Introduction

I. What is Arbitration?

Arbitration, litigation and mediation are all prevailing dispute resolution mechanisms. Arbitration is, however, the dispute resolution mechanism for resolving civil and commercial disputes on the basis of the arbitration clause in the contract or a separate arbitration agreement concluded by the parties in civil and commercial matters. By concluding the arbitration clause or agreement, the parties voluntarily submit the dispute to the arbitration institution or arbitral tribunal agreed upon by the parties for settlement by making a final and binding arbitral award.

Arbitration and litigation are mutually parallel and exclusive mechanisms of dispute resolution. In cases where the parties agree to submit the dispute to arbitration, the dispute shall be submitted to the corresponding arbitration institution as agreed upon in the arbitration agreement or arbitration clause. A valid arbitration agreement or arbitration clause excludes the jurisdiction of any court so that no court has jurisdiction over the dispute. If the parties agree in the contract that "in case of any dispute, both parties agree to submit the dispute to SCIA for arbitration", the parties may apply to SCIA for arbitration to resolve the dispute that has arisen from the contract.

II. Characteristics and Advantages of Arbitration

Compared to litigation, arbitration has the following characteristics and advantages:

(I) Party autonomy

By choosing arbitration, the parties may enjoy autonomy to the fullest extent, which includes the freedom to choose the arbitration institution, arbitrators, place of arbitration, place of hearings, language of arbitration, arbitration rules, and the applicable laws governing the arbitration, etc. Moreover, the parties may design the arbitration procedures that could satisfy their own special needs.

(II) Finality of arbitral award

The parties to commercial contracts have a variety of methods to resolve their disputes. However, only court judgments and arbitral awards have binding force over the parties and can be coercively enforced. Any arbitral award, once made, shall be final and binding upon the parties. Although the arbitral award is susceptible to being set aside by the court for the place where the award is made or being denied recognition or enforcement by the court for the place of enforcement, the grounds for setting aside or refusing recognition and enforcement are very limited, mainly to procedural issues in foreign-related arbitration.

(III) Confidentiality

The whole process of arbitration, including arbitration procedures, evidence documents, hearing proceedings, and arbitral awards, etc., is not subject to external disclosure. The confidentiality of arbitration aims to effectively protect the parties’ trade secrets and business reputation.

(IV) Arbitral awards can be recognized and enforced internationally

As of April 2020, there are 163 Contracting States that have ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter referred to as the “New York Convention 1958”). Under the New York Convention 1958, the arbitral awards made in the territory of the Contracting States can be recognized and enforced by the courts of the Contracting States where the recognition and enforcement of such awards are sought. Moreover, the arbitral awards can also be recognized and enforced in accordance with other relevant international conventions or treaties. China acceded to the New York Convention 1958 on 22 January 1987, and the New York Convention 1958 entered into force in China on April 22 of that year. Consequently, the arbitral awards made in China are recognizable and enforceable not only in China, but also in the other 162 Contracting States of the New York Convention 1958.

III. Scope of Arbitrable Cases

Scope of arbitrable cases refers to the scope of the cases in which disputes can be resolved by arbitration, as opposed to the cases in which disputes cannot be settled by arbitration, also called the "arbitrability of disputes". The scope of arbitrable cases and the non-arbitrable cases are specified in Article 2 and Article 3 of the Arbitration Law of the People's Republic of China.

Article 2 of the Arbitration Law of the People's Republic of China stipulates that contractual disputes and any other dispute concerning property rights and interests between citizens, legal persons and other organizations that are equal subjects may be arbitrated.

This Article expressly provides for three principles, which are, firstly, the eligible subject principle that requires the parties to the dispute to be civil subjects, including domestic and foreign legal persons, natural persons, and other legal organizations which are qualified to be independent subjects. Secondly, the disputed subject matter principle requires that the subject matters in dispute for arbitration shall be those of which the parties have the right to dispose. Thirdly, Article 2 lays down the content of dispute principle, which means that the content of the dispute shall be concerned with contractual disputes and any other dispute concerning property rights and interests. The term “Contractual disputes” denotes the disputes arising from the conclusion or performance of various economic contracts between contracting parties engaged in economic activities, including domestic economic contract disputes, intellectual property disputes, real estate contract disputes, futures and securities transaction disputes, insurance contract disputes, loan contract disputes, bill disputes, mortgage contract disputes, transportation contract disputes, and maritime disputes between domestic or foreign natural persons, legal persons, and other organizations with equal status. Besides, it also covers foreign-related disputes, disputes related to Hong Kong, Macao, and Taiwan as well as disputes concerning international trade, international agency, international investment, international technical cooperation, etc. The expression “any other dispute concerning property rights and interests” mainly refers to the disputes arising from torts, which are commonly found in cases over liability for product quality and intellectual property rights.

Article 3 of the Arbitration Law of the People's Republic of China stipulates that the following disputes are non-arbitrable:

(I) Disputes concerning marriage, adoption, guardianship, support and succession;

(II) Administrative disputes which shall, as prescribed by law, be resolved by administrative organs.

This Article expressly specifies the scope of non-arbitrable disputes. Generally speaking, disputes involving personal relations and administrative acts are not arbitrable. Instead, they shall be settled by court litigation. However, the disputes with formal connections with personal relations and administrative organs, but having substantial concern with property rights and interests, such as the dispute concerning the loan contract between a husband and a wife that is unrelated to marital relationship and the dispute concerning the procurement contract concluded between a company and the government as equal subjects, shall be considered as "disputes concerning contracts and any other property rights and interests" as stipulated in Article 2 of the Arbitration Law of the People's Republic of China, falling under the scope of arbitrable cases.

Article 2 of the SCIA Arbitration Rules also stipulates the scope of accepting cases (jurisdiction)

Article 2 Jurisdiction

(1)The SCIA accepts arbitration cases related to contractual disputes and other disputes over property rights and interests, including:

(a) International or foreign-related disputes;

(b) Disputes related to the Hong Kong Special Administrative Region, the Macao Special Administrative Region or Taiwan Region; and

(c) Chinese Mainland disputes.

(2)The SCIA accepts arbitration cases related to investment disputes between states and nationals of other states.

All the types of cases clearly specified above can be submitted to SCIA for arbitration.

IV. Why do you choose SCIA?

(I) Abundant experience in dispute resolution

SCIA has been focusing on dispute resolution for more 30years and have accumulated abundant experience. It has served parties coming from all provinces, autonomous regions, and municipalities in mainland China, regions of Hong Kong, Macao, and Taiwan, and more than 50 countries. The cases managed by SCIA involves various aspects of modern business society.

SCIA is the pioneer in building up the modern commercial arbitration regime of the People’s Republic of China, leading the way to innovation and development. For example, SCIA is the first arbitration institution in mainland China which began to employ foreign arbitrators in 1984. In 1989, the very first arbitral award made in mainland China that was successfully enforced by the overseas court in accordance with the New York Convention 1958 was made by SCIA.

The cases accepted by SCIA cover not only international and foreign-related arbitration cases, cases involving Hong Kong, Macao and Taiwan, but also domestic arbitration cases in mainland China. The categories of disputes settled by SCIA involve traditional or emerging areas in domestic and foreign trade, Sino-foreign joint ventures, international investment, technology transfer, construction and design, real estate, commercial contracts, intellectual property rights, securities, insurance & reinsurance, financing, energy, environmental rights and interests, information technology, franchising, company operations, equity transfer, recreational and sports industry, mergers and acquisitions, e-commerce, logistics, maritime trade, property rights transactions, etc.

(II) An independent institutional management model authorized by legislation

SCIA was the first and is currently the only arbitration institution in China that has adopted the independent institutional management model authorized by specific legislation. The specific legislation stipulates that SCIA implements the check-and-balance governance mechanism that takes the council as the core in decision-making, execution, and supervision, with the aim to strengthen the independence of arbitration. It also stipulates that more than one-third of the council members and arbitrators shall be from overseas in order to enhance the internationalization of the operation mechanism.

(III) Efficient management of arbitration procedures

Keeping in line with international standards, SCIA fully respects the arbitrators' power to manage arbitration procedures, and meanwhile clearly specifies the duties of SCIA to assist, urge and supervise. SCIA has been endeavoring to achieve an optimal balance point between safeguarding the autonomous jurisdiction of arbitral tribunal and ensuring the efficiency of arbitration procedures. Moreover, SCIA has taken effective approaches to reasonably allocating power to manage procedures in order to protect legal rights and interests of parties.

(IV) Full respect for party autonomy

During the whole process of SCIA Arbitration, the parties enjoy full party autonomy. The parties may choose to apply the SCIA Arbitration Rules, or alternatively might agree to apply the United Nations Commission on International Trade Law Arbitration Rules or the arbitration rules formulated by other arbitration institutions. The parties may agree upon the language of arbitration, appropriate applicable laws, place of hearings, or place of arbitration. They can also have recourse to different ADRs , such as mediation and conciliation, to most effectively resolve their disputes.

In summary, the parties’ autonomy to choose fully respected by SCIA are mainly demonstrated in the following aspects:

1. Choosing the applicable law for arbitration;

2. Choosing the arbitration rules;

3. Choosing the Arbitrators;

4. Choosing the procedures for hearings ;

5. Choosing the rules of evidence;

6. Choose the applicable procedures;

7. Choosing the language of arbitration;

8. Choosing the place of hearings or the place of arbitration;

9. Choosing whether to conduct mediation during the arbitration proceedings;

10. All other matters that do not violate mandatory laws and rules.

(V) Flexibility in composition of arbitral tribunal

The parties to the arbitrations managed by SCIA may choose the approach to composition of the arbitral tribunal that best reflects their wishes:

1. The parties may appoint arbitrators within the time limits prescribed in the Rules to form the arbitral tribunal in accordance with the Arbitration Rules.

2. The parties may agree to compose an arbitral tribunal comprising one or three arbitrators.

3. The parties may agree upon the method of appointing arbitrators.

As to composition of the arbitral tribunal, reference can be made to Article 29 and 30 of the SCIA Arbitration Rules.

(VI) A panel of arbitrators with diversified backgrounds

SCIA has a panel of arbitrators including experts in all professions and trades around the world, with an open-ended structure and selecting model. SCIA is so far the most internationalized arbitration institution in mainland China in terms of composition structure of arbitrators. The foreign arbitrators serving with SCIA, coming from 77 countries and regions, comprise 41% of the panel of arbitrators. In selecting arbitrators, significant attention has been paid to the rational distribution in the regions of Europe, North America, and Asia and the combination of specialization and industry character. The arbitrators are experts with expertise in certain professions and industries. They all have rich experiences in law and other relevant professional areas, showing strong serviceability, representativeness, influence, and credibility.

(VII) Effective jurisdictional competence of the arbitral tribunal

1. The arbitral tribunal has been granted with strengthened jurisdictional competence to determine its jurisdiction. Except for the challenges to jurisdiction concerning the validity of arbitration agreements, the arbitral tribunal has jurisdiction to make a decision over other challenges to arbitral jurisdiction, including challenges to the qualifications of subjects. In order to make use of institutional advantages, the SCIA or the arbitral tribunal authorized by the SCIA has the jurisdiction to determine the jurisdictional challenges concerning the validity of arbitration agreements.

2. The arbitral tribunal has the right to determine the appropriate procedures for hearing cases, which could be the adversary process, interrogation system, or any other procedures that are suitable for the case.

3. It is explicitly stipulated that the procedural issues shall be determined by a majority vote.

4. In line with international practice, it is expressly stipulated that the arbitral tribunal can take a series of measures to improve the efficiency of arbitration proceedings. For example, the arbitral tribunal can issue procedural orders or question lists, hold pre-hearing conferences, produce the terms of reference, and require the parties to conduct pre-hearing exchange of evidence or disclosure of relevant documents.

(VIII) Favorable arbitration fee arrangement

In order to alleviate the party’s financial pressure to pay arbitration fees, the draft Rules stipulate that if an arbitration case involves a large amount of arbitration fees or under other special circumstances, the SCIA may allow the party to pay the arbitration fee in installments according to the progress of arbitration proceedings.

SCIA may either provide the parties with a fee arrangement pursuant to the SCIA Rules, or ask the arbitrators to offer a quote (which is common in ad hoc arbitration overseas) according to the rules agreed upon by the parties. In addition, the lower fee will be charged when there is any difference between the fee arrangement under other rules agreed upon by parties and that under the SCIA Rules.

(IX) Optimal cost-efficiency ratio

For cases applying the general procedure by SCIA, the arbitration tribunal shall render an arbitral award within 6 months if it is an international or foreign-related case. If it is a domestic case, the arbitral tribunal shall render an arbitral award within 4 months. For cases applying the expedited procedure by SCIA, the arbitral tribunal shall make an arbitral award within 2 months. Parties may agree upon the deadlines to submit pleading materials. Compared to other international arbitration institutions, SCIA has a streamlined pre-hearing process that avoids any unreasonable procedural delays. SCIA can timely and effectively urge the arbitrators to conduct arbitration proceedings promptly. Hence, the parties can be provided with dispute resolution service with good quality and high efficiency, nonetheless being charged with a fee that is far lower in cost (including lawyer's fees and arbitration fees) than any other international arbitration institution.

(X) Elite team for arbitration service

SCIA's management board is highly experienced in international and domestic commercial arbitration. This elite team has a significant influence both at home and abroad. SCIA’s Secretariat has been highly appraised by its high efficiency in accepting cases, composition of arbitral tribunal, assisting proceedings for hearings, and other procedural matters, etc. The Secretariat staffs are all graduates from law schools of domestic and foreign universities with high reputation, having solid background in law and excellent comprehensive quality. They can manage the cases in both Chinese and English, and provide efficient and high-quality services to the parties from different countries and regions.