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4 October 20203 minute read

Recent Breakthroughs for Foreign Arbitration Institutions in China

As reported in our earlier article, the State Council of the People’s Republic of China had issued the “Framework Plan for the New Lingang Area of China (Shanghai) Pilot Free Trade Zone” on 27 July 2019 allowing “well-known” overseas arbitration and dispute resolution institutions to establish business divisions in the Lingang Free Trade Zone in Shanghai to conduct arbitration with respect to civil and commercial disputes arising in international commerce, maritime, investment and other fields and to support and safeguard applications for interim measures applications made before and during arbitrations.

On 7 September 2020, the State Council has further published the “Work Plan for Deepening Comprehensive Pilot and New Round of Opening-Up of Services Sectors in Beijing and Building Comprehensive Demonstrative Area of Opening-Up of State Service Sectors” further allowing foreign arbitration institutions to provide arbitration services in designated areas in Beijing in relation to civil and commercial disputes arising in the areas of international commerce and investments and to support and secure the application and enforcement of interim measures before and during the arbitration proceedings, such as asset preservation, evidence preservation and conduct preservation. It is expected that further guidance will be issued detailing how the policy will be implemented.

Previously, there was no express laws allowing or prohibiting foreign arbitration institutions to administer arbitrations in China and there has always been an uncertainty on the validity of an arbitration clause providing for a China seated arbitration to be administered by a foreign arbitration institutions. The policy to expand the areas where foreign arbitration institutions are allowed to provide service signals a very positive sign that arbitration market in China will continue to be liberalized and open up to foreign arbitration institutions.

The question on validity of arbitrations administered by foreign arbitration institution was also revisited in two recent rulings by the PRC Courts after the Supreme People’s Court had upheld the validity of an arbitration agreement providing for ICC arbitration in Shanghai in the landmark case of Longlide Packaging Printing Co. Ltd. v. BP Agnati S.r.l, in 2013.

On 29 June 2020, the Shanghai Intermediate People’s Court has upheld an arbitration agreement providing for SIAC arbitration in Shanghai in the case of Daesung Industrial Gases Co., Ltd v Praxair (China) Investment Co., Ltd.

On 6 August 2020, in the case of Brentwood Industries (US) v Guangzhou Zhengqi Trading Co Ltd., the Guangzhou Intermediate People’s Court has ruled that an ICC arbitration award made in Guangzhou should be considered as a Chinese arbitral award with foreign element and enforced under the more direct route under the PRC Civil Procedural Law instead of the New York Convention.

These important judicial decisions further demonstrate and confirm the general positive attitude and willingness of the PRC Courts to uphold arbitrations administered by foreign arbitration institutions despite that there is still no express provisions allowing foreign arbitration institutions to administer arbitration cases seated in Mainland China under the PRC Arbitration Law.

If you have any questions about these new developments, please feel free to contact the authors.

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