By and large, disputes arising from doing business are civil disputes. In China, the predominant means for resolving civil disputes are mediation, arbitration, and litigation. Depending on the nature of a dispute, the disputants may resort to one, two, or even all of these mechanisms. For instance, when a dispute arises between joint-venture partners, the disputants may first seek mediation, then request arbitration, and finally file a lawsuit. In fact, the same dispute-resolution institution may also try to resolve a dispute through more than one of these modes. For example, to resolve a dispute over the performance of a contract, the court may first undertake mediation and, if mediation fails, conduct adjudication. At times, businesses may disagree with government agencies on denial of licenses, imposition of fines, or dispensation of orders. To challenge administrative actions, complainants may either seek administrative reconsideration or file a suit against the government in court. Accordingly, foreign investors should familiarize themselves with the basic means of resolving civil disputes and the avenues to contest administrative decisions.
To provide an overview of dispute-resolution mechanisms in China, this chapter discusses conciliation/mediation, administrative proceedings, litigation, and arbitration. The sections on conciliation/mediation, administrative proceedings, and litigation are succinct, while the discussion on arbitration of commercial disputes is more elaborate. The main reason for such an approach is that although litigation has increased in recent years and will continue to increase as a result of further improvement of China's legal infrastructure, arbitration has been a very popular dispute-resolution means for foreign investors in China and many commercial disputes in the world have been resolved by arbitration rather than litigation. With a basic understanding of dispute-resolution modes, foreign investors can be better prepared to undertake commercial endeavors in China.
“Alternative dispute resolution” refers to the resolution of disputes by means other than litigation. In recent years, alternative dispute resolution has