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

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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

158 b. Financing

Arbitration institutions should be detached from the government’s involvement in terms of their financing. Cutting both the extra financing and assigned cases would likely result in a reduced number of institutions in China. It would then, likely enhance the effectiveness of the institutions seeking to survive in the market.

Alternatively, the institutions should be given a free choice between being a part of the Ministry redistribution scheme or managing their finances by themselves. Further, in case this choice is offered, overly burdening taxes should not be imposed on the institutions that decide to take tend to their own financing. In this respect, Wang proposes that for tax purposes, the arbitration institutions should be regarded as non-profit organizations and, therefore, enjoy tax exemptions.⁵⁶⁹ The self-management of the profitable institutions would allow them to use any surplus of funds in the most effective way. For instance, the institutions could increase the rates paid to arbitrators, and by doing that, attract more of prominent arbitrators available to hear cases. This would be of practical relevance for the above mentioned postulate of applying the nationality exclusion rule to a sole or presiding arbitrator in cases where the parties from different states are involved.

c. Addressing the excessive number of arbitration institutions in China

Future reforms in China should also embrace the problem of the excessive number of the arbitration institutions in China. This is because this extensive number and artificial support for some institutions has contributed to irregularities, such as imposing on the parties the choice of arbitration administered by a particular institution, which contradicts the basic principle of arbitration – party autonomy. Some extent of “marketization” of the arbitration institutions in China would likely allow to see which institutions are, indeed, needed.

d. Possible references

i. BAC

The BAC, in a number of aspects, is a fairly unique arbitration institution in China. It is funded in an alternative way, and, to some extent, it operates differently than most of the Chinese arbitration institutions. Therefore, the BAC’s reliance on the government has also decreased when comparing it with other institutions in China.⁵⁷⁰ In practice, the BAC has managed to build itself as a successful

569 Sun and Willems, 9. See also the official website of the BAC: http://www.bjac.org.cn/news/view?id=1517 (last accessed: 20 November 2018).

570 See, generally, Chen, "Striving for Independence, Competence, and Fairness: A Case Study of Beijing Arbitration Commission.", 313 et seq.

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arbitration center, and, in turn, its international recognition and caseload have been steadily growing.⁵⁷¹ With that in mind, the BAC model could serve as a point of reference for the future attempts to restructure the arbitration institutions in China. The details of the functioning of the BAC, regarding both its personnel and financing, are discussed broader in Chapter 2.⁵⁷²

ii. International institutions: the example of the HKIAC

Looking at some other possible points of reference, one could also turn to international arbitration institutions established beyond China. The HKIAC is a good example, primarily because of access to information on the functioning of this institution. Some other solutions are occasionally mentioned below as well.

1. Personnel

The HKIAC is governed by its Council, which is comprised of a number of individuals of various nationalities, and is headed by a chairperson and a number of vice-chairpersons. Daily operations of the HKIAC are conducted by its secretary-general and secretarial staff. The HKIAC has a number of committees, which work under the guidance of the Council. This includes the executive committee – a principal body directing the HKIAC’s activities, the above mentioned appointment committee and procedure committee, as well as the third standing committee – the finance and administration committee, which deals with overseeing of finances, accounts, tax, human resources, general administration, and corporate governance.⁵⁷³ Members of all of these bodies are practitioners representing a variety of nationalities.⁵⁷⁴

As to the HKIAC Council, it is composed by between three and 25 members. Every year, one-third of the Council members who have been in office longest since their last election are required to retire at the annual general meeting. By default, if a retiring Council member offers him or herself for re-election, he or she is deemed have been re-elected, except if the HKIAC expressly resolves not to fill

571 In 2017, the BAC accepted 77 international commercial arbitration cases, which makes an increase of 21 cases comparing to 2016. See the official website of the BAC:

http://www.bjac.org.cn/english/news/view?id=3167 (last accessed: 20 November 2018).

572 Chapter 2 p. 47-48.

573 Cheng and Moser, 23. See also the official website of the HKIAC: http://www.hkiac.org/about-us/council-members-and-committees (last accessed: 20 November 2018).

574 See the official website pages of the HKIAC: http://www.hkiac.org/about-us/council-members-and-committees/hkiac-council; http://www.hkiac.org/about-us/council-members-and-committees/executive-committee; http://www.hkiac.org/about-us/council-members-and-committees/finance-and-administration-committee; http://www.hkiac.org/about-us/council-members-and-committees/proceedings-http://www.hkiac.org/about-us/council-members-and-committees/finance-and-administration-committee; and http://www.hkiac.org/about-us/council-members-and-committees/appointments-committee (last accessed:

20 November 2018).

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the vacated position, or if a resolution for the re-election of a Council member is put to the meeting and lost. As a general rule, only retiring Council members are eligible for election, unless another candidate is recommended by the Council or a vacancy exists. To be eligible for election, a candidate must be first proposed by a member of the HKIAC and notify in writing about his or her willingness to be elected.⁵⁷⁵

The HKIAC executive committee directs the activities of the HKIAC in accordance with policies approved by the HKIAC Council. It comprises of a maximum of six members: the HKIAC’s chairperson, two vice-chairpersons, and the heads of the three standing committees. All members of the executive committee must be members of the HKIAC Council and their term on the committee is three years.⁵⁷⁶ With respect to the three standing committees, all their members are appointed by the HKIAC Council.

Further, the chairperson and secretary-general of the HKIAC are ex officio members, the majority of members shall be the HKIAC Council members, and their term of office is two years, with the exception that the chairperson of each committee serves a three-year term, which the HKIAC Council may extend to a four-and-a-half-year term.⁵⁷⁷ It should be noted that in June 2017, the HKIAC Council reconstituted its procedure committee and appointment committee with a view to achieving diverse representation on both committees, taking into account the following considerations: nationality, gender, common law and civil law qualifications, representation from law firms, barristers’ chambers and in-house counsels, diverse subject-matter and jurisdictional expertise, recognised international and local profiles, as well as balancing seniority with developing younger, local talent.⁵⁷⁸

Regarding internationalization and diversification, also the SIAC’s Court of Arbitration stressed the need to implement these into structures.⁵⁷⁹ By way of further example, the Court of the London Court of International Arbitration (“LCIA”), which deals with, among others, the appointment of arbitrators and challenges, is made of up two thirty three members. Maximum six of the LCIA Court members can

575 See Art. 37, 46, 47, 49, 50 of the of the HKIAC Articles of Association. Note, however, that by ordinary resolution, the HKIAC may increase or decrease the number of the Council members (Art. 51). The information concerning the details of the HKIAC’s structures was obtained from Sarah Grimmer, the Secretary-General of the HKIAC on 18 January 2018 (email correspondence on file with the author of this thesis).

576 Art. 2, 5, 6, 9, 10 of the HKIAC Executive Committee Regulations (31 May 2014). Note also the changes as of 2017.

577 Art. 2-6 of the HKIAC Standing Committee Constitution (2017), Art. 3 of the HKIAC Procedure Committee Regulations (2014), and Art. 4 of the HKIAC Appointment Committee Regulations (2014).

578 This information was obtained from Sarah Grimmer, the Secretary-General of the HKIAC on 18 January 2018 (email correspondence on file with the author of this thesis).

579 See the official website of the SIAC: http://www.siac.org.sg/2014-11-03-13-33-43/about-us/court-of-arbitration (last accessed: 20 November 2018).

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be of the UK nationality. As claimed by the LCIA, the diversification of the LCIA Court is a pursuit to

“maintain a balance of leading practitioners in commercial arbitration, from the major trading areas of the world”.⁵⁸⁰

It is perhaps unrealistic that such an extensive degree of internationalization will happen in the case of the Chinese arbitration institutions, at least as of today. However, an increased diversification and professionalism of personnel is important for any type of institution. Therefore, this is also desirable in China, in particular, in the case of institutions that seek to become more international.

2. Finances

Regarding finances, in reality, it is rare for arbitration institutions to be entirely independent – both organically and financially. A full independence would mean no connection to another organization or government, and no funding from a government. Gerbay points out that the American Arbitration Association (“AAA”) is a rare example of a fully independent institution. The AAA has the form of a New York not-for-profit corporation and it is not linked to a chamber of commerce or any other state entity. The AAA does not receive any funding from the government, and it regularly publishes its annual reports including financial information.⁵⁸¹ In practice, however, many arbitration institutions are connected to chambers of commerce. This often happens, because the chambers’ business communities are frequently the driving force behind creating particular institutions.⁵⁸²

As to the control of financing by the government, taking the HKIAC as an example, it can be observed that although at the beginning the HKIAC was financially supported by the Hong Kong government, it gradually freed itself from the need to be financially assisted, and now it declares to be “financially self-sufficient and completely free and independent from any type of influence or control”.⁵⁸³ Annual reports including financial statements, which are regularly published by the HKIAC, seem to support its financial self-standing and self-governance.⁵⁸⁴ Indeed, a crucial point is how independently

580 See the official website of the LCIA: http://www.lcia.org/LCIA/organisation.aspx (last accessed: 20 November 2018).

581 See Gerbay, The Functions of Arbitral Institutions, 21. See also the annual report of the American Arbitration Association for 2016, including its financial information at:

https://www.adr.org/sites/default/files/document_repository/AAA_AnnualReport_2017.pdf (last accessed: 20 November 2018).

582 Gerbay, The Functions of Arbitral Institutions, 20-21.

583 See the official website of the HKIAC: http://hkiac.org/about-us (last accessed: 20 November 2018), also Ma and Brock, 157.; Cheng and Moser, 23.

584 See, for example, the 2015 and 2016 HKIAC Annual Reports for 2014 and 2015, respectively, available at the official website of the HKIAC:

http://www.hkiac.org/sites/default/files/annual_report/2015_Annual_Report_Final.pdf and

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particular institutions function after they were initially helped, and thereafter reached financial independence. This is because, with the notable exception of the AAA, it would be perhaps unrealistic to argue that, generally, governments have nothing to do with arbitration institutions. Quite conversely, as argued in Chapter 3, states normally have an interest in supporting the arbitration infrastructure.⁵⁸⁵ As such, it happens that states become involved especially at the initial stage of the functioning of the arbitration institutions. Nonetheless, once the arbitration institution is effectively helped to start its operations, the involvement of the government should be minimized: this includes China.

http://www.hkiac.org/sites/default/files/annual_report/annual%20report%202016%20%28low%20resolution

%29%20v2.pdf (last accessed: 20 November 2018).

585 See Chapter 3 p. 52-53.

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