CHINA Law and Practice Contributed by: Tim Yimin Liu, Sybil Xueting Yuan and Cassie Wenjing Li, Global Law Office
• Parties and consent – The parties to the arbitra - tion agreement must have legal capacity, and the agreement must be concluded voluntarily, without coercion or fraud. • Designation of an arbitration institution – Unlike many jurisdictions that allow ad hoc arbitration, under the current PRC Arbitration Law, except in limited foreign-related scenarios, an arbitration agreement must designate a capable arbitration institution. Failure to do so renders the agreement invalid and thus unenforceable. 3.2 Arbitrability Arbitrable disputes refer to disputes over contracts and other property-related rights and interests between citizens, legal persons and other organisa - tions with equal legal status that may be submitted to arbitration (see Article 2 of the PRC Arbitration Law). Non-arbitrable disputes refer to disputes concerning marriage, adoption, guardianship, child maintenance, inheritance, and administrative disputes that are sub - ject to resolution by administrative authorities (see Article 3 of the PRC Arbitration Law). The Second Draft Amendment largely retains the cur - rent structure, with only minor wording adjustments – replacing “citizen” with “natural person” and “other organisations” with “unincorporated organisations”. 3.3 National Courts’ Approach The approach to determining the law governing the arbitration agreement is as follows (see Article 16 of the SPC’s Interpretation of the Arbitration Law). • Firstly, where the parties have agreed on the law governing the arbitration agreement (as distinct from the governing law of the underlying contract), then such law shall govern. • In the absence of such, if the seat of arbitration is specified, then the law of the seat shall apply. • Lastly, the law of the forum (Chinese court) will apply. It is worth noting that, in China, the agreed governing law over the underlying contract does not automati - cally become the governing law on the validity of the arbitration agreement.
Chinese courts usually take an arbitration-friendly stance. Unless an arbitration agreement is clearly invalid, Chinese courts generally respect and uphold its validity and enforceability. For further discussion on enforceability, see 3.1 Enforceability . 3.4 Validity The rule of separability is generally respected and upheld in China. When reviewing the validity of an arbitration clause, Chinese courts typically treat the arbitration clause as independent from the contract in which it is con - tained, unless the clause itself is found to be invalid on specific legal grounds such as coercion, fraud, or circumvention of mandatory legal prohibitions. The rule of separability under Chinese law encom - passes the following. • The amendment, rescission, termination or inva - lidity of the contract shall not affect the validity of the arbitration clause itself (see Article 19 (1) of the PRC Arbitration Law). • Even if a contract itself is found to be invalid or has been rescinded, that shall not affect the validity of the arbitration clause (see Article 10 of the SPC’s Interpretation of the Arbitration Law). • Where the parties have reached an arbitration agreement when concluding a contract, regardless of the contract’s formation or effectiveness, that shall not affect the validity of the arbitration agree - ment clause (see Article 10 of the SPC’s Interpreta - tion of the Arbitration Law).
4. The Arbitral Tribunal 4.1 Limits on Selection
Parties have a high degree of autonomy in appointing arbitrators, though this autonomy must be exercised within the statutory framework and the rules of the relevant arbitration institution. • Numbers – Parties may freely agree on the number of arbitrators, typically one or three.
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