Arbitrating Chinese Domestic Disputes

May 08, 2008 | BY

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Despite some remaining flaws, arbitration is still the preferred method of dispute resolution for investors in China. This is not only due to the generally applicable advantages of arbitration over litigation but is also linked to the particularities of the Chinese legal system. However, these particularities should be carefully taken into account when drafting the arbitration clause in a contract involving a Chinese party, otherwise the arbitral process could lead to an unenforceable and useless award.

SETTLING CHINA-RELATED DISPUTES THROUGH ARBITRATION

Settling a dispute through arbitration is in many respects more attractive than litigation as it ensures neutrality, flexibility, and the possibility of choosing arbitrators with technical abilities in the relevant industry or business sector. Furthermore, not only does arbitration allow confidentiality of the hearings and awards, it is also attractive because of its speed and cost. But above all, arbitration is attractive because of its easy enforceability.

By way of contrast with judgments, which usually can only be enforced in countries that have entered into bilateral treaties with the country where the judgment was rendered, arbitral awards from any of the 142 member States of the 1958 Convention on the Recognition and Enforcement of Arbitral Awards, known as the New York Convention, can be enforced by the judges of any other member State. In addition, the grounds for refusal of enforcement of an arbitral award by a foreign judge are very limited, mainly relating to the validity of the arbitration procedure under the New York Convention.

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