Arbitration is a legal arrangement whereby both parties to a civil
(commercial) dispute reach an agreement to voluntarily submit the
case to a third party to adjudicate in accordance with specified
procedures and rules and following the principle of impartiality,
and whereby both parties are bound to enforce the ruling.
Arbitration is usually a non-governmental trade activity; it
represents a private action. Together with composition, mediation
and action, it is a common way to settle civil (commercial)
disputes. Arbitration, however, is subject to state supervision.
The State intervenes through courts in accordance with legal
provisions of the place where the arbitration takes place in the
validity of the arbitration award, the making of arbitration
procedures, the enforcement of awards and in the case of
involuntary enforcement by a party. Arbitration, therefore, is a
judicial activity and a part of China's judicial regime.
The Arbitration Law of the People's Republic of China, promulgated
on August 31, 1994, unified arbitration practices across the
country and harmonizes China's arbitration system with
internationally accepted principles, systems and practices.
Basic Principles
1.
Voluntarism:
Parties to a dispute should voluntarily reach an agreement to
resolve their dispute through arbitration. An arbitration committee
shall not consider a case without application from a party to the
agreement.
2.
Independence:
Arbitration should be independent of any interference from
administrative bodies, social organizations or individuals.
- An arbitration agency is not part of the administrative
apparatus.
- Arbitration institutions are established geographically,
independent from each other; they have no affiliation among
themselves.
- Arbitration committees, arbitration associations and
arbitration tribunals are also independent from each other, with
arbitration tribunals adjudicating cases free from interference by
arbitration associations or arbitration committees.
- Courts must exercise the power of supervision over arbitration
activities; however, arbitration is not dependent on adjudication
and arbitration institutions are not dependent on courts.
3.
Legality and Impartiality:
The Arbitration Law provides that arbitration should be based on
facts, comply with laws and resolve disputes in an impartial and
reasonable manner.
Arbitration Bodies
1.
Arbitration Association
China Arbitration Association is a self-disciplinary organization
of arbiters. It supervises arbitration committees and their members
and the behaviors of arbiters in accordance with their
constitution. Arbitration committees are members of the China
Arbitration Association. The constitution of the association is
made by a national congress. It makes arbitration rules in
accordance with the Arbitration Law and the Civil Procedure
Law.
2.
Arbitration Committees
Arbitration committees are executive bodies established in capital
cities of provinces, municipalities and autonomous regions. They
can also be set up in other cities if necessary.
Arbitration committees are formed with members from government
departments and chambers of commerce and registered with the
judicial administration of the province (municipality, autonomous
region).
An
arbitration committee consists of one chairman, two-to-four vice
chairmen, and seven to 11 members. The chairman, vice chairmen and
members should be legal and trade experts and individuals with
working experience. The number of legal and trade experts should
not be less than one third of the membership of an arbitration
committee.
Arbiters should meet the following qualifications:
- Eight full years in the arbitration field;
- Eight full years in the legal profession;
- Eight full years as judge;
- Specialized in legal research and teaching and holding a senior
professional title;
- Familiar with legal knowledge, specializing in economic and
trade activities and holding a senior professional title or with
equivalent qualifications.
An
arbitration committee has different panels of arbiters for
different trades.
3.
Arbitration Tribunals
After taking up an arbitration case, an arbitration committee does
not directly arbitrate the case; instead, it forms an arbitration
tribunal to adjudicate the case.
Organizationally, an arbitration tribunal can be a collegiate panel
or a sole arbitrator. An arbitration panel should be composed of
three arbiters, one of whom should the chief arbiter who presides
over the arbitration.
In
case the parties agree to form a tribunal of three arbiters, each
party should designate, or ask an arbitration committee to
designate, one arbiter, and the third arbiter, who should be
jointly selected by the parties or designated by the arbitration
committee chairman jointly authorized by the parties, should be the
chief arbiter. In case the parties agree to form a sole-arbiter
tribunal, the arbiter should be jointly selected by the parties or
designated by the arbitration committee chairman jointly authorized
by the parties.
Essential Components of Arbitration
1.
Arbitration or Adjudication
This practice represents a respect for the parties' right of choice
as to the way to settle their dispute. It means:
If
the parties have reached an agreement on arbitration, it rules out
the jurisdiction of the court over the dispute; the parties can
only apply for arbitration to an arbitration body rather than
bringing action to the court.
However, courts may have jurisdiction over disputes that the
parties have already signed an agreement about under special
circumstances. These include:
- The arbitration agreement is invalid or its validity has
expired;
- One party brings a suit to the court and the other party
answers the lawsuit and mounts a substantial defense that does not
challenge the jurisdiction of the court over the dispute. In such
cases, the parties are understood to have renounced the original
arbitration agreement and the court has judicial power to
adjudicate the case.
2.
One Instance Being Final
This means that the ruling takes effect immediately upon
pronunciation. Even if the parties are not happy with the ruling,
they cannot file a suit to the court for the same dispute or apply
for arbitration or reconsideration to arbitration organizations.
Instead, they should automatically implement the ruling; otherwise
the other party has the right to apply to the court for
enforcement.
As
a remedy to the one-instance-being-final practice, however, parties
may apply to the court for a review and verification of the case
and annulment of the arbitration ruling if they believe it is
indeed wrong and conditions for a legal revocation have been
met.
China International Economic and Trade Arbitration
Committee
The China International Economic and Trade Arbitration Committee is
the only arbitration agency in China that handles international
economic and trade disputes. It is headquartered in Beijing, with
branch offices in Shenzhen and Shanghai.
