Shifting landscape of international arbitration in China

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In China, amateurs may regard a city-named arbitration institution as one that only handles local arbitration cases. This is not the case. Among the main international arbitration institutions, city-named is more often the case worldwide, since the impartiality and professional capability, rather than nationality, plays the uppermost role in gaining trust from global arbitration users.

This article takes Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC) as the leading Chinese arbitration institution, as an example, and tries to debrief the developments of its international cases in the past five years and to demonstrate the landscape changes of international arbitration practice in China, which would be valuable for arbitration users’ decision-making process.

Caseload overview

With the development and shift of global trades and investment, the market share of international arbitration in China is expanding. In terms of the caseload, BAC/BIAC’s international cases have increased from 52 in 2015 to 163 in 2019, with an average annual growth rate of 35.95%.

In terms of the average value of a single dispute, BAC/BIAC’s international cases have also increased from more than RMB21 million (US$3 million) in 2015 to more than RMB42 million last year, with an average annual growth rate of 54.38%. In 2019, the largest international case reached RMB1.46 billion in value, and 12 international cases were valued at more than RMB100 million, respectively.

In the past five years, BAC/BIAC’s international cases have involved parties from all over the world. Excepting Hong Kong, Macau and Taiwan, the number of parties from: the Americas (including North America, Central and South America) was 51; Asia was 47; Europe was 39; Africa was nine; Oceania was 6.43%.

Of the non-Chinese parties that have applied for arbitration at BAC/BIAC, nearly 57% have participated in the arbitration as respondents. Furthermore, among the non-Chinese parties, 35 were from the US, 26 were from the UK and British Isles, and 12 were from Canada, as the top three of BAC/BIAC’s non-Chinese users.

In terms of the types of cases in the past five years, BAC/BIAC has accepted: 174 pan-financial cases (131 equity investment and 43 lending and guarantee); 104 international trade cases (68 sales and 36 services); 64 international engineering and real estate (40 construction and 24 real estate); 31 intellectual property and technology cases; and 76 cases of other types. The growth rate of equity investment, intellectual property and technology cases were comparatively fast over the period.

Handling of cases

By introducing and innovating international practice in institutional arbitration rules, the arbitrators and parties who take part in Chinese international arbitration practice are well equipped with more procedural tools and capacities.

First, in terms of the arbitration language, since the 2015 amendment repeals of the default language provision, which introduces Chinese as the arbitration language if no agreement on arbitration language has been specified, more arbitration tribunals and parties concerned have opted for English as the arbitration language.

In addition, as more and more arbitrators (including those non-Chinese ones) who are capable of handling international cases preside over BAC/BIAC’s international arbitration cases, those English cases will be handled more smoothly.

Second, in terms of the applicable laws and arbitration rules, in the past five years a diversified scenario has been witnessed, where the applicable laws involve the laws of: Hong Kong; the US state of New York; Korea; Uzbekistan; Kyrgyzstan; and the UN Convention on Contracts for the International Sale of Goods, while the applicable arbitration rules involve the ICC Arbitration Rules and the UNCITRAL Arbitration Rules.

In a number of cases, parties from within and outside China even reached amendments on their arbitration agreements that stipulated another well-known international arbitration institution, and replaced BAC/BIAC as the eligible arbitration institution for their dispute resolution.

Finally, since the BAC/BIAC’s 2015 Arbitration Rules introduced a series of cutting-edge international practices, the joinder and the consolidation of arbitration has been a frequent practice in BAC/BIAC’s international cases.

It is also worth noting that after the first emergency arbitrator case in mainland China was administered by BAC/BIAC, and the interim measures of that case were enforced in 2017, BAC/BIAC has begun to encourage and support more tribunals and parties to apply for emergency arbitrator proceedings, and to seek enforcement of interim measures in countries and regions along the Belt and Road.

Efficiency and quality

The traditional wisdom in Chinese institutional practice allows for a quicker study curve for more tribunals and parties to become competent conducting arbitration in different but efficient ways.

In terms of case management approaches, in the past five years, BAC/BIAC’s international cases have widely adopted the procedural orders and terms of reference, which are believed to be a more effective way of preparing arbitration. In 2019, one of BAC/BIAC’s international cases used the Redfern Schedules in discovery. On other occasions tribunals, parties and witnesses were allowed to consent on an online hearing or electronic service, and BAC/BIAC encouraged and supported all choices.

In terms of the duration of case management, all above-mentioned innovations and measures contributed to the high efficiency of BAC/BIAC’s international cases. Taking 2019’s statistics as an example, the time limit for BAC/BIAC’s arbitrations that applied to ordinary international commercial procedures was six months, and the time limit for BAC/BIAC’s arbitrations that applied to expedited international commercial procedures was 90 days, while the actual average durations for BAC/BIAC’s 2019 international cases was 157 days for the former type of procedures, and 63 days for the latter. (Note: the time limit counts from the composition of tribunal to the rendering of award.) These statistics can be very persuasive to users who are sensitive to efficiency.

Yet, no awards rendered in BAC/BIAC’s international cases have been set aside or non-enforced, and the enforcement and recognition of BAC/BIAC’s awards were witnessed in the US and many other countries and regions.

The platform

In 2019, the BAC/BIAC moved forward with new amendment to its commercial arbitration rules, and a set of investment arbitration rules. The former made a bold breakthrough in the fee structures of Chinese commercial arbitration. The latter was an innovative proposal to alleviate existing concerns about investment arbitration.

With these efforts, the proportions of panel listing arbitrators who actually sit in BAC/BIAC’s international cases have increased significantly in the past five years. Among them, 526 non-Chinese arbitrators have been appointed or nominated in BAC/BIAC cases.

As Shakespeare wrote: “What’s past is prologue”. The continual improvement of China’s business environment and the further “opening up” empower arbitration practice in China to grow rapidly. In the meantime, the international arbitration community in China may embrace a better future while profound changes take place in global politics and economies.

Chen Fuyong is deputy secretary general of Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC). BAC/BIAC’s senior manager, Terence Xu, also contributed to the article