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Arbitration of a legal contract in a foreign country and foreign language, of a contentious issue, with a potentially adversarial party is a daunting proposition. Just what is the process likely to involve in China?

Article 30 of the Arbitration Law requires an arbitration be conducted before either one or three arbitrators. Generally, the parties agree together on one, and if more arbitrators are desired, each party then chooses their own arbitrator. The hearing is conducted in an inquisitorial, objective and impartial manner, and both the hearing and the decision are closed unless the parties agree otherwise. China International Economic and Trade Arbitration Commission (CIETAC) aims for a turnaround of six months from formation to award, a time period that is significantly shorter in practice: despite an annual increase in its case load of 33% from 1998 to 2006, the Beijing Arbitration Commission has an average duration of 70 days for the cases it hears (Gu Xuan, Combination of Arbitration and Mediation in China, 2008).

Initiating an arbitration
Arbitrations can be used in most contractual situations: they are applicable in lease or tenancy contracts, physical or online contracts, concerns over the rights of citizens and legal entities, and generally for commercial or property contracts (Article 2, Arbitration Law). The purview of arbitration within China, however, does not extend to matters of family or administrative law (Article 3, Arbitration Law).

The legal contract between the parties must also contain an arbitration clause. Without it, no arbitration can occur within China unless both parties agree. Where there is a contractual clause, either party may submit to the named commission, the contract and a written application for arbitration with all relevant information such as names, addresses, claims and evidence (Article 23, Arbitration Law). This arbitration clause exists independently of the contract, despite changes, recision or invalidity of the contract (Article 19, Arbitration Law).

Pleadings
The language of the arbitration can be decided on by the parties, but typically occur in both English and Mandarin. Whilst translators can be provided by the commission, the parties should bring their own to ensure the translators can be briefed in advance on the issues to be covered and that they have the requisite knowledge of the applicable issues. This bi-lingual approach means that, as a courtesy, any documents given to the commission should be given in both English and Mandarin (Jim Harrowell, Successful Commercial Arbitration in China, 2008).

The pleadings themselves have no formal approach and may be oral or written (Article 39, Arbitration Law). Generally, though, the commission will approach them in three stages: fact finding, application of law to those facts, and a decision on that application. As such, pleadings provided by the parties’ lawyers should take a similarly structured approach.

Awards
Arbitration commissions have significant powers that include the ability to seize goods, order a company to be wound up, issue a bankruptcy or prevent the disposal of property (Gu Xuan, Combination of Arbitration and Mediation in China, 2008). Arbitration awards have the effect of a court decision and are final and binding: they cannot be appealed to any judicial organ, except in exceptional circumstances (Article 9, Arbitration Law) and are enforceable in any country that has ratified the New York Convention. This is a significant advantage over litigation, considering the difficulties in enforcing foreign judicial judgements.

Where a party does not comply with an award, an application can be made to the courts to issue a court order, however, this needs to be initiated within six months of the award or it is unenforceable (Article 219, Civil Procedure Law).

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