Beijing Arbitration Commission interview: Why efficiency and quality are key

1. What is your role at the BAC? Can you give a brief background of the commission?

I am the deputy secretary-general of the Beijing Arbitration Commission (BAC), also known as the Beijing International Arbitration Center (BIAC), which was established in 1995 as a non-governmental arbitration institution and became the first self-funded arbitration institution in China in 1999. The BAC provides institutional support as a neutral and independent centre for conducting domestic and foreign arbitration and alternative dispute resolution (ADR) proceedings.

There are 401 domestic and 105 foreign arbitrators on the panel, all with wide-ranging expertise. Appointing external arbitrators is also possible for international cases. As of the end of May 2015, the BAC has accepted 25,443 cases in total. Since 2010, the total claim amount has been around Rmb10 billion (US$1.6 billion or EUR1.27 billion) per year on average.

2. What are the most common types of disputes the BAC has been handling in the past 12 months?

During 2014, the BAC accepted 2,041 arbitration cases in total, in a range of fields.



Generally speaking, the BAC's arbitration services cater to all kinds of commercial issues. Sales and goods disputes used to dominate during the early years of the BAC's establishment, though the centre has grown in expertise and now handles a wide range of sophisticated and complex cases.

3. What percentage of the BAC's caseload involves international parties? Do you see this increasing?

The BAC has handled 632 international arbitrations in total to date, involving parties from various jurisdictions including the US, UK, Germany, Australia, Japan, South Korea and Singapore. There have also been many domestic cases involving parties that are wholly or partly owned by foreign investors. The statistics below show the components of our caseload in the past five years:



International cases mainly refer to those where the parties or subject matters were recognised as foreign pursuant to Article 178 of the Judicial Interpretation of the General Principles of the PRC Civil Procedure Law. Therefore, the international caseload depicted in this chart appears relatively lower.

One the other hand, ever since 2009, the growth rate of China's foreign investment has continuously decreased, with the compound growth rate at around 6%. At the same time, the amount of China's outbound direct investment has doubled, with the compound growth rate at 17%. I would take this as an important indicator that the dramatic increase in Chinese outbound investments may shift the bargaining power in those transactions, leading to more frequent choices of Chinese arbitration institutions.

4. Can you describe the process for enforcing BAC arbitral awards in China? Can they also be enforced overseas?

BAC arbitral awards are final and binding, and are enforceable in over 140 countries worldwide under the 1958 New York Convention. The BAC Arbitration Rules have widely adopted the UNCITRAL Arbitration Rules and international practice. BAC Rules are particularly foreigner-friendly. For example, the Rules allow for the replacement of arbitrators in the event of an unsuccessful Arb-Med. Foreign lawyers are allowed to appear in BAC arbitral proceedings without any quota limits. Therefore we see no obstacles or barriers to the enforcement under the New York Convention so far.

For international or foreign-related cases enforced in the PRC, if the debtor refuses to comply with the awards, the creditor may apply to enforce the award in the Intermediate People's Court located in the debtor's domicile or where his assets are. The court may directly procure and distribute the assets unless it approves a non-enforcement application risen by the debtors on the limited grounds of Article 274 of the PRC Civil Procedure Law as follows:

a. the parties did not have an arbitration clause in the contract or have not subsequently reached a written arbitration agreement;
b. the party against whom the enforcement application is made was not given notice for the appointment of an arbitrator or for the inception of the arbitration proceedings or was unable to present his case due to causes for which he is not responsible;
c. the composition of the arbitral tribunal or the procedure for arbitration did not conform with the rules; or
d. the matters dealt with by the award fall outside the scope of the arbitration agreement or which the arbitral organ was permitted to handle.

Also, similar to the New York Convention, being “against social and public interest” also composes one of the grounds for non-enforcement under Article 274.

However, the PRC courts have seem to have gradually taken a pro-arbitration stance. In 2014, we had only one out of 2041 cases that was not enforced, which was by the Hu He Hao Te Intermediate People's Court.

6. How can arbitration procedures be further enhanced in terms of efficiency?

A case, from application to conclusion, takes less than 100 days on average at the BAC. In 2014, the average duration was 89 days.

We continuously and intensively hold workshops and seminars for the arbitrators and all the practitioners to help improve their understanding of arbitration and sharpen their skills. One way to further enhance efficiency is the use of the procedural order. In the past few years, we have encouraged and helped many domestic tribunals to make full use of this important but less popular mechanism, which helps the tribunal and the parties to better organise arbitration procedures. I would therefore say that adopting the procedural order more frequently and strategically will definitely increase efficiency.

Offering high quality mediation services would also be beneficial. A neutral, professional and experienced mediator may help parties to find an amicable way out of a dispute. This process usually costs far less money and time.

The BAC began its reform of separating Med from Arb in 2008 and established the Beijing Arbitration Commission's Mediation Centre in 2011. We provide the users an option of independent mediation services outside of arbitration. In 2014, the Mediation Centre provided services to clients in 118 independent cases, 95 of which have been successfully mediated at the parties' satisfaction. Cases ranged across 17 types of disputes from financing and real estate to intellectual property. These mediation cases only take 20.7 days on average.

7. What are some trends in PRC arbitration you see emerging?

In 2008, the Supreme People's Court released the Several Opinions on Establishing a Sound Conflict and Dispute Resolution Mechanism that Connects Litigation and Non-litigation. Article 4 of this judicial interpretation explicitly states that all PRC courts must respect the special features of the arbitration system in terms of the validity of arbitration agreements, rules of evidence, arbitration procedures, basis for rendering arbitral awards and the examination criteria for revoking awards and for deciding non-enforcement of awards, as well as maximise the role of the arbitration system in resolving disputes. The courts must handle the applications for evidence and property preservation during the arbitration process in a timely manner. This reflects the strong judicial and policy support of arbitration, and it will become more favourable.

On January 20 2015, the National Bureau of Statistics released China's 2014 GDP, which rose by 7.4% from 2013, amounting to Rmb63.6 trillion (US$10.2 trillion). Although some have expressed concern due to the declining economic growth rate, China has undoubtedly become one of the most important economies in the world. This explains the overall number of disputes. The following chart shows how the courts have been overwhelmed by cases in recent years and how arbitration was boosted at the same time. These statistics reflect a real need for ADR, and arbitration provides a great way to lift the courts' heavy burdens.

Source: Civil caseload 2007-2012: stats.gov.cn/tjsj/ndsj/2013/indexch.htm, civil caseload 2013: court.gov.cn/qwfb/sfsj/201407/t20140725_196834.htm