{"id":282863,"date":"2024-09-06T15:27:12","date_gmt":"2024-09-06T13:27:12","guid":{"rendered":"https:\/\/dailyjus.com\/?p=282863"},"modified":"2024-09-05T15:57:24","modified_gmt":"2024-09-05T13:57:24","slug":"2023-arbitration-year-in-review-china","status":"publish","type":"post","link":"https:\/\/dailyjus.com\/index.php\/2024\/09\/06\/2023-arbitration-year-in-review-china\/","title":{"rendered":"2023 Arbitration Year In Review – China"},"content":{"rendered":"\n
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This article was featured in Jus Mundi<\/a>‘s 2023 Arbitration Year in Review<\/strong>, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.<\/p>\n\n\n\n

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Download now<\/a><\/div>\n<\/div>\n<\/blockquote>\n\n\n\n
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THE AUTHOR:<\/strong>
Jolie Guo<\/strong>, Vice President at LexPR China<\/strong>
Yifei Zhang<\/strong>, Associate at Global Law Office<\/a><\/strong>
Angela Yan<\/a>, <\/strong>Senior Associate at Zhonglun Law Firm<\/a><\/strong><\/p>\n\n\n\n

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Investment Arbitration<\/span><\/strong><\/h2>\n\n\n\n

Investment Arbitration Cases Involving China and Chinese Entities<\/strong><\/h3>\n\n\n\n

In recent years, there has been a notable increase in Chinese investors initiating investment arbitration to safeguard their rights when investing overseas. In 2023, PowerChina and China Railway filed their second case against Vietnam based on the China-Vietnam BIT (1992) (PowerChina and China Railway 18th Bureau v. Vietnam)<\/a>. China Machinery Engineering Corporation commenced investment arbitration proceedings against the Republic of Trinidad and Tobago<\/a> (CMEC v. Trinidad and Tobago<\/a>). These cases signify growing familiarity with investment arbitration among Chinese entities, especially among Chinese SOEs.<\/p>\n\n\n\n

The award of Beijing Everyway Traffic & Lighting Tech. Co., Ltd v. The Republic of Ghana<\/a> was issued on 30 January 2023. The Tribunal found that the MFN provision in Article 3(2) of the China-Ghana BIT (1989)<\/a> cannot be used to extend its jurisdiction to the Claimant\u2019s claims. The Tribunal reasoned that the MFN clause in Article 3(2) is limited to \u201cthe treatment and protection referred to paragraph 1.\u201d Noting that Article 3(1) sets out substantive standards of equitable treatment and protection, the Tribunal considered that there is nothing to suggest that the scope of the MFN clause should be broad.<\/p>\n\n\n\n

In 2023, there were no new investment arbitration cases initiated against China<\/a>, with the total number of cases against China remaining nine. In the noteworthy case of AsiaPhos Limited and Norwest Chemicals Pte Ltd v. PRChina<\/a>, the Tribunal issued a final award in favor of China on 16 February 2023. The majority of the Tribunal has found that the Respondent\u2019s arbitral consent provided in Article 13(3) of the China-Singapore BIT (1985)<\/a> does not cover the Claimant\u2019s expropriation and non-expropriation claims; rather, the scope of the arbitration clause is limited to disputes regarding the amount of compensation.<\/p>\n\n\n\n

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New Legislations Relating to Investment Arbitration<\/strong><\/h3>\n\n\n\n

The National People\u2019s Congress Standing Committee (NPCSC) adopted the Law on Foreign Relations of the PRC<\/a> on 28 June 2023. Key provisions include: Article 26 provides for China\u2019s commitment to advance high-standard opening up, develop foreign trade, promote and protect foreign investment, encourage outbound foreign investment, and promote the joint construction of the Belt and Road Initiative. Article 33 provides that China has the right to employ countermeasures or reJolie Guo Vice President LexPR China Yifei Zhang Associate Global Law Office Angela Yan Senior Associate Zhonglun Law Firm strictive measures against acts that violate fundamental principles of international law and international relations and harm its sovereignty, security, and developmental interests. Notably, Article 37 has an extraterritorial effect, which may mean that China is authorized to take necessary measures in accordance with its law to protect the security and legitimate rights and interests of Chinese citizens and organizations overseas, and to ensure that the nation\u2019s overseas interests are not threatened or encroached upon. The language used in the provisions is broad, because the Law on Foreign Relations serves as a broad framework that empowers relevant administrative departments to establish specific measures.<\/p>\n\n\n\n

The NPCSC adopted the Foreign State Immunity Law of the PRC<\/a> on 1 September 2023. The Law marks a historic change in China\u2019s approach to state immunity, transitioning from absolute immunity to restrictive immunity. This brings China\u2019s stance in line with prevailing international norms. The Law affirms the fundamental principle that a foreign state and its property enjoy immunity in China<\/a>, subject to a few exceptions under which Chinese courts can exercise jurisdiction. These exceptions include disputes relating to commercial activities, contracts concluded to obtain labor or services in PRC, intellectual property, death, personal injury, etc. The Law also states that Chinese courts can take compulsory measures against a foreign state\u2019s commercial property under a few narrowly defined conditions.<\/p>\n\n\n\n

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Developments in Arbitral Institutions<\/strong><\/span><\/h2>\n\n\n\n

Institutional Reform<\/strong><\/h3>\n\n\n\n

Traditionally, most Chinese arbitration institutions were government-affiliated institutions, with their personnel, financial, and salary systems under government management. This mechanism has constrain the development of arbitration in China<\/a>, especially its internationalization. As a result, since 2019, the Ministry of Justice has guided the reform of arbitration institutions to promote their internationalization.<\/p>\n\n\n\n

 <\/span>The Dalian International Arbitration Court (\u201cDIAC\u201d) is a good example. DIAC completed its institutional reform in March 2021. That year, the aggregate amount in dispute across all of the DIAC\u2019s cases exceeded 10 billion Yuan for the first time. As of 16 November 2023, only two years from the reform, the cumulative disputed amount of the DIAC\u2019s cases has exceeded 41 billion yuan.<\/p>\n\n\n\n

Beijing Arbitration Commission<\/a> (\u201cBAC\u201d), also known as Beijing International Arbitration Center, is another good example. BAC essentially completed its institutional reform in 2023 after years of preparation.<\/p>\n\n\n\n

Most notably, BAC has revised its Schedule of Arbitration Fees<\/a>, clearly separating \u201carbitrator\u2019s fees\u201d and \u201cadministration fees\u201d and increasing the proportion of arbitrator\u2019s fees relative to administrative fees, aiming to advance the remuneration level of arbitrators and clarify arbitrators\u2019 dominant role in arbitration proceedings. The revised fee schedule resembles the fee schedules of many international arbitration institutions.<\/p>\n\n\n\n

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New Arbitration Rules<\/strong><\/h3>\n\n\n\n

In 2023, several Chinese arbitral institutions revised their arbitration rules to stay better in line with international arbitration practices.<\/p>\n\n\n\n

On 5 September 2023, the China International Economic and Trade Arbitration Commission (\u201cCIETAC\u201d)<\/a> released its new rules<\/a> to offer more internationalized and professional dispute resolution services.<\/p>\n\n\n\n

Particularly, the rules allow arbitral tribunals to apply CIETAC Guidelines on Evidence, in which rules regarding disclosure of documents and examination of witnesses can be found. Disclosure of documents and examining witnesses are not regular procedures in Chinese arbitrations. That is to say, the new CIETAC Rules may help align Chinese arbitration practices with international arbitration practices.<\/p>\n\n\n\n

Some other arbitral institutions, including the Shanghai International Arbitration Center (SHIAC)<\/a>, Xi\u2019an Arbitration Commission (XAAC)<\/a>, and Wuhan Arbitration Commission (WIAC), also released their new arbitration rules in 2023, in lock step with the updated CIETAC Rules.<\/p>\n\n\n\n

It is also worth mentioning that, in 2023, a series of documents significantly enhanced the prospects for ad hoc arbitration in China.<\/p>\n\n\n\n

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Highlights of Regional Developments<\/strong><\/h3>\n\n\n\n

2023 is the 10th anniversary of the Belt and Road Initiative. Over the past decade, Chinese arbitral institutions have witnessed a growing number of cases involving countries and regions along the Belt and Road. They are playing an increasingly important role in resolving these disputes.<\/p>\n\n\n\n

On 29 October 2023, the Shenzhen Court of International Arbitration<\/a> launched its Kashi Center. It is currently used as a platform for international arbitration cooperation between China and Central, South, and West Asia.<\/p>\n\n\n\n

On 1 November 2023, CIETAC<\/a> launched its Central Asia Trial Center in Urumqi. Only 45 days following its establishment, the Center conducted its first oral hearing.<\/p>\n\n\n\n

In the east of China, in response to the directive from the Ministry of Justice in 2022, Shanghai has actively implemented initiatives to establish itself as an arbitration center in the Asia-Pacific Region. On 1 December 2023, Regulations of the Shanghai Municipality on Promoting the Initiative for Building an International Commercial Arbitration Center came into force, according to which, overseas arbitration institutions can set up operational branches in Shanghai and conduct arbitration cases. On the same date, the Korean Commercial Arbitration Board (KCAB)<\/a> launched its operational agency in Shanghai.<\/p>\n\n\n\n

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Judicial Support to International Commercial Arbitration<\/strong><\/h2>\n\n\n\n

Chinese courts generally support arbitration, as evidenced by courts\u2019 interpretation of the arbitration agreements and enforcement of arbitral awards. Several cases from the past year are notable examples of this longstanding approach.<\/p>\n\n\n\n

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Interpretation of Arbitration Agreements <\/span><\/strong><\/h3>\n\n\n\n

The Beijing Financial Court has recently upheld the validity of an \u201casymmetric arbitration clause\u201d, determining that it did not constitute an impermissible \u201ceither arbitration or litigation clause\u201d under the PRC<\/a> laws. (China Development Bank v. Fiber Optic Communication Network Co., Ltd. (2022) Jing 74 Min Te No.4). The Court distinguished between an \u201ceither arbitration or litigation clause\u201d and an \u201casymmetric arbitration clause\u201d and stated that when only one party has the right to choose between arbitration and litigation, and it chooses to resort the dispute to arbitration, the arbitration agreement constitutes a definite consent to submit the dispute to arbitration exclusively, thus solving any indeterminacy that may render the arbitration agreement invalid. This case provides a helpful indication to parties of the willingness of some Chinese courts to employ sophisticated legal reasoning to uphold \u201casymmetric arbitration clauses\u201d.<\/p>\n\n\n\n

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Recognition and Enforcement of Foreign Awards<\/strong><\/h3>\n\n\n\n

Guiding case No. 200 released by the Supreme People\u2019s Court (\u201cSPC\u201d) (SvenskHonungsfora\u2013dlingAB v. Nanjing Changli Bees Product Co. Ltd<\/a>, (2018) Su 01 Wai Xie Ren No.8) reflects Chinese courts\u2019 pro-enforcement stance towards foreign arbitration awards adjudicated in the way of ad hoc arbitrations. The applicable arbitration agreement provided that \u201cin case of disputes governed by Swedish Law and that disputes should be settled by Expedited Arbitration in Sweden\u201d. The issue before the Nanjing Intermediate People\u2019s Court was whether a foreign ad hoc arbitration initiated by the parties was in conformity with the above-mentioned arbitration agreement. The court found that ad hoc arbitration and expedited arbitration share the features of efficiency, convenience, and economy. Therefore, the term \u201cExpedited Arbitration\u201d in the arbitration agreement does not exclude resolving the dispute in an ad hoc arbitration.<\/p>\n\n\n\n

It is worth mentioning that ad hoc arbitration is not clearly recognized by PRC<\/a> Arbitration Law, which requires an arbitration agreement to designate an arbitration institution. In 2016, the SPC opened the door for companies registered in the free trade zones to submit their dispute to ad hoc arbitrations, but it was not until 2023 that the first ad hoc arbitration award was rendered.<\/p>\n\n\n\n

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ABOUT THE AUTHOR:<\/strong><\/p>\n\n\n\n

Jolie Guo<\/strong> is the Vice President of LexPR China<\/strong>. Prior to joining LexPR China, she worked at Beijing International Arbitration Center as a Counsel, where she has dealt with several hundreds of arbitration cases. Then she practiced at a leading Chinese Law firm as a PRC licensed lawyer specializing in dispute resolution. Jolie received her J.M. and J.D. from Peking University School of Transnational Law.<\/p>\n\n\n\n

Yifei Zhang<\/strong> is an associate of Global Law Office<\/a><\/strong>. Yifei has represented clients in arbitrations administered by CIETAC<\/a>, SHIAC<\/a> and HKIAC<\/a>. He also represented clients in commercial litigations before various levels of courts in Beijing, Shanghai, and Guangdong. The cases he has handled include disputes over international trade, property leasing contract, share transfer, export credit insurance and product liability.<\/p>\n\n\n\n

Angela Yan<\/a><\/strong> is a senior associate of Zhonglun Law Firm<\/a><\/strong>. She is admitted to practice law in China mainland and the State of California. She is also a Chartered Financial Analyst (CFA). Her practice covers a range of China-related commercial arbitrations and lawsuits before Chinese courts. She also frequently cooperates with lawyers from other jurisdictions to deal with arbitration-related winding up petitions and parallel litigations.<\/p>\n\n\n\n

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Discover more insights into the latest developments in arbitration in 2023 from around the world now<\/p>\n\n\n\n

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Download now<\/a><\/div>\n<\/div>\n<\/blockquote>\n\n\n\n

*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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