- Path to internationalisation of arbitration in China
Jiang Lili – BAC/BIAC
- Innovative rules, upgraded mechanism
Wang Chengjie – CIETAC
- Swift winds of change sailing foreign-related maritime arbitration
Li Hu – CMAC
- The ‘Asian century’ of arbitration
Yang Ling -HKIAC
- Emergency arbitrator: a helping hand in times of need
Vera He & Donna Huang – ICC
- Back to the essence: party autonomy
Liu Xiaochun – SCIA
- A barometer for the business environment
Wang Weijun – SHIAC
AFTER DECADES of progress and internationalisation, China’s now fairly sophisticated arbitration industry and its top players look to the essence – the fundamental advantages behind arbitration thriving as an alternative to traditional litigation – to improve on their collective offering of dispute resolution services.
Party-centric appears to be the consensus on which new paths are charted, as arbitration rules and practices are upgraded to better reflect parties’ autonomy of will, including new and improved ways of presiding over arbitrator elections, early dismissals and emergency arbitration mechanisms.
With tireless efforts to cater to the increasingly complex needs for international disputes, leading institutions in China, now boasting statistics guaranteed to impress in any market, strive to make the country a first-rate venue of international arbitration for users around the world, coinciding, not accidently, with the dawn of the “Asian century” of arbitration.
In this exclusive series, we present a collection of insightful contributions from seven top arbitration institutions in China’s legal market, as they lend invaluable expertise and perspectives on the evolving arbitration landscape in mainland China, Hong Kong, and the rest of Asia.
* The articles are arranged in alphabetical order by the abbreviated name of institutions
In recent decades of globalisation, alongside China’s reform and opening-up, the country’s arbitration institutions have steadily continued to internationalise, which is a boon not only for their own worldwide competitiveness but also for domestic and foreign enterprises now having access to world-class arbitration services.
Internationalisation has been the mission of the Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC) since 2002. After more than two decades, it has evolved into a “domestic arbitration institution that meets or even exceeds international standards”.
This article reviews the path to internationalisation of arbitration institutions in China from the BAC’s perspective.
International arbitration rules
Since its inception, the BAC has revised its arbitration rules 11 times, each time aligning it closer to international standards.
In 2015, emergency arbitrator and interim measures and procedures were established in the arbitration rules to protect cross-border, interjurisdictional interests of parties in both preservation and enforcement.
In 2017, the BAC accepted the first arbitration case in mainland China applying the emergency arbitrator procedure, which subsequently obtained an enforcement order from the Court of First Instance in Hong Kong.
As of the end of June 2023, the BAC rendered a total of six emergency arbitrator decisions, four of which upheld the parties’ application for interim measures.
With a series of new measures, the 2022 BAC arbitration rules: clarified on online hearings; added a new method of electing a presiding arbitrator (where two arbitrators, individually selected by each party, appoint the presiding arbitrator); and affirmed the effect of electronic service.
International fee standards
Arbitration fee reform has long been a priority in the BAC’s internationalisation exploits. Since 2019, arbitration fees have been expressly categorised into arbitrator compensation and institution fees, the breakdown of which is listed on the verdict. The differentiation enhances transparency of fee composition, informs parties of exactly how the fees are used, and further motivates the arbitrators.
In terms of arbitrator compensation, the BAC also allows parties to adopt hourly rates, facilitating their cost management for dispute resolution. Practice has shown that hourly billing of arbitrator fees can save parties up to half of the costs of arbitration. The BAC is the first and so far only arbitration institution in mainland China that supports arbitrator compensation on the basis of hourly rates.
Internationally sourced cases
As the BAC revamps and upgrades its practices, a growing number of cross-border dispute parties have selected it as the seat for resolution. In 2002, only 19 international cases came to the BAC; by 2022, the number had grown to 221, a 10-fold gain in 20 years.
In the past three years, the BAC has consistently handled more than 200 international cases a year, with the largest subject matter of a single case approximating RMB8.2 billion (USD1.2 billion). Extraterritorial laws or international conventions were applied in 30 cases; 37 cases used non-Chinese languages; and foreign arbitrator participation occurred in 312 instances, with nine cases involving unlisted arbitrators.
These cases reflect the BAC’s internationalisation while also bringing valuable experience for further rules and systematic innovation.
The BAC has been an active player on the stage of international arbitration, striving to enhance the global influence of China’s arbitration.
For 10 years since 2013, the BAC has been organising the Annual Summit on Commercial Dispute Resolution in China across Europe, Asia and America, and publishing Commercial Dispute Resolution in China: An Annual Review and Preview in both Chinese and English.
An active respondent to the Belt and Road Initiative, the BAC co-launched the Belt and Road Arbitration Initiative in 2017, and established the Beijing branch of the China-Africa Joint Arbitration Centre.
Since 2017, the BAC has been acting as an observer at the UN Commission on International Trade Law (UNCITRAL), contributing its experience and insights in international commercial mediation and simplified arbitration, among many topics.
In addition, as vice president of the Asia Pacific Regional Arbitration Group (APRAG), the BAC hosted the APRAG Conference 2023 in November.
The next step
On 1 September 2023, the eighth committee of the BAC was inaugurated, in accordance with the Opinions on Improving the Arbitration System and Enhancing the Credibility of Arbitration, released by the general offices of the Central Committee and the State Council, as well as general BAC reform plans of the Beijing municipal government.
The new committee comprises 12 Chinese or foreign senior experts in legal, finance, digital economy, intellectual property and international commercial dispute resolution. It marked the first time a foreign member was included in the committee and a board of supervisors had been created. The committee shoulders core decision-making responsibilities under the Arbitration Law, aiming to truly transform the BAC into a first-rate international seat of arbitration defined by professionalism, standardisation and internationalisation.
Looking back, the growth of China’s arbitration since promulgation of the Arbitration Law in 1995 has been closely connected with, and reliant on, internationalisation.
Owing to the New York Convention and commercial nature of arbitration, arbitral awards are inherently accessible across borders. It was with this attribute in mind that China proposed to create trial international arbitration seats in Beijing, Shanghai, Guangdong and Hainan, aiming to make China a desirable destination for arbitration.
Only with international development as the goal can arbitration in China truly unleash the systematic strengths of arbitration, further participate in the interpretation and formulation of international economic and trade rules, and continue to elevate international influence and discourse.
The level and quality of arbitration rules and relevant supporting measures are not only a reflection of an arbitral institution’s soft power, but also a guarantee for domestic and international dispute resolution.
With the constant growth of international economy and trade, and the in-depth promotion of the Belt and Road Initiative, arbitration institutions in China are accepting increasing numbers of foreign-related disputes. In 2022 alone, there were 72 arbitral institutions in China handling a total of 2,888 cases involving Hong Kong, Macau, Taiwan, and foreign countries and regions; an increase of 197 cases as compared with 2021 and representing an aggregate amount in dispute of RMB119.9 billion (USD16.9 billion).
The China International Economic and Trade Arbitration Commission (CIETAC) is the first foreign-related arbitration institution in China and one of the five most preferred arbitral institutions in the world. In 2022, the CIETAC accepted 642 foreign-related cases, with the aggregate amount in dispute standing at RMB37.4 billion.
The cross-border dispute resolution in China cannot develop without the reform and innovation of arbitration rules and related measures.
Revising arbitration rules
To further adapt to the higher requirements brought by the new situation, meet the parties’ demand of resolving disputes fairly and impartially, and formulate arbitration rules that are in line with international high standards, the CIETAC has revised its current arbitration rules in a bid to provide modern and international arbitration procedure services for commercial entities. The revised CIETAC Arbitration Rules (the “new rules”), composed of 88 articles involving more than 30 revised items, became effective on 1 January 2024, providing a more advanced basis for cross-border dispute resolution. The revisions are reflected below.
Application of information technology. The new rules support broad application of digital and smart technologies in arbitration procedures, giving priority to electronic delivery of arbitration documents, granting the arbitral tribunal the discretion to conduct virtual hearings, giving equal effect to electronic and handwritten signatures of arbitrators, and allowing electronic delivery of arbitral awards. These provisions have addressed the pandemic-induced difficulties in case filing, document delivery and in-person hearings regarding cross-border dispute resolution, and have effectively responded to the requirements of the digital era.
High efficiency. The new rules make arbitration more efficient in many ways.
- The new rules clarify that the power of determining jurisdiction is delegated to the arbitral tribunal pursuant to arbitration rules after the tribunal is formed. This practice not only conforms to the existing Arbitration Law, but also aligns with the generally accepted international principle of competence-competence, that is, an arbitral tribunal may determine its own jurisdiction.
- The scope of multiple contracts arbitration is further expanded, allowing claimants to add contracts during the arbitration proceedings so as to better address cross-border disputes caused by frequent serial transactions, multi-party transactions and multiple transactions under a single project in the context of economic globalisation.
- The early dismissal procedure is introduced for the first time in China. The new rules set out circumstances and procedural provisions for the early dismissal of an arbitration claim or counterclaim that is manifestly without legal merit, or is manifestly outside the jurisdiction of the tribunal, making it clear that a decision on early dismissal can be rendered in an award.
- The new rules clarify for the first time that failure to negotiate or mediate shall not prevent the claimant from applying for arbitration, addressing longstanding uncertainties in practice, and protecting the legitimate rights and interests of the parties.
Standardisation. The new rules: (1) allow the CIETAC to forward a party’s application for conservatory measures to a court based in mainland China, or, at the request of the party, to an overseas competent court; and (2) affirm for the first time the applicability of the CIETAC’s Guidelines on Evidence to arbitral proceedings. The Guidelines on Evidence effectively combine the evidence principles under the systems of civil law and common law to meet the needs of the parties in different legal systems for using relevant evidence rules to resolve disputes, helping the tribunal and the disputing parties substantiate facts of the case in a more effective and standardised manner.
Transparency. While maintaining the confidentiality of arbitration, the new rules enhance the transparency among participants in arbitration proceedings. (1) the disputing parties are required to disclose the information on any third-party funding to the tribunal in a timely manner; and (2) the provisions on arbitrators’ remuneration and hourly rates are improved with reference to international arbitration practices, allowing both Chinese and foreign arbitrators to charge fees at hourly rates, and the fee schedule for the arbitrators’ hourly rates to be published on the CIETAC’s website at the same time.
Autonomy. The new rules demonstrate more respect for the parties’ right to fairly and equally nominate arbitrators, giving the parties more options to jointly nominate the presiding arbitrator, including joint nomination by the parties, joint nomination by arbitrators as agreed by the parties, recommendation of candidates by the parties and recommendation of candidates by the arbitration commission. The new rules also restrict the parties from abusing their rights to delay the arbitration proceedings.
Belt and Road co-operation mechanism
As the Belt and Road construction is further promoted, the number of related disputes is also increasing. From 1 January 2013 to 15 August 2023, the CIETAC accepted 2,856 cases involving jurisdictions, countries and regions along the Belt and Road, including Hong Kong, Macau and Taiwan. In the past 10 years, the total amount in dispute in cases involving the Belt and Road accepted by the CIETAC has reached RMB153.5 billion, averaging more than RMB15 billion per year. There are 246 cases with a disputed amount of more than RMB100 million, including 27 cases exceeding RMB1 billion. The average amount in dispute of the cases involving the Belt and Road exceeds RMB53 million.
In 2023, the CIETAC launched the Co-operation Mechanism on Foreign Law Ascertainment of the Belt and Road Arbitration Institutions, the latest achievement in the implementation of the Belt and Road arbitration legal co-operation that helps create a stable, fair, transparent and predictable business environment of the rule of law for resolving international commercial disputes. To date, a total of 40 partners have signed the memorandum for this mechanism, including 24 international arbitration institutions and other relevant dispute resolution organisations from nearly 20 countries and regions in Asia, Europe, the Americas and Africa.
Strengthening team building
Professionals are essential to the quality of cross-border dispute resolution services. To further meet the growing arbitration needs of international commercial entities and improve the service level in key sectors such as securities, futures and construction projects, CIETAC keeps updating the panels of arbitrators and mediators.
In 2022, the CIETAC successfully completed the in-session renewal of arbitrators. Now it boasts a global team comprising 1,881 arbitrators hailing from 145 countries and regions, including 112 signatories of the Belt and Road co-operation documents across six continents.
In June 2023, the CIETAC announced a new panel of 300 mediators, including 35 from outside mainland China, including Hong Kong, Macau, Taiwan and 11 foreign countries such as the UK, the US and Australia. The CIETAC also published a new list of experts for construction dispute review. Among the 191 experts, 26 are from Hong Kong, Macau, Taiwan and 12 foreign countries.
The working languages of mediators and review experts include English, Russian, German, French, and also Cantonese, Hakka, Minnan and other Chinese dialects, meeting the dispute resolution needs of parties from various countries and regions.
Wang Chengjie is the vice chairman and secretary general of the China International Economic and Trade Arbitration Commission (CIETAC)
In 1959, the China Maritime Arbitration Commission (CMAC) was established as part of the China Council for the Promotion of International Trade (CCPIT), becoming mainland China’s only state-level foreign-related arbitration institution specialising in resolving maritime disputes.
To the world, the CMAC now represents China’s standard for foreign-related maritime arbitration, which, due to years of high-level opening-up, is sailing in rapid currents.
In 2022, the CMAC handled a total of 190 cases, including 34 foreign-related and 15 concerning Hong Kong or Macau maritime issues, involving 25 overseas parties from 32 countries and regions.
In 2023, as of 31 October, the CMAC handled 1,078 new cases, including 26 foreign-related and 23 concerning maritime issues in Hong Kong, Macau and Taiwan, involving 38 overseas parties from 23 countries and regions.
These cases involved a considerable number of countries and regions across all continents including South Africa, the Philippines, Malaysia, Vietnam, Israel, Egypt, Pakistan, Russia, Italy, the US, Germany, Japan, Brazil, the Cayman Islands, the BVI and Bermuda, as well as Hong Kong, Macau and Taiwan.
Overall, these foreign-related maritime cases exhibit the following trends:
- Significant increase in the number of cases, with more than RMB100 million (USD14 million) in dispute;
- Emergence of new types of disputes – involving bunker fueling, offshore engineering, photovoltaic equipment and transfer of ship equity – as the number of traditional maritime cases dealing with the construction, management, retention, salvage and mortgages of ships was generally average, with a steady increase in issues involving supply of materials and spare parts, wharf leasing, personal injury at sea, marine insurance, and shipping fraud;
- Emergence of international maritime cases where both sides are foreign parties; English is mutually designated as the language of proceedings; and foreign substantive law is applied as the governing law; and
- Increasing complexity of legal issues involved in cases, such as the identification and application of foreign laws.
Setting the sails
To promote continual development and internationalisation of foreign-related maritime arbitration, the CMAC regularly updates its panel of arbitrators and revises its arbitration rules, and has established rules for ad hoc arbitration.
A total of 826 arbitrators constitute the CMAC’s 2021 panel, with the number of overseas arbitrators (including those from Hong Kong, Macau and Taiwan) increasing to 123, hailing from 36 countries and regions. This greatly facilitates the selection of arbitrators for Chinese and foreign parties alike.
In arbitration management, the CMAC’s 2021 arbitration rules recorded several breakthroughs. For the first time, the rules:
- Provided comprehensive regulations on electronic service of notice, video hearing, video testimony and e-signature, as well as cybersecurity and privacy and data protection, recognising the wide application of information technology in conventional arbitration;
- Provided systematic rules for arbitration evidence to facilitate the arbitral tribunal ascertaining case facts;
- Distinguished between the case manager and secretary of the arbitral tribunal, and clarified the scope of duties between the institution and the tribunal, preventing conflicts of interests while also improving arbitration transparency; and
- Clarified service to the captain of the ship involved in the case as a valid form of service of process, adapting to the special needs of maritime arbitration.
In addition, while further emphasising the importance of party autonomy, the 2021 rules granted more autonomous powers to the tribunal, strengthening its duty of care and transitioning the institution to a “light management” system.
Optimal composition of the tribunal. Parties may elect arbitrators outside of the CMAC’s own panel. Where parties cannot agree on a presiding arbitrator, two arbitrators, respectively selected by the parties, may do so jointly. Only when a presiding arbitrator cannot be elected within the specified period will it fall to the institution to make an appointment.
Strengthened competence and responsibility. According to the 2021 rules, the tribunal is required to convene a case management meeting immediately after its constitution to determine the possible procedures, as well as the roadmap and timetable of the hearing. The tribunal has the right to require the parties to disclose any third-party funding or financial interests in the outcome of the arbitral award.
Furthermore, the tribunal is required to carefully consider the adequacy of pre-trial exchange of documents and fulfilment of conditions when setting a date for a hearing, in order to maximise efficiency.
Flexible fee management. Special agreements are permitted for parties to separate institution fees and arbitrator fees, which further aligns with international practice.
Innovation and outlook
Echoing the continual opening-up and worldwide exposure of China’s domestic arbitration market, the CMAC launched its Ad Hoc Arbitration Rules, making ad hoc arbitration available for its members, as well as Chinese and foreign parties.
Together with the concurrently released CMAC Ad Hoc Arbitration Service Rules, they serve as a pioneer for ad hoc arbitration in mainland China, further promoting the development of foreign-related maritime arbitration.
On 30 June 2023, the first ad hoc arbitration case in mainland China, with the CMAC designated as arbitration institution in charge, reached a successful conclusion with the issuance of an award.
With implementation of the Regional Comprehensive Economic Partnership, there is great anticipation of economic growth and potential within the Asia-Pacific. In tandem, maritime arbitration in resolving international shipping trade disputes becomes increasingly important.
The CMAC will work alongside fellow institutions both within and outside China to contribute to the healthy development of international arbitration.
Li Hu is the vice chairman of the China Maritime Arbitration Commission (CMAC)
Asia’s booming economy is spawning first-rate seats of arbitration across the region, with Hong Kong and Singapore setting the world-class benchmark, says Yang Ling, deputy secretary-general and chief representative of the Shanghai office of the Hong Kong International Arbitration Centre (HKIAC), in this interview with China Business Law Journal.
CBLJ: What are the key developments at the HKIAC in the past year?
Yang Ling: In many ways, the HKIAC builds its success and growth upon the development of dispute resolution infrastructure of Hong Kong as a jurisdiction. This refers first and foremost to legislation.
One of the most significant legislative moves in recent memory involves flexible fee arrangements related to the outcome of arbitration. Along with the third-party funding (TPF) mechanism introduced earlier, it was a major step forward that makes Hong Kong – a traditional international arbitration hub – that much more attractive and competitive.
The judicial efforts are also notable, as Hong Kong courts have long supported the development of arbitration. In a recent major case, C v D  HKCFA 16, the Hong Kong Court of Final Appeal for the first time affirmed the distinction between “admissibility” and “jurisdiction”.
This means that, in a case involving multiple layers of dispute resolution clauses, where one party fails to follow through the negotiation, mediation or other such arrangements provided by the clause, the court would consider it only a matter of admissibility but not jurisdiction.
Under the common law system, clear judgment of jurisdiction is essential. The distinction means that the Hong Kong courts will not easily interfere with the application of multi-layered dispute resolution clauses in arbitration. In fact, intervention by Hong Kong courts in arbitration is strictly governed by the Arbitration Ordinance.
In terms of recent mechanism innovation, the HKIAC launched its Case Digest and Case Connect systems. The latter serves as an online case management platform for tribunals and parties, while the former allows international arbitration users to become familiar with beneficial procedural decisions made by the HKIAC.
In addition, we have some exciting events and collaborations. In September 2023, the HKIAC entered into a strategic collaboration with the Dubai International Arbitration Centre (DIAC), promoting international arbitration as a method of resolving cross-border disputes across Hong Kong, mainland China and the Middle East, which also goes along well with the increasingly dynamic investment and economic exchanges between these regions.
In November 2023, we also renewed our co-operation arrangement with the Shanghai International Arbitration Centre (SHIAC).
It is also worth noting that the 26th International Council for Commercial Arbitration (ICCA) Congress is set to take place in Hong Kong from 5 to 8 May 2024, with the HKIAC as host.
CBLJ: How is the arbitration industry faring in terms of safeguarding the equality and diversity of arbitrators?
Yang Ling: In this regard, I believe we have made much headway, although there remains a long way to go. The general view on the importance of arbitrator diversity differs drastically between cultures and jurisdictions, ranging from paramount all the way to negligible.
There is no shortage of global initiatives promoting diversity in the selection of arbitrators, such as ArbitralWomen, founded in 1993, and Racial Equality for Arbitration Lawyers (REAL).
For the HKIAC, it has been a goal established early on to not only raise awareness of this issue among the arbitration community, but also practise what we preach.
In 2016, the HKIAC signed the Equal Representation in Arbitration Pledge; and in 2018, it launched the Women in Arbitration (WIA) initiative. Ostensibly, the WIA is about gender diversity, but it is in fact much more than that, touching on the diversity of age, culture and other aspects. The HKIAC has also launched HK45, designed to facilitate the long-term growth of young arbitration practitioners.
For the HKIAC’s practice in selecting arbitrators, I would like to direct you to its Practice Note on Appointment of Arbitrators, which is accessible on our website. The note clearly lists “diversity of qualified arbitrators” as one of the factors to be considered when it falls to the institution to select arbitrators, either by the request of the parties or because they failed to come to an agreement. In fact, when all other conditions are equal, we tend to recommend a female arbitrator.
At the moment, the HKIAC arbitration rules are being revised, and one of the matters under discussion is whether to add an article on “diversity” to the rules.
CBLJ: What do you see as major trends in the evolution of international arbitration in recent years?
Yang Ling: From my observations both as a follower of academic research and in my capacity at the HKIAC, I believe that international organisations are playing an increasingly prominent role in international arbitration.
For example, the arbitration-related working groups of the UN Commission on International Trade Law (UNCITRAL) released model provisions and guidelines on the mediation for investment disputes code of conduct for arbitrators; and the International Bar Association (IBA) has issued guidelines regarding conflicts of interest and rules on taking evidence in international arbitration.
In recent years, the ICCA also, by itself and along with others, published several reports on the international arbitration, including two reports on diversity of arbitrators, and one on cybersecurity, co-published with the New York City Bar. The Chartered Institute of Arbitrators (CIArb) also introduced guidelines relating to the use of technology in international arbitration.
International arbitration institutions are also playing an increasingly prominent role in the development of international arbitration.
From what I have seen in both Shanghai and Hong Kong, arbitration institutions find themselves in a leading position not just in mainland China, but across the international community, where they contribute to the formation of legislation, practices and rules. TPF, for instance, could not have enjoyed its level of success if the institutions did not incorporate it into their arbitration rules.
Finally, we cannot discuss international arbitration without considering our era, of which it is a product. What defines our era? Is it rapid growth or economic downturn? World peace or constant regional strife?
I believe our era, compared with a few years ago, is more prominently characterised by conflicts, sanctions and emerging sectors, which means international arbitration faces unprecedented complexity.
International arbitration is designed to resolve cross-border disputes. With our time marked by conflicts, arbitration will undoubtedly play an even more significant role.
CBLJ: What does the future landscape of dispute resolution in Asia look like?
Yang Ling: I have absolute faith in the future of dispute resolution in Asia. In November 2023, I attended the Asia-Pacific Regional Arbitration Group (APRAG) conference held in Beijing, representing the HKIAC.
In a panel discussion of which I was a part, the moderator, Professor Sundra Rajoo, director of the Asian International Arbitration Centre (AIAC), asked the panellists what we thought about the “Asian century” of international arbitration.
“Asian century” is a bold claim, but it was not without reason. Asia is home to the world’s burgeoning economies, so it is no surprise that its arbitration scene enjoys similar success.
Little needs to be said about Singapore and Hong Kong, which are time-honoured arbitration hubs in Asia, long held to be evenly matched with the best that the Western world has to offer.
Mainland China is also home to a number of leading arbitration institutions, each boasting statistics that would be impressive anywhere on earth.
Some of our neighbouring countries, like South Korea and Japan, are not traditionally large arbitration markets. But after years of government support and talent inflow, their arbitration centres are now forces to be reckoned with.
Similarly, to our south, arbitration is growing steadily in Malaysia, Thailand and India, on their way to becoming arbitration hubs in the region.
To all users, in Asia and elsewhere, it means an abundance of options. With so many first-rate seats of arbitration, as well as many more striving to make the top tier, creating an environment of healthy and dynamic competition, users can expect dispute resolution services to improve further.
That being said, by my estimation the supply of arbitration services in Asia still falls short by far from what’s required for its booming economy. All arbitration institutions stand to benefit from the regional growth.
On the other hand, as they continue to improve service quality and together create an exceptional dispute resolution package, parties from all over the world will be attracted to Asia, bringing with them opportunities and their needs for dispute resolution.
Yang Ling is the deputy secretary-general and chief representative of the Shanghai office of the Hong Kong International Arbitration Centre (HKIAC)
When commercial or economic entities become embroiled in disputes, many take measures to quickly divert or conceal the property in question, or destroy case-related evidence to minimise their losses in the dispute.
As constitution of an arbitral tribunal in international arbitration can take a long time, a party must bear the risks of property diversion or evidence destruction before the hearing.
On that note, to address arbitration needs “so urgent that waiting for the constitution of the arbitral tribunal before the granting of interim or preservation measures is not an option”, the emergency arbitrator system was created, offering parties access to pre-tribunal interim relief.
The International Chamber of Commerce (ICC) Court of Arbitration introduced the emergency arbitrator mechanism in 2012, but it was not the ICC’s first attempt to try pre-arbitral interim measures. As early as 1990, the ICC created the pre-arbitral referee procedure in an attempt to put in place a system to resolve the issue of interim measures before arbitral tribunals are constituted.
The pre-arbitral referee procedure was an embryonic form of the ICC’s emergency arbitrator provisions, although the two fundamentally differ in how they apply, with the former being “opt-in” and the latter being “opt-out”.
This difference is the fundamental reason why the former has not been widely employed while the latter has been wildly successful.
It should be noted that the ICC’s Rules for a Pre-Arbitral Referee Procedure are still in effect. The latest 2021 edition of the ICC Arbitration Rules (ICC rules) details current provisions for the emergency arbitrator procedure in article 29 and appendix V, Emergency Arbitrator Rules.
Why emergency arbitrator?
Although there is not yet any uniform practice around the enforceability of emergency arbitrator orders in courts of different countries, the mechanism has been demonstrating increasingly greater vitality in the past 30 years due to its high attentiveness of party autonomy, confidentiality, efficiency and impartiality.
Practice has shown that the enforceability of emergency arbitrators’ orders is not manifest solely in their recognition and enforcement by courts.
On one hand, arbitration rules specify that orders are binding on the parties; on the other hand, the non-complying party also bears potential risk of the arbitral tribunal drawing an adverse inference from its breach.
As of April 2018, in 23 orders rendered by the ICC approving emergency measure applications, a party failed to voluntarily comply with the order in only three instances.
The emergency arbitrator mechanism has also played a positive catalytic role in promoting settlements between parties, evidenced by a review of the substantive content of applicants’ arbitration claims by emergency arbitrators on whether reasonable prospect of prevailing permits parties to build up expectations of the arbitral award and adjust their positions at an early stage.
As of April 2018, of the 80 applications for emergency measures accepted by the ICC, settlement was reached before rendering of the final award in 25 cases, representing 31% of cases.
Duration and effect
If the court of arbitration determines that an application for emergency arbitrator should be accepted, the president will usually appoint an emergency arbitrator within two calendar days from the date that the secretariat receives the application. The emergency arbitrator will issue a procedural schedule within two days from the date of receipt of the case materials and render an order within 15 days.
The applicant must submit an application for arbitration before submitting its application for an emergency arbitrator – or within 10 days from the date it submits the application – failing which the emergency arbitration procedure halts.
In the practice of the court of arbitration, the emergency arbitrator renders an order on average within 16 days.
Unless the parties have expressly excluded an application of the emergency arbitrator provisions, they are deemed to have undertaken to comply with any order rendered by the emergency arbitrator. The emergency arbitrator may additionally require a party to provide appropriate security.
However, notwithstanding an application of the emergency arbitrator procedure, a party retains the right to apply for emergency measures to a competent judicial authority at any time. An emergency arbitrator’s order is not binding on the subsequently constituted arbitral tribunal with respect to any question, matter or dispute identified in the order. The arbitral tribunal may revise, terminate or set aside an order rendered by the emergency arbitrator.
Criteria and actual use
Once the secretariat receives an application, the president of the court of arbitration will consider whether the emergency arbitrator provisions are applicable by measuring against the following criteria:
- Parties are signatories to, or assignees under, the arbitration agreement and the arbitration agreement is the same under which the request is made;
- The arbitration agreement was entered into after 1 January 2012;
- Parties have not expressly excluded application of the emergency arbitrator provisions; and
- The arbitration agreement on which the request is based does not derive from an international treaty.
Of 212 applications received by the ICC between 2012 and 2022, the president denied applicability in only six cases, making it a rare occurrence.
Once applicability is confirmed, it is up to the emergency arbitrator to decide on the jurisdiction and admissibility of the application, the latter including a review of urgency to confirm whether emergency measures without waiting for tribunal constitution are truly necessary.
Although the emergency arbitrator system has been widely accepted by international arbitration institutions, the mechanism is designed for special and urgent cases, so the determination of “urgency” requires great caution.
Accordingly, instances in which emergency measures were ultimately taken remain relatively few in number. As mentioned, of 80 applications for emergency measures, only 23 were partially or fully approved by the emergency arbitrator, representing an approval rate of 29%.
Among emergency arbitrator applications received as of 2022, 51% were denied by the arbitrators, holding that they did not reach the threshold for granting emergency measures.
Additionally, there is still a lack of substantive regulations and guidelines on the issues of jurisdiction, admissibility and urgency of emergency arbitrators in international arbitration.
According to the ICC’s Emergency Arbitrator Proceedings report issued in April 2019, out of 80 applications:
- In 50% of the cases, consideration was given to whether irreparable losses would be caused if no relief was granted;
- In 38% of the cases, consideration was given to the likelihood of success in the substantive dispute;
- In 20% of the cases, consideration was given to whether the loss incurred from not granting emergency measures would be significantly higher than the likely loss from granting the emergency measures;
- In 15% of the cases, consideration was given to whether there was a risk that the dispute would be further aggravated if no relief was granted; and
- In a further 24% of cases, no consideration was given to the substantive dispute.
Clearly, given the varying considerations for granting interim measures by different emergency arbitrators, no uniform practice or criteria have taken form.
What is certain, however, is that “urgency” is a very high standard. Arbitrators’ determination of the degree of urgency is extremely prudent, essentially requiring a level that is “so urgent that waiting for constitution of the arbitral tribunal is not an option”.
Experience and outlook
Incorporation of the emergency arbitrator system places greater demands on the speed of response of arbitral institutions and the speed of appointment of arbitrators.
Although, pursuant to article 3 of the ICC rules, the period for appointing an emergency arbitrator does not include public holidays or non-working days, in practice the secretariat will nevertheless usually process applications for emergency measures on “off” days to quickly respond to the urgent needs of parties.
Efficiency of the emergency arbitrator system is also highly dependent on the active co-operation of parties. Applicants will often resort to a “sudden ambush” tactic – such as submitting an application before a holiday or after work on a Friday – to catch the respondent off-guard in responding. The problem, however, is that this also makes it difficult for the arbitral institution to deal with the application and appoint a suitable emergency arbitrator outside working hours. Accordingly, informing the secretariat in advance of an impending emergency application is crucial to the efficient and rational progress of subsequent proceedings.
With the exception of Hong Kong, Singapore and New Zealand – which expressly specify that orders of emergency arbitrators are enforceable – whether courts in other countries and regions have the power to enforce the orders of emergency arbitrators is a matter that requires further accumulation of precedents.
How to better co-ordinate between courts and arbitral institutions in terms of emergency measures and provide a more user-friendly and reliable environment for commercial entities to survive in international arbitration is one of the considerations in creating a preferred seat of arbitration.
Donna Huang is the director and Vera He is the deputy director of arbitration and ADR for North Asia at the International Chamber of Commerce (ICC). Huang is also the chief representative of the Shanghai office
In the academic world, some have proposed that arbitration rules should be tribunal-centric, while others advocate for them being institution-centric. From where we stand, however, if there is anything “centric” about commercial arbitration – not that there has to be – it should only be party autonomy.
In other words, parties to the arbitration should be the top consideration of arbitration rules, as per the very nature of arbitration itself.
Arbitral jurisdiction originates from the trust, agreement and authorisation of the parties. Therefore, arbitration rules should be made for the benefit of the parties, and only the rules that value party autonomy can serve arbitration in its original and essential purpose.
Evolution of the idea
Party autonomy has long been at the core of the development and innovation of international arbitration in the Shenzhen Special Economic Zone, the first special economic zone (SEZ) established in China. The idea steadily grew along with China’s reform and opening up, and it was eventually established as a fundamental principle in the arbitration rules at the Shenzhen Court of International Arbitration (SCIA).
In 1982, the early days of China’s reform and opening up, preparations were made for establishing an international arbitration institution in the Shenzhen SEZ. Even then, party autonomy was heavily represented in the draft arbitration rules, although they were not implemented at the time for historical reasons.
Thirty years later, the year 2012 marked not only a new period of China’s reform and opening up, but also the initiation of emphasising party autonomy in the arbitration rules. In 2016, the Council of the SCIA amended the arbitration rules and officially established “party autonomy” as a core principle.
Problem in practice
The SCIA is dedicated to ensuring full respect for party autonomy, emphasising its “centric” role in arbitration. According to the SCIA arbitration rules, parties, either Chinese or foreign, may voluntarily decide the seat, rules and language of arbitration, as well as the method of service, the composition of an arbitral tribunal, the conduct of hearing proceedings, the place of hearings, the rules of evidence, and the governing law, etc.
Among these numerous factors, perhaps the parties’ topmost concern lies in the appointment of the presiding arbitrator, which is also where the SCIA wishes to maximise party autonomy.
Most arbitration rules, both in mainland China and abroad, stipulate that, in principle, the presiding arbitrator should be appointed by both parties, which is one of the most important aspects of party autonomy. The problem is, disputing parties usually disagree with each other, which means that it may be difficult for them to appoint a presiding arbitrator together.
According to China’s Arbitration Law and ordinary Chinese arbitration rules, if the parties cannot appoint a presiding arbitrator together, then the director of the arbitration commission (the president of the arbitration institution) shall appoint a presiding arbitrator for them. A considerable proportion of parties remain sceptical about the neutrality of the presiding arbitrator appointed through this conventional method.
Innovation of the rules
To minimise these misgivings, the SCIA innovated several special methods to help the parties appoint the presiding arbitrator according to their will. Under article 30 of the SCIA Arbitration Rules, most of these methods draw on years of experience in practice and innovative measures emphasising party autonomy.
The idea is to, as much as is feasible, give back the right to appoint the presiding arbitrator to the parties, locate common ground between the parties, and assist them in realising their autonomy.
One of the special methods is the “appointment by co-arbitrators”, which is stipulated under article 30(3) of the SCIA Arbitration Rules. According to this method, the two arbitrators, each appointed by a party, jointly appoint the presiding arbitrator.
This practice has been met with much enthusiasm from both Chinese and foreign parties since its implementation in 2012. Based on the practices and feedback in the market, this method was further confirmed in the 2016 and 2019 versions of the SCIA Arbitration Rules. As the two arbitrators are appointed by the parties, the right to appoint the presiding arbitrator is to some extent “returned” to the parties through this method.
In addition, articles 30(4) to 30(6) of the SCIA Arbitration Rules provide three more alternative methods for appointing the presiding arbitrator, which are: “ranking from recommendation”, “selection from recommendation”, and “exclusion from recommendation”, meaning that, with the consent of the parties and after consideration of the issues of the case, the SCIA may recommend a list of presiding arbitrator candidates for each party to rank, choose or exclude. The eventual appointment will be based on their ranking, choices or exclusion. These methods also apply to the appointment of a sole arbitrator.
These creative and constantly evolving rules uphold the parties’ right to choose a presiding (or sole) arbitrator on a scale exceeding ordinary standards, facilitate the parties in the achievement of mutual consent, address the concerns about arbitrator neutrality, and boost their confidence in the arbitration institution, arbitral tribunal, and the arbitral award.
According to SCIA case statistics, in 2022, among the cases involving an amount in dispute of more than RMB100 million (USD14 million), 70% saw the parties jointly appoint the presiding or sole arbitrator.
Essence of arbitration
From certain perspectives, the above-mentioned innovation of arbitration rules shares the same spirit of the self-revolutionary with the innovation on the international corporate governance structure of the SCIA. In 2012, according to special legislation rendered by the Shenzhen SEZ, the SCIA became the first arbitration institution in the world to embrace a statutory body corporate governance structure.
In fact, rather than considering these reforms as innovations, it may be more appropriate to see them as a return to the very essence of arbitration. Arbitration exists because of the parties, so it stands to reason that they should be at the centre, and that they should be assisted to achieve their autonomy as far as possible. This, however, takes courage from the reformers and requires institutional support to set reliable expectations for Chinese and foreign parties.
Encouragingly, the party autonomy mindset was recently enhanced by legislation. In August 2020, at the 40th anniversary of the establishment of the Shenzhen SEZ, the Standing Committee of the Shenzhen Municipal People’s Congress, with special authorisation from the Standing Committee of the National People’s Congress, passed the Ordinance on the Shenzhen Court of International Arbitration. In the ordinance, “respecting the party autonomy” and “ensuring the independence of arbitration” are cited as the basic principles on which the SCIA arbitration rules shall be made.
Liu Xiaochun is president of the Shenzhen Court of International Arbitration (SCIA)
International arbitration is a natural mode of cross-border commercial dispute resolution for modern times. In a way, its level of development serves as an indicator that reflects the overall business environment of the jurisdiction.
An open and free business environment that respects the rule of law and spirit of the contract can be a strong driving force behind inflows of foreign investment and the evolution of domestic business practices, as well as the flourishing of international arbitration in the region.
Metrics to measure
With global balanced development as its goal, the World Bank has been releasing annual Doing Business (DB) reports since 2003, containing quantitative assessments and rankings of the business environment of 190 economies around the globe. In May 2023, the World Bank released the manual, guide and methodology handbook for the new Business Ready (B-Ready) report, containing a fresh set of assessment standards, designed to replace the DB.
Unlike the now-obsolete DB standards, where arbitration is but one item under the “enforcing contracts” chapter assigned a score of 1.5, the updated B-Ready has set out a separate chapter dedicated to “dispute resolution”, containing 19 arbitration-related indicators totalling more than 40 points, making it one of the key metrics under the updated system.
The B-Ready standards for assessing arbitration demonstrate two key characteristics. The first is that they tap into the growing trend of arbitration becoming more “party-centric”, such as where “parties’ autonomy” is listed as one of the indicators under “acceptance of arbitration”, questioning if the parties can freely select arbitrators, select an arbitral institution or ad hoc arbitration, and select a legal counsel. The availability of “online platform for arbitration” is listed as a standard under “ADR-related services”.
The second characteristic is the integrated assessment from the perspectives of regulatory framework, public services and accessibility, including whether the arbitral tribunal has the power to determine its own jurisdiction, and whether the court supports and enforces the interim awards made by the tribunal.
The refinement of relevant standards is a clear indication that arbitration is now regarded under the B-Ready system as an inseparable component of the business-friendliness of the region.
Per the World Bank’s request in 2023, Shanghai became the only city in China to be assessed for B-Ready, meaning that it shoulders the responsibility of representing China’s international arbitration in the context of more nuanced significance.
In the meantime, Shanghai’s legislators, judicial administrators, courts and arbitral institutions have actively responded to the scrutiny with numerous updates and innovations in laws, regulations and practice.
In terms of the legislation, on 22 November 2023 the standing committee of the Shanghai Municipal People’s Congress approved by vote the Regulations of the Shanghai Municipality on Promoting the Initiative for an International Commercial Arbitration Centre (the regulations), which provided guidance on the disclosure of arbitrators’ conflicts of interests, court-supported arbitration discovery, and publication of arbitration-related data, meeting B-Ready’s arbitration-related indicators on the business environment.
The above-mentioned regulations further encourage setting Shanghai as a destination for resolving foreign-related commercial and marital disputes, where specified persons may engage in ad hoc arbitration under special rules, while supporting tribunals in rendering opinions on parties’ applications for interim measures.
They also support institutions in the application of big data, cloud computing, blockchain, AI and other emerging technologies in order to facilitate smart and green arbitration, and the provision of high-quality, efficient and accessible commercial dispute resolution services.
In terms of the openness of the local market, the Shanghai centre of the Korean Commercial Arbitration Board (KCAB) was registered on 1 December 2023, which became the first operational body of an overseas arbitral institution, following the WIPO Arbitration and Mediation Shanghai Service. Under the regulations, the KCAB Shanghai will be able to carry out foreign-related arbitration in the fields of international commerce, maritime and investment.
In terms of court action, the first case of online arbitration property preservation in mainland China was handled in Shanghai, where the Shanghai International Economic and Trade Arbitration Commission (SHIAC) smoothly transferred the property preservation application and the official acceptance of arbitration to the court through the online filing port on the Shanghai court litigation service website.
In 2023, the Shanghai court further handled the first case in mainland China in which an investigation order was issued on the application of an arbitration institution, improving the court support mechanism for the obtaining of evidence in arbitration.
Arbitration rules refined
On the SHIAC’s part, it also met the B-Ready criteria with fervour, improving both arbitration rules and practices. For example, the SHIAC arbitration rules have been overhauled, with the 2024 version boasting a new system consisting of one set of main rules, two sets of special rules, and two procedural guidelines.
The new main rules carry through the theme of being “party-centric”, which aligns with the core idea behind the B-Ready standards. For example, they expressly allow parties to consolidate disputes under multiple related contracts for arbitration, further expand the participation of off-roster arbitrators, allow parties to agree on two side arbitrators to elect the presiding arbitrator, allow the parties to apply for determination of presiding arbitrator by way of a “shortlisting”, and permit zero-barrier, full-cycle online arbitration.
In addition, taking domestic practices into consideration, the main rules strike a balance between the leading role of the tribunal and the administrative role of the institution. For example, while they clarify that the tribunal enjoys competence-competence and the rights over interim measures and interlocutory awards, they also decree that the institution is required to strengthen the supervision and management over the information disclosure of parties, constrain parties from dishonest acts such as deliberately electing opposing arbitrators and, with consent, publish desensitised judgments.
The two sets of special arbitration rules focus on the aviation and data industries, respectively, each being the first rules designed by institutions to govern institutions within their fields. They also answer the call of the regulations for industry-specific arbitration rules, branding for professional arbitration services, and bringing arbitration capacity to the next level.
The two procedural guidelines shed light on full-cycle online arbitration and institutions’ assistance in ad hoc arbitration, respectively. In particular, the Declarations on the Handling of Personal Information of Users of Dispute Resolution Services, an attached document of the online arbitration guideline, is the first of its kind in mainland China that focuses on the security of personal information of arbitration users.
Wang Weijun is the secretary-general of the Shanghai International Economic and Trade Arbitration Commission/Shanghai International Arbitration Centre (SHIAC)