Latest Changes in China’s Arbitration Law

The evolution of China’s arbitration law reached a significant milestone on November 4, 2024, when the draft amendment to the arbitration law of the People’s Republic of China was submitted for its first deliberation at the twelfth session of the Standing Committee of the 14th National People’s Congress. This marks the most substantial revision since the implementation of the current arbitration law in 1995, addressing key issues in arbitration systems and practices that have emerged over nearly three decades.

The current arbitration law underwent minor amendments in 2009 and 2017. During its implementation period, China experienced rapid economic development and increasing international engagement, leading to growing calls for modernization of the arbitration framework to better align with international standards and support initiatives like “Belt and Road” and broader economic opening-up strategies.

The amendment process gained momentum when the Ministry of Justice released a draft for public comments in July 2021 proposing substantial changes, including opening China’s arbitration market to foreign institutions and allowing ad hoc arbitration. The process continued through 2024, with Premier Li Qiang’s state council executive meeting approving the draft amendment in July, followed by its submission to the National People’s Congress Standing Committee in November.

The draft amendment comprises 91 articles across eight chapters, introducing significant reforms while maintaining a balanced approach to modernization. It explicitly establishes party leadership in arbitration work while expanding the scope of foreign-related arbitration and introducing special arbitration provisions. The amendment also strengthens arbitration credibility through improved governance systems and promotes innovative practices aligned with international norms.

Key Amendments and Highlights of the Draft Revision

Arbitration Agreement Validity

Regarding arbitration agreement validity, the draft amendment takes a more conservative approach compared to the 2021 Draft for Public Comments. It maintains the four essential requirements from the current law: written form, arbitration intent, specified matters, and designated arbitration commission. Arbitration Law of the People’s Republic of China §16 (2017). This approach creates potential tension with the new special arbitration provisions, as special arbitration doesn’t require specifying a commission.

The draft amendment recognizes implied arbitration agreements when one party claims their existence and others don’t object, though it adds the requirement of tribunal notification and recording. Arbitration Law of the People’s Republic of China §16 (2017); Arbitration Law Draft §24 (2024). On the principle of tribunal competence-competence, it maintains the current framework while explicitly granting tribunals authority to determine arbitration agreement validity. Arbitration Law Draft §28 (2024).

Expanding the Scope of Foreign-Related Arbitration Cases

A significant change appears in the scope of foreign-related arbitration cases, expanding from specific categories like foreign economic trade and maritime matters, Arbitration Law of the People’s Republic of China §65 (2017), to encompass all “disputes with foreign elements.” Arbitration Law Draft §75 (2024). While the precise definition of foreign elements remains to be detailed, it’s expected to align with existing judicial interpretations covering cases involving foreign parties, overseas assets, or international legal relationships.

Introduction of Special Arbitration System

The introduction of a “special arbitration” system represents a careful step toward accepting ad hoc arbitration practices, though with a narrower scope than initially proposed in 2021. Arbitration Law Draft §79 (2024). This system applies specifically to foreign-related maritime disputes and certain disputes between enterprises in free trade zones. While this represents progress in aligning with international practices, questions remain about its integration with existing arbitration mechanisms.

Permitting Foreign Arbitration Institutions to Establish Operations in China’s Free Trade Zones

The draft amendment takes a measured approach to foreign arbitration institutions’ operations in China, allowing them to establish presence and conduct foreign-related arbitration activities within free trade zones. Arbitration Law Draft §83 (2024). This legislative confirmation of existing pilot programs creates a formal pathway for foreign institutions while maintaining controlled market opening.

Establishment of Seat of Arbitration System in the Foreign-Related Arbitration Chapter

The introduction of the “seat of arbitration” concept marks a significant development particularly for foreign-related arbitration. Arbitration Law Draft §78 (2024). This addition helps address issues regarding the treatment of awards made by foreign institutions within China and supports the implementation of special arbitration. However, some inconsistencies remain, such as jurisdiction for setting aside awards being tied to institution location rather than arbitration seat. Arbitration Law Draft §68 (2024).

Removing Interim Measures Chapter from the Draft for Public Comments

Regarding interim measures, the draft amendment adds conduct preservation while removing earlier proposals for broader arbitral tribunal powers in issuing interim measures. Arbitration Law Draft §36 (2024). This reflects a cautious approach to balancing international practices with China’s existing judicial framework.

The amendment reduces the time limit for applications to set aside awards from six to three months and explicitly includes invalid arbitration agreements as grounds for setting aside awards. Arbitration Law of the People’s Republic of China §58–59 (2017); Arbitration Law Draft §68–69 (2024). These changes aim to enhance efficiency and clarity in the award challenge process.

The draft amendment represents a significant step in the evolution of China’s arbitration system, balancing international alignment with local conditions. While more conservative than the 2021 Draft for Public Comments in several areas, it introduces important innovations and clarifications that should enhance China’s arbitration framework.

Outlook

Looking forward, the amendment process is expected to continue refining these provisions through public consultation and legislative review. The goal remains to develop a distinctive Chinese arbitration system that serves domestic needs while facilitating international commercial dispute resolution. The final version will likely reflect careful consideration of practical implementation challenges and the need to maintain consistency with China’s broader legal framework.

The success of these reforms will depend largely on their implementation and interpretation by courts and arbitration institutions. Particular attention will need to be paid to the operation of new mechanisms like special arbitration and the seat concept, as well as the integration of foreign arbitration institutions into China’s legal landscape. These developments suggest a continuing evolution toward a more sophisticated and internationally compatible arbitration system while maintaining Chinese characteristics.