Originially from: World Arbitration and Mediation Review (WAMR)

NEW CIVIL PROCEDURE LAW AFFECTS
ARBITRATION PRACTICE IN CHINA
By Michael J. Moser, Baker & McKenzie, Hong Kong
On April 9, 1991, the People’s Republic of China promulgated a new Law on
Civil Procedure, which substantially amends and supersedes an earlier enactment
that came into effect in 1982.
Among the changes introduced by the new law are a number of provisions
dealing with international arbitration, most of which are contained in five new
articles set forth as Chapter 28. This chapter is found in Part IV of the Civil
Procedure Law, which sets forth special rules regarding cases involving
foreigners.
One important aspect of the new law is the answer it provides to a question that
has long vexed arbitration practitioners dealing with China: Does the existence of
an arbitration clause in a Chinese-foreign contract that provides for arbitration of
disputes outside of China bar commencement of a lawsuit in China?
The question arises because of a provision in the 1982 law stipulating that the
Chinese People’s Courts shall have no jurisdiction in a case where the parties
have included an arbitration clause in the contract or have subsequently entered
into a submission agreement providing for the submission of a dispute to “an
arbitration organization in China”. The reference to arbitration in China means
arbitration before the China International Economic and Trade Arbitration
Commission (CIETAC) or the China Maritime Arbitration Commission (CMAC).
The 1982 law, therefore, left open the issue whether a People’s Court would
also be barred from accepting a suit brought by one of the parties to a contract or
submission agreement providing for arbitration outside China.
New Article 257 of the Civil Procedure Law states that the People’s Courts
shall be barred from accepting cases where the arbitration clause or submission
agreement provides for arbitration by CIETAC, CMAC, “or another arbitration
institution”. According to Chinese sources, the new provision is intended to
encompass arbitration conducted outside China, thereby putting to rest the
question raised by the 1982 law.
However, the reference to “another arbitration institution” raises the question
whether the language is intended to apply only to institutional, as opposed to ad
hoc, arbitration proceedings conducted abroad. Obviously, a restrictive
interpretation of the statutory provision would have an important impact on the
drafting of arbitration agreements that involve Chinese parties.
On April 9, 1991, the People’s Republic of China promulgated a new Law on
Civil Procedure, which substantially amends and supersedes an earlier enactment