Limited independence of the Chinese arbitration institutions

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also appointed to hear cases. It seems that in order to have the two happen, it is in the arbitrator’s interest to act in line with the institution’s expectations. That, however, can potentially reflect on the arbitrator’s independence.⁵⁴⁰

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the local government’s interest is favored. This can be a possible scenario where, for instance, state assets or state-owned enterprises are involved in arbitration.⁵⁴⁴

a. Involvement of the government in deciding who holds the key positions in the arbitration institutions

One problem is the involvement of officials from industrial and commercial branches of local governments, which is a common scenario for many arbitration institutions in China, with a few exceptions, such as CIETAC and the BAC.⁵⁴⁵ Yang Runshi, the former director of the general office of the SPC in China criticizes the intrusion of the government into the functioning of the Chinese arbitration institutions. He observes that governmental officials frequently hold various offices within the institution, and that they are not willing to let arbitration develop independently. Yang mentions also that officials of a senior rank often act as chairmen of the institutions. In addition, Yang stresses that in particularly contentious or controversial cases that can have an influence on the public, the arbitration institution or the tribunal needs to report to officials of the relevant governmental authorities – before the award is rendered.⁵⁴⁶

Furthermore, even if local officials do not occupy key positions in the arbitration institution themselves, the governmental units are typically involved in appointing the institution’s chairman and other personnel who act in the capacity of chairman. Also, although the “governmental shadow” can be less present in the leading arbitration institutions in China, even these leading institutions are still influenced by the government participating in the appointment of their key staff.

By way of example, the CIETAC’s key personnel, including the CIETAC chairman, is engaged by the China Council for the Promotion of International Trade (“CCPIT”).⁵⁴⁷ The CCPIT is a governmental agency

544 Yuen, McDonald, and Dong, 236.

545 See ibid., 235-236.; Kun Fan, "Underlying Influences on the Effectiveness of Arbitration in China," Asian Dispute Review 2012, no. 3 (2012), 78.; Sun and Willems, 8.; Tao, Arbitration Law and Practice in China, 7.

546 Runshi Yang, "Free Our Thinking and Push through the Reform of the Arbitration Regime and Its Mechanisms [Origial Title: 解放思想推进仲裁体制和机制改革]," Beijing Arbitration Commission Official Website (15 October 2008), http://www.bjac.org.cn/news/view?id=1516. (last accessed: 20 November 2018).

See also Sun and Willems, 8-9.

547 Art. 5 of the Articles of Association of CIETAC: “CIETAC is composed of one Chairman, one Executive Vice Chairman, a number of Vice Chairmen and a number of Commission Members, who are experts and

distinguished persons in relevant fields engaged by the China Council for the Promotion of International Trade (China Chamber of International Commerce). They shall serve a term of three years, subject to adjustment when necessary.” The original language of Art. 5 is: 贸仲委由主任一人、常务副主任一人、副主任若干人及 委员若干人组成。上述组成人员由中国国际贸易促进委员会（中国国际商会）聘请有关方面的专家和知 名人士担任，每届任期三年。在必要时，任期可做适当调整, where ”聘请” (pìn qǐng) means „employ”,

„engage”, „hire”, „appoint”.

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dealing with issues of trade and investment promotion.⁵⁴⁸ It undertakes the related work and accepts the government’s guidance, and – importantly – its funding comes from the government.⁵⁴⁹ CIETAC is actually a related agency of the CCPIT.⁵⁵⁰ Therefore, a decision as to the CIETAC chairman (and also the vice-chairmen performing the functions of the CIETAC chairman when so authorized) is, in practice, influenced by the government.

As to the appointment of the key staff of the BAC, a BAC Committee (a governing organ of the BAC, which includes the chairman, vice-chairmen and a few other members) is involved in the nomination of candidates to a BAC Committee for a succeeding term. The chairman of the BAC Committee will have a meeting with relevant departments and the chamber of commerce for the purpose of nominations. Upon the nomination, the appointment itself is made by the Municipal People's Government.⁵⁵¹

b. Involvement of the government in various aspects of financing of the Chinese arbitration institutions

As to the aspect of financing of the Chinese arbitration institutions, some problems that reflect on the institutions’ independence exist as well. As noted above, there is a number of arbitration institutions in China, which need to rely on the governmental support for their financing. In addition, although, there are a few institutions claiming to establish themselves as fully independent financially, in principle, they still need to report their expenses and take part in the subsequent allocation of resources under the rules of the Ministry of Finance. Further, this subsequent allocation of resources does not necessarily reflect the income that a particular institution was able to make.⁵⁵²

The financial scheme introduced by the Ministry of Finance can lead to doubts as to the institutions’

independence, since the institutions may prefer to obey the instructions of the government in order to secure their financing for the future. As such, as expressed by Yu, the past Secretary-General of

548 See the official website of the CCPIT:

http://en.ccpit.org/info/info_40288117521acbb80153a75e0133021e.html (last accessed: 20 November 2018).

549 Art. 4 and 16 of the CCPIT Constitution.

550 See the official website of the CCPIT:

http://en.ccpit.org/info/info_8a8080a94fd37680014fd3c885fc0006.html (last accessed: 20 November 2018).

551 Art. 16 of the BAC’s Articles of Association.

552 See Chapter 2 p. 40-41. See also the Notice of the Ministry of Finance, the National Development and Reform Commission, the Ministry of Supervision and the National Audit Office on Strengthening the Two-Channel Management of the Receipts and Disbursements of the Administrative Charges and Other Revenues of Central Departments and Entities (Circular 29) from 9 May 2003. [财政部、国家发展和改革委员会、监察 部、审计署关于加强中央部门和单位行政事业性收费等收入“收支两条线”管理的通知, 财综[2003] 29 号, 2003年5月9日].

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CIETAC, the Ministry scheme seems not to be welcomed by the Chinese institutions that are able to do financially well by themselves.⁵⁵³ This is mainly because these institutions cannot decide freely on their expenditures, and instead – they have to accept the government’s control.⁵⁵⁴

As also mentioned above, theoretically, there is an option of an alternative model of financing, such as the one explored by the BAC. The BAC is not a part of the Ministry scheme. Instead, it obtained a status of an “institution managed as an enterprise” and pays the business tax based on its revenues.⁵⁵⁵ However, this alternative model of financing requires the approval of the authorities. Furthermore, the price of the financial independence is quite high, because of relatively high tax rates applicable.