Arbitrability in China

Arbitrability, in the sense in which it is used generally, involves

determining which types of disputes may be resolved by arbitration and
which belong exclusively to the domain of the courts.1 Article 2 of the
PRC Arbitration Law establishes the principle that disputes concerning
property rights and obligations, whether contractual or non-contractual,
may be subject to arbitration. In China, arbitrable disputes must involve
equal civil subjects. In other words, disputes between parties not on an
equal footing may not be referred to arbitration.

The PRC Arbitration Law also lists several disputes that are not capable
of settlement by arbitration, which include administrative disputes and
disputes of personal rights. In the following part, I’ll address several
kinds of disputes that may raise a question of arbitrability.

1 intellectual property

Generally, disputes arising from intellectual property contract may be

resolved by arbitration in China. Shanghai Arbitration Court of
Intellectual Property clearly defines the scope of acceptable cases as
“arbitration case involving intellectual property contract disputes”. In
2014, this institute accepted intellectual property cases including
franchise contracts, technical service contracts, technology development
contracts, technology transfer contracts, technical consulting contracts,
copyright contracts and publishing contracts.

Specifically, Article 55 of the PRC Copyright Law(2010) provides that a

copyright dispute may be submitted to an arbitration agency for
arbitration. Since the modification in 2001, the PRC Copyright Law has
replaced “a dispute over a copyright contract” with “a copyright dispute”
in respect of arbitrable disputes, largely expanding the arbitrability of

1
Redfern and Hunter on International Arbitration (Sixth Edition).
copyright disputes. Therefore, any disputes relating to copyright are
arbitrable now.

The arbitrability of patens and trademarks is more complicated.

According to the PRC Patent Law and the PRC Trademark Law,
disputes over the grant or validity of patents or trademarks should be
referred to a review committee, the patent review committee for patents,
and the trademark review and adjudication board for trademarks. Those
who disagree with the decision of the review committee may file a
lawsuit with a People's Court. Therefore, in China, disputes as to the
grant or validity of patents or landmarks fall outside the domain of
arbitration. Furthermore, the practice of CIETAC indicates that trademark
infringement disputes are arbitrable.

2 Antitrust and competition claims

Under Chinese law, there is no clear restriction on the arbitration of
antitrust disputes, but the courts traditionally hold a negative attitude.
Chinese courts attach great importance to the public law nature of
antitrust law, thus there has not yet appeared practice of arbitrating
antitrust disputes. In a case handled by the Higher People's Court of
Jiangsu Province in 2015, which is known as “the first case involving the
arbitrability of antitrust dispute”, the Court held that the antitrust dispute
in this case touched on public interest, therefore it is non-arbitrable.
Some Chinese scholars believe that not all antitrust disputes are non-
arbitrable, and the arbitrability of antitrust disputes should be determined
based on the specific circumstances of each case.

3 Securities transactions

Chinese law does not expressly prohibits referring securities

transactions disputes to arbitration. Indeed, according to Chapter 5
(Articles 85 to 89) of the Provisional Measures on the Administration of
Securities in Shenzhen Special Economic Zones, disputes arising from
securities transactions are arbitrable by the relevant securities exchange
center regardless of whether the two parties have concluded any
arbitration agreement. The State Council has appointed CIETAC as the
arbitration institution for securities disputes to exercise jurisdiction on
disputes between stock dealers inter se or between the stock dealers
and the securities exchange centers arising from the issue and
transactions of stocks.

4 Bankruptcy

Like other jurisdictions, in China, only courts have the authority to

commence , administer and conclude bankruptcy cases.2 Article 3 of the
PRC Enterprise Bankruptcy Law provides that all bankruptcy cases shall
be administered by the People's Court with jurisdiction where the debtor
is domiciled. Disputes concerning “core” bankruptcy functions are non-
arbitrable, including proceedings that liquidate a bankrupt company,
reschedule its debts, operate it under some form of receivership, or
distribute pro rata payments to creditors.

As for disputes merely involving a bankrupt entity as a party to an

arbitration agreement, Chinese law does not expressly deal with their
arbitrability. According to Article 21 of the PRC Enterprise Bankruptcy
Law, after a People's Court accepts a bankruptcy application, civil
lawsuit relating to the debtor shall only be initiated in the People's Court
that accepted the bankruptcy application. Some Chinese lawyers hold
that this article only requires “lawsuits” to be initiated in the People's
Court that accepted the bankruptcy application, rather than excluding
disputes from arbitration. In practice, some courts have shown
supportive attitude that contract disputes involving a bankrupt entity can
be referred to arbitration.

5 Labor disputes

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International Arbitration: Law and Practice
Chinese law does not impose any non-arbitrability restrictions on labor
disputes. On the contrary, it encourages arbitration of labor disputes.
According to Article 5 of Law of the PRC on Mediation and Arbitration of
Labour Disputes, parties to a labor dispute may apply to a special
arbitration institute, labour-dispute arbitration commission, for arbitration,
regardless of whether the parties have concluded any arbitration
agreement. Particularly, in China, labor arbitration is the pre-procedure
of litigation. If the labor dispute has not been submitted to the labour-
dispute arbitration commission and the party directly files a lawsuit, the
court will not accept it.

6 Consumer disputes

Chinese law permits the arbitration of both existing and future consumer
disputes. Article 39 of Law of the PRC on the Protection of Rights and
Interests of Consumers provides that disputes over consumer rights and
interests may be resolved through arbitration in accordance with the
arbitration agreement.

Under Chinese Contract Law, the standard clause which operates to

exclude the liabilities of the party proposing the standard clause, or to
increase the liabilities of the other party, or to remove important rights
enjoyed by the other party, shall be without effect. However, it’s unclear
whether an arbitration agreement in a standard form consumer contract
is valid.

a. Arbitrability3
Pursuant to Art. 3 of the Arbitration Law, the following disputesshall not be subject to
arbitration:
(1) disputes concerning marital status, adoption, guardianship, maintenance and succession;
(2) administrative disputes that the law requires to be dealt with by administrative bodies.
It is not provided in the Arbitration Law whether the above enumeration is an exhaustive list.
3
Lu Song, 'National Report for China (2018)', in Jan Paulsson and Lise Bosman (eds), ICCA International
Handbook on Commercial Arbitration, (© Kluwer Law International; Kluwer Law International 1984,
Supplement No. 98, March 2018), p. 11.
Under Chinese law, those disputes directly relating to an individual's civil status, family
relations and succession are not considered appropriate matters to be dealt with by a private
dispute settlement mechanism.
Administrative disputes, in which the legality of an administrative decision by a government
body is the subject matter of the dispute, are also believed to be unsuitable for settlement by
arbitration. Chinese anti-trust legislation (effective from 1 August 2008) neither provides that
an anti-trust dispute can be referred to arbitration, nor specifically prohibits it. However, Art.
3(2) of the Arbitration Law provides that “administrative disputes that law requires to be
handled by administrative bodies” shall not be subject to arbitration. It would be reasonable
to conclude on the basis of the wording of Art. 3(2) that a dispute involving an administrative
decision by the government authority in respect of anti-trust issues may not be subject to
arbitration in China.
With regard to intellectual property disputes, if the dispute involves an administrative
decision by the State Intellectual Property Office of the PRC, for instance on the validity of
an intellectual property right, it may not be subject to arbitration. However, other disputes
where only private parties are involved, such as a dispute concerning a licensing agreement
or the sale of a trademark, can be subject to arbitration if the parties have so agreed.