Abstract: the 1995 Chinese Arbitration Actcombined with the CPL and other sources of arbitration laws constitute the legal bases of Chinese Arbitration System. Compared with other advanced arbitration systems, there are some birth-defects of the Chinese Arbitration Law due to the short of legislation experiences and the conservative attitude toward arbitration. The New Judicial Interpretation issued by the Chinese Supreme People’s Court symbolizes a new progress of Chinese Arbitration Law by strengthening the supportive but not the intervening role of the People’s Court to Arbitration.

Key words: Progress, Chinese Arbitration Law, the new Judicial Interpretation to Arbitration Act

The Chinese Arbitration Act implemented on 1 September 1995 unified in some extent the previously conflicting regulations governing arbitration in China, and marked a fundamental change in the system of Chinese arbitration. It established basic requirements for the validity of arbitration agreements and the conduct of arbitrations, and deal with other matters relating to both domestic and international disputes. The 1995 Arbitration Act was formulated on the basis of a number of guiding principles. These include the principles of independence and impartiality, party autonomy, simple and efficient arbitration and the use of conciliation.The arbitration Act has been applied to resolve both the domestic and international commercial disputes for nearly 13 years and some birth-defects of this legislation have been exposed gradually through its operation. Compared with the 1985 UNCITRAL Model Lawand other advanced municipal arbitration laws (e.g. the U.S Arbitration Law and the English Arbitration Act of 1996, etc.), the main defects of Chinese arbitration law consist of the following aspects:

1 Conflict remains among multi-hierarchy statutes

the legal framework of Chinese commercial arbitration law consists of two basic laws promulgated by the Standing Committee of the National People’s Congress: the 1995 Arbitration Act and the 1991 Civil procedure Law ( hereinafter referred to as the CPL ) (revised in 2007), more than 30 pieces of Judicial Interpretations issued by the Supreme People’s Court, International Treaties,Regulations adopted by the State Counciland the Arbitration Rules of more than 180 arbitration institutions (only effective when the disputing parties choose it as the applicable rules to the arbitration procedure issues).Conflict remains among these different hierarchy rules of laws. For example, both the CPL and the Arbitration Act generally divide arbitration into a parallel system of domestic arbitration and foreign related arbitration. under the current legal systems, arbitration agreement is divided into domestic arbitration agreement and foreign related arbitration agreement; arbitration institution is divided into domestic arbitration institution and foreign related arbitration institution; arbitral award is divided into domestic arbitral award, foreign related arbitral award or foreign arbitral award, etc. and they will be controlled or supervised by different courts and by different rules. Generally speaking the foreign-related arbitration agreement and the arbitral award will enjoy more favorable status than the domestic ones. Traditionally (before the year of 2000), CIETAC and the CMAC are the only Chinese foreign related arbitration institutions and both institutions can only hear the international commercial disputes arising from the economics and trade, they had no jurisdiction to any domestic issues. Meanwhile the so called domestic institutionsre-organized in accordance with the 1995 Arbitration Act can only accept the cases without any foreign elements. But according to the revised 2000 CIETAC arbitration rules and the 1996 Notice issued by the State Council, all the arbitration institutions, whatever marked domestic or foreign-related have jurisdiction to both the domestic or international disputes. So the classification of domestic or international institution is meaningless in China since then, but the CPL (Revised) and the 1995 Arbitration Act remains unaffected.#p#分页标题#e#

2 Parallel control systems for domestic and foreign related arbitration

Under the current Chinese legal systems, we have a unique “parallel control mechanisms” separately applied to domestic or foreign-related arbitration. As l mentioned above, in China, the domestic arbitration agreements and the arbitral award has faced more stringent judicial review than the foreign-related ones.

For example, according to the so-called “Pre-Report Mechanism” issued by the Supreme People’s Court,before the People’s Court of First Instance (usually the Intermediate People’s Court) decides to deny the validity of a foreign related arbitration agreement, it has to report to the High People’s Court, and if the High Court made the same decision as the Court of First Instance, it should further report to the Supreme People’s Court. However if the inferior People’s Court confirm the effectiveness of such foreign-related arbitration agreement, the “Pre-Report Mechanism” will no longer take any functions ; but the so-called “Pre-Report Mechanism” can not be used by the People’s Court to review the validity of a purely domestic arbitration agreement.

More over, after the arbitral award was rendered, the domestic and foreign related awards will also confront different judicial reviews. Before setting aside an foreign-related arbitral award, the competent People’s Court will review only the procedural matters while to the domestic award, the court will not only review the procedural matters but also the merits of the award, this parallel control system will also be applied to the recognition and enforcement of different kinds of arbitral awards.

3 Prior power of local court to decide the jurisdiction of arbitral tribunal

The Competence/Competence doctrine has been recognized by many jurisdictions. There are two elements to the Competence/Competence doctrine: first, that an arbitral tribunal itself (not the arbitration institution) can rule upon its own jurisdiction; and secondly that, for this purpose, the arbitration clause is separate and independent from the substantive contract. The establishment of Competence/Competence doctrine can prevent any party to delay the arbitration proceedings by submitting the case to the local court and permit the tribunal to rule on its own jurisdiction whenever the validity or existence of the main contract is challenged. The arbitration can continue, and normally the state court cannot intervene, until the award is made. The 1996 English Arbitration Act Section 30 is a typical article concerning this doctrine.Section 30 sets out the basic principle that, subject to the precise wording of the arbitration clause itself and to any other agreement between the parties, the arbitrators may determine their own substantive jurisdiction. That extends to the validity of the arbitration agreement (including existence and legality), the constitution of the tribunal and whether the issues referred to them fall within the arbitration agreement. The power of an arbitral tribunal to decide upon its own jurisdiction is recognized by not only many countries such as United Kingdom, but also most of international arbitration bodied through their arbitration rules..#p#分页标题#e#

But the widely accepted doctrine of Competence/Competence has not been adopted in Chinese legislation and practice. Instead of the tribunal, the arbitration institutions (e.g. CIETAC) or the competent People’s Court has a final say on the existence and validity of an arbitration agreement and the jurisdiction of the arbitral tribunal over a case.The People’s Court has direct power to decide on a dispute over whether an arbitration agreement is effective, not through judicial review after the decision is made by an arbitral tribunal but through participation in solving the question at the earlier stage. According to Article 20 of Chinese Arbitration Act,if one party resorts to an arbitration commission, but the other resorts to a court for determining the validity of agreement, the court’s jurisdiction prevails.

And Article 26 of the Arbitration Act reads If the parties have concluded an arbitration agreement and one party has instituted an action in a People’s Court without declaring the existence of the arbitration agreement and, after the People’s Court has accepted the case, the other party submits the arbitration agreement prior to the first hearing, the People’s Court shall dismiss the case unless the arbitration agreement is null and void. If, prior to the first hearing, the other party has not raised an objection to the people’s Court’s acceptance of the case, it shall be deemed to have renounced the arbitration agreement and the People’s Court shall continue to try the case.

Further more, in Reply on several Issues Relating to Adjudication of the validity of Arbitration Agreements,the Supreme People’s Court emphasizes the prior power of the People’s Court. This Judicial Interpretation stipulates if the parties have dispute relating to the validity of arbitration agreement, and one party has submitted to arbitration commission to adjudicate the validity of the arbitration agreement while another party has instituted an action in a People’s Court to avoid the arbitration agreement, in the case of arbitration commission has accepted this application and has made a decision, People’s Court shall dismiss this case; in the case of arbitration commission has accepted this application but has not made a decision, People’s Court shall accept this case and announce arbitration commission suspend the application.

4 Ad hoc Arbitration has not been recognized by Chinese Arbitration law

The expression “ad hoc arbitration” is an antonym of the expression “institutional arbitration”. It refers to any types of arbitration which are not performed by an institution. There are only administered arbitration in China. No provision for ad hoc arbitration is laid down in the 1995 Arbitration Act. In practice, an arbitration agreement submitting a dispute to ad hoc arbitration in China is not valid under Article 16 of the Arbitration Act, and an award made in ad hoc arbitration will not be enforceable because it will be set aside or refused under Article 58, 63, 70 and 71 of the Arbitration Act. Consequently, it can be said that use of ad hoc arbitration is at the risk of the parties in dispute. However, ad hoc arbitration awards made in other countries that are contracting members of 1958 New York Convention are recognizable and enforceable in Mainland China according to Articles 1-3 of New York Convention. In Ocean Shipping Company Ltd of Guangdong v. Marships of Connecticut,the applicant, Ocean Shipping Company Ltd of Guangdong, in 1990, request the Maritime Court of Guangzhou to enforce three awards of ad hoc arbitration conducted in London. The court examined the validity of the awards under English law and granted the request of the applicant. This case represents the position taken by Chinese courts to awards of ad hoc arbitration made outside China. The absence of ad hoc arbitration in China will inevitably reduce the opportunities for the parties in disputes to choose China as the place of arbitration, it will also make China take more responsibility than other New York Convention Members. #p#分页标题#e#

5 The specific requirements for an valid arbitration agreement is too rigid .

Arbitration agreement is the base stone of arbitration, which empowers anarbitral tribunal the authority to accept and examine the case. A valid arbitration agreement also ousts the court jurisdiction over the same dispute. But the attitude towards the validity of arbitration agreement of countries are totally different, some are more flexible and some more stringent. According to Article 16 of Chinese Arbitration Act, an arbitration agreement must contain the following particulars: (1) an expression of intention to apply for arbitration; (2) matters for arbitration and (3) a designated arbitration commission

In practice, the parties in dispute are both merchants, they are usually laymen on the arbitration law and actually it is not realistic for them to know the arbitration laws of different countries. So it is not unusual for the parties to have drafted a defective or ambiguous arbitration agreement. Some times they don’t specify the arbitration institution or they just want ad hoc arbitration in the Mainland China. In a dispute between a German Company (Züblin Company) and a Chinese registered Company (Wuxi Woke Company), the two parties conclude a construction contract, the arbitration clause in the contract reads: “Arbitration: ICC Rules, Shanghai shall apply”. Then disputes arise on the validity of the arbitration clause. the Chinese Supreme People’s Court finally decided that the arbitral award is not valid for the absence of an appointed arbitration institution according to the law of the place of arbitration , that is the 1995 Chinese Arbitration Act in this case.

In order to offset the defects or fill the gap of the Arbitration Act, the Supreme People’s Court has issued more than 30 pieces of judicial interpretations to implement the CPL and the Arbitration Act since 1995. The most important one among them is the New Judicial Interpretation to the Chinese Arbitration Actissued by the Supreme People’s Court. This Interpretation in the widely extent fill the gap of the Arbitration Act and has showed a strong pro-arbitration bias to arbitration.

1 Have a strong pro-arbitration bias to the validity of the arbitration agreement.

Article 16 and article 18 of Arbitration Act sets out some rigid criterion on adjudicating the validity of an arbitration agreement that is to be implemented in the Mainland China. It is well known that ad hoc arbitration is non-permissive under these clauses. In addition, an ambiguous arbitration agreement may be interpreted as null and void. However the new Interpretation, under the bases of some judicial practices, suggests that the People’s Court may take a more flexible way to construe the validity of an arbitration agreement through article 3 to article 7. #p#分页标题#e#

It is anticipated that the new pro-arbitration policy taken by the Supreme People’s Court will be much appreciated by the parties to establish their confidence in arbitration.

2 Extend the separability doctrine even to the non-existence of the principle contract.

Article 19 of the Arbitration Act clearly recognizes the doctrine of Separabilty: an arbitration clause shall exist independently, the amendment, rescission, termination or invalidity of a contract shall not affect the validity of the arbitration clause. But issues arise when one party denies ever entering the agreement. Is the separation principle also accepted if it is alleged that the contract is non-existed (as apposed to invalidity). One may argue that there is no arbitration clause at all, there is no contract in which the arbitration clause is allegedly embedded and under this circumstances, the Separability doctrine would not be applicable. Chinese Arbitration Act is silent on this issue. The New Judicial Interpretation, however reveals to affirm the Separability doctrine even if the contract in question is alleged to be non-existed. Article 10 (2) of the Interpretation reads: Where the parties concerned reach an agreement for arbitration regarding a dispute when concluding the contract, the effectiveness of the agreement for arbitration shall not be impacted if the contract is not formed. So the New Judicial Interpretation tends to leave the issue whether the contract in question is really non-existed to the arbitrators to decide.

3 Give a broader explanation to the written forms of the arbitration agreement

It is widely accepted that an arbitration agreement must be in writing. Article 16 recognizes writing as the valid form of arbitration agreement and rejects oral agreement is a valid arbitration agreement. Nevertheless, it fails to define writing broadly and exactly. The words “other written forms” not only are ambiguous but also leave a lot space to interpretation of law. Considering the development of electronic communication, the new Judicial Interpretation made a broad interpretation to “other forms as prescribed in Article 16 of the Arbitration Act. Article 1 of the Interpretation provides that agreements for arbitration in other written forms as prescribed in Article 16 of the Arbitration Law should include the agreements on resorting to arbitration which are reached in the forms of contracts, letters or data message (including telegraph, telefax, fax, electronic data interchange and email), etc

4 Provide the governing law applied to the validity of arbitration agreement.

Due to the different requirements to an arbitration agreement in different countries, the applicable law to the validity or interpretation of an arbitration agreement is very important to a foreign-related arbitration agreement. The Chinese Arbitration Act has no word on this important issue, which used to result conflicting adjudications by the People’s Court on this matter. In a 1999 case, the parties in dispute concluded a contract for sale of goods, and the arbitration clause contained in the contract read: “Arbitration: ICC Rules, the place of arbitration is London”. After the disputes arose, the Chinese party submitted the case directly to Hai Kou Intermediate People’s Court in Hainan Province. The other party (a foreign legal person) challenged the jurisdiction of the People’s Court and claimed the Court to terminate its hearing to order the parties to resolve this dispute through arbitration. According to the “Pre-Report Mechanism”, the Supreme People’s Court finally decided that the arbitration clause contained in the contract should be null and void for the reason of lack clearly appointed arbitration commission according to Article 16 of Chinese Arbitration Act. Although the Supreme People’s Court did not mention the applicable law to the effectiveness of the arbitration clause, it actually applied the law of the Court (Chinese law in this case) as the governing law to the arbitration clause. But in a similar case occurred in 2002, the Supreme People’s Court confirmed that in the absence of parties’ choice of law, the applicable law to the validity of arbitration agreement should be the law of the place of arbitration chosen by the parties, in this case is the Hong Kong arbitration law.#p#分页标题#e#

Article 16 of the New Interpretation provides in the first time the applicable law to the arbitration agreement, it shall be the law chosen by the parties in disputes, in the absence of such choice, the governing law shall be the law of the place of arbitration, if the parties do not designate the place of arbitration in the arbitration agreement, the governing law shall be the law of the forum.

5 Limit the power of the court in deciding the jurisdiction of arbitral tribunal.

Article 13 of the new Judicial Interpretation re-allocates the power between the arbitral institution and the People’s Court on the jurisdiction of the arbitral tribunal through the rule of Waiver of Right. An allegation of waiver may arise in the following ways. If a party becomes aware of circumstances before or during the proceedings that may be grounds for complaint to the arbitral tribunal but chooses to remain silent until after the award is delivered , than arguably the party should not be allowed to challenge the award on that ground. By its inaction, the party may be considered to have waived the objection and so cannot later raise it as a ground of challenge. This principle of waiver of Right is found in a number of national arbitration laws,and is important in preserving fairness between the parties and avoiding waste of time and expense.

Article 13 of the new Judicial Interpretation confirms this principle: A plea that the arbitration agreement is invalid shall be raised not later than the first hearing of the arbitral tribunal, the People’s court will not accept any plea concerning the effectiveness of arbitration agreement after that time; if the validity of an arbitration agreement has been determined by an arbitration institution, the party dissatisfied with the determination without raising the challenge before the first hearing of the arbitral tribunal, will lose the right of challenge to resort to the procedures for setting aside the award made by the Arbitration Commission

6 Establish partial vacation of the arbitral award and rebuildremission system

There are two main judicial remedies for challenging of an award: setting aside by a court or remission by the court to the arbitration tribunal for amendment. The effect of an award being set aside is very serious. It will result an award rendered void and unenforceable in the country of rendition as well as in any country that is a Party to the New York Convention. The claimant must therefore return to the beginning and have the matter entirely re-heard with significant waste of time and expense. So an exception to this consequence is when an arbitral tribunal is found to have exceeded its jurisdiction in the award, but the “excess” can be severed from the other parts of the award, thereby leaving a certain amount of the award intact. Article 19 of the New Interpretation confirms in the first time this rule in the Chinese arbitration legal history.#p#分页标题#e#

Remission, involves the court submitting an award back to the tribunal for amendment or clarification. Remission is useful procedure when there is an error that can be cured relatively easily since it does not have the same drastic consequences as setting aside the award.Article 61of the Arbitration Act stipulates the Remission system, but this article too simple to be applied practically. Article 21 to Article 23 of the new Judicial Interpretation reconfirm this rule and made it more detailed to be easily implemented.

7 Re-allocate the supervision power of the People’s Court in the stage of setting aside an award and enforcement of an award.

The bases for setting aside an award and non-enforcement of an award are mostly the same according to the Chinese Arbitration Act. It is very easy for the losing party to resort to both supervision mechanisms under the same bases in the same Court or different Courts. To avoid rendering the conflicting adjudications from the different courts, Article 25 and 26 of the new Judicial Interpretation harmonize the relationship between setting aside an award and non-enforcement an award, and provide that if the loser party challenges the award according to any reason listed by the arbitration Act, he will be prohibited to claim for the non-enforcement as the same reason

Conclusions

A great progress of Chinese Arbitration Law has achieved since the enactment of the new Judicial Interpretation by the Supreme People’s Court, but the reform or innovation of the new Judicial Interpretation to the Arbitration Act is still very limited due to its nature and status. first, the legal effect of Judicial Interpretation concerning arbitration issued by the Supreme People’s Court is inferior to the Arbitration Act and CPL enacted by the National People’s Congress, and second the regulating scope of the Judicial Interpretation is limited to the relationships between arbitration and judicature under the current legal systems. Some issues are left untouched under the new Judicial Interpretation, which include but not limited in (1)A parallel legal system applied to domestic and foreign related arbitration still exists under the current arbitration laws; (2) Whether ad hoc arbitration is permitted under the current arbitration law is still ambiguous; (3) The nationality and legal status of an arbitral award rendered in China by a foreign arbitration institution (such as ICC International Arbitration Commission) is still not clear; (4) Whether an award concerning two Chinese Parties (without other foreign elements ) rendered outside China can be recognized and enforced by the People’s Court is still arguable. These residual issues are important and can only be resolved by the fundamental reform of Chinese Arbitration Law instead of simply adopting a Judicial Interpretation.