On September 9, during a press conference hosted by the Supreme People’s Court, the 2023 Annual Report on Judicial Review of Commercial Arbitration was unveiled. The Report showcases significant developments in China’s arbitration sector, particularly the ongoing revision of the Arbitration Law initiated by the Ministry of Justice.
Yang Xiangbin, Director of the Public Legal Services Administration of the Ministry of Justice, revealed impressive statistics in the country’s arbitration landscape:
- China has established 282 arbitration institutions.
- Over 60,000 arbitrators have handled more than 5 million cases, involving over 80 trillion yuan in disputed amounts.
- In 2023 alone, arbitration institutions handled 607,000 cases—a 27.8% increase from the previous year.
Before reading on to learn about the initiatives introduced in the Report, you might want to first understand China’s approach over institutional arbitration and ad-hoc arbitration.
In international commercial arbitration, two main forms exist: institutional arbitration and ad-hoc arbitration. Ad-hoc arbitration, which predates institutional arbitration, allows for more flexibility and has a long-standing history, particularly in resolving international maritime disputes. However, China has historically only recognized institutional arbitration, as enshrined in its Arbitration Law. Article 16 of the current law requires arbitration agreements to specify an arbitration commission, and without this, the arbitration agreement is deemed invalid.
This means that parties cannot conduct ad-hoc arbitration within the mainland. However, with the rapid globalization of trade and China’s increasing international engagement, there is a growing movement toward adopting ad-hoc arbitration. Some regions, such as Shanghai, have begun experimenting with local legislation to accommodate ad-hoc arbitration, particularly in international commercial disputes. This experimentation serves as a precursor to potential national-level acceptance in future legal reforms.
Key initiatives as below are highlighted in the Report:
- Arbitration Law Revision: The comprehensive revision of the Arbitration Law, which began in early 2024, is a landmark initiative. The Ministry of Justice led the drafting, involving input from key legislative bodies, government agencies, and experts. The revision has already been reviewed and approved by the State Council, signaling the start of a new chapter for arbitration in China. The law shall be approved by the Standing Committee of the National People’s Congress to be promulgated and become effective.
- International Commercial Arbitration Centers: To promote international dispute resolution, China is setting up pilot centers in major cities like Beijing, Shanghai, Guangdong, and Hainan. These centers aim to enhance the specialization and internationalization of China’s arbitration services, helping to cement China’s role as a global hub for commercial arbitration.
- Collaboration Mechanisms: Arbitration is now a key part of the diversified dispute resolution system. In 2023, over 36% of cases handled by arbitration institutions were resolved through mediation, demonstrating the growing importance of alternative dispute resolution (ADR) in China’s legal landscape. New rules and structures for better cooperation between courts and arbitration institutions have been put in place to streamline the enforcement of arbitration awards.
Looking Forward:
With these reforms, China’s arbitration system is poised to become more aligned with international practices, enhancing its role in both domestic and cross-border disputes. The growing focus on training foreign-related arbitration professionals and fostering international collaborations underscores China’s ambition to be a leader in global arbitration: it will be a giant game changer if China will finally allow on national level the recognition of ad-hoc arbitration awards, as they are a flexible and cost-effective solution to resolve international commercial disputes!
Stay tuned for more updates as these reforms reshape the future of commercial arbitration in China: we will publish follow up articles on the topic as soon as we will obtain the draft of the new Arbitration Law. Should you have any question, feel free to contact us via info@icl-consulting.net.
