Many of the Indian parties have a few misconceptions about arbitrating Commercial disputes in China, against a Chinese Company, which include the doubt about a fair proceeding, enforceability of awards against Chinese parties, complex unpredictable judicial system etc., But in fact in support of the said apprehensions nobody has any proof or statistics. In practice, either conducting an arbitration in China or enforcing of foreign arbitral awards, against parties in China are not difficult and effective systems are in place in China, to match with the international business requirements.

Arbitration Law of China is “Arbitration law of the People’s republic of China” with regard to all arbitrations seated in China, as well as enforcement of International arbitral awards passed from a foreign seat. People’s republic of China (PRC) is a signatory to New York Connection of Recognition and Enforcement of Foreign awards and hence it recognises the international arbitral awards passed in New York Convention seats, on reciprocity basis. It is important to note that India recognised, China and Hong Kong under New Your Convention form. Hence the arbitral award passed in China and Hong Kong after 19th March 2012, are enforceable in India. Same way, international arbitral awards passed in India after 19th March 2012 are enforceable in China, Adhoc arbitrations are not recognised as per the PRC law and hence if you are entering into a Contract in which a PRC seat of arbitration is chosen, the arbitration clause must specify an arbitral institution registered in China to administer the arbitration. An arbitration clause specifying an adhoc arbitration seated in china is not valid in law and arbitrations administered by an arbitral institution alone is sustainable in law. But at the same time an international arbitration award arising out of an adhoc arbitration, seated outside PRC is enforceable in China, which means PRC seated arbitrations have to be institutional arbitrations only. In addition to that PRC law recognises only PRC registered arbitral Institutions to administer the arbitrations seated in China. That means parties should not enter into an arbitration agreement in which they have chosen a foreign arbitral Institution like international chamber of commerce (ICC) London Court of International Arbitration (LCIA), Singapore International Arbitration Centre (SIAC) etc., to administer the arbitrations seated in China. Such an arbitration administered by a foreign institution is not recognised in China. China has many World class arbitral Institutions like China International Economic Trade Commission(CIETAC), Shanghai International Arbitration Centre(SHIAC), Beijing International Arbitration Centre (BIAC) etc., These arbitral Institutions are registered as per the PRC law and hence they can administer arbitrations (domestic & international) in PRC. These arbitral institutions have their own arbitration rules which are efficient, fair and transparent.

In a recent case, challenging the validity of an International arbitration award, which arose out of an arbitration clause entered into between an Italian company BP Agnati SRL and a Chinese company Anhui Longlide Packaging and Printing Co in which ICC was the administering Arbitral institution for an arbitration seated in Shanghai, the Supreme People’s court (SPC is the highest court of China) confirmed the order of the High People’s Court, which finally held the said arbitration clause as valid. The Chinese party challenged the award before the People’s High Court on the ground that the administering institution does not comply with the requirements of an arbitral institution under the China Arbitration law, since ICC is not an arbitral institution affiliated under Article 10 of the arbitration Act and hence the arbitral award violates Article 16 as well. But the High People’s Court held that the award and arbitral institution (ICC) satisfies the requirements of Article 10 as well as 16 and upheld the award. The Chinese party challenged the said order of the People’s High Court and Supreme People’s court rejected the appeal. It is a great news for the international community because it opens up a lot of opportunities for the international arbitral institutions. Recently ICC and SIAC have opened their offices in a Special Economic Zone of PRC but they operate like Liaison offices or information centers.

Language of arbitration is one of the issues, Parties entering into arbitral agreement with parties from PRC with PRC arbitral institutions to administer arbitrations. Parties must choose the language of arbitration expressly, if they wish to conduct the arbitrations in a language other than Chinese. If the parties do not expressly choose any other foreign language as the language of arbitration, then the language of arbitration will be Chinese only. All the above said arbitral Institutions have many foreign arbitrators coming from different language back ground are available in their panel of arbitrators and hence conducting an arbitration seated in PRC, in a foreign language is possible and legally approved.

Non – Chinese arbitrators are also allowed to be appointed as arbitrators in PRC seated international arbitrations. The only limitation in the appointment of arbitrators in China seated arbitrations is, the parties cannot choose somebody from out of the panel of arbitrators maintained by the arbitrators. The PRC based arbitral Institutions like CIETAC, SHIAC, BAC etc., are fully equipped and professionally managed institutions. The arbitrations are closely monitored by the arbitral institutions and hence most of the arbitrations get concluded between six to twelve months. In normal circumstances, the International Arbitral Institutions do not raise any objection to parties nominating their arbitrators from outside the panel of arbitrators of the arbitral institutions, but PRC based arbitral Institutions do not permit the same. But all the arbitral institutions based in PRC have empanelled arbitrators from different countries of Asia, Europe and America. Hence parties can choose non-Chinese arbitrators also from the Panel of arbitrators of the Institution.

Enforcement of Foreign awards passed in New York Convention seats recognised by PRC are smooth and normally courts do not refuse enforcement of foreign awards. As per the Court reporting system of Supreme People’s Court, if any court including a People’s intermediate court or a People’s High Court decides to refuse enforcement of an award then the said court has to approach the higher court and take its consent. This procedure clearly shows the keen interest in allowing the smooth enforcement of arbitration awards in China.