180
CHAPTER 8: FOREIGN ARBITRATION INSTITUTIONS AND SCOPE OF
181
developments in China, which includes the SPC’s official endorsement of the validity of an arbitration agreement providing for a foreign institution-administered arbitration seated in China, as well as the first opening of representative offices by foreign institutions in the Shanghai FTZ, details of which are discussed below.
8.2.1. Transnational standards
Generally speaking, numerous jurisdictions, including UNCITRAL Model Law jurisdictions, such as Hong Kong and Singapore, allow for the full range of activities to be offered by foreign arbitration institutions in arbitration proceedings seated within their territories. Also, the local courts in these jurisdictions supervise the arbitration proceedings and offer their assistance to arbitration, when needed.
A. UNCITRAL Model Law
Generally, for an arbitration agreement to be valid, in addition to the common requirement of a written form, there are very few other conditions that need to be satisfied. Under the New York Convention, a valid arbitration agreement requires: (1) a consent of parties to submit to arbitration (2) existing or future disputes pertaining to a defined legal relationship (3) which can be solvable by means of arbitration.648 This concept is contained in Art. 7(1) of the UNCITRAL Model Law, which provides that: “[a]rbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.”
The essential elements of a valid arbitration agreement are listed exhaustively in Art. 7(1). The guide to the UNCITRAL Model Law, commenting on this provision, states that Art. 7 is “one of the most important parts of UNCITRAL's attempt to unify national arbitration statutes. It is here that States should resist most strongly any temptation to impose more onerous or peculiarly local requirements.”649
648 Art. II(1) of the New York Convention. Art. V(1)(a) states also that the enforcement of an award can be refused if an arbitration agreement was entered by a party not having the capacity to do that, the agreement was invalid under the applicable law, a dispute matter was not arbitrable; or the enforcement of an award would be contrary to the public policy of the enforcing state.
649 Holtzmann and Neuhaus, 258. There exist also additional factors not listed in Art. 7, but pertaining to the issue of a valid arbitration agreement. These are listed in Art. 34 on the setting aside of an award, and in Art. 36 on the grounds for refusing the award’s enforcement. They include the aspects of the capacity of the parties entering into the arbitration agreement, validity under the law to which the parties subjected the agreement, arbitrability of disputes, and compliance with the public policy.
182
Article 7 was modified in 2006 in order to better accommodate various forms in which the agreement can be concluded, but the definition of an arbitration agreement remained the same.650 Accordingly, no further requirements are imposed on the parties in reaching a valid arbitration agreement. As such, the UNCITRAL Model Law jurisdictions permit both ad hoc and foreign administered arbitration within their territories.
A related issue is the classification of an arbitration proceeding administered by an overseas institution.
The concept of the seat of arbitration is of particular importance here. The seat of arbitration is a legal theory, and it means that “arbitration is governed by the law of the place in which it is held”.651 The choice of the seat of arbitration produces a number of consequences for the arbitration proceeding.
They include the powers of the tribunal (such as whether it can decide about its competence to resolve a dispute or effectively order interim measures); the level of supervision and assistance over arbitration (such as whether the court will support arbitration in evidence taking and exercise supervision over the award); and also the application of default mechanisms in case relevant choices have not been made by the parties (like in case of forming an arbitral tribunal).
As provided under Art. 1(2) of the UNCITRAL Model Law, the seat of arbitration determines the applicability of the UNCITRAL Model Law. Further, the concept of the seat is also relevant for the post-award fate of arbitration. In that context, it is generally accepted that the arbitral post-award bears the nationality of the seat of arbitration. This is relevant for the enforcement regime, including the application of the New York Convention. This concept is enshrined in Art. 31(3) of the UNCITRAL Model Law.652 Moreover, the court of the seat of arbitration is the one that has the power to set aside an award. This is reflected in Art. 34(2) of the UNCITRAL Model Law.
As such, in the cases administered by foreign arbitration institutions, but seated in the UNCITRAL Model Law jurisdictions, the arbitral award rendered in such proceedings is seen as rendered in the seat for the purposes of nationality and enforcement regime. Also, the court of the seat will have the
650 The UNCITRAL Model Law (version of 2006) offers a choice between two options of Art. 7.
Option I deals with the issue of a form of an arbitration agreement, and it provides in greater detail what means that that an arbitration agreement needs to be made “in writing”.
Option II does not deal with the question of a form at all.
Countries adopting the UNCITRAL Model Law can choose between these two options. See more in Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International Commercial Arbitration as
Amended in 2006, p. 28.
651 Redfern and Hunter, 171. See also, generally, about the concept of the seat of arbitration and the
ramifications of the choice of the seat in ibid., 165-175 & 181.; Born, 1536-1583.; Lew, Mistelis, and Kröll, 172-173.
652 See more on the legislative history of Art. 31(3) in Holtzmann and Neuhaus, 838-839.
183
power to set aside such an award. In addition, this court will be available to offer its support to the arbitration proceeding, for example, in instances where the coercive enforcement would be requested for an interim measures ordered by the tribunal. Therefore, in the sense of permitting the actions of foreign arbitration institutions, as well as overseeing them and providing assistance, the cases administered by foreign institutions are treated equally with the cases administered by domestic institutions.
B. Hong Kong and Singapore
Both Hong Kong and Singapore support the approach of the UNCITRAL Model Law to a valid arbitration agreement. In Hong Kong, Art. 7 is incorporated by virtue of Section 19 of the HK Arbitration Ordinance, and in Singapore – through Section 2A(1) of the SIAA. Consequently, the laws of Hong Kong and Singapore do not impose any additional requirements on the parties in respect to a valid arbitration agreement.653
Further, the nationality of an arbitral award and the post-award regime in Hong Kong and Singapore also follow the UNCITRAL Model Law concepts.654 Judges both in Hong Kong and Singapore confirmed in their decisions that the seat of arbitration is a crucial element in determining the award’s nationality and the post-award regime.655 As a consequence and by way of example, the ICC has successfully administered cases seated both in Hong Kong and in Singapore.656
8.2.2. Chinese standards
In China, under Art. 16 of the CAL, there is a requirement that an arbitration institution needs to be named in an arbitration agreement. As such, ad hoc proceedings, in principle, are not allowed in China.657 Furthermore, foreign arbitration institutions – with their rather unclear legal status in China, are limited in providing services in cases seated in China. Importantly, the lack of clarity over the status
653 See, generally, on the validity of an arbitration agreement in Hong Kong in Ma and Brock, 208-214.; and in Singapore in Joseph and Foxton, 39-45.
654 For Hong Kong, see Sections 67(1) and 81(1) of the HK Arbitration Ordinance; and for Singapore, see Art.
31(3), 34(2) of the UNCITRAL Model Law read together with Art. 3(1) of the SIAA. Also, see generally, about the concept of the seat of arbitration in Hong Kong in Ma and Brock, 140-141.; and in Singapore in Chew, 36-37 &
89-93.; Joseph and Foxton, 372-376.
655 For Hong Kong, see Shenzhen Nan Da Industrial and Trade United Co Ltd v. FM International Ltd [1992] 1 HKC 328 (2 March 1992); for Singapore, see PT Garuda Indonesia v Birgen Ai r [2002] SGCA 12, Court of Appeal, Civil Appeal No 600099 of 2001.
656 See the compilation of the ICC statistics in Born, 2064-2067.
657 See Chapter 2 p. 35-36.
184
and scope of services that can be provided by foreign institutions in China pertains only to “foreign-related” cases, because the SPC confirmed that the administration of domestic disputes by foreign institutions is not possible in China.658
As to “foreign-related” disputes specifically, the status of foreign institutions in China remains uncertain. Chinese arbitration-related regulations neither explicitly permit nor prohibit the conduct of arbitration in China by foreign institutions.659 However, that which is certain under the CAL is that an arbitration institution needs special registration and approval.660
Traditionally, the discussion in China centered on the above mentioned Art. 16 of the CAL, and the positions of the Chinese courts as to the validity of an arbitration agreement selecting a foreign institution for a China-seated arbitration case varied.661 However, and notably, the validity of such an arbitration agreement was endorsed by the SPC in the Longlide case in 2013.662 The Longlide case concerned a dispute administered by the ICC and seated in Shanghai, China. The SPC declared this agreement to be valid. Yet, this should not be seen as a total breakthrough allowing the foreign institutions to provide a full range of services in China.
658 Yuen, McDonald, and Dong, 87-88. In the Jiangsu Aerospace Wanyuan Wind Power Co. Ltd. vs. LM Wind Power (Tianjin) Co. Ltd. case, the SPC held that there is no legal basis permitting the parties to choose a foreign institution or ad hoc arbitration in a case, which does not contain a “foreign-related” element.
659 See Tao, "Challenges and Trends of Arbitration in China " in New Horizons in International Commercial Arbitration and Beyond, ICCA Congress Series, 84-85.; Yuen, McDonald, and Dong, 88-91.; Weixia Gu, "The Developing Nature of Arbitration in Mainland China and Its Correlation with the Market: Institutional, Ad Hoc, and Foreign Institutions Seated in Mainland China," Contemporary Asia Arbitration Journal 10, no. 2 (2017), 266-267.
660 Art. 10 of the CAL provides that: “An arbitration commission may be set up in the domicile of the people's governments of municipalities directly under the Central Government (hereinafter referred to as
"municipalities"), provinces and autonomous regions or in other places according to needs. It shall not be set up according to administrative levels.
An arbitration commission shall be set up by the relevant departments and chambers of commerce under the coordination of the people's governments of the cities prescribed in the preceding paragraph.
The establishment of an arbitration commission shall be registered with the judicial administrative departments of provinces, autonomous regions and municipalities.”
Art. 11 to 14 of the CAL provide for further requirements concerning the arbitration commission. For more of the arguments why Chinese law, and especially the provisions of the CAL, compellingly lead to the conclusion that a foreign institution cannot administer cases in China, see Yuen, McDonald, and Dong, 88-91.
661 Ibid., 88.
662 See the Reply of the Supreme People’s Court regarding the Dispute on the Validity of an Arbitration Agreement between Anhui Longlide Packing and Printing Co., Ltd. and BP Agnati S.R.L; issued on 25 March 2013, effective from 25 March 2013; [《最高人民法院关于申请人安徽省龙利得包装印刷有限公司与被申 请人BP Agnati S.R.L.申请确认仲裁协议效力案的复函; [2013]民四他字第13号; 颁布时间: 自2013年3月 25日, 实施时间: 2013年3月25日].