Gears changing

* The articles are arranged in alphabetical order by the abbreviated name of institutions

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Path to internationalisation of arbitration in China

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.

International branding

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.

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Jiang Lili is the secretary-general at the Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC)

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Innovative rules, upgraded mechanism

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.

1. 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.
2. 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.
3. 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.
4. 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.

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.

Worldwide routes

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:

1. Significant increase in the number of cases, with more than RMB100 million (USD14 million) in dispute;
2. 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;
3. 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
4. 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:

1. 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;
2. Provided systematic rules for arbitration evidence to facilitate the arbitral tribunal ascertaining case facts;
3. 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
4. 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.

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 [2023] 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)

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