Ma Yi is vice-chairman and secretary general of Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Centre, or SHIAC)