Adaptations and Paradigm Shift: Recent Developments of Commercial Dispute Resolution Mechanism in China

33 Pages Posted: 5 May 2021 Last revised: 6 Jul 2021

See all articles by Kun Fan

Kun Fan

UNSW Law and Justice; Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre

Date Written: April 30, 2021

Abstract

Arbitration has evolved from a pragmatic, de casu ad casum applied mechanism, towards growing self-recognition as a transnational system to administer justice. The development of international arbitration towards an autonomous legal order constitutes remarkable institution building at the global level. The autonomous view sees arbitration as deriving its original legitimacy not from consent within a specific legal order or orders, but rather from a general, initial authorization offered by the community of States, later fulfilled by arbitral tribunals without further State intervention , and thus detached from a national order. This conceptualization has been connected with general theories pointing to the development of “global legal order(s)”, free from traditional intervention and control exercised by the States. For instance, Gunther Teubner’s characterization of the new lex mercatoria as a model global law without a State was based on its formulation and application independent from domestic legal systems thanks to arbitral decision-making. In this context, how will an authoritarian state like China react to the trends of trans-nationalization and autonomization of arbitration? What role will China play in the development of international dispute resolution mechanisms? Is China showing signs of adapting to the current trend of transnational standards?

On the other hand, the users’ constant search for predictability has led to the increasing proceduralization, formalization , judicialization of arbitration , or the colonization of arbitration by litigation , in which the international commercial arbitration laws and procedures increasingly replicate national judicial procedures, national laws and their legal intricacies , departing from arbitration’s original purpose as an alternative resolution to court proceedings. This has resulted in an opposing trend to harmonization. This opposing trend consists of hybrid processes and mixed mode dispute resolution. Will Chinese legal culture and practice characterized by informalism and flexibility offer a counter-force to the judicialization of arbitration, and thus influence the future direction of transnational norms?

This article highlights the recent developments of China’s commercial dispute resolution mechanism and illustrates China’s two-way adaptations towards transnational standards as a result of the constant interplay between the global formal regulation and local informal practice, predictable regulation and flexible practice, and the clashes between the increasingly cosmopolitan professional culture in the arbitration community and deeply rooted demands of national culture.

On the one hand, China is following the trend of harmonization, making adaptations to global norms. This move is essentially driven by the market force, when “economic actors seek more predictability through reliance on formalized processes for managing transactions, and also to seek more formal limits on state power.” Arbitration is developed through practice within the community, rather than through top-down imposition from outside the community. While States need to endorse and embrace norms, the norms develop independently, based on the expectations of the users, rather than the specific requirements of the State. Despite legislated limitations on party autonomy , other non-state actors (i.e., arbitration institutions and individuals such as judges, arbitrators, case managers and lawyers) also exert an essential influence on arbitration reforms in China. In order to make China a more appealing hub of dispute resolution to meet users’ needs, various stakeholders have made a number of innovations and adaptations to bring the practice of arbitration more in line with transnational standards, as a result of the marketization of arbitration in China.

On the other hand, China is also taking an increasingly active role in shaping international norms. The Chinese view of the relationship between law and development differs from the Western notion of the rule of law, challenging American notions of legal norms. China has an alternative vision of numerous aspects of global and domestic governance including legal norms, values and contexts. For instance, the Chinese approach of dispute resolution is featured by informalism, de-proceduralisation and flexibility, focusing more on the parties’ interest rather than sending them home with a winner and a loser. Such informal norms and institutions often function as a means of dispute resolution alternative to state law and formal organizations in non-Western countries, and challenges the “Americanization of international commercial arbitration”.

These recent developments demonstrate China’s efforts to balance the globalization and localization of its commercial arbitration and mediation practice, including both localized globalism and globalized localism—the “glocalization” process.

Part II of this paper illustrates China’s adaptations towards transnational standards through efforts of the courts, arbitration institutions and individual transnational elites. Part III analyzes China’s role in shaping the norms and values in international economic order, exemplified by China’s signature to the Singapore Convention on Mediation (“Singapore Convention”) and the establishment of the China International Commercial Courts (“CICC”). Part IV concludes with predictions of the prospects of these adaptations.

Keywords: dispute resolution, arbitration, China, Belt and Road Initiative, Global governance, CICC

JEL Classification: K10, K33, K40, K41

Suggested Citation

Fan, Kun, Adaptations and Paradigm Shift: Recent Developments of Commercial Dispute Resolution Mechanism in China (April 30, 2021). 7 McGill Journal of Dispute Resolution 1, 2021, Available at SSRN: https://ssrn.com/abstract=3837327

Kun Fan (Contact Author)

UNSW Law and Justice ( email )

Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre ( email )

UNSW Law
Sydney, NSW 2052
Australia

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