Originally from American Review of International Arbitration - ARIA

Preview Page

The emergence in China of local arbitration commissions (“LACs”), and in particular their growing role as a forum of choice for dispute resolution, is a phenomenon that has received inadequate scholarly attention.  Outside of China, research focusing on LACs is almost nonexistent, and articles dealing with LACs are characterized both by an absence of direct sources of knowledge as well as skepticism regarding the potential independence, competence and fairness of LACs.  This article intends to present an analysis of LACs based on a case study of the Beijing Arbitration Commission (“BAC”), for which the author worked as a part-time case-handling secretary from April 2005 to April 2007. The case study describes how the BAC maneuvers within the legal and policy framework to obtain independence, raise standards, strengthen competence, and build effective mechanisms to maintain integrity.  The findings of this case study suggest that the BAC’s employment system and its full financial independence are two fundamental factors bolstering the quality and efficiency of its arbitration. However, the achievement of these two factors requires a strong executive, which explains the challenges both for the BAC itself in its early years, and later for other LACs that wish to model themselves on the BAC.

INTRODUCTION

Since the Arbitration Law of the People’s Republic of China came into force in 1995, 183 new arbitration institutions have been founded, in addition to the China International Economic and Trade Arbitration Commission (“CIETAC”), established in 1954, and the China Maritime Arbitration Commission (“CMAC”), established in 1959.  These new arbitration institutions are called local arbitration commissions (“LACs”), generally named after the administrative area in which they are registered. However, their jurisdiction is not confined to their respective administrative areas; any Chinese arbitration institution can arbitrate domestic and international cases regardless of the location of the dispute or parties.  Although LACs are a relatively recent phenomenon in China, they are growing in importance and influence.

[…]

Some experts are aware of the rising role of LACs, but are skeptical about their independence, competence, and fairness.  Professor Donald C. Clarke argues that LACs are closely tied to government, especially in their reliance on local government for funding and personnel.  Nadia Darwazeh and Michael Moser have questioned whether all LACs are in fact competent and experienced enough to handle foreign-related arbitrations.  Professor Jerome A. Cohen has admitted that geographic convenience is usually the best argument to attract foreign companies to an LAC. But, unless elaborate measures are devised and implemented to prevent local government, the Communist Party, or business and personal influences from interfering with the decision-making of the arbitration panel, foreign businesses are unlikely to embrace this option.  Thus, whether LACs can be independent, competent, and fair forums is a significant and critical question worthy of careful study. Based on a case study of the BAC, this article will explore what kind of specific constraints LACs face during the process of striving for independence, competence, and fairness against the background of China’s economic transition and social transformation resulting from the reforms and open policy adopted in 1978, and to what extent they can overcome these constraints through their own efforts