New Arbitration Laws in China

Mediation & arbitration expert, Matt K. offers his option on the new laws and how this will impact the sourcing industry.  BTW, Matt is from the USA but studied law in HK.    I appreciate his help on this topic for my blog post!

Matt writes:


Happy to add my 2 cents on the new laws and what it means for foreign buyers.

Hong Kong has a long standing tradition of facilitating trade for China.

The new Arbitration Law will help make alternative dispute resolution (arbitration, mediation and negotiation) more efficient and of greater assistance to those that utilize it.

A quick view of the new law shows that Hong Kong is making a great effort to increase the usage of arbitration as a cornerstone of dispute resolution between China and the world.

The new legislation appears to be focused on minimizing the involvement Hong Kong’s actual courts will have and attempting to streamline the dispute resolution process as much as possible.

The first change that really stands out is the removal of the distinction between “domestic” and “international” arbitration.

This alteration will take some of the headache and analysis that was previously necessary, now Hong Kong arbitration will be unified.

There are some specific groups that will be able to “opt-in” to certain provisions for arbitration.

These “opt-in” provisions must be specifically selected by the parties when structuring their initial arbitration agreement.

Another change for Hong Kong is the heavy influence the Model Law will now play in Hong Kong arbitration.

The Model Law is heavily relied upon internationally to provide a certain base level or minimum standards that must be met for a nation’s arbitration legislation.

This will bring Hong Kong into the international mainstream thought and practice with regards to arbitration, and will allow parties a wider range of freedom in deciding what process their arbitration will follow and what will be done in the absence of a true arbitration agreement.

Another important step Hong Kong has taken is providing interim measures arbitral tribunals seated in Hong Kong may utilize to have an immediate impact on a situation, if they deem appropriate.

From my point of view, this is a highly welcomed change to the arbitration law, it empowers the arbitrators to take actions to protect evidence, freeze assets or take specific actions such as impose time restrictions for compliance with the tribunal’s orders.

This change will greatly increase the effectiveness of the arbitration tribunal and gives them the power to expedite the arbitration process should either side move into a defensive position in which their goal is the delay the progress of the proceedings.

As those working in China are well aware, the delay/slow bleed tactic is a favorite, this change to the regulation should give the tribunal’s orders a bit more bite.

Another change in the regulations that should have a positive influence on companies making a decision on whether or not to use arbitration, confidentiality.

The expressed responsibility, as opposed to those jurisdictions that merely imply confidentiality, should be a big boost in commercial usage of arbitration.

The new Hong Kong arbitration law expressly prohibits parties from disclosing any information relating to the arbitral proceedings or the award, subject to the usual exceptions regarding disclosure to professional advisers or disclosure required by law.

This should instill a greater confidence for businesses in using arbitration at a greater frequency.

The increased intertwining of arbitration and mediation in the new law is another distinguishing point.

Hong Kong has stated, on several occasions, that they would like to funnel more disputes towards these types of alternative resolution methods.

In fact this position has taken on such prominence in Hong Kong, that if someone skips mediation entirely and goes straight to litigation without making a reasonable attempt to mediate, they may be fined.

The final change to the arbitration regulation deals with the enforcement of arbitral awards.

The new law attempts to bring arbitral awards in line with court judgments.

Because China is not a party to the New York Convention states enforcing arbitration awards can be complicated and time consuming. By attempting to streamline the process, Hong Kong is attempting to iron out some of the wrinkles that make arbitration less effective than if should be.

Overall, a big step forward for Hong Kong in staying at the forefront of Alternative Dispute Resolution.

The clarifications should increase the frequency that ADR is utilized as well as streamlining the overall process for those that engaged in this type of service.

Thanks Matt!

Best Regards,

Mike Bellamy

China Operations Director, PassageMaker Sourcing Solutions (3rd party assembly & inspection to protect intellectual property and ensure quality.)

Chairman of the Advisory Board, China Sourcing Information Center

Author, The Essential Reference Guide to China Sourcing

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