When Chinese and foreign enterprises enter into arbitration clauses, both sides tend to prefer stipulating that arbitration be conducted by an arbitration institution located in their respective home country or region, either because they are more familiar with or have more confidence in their local legal and arbitration systems. Due to certain issues in the past on the part of PRC arbitration institutions – e.g. the breakup of the head office of a certain arbitration institution and its sub-commissions – a significant number of foreign enterprises, when entering into arbitration clauses, do their best to ensure any arbitration pertaining to them is not conducted in China.
While the authors of this opinion understand why foreign enterprises are wary of PRC arbitration institutions, we are of the opinion that there are both advantages and disadvantages in selecting either a PRC or a foreign arbitration institution, and a foreign enterprise needs to select the institution that is most beneficial to its interests based on the actual circumstances of each business. The authors will give a brief overview of the special issues that a foreign enterprise needs to keep in mind when selecting an arbitration institution.
Whether an enterprise needs to have a PRC court take preservation measures is a special factor that foreign enterprises need to consider when selecting an arbitration institution. The diverting of assets by PRC enterprises after the commencement of arbitration – thereby making a winning award obtained with great effort by a foreign enterprise impossible to enforce – has become an immense problem that foreign enterprises regularly encounter when attempting to enforce an award. Pursuant to the Civil Procedure Law, when arbitration is conducted by a PRC institution, a party may promptly apply to the competent people’s court to take preservation measures, not only in the course of the arbitration procedure, but even before applying for arbitration, thereby ensuring as much as possible that the arbitration award rendered by the tribunal can be smoothly enforced.
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Wang Yadong (firstname.lastname@example.org) is the executive partner, and Xiao Jing (email@example.com) is the partner at Run Ming Law Office. They can be contacted by phone at +86 10 6569 3511