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Arbitration Procedure

Photo: Arbitration Procedure
Photo: Arbitration Procedure

(a)  Application

When lodging an application with the arbitration commission, a party should submit the arbitration agreement, arbitration application and copy, and power of attorney (where a legal representative is appointed).

  • Arbitration agreement

Arbitration agreement is the prerequisite for lodging an arbitration application. The arbitration agreement can be in the form of an arbitration clause in the contract or an agreement in any written form reached before or after the occurrence of the dispute requesting arbitration. The most important feature of arbitration is to enable the parties to resolve their dispute through arbitration without going to court. In the case where the parties have an arbitration agreement and one of them tries to bring a lawsuit to the people’s court, it will not be accepted by the court, with the exception where the arbitration agreement is invalid.

An arbitration agreement may be in three forms. First, an arbitration provision included in a contract stipulating that arbitration will be sought should a dispute occur, and such agreement is made prior to the occurrence of dispute. Second, an arbitration agreement signed either before or after a dispute occurs by the parties on a voluntary basis as an independent agreement whereby it is agreed that arbitration is to be sought to resolve disputes. Such agreement is not annexed to any other contracts. Third, an arbitration agreement contained in other relevant written document including letter, telegram, telex, facsimile, electronic data interchange and electronic mail where communication between the parties occurs and arbitration agreement is reached. The expressed arbitration intent is often scattered in different documents generated in the course of multiple dealings between the parties. In light of the existence of a stand-alone arbitration agreement, the validity of an arbitration agreement is not affected by any change in its underlying contract, or its rescission, termination or being declared invalid.

An arbitration agreement should have the following contents: (1) an expressed intent to request arbitration (i.e. both parties expressly indicate that they wish to resolve the dispute by arbitration); (2) the matter for arbitration (i.e. the concrete issue(s) in dispute seeking arbitration as submitted by both parties); (3) the chosen arbitration commission (arbitration commissions are not governed by authorities of any administrative level or any geographic region. As long as both parties are in agreement, any arbitration commission may be chosen to arbitrate a current or future dispute).

An arbitration agreement must specify clearly the issues for arbitration and an arbitration commission. Where no specification is made or the specification is not clear, the parties may make a supplemental agreement. Where no supplemental agreement can be reached, the arbitration agreement will be deemed invalid.

If, after reaching an arbitration agreement, the parties object to its validity, objection should be raised before the arbitration tribunal starts the first hearing of the case, and a request should be raised to the arbitration commission to make a ruling or the people’s court to make a judgment. If one of the parties requests the arbitration commission to make a decision while the other requests the people’s court to make a judgment, the people’s court should make a judgment.

  • Application for arbitration

    An application for arbitration should contain the following:

    • the name, gender, age, occupation, employer and address of the parties; the name and address of the legal person or other organisations concerned; and the name and profession of the legal representative and other principal persons in charge;

    • arbitration requested and the facts and reasons on which the request is based;

    • evidence and its sources; the names and addresses of witnesses.
  • Power of attorney

A party or his legal representative may request a lawyer or an agent to represent him at the arbitration. In doing so, he should submit a power of attorney to the arbitration commission.

The power of attorney should specify the subject matter and limits of authorisation. The attorney may acknowledge, renounce or change the arbitration request on behalf of the party. If the arbitration tribunal carries out mediation or the adverse party submits a counter-request, the attorney has to obtain special permission from the party to proceed on his behalf. The party should notify the arbitration commission or arbitration tribunal in writing of any change or termination of the authorisation. The arbitration commission or arbitration tribunal concerned will then notify the other party.

(b)  Acceptance

When the arbitration commission receives an application, it should accept it and notify the parties within five days if it deems the application meets the requirements. As for cases that do not meet requirements, the arbitration commission should notify the parties in writing that the case is not accepted along with an explanation.

After accepting an arbitration application, the arbitration commission should, within the period prescribed in the arbitration rules, deliver the arbitration rules and the names of the arbitrators to the applicant as well as a copy of the arbitration application, arbitration rules and the names of the arbitrators to the adverse party.

After receiving the copy of the arbitration application, the adverse party should furnish a defence to the arbitration commission within the period prescribed in the arbitration rules. After receiving the defence, the arbitration commission should, within the period prescribed in the arbitration rules, deliver a copy of the defence to the applicant. The absence of a defence on the part of the adverse party does not affect the arbitration process.

The applicant may, after submitting the arbitration application to the arbitration commission and before the opening of court session, renounce or change the arbitration request. The adverse party may acknowledge or rebut the arbitration request and has the right to submit a counter-request.

Where the behaviour or other circumstances of one party cause a halt or obstruction in carrying out the ruling of the arbitration commission, the other party may apply for preservation of property. On behalf of the party requesting preservation of property, the arbitration commission shall submit the application to the people’s court in accordance with provisions stipulated in the Civil Procedure Law. In the event that there are errors in the application, the applicant shall compensate the other party for losses incurred in the preservation of property.

(c)  Formation of Arbitration Tribunal

Upon accepting an application, the arbitration commission will form an arbitration tribunal. An arbitration tribunal may be a collegiate panel or single-member panel. A collegiate panel is composed of three arbitrators, one of which is the presiding arbitration officer. A single-member panel is composed of only one arbitrator.

After receiving the arbitration rules and the names of the arbitrators from the arbitration commission, the parties should, within the period prescribed in the arbitration rules, select the arbitrators in accordance with the agreed tribunal formation and arbitrator selection methods. If the parties agree that a collegiate panel be formed, each of them should select his own arbitrator or request the arbitration commission director to designate an arbitrator for him. The third arbitrator (or presiding arbitration officer) should be selected by the parties jointly or by the arbitration commission director at their request. If the parties agree that a single-member panel be formed, they should select the arbitrator jointly or request the arbitration commission director to designate the arbitrator for them.

If the parties fail to agree on the form of the arbitration tribunal or selection of arbitrators within the period prescribed in the arbitration rules, the arbitration commission director will make the decision for them.

After an arbitration tribunal has been formed, the arbitration commission will notify the parties in writing of the formation of the tribunal.

After receiving the notification in writing, the parties have the right to present a withdrawal request, either in writing or verbally, if an arbitrator is found to be in one of the following situations where withdrawal from the arbitration is warranted:

  • Where he is one of the parties in the arbitration, or a close relative of any one party or of the attorney;

  • Where he has an interest in the arbitration;

  • Where he is related to any of the parties, or their attorneys, in other respects which may affect an impartial arbitration;

  • Where he has had private meetings with any of the parties or with their attorneys, or where he has accepted the invitation of any of the parties or their attorneys to dine, or has accepted their gifts.

When a party submits a withdrawal request, he should state and submit the reasons prior to the opening of the first court session. If the cause of the withdrawal is not known until the first court session has been held, the cause may be submitted prior to the closure of the last court session.

If a new arbitrator is elected or designated as a result of the withdrawal of an arbitrator, the parties may request that the ongoing arbitration process be started anew. The arbitration tribunal will decide whether or not to approve the request. The arbitration tribunal may also decide whether the ongoing arbitration process should be started anew.

(d)  Hearing

The hearing of arbitration cases should be held in open court. Where the parties agree not to have open court hearing, the arbitration tribunal may make a ruling in accordance with the arbitration application, the defence and other documents. Where there is no open arbitration and the parties agree not to have open court hearing, the arbitration tribunal may make a ruling in accordance with the arbitration application, the defence and other documents. Where the litigating parties agree to have open court hearing, the hearing may be held openly except for the cases that involve state secrets.

The arbitration commission will notify both parties of the date of the tribunal session within the period prescribed in the arbitration rules. The parties may, within the prescribed period, request a postponement of the session if they have a legitimate reason. The arbitration tribunal will decide whether the session should be postponed.

The applicant will be deemed to have withdrawn his arbitration request if he, after being notified in writing, fails to attend the tribunal session without a legitimate reason, or if he leaves the tribunal session halfway without the tribunal’s approval. If the other party, after being notified in writing, fails to attend the tribunal session without a legitimate reason, or if he leaves the tribunal session halfway without the tribunal’s approval, a ruling can be made by default.

During the tribunal session, parties should present evidence to support their respective stands. The arbitration tribunal may collect on its own account evidence it deems essential. All evidence should be presented during court hearing for parties to cross-examine each another. If the evidence is perishable or may become difficult to obtain in the future, the parties may apply for preservation of evidence. Where the parties apply for preservation of evidence, the arbitration commission should submit the application to the grass-roots people’s court (or intermediate people’s court in foreign-related cases) of the location where the evidence is obtained. The people’s court should make a decision whether or not the evidence preservation measures will be adopted in accordance with law.

Either party has the right to debate during the arbitration process. When the debate ends, the presiding arbitration officer, or the arbitrator of a single-member panel, will solicit the parties’ final views.

The arbitration tribunal may carry out mediation prior to making a ruling. The arbitration tribunal should mediate when the parties agree to do so. If the mediation fails, a ruling should be made promptly. Where an agreement is reached through mediation, the arbitration tribunal should draw up a written mediation, or a written ruling on the basis of the agreement. A written mediation has the same legal effect as a written ruling. A written mediation becomes legally valid after it has been signed and accepted by the parties. If one of the parties backs out prior to the signing of the written mediation, the arbitration tribunal should make a ruling promptly.

In order to facilitate the arbitration procedure and ensure the execution of the ruling, parties may request preservation of property at any stage of the arbitration process before a ruling is made. When a party requests preservation of property, a written request should be submitted to the arbitration commission which will then forward the request to the grass-roots people’s court (or intermediate people’s court in foreign-related cases) of the location where the adverse party resides or where the property is located. The people’s court should make a decision whether or not the property preservation request will be granted in accordance with law. The party applying for property preservation must provide guarantee. If no guarantee is provided by the party, the application will be dismissed.

(e)  Ruling

When arbitrating a dispute, the arbitration tribunal may make a ruling on the part of the dispute for which facts have been ascertained.

For any terminological or calculation error in the written ruling or any ruling decision left out in the written ruling, the arbitration tribunal should make corrections. The parties may, within 30 days upon receipt of the written ruling, request that the arbitration tribunal make corrections.

The written ruling takes legal effect on the date it is written.

Rulings are final and legally binding to both parties. Neither party may appeal to the court or make request to any organ in an attempt to change an arbitration ruling. If a party produces evidence proving that a ruling has one of the following, he may, within six months upon receipt of the written ruling, apply to the intermediate people’s court of the place where the arbitration commission is located to repeal the ruling:

  • Where there is no arbitration agreement;

  • Where the dispute arbitrated is not within the scope of the arbitration agreement, or one which the arbitration commission has no authority to arbitrate;

  • Where the formation of the arbitration tribunal or the arbitration process has violated legal procedure;

  • Where the evidence on which the arbitration is based is counterfeited;

  • Where the other party has concealed evidence that could affect an impartial ruling;

  • Where the arbitrator(s) have solicited or accepted bribes, practised favouritism, or bent the law while arbitrating the case.

The people’s court should decide whether to approve or reject an application for repealing a ruling within two months upon receipt of the application. The ruling will be repealed if the collegial panel formed by the people’s court has examined the ruling and ascertained that it has one of the above-mentioned situations. After the repeal of the ruling, the parties may re-file an application for arbitration of the dispute in accordance with a new arbitration agreement reached between the parties or initiate legal proceedings at the people’s court. If the people’s court maintains that the arbitration tribunal may re-arbitrate the dispute after the application for repealing the ruling has been accepted, it will notify the arbitration tribunal to re-arbitrate within a specified period and it will also rule to suspend the repeal procedure. In the event the arbitration tribunal refuses to re-arbitrate the dispute, the people’s court should reinstate the repeal procedure.

(f)  Execution

Parties should abide by the ruling. If one party fails to abide by the ruling, the other party may, in accordance with provisions in the Civil Procedure Law, request to execute the ruling at the people’s court located at the place of domicile of the adverse party or the place where the property of the adverse party is located. The valid arbitration ruling or written mediation on which the execution request is based (original copy), proof of delivery of the arbitration ruling, the arbitration agreement, the contract containing arbitration clauses or document of reconciliation should be submitted to the court together with the application. If the adverse party or his property is not within the territory of the People’s Republic of China, the party should directly request recognition and enforcement from the foreign court which has jurisdiction over the property, and submit documents according to the requirements of that court.

If the adverse party produces evidence proving that a ruling has one of the situations set out in Article 237 (2) of the Civil Procedure Law, and after the collegial panel formed by the people’s court has examined, ascertained and ruled that the ruling should not be executed, the party may re-file an application for arbitration of the dispute based on a new arbitration agreement reached or initiate legal proceedings at the court.

If one party applies for executing a ruling and the other party applies for repealing it, the people’s court should rule that the execution be suspended. If the people’s court judges that a ruling be repealed, the execution of the ruling should be terminated. If the application for repealing a ruling is rejected, the people’s court should judge that the execution of the ruling be resumed.

Content provided by Picture: HKTDC Research
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