Articles 16 and 18 of the PRC Arbitration Law: The Great Wall of China for Foreign Arbitration Institutions

Abstract

Although China has been continuously developing its arbitration practice to international standards, one thing on the Chinese arbitration scene remains anomalous: Whereas local arbitration commissions have been mushrooming since 2005, today exceeding 180 in number nationwide, foreign and/or international arbitration institutions are almost completely absent from the Chinese arbitration scene. The present article aims to analyze the reasons for this absence from a legal perspective, i.e. the actual legal impediments preventing foreign arbitration institutions from operating in China: Articles 16 and 18 of the Arbitration Law. These two provisions disqualify, if not de lege , at least de facto , international arbitrations from operating in China, first of all because of the formal requirements they set with regard to arbitration agreements, but also and especially because of the protectionist and restrictive way these provisions are interpreted and handled by the different People's Courts. Articles 16 and 18 are crucial when deciding on conflicts of jurisdiction between courts and arbitration institutions raised by pathological arbitration agreements, and the way they are applied by Chinese courts reveals the lack of a consistent and arbitration-friendly approach in this regard. This article illustrates this lack of consistency through a short study of case law and in the end shows the impact of articles 16 and 18 of the Chinese Arbitration Law on foreign arbitration institutions, taking the ICC Court of Arbitration as an example. Despite its growing role in the international market, China has not yet managed to position itself as a leading center for arbitration. If one of the reasons is the lack of experience of Chinese courts, arbitrators and counsel dealing with international arbitration, this deficiency could be – at least partly – filled by opening the doors to foreign arbitration institutions and practitioners. Of course, this would increase the competition for local arbitration commissions, but this pressure would be a strong incentive for Chinese arbitration to become more efficient and thus more competitive on a world scale.