China International Economic Trade Arbitration Commission in 2006: New Rules, Same Results?

By Kostrzewa, Benjamin O. | Washington International Law Journal, June 2006 | Go to article overview

China International Economic Trade Arbitration Commission in 2006: New Rules, Same Results?


Kostrzewa, Benjamin O., Washington International Law Journal


I. INTRODUCTION

In the past twenty-five years, the blistering speed of Chinese economic development outpaced efforts to reform China's judicial system. The corresponding expansion in legal relationships between foreign and Chinese businesses created a demand for forums to hear legal claims. Recently, professional arbitration organizations have filled that void as an alternative to the Chinese judiciary.1 Foreign corporations, leery of a Chinese legal system that is widely considered to be parochial, unsophisticated, and unable to handle modern business conflicts, often choose private arbitration institutions to resolve disputes.2

The China International Economic Trade Arbitration Commission ("CIETAC") is the leading arbitration organization for foreign-related legal disputes. CIETAC was established in 1988 out of its predecessor, the Foreign Economic and Trade Arbitration Commission ("FETAC").3 CIETAC is now the world's busiest international business arbitration institution, handling over 850 cases in 2004.4 Yet, in spite of the growing volume of cases CIETAC handles, some international observers believe that it still has institutional problems that chip away at its objectivity and effectiveness.5

In 2005, CIETAC issued new arbitration rules to address many of the problems commonly associated with it.6 Problems with the arbitrator selection process and the efficiency of the tribunal were improved to meet international norms of arbitration.7 These new regulations are an important step for CIETAC towards fully meeting international arbitration standards, for they solve many of the systemic defects that plagued the CIETAC arbitration process.

The Chinese government is aware of the importance of arbitration and regularly reforms its laws and regulations in order to modernize the legal system. In addition to the CIETAC rules, there have been many changes made to the judiciary to make the enforcement of arbitration awards as fair as possible.8 The effectiveness of such reforms, however, is often questioned.9 Post-award problems in the execution of awards continue to plague the Chinese system in spite of reform efforts by the Chinese government.10

However, other problems regularly associated with arbitration in China, such as local protectionism, bias against foreigners, and competency of the courts, are more a problem of outside perception of CIETAC rather than actual institutional defects.11 The widespread reform efforts to ensure the legitimacy of arbitration in China are under appreciated by the business community at large.12

In order to solve both the problems that still remain in the seizure of assets to satisfy arbitral awards, as well as the institutional defects that remain in CIETAC, the Chinese government must reduce the gap between the statutory authority granted by the law and the lack of legal power the courts currently hold in China. Comprehensive redrafting of statutes is an important step; however, the Chinese government must also encourage the judiciary to become strong and independent.

This Comment will examine the development of Chinese arbitration law. Part II will discuss international arbitration generally and the development of Chinese arbitration. Part III will analyze the 2005 CIETAC revisions and the problems that were cured by the changes. Part IV will examine the post-award legal regime in China and the problems that remain. Lastly, this Comment will identify remedies to the real and perceived problems that remain after the 2005 arbitration rules in China.

II. CIETAC HAS DEVELOPED TO MEET INTERNATIONAL ARBITRATION STANDARDS

International arbitration seeks to provide an alternative to traditional litigation by allowing the parties to craft a forum that best suits their individual needs.13 Rather than the formalism of rules and procedure that colors litigation, arbitration offers flexibility, efficiency, and privacy for the parties involved.14

A. …

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China International Economic Trade Arbitration Commission in 2006: New Rules, Same Results?
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