New developments in commercial arbitration and mediation

By Fan Kun, McGill University

The recent developments on arbitration in China made me think about questions I raised in my book, Arbitration in China: A Legal and Cultural Analysis, published with Hart in 2013. How will new economic players such as China react to the movement of harmonization of international arbitration? With the harmonization of the law and practice of arbitration worldwide, is China showing signs of adapting to the current trend of international arbitration? Will Chinese legal culture influence the evolution of international arbitration?

My answers to the questions remain affirmative: adaptations in both directions are taking place. On the one hand, China is making adaptations to bring its practice more in line with international standards. On the other hand, China is bringing innovations that may influence the practice elsewhere. These developments also come at an important time, with China launching an ambitious program of economic expansion, the Belt and Road Initiative (BRI), and approaching a leading role in the world’s economy.

Important role of SPC

SPC interpretations. Although judicial interpretations do not carry the force of national laws under the constitution, they play a crucial role in practice. They not only interpret or clarify, but also supplement national laws, particularly where an area is changing rapidly and the national legislation is not equipped to deal with new issues that have emerged.

After the Arbitration Law came into force, the Supreme People’s Court issued a number of judicial interpretations concerning the application of relevant laws and treaties by Chinese courts. In practice, the court’s judicial interpretations provide important guidance for lower courts on the application of the Arbitration Law and also fill interpretative gaps not addressed. Since May 2017, the court successively promulgated a series of judicial interpretations and documents, which marks another major milestone in the development of arbitration in China. These interpretations and documents, to some extent, plug the deficiency gaps in the Arbitration Law and the courts’ interpretation on its application.

Guiding cases. An interesting phenomenon is China’s recently established Guiding Cases System and its potential impact on arbitration. Though the majority view among legal scholars is that guiding cases are not legally binding on lower courts, “this does not exclude the possibility that guiding cases are factually binding on lower courts, i.e., court decisions will be overturned by a higher level court if decisions do not properly take account of guiding cases” (Björn Ahl, “Retaining Judicial Professionalism: The New Case Guiding Mechanism of the Supreme People’s Court”, pp. 121-139). It has been reported that “guiding cases have been applied as sources of substantive rules in a number of arbitral proceedings” (Mark Jia, “Chinese Common Law? Guiding Cases and Judicial Reform, 129 Harvard Law Review 2213 (2016), p. 2226). It remains to be seen what impact guiding cases may have on arbitrators’ decision-making when arbitrating in China or when Chinese law is applicable to the merits of a dispute.

Belt and Road and CICCs

Another interesting development to be highlighted is China’s ambitious BRI, which has the potential to reshape the global socio-economic landscape. One core feature of the BRI is the emphasis on the rule of law, including efforts to develop an effective dispute resolution mechanism, which suits the needs of the BRI projects. In this context, it is worth noticing the recent establishment of the two China International Commercial Courts (CICCs), which are examples of two-way adaptations.

On the one hand, the CICCs’ establishment follows an interesting development worldwide: the emergence of “international” commercial courts created within a domestic legal system to resolve cross-border commercial matters, such as the Singapore International Commercial Court (SICC).

On the other hand, the CICCs also demonstrate a Chinese innovation by establishing a comprehensive multiplex dispute resolution mechanism, allowing the parties to choose between mediation, arbitration and litigation.

The “one-stop” dispute resolution mechanism established by the CICCs could better facilitate the interconnection between mediation, arbitration and litigation, and thus enable a fair, efficient and convenient resolution of international commercial disputes in the context of the BRI.

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