Ministry of Justice publishes revised draft PRC Arbitration Law

On 30 July 2021, the Ministry of Justice (MoJ) of the PRC released proposed revisions to the PRC Arbitration Law for public consultation.  The MoJ also published explanatory notes to the Revised Draft.

The PRC Arbitration Law was promulgated in 1994 and has been in force for 26 years without substantial amendment.  With the rapid economic expansion over the past decades in Mainland China, the Arbitration Law has, in many respects, become disconnected from both economic reality and international practice.  In 2018, the MoJ started the revision process, which led to the publication of the Revised Draft on 30 July.

The Revised Draft signals a range of ground-breaking changes to the existing arbitration regime in Mainland China.  For example:

• Foreign arbitration institutions will be expressly permitted to establish business operations in Mainland China to "conduct foreign-related arbitration business";
• Ad hoc arbitration, which is not currently permitted in Mainland China, will be permitted for "foreign-related commercial disputes";
• The Law will expressly recognise that the nationality of arbitral awards is determined by the seat of the arbitration. While the PRC judiciary has adopted this approach in practice, the concept of a "seat" of arbitration is not expressly recognised under the current PRC Arbitration Law.
• The kompetenz-kompetenz doctrine, which does not exist under the current Arbitration Law, will finally be recognised. This principle allows arbitrators to determine their own jurisdiction over a claim;
• Arbitral tribunals will be empowered to grant interim measures. Currently, this power is reserved to the PRC courts.

These are all welcome changes, which would bring Mainland China's arbitral regime further into line with international best practice.

We will provide a more detailed summary of the key changes proposed in a later blogpost.

For further information, please contact Helen Tang, Partner, Weina Ye, International Partner, Stella Hu, Senior Consultant, Kathryn Sanger, Partner or your usual Herbert Smith Freehills contact.