There are usually four alternatives in resolving international commercial disputes, i.e. negotiation, conciliation, arbitration and litigation.

 

 

Arbitration has become very popular in resolving international commercial disputes. Arbitration has advantages in that it is convenient, cost-saving and efficient in concluding cases. Arbitration allows the parties full autonomy and can resolve disputes independently, impartially and without delay. It is also preferred for its flexibility, confidentiality, finality and enforceability of its award. More parties have come to choose and adopt arbitration for dispute resolution.

China has been advocating and encouraging the use of arbitration to resolve international commercial disputes. The establishment of a foreign related commercial arbitration institution in China was announced as early as 1956.Over the past four decades, arbitration in China has made a great progress with remarkable achievements. At present, China's foreign-related arbitration institution has the heaviest caseload in the world, and the impartiality of its awards has been recognized unanimously both at home and abroad. The cases accepted involve parties from more than 40 countries and regions. China has become one of the world's major commercial arbitration centers.

 

I. Arbitral Organizations Handling Cases Involving Foreign Element in China

There are two arbitral organizations handlingcases involving foreign element in China. One of them is China International Economic and Trade Arbitration Commission (CIETAC) and the other is China Maritime Arbitration Commission (CMAC). CIETAC handles disputes arising from international economic and trade activities, while CMAC handles maritime disputes.

The China International Economic and Trade Arbitration Commission established in Beijing, has chapters in Shenzhen and Shanghai, and liaison offices in Dalian, Fuzhou, Changsha, Chengdu and Chongqing. The commission and chapters accept arbitration cases according to arbitration rules and regulations, use the unified Arbitration Rules and Panel and Panal of Arbitrators. The liaison offices are responsible for providing arbitration consultation services, help arrange arbitration tribunal, and do promotion work for arbitration publicity and promotion, collect related arbitration information, develop arbitration research work and carry out work appointed or entrusted by the arbitration commission.

The China Maritime Arbitration Commission, established in Beijing, has liaison offices in Shanghai and Guangzhou. The China Maritime Arbitration Commission accepts maritime arbitration cases according to arbitration rules and regulations. The liaison offices are responsible for providing arbitration consultation services, assist to arrange arbitration tribunal, carry out arbitration publicity and promote arbitration negotiations, collect arbitration information, develop arbitration research and do work appointed and entrusted by the arbitration commission.

 

 

  CIETAC resolves by means of arbitration disputes arising from economic and trade transactions of a contractual or non-contractual nature. These disputes include:   

(1)International or foreign-related disputes;   

(2)Disputes related to the Hong Kong SAR, the Macao SAR, or the Taiwan region;   

(3)Disputes between foreign investment enterprises or between a foreign investment enterprise and a Chinese legal person, physical person, and/or economic organization;   

(4)Disputes arising from project financing, invitations to tender and bidding submissions, project construction or other activities conducted by a Chinese legal person, physical person and/or other economic organizations which utilize capital, technology or services from foreign countries, international organizations or from the Hong Kong SAR, the Macao SAR and the Taiwan region;  

 (5)Disputes that may be taken cognizance of by CIETAC in  accordance with special provisionsof or upon special authorization from the laws or administrative regulations of the People's Republic of China;

  (6)Any other domestic disputes that the parties have agreed to submit to CIETAC for arbitration.

 

For an arbitration to take place, the disputing parties must agree in writing to submit their dispute to arbitration. This agreement may be made by including an arbitration clause in the commercial contract or may be concluded after a dispute arises. CIETAC recommends to Chinese and foreign business clients the following model arbitration clause:

Any dispute arising from or in connection with this Contract shall be submitted to China International Economic and Trade Arbitration Commission for arbitration which shall be conducted in accordance with the Commission's arbitration rules in effect at the time of applying for arbitration.

The arbitral award is final and binding upon both parties. The parties may also stipulate the following matters in the arbitration clause:

1. the place of arbitration and/or hearing;

2. the language of the arbitration;

3. the number of arbitrators;

4. the nationality of arbitrators;

5. the applicable law of the contract; and/or

6. the application of ordinary procedure or summary procedure.

 

 

When applying for arbitration, the Claimant must submit to CIETAC Secretariat in the headquarters or in the Sub-Commissions an arbitration agreement, an Application for Arbitration in writing, and the facts and evidence on which its claim is based. In addition, an arbitration fee shall be paid by the Claimant in advance to the CIETAC according to the CIETAC Arbitration Fee Schedule.

The following shall be specified in the Application for Arbitration:

(1)the name and address of the Claimant and those of the Respondent, including the zip code, telephone number, telex number, fax number and cable number or any other means of electronic telecommunications, if any;

(2)the arbitration agreement relied upon by the Claimant;

(3)the facts and the main points of dispute; and

(4)the Claimant's claim and the facts and evidence on which its claim is based.

The Application for Arbitration shall be signed and/or stamped by the Claimant and/or the attorney authorized by the Claimant.

The Application for Arbitration and relevant documentary evidence should be submitted in the same number of copies as the total number of the Respondent and arbitrators plus the Secretariat as a separate party.

 After applying for arbitration, the Claimant may request to amend its arbitration claim; but the arbitral tribunal may refuse such a request for amendment if it considers that it is too late to raise the request and the amendment may affect the arbitration proceedings.

 

At the same time of sending to the Respondent the Notice of Arbitration, the CIETAC Secretariat shall enclose one copy each of the Claimant's Application for Arbitration and its attachments as well as the Arbitration Rules and the Panel of Arbitrators.

The Respondent shall, within 45 days (in foreign-related arbitration) or 30 days (in domestic arbitration or arbitration where the summary procedure applies) from the date of receipt of the Notice of Arbitration, produce its written defense and relevant documentary evidence to the CIETAC Secretariat. The Respondent may request to amend its defense. The Respondent shall submit its defense within the time limit specified by the arbitral tribunal, and the arbitral tribunal has the power to reject documents that are submitted too late.

The Respondent may lodge its counterclaim during the arbitration procedure, and the counterclaim must meet the following three requirements:

(1)the counterclaim arises from the same contract relation or legal relation as that of the claims raised by the Claimant;

(2)the counterclaim is directed against the Claimant; and

(3)the disputes involved in the counterclaim shall not be the same as the disputes involved in the arbitration claims.

The counterclaim shall, at the latest within 60 days (in foreign-related cases), or 45 days (in domestic cases), or 30 days (in cases where  summary procedure applies) from the Respondent's receipt of the Notice of Arbitration, be submitted to CIETAC. The arbitral tribunal may extend that time limit if it deems that there are justified reasons.

When lodging a counterclaim, the Respondent shall lodge with the arbitral tribunal its counterclaim in writing, and state in it its specific claim, reasons for its claim and facts and evidence upon which its counterclaim is based and attach to its written statement of counterclaim the relevant documentary evidence. The written statement of counterclaim may be submitted together with its defense or alone. The written statement of counterclaim and the relevant documentary evidence shall be submitted inthe same number of copies as the total number of the parties and arbitrators put together, so that all of the parties, arbitrators and the Secretariat could get one copy each.

When lodging its counterclaim, the Respondent shall pay a deposit in advance as arbitration fee according to CIETAC Arbitration Fee Schedule.The Respondent may request to amend its counterclaim, but the arbitral tribunal may refuse such request for amendment if it considers that it is too late to raise the request and the amendment may affect the arbitration proceedings.

A party may lodge jurisdictional objections if it has justified reasons. Such objections as to arbitration agreement and/or jurisdiction over an arbitration case shall be raised before the first hearing. Where the case is examined on the basis of documents only, the jurisdictional objections should be raised in writing before submission of the first substantive defense. CIETAC has the power to decide on the existence and validity of an arbitration agreement and the jurisdiction over an arbitration case.

 

According to CIETAC Arbitration Rules, the arbitral tribunal may be composed of either a sole arbitrator or three arbitrators.

(1)Sole arbitrator

If the case is to be heard by a sole arbitrator, both parties may jointly appoint or jointly entrust the Chairman of CIETAC to appoint the sole arbitrator from among the Panel of Arbitrators to form the tribunal for the case.

If the parties in summary procedure fail to make such appointment or entrustment within 15 days from the date on which the Respondent receives the Notice of Arbitration, or if the parties in ordinary procedure, who have agreed that a sole arbitrator will examine and hear their case, fail to agree on the choice of such a sole arbitrator within 20 days (in foreign-related cases) or 15 days (in domestic cases) from the date on which the Respondent receives the Notice of Arbitration, the Chairman of CIETAC shall make such appointment.

(2)Three arbitrators

If the case is to be heard by three arbitrators, both the Claimant and the Respondent shall appoint or entrust the Chairman of CIETAC to appoint one arbitrator from among the Panel of Arbitrators respectively within 20 days (in foreign-related cases) or 15 days (in domestic cases) after their receipt of the Notice of Arbitration. If the Claimant or the Respondent fails to do so within the said time limit, the Chairman of CIETAC shall appoint an arbitrator for the Claimant or the Respondent.

When there are two or more Claimants and/or Respondents in an arbitration case, the Claimants?side and/or the Respondents?side each shall, through consultation, appoint or entrust the Chairman of CIETAC to appoint one arbitrator. In case the parties fail to do so within the said time limit, the Chairman of CIETAC shall make such appointment for the parties.

The third arbitrator, who shall act as the presiding arbitrator, shall be appointed jointly by both parties or by the Chairman of CIETAC upon authorization from both parties. In case the parties fail to jointly appoint or entrust the Chairman of CIETAC to appoint the third arbitrator within 20 days (in foreign-related cases) or 15 days (in domestic cases) from the date on which the Respondent receives the Notice of Arbitration, the third arbitrator shall be appointed by the Chairman of CIETAC.

The presiding arbitrator and the other two arbitrators shall jointly form an arbitral tribunal to examine and hear the case.

 

(1)  Method of hearing

Generally, oral hearings are conducted in the course of arbitration. However, the arbitral tribunal may examine the case and make an award on the basis of documents only at the request of the parties or with their consent, and with the arbitral tribunal's confirmation that oral hearings are unnecessary, or in cases where summary procedure is applied.

(2)  Date of hearing

The date of oral hearing shall be fixed by the arbitral tribunal after consultation with the CIETAC Secretariat, and shall be communicated to the parties 30 days (in foreign-related cases) or 15 days (in domestic cases) prior to the date of the hearing so that they may have sufficient time to make necessary arrangements. However, the notice of the date of hearing subsequent to the first hearing is not subject to the 30-day or 15-day time limit.

A party having justified reasons may communicate its request to the CIETAC Secretariat for a postponement of the date of the hearing 12 days (in foreign-related cases) or 7 days (in domestic cases) prior to the date of the hearing. And the arbitral tribunal shall decide whether to postpone the hearing or not. Such 12-day or 7-day time limit is imposed to provide the parties and arbitrators with opportunities to rearrange their times.

(3)  Place of hearing

The arbitration cases shall be heard in the place where they are accepted, i.e. Beijing, Shenzhen or Shanghai. With the approval of the Secretary-General of CIETAC, cases can also be heard in other places in or outside China.

(4)  Hearing by default

The parties shall send their representative(s) or authorized agent(s) to attend the hearing. Should one of the parties fail to appear at the hearing, the arbitral tribunal may proceed with the hearing and make an award by default.

The Claimant and the Respondent shall produce evidence for the facts on which their claim, defense or counterclaim is based. The arbitral tribunal may undertake investigation and collect evidence on its own initiative if it deems it necessary. If the arbitral tribunal investigates and collects evidence on its own initiative, it shall timely inform the parties to be present on the spot if it deems it necessary. Should one party or both parties fail to appear on the spot, the investigation and collection of evidence shall by no means be affected.

The arbitral tribunal may consult an expert or appoint an appraiser for the clarification of special issues relating to the case. And the parties are obliged to submit or produce to the expert or appraiser any materials, documents, properties or goods related to the case for check-up, inspection or appraisal. The parties may engage experts to be present at the hearing to make witness on its own initiative.

The admission of any evidence, including the evidence submitted by the parities and the expert's report and the appraiser's report, shall be decided upon by the arbitral tribunal after examination. And the arbitral tribunal has the right to make decision on the relevance, importance and effectiveness of evidence.

 

To ensure the smooth conduct of the arbitration proceedings and the enforcement of the awards, the parties may apply for interim measures of protection in relation to property and evidence. According to the Chinese law, only the people's court has the power to order interim measures. As a result, CIETAC shall transmit the party's application to the intermediate people's court (in foreign-related cases) or to the basic-level people's court (in domestic cases) in the place where the domicile of the party against whom the interim measures aresought is located or in the place where the property and/or the evidence is located. It is the people's court to decide in accordance with the law whether to take the interim measures or not.

 

In ordinary procedure, the arbitral tribunal shall render an arbitral award within 9 months (in foreign-related cases) or 6 months (in domestic cases) as from the date on which the arbitral tribunal is formed. In summary procedure, the arbitral tribunal shall make an award within 30 days from the date of the oral hearing, or within 90 days from the date on which the arbitral tribunal is formed if there is no oral hearing. At the request of the arbitral tribunal and with the approval of the Secretary-General of the CIETAC, the time limit of rendering an arbitral award may be extended.

The arbitral award shall be decided by the majority of the arbitrators.

According to CIETAC Arbitration Rules, the arbitral tribunal shall submit its draft arbitral award to CIETAC before signing it and CIETAC may remind the tribunal of the issues related to the form of the award on condition that the tribunal's independence of decision is not affected.

The date on which the arbitral award is made is the date on which the arbitral award comes into effect.

The arbitral award is final and binding upon both parties. Neither party may bring a suit before a court of law or make a request to any other organization for revising the arbitral award.

 

Dispute Resolution Center was established in 2000 and devotes itself to providing alternative dispute resolution (ADR) services in the areas of intellectual property and information technology. The Center has formulated separate procedural rules for .cn domain name,keywords and generic top level domain name dispute resolution services, maintains Lists of Panelists and implements a system whereby Panel of Neutrals are responsible for the resolution of disputes. Possessing the modernized working facilities and the scientific management system, the Center can deal with the domain name dispute resolution proceedings online.

Currently, the Center provides the following dispute resolution services in intellectual property and internet domains in cyberspace:

1. As the provider appointed by China Internet Network Information Center (CNNIC), the Center is providing dispute resolution services with regard to .CN domain names (including Chinese-Character Domain Name). The resolution of .CN domain name is subject to CNNIC Domain Name Dispute Resolution Policy (CNDRP) issued by CNNIC on September 30, 2002.

2. The Center is also appointed to be the sole provider of dispute resolution services in regard to keywords managed by CNNIC. The resolution of keyword disputes is subject to CNNIC Keyword Dispute Resolution Policy issued by CNNIC on August 4, 2001.

3. As the Beijing Office of Asian Domain Name Dispute Resolution Center (ADNDRC) which is one of the four domain name dispute resolution providers approved by the Internet Corporation for the Assignment of Names and Numbers (ICANN), CIETAC Domain Name Dispute Resolution Center is also providing domain name dispute resolution services in regard to generic top level domain names (gTLDs) such as .com, .net and .org. Disputes in regard to gTLDs are resolved under the Uniform Domain Name Policy (UDRP) issued by ICANN on August 26, 1999.

 

 

As an important means of resolving disputes arising from international commercial and maritime transaction, with advantage of time and expense-saving, confidentiality, flexibility, conciliation is now attached more and more importance to the parties, and is playing a greater role in settlement of international commercial disputes.

China Council for the Promotion of international Trade/China Chamber of international commerce (CCPIT/CCOIC) Conciliation Center is the permanent conciliation institution in China, which independently and impartially resolve disputes arising from international commercial and maritime transactions by means of conciliation.

CCPIT/CCOIC Conciliation Center, located in Beijing, was established by CCPIT in 1987. To meet the development of the conciliation business, from 1992 to the end of 1997, CCPIT has set up altogether 34 conciliation centers within its sub-Councils successively. So far, the conciliation centers of CCPIT system have covered the main areas in China, and the CCPIT conciliation network has been basically established. All the centers apply the uniform conciliation rules, and are under the leadership of CCPIT/CCOIC Conciliation Center in vocational work.

The conciliation centers take cognizance of cases in accordance with a conciliation agreement, or in the absence of such an agreement, upon application from one party with the consent of the other party. The Centers all maintain a Panel of Conciliator, from which the parties to a certain case could make the nomination. The conciliators are selected and appointed by CCPIT from among the impartial personages with special knowledge and/or practical experience in international economy, trade, finance, investment, technology transfer, project contracting, transportation, insurance and other of international commerce, maritime issues and/or law.

In the conciliation proceedings, the conciliators shall observe the principle of parties?autonomy, conduct conciliation on the basis of ascertaining the facts, distinguish right from wrong and determining the liabilities, while respecting the terms of the contract, abiding by the law, referring to the international practice, and adhering to the principle of fairness and reasonableness so as to help bring about mutual understanding and mutual concession between the parties and an amicable settlement of their disputes.

Through years of its continuous efforts, the caseload of the conciliation network of CCPIT goes up year by year, as well as the success rate of conciliation. The success rate of conciliation reaches over 80%. The cases involve parties from more than 30 countries and regions in addition to China. The impartiality and promptness of conciliation and regions in addition to China . The impartiality and promptness of conciliation are highly praised by the parties both at home and abroad.

In order to promote communication and co-operation with the international society, CCPIT/CCOIC Conciliation Center signed a co-operation agreement with Beijing-Hamburg Conciliation Center established in Hamburg, Germany. At the same time, Beijing-Hamburg Conciliation rules formulated for the two sides to apply in conciliation of the disputes involving parties of the two countries. The American Arbitration Association (AAA)a co-operation agreement with CCPIT/CCOIC Conciliation Center. In January 1995, CCPIT/CCOIC Conciliation Center acceded to the International Federation of Commercial Arbitration Institutes (IFCAI); in November 1997, CCPIT/CCOIC Conciliation Center signed a conciliation co-operation agreement with London court of International Arbitration (LCIA).

 

 

Disputes arising from Sino-foreign economic, trade, transport and maritime activities may be brought to a people's court in a civil action for settlement if the parties concerned have had no arbitration clauses in their contract or have not consequently reached a written arbitration agreement.

 

There is much in common between civil proceedings in regard to cases involving foreign element and domestic civil proceedings. However, as the subject, subject matter and the object of an action in civil proceedings in regard to cases involving foreign element involve foreign parties or interests, civil proceedings in regard to cases involving foreign element feature the following special characteristics:

1. Civil proceedings in regard to cases involving foreign element may have a bearing on state sovereignty. While handling civil cases involving foreign element, the people's court shall not only safeguard China's state sovereignty but also respect the state sovereignty of other countries.

2. It takes relatively longer time to complete a certain act of procedure in civil proceedings in regard to cases involving foreign element. It takes rather long time for a people's court to serve litigation documents on a party concerned who has no domicile within the territory of China, or for a party concerned to answer his defense or appeal.

3. The people's court may need judicial assistance in completing a certain act of procedure in civil proceedings in regard to cases involving foreign element. Jurisdiction is of geographic features. The people's court may enforce a litigation act within the territory of China, but judicial assistance and co-operation of foreign courts are required if an action has to be enforced abroad.

II. General Principles in Civil Procedure of Cases Involving Foreign Element

The following are general principles in civil procedure of cases involving foreign element in accordance with the Civil Procedure Law of the People's Republic of China:

1. Where a civil action involving foreign element is brought within the territory of China, the law of civil procedure of China shall apply.

2. The provisions of international treaties concluded or acceded to by China shall apply, except those on which China has made reservations.

3. Civil actions brought against a foreign national, a foreign organization or an international organization that enjoys diplomatic privileges and immunities shall be dealt with in accordance with the relevant law of China and the provisions of the international treaties concluded or acceded to by China.

4. The people's court shall conduct trials ofcivil cases involving foreign element in the spoken and written language commonly used in China. Translation may be provided at the request of the parties concerned, and the expenses shall be borne by them.

5. When foreign nationals, stateless persons or foreign enterprises and organizations need lawyers as agents to bring an action or enter appearance on their behalf in the people's court, they must appoint Chinese lawyers.

6. Any power of attorney mailed or forwarded by other means from outside the territory of China by a foreign national, stateless person, or a foreign enterprise and organization that has no domicile in China for the appointment of a lawyer or any other person of China as an agent must be notarized by a notarial office in the country of domicile and authenticated by the Chinese embassy or consulate accredited to that country or, for the purpose of verification, must go through the formalities stipulated in the relevant bilateral treaties between China and that country before it becomes effective.

III. Jurisdiction in Civil Procedure of Cases Involving Foreign Element

Jurisdiction in civil procedure of cases involving foreign element refers to the scope of functions and powers entrusted to a people's court in handling cases involving foreign element at the first trial, which sets forth the internal division of labor among the people's courts at various levels in handling civil cases involving foreign element at the first trial.

1. In the case of an action concerning a contract dispute or other disputes over property rights and interests, brought against a defendant who has no domicile within the territory of China, if the contract is signed or performed within the territory of China, or if the object of the action is located within the territory of China, or if the defendant has distrainable property within the territory of China, or if the defendant has its representative office within the territory of China, the people's court of the place where the contract is signed or performed, or where the object of the action is, or where the defendant's distrainable property is located, or where the torts are done, or where the defendant's representative office is located, shall have jurisdiction.

2. Parties to a dispute over a contract concluded with foreign element or over property rights and interests involving foreign element may, through written agreement, choose the court of the place which has practical connections with the dispute to exercise jurisdiction. If a people's court of China is chosen to exercise jurisdiction, the provisions of the Civil Procedure Law of the People's Republic of China on jurisdiction by forum level and on exclusive jurisdiction shall not be violated.

3. If in a civil action in respect of a case involving foreign element, the defendant raises no objection to the jurisdiction of a people's court and responds to the action by making his defense, he shall be deemed to have accepted that this people's court has jurisdiction over the case.

4. Actions brought on disputes arising from the performance of contracts for Chinese-foreign equity joint ventures, or Chinese-foreign contractual joint ventures, or Chinese-foreign co-operative exploration and development of the natural resources in China shall fall under the jurisdiction of the people's courts of China.

As for other matters concerning civil procedure in respect of cases involving foreign element, refer to the Civil Procedure Law of the People's Republic of China is recommended.