In March of this year, Supreme People’s Court (SPC) Vice President Justice Tao Kaiyuan released, by the standards applicable to senior SPC leaders, forthright public comments about the state of Chinese international commercial dispute resolution and her proposed solutions in an article in the SPC’s glossy journal China Trial (中国审判 ). Based on the article, she appears to continue to have responsibility for the #4 Civil Division, the one focusing on cross-border commercial matters and arbitration. I summarize her comments below. My comments on her assessment are in italics.
Her overall assessment is that there is much to be done to make China a preferred destination for international commercial dispute resolution, as the political leadership would like. I agree and would add that Chinese institutions could improve their soft power in specific, discrete ways by “making reference to the beneficial experience of foreign institutions” (对世界上的优秀法治文明成果要积极吸收借鉴) or considering some new ideas. Why it is so difficult merits extended discussion (elsewhere). It appears to require some legal and institutional flexibility, openness to outsiders and outside practices, and practical thinking about how those ideas or practices could adapted to the Chinese environment. It seems these qualities are in short supply these days when the emphasis is on self-reliance and in judicial reform, “Chinese style and self-owned brand.” Justice Tao draws on the beneficial international experience of several SPC judges to make a suggestion that implies greater institutional flexibility. She does not address the possible legal obstacles, but what is important is the signal that she is considering ideas other than the tried and true.
- China’s legal infrastructure lags behind the trend of international developments
Justice Tao points to what the international community has done in harmonizing international commercial legal rules through the New York Convention [Convention on the Recognition and Enforcement of Foreign Arbitral Awards], Singapore Convention on Mediation, Hague Judgments Convention, and the Mauritius Convention, as well as the related Model Laws. She notes that China has only ratified and implemented the New York Convention, while the other conventions have not been ratified or lack supporting measures. The Civil Procedure Law and Arbitration Law are being revised, and commercial mediation and investment arbitration legislation are absent.
While I will leave the analysis of the current amendments to the Civil Procedure Law to those who have greater expertise than I, I believe neither the amendments nor the latest socialist education campaign will sway litigants who have selected the New York, English, Hong Kong, or Singapore courts for dispute resolution. It is difficult to know whether issues lie in the original draft proposed by the SPC or have resulted from comments from the NPC’s Legislative Affairs Commission or other institutions involved in commenting on the draft before it was made public.
She recommends “promoting” the revision of the Arbitration Law to incorporate more elements from the Model Law, specify the seat of arbitration, and accelerate the efficiency of the enforcement of arbitral awards. It is not clear what she means by the latter and she may be just expressing a general concern with efficiency.
On the Arbitration Law, it is not apparent whether there has been any progress since I last wrote about the SPC’s contribution to the complicated amendment process in December of last year. From press reports of discussions of the draft and related training sessions, it appears that work is continuing behind the scenes until major points of disagreement are resolved. Other than the summary of the statement that Justice Tao made to the Chinese People’s Political Consultative Conference (CPPCC)’s Committee on Social and Legal Affairs last year, we do not know what views the SPC expressed and the bases for those views. That being said, this is not usual when it relates to the SPC contributing to the drafting or amendment of legislation. As I wrote then, it appears from her summary that views from several different divisions and offices of the SPC are reflected in what she said, including the #4 civil division (responsible for international arbitration matters), #3 civil division (intellectual property and anti-monopoly), and the enforcement bureau.
On the Singapore Mediation Convention and Chinese commercial mediation legislation, this is the second official signal I have seen from the SPC that such a law is needed–the one seen earlier was in the SPC’s Specialized Report on Foreign-Related adjudication work. Drafting such legislation would be within the bureaucratic authority of the Ministry of Justice. It is understood that the Ministry of Justice is communicating with the Ministry of Commerce, to draw on the technical expertise that resides with the Chinese negotiator of the Singapore Mediation Convention and the UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation and those who worked to support the Chinese negotiator. This 2021 article by Professor Jiang Lili of the China University of Political Science and Law on mediation legislation challenges does not give positive signals about an internationalized commercial mediation law, but that may predate the ongoing communications. Justice Tao flags researching the feasibility of ratifying the Hague Judgments Convention and the “Singapore Mediation Convention”. A team at the Chinese Academy of Social Sciences has already undertaken detailed research on what would be required for China to ratify the Singapore Mediation Convention. I am not aware of serious research related to the possible ratification of the Hague Judgments Convention. Mr. Wen Xiantao of the Ministry of Commerce has recently published a comparison of the New York, Singapore Mediation Convention, and Hague Judgments Convention.
On investment arbitration legislation, Justice Tao suggests that a mechanism should be put in place to enable the recognition and enforcement of Washington Convention (ICSID) awards. She does not detail the mechanics. That means that she has recognized the issue and it may mean others are considering how it could be most easily done.
2. Chinese international commercial dispute resolution institutions lack sufficient voice and are not competitive enough
She points to international commercial courts elsewhere in the world and to international long-term contracts and high-value transactions still mainly being based on the application of Anglo-American law, the dominance of dispute resolution (China-related, presumably) still being in the hands of the United States and the West, and the competitiveness of Chinese institutions being insufficient. Involvement in litigation or arbitration she finds not conducive to the protection of China’s relevant sovereignty, security, development interests and overseas interests. I have heard and read this often and would not expect Justice Tao to state otherwise.
I do not take Justice Tao’s comments as a scientific assessment of where arbitration cases involving Chinese parties are being heard. My own unscientific sample based on inquiries with senior lawyers at major Chinese and international law firms indicates a preference for Hong Kong International Arbitration Centre (HKIAC), Singapore International Arbitration Centre, and ICC International Court of Arbitration clauses, depending on the location of the project. I see a preference in major transactions for English law rather than New York law, reflected in the involvement of the “magic circle” [English] law firms and some of the “red circle” firms representing major SOEs in major arbitration or litigation. She does not specify what she means by “international long-term contracts”–possibly the FIDIC set of construction contracts. On the competitiveness of Chinese institutions, prior to Covid, Chinese institutions were actively marketing themselves, and this practice is starting to come back this year. Chinese dispute resolution institutions might want to do a better job of listening to issues raised by users. This practice seems to be usual among the leading international arbitration institutions, but in my experience, Chinese arbitration institutions have not sufficiently borrowed this practice.
3. Improvements needed with the China International Commercial Court (CICC)
Justice Tao says that the CICC cannot play its intended role because it lacks full-time judges, full-time staff, and its own budget. (I had flagged this in 2018), but such matters are not usually made public. The fact that she mentions this signals deep frustration. The significant number of staff that the SPC borrows from the lower courts also suggests that other central institutions are benefiting from greater headcount in preference to the SPC. Justice Tao also proposes that Hong Kong and Macau part-time judges be permitted to join the CICC.
Whether such judges would meet the requirements set by the Organic Law of the People’s Courts and the Judges Law does not seem to be clear. What is important is the signal that she is considering new ideas. It appears that Justice Tao is looking to the beneficial experience of SPC judges as part-time judges with United Nations institutions.
Many thanks to the highly knowledgeable peer reviewers, who commented on several earlier drafts of this article.
2 thoughts on “Justice Tao Kaiyuan on the State of Chinese International Commercial Dispute Resolution”
Thanks for this very interesting article Susan. Can I send it along to a few friends outside China? Louise
Yes of course!