Update on arbitration developments in China

Update on arbitration developments in China

46779736 - beautiful architecture china's styleZhang Shouzhi, partner in the arbitration, litigation and dispute resolution practices at King and Wood Mallesons in Beijing, looks back over arbitration in China so far this year and considers what the remainder of the year may hold, both in China and globally.

What have been the most significant arbitration-related case law developments in China so far in 2016?

On 2 June 2016, the Taizhou Court of China refused to recognise and enforce an International Chamber of Commerce (ICC) award on the basis that the recognition and enforcement of the award would violate public policy (public interests) because the award conflicted with an effective and binding Chinese court ruling which was rendered on 11 December 2012 and which held that the arbitration clause underlying the ICC award was invalid (Wicor Holding AG v Taizhou Haopu Investment Co, Ltd, Taizhou Intermediate People’s Court, P R China, Case Docket Number [2015] Tai Zhong Shang Zhong Shen Zi, No 00004 (2 June 2016)).

Chinese courts rarely cite public policy (public interests) to refuse recognition and enforcement of foreign arbitral award. The recent Taizhou Court’s decision indicates the courts’ explicit acknowledgement of the ‘res judicata’ principle being part of public policy/public interests and that any arbitral award conflicting with an earlier Chinese court ruling is subject to the risk of being refused recognition and enforcement in China.

What have been the most significant developments in arbitral institutions in China in the same period?

In 2016, following in the steps of Hong Kong International Arbitration Center (HKIAC) and Singapore International Arbitration Centre (SIAC), the Court of Arbitration of the ICC opened a representative office in the Shanghai Free Trade Zone (SFTZ). Around the same time, Shanghai International Arbitration Center implemented special arbitration rules in SFTZ.

What developments are you expecting during the rest of 2016?

The current arbitration rules of the China International Economic and Trade Arbitration Commission, which entered into effect on 1 January 2015, introduced consolidated arbitration. HKIAC published a Practice Note on Consolidation of Arbitrations which became effective on 1 January 2016—and, in particular, the current arbitration rules of SIAC, which came into effect on 1 August 2016, highlighted revisions on consolidated arbitration, clearer rules on joinder, and intervention of parties. All these developments indicate a general and clear trend towards more efficient and transparent arbitration proceedings both in China and among the other major international arbitration institutions. And we expect that the trend will continue during the rest of 2016.

What have been the most notable features of your practice so far this year?

I have been practising international dispute resolution for more than 20 years. In recent years I have advised some Chinese companies in three international arbitration proceedings relating to confidentiality agreement disputes in petrochemical and mechanical manufacturing industries. These Chinese companies, including factories and engineering companies, which used to be technology licensees in the 1990s, have obtained many patents and become competitors with the previous foreign technology licensors. Our work is meaningful especially in the context of the belt and road policy which encourages the Chinese companies to go abroad and compete with foreign companies in international markets.

Besides, the number of domestic disputes arising from share transfer agreement is increasing steadily in 2016.

What development internationally has caught your eye and why?

Throughout this year so far, Ansung Housing Co, Ltd v People’s Republic of China (ICSID Case No ARB/14/25) continues to attract much attention in China. As this is the first case against the Chinese Government that may come into substantive proceeding in the International Centre for Settlement of Investment Disputes (ICSID), this case is a milestone in the Chinese Government’s participation in ICSID, and a good opportunity to observe the ICSID dispute resolution mechanism.

Interviewed by Jenny Rayner. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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