Arbitration in the PRC

By Eu Jin Chua and Kathryn Sanger, Clifford Chance, Shanghai and Hong Kong

Over the last decade, China has been the destination of choice for many multinational companies. However, investments can sometimes go wrong and disputes arise between parties to an investment. Foreign investors may therefore have to resort to legal action to extricate themselves from their investments.

Among the various ways of settling disputes in China between Chinese and foreign parties, as most readers are probably aware, arbitration is the most popular. In part this is because China has for several years promoted arbitration as the preferred method for dealing with commercial disputes. Indeed, the China International Economic and Trade Arbitration Commission (CIETAC) has emerged in recent years as a world heavyweight in terms of numbers of cases heard each year. Some commentators have criticized the CIETAC regime, but this appears not to have gone unheeded. At the time of publication, CIETAC has just issued the CIETAC, Arbitration Rules (2005 Version) (the New Rules, which will be discussed in the following sections) that go some way toward redressing the criticisms. The New Rules became effective on May 1 2005.