Arbitration and mediation for the resolution of disputes with Chinese companies
K’ang Hsi, emperor of China during 17th century, said: “The good citizens will make up the dispute between them as brothers, asking for arbitration by an old man or the most important person of the village. Let that turbulent, stubborn and quarrelsome people ruin themselves in the Courts: this is the justice they deserve”
Even in today’s China, arbitration and mediation are methods of resolution of civil and commercial disputes which provide important advantages: the time necessary to reach the resolution is significantly shorter than in judicial proceedings and the costs are known in advance and set out in a schedule of fees.
The main characteristic of arbitration is that the parties are entitled to choose the arbitrators and decide the location of the arbitration. In order to refer their dispute to arbitration, the parties must incorporate an arbitration clause in the main contract, or sign an arbitration agreement when their dispute has already arisen. Many arbitration commissions publish standard suggested arbitration clauses in order to eliminate uncertainty about the intent of the parties.
Mediation allows the parties to negotiate with the assistance of a mediator in a neutral environment. The mediator does not settle the controversy in lieu of the parties, but rather helps them reaching an agreement, by facilitating a constructive communication to reach a solution.
Because arbitration have a long history in China, a Chinese company is likely to be open to the inclusion of an arbitration clause in a contract. As China is a signatory to the New York Convention, Chinese courts are bound to recognize and enforce an arbitral award issued by arbitration commissions in any of the New York Convention’s other 142 signatory countries. However, often the Chinese companies will certainly prefer an arbitration commission in mainland China; two possible exceptions are Hong Kong and Singapore that, also for cultural reasons, can provide a neutral forum for arbitration involving Western and Chinese companies, and their location make them relatively acceptable to Chinese contracting parties. The members of the Hong Kong International Arbitration Centre (HKIAC), in particular, have substantial expertise and experience in international businesses.
Most international arbitrations in China occur in the China International Economic and Trade Arbitration Commission (CIETAC) that has more than 400 arbitrators. In 2005, the CIETAC enacted comprehensive reforms to its rules to promote transparency and impartiality in its arbitration proceedings. China’s law relating to arbitration is grounded on China’s general Civil Procedure Law (CPL) and China Arbitration Law (CAL) that is substantially modeled on the United Nations Commission on International Trade Law (UNCITRAL) Law on International Commercial Arbitration.
It’s important to know that Italian and Chinese companies can also apply for the mediation services provided by the Italy-China Business Mediation Centre (ICBMC).
ICBMC was set up following a cooperation agreement signed on 7th December 2004 between the Chamber of Arbitration of Milan, the Italy-China Chamber of Commerce and the Mediation Centre of the China Council for the Promotion of International Trade(CCPIT); the Centre became operational in November 2005 and has an office in Beijing and an office in Milan. In order to begin a mediation procedure at the ICBMC, either party may apply to their National Centre (Mediation Service of the Chamber of Arbitration of Milan for Italy, Mediation Center of CCPIT for China); after the application, the Italian and Chinese officials of ICBMC will contact the other party, instruct the conciliation procedure and organize the meetings in order to reach an agreement. For its bilateral nature, ICBMC ensures neutrality, independence and reliability in the resolution of conflicts. The parties can decide to appoint a single mediator or a joint team of one Chinese and one Italian mediator.