China to revise Arbitration Law and embrace ad hoc arbitration
A draft revision of the PRC Arbitration Law to enable ad-hoc arbitration in China was submitted to the Standing Committee of the National People's Congress (NPC) on 4 November 2024 for first reading. The Ministry of Justice previously published an earlier draft of the revision in July 2021 for public review and input. The latest draft is also released for public consultation until 7 December 2024.
According to the Minister of Justice, the revision introduces comprehensive changes that focus on promoting greater openness, inclusiveness and international alignment within China's arbitration regime. It features a reform in favour of ad hoc arbitration, which is not recognised under the current Arbitration Law. If the revision is adopted, the long-term prohibition against ad hoc arbitration will be relaxed nation-wide for two types of disputes – (i) maritime disputes with international elements, and (ii) foreign-related disputes between entities registered in China's Free Trade Zones (FTZs).
Legislation timeline
- September 2018
The State Council’s initiative to amend the Arbitration Law was adopted by the NPC Standing Committee in its five-year Legislation Plan
- March 2019
At the 1st National Arbitration Work Conference, the Ministry of Justice led the organisation and directive for preparing the draft revision
- May 2019
The Ministry of Justice began soliciting topics and opinions and commissioned research and education institutions to conduct studies on relevant issues
- March 2020
Focused studies on foreign-related arbitrations
- September 2020
A working group of arbitration experts was set up to put together a draft revision
- October 2020
A discussion draft was sent to central government entities, provincial judicial bureaus and arbitration institutions for comments, followed by rounds of review by experts and representatives from diverse sectors
- July 2021
Consultation draft released for public input
- July 2024
State Council confirmed revision draft ready for submission to NPC Standing Committee session
- November 2024
Revision draft entered NPC Standing Committee session for 1st reading
- 8 November to 7 December 2024
Latest draft released for 30-day public consultation
Although there are still steps remaining in the legislative process before the revised Arbitration Law is enacted and takes effect, regional pilot practice of ad hoc arbitration in Shanghai and FTZs in Guangdong, Hainan, Fujian and Tianjin have developed over the years. Arbitral institutions including CIETAC, SHIAC and CMAC now offer services in support of ad hoc arbitration.
Regional Pilot Practice of Ad Hoc Arbitration
|
Region/Sector |
Shanghai |
Free Trade Zones (FTZs) |
|
Documentary basis (including regional regulation/ guidelines) |
Regulation of the Shanghai Municipality on Promoting the Initiative for an International Commercial Arbitration Centre (上海市推进国际商事仲裁中心建设条例) (Effective from 1 December 2023) |
Opinions of the Supreme People's Court on Providing Judicial Support for Developing Pilot Free Trade Zones (最高人民法院关于为自由贸易试验区建设提供司法保障的意见) (Effective from 30 December 2016) |
|
Permitted type(s) of disputes |
Foreign-related commercial and maritime disputes:
|
Disputes between enterprises registered in FTZs |
|
Ad hoc Arbitration Rules |
Hengqin Pilot Free Trade Zone Ad Hoc Arbitration Rules (横琴自由贸易试验区临时仲裁规则) (Effective from 15 April 2017) China Maritime Law Association (CMLA) Ad Hoc Arbitration Rules (中国海商法协会临时仲裁规则) (Effective from 18 March 2022) Shanghai Arbitration Association (SHAA) Ad Hoc Arbitration Rules (上海仲裁协会临时仲裁规则) (1 August 2024) |
|
|
Institutions offering services in support of ad hoc arbitration (as appointing authority, etc.) |
Zhuhai Court of International Arbitration (ZCIA) or Zhuhai Arbitration Committee (珠海仲裁委员会) China Maritime Arbitration Commission (CMAC)(中国海事仲裁委员会) Shanghai Arbitration Association (SHAA)(上海仲裁协会) China International Economic and Trade Arbitration Commission (CIETAC)(中国国际经济贸易仲裁委员会) |
|
China's first set of ad hoc arbitration rules was published in April 2017 to enable pilot practice in Hengqin FTZ in Guangdong, followed by CMLA (China Maritime Association) and SHAA (Shanghai Arbitration Association) releasing their respective ad hoc arbitration rules in March 2022 and August 2024. These ad hoc arbitration rules are structured similarly to commonly observed PRC institution-administered arbitration rules save that powers of arbitration institutions overseeing the proceedings are removed. Instead, the tribunal is given broad powers to conduct arbitration in such manner as they consider appropriate.
The revised draft of the PRC Arbitration Law also incorporates additions in respect of agreed place of arbitration, virtual arbitral proceedings, deemed admission to jurisdiction in certain circumstances and required disclosure by arbitrators of issues that may affect their independence and impartiality. There might be two more rounds of review by the NPC Standing Committee before a finalised draft is put to vote for adoption.
As China has been a contracting party to the New York Convention (i.e., the Convention on the Recognition and Enforcement of Foreign Arbitral Awards) since 1987 and has consistently recognised foreign ad hoc arbitral awards under the New York Convention, the anticipated revision to the PRC Arbitration Law will mark the end of China's longstanding asymmetric treatment in legal recognition and enforcement of ad hoc awards that favours international proceedings over comparable local practices.
*The briefing note is authored by Xueqing Wan, with assistance from Fei YU and Ailsa Yifei CHEN.
