Chinese Supreme Court Issues Guidance on Lower Courts’ Review of Arbitration-Related Applications

May 28, 2018
Kluwer Law International

Dechert is pleased to announce the publication of the article on the ‘Chinese Supreme People's Court's 2017 Reform of Court Review Mechanism of Arbitration-Related Applications’ written by Dechert partner, Jingzhou Tao and associate Mariana Zhong, and published by Kluwer Law International.

By the end of 2017, in response to the Chinese government's call for judicial support in the implementation of "One Belt One Road" Initiative, and to tackle the somewhat chaotic situation in Chinese courts' review of arbitration-related applications in domestic cases, the Chinese Supreme People's Court consecutively issued several notices including judicial interpretations focused on regulating and improving Chinese courts' review of arbitration-related applications.  Among the innovative rules issued for the purpose of further aligning Chinese judicial practice with international prevailing standards, the most notable improvement is the unification of Chinese courts' review of foreign/foreign-related and domestic arbitration applications, which effectively put an end to the widely-criticized "dual-track review system".

Specifically, prior to the 2017 reform, Chinese courts had been implementing a "Prior-Reporting Mechanism" in the review of applications relating to foreign/foreign-related arbitrations such as applications to set aside a foreign-related award or not to enforce a foreign/foreign-related arbitral award.  Such "Prior-reporting Mechanism" ensures that a first instance court would not deny the effect of a foreign-related arbitration agreement or reject enforcement of a foreign/foreign-related award, without approval from the Supreme People's Court.  Such mechanism doubtlessly ensures a more consistent exercise of judicial "review" practice and in reality, has been proven to significantly reduce the amount of cases where the arbitral agreements were declared void or enforcement of arbitral awards was refused.  

However, such "Prior-Reporting Mechanism" was not available to domestic arbitration cases until the 2017 reform, which, as noted above, historically unified the Chinese courts' review of both foreign/foreign-related and domestic
arbitration-related applications.  As a result of the 2017 reform, parties  of domestic arbitrations could also benefit from the additional remedy afforded by the mechanism. This is of particular importance to Chinese subsidiaries or joint ventures invested by foreign shareholders, as they have been consistently considered by Chinese law as "pure Chinese entity" without a foreign element.