by Dr. Dr. Adolf Peter

On 30 July 2021, the Ministry of Justice of the People’s Republic of China released proposed revisions to the Chinese Arbitration Law  (“Draft Amended Arbitration Law”) for public consultations. If adopted, the Chinese Arbitration Law will mirror several principles which are deemed international standard on the basis of the 1985 UNCITRAL Model Law on International Commercial Arbitration, such as the concept of the seat of arbitration, the availability of ad-hoc arbitrations, the arbitral tribunal’s authority to grant interim measures (it will in particular be interesting to see whether Chinese courts will also enforce interim measures ordered by arbitral tribunals in arbitrations seated outside of China) and to decide on its own jurisdiction (Kompetenz-Kompetenz), and the ability for parties to select arbitrators who are not part of the lists/panels of arbitrators of the respective arbitration institution administering the arbitration case. Furthermore, Art. 12 of the Draft Amended Arbitration Law explicitly allows foreign (non-Chinese) arbitration institutions to conduct foreign-related arbitration business.

However, the Draft Amended Arbitration Law does not provide further guidance on the interpretation of the foreign-related criteria (developed by the Chinese Supreme People’s Court) which are relevant for determining whether a contractual relationship is foreign-related and thus eligible for a foreign-related arbitration. The assessment of the foreign-related criteria is also relevant in terms of ad-hoc arbitrations, as the Draft Amended Arbitration Law only allows foreign-related arbitrations to be arbitrated ad-hoc. To be on the safe side and to avoid the risk of an invalid arbitration agreement, the parties are well-advised to only agree upon a non-Chinese arbitration institution or an ad-hoc arbitration (even after the adoption of the Draft Amended Arbitration Law), if the contract involves at least one party incorporated outside of China, or the arbitration agreement is concluded between two wholly foreign-owned entities registered inside a Chinese Pilot Free Trade Zone (e.g. the Shanghai Lingang Pilot Free Trade Zone).

In this context, it should be emphasized that China has very professional arbitration institutions, such as the Shanghai International Arbitration Center (“SHIAC”), the China Maritime Arbitration Commission (“CMAC”), the Shanghai Arbitration Commission (“SHAC”) and the China International Economic and Trade Arbitration Commission (“CIETAC”). CIETAC even established an office in Vienna, Austria (the CIETAC European Arbitration Center). The new Chinese Arbitration Law will certainly lead to major improvements as to arbitrations seated in China and administered by Chinese arbitration institutions. Nevertheless, the Draft Amended Arbitration Law is still under review, and it is not expected that it will be adopted by the National People’s Congress (“NPC”) before 2023 or even 2024.