If you get into hot water legally in China and a dispute is on the cards, the good news is that alternative solutions to solve disputes are widely encouraged in China. We regularly advise clients on navigating China’s bouyant arbitration landscape and here’s our full lowdown.
Arbitration as a commercial resolution, is common in China, yet, interestingly, domestic ad-hoc arbitration is not legally recognized. Meanwhile, overseas ad-hoc arbitration awards can be recognized and enforced in Chinese courts. Mediation occurs in a range of procedures and at various levels, and a quick solution is usually arrived at through a conventional pre-court/arbitration stage. When the dispute goes before a court, the agreement may be finalized as a judgement/award, and is therefore legally enforceable.
Even though there is no longer a distinction between foreign arbitration and domestic arbitration institutes (since traditional domestic arbitration institutes can accept foreign related disputes upon the request of the parties), there is still a distinction between domestic arbitration and foreign arbitration. Laws involve difference procedural rules for foreign arbitrations.
What kind of cases can be dealt with through arbitration in China?
Commercial arbitration institutes can accept cases involving disputes of either contractual or non-contractual nature, based on an agreement of parties, except those concerning marriage, adoption, guardianship, child maintenance and inheritance (which are forbidden by arbitration law).
A valid arbitration agreement must be reached between parties of the dispute and the arbitration agreement precludes the possibility of filing the case in court. However, the court may accept any party disputes arising from the validity of the arbitration agreement.
Just how effective is commercial arbitration in China?
The arbitral award of commercial arbitration is a final and binding legal instrument so is highly effective. After the award is made, all parties must obey the award judgement and are not able to seek other remedies.However, there are exceptions and the parties may apply to the court to revoke the award. These include situations when:
- There is no arbitration agreement;
- The ruling is not within the scope of the arbitration agreement or about something the arbitration institute has no right to arbitrate;
- The composition of the arbitral tribunal or the arbitral proceedings violates the legal procedures;
- The evidence on which the award is based was forged;
- The other party conceals evidence sufficiently to influence the fair ruling;
- The arbitrator has arbitrarily accepted bribes, arbitrarily cheated, and defamed act in the arbitration of the case.
In addition, if the arbitral award involves any of the above circumstances, if the main evidence is insufficient, or if there is an error in the applicable law, parties may also apply to the court to refrain from executing the arbitral award.
Can foreign dispute awards also be revoked in China under certain circumstances?
Yes. However, only the following circumstances may sustain a revoke:
- The contract between the parties does not include an arbitration clause or the parties have not reached any written arbitration agreement after a dispute arose.
- The respondent is not notified to appoint an arbitrator if the conduct of the arbitration procedure is inappropriate or fails to present its case, which is not attributable to the fault of the respondent.
- The composition of the arbitration tribunal or the arbitration procedure does not conform with arbitration rules.
- The matters arbitrated are outside the scope of an arbitration agreement or the arbitral institution has no arbitration power.
If a people’s court holds that the enforcement of an arbitration award is contrary to the public interest, the people’s court shall issue a ruling not to enforce the award. Where an arbitration award is not enforced according to a ruling of a people’s court, the parties may, according to a written arbitration agreement reached by them, apply again for arbitration or file the case in a court.
Which are the main commercial arbitration institutes in China?
There are many commercial arbitration institutes in China, most of which were established as independent commercial entities, but some developed from previous administrative institutes.
- Beijing Arbitration Commission/Beijing International Arbitration Center
- China International Economic and Trade Arbitration Commission
- China Maritime Arbitration Commission
- Guangzhou Arbitration Commission
- Shanghai Arbitration Commission
- Shanghai International Economic and Trade Arbitration Commission/Shanghai International Arbitration center
- South China International Economic and Trade Arbitration Commission/Shenzhen Court of International Arbitration
What is the time limit for litigation and commercial arbitration in China?
The current statute of limitations for litigation and commercial arbitration in China is three years. The period of limitation of action is calculated from the date on which the right holder knows or should have known that the right has been damaged.
The statute of limitations may be interrupted by the request of performance made by the right holder upon the other party, and the statute of limitations shall be recalculated thereafter.
What sort of disputes could involve labour arbitration?
The Labor Arbitration Commissionis the only remaining administrative arbitration institute, functioning as a required pre-litigation procedure in solving labor disputes such as:
- Disputes arising from the confirmation of labour relations;
- Disputes arising from the conclusion, performance, alteration, dissolution and termination of a labour contract;
- Disputes arising from delisting, dismissal and resignation, and leaving;
- Disputes arising from working hours, rest and vacation, social insurance, benefits, training, and labour protection;
- Disputes arising from labour remuneration, work injury medical expenses, economic compensation or compensation.
How effective is labour arbitration in China?
If there is a dispute between the employer and the employee, they should first apply to the labour dispute arbitration committee for arbitration. If they are dissatisfied with the arbitral award, they can seek judicial remedy from the court.If the parties fail to seek judicial remedies within the stipulated time, the arbitral award is an effective ruling.
Who is the Labour Dispute Arbitration Commission and what do they do?
The Labour Dispute Arbitration Commission consists of representatives of the labour administrative department, trade union representatives and representatives of enterprises and performs the following duties in accordance with law:
- Appointment or dismissal of full-time or part-time arbitrators;
- Accept labour dispute cases;
- Deliberate major or complex labour dispute cases;
- Supervise the arbitration activities.
What is the time limit for labour arbitration in China?
The limitation period for labour dispute application arbitration is one year. The period of limitation of arbitration shall be calculated from the date on which the party knows or should know that their rights have been infringed.