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China Aims to Modernize Its Arbitration and Award Enforcement Regime

China’s Standing Committee of the National People’s Congress issued its five-year legislative plan on Sept. 7, 2018. The five-year plan commits Chinese government bodies to study and potentially move forward with revisions to China’s arbitration law (Arbitration Law) and the implementation of a new civil enforcement law. While this commitment of the Standing Committee was not among the highest-priority categories of legislative activities, it nonetheless signals the potential for further progress in China’s efforts to modernize its arbitration regime and make enforcement of arbitration awards and agreements to arbitrate more consistent.

China’s Arbitration Law has not been modified in some 20 years. Accordingly, there are various topics ripe for revision. These include the permissibility of ad hoc arbitration, whether foreign arbitral institutions may be recognized to conduct arbitrations in China, and the power of the tribunal to grant interim measures, among others. Revisions to the Arbitration Law will be considered by the State Council, while the new civil enforcement law will be considered by the Supreme People’s Court of China.

China has recently adopted other pro-arbitration reforms via judicial notice, including the establishment of mandatory reporting requirements from lower courts, intermediate courts, and ultimately the Supreme People’s Court, where there has been a refusal to enforce an agreement to arbitrate or to enforce an arbitration award. Further, lower courts must now provide written reasoning for denial of enforcement of an arbitration award.

Despite these reforms, China’s reputation for enforcing foreign arbitration awards remains mixed, and there are examples of the process taking many years. However, because of China’s prominence in the global economy, these pro-arbitration steps are encouraging and should be closely monitored.