International Commercial Arbitration in China – State Involvement in the Pre-Award Stage : A Comparative Analysis

Abstract

In face of growing commercial interaction between China and the rest of the world, business disputes are inevitable. In order to address them, efficient dispute resolution mechanisms are needed. International commercial arbitration has proven to be a viable mechanism – and even the preferred one globally. In response to increasing Sino-foreign business disputes, China has been developing its arbitration system in an effort to reach international standards. Nonetheless, there are still some obstacles hindering the attractiveness of international arbitration in China. One of the problems pertains to the Chinese state’s involvement in the pre-award stage of arbitration.

In general, although arbitration is a private method of resolving disputes, the state plays an important role. This is because the state accepts arbitration as a valid method to resolve disputes, but in exchange, it expects to exercise some level of control. Further, arbitration, a private method, is not equipped with coercive powers, with which only state organs are equipped. Therefore, the state supervises arbitration and offers its support – if it is needed. The role of the state in arbitration is typically understood as the role of state courts in arbitration. However, in the case of China, the notion of “state” goes beyond the traditional understanding and often extends also to the arbitration institutions, because of strong governmental control over Chinese institutions.

This thesis focuses on the role of the state in the pre-award stage of international commercial arbitration in China, and looks at China’s peculiarities through a comparative lens. The UNCITRAL Model Law on International Commercial Arbitration, which has been created to unify the practice of various jurisdictions and to suggest an arbitration-friendly direction, as well as representative Model Law jurisdictions – Hong Kong and Singapore serve as the primary points of reference for the discussion on China.

It is claimed that there is too much state supervision and not enough state assistance provided to arbitration in China. There exists an imbalance of power shared among the arbitral tribunal, the state court, and the arbitration institution, which affects the work of the tribunal tasked with conducting the proceeding in a neutral and efficient way and, likewise – deciding the case. Furthermore, the state limits the independence of the Chinese arbitration institutions and also restricts the functioning of foreign arbitration institutions in China.

This thesis argues the need: (1) to rebalance the distribution of power shared among the arbitral tribunal, the state court, and the arbitration institution; (2) to enhance the independence of the Chinese arbitration institutions; and (3) to permit the full range of actions of foreign arbitration institutions in China. Together this would help China establish itself as a more efficient, arbitration-friendly jurisdiction and, thus, better facilitate the continuously expanding Sino-foreign businesses.