China Tackles Dispute Resolution Head-On in Light of One-Belt-One-Road

“It is an innovative move to establish the CICC. It is envisioned that the CICC will provide a 'one-stop' dispute resolution mechanism to address BRI disputes,” said Jingzhou Tao, managing partner of Dechert's China practice, who was appointed as one of the first 32 members of the Expert Committee. “CICC aims to integrate mediation, arbitration and litigation under one roof and provides an additional option for dispute settlement in China.”

“Pivotal to the development of the two new international commercial courts is the establishment of the Expert Committee comprising experts who are highly qualified to provide expert opinion to CICC judges in ascertaining the content of foreign laws and to mediate cases authorized by the CICC,” Tao added.

The Expert Committee will provide expert opinions and legal advice to assist the CICC judges in articulating and understanding the content of foreign laws and to facilitate operation and promote adjudication of the International Commercial Court. They would also advise and support stakeholders to resolve international commercial disputes through arbitration, litigation, mediation and other diversified commercial dispute settlement methods.

According to the SPC, not only will the Expert Committee be entrusted by the CICC to mediate international commercial disputes brought by litigants and provide advisory opinions on specialized legal issues in the trial of international commercial disputes, it will also contribute to the development, judicial interpretations and judicial policies formulated by the SPC.

BRI WILL DRIVE CHINA'S INTERNATIONAL DISPUTE RESOLUTION MECHANISMS

Although the current China arbitration regime remains fairly unattractive as their institutional rules are not entirely based on the UNCITRAL Arbitration Rules model, compared to the Singapore and Hong Kong Arbitral rules, there may be changes in the arbitration and mediation front as the BRI drives further development of dispute resolution mechanisms and resources in China. It is clear that China is taking proactive measures to encourage international arbitration in China.

The SPC, this year had published two provisions on judicial interpretation for arbitration proceedings, making it easier to enforce arbitral awards in China, and bringing greater certainty and confidence to foreign parties to an arbitration proceeding in China. This shows China's resolution to improve and increase enforcement of local arbitral awards and take on more international arbitration.

Further, The China International Economic and Trade Arbitration Commission (CIETAC) also introduced new rules earlier this year, governing the arbitration of international investment disputes in a bid to develop and promote international investment practice in China. The CIETAC Rules, though retain traditional arbitration characteristics such as flexibility and efficiency, incorporates both international and Chinese elements of arbitration law and practice.

CIETAC's introduction of its first public-private partnership arbitration center in mid 2017 was another measure intended to encourage international arbitration for disputes arising out of public-private partnerships, especially those that may arise out of the BRI projects. The merger of the Shenzhen Court of International Arbitration and the Shenzhen Arbitration Commission in January 2018 also reflects China's ambition to become an international arbitration platform especially that the region falls squarely in the BRI routes.

“With the Belt and Road Initiative as one of the key drivers of growth in East Asia and beyond, we will see disputes before Chinese courts, including in setting-aside proceedings, increase,” said Sundra Rajoo, director of the Asian International Arbitration Centre in Kuala Lumpur, who was also appointed as a member to the CICC Expert Committee.

“The Asian International Arbitration Centre has positioned itself well to take on cross-border disputes from Belt and Road Initiative contracts, in particular, and we will contribute to commercial growth in the region and beyond through capacity-building initiatives,” said Rajoo.

China is building joint arbitration centers with other regions, especially those in which China is heavily investing in, as part of the strategy to further international engagement, according to professor Huiping Chen of Xiamen University Law School. In her research paper titled “China's Innovative ISDS Mechanisms and Their Implications,” she explored three possible implications of China's efforts to engage in international collaboration in dispute resolution.

Firstly, it is a mechanism to protect Chinese investments abroad, especially in developing states where the BRI is mostly concentrated; secondly, it would help China amplify its voice and influence in international legal matters to safeguard its interests, as China has been particularly involved in UNCITRAL reform proposals and negotiations; and thirdly, China's reform would enable them to break the monopoly of existing western institutions and may eventually be able to compete alongside established arbitral tribunals.

DISPUTE RESOLUTION CLAUSE KEY TO PROTECTION IN BRI DISPUTES

Given the magnitude of the BRI network and investments, parties to a BRI project should anticipate and manage their potential legal risks before entering into a contract. Tao stressed that given the scale and the sectoral focuses of the BRI, disputes arising out of BRI, be it commercial disputes between entities or investment disputes between investors and the state, will inevitably become routine.

“It is therefore of great strategic importance for Chinese companies, international investors, contractors and developers involved in BRI to consider the structuring of their dispute resolution clauses in their underlining contracts on how a dispute should be resolved, including whether, to resolve the dispute through mediation, arbitration or litigation, and which court should have jurisdiction over a dispute—to ensure a dispute is settled in an impartial, cost-efficient and culturally sensitive way,” he said.