Force for change

A number of elements have combined to create an irresistible wave of change in the practice of dispute resolution, but will this be enough to revolutionise the sector within China? Sophia Luo reports

Imprint of the coronavirus pandemic that is still rampaging across the globe, the economic downturn that shows no sign of abating, and a storm of rising geopolitical issues.

“Companies have faced unprecedented challenges in 2020, following the coronavirus pandemic, including temporary shutdowns of their operations, widespread supply chain disruption and reduced cashflow,” says Emmanuel Jacomy, a partner in the International Arbitration practice at Shearman & Sterling based in Beijing and Singapore. “This has led to an increase in disputes, as companies have tried to modify or terminate their contracts to alleviate financial pressure in the face of an unforeseen economic climate.”

Jacomy notes this has also led to an increase in foreign-related disputes, as well as arbitration cases seated in mainland China and Hong Kong, although several of these disputes are still at the negotiation stage and have yet to translate into actual arbitration. M&A transactions, for example, have ended up in disputes as buyers look to renegotiate prices, or call off the transaction altogether. Construction projects have faced substantial delays, leading to arbitrations between contractors and project owners over who should bear financial responsibility.

Cao Lijun, a Beijing-based partner at Zhong Lun Law Firm, says escalating Sino-US tensions have indirectly locked many tech firms into contractual and intellectual property (IP) disputes. Meanwhile, as China presses ahead with its Belt and Road Initiative (BRI), disputes over offshore construction projects are also inevitable.