3.1 Ad hoc arbitration

Ad hoc arbitration refers to arbitral proceedings that “are not conducted under the auspices or supervision of an arbitral institution.” ^{Footnote 27} Parties simply agree to settle their dispute by arbitration without explicitly designating any arbitral organ to administrate their case. Despite its practical popularity, however, the current Chinese Arbitration Law does not recognize the legality of ad hoc arbitration held within China; ^{Footnote 28} only awards rendered by ad hoc arbitration in foreign seats can be recognized and enforced. ^{Footnote 29} More precisely, under the Arbitration Law (Articles 16 and 18), any arbitration agreement that fails to include a designated arbitration commission may be deemed null and void. ^{Footnote 30}

This denial of ad hoc arbitration seated in China has been widely criticized as an example that shows the Chinese arbitration system’s deviance from international standards, raising concerns about China’s commitment to the spirit of the New York Convention. ^{Footnote 31} As a contracting state to the Convention, Chinese courts are obligated to recognize and enforce foreign arbitral awards that include both institutional and ad hoc arbitration. ^{Footnote 32} Under the current 1994 Arbitration Law, however, it is unclear whether ad hoc arbitration seated in China is permissible. In practice, Chinese courts have largely adopted a negative view. ^{Footnote 33}

The Chinese central authority has recently relaxed the legislative constraint on the use of ad hoc arbitration. On 30 December 2016, the Supreme People’s Court (SPC) issued a landmark policy document, Opinions of the SPC on Providing Judicial Protection for the Establishment of Pilot Free Trade Zones (hereinafter, “the SPC’s 2016 Opinions”), which sets out the conditions under which the validity of ad hoc arbitration agreements shall be recognized (Article 9). First, enterprises registered in China’s pilot free trade zones (hereinafter, “FTZs”) are eligible to make ad hoc arbitration agreements. Second, such agreements may be found to be valid insofar as the parties clearly specify the location of arbitration in mainland China, the arbitration rules, and the arbitrators to handle their disputes. ^{Footnote 34}

To be sure, the conditions that the SPC lays down still remain rather ambiguous, casting doubt on the practicality of implementation and legality under the national Arbitration Law. Nevertheless, given the SPC’s central status in China’s formal state system, the opinion is highly instructive, reflecting the central state’s policy shift in a more “pro-arbitration” direction. ^{Footnote 35} The SPC’s document itself is not a state law in the strict sense, nor do Chinese local governments necessarily have the obligation to obey the SPC’s instructions. But in practice, a central policy decree such as the SPC’s opinion can often function as a strong basis upon which local states may initiate more concrete reform measures.

One such local initiative was made by the Zhuhai municipal government in 2017, which endorsed the first ad hoc arbitration rule in China: the Ad Hoc Arbitration Rules of the Hengqin Area of Zhuhai in China (Guangdong) Pilot Free Trade Zone (hereinafter, “the Hengqin Rules”). The Hengqin Rules adopt a number of innovative schemes to further concretize the SPC’s policy instructions. First, the rules can be used to govern ad hoc arbitration of disputes that take place between enterprises registered in any Chinese FTZ regardless of whether the parties themselves actually operate in the Hengqin FTZ or not (Article 3). Second, the rules recognize the authority of arbitrators to determine disputes over the validity and enforceability of arbitration agreements (Article 9). Third, the fees of arbitrators, in principle, shall be agreed upon by both arbitrators and parties (Article 17). These designs, among others, ^{Footnote 36} complement the lack of regulations that govern ad hoc arbitration under the current national arbitration legislation.

3.2 Foreign institutional arbitration in China

Foreign arbitral organs refer to arbitration institutions registered outside of mainland China. Examples include the International Chamber of Commerce (ICC) in Paris, the London Court of International Arbitration (LCIA), and the Singapore International Arbitration Centre (SIAC). Arbitral awards rendered by foreign arbitral organs seated outside of China are precisely one major category of foreign arbitral awards that the contracting states to the New York Convention are obliged to recognize and enforce (Article I.1). As the Convention’s contracting member, China is not exceptional in this regard. ^{Footnote 37} However, when parties opt for foreign arbitral institutions to process their disputes in China, problems occur, especially with respect to the validity of such agreements and the enforceability of their resulting awards under the current Chinese arbitration legislation.

Strictly speaking, the 1994 Arbitration Law does not explicitly prohibit foreign arbitral institutions from undertaking cases in mainland China. ^{Footnote 38} Yet Chinese legal scholars and arbitration officials have long debated whether such arbitral institutions can operate and manage arbitral cases in China. Some argue that the absence of legislative recognition does not necessarily preclude the validity of arbitration agreements that designate foreign arbitral institutions to process disputes within China, insofar as such agreements accord with the New York Convention. ^{Footnote 39} Others hold that the Chinese government has not yet opened the arbitration market; therefore, under the 1994 Arbitration Law (Articles 10, 16, and 18), the only permissible institutions that can offer arbitration services in China are limited to Chinese arbitration commissions. ^{Footnote 40}

In the past, Chinese courts adopted the latter position. But since 2009, the courts have allowed some exceptions through a series of landmark decisions and policy guidance. ^{Footnote 41} The first exception was made by the Ningbo Intermediate People’s Court in 2009, holding that the award in question shall be deemed as a “non-domestic award” and become enforceable because China is a contracting state to the New York Convention. ^{Footnote 42} This view was later endorsed by the SPC in 2013. In Anhui Longlide Packaging and Printing, Co. v. BP Agnati S.R.L., the SPC indicated that a foreign arbitral institution, such as the ICC Arbitration Court, can be regarded as a legitimate designated arbitration institution under the Chinese arbitration legislation. ^{Footnote 43} More recently, in 2021, Chinese courts have made two momentous decisions to recognize the validity of arbitration agreements that designated foreign arbitral organs to administer cases in China. ^{Footnote 44} One that followed the SPC’s position in the 2013 Anhui decision was delivered by Shanghai No. 1 Intermediate People’s Court on 29 June 2020. ^{Footnote 45} The other was rendered by Guangzhou Intermediate People’s Court on 6 August 2020, asserting further that the arbitral award rendered by the ICC in China can be regarded as a “Chinese foreign-related arbitral award” and thus be enforced under the Civil Procedure Law of the PRC (Article 273). ^{Footnote 46}

Local initiatives that aim to promote the use of foreign institutional arbitration in China have been very rare. However, some local governments see the State Council’s recent interest ^{Footnote 47} in promoting the industry of cross-border legal services in FTZs as an opportunity to lift themselves out of the constraints of the national arbitration legislation governing the operation of foreign arbitral institutions seated in China. One such example is the Shanghai municipal government. In October 2019, the Shanghai Municipal Bureau of Justice promulgated the Measures for the Administration of Overseas Arbitral Institutions’ Establishment of Business Departments in the Lin-Gang Special Area of China (Shanghai) Pilot Free Trade Zone. The measures not only ascertain the legality of foreign institutional arbitration in China but also detail the precise conditions under which foreign arbitration institutions may operate within the Lin-Gang area of the Shanghai FTZ. Specifically, any lawful and internationally reputable foreign arbitral institutions that have operated for more than five years and have conducted substantial arbitration activities can register with the Shanghai Municipal Bureau of Justice insofar as the persons in charge have never intentionally committed crimes (Articles 6 and 7). Moreover, to ensure the smooth running of this initiative, the Management Committee of the Lin-Gang Special Area has issued another policy document: Several Policies for the Promotion and the Development of Legal Service Industry in Lin-Gang New Area of China (Shanghai) Pilot Free Trade Zone (2020), which details the processes through which foreign arbitral institutions may apply for subsidies to cover their operating expenses.

Shanghai to date has been the only local authority that has introduced concrete measures to support foreign institutional arbitration seated in China. In fact, Chinese top-tier cities have not shown much interest in promoting the use of foreign institutional arbitration. ^{Footnote 48} The primary reasons for their resistance are twofold. First, promulgating such an innovative measure is likely to be seen as “unlawful”—a point that will be further articulated later in this article. While Chinese courts have indeed made a series of decisions that allow foreign arbitral institutions to administer non-domestic disputes in China, such progressive decisions are exceptional—far too expedient and fragmented. Neither is the scope of their application clear, especially with regard to the precise conditions under which foreign arbitral institutions may be accommodated in the Chinese legal system. Second, such a local initiative may overstep the central state’s authority with regard to determining whether China should open its market for arbitration services under the General Agreement on Trade in Services (GATS). ^{Footnote 49}

The other exceptional case is that of the Beijing municipal government. Beijing is often seen as more guarded in terms of its openness than other major coastal cities, such as Shanghai and Shenzhen. However, the central authority’s increasing push for further “comprehensive opening-up” seems to have provided Beijing with an opportunity to transform itself into a financial hub open to trade and investment activities. ^{Footnote 50} After 40 years of the Shenzhen Special Economic Zone, Beijing in 2020 set up its own FTZ and “demonstration zone” (shifanqu). ^{Footnote 51} In these special zones, the municipal government allows foreign entities to offer various categories of services, including computing technologies, finance, tourism, biomedical research, and legal services. ^{Footnote 52} One such type of legal service is commercial arbitration. Foreign arbitral institutions may now be able to undertake non-domestic arbitral cases in Beijing, provided that these institutions have registered with the municipal government’s relevant judicial authorities and set up their offices in areas designated by the government. ^{Footnote 53}

5.1 Ad hoc arbitration under the SPC’s 2016 Opinions

The recognition of ad hoc arbitration under the SPC’s 2016 Opinions directly challenges the 1994 Arbitration Law, which only allows for institutional arbitration to operate in mainland China. To be sure, the Opinions are likely to be interpreted as the central government’s increasingly hospitable stance toward the legalization of ad hoc arbitration given the SPC’s very central status in China’s formal state system. But it is unclear whether the SPC, as a judicial branch, can under Chinese law legitimately override national arbitration legislation by simply issuing such a decree. As required by the Legislation Law of the PRC, matters concerning “litigation and arbitration systems” must be exclusively governed by national laws (Article 9); in other words, it is the NPC that has the power to legalize the operation of ad hoc arbitration in China, not the SPC. ^{Footnote 65}

In addition to the problem of legality, the ad hoc arbitration scheme under the SPC’s 2016 Opinions is limited in its scope. First, the scheme only applies to disputes that occur among enterprises registered in Chinese FTZs. Second, it requires parties to specify the following matters in their arbitration agreements: (1) the location to host the dispute; (2) the arbitration rules to govern the proceeding; and (3) the person or persons to arbitrate the dispute. An ad hoc arbitration agreement can only be found to be valid if these conditions are met. As a result, enterprises registered outside of FTZs are not eligible for ad hoc arbitration; neither will agreements that fail to cover these three “requirements of specification” be recognized.

Despite these limitations, the SPC’s ad hoc scheme is still a step forward. It provides enterprises in China’s FTZs with a dispute resolution alternative to people’s courts and China’s domestic arbitral institutions. Nevertheless, this scheme is likely to be faced with problems of implementation because ad hoc arbitration has never been envisioned as a prototype in China’s national arbitration laws. The processes to which prospective users can resort to resolve disputes over arbitration agreements and proceedings are not clear, especially with regard to the allocation of competence or authority between arbitrators and courts to determine such matters. For example, under the current Arbitration Law, the Chinese arbitration commission is one of the major designated authorities to determine controversies over competence–competence, selection, and replacement of arbitrators as well as provisional measures (Articles 20, 28, 31, and 32). This set of rules can hardly be applied to ad hoc arbitration, as there are simply no institutions to manage its proceedings. In consequence, unsolved questions remain about how such controversies may be tackled in ad hoc arbitration processes as well as in post-award enforcement stages.

5.2 Foreign institutional arbitration under the Shanghai FTZ scheme

The recognition of foreign institutional arbitration under the current Shanghai FTZ arbitration scheme also creates tension with China’s national legislation. The Shanghai Lin-Gang FTZ Measures have so far not specified clearly how this scheme can be incorporated into China’s national arbitration laws, such as the Arbitration Law and the Civil Procedure Law. They also do not contain any details about aspects of arbitral proceedings and, crucially, the precise processes through which parties can challenge or enforce awards rendered under this scheme. The operation of foreign institutional arbitration in the Shanghai FTZ thus prompts several important questions that need to be further clarified by the relevant authorities. For example, what exactly is the procedural law of the arbitration (or lex arbitri) that governs arbitration under the auspices of foreign arbitral institutions in the FTZ? To what extent would Chinese national arbitration legislation and judicial precedents still apply to foreign institutional arbitration in China? Perhaps more fundamentally, how “special” is the Shanghai FTZ as a distinctive sphere of regulatory regime in relation to the wider Chinese national legal system?

Chinese judicial authorities have thus far adopted a rather cautious stance toward these questions. In 2019, the SPC issued a decree to endorse the Shanghai Lin-Gang FTZ Measures, instructing that people’s courts should handle “by law” (yifa) requests for provisional measures and enforcement of the awards rendered under the FTZ’s arbitration scheme. ^{Footnote 66} The SPC’s instruction was immediately followed by an instruction from the Shanghai High People’s Court that designated people’s courts as the only authority to grant provisional relief for foreign institutional arbitration. ^{Footnote 67} In effect, this instruction is simply a reiteration of China’s current Arbitration Law, which only permits courts to deliver such relief. Therefore, despite the ambiguity of the very term “by law,” the underlying message that Chinese judicial authorities attempt to convey is clear: the Shanghai FTZ’s arbitration reform is not free from constraints imposed by national arbitration legislation and judicial precedents.

To be fair, the recognition of foreign institutional arbitration in Shanghai’s Lin-Gang FTZ is a scheme that remains open to international norms and standards, as opposed to measures that emphasize local needs or the so-called “Chinese characteristics.” And the judicial authorities’ seemingly conservative position seems not so much a regression as a deliberate attempt in itself to help ensure the reform’s smooth running within the broader system of Chinese legal bureaucracy. ^{Footnote 68}

There remains a series of concerns about the operation of the Shanghai FTZ arbitration scheme, however. First, it is unclear whether and how foreign arbitral institutions registered in the FTZ should perform tasks that are assigned to Chinese arbitration commissions under the current Arbitration Law. Compared to arbitration laws in leading Western countries, China’s Arbitration Law gives its arbitration commissions rather extensive power over the administration of arbitral proceedings. The Arbitration Law designates the commissions as the authority, for instance, to (1) form the panel list of qualified arbitrators (Article 13); (2) determine the validity of arbitration agreements (Article 20); and (3) submit applications for provisional relief on behalf of the parties (Articles 28 and 46). By contrast, arbitral institutions outside of China do not usually intervene in these matters; instead, such matters are often determined by arbitrators. As a result, the Shanghai FTZ arbitration scheme is likely to arouse legal controversies about the degree to which foreign arbitral institutions registered in the FTZ are bound by these requirements, and if these institutions adopt measures that differ from the Arbitration Law, what the consequences may be.

Second, the category of awards rendered by foreign arbitral institutions remains ambiguous. Chinese scholars and practitioners have long debated the processes through which awards rendered by foreign arbitral institutions in China should be challenged, recognized, and enforced. ^{Footnote 69} One key issue is focused on whether such awards should be treated as “Chinese awards”—as opposed to the category of “foreign awards”—so that they could be directly challenged and enforced under China’s national arbitration legislation without referring to the New York Convention. ^{Footnote 70} It is unfortunate that the Shanghai FTZ arbitration scheme does not clarify this controversy; neither has any central judicial authority to date attempted to do so. Consequently, such a controversy may continue to occur during post-award stages.

Third, the provisional design of the Shanghai FTZ arbitration reform may lead to further legal uncertainty regarding its implementation in the long run. Under the current reform scheme, the operation of foreign institutional arbitration seated in China is subject to a limitation period of three years. Specifically, as provided in the Shanghai Lin-Gang FTZ Measures (Article 25), the scheme will soon end on 31 December 2022. For potential users, how to deal with this temporal constraint in their arbitration agreements becomes an immediate challenge. It is also unclear whether foreign arbitral organs can undertake disputes or deliver awards after the expiry date.

These are all challenges that can affect how prospective users may choose China-seated foreign arbitral organizations over Chinese arbitration commissions and overseas arbitral venues such as Hong Kong and Singapore. Illegality and uncertainty are all risks that clients and their lawyers would very much like to avoid during the contract drafting phase. To mitigate such risks, prospective users may consider Chinese arbitration commissions or even arbitral services outside of China to be better fora than foreign institutional arbitration seated in the Shanghai FTZ.

5.3 Institutional arbitration rules and national arbitration legislation

As discussed previously, many arbitration commissions in China’s top-tier cities borrow or transplant foreign arbitration rules to formulate their own institutional rules in order to compete for international cases. Nevertheless, it is questionable whether this strategy can achieve its objective since many of these rules are likely to be unlawful. While most of these rules simply aim to improve on national arbitration laws—often by further detailing aspects of arbitral proceedings that state laws neglect to cover—some are directly modelled on foreign or transnational legal sources, such as the arbitration rules of leading arbitration institutions and the UNCITRAL Arbitration Rules. As a result, these schemes tend to be inconsistent with China’s current national legislation, provoking controversies over their legality and, more immediately, their enforceability during post-award processes. This section examines three such examples: (1) competence–competence; (2) the allocation of power to grant interim relief; and (3) the operation of investor–state arbitration.

First, most leading Chinese arbitration commissions adopt competence–competence measures that are in conflict with the Arbitration Law. “Competence–competence” refers to a widely accepted arbitral scheme or doctrine under which arbitrators are the primary authorities to consider and determine jurisdictional disputes. ^{Footnote 71} For example, the UNCITRAL Arbitration Rules stipulate: “The arbitral tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement” (Article 23). A number of Chinese institutional rules have adopted similar schemes, including the BAC Arbitration Rules (Article 6), the SHIAC Arbitration Rules (Article 6), and the SCIA Arbitration Rules (Article 10). However, the competence–competence doctrine has never been recognized by China’s current Arbitration Law, according to which such power is only granted to courts and arbitration commissions (Article 20). ^{Footnote 72} As a result, the competence–competence schemes under these institutional rules are likely to be unlawful as they seem to breach the national arbitration legislation.

Second, certain rules that grant power to arbitrators to order provisional relief overstep Chinese arbitration laws. Pro-arbitration regimes often grant tribunals broad power to deliver such relief in conjunction with national courts. For instance, the Model Law provides that “the arbitral tribunal may, at the request of a party, grant interim measures” unless the parties agree otherwise (Article 17), but this mode of arrangement does not exclude the concurrent authority of national courts to order such measures (Article 9). Similar legislative schemes have also been adopted in France, Germany, the UK, and the US. ^{Footnote 73} Therefore, arbitration rules that follow this regulatory model do not clash with the national legislation in these jurisdictions. However, China adopts a different approach, reserving such power exclusively to national courts. ^{Footnote 74} Tribunal-ordered provisional measures in China can be thus potentially unlawful.

Most leading arbitral institutions in China tend to formulate their arbitral rules to adhere to the Arbitration Law in this regard. For example, the CIETAC Arbitration Rules provide: “Where a party applies for conservatory measures pursuant to the laws of the People’s Republic of China, CIETAC shall forward the party’s application to the competent court designated by that party in accordance with the law” (Article 23). This approach is also followed by institutional rules, such as the BAC Rules (Article 17), the SHIAC Rules (Article 18), and the SCIA Rules (Article 25). These rules reflect the wider trend that arbitrators are unwilling to grant provisional relief unless the national legislation of the arbitral seat allows arbitrators to do so. ^{Footnote 75}

Problems occur when these institutions make exceptions by granting arbitrators the power to order provisional relief. One example is the scheme of emergency arbitration. This scheme refers to a process by which parties are enabled to apply for an emergency tribunal to seek urgent relief prior to the formation of an arbitral tribunal. ^{Footnote 76} This has been widely adopted by leading international arbitration houses, such as ICC, LCIA, SIAC, HKIAC, and the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). It has also been instituted by China’s primary arbitration commissions, including BAC, CIETAC, SHIAC, and SCIA. ^{Footnote 77} For instance, the CIETAC Arbitration Rules permit parties to “apply to the Arbitration Court for emergency relief,” insofar as the applicable law or the arbitration agreement permits (Article 23). However, the operation of such an innovative measure in China is potentially unlawful since the Chinese Civil Procedure Law only permits courts to issue urgent relief prior to the constitution of an arbitral tribunal (Article 101). ^{Footnote 78}

Third, the operation of investor–state arbitration under Chinese arbitration rules is likely to face a number of legal impediments. Investor–state arbitration is a type of conflict resolution that specializes in disputes arising from cross-border direct investments. Some leading Chinese arbitration institutions have introduced this scheme in their institutional rules, including the SCIA Rules (2016), the CIETAC International Investment Arbitration Rules (2017), and the BAC Rules for International Investment Arbitration (2019). Despite some of its similarities to the conventional forum of international commercial arbitration, investor–state arbitration is distinctive in its own right, especially regarding its treaty-based jurisdiction and the unequal relationship between its users (namely, “the investor vs. the state” structure). ^{Footnote 79} Consequently, the promulgation of the investment arbitration rules by Chinese arbitration commissions is not a comfortable fit with China’s current arbitration legislation. For example, it is likely to give rise to jurisdictional controversies over the competence of Chinese arbitration commissions to undertake investor–state cases because the national law only allows for commercial disputes among subjects of equal status. ^{Footnote 80} Investor–state awards rendered by Chinese arbitration commissions may also not be recognizable and enforceable under the New York Convention due to the commercial reservation made by China since its adoption in 1987. ^{Footnote 81}

It is surely right for Chinese arbitral institutions to start competing for cross-border disputes by reforming their institutional rules, especially by synchronizing these rules with those of major institutions in leading jurisdictions. Such regulatory reforms provide prospective users with some of the best practices of international arbitration and, more importantly, convince them to migrate their cases to Chinese arbitral institutions. However, it is questionable whether the promotion of these innovations can help attract the kind of international cases that these institutions hope to undertake. As I have already shown, due to their inconsistency with China’s current arbitration legislation, the use of these measures is likely to arouse controversy over their legality and enforceability during post-award stages. ^{Footnote 82} As a result, prospective users may want to avoid rather than mobilize these innovations.

5.4 The 2021 proposed amendments

To reduce the uncertainty of the schemes aforementioned, further reform is needed. As most of the current measures are promulgated sparsely at judicial and subnational levels, an immediate solution to be considered would be a legislative reform by the NPC that can be nationwide applied to tackle the legality problems listed here. ^{Footnote 83} One such effort is the proposed amendments (hereinafter, the “Draft”) to the 1994 Arbitration Law released by the Ministry of Justice for public consultation on 30 July 2021. It introduces a series of radical changes that cover most of the reform schemes discussed above. ^{Footnote 84} Consequently, the Draft may help ensure the certainty of these measures, if it becomes enacted by the NPC.

First, the Draft allows ad hoc arbitration and foreign arbitration institutions to operate in China for foreign-related (shewai) cases. As provided in the Draft (Article 91), parties are able to refer their case to an ad hoc arbitral tribunal so long as the case involves foreign-related commercial disputes. Article 12 also stipulates that foreign arbitration institutions that set up branch offices in mainland China to conduct foreign-related arbitration businesses shall register with the local sectors of judicial administration in accordance with regulations to be formulated by the State Council. This measure no doubt helps to clarify the long debate about whether foreign arbitration institutions are allowed to administrate arbitration in mainland China. ^{Footnote 85}

Second, the Draft recognizes the principle of competence–competence. Under the 1994 Arbitration Law, parties can only submit their objections to arbitrators’ jurisdiction to arbitration commissions or people’s courts. Generally referred to as competence–competence, the authority of arbitrators to determine challenges to their own jurisdiction is not clearly recognized in China’s present arbitration legislation. ^{Footnote 86} In practice, it is possible that arbitration commissions can simply delegate the authority to arbitrators or make the formal decision on behalf of the tribunal, so as to adhere to the principle of competence–competence. These arrangements are by no means uncontroversial, however, and should be seen as merely expedient. Crucially, one must not confuse the existence of such prevailing practices with the normative question about their legality. The Draft is an apparent attempt to resolve the controversy: any objection to the existence or validity of the alleged arbitration agreement or to the jurisdiction of the arbitral case should be submitted to the tribunal in accordance with the applicable institutional rules (Article 28(1)); the courts do not consider and decide objections that fail to follow the aforementioned procedure (Article 28(3)).

Third, the Draft recognizes the authority of arbitrators to grant provisional measures of protection. Under China’s current national arbitration legislation, the courts are the only authority to render such measures. This design is inconsistent with the pro-arbitration Model Law, according to which “the arbitral tribunal may, at the request of a party, grant interim measures” unless the parties have agreed otherwise (Article 17). Following the Model Law, the Draft authorizes arbitral tribunals to grant interim relief in addition to the courts (Articles 43 and 46(2)). Provided that tribunal-ordered provisional measures become permissible, the emergency arbitration scheme introduced by many of the Chinese leading arbitral institutions would be applicable to both domestic and foreign-related cases. ^{Footnote 87} These institutions may also consider revising their current arbitration rules to harmonize with the proposed amendments and providing further details about the circumstances under which such measures may be granted.

It remains to be seen whether the Draft would be eventually enacted by the NPC as it is presently suggested by the Ministry of Justice. Doubtless though the proposed Draft is one such comprehensive legislative effort that is to systematically reforms China’s arbitration scheme. ^{Footnote 88} Should the proposed amendments become officially legislated, most of the legality problems listed in this article would be less unsettled. Before the Draft is finalized, nevertheless, the legality of most of the current internationalization reform schemes may remain subjected to challenges.

6.1 The heterogeneity of arbitration in China

The first challenge comes from the incoherent attitudes toward the institutional purposes and orientation of arbitration in China. Due to an emphasis on emulating norms and practices of Western arbitral regimes, the innovations promoted by Chinese arbitral organs in recent years have clearly reflected the policy process of internationalization that is taking place in the field of Chinese dispute resolution. ^{Footnote 91} Despite the central government’s affirmative position towards the policy goal,Footnote ⁹² arbitration in China is a highly heterogeneous dispute resolution scheme. Different local officials and case managers tend to understand it differently. As a result, these front-line actors are not necessarily inclined to always prioritize the policy of internationalization over other competing demands and norms by which they are bound or about which they care. The implementation of this policy often needs to be mediated or, in fact, circumscribed by the different preferences of these front-line agents with regard to the expected function of arbitration in China as well as the internal politics of the arbitration commissions in question.

One such example is Commission A. ^{Footnote 93} The commission is one of the very few Chinese city-named arbitral organs that managed to secure financial and organizational independence from local states soon after China’s 1994 arbitration reform. It is particularly renowned for its progressive and open attitude toward Western norms and practices of commercial arbitration. Many of my informants attribute Commission A’s reputation for its commitment to internationalism to the incumbent deputy Secretary-General, whom I will call Mr Dan. In the wider Chinese arbitration circle, Mr Dan’s strong and enduring interest in emulating leading arbitral regulatory models and institutions in Euro-American jurisdictions is highly known. For Dan, the central state’s recent emphasis on reforming the Chinese arbitration system for cross-border dispute resolution echoes his vision. In several conferences hosted by Commission A, he stated that it was “a much-needed policy declaration.”

Dan’s high-profile enthusiasm for the ideal of internationalization is described by some of my informants as “too radical” since his vision of arbitration as a specialist scheme for cross-border commercial dispute resolution impairs the broader functions that arbitration is expected to perform in China. Although there has been an increasing trend toward specialism in Chinese arbitration in recent years, ^{Footnote 94} there remains a widely shared view that considers arbitration to be a populist justice scheme that has as its main purpose the maintenance of social stability. For example, the head of Commission A, Mr Zhang, does not seem to be a fan of Dan’s blueprint for internationalizing the commission. Zhang has never openly criticized Dan’s position, at least not in front of me. But Zhang’s responses to Dan’s reform initiatives are often rather inactive or deliberately ambiguous. Zhang does not object to Dan’s reforms for internationalization per se. What seems to concern him is that internationalization may come at the cost of arbitration’s broader function of maintaining stability due to the policy’s discrimination against ordinary civil quarrels that only involve small claims.

The tension between Zhang and his deputy somewhat reflects the differences in their educational backgrounds and career paths. Dan is well regarded by many Chinese arbitration practitioners for his academic achievements and professionalism. Having received his Ph.D. in law from a prestigious Chinese university in the late 2000s, Dan was soon promoted by the then Secretary-General of Commission A to his current position. His monograph on arbitral institutions in China is praised by many of my interlocutors as a seminal work of Chinese arbitration studies. Dan is particularly famous for his liberal stance toward the function and development of arbitration in China. For example, Dan, along with Commission A’s former Secretary-General, is one of the earliest arbitration officials to push for the “privatization” of Chinese arbitral institutions—an ideal that is inconsistent with China’s arbitration legislation but that he sees as an intrinsic aspect of arbitration.

Zhang’s curriculum vitae is not as impressive as Dan’s, nor does Zhang have a nationwide reputation as does Dan. Zhang was scarcely known by the Chinese arbitration circle before taking up his current position as Commission A’s administrative head. Although almost two decades older than Dan, Zhang has spent most of his career working as an official in the municipal government. Arbitration is not within his area of expertise. While Dan continues to be invited to teach and give talks on arbitration in various Chinese universities and arbitration houses, Zhang is often considered by my interlocutors to be a mere state technocrat who is not a proper class of “arbitration person” in China. This perception in part results from an impression that Dan’s success is hard-earned and merit-based: he was recruited through Commission A’s own employment competition and it was his hard work and contributions to the commission that helped him climb to the deputy rank. By contrast, Zhang is an outsider whose position as Commission A’s head is sometimes described as unearned because it was his civil service qualification and grade in the formal state system over the past 20 years or so that allowed him to win the title rather than his dedication to the commission. There is, in fact, a long tradition established by the municipal government that Commission A’s Secretary-General can only be a civil servant from the government’s legal affairs office, namely Commission A’s de facto direct supervisory authority.

As the local government’s designee to fulfil the position, Zhang is expected to act as an intermediary to ensure effective communication between Commission A and its supervisory authorities inside the municipal government. While he certainly has the skills and connections to help Commission A seek policy support from the government, Zhang’s bureaucratic identity and background also make him vulnerable to the suspicion that he may be more inclined to see himself as the municipality’s representative rather than as an independent professional. Consequently, there have been doubts about the extent to which he would prioritize the interests of Commission A over that of the local government should a conflict of interest arise between these two entities.

Zhang’s seemingly conservative position toward the policy of internationalization now becomes comprehensible. It must not simply be reduced to a strategic move that aims to compete for authority against Dan; instead, his reluctance is likely an attempt to realize the municipality’s continuing interest in operating arbitration for grassroots disputes in order to reduce the congested dockets of local courts. In effect, the tension between Zhang’s conservatism and Dan’s progressive ambition may be symptomatic of a deeper conflict between the different interests and competing goals of the local state and its subsidiary: the former persists with the social function of arbitration for public services, whereas the latter is eager to transform itself to become a market-driven scheme specializing in selective high-stakes and international disputes.

Similar conflicts between the divergent understandings of arbitration’s function and vision can also be seen in the wider community of Chinese arbitration, although they do not necessarily take the form of inter-institutional antagonism that I have just presented in the case of Commission A. The other example to be considered here is Commission B, in which the resistance to international norms and practices comes from front-line case managers rather than the governmental authority.

Commission B is often seen as China’s flagship arbitration institution due to its institutional ranking as a legal organ directly sponsored by the central government. As part of the corridors of power, Commission B also enjoys a long monopoly on China-related international cases among high-profile parties, such as SOEs and foreign investors. In recent years, however, there have been increasing concerns about its professional competence and commitment to international standards and practices. For example, Commission B does not prohibit its own employees from being selected as arbitrators; it has not implemented any effective measures to prevent arbitrators from engaging in ex parte contacts; and it also seems to have frequently failed to maintain the confidentiality of its proceedings. But more generally, Commission B is frequently described by Chinese advocates as a bureaucratic organ that by its nature is “arrogant, formalist, and closed to outsiders.”

The incumbent Secretary-General, Mr Shen, then comes to rescue Commission B’s increasingly deteriorating reputation by initiating new processes of reform. Shen is no stranger to Commission B’s internal politics and highly bureaucratic predisposition, having served as a high-ranking official in charge of China’s international economic legal affairs for most of his career. He is aware that foreign parties frequently use these factors as excuses to push for arbitral fora outside of China. He often openly urges that the internationalization of the commission’s rules and services is the right path to follow to enhance Commission B’s trustworthiness among foreign parties—specifically by adapting to international arbitral rules, developing front-line employees with the ability to engage in international arbitration, and increasing the commission’s international visibility.

But many of Shen’s efforts have been compromised by the uncooperative responses from the employees of Commission B. This resistance comes from two major considerations. First, the extent to which Shen would commit to the policy ideal of internationalization is by no means clear to these front-line actors. As some of my interlocutors suspect, it is likely that Shen’s interest in internationalization is superficial, limited only to the aspect of public relations that aims to change the perception of Commission B simply by organizing overseas roadshows and international conferences. New rules and training workshops introduced by Shen may be just propaganda techniques expected to perform only symbolic functions rather than to be taken seriously.

Second, even if his intention is genuine, not all of these front-line practitioners agree with Shen’s push for international standards and practices. The very term “internationalization” (guojihua) is, after all, an essentially contested idea, and local actors do not always agree on the best way to realize it. For example, although hardly any of these front-line actors would object to Shen’s attempt to boost Commission B’s international visibility, they are not necessarily keen on his endeavours to closely align the commission’s arbitral rules and proceedings with foreign norms and practices. As some of my informants sharply pointed out, “internationalization” should not be narrowly understood as a one-way process in which China can only be the passive end that receives legal standards and practices from Euro-American countries. They instead suggested that arbitral rules and practices already adapted to China’s own sociopolitical conditions should be reserved or, more ambitiously, simply seen as part of international norms and practices.

It should be noted that the extent to which the aforementioned tensions are experienced and expressed by Chinese arbitral participants varies. It is also not my intention to employ the cases of Commissions A and B to make general claims about the diverse political conditions of arbitral institutions in different localities in China. But such noticeable conflicts over the purposes and orientation of practising arbitration can hardly be ignored. These tensions suggest that a wider transitional process or cultural change is taking place in the sphere of Chinese arbitration. And the policy goal of internationalization now comes into play to compete or negotiate with other conventional positions that attempt to challenge such an endeavour. As a policy ideal, internationalization is one part of the plurality of goals and values to which Chinese arbitral practitioners stay attuned, and different actors may approach it differently in response to their own perceptions of how arbitration in China should operate and develop.

6.2 The lack of institutional support

Another challenge to implementation of the policy ideal of internationalization directly results from the lack of support that helps develop the institutional capacity of Chinese arbitral organs to engage in international arbitration. Institutional capacity refers to operational aspects of institutional performance, including organizational designs, financial and human resources, and professionalism. As several studies have observed, the capacity of legal institutions plays a vital role in shaping Chinese legal policies and practices, and it has long been seen as a major obstacle to the implementation of reform measures in China that are modelled on globalized regulatory norms and practices. ^{Footnote 95} Similar phenomena can also be seen in the field of Chinese arbitration.

There are two key factors that may discourage front-line arbitral workers from engaging with regulatory innovations initiated by their own commissions. One involves designs and organizational structures that fail to provide front-line staff with sufficient administrative resources to manage high-stakes international cases. The other concerns the underdevelopment of professional competence necessary to fulfil new standards and requirements set by the arbitration reforms.

First, the organization of many Chinese arbitral organs is often ill adapted to handling international arbitration proceedings. While regulatory reforms that aim to internationalize arbitration in China have proliferated in recent years, most Chinese arbitral organs remain slow to improve their organizational structures to respond to such trends—a problem that the Chinese central state has also addressed. ^{Footnote 96} For example, although most Chinese arbitration rules have maintained a clear distinction between domestic and international arbitration procedures, their operations in practice have shown very little difference. Front-line staff seem inclined to conflate international proceedings with domestic ones, even though a formal distinction is maintained.

One immediate cause of this tendency is the absence of a clear division of labour. As a latecomer in the international economy, China’s interest in promoting its own arbitration system for cross-border dispute resolution is a relatively new move. Chinese arbitration commissions rarely dedicate themselves exclusively to international commercial cases. Unlike their major competitors in global financial centres such as Hong Kong, Singapore, and London, which have long focused on developing expertise and experience in cross-border commercial conflict resolution, ^{Footnote 97} the strength of Chinese arbitration commissions lies in their high efficiency in resolving domestic cases. Their organizational designs and arrangements tend to reflect this orientation, failing to develop a clear division of labour or a separation of tasks so that front-line staff can have the administrative resources, such as time and attention, to manage and process cross-border disputes in ways that meet international standards. As a result, Chinese case managers continue to be overwhelmed by domestic case-loads, and they are unlikely to handle international cases as expected by the regular users of international arbitration. ^{Footnote 98}

Second, the implementation of arbitration reform schemes may encounter the problem of a lack of professionalism. ^{Footnote 99} Due to China’s relatively recent participation in the international economic legal order, concerns exist about the extent to which Chinese legal professionals possess the skills and expertise to meet the particular requirements of legal reforms. ^{Footnote 100} In the specific domain of arbitration, the concern becomes whether Chinese participants are capable of engaging with reforms to arbitration rules that are modelled on international norms and practices. After more than four decades of reform and opening-up, Chinese experts in cross-border economic affairs are no longer in short supply. ^{Footnote 101} But the distribution of these human resources is uneven. Geographic locations matter. ^{Footnote 102} Arbitration commissions outside of China’s first-tier cities generally suffer from a shortage of specialists in international commercial dispute resolution because of their relative underdevelopment of legal service industries. Arbitration commissions in first-tier cities may also face difficulty in recruiting the best legal talent, given that they offer lower wages than that of law firms. Therefore, it is unclear whether Chinese front-line workers have the subject-matter expertise and English-language proficiency to administrate international arbitration in the way that prospective users experience and expect from the other leading arbitration houses outside of China.

The process by which Chinese arbitration commissions engage in international arbitration practices represents a learning curve. The slow response of their personnel structures and their competency to meet international standards may be only temporal and, therefore, must not be reduced too quickly to fixed ideas or assumptions about the legal culture in China. ^{Footnote 103} There will be change over time. It is probable that Chinese arbitration commissions will soon take seriously the need for capacity-building to compete with foreign competitors. Their pathways to reform may also lean toward international standards rather than “Sinicization,” especially since the nationalist approach will not help overcome the image deficit of China’s arbitration system. Of course, not all Chinese arbitration commissions have a demand for cross-border commercial dispute resolution since the socioeconomic conditions of their localities differ greatly. This means that the degree to which Chinese arbitration commissions would engage in international standards is likely to vary. As a result, there may be polarized development among them. Whereas arbitration houses in Beijing, Shanghai, and Shenzhen continue to be pushed for internationalization, the rest may remain as regional institutions and specialize only in domestic cases.