Improving the distribution of power and mechanisms in the area of forming an arbitral

Generally, arbitration law should support the parties’ freedom to arrange their own procedures in the area of forming an arbitral tribunal. Further, a workable default framework should be provided under the CAL, with the aim of accommodating also ad hoc proceedings.

a. Appointment of arbitrators

The CAL should provide for a default number of arbitrators – in case the parties have not specified it.

The default number should be three. As noted above in the context of transnational standards, a panel of three arbitrators can potentially better understand the positions of all the parties involved in dispute.

Also, as observed by Mangan, Reed, and Choong, the parties are statistically more likely to agree on a presiding arbitrator in a three-member panel than on a sole arbitrator.⁵⁶¹ However, if a sole tribunal is favored by the parties, for example, because of the cost efficiency, the parties should be free to choose a sole arbitrator.

Further, it is recommended that for the selection of the third arbitrator in a three-member panel, the solution of the UNCITRAL Model Law is followed, whereby the third arbitrator is appointed by the two party-appointed arbitrators. As noted above, the Singaporean solution (whereby the third arbitrator is

559 Wang, "CIETAC's Perspective on Arbitration and Conciliation Concerning China," in New Horizons in International Commercial Arbitration and Beyond ICCA Congress Series 36-37.

560 Sun and Willems, 9.

561 Mangan, Reed, and Choong, 89.

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jointly appointed by the parties, and only if that it is not possible – the SIAC makes the appointment) is claimed to give more way to party autonomy. However, the default solution under the UNCITRAL Model Law (and also that of Hong Kong) also respects the autonomy of parties: the third arbitrator is selected by the arbitrators appointed by the parties, and, thus, indirectly by the parties as well. In practice, once a dispute occurs, it may be difficult for the parties to make a compromise on any issue, including the third arbitrator. As such, it seems more likely that a compromise will be reached by party-appointed arbitrators. Therefore, the latter solution is recommended to China.

Another issue that can come into play, in particular if ad hoc arbitration is more widely permitted in China, is who should be a “statutory appointing authority”. In answering this question, it should be noted that in contrast to Hong Kong and Singapore, China has a few leading arbitration institutions⁵⁶² and, therefore, it would be more difficult to choose one of them to be such an authority. However, if one of them is to be selected, due to its experience, expansive lists of arbitrators (including foreign arbitrators), and the presence of sub-commissions offices in different regions, this could potentially be CIETAC. Nonetheless, it should be noted, that as argued in this Chapter, CIETAC itself is not free of problems in the area of appointment.

Moreover, the appointment decision rendered by a default appointing authority should not be appealable, mainly for the sake of efficiency of the proceeding. In addition, specific and relatively short time limits should be added for the appointment decisions by the parties. This is already provided by the arbitration rules, yet, should be also implemented into the arbitration law.

Concerning other problems existing in the area of the appointment in China – beyond issues pertaining to the distribution of power and mechanisms discussed above, there is a number of actions that can be taken to remedy the shortcomings. First, governmental officials and staff of the arbitration institutions should not be appointed as arbitrators. By way of example, the BAC decided that its chairperson and the BAC’s staff cannot concurrently serve as arbitrators, and the BAC’s vice-chairpersons and committee members can only act as arbitrators, if they are jointly appointed by the parties.⁵⁶³ This solution could serve as an inspiration for other Chinese institutions. Second, in case of disputes involving foreign elements, a sole or a presiding arbitrator should be of a different nationality than that of the parties – unless the parties agree otherwise.⁵⁶⁴ Third, providing a set of criteria for

562 See Chapter 2. p. 39.

563 Chen, "Striving for Independence, Competence, and Fairness: A Case Study of Beijing Arbitration Commission," 342-343.

564 Yet, in China, the problem is more complex, because, as mentioned above, CIETAC offers relatively low payment to arbitrators, which can be discouraging for foreign arbitrators. See more Fan, Arbitration in China, a Legal and Cultural Analysis, 68-69.; Tao, Arbitration Law and Practice in China, 134.

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situations, where the chairman makes the appointment would help to reduce the risk of the chairman’s discretionary power. Here, the CIETAC’s solution under Art. 30 of the 2015 CIETAC Rules could serve as a reference. Finally, eliminating the assumption of compulsory panels of arbitrators in China would be another positive change.

On this last point specifically, it is true that many of the leading arbitration institutions in the world have their own lists of arbitrators. This is also the case for the HKIAC and the SIAC. However, these lists serve as a reference/recommendation. For example, the SIAC in its FAQ section available on the SIAC’s official website makes it clear that despite the existence of the SIAC’s panel list, the parties are free to nominate arbitrators of their own choice.⁵⁶⁵ Broadening the access to various arbitrators is important in light of the changing dynamics of business transactions that China does with the rest of the world.

By way of example, having in mind the Belt and Road Initiative,⁵⁶⁶ it is noteworthy that as to arbitrators from countries like Myanmar, Pakistan, or Bangladesh participating in this initiative, the choice is extremely limited, even when looking at the extensive panel of arbitrators of CIETAC.

b. Challenge, removal, and replacement of arbitrators

The approach to the time limits to raise the challenge should be modified in China. As mentioned, under the CAL, a party, generally, needs to raise the challenge before the first hearing of the tribunal.

However, if the reasons for a challenge become known only after the first hearing, the challenge can be brought up before the end of the last hearing. This can potentially lead to abuses. One could imagine a situation where a party realizes that there exists a reason for a challenge after the first hearing, but it waits to see how arbitration proceeds. In case it proceeds in a way not favorable to that party, it raises the challenge at the later stage. This can result in a waste of time and money, in particular, if the challenge is successful. It seems to be more practical that a party is given a specific amount of time for raising the challenge, counted from when the party has become aware of circumstances giving rise to justifiable doubts as to the arbitrator’s impartiality or independence. In case of the UNCITRAL Model Law, these are 15 days, and if a party does not raise the challenge timely, it should be deemed waived on those grounds. The recommendation of introducing a more specific time framework pertains to both the CAL, as well as the Chinese institutional rules.

Concerning future ad hoc proceedings, the UNCITRAL Model Law mechanisms are recommended.

Beyond specific time limits for raising a challenge; other aspects include putting the arbitral tribunal in

565 See the official website of the SIAC: http://www.siac.org.sg/faqs#faq40 (last accessed: 20 November 2018).

Yet, the appointment is subject to the approval by the SIAC President.

566 See Chapter 1 p. 2.

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charge of deciding the matter, and providing an option of recourse to the court in case of an unsuccessful challenge. On the point of recourse to the court, in case China decides to implement this mechanism, a number of safeguards employed by the UNCITRAL Model Law should be used as well.

This includes (1) a short period of time for appealing a challenge decision; (2) a possibility for the continuation of the arbitration proceeding during court review; and (3) the lack of appeal for the subsequent court decision.

B. Need for restructuring of the arbitration institutions in China and enhancing their