CHINA Trends and Developments Contributed by: Jun Gao and Fan Xu, Zhong Lun Law Firm
Risks and Proactive Strategies for Cross-Border Arbitration The number of international arbitration cases involving corruption allegations continues to rise. Corruption allegations not only influence arbitration proceedings as grounds for claims or defences but also directly challenge the basis of arbitral awards; as a result, anti- corruption has become a highly disruptive risk factor in international arbitration. Core risks facing enterprises operating in high-risk cross-border environments Specifically, businesses face the following risks. • Risks of corruption allegations in high-risk jurisdic - tions: potential conflicts may exist between local business practices and international anti-corruption standards, which could lead to inadvertent involve - ment in third-party misconduct. • Risk of the arbitral tribunal conducting a proactive investigation: even if neither party raises the issue of corruption, the arbitral tribunal may still conduct a proactive review if there are evident red flags. • Risk of the award being set aside: failure to proac - tively identify and disclose conflicts of interest may lead to avoidable challenges to the award. Key measures for prevention and response To avoid the risks mentioned above, companies are advised to proactively take the following measures. • Contract refinement: incorporate ICC standard anti-corruption clauses and clarify parties’ compli - ance obligations, liability for breach of contract, and audit and inspection rights. • Due diligence: strengthen background checks on counterparties and third-party intermediaries, and establish a warning mechanism for corruption risks. • Procedural participation: proactively fulfil disclo - sure obligations under the Rules and emphasise the selection of arbitrators with relevant business backgrounds or experience.
Conclusion: Future Direction of International Commercial Arbitration International commercial arbitration is transforming from purely post-dispute adjudication to preventative risk governance by promoting the proactive partici - pation of all parties. This trend also reflects a central theme in the development of international arbitration – striking a balance between safeguarding the public interest and upholding the commercial nature of arbi - tration. It is essential to bear in mind that the vital - ity of arbitration lies in its commercial nature. While strengthening anti-corruption measures, caution must be exercised against the risk of excessive judiciali - sation, with the core objective always remaining the pursuit of efficient and practical commercial solutions. For Chinese enterprises, proactively adapting to new international arbitration rules is crucial. On the one hand, businesses must strengthen internal compli - ance systems to prevent corruption; on the other hand, continuous improvement of cross-border dis - pute resolution strategies should be prioritised, with a focus on proactively identifying conflicts of interest rather than passively waiting for them to arise.
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