International Law & Trade - Law Firms CIETAC - Offering A More Level Playing Field For Chinese Dispute Resolution

Saturday, October 1, 2005 - 01:00

Editor: Please tell our readers about your background.

Moser: Prior to studying law, I obtained a Ph.D. in anthropology at Columbia University. There I focused on the study of dispute resolution in Chinese society. I conducted fieldwork in China for my dissertation. Afterwards, I graduated from Harvard Law School. I started practicing in Asia in the 1980s and have been here ever since. I moved to Beijing in 1983. I was one of the early lawyers here and gradually moved into dispute resolution. In 1988, China reformed its arbitration system and they invited four foreigners to be arbitrators in Chinese foreign business disputes. I was one of the four appointed by the Chinese government at that time. I have been involved in the field for a long time now. I followed the development of the field as it has branched out from China to disputes all over the world. My practice today involves representing multinational companies or sitting as an arbitrator in Chinese foreign business disputes in China, Hong Kong, Singapore, Stockholm, Zurich and in other places all over the world.

Editor: Would you say that the emphasis on ADR in China is a reflection of the unease that foreign investors might have with respect to the court systems in developing countries?

Moser: That is definitely true. Commercial contracts both those drafted by foreigners and those drafted by Chinese companies almost invariably provide for dispute resolution by arbitration. From a foreigner's perspective, a lot of that is driven by the fact that the Chinese courts have been for a long time very much a work in progress. They are still developing. Even if you go back five years, you would see that most judges throughout courts in China did not have formal legal training in their background.

Editor: What are the advantages of ADR?

Moser: With respect to arbitration, you are able to choose your judge. In a court, the case is decided by whoever is assigned by the court. You have the ability to choose someone who will have a better understanding of your dispute, who might be more sympathetic or who has special expertise in an area. Another advantage is that you can generally choose your rules. In a court, you are stuck with the jurisdiction's procedural rules. In arbitration, you can have a procedure that is agreed on by the parties. These can be institutional rules or procedures tailored for the conduct of the arbitration. For example, in some cases you may want discovery and in others you may not. In ADR, you can choose your own attorney, while in Chinese courts you have to have a Chinese attorney with you. There are a number of advantages that boil down to more flexibility and greater party autonomy.

Editor: My impression is that, in the case of arbitrations that take place in China, the choice of the arbitration institution is limited?

Moser: CIETAC is China's largest and oldest arbitration institution. Since the reforms introduced after the implementation of the arbitration law in 1996, there are now 78 arbitration bodies throughout the country. You now have CIETAC that goes back to the 1950's together with many others that are set up in different localities. These include the Beijing Arbitration Commission, Shanghai Arbitration Commission, etc. They are all competitors with CIETAC in dealing with arbitration cases. CIETAC is still the busiest when it comes to handling international disputes. Many of the others handle primarily domestic disputes so CIETAC is different in that it is mainly an international arbitration body.

Editor: Are ad hoc arbitrations treated differently from administered arbitrations?

Moser: There are two types of arbitration. One is an institutional or administered arbitration. That is where two parties submit their arbitration to an institution like CIETAC or the ICC. That institution has its own rules that specify how the arbitration should be conducted. The other type is an ad hoc arbitration where the parties are free to agree to the procedures on how to conduct the arbitration. There is no institution or body involved. The lawyers agree to follow certain procedures and rules and may conduct the arbitration in any location they choose. They decide how to appoint the arbitrators so there is no need to pay an institution to supervise or oversee the conduct of the hearing. Ad hoc arbitration is very common in England and in Hong Kong.

If the arbitration takes place in China, the only kind of arbitration permitted is institutional. All arbitrations must be conducted by one of the 78 recognized institutions. You may not have an ad hoc arbitration in China and if you do the award will not be enforceable. However, an ad hoc arbitration can be conducted outside China and the award, as long as it is legal in the place where the arbitration was conducted, should be enforceable in China under the New York Convention. The prohibition goes to the conduct of ad hoc proceedings in China not to the enforcement in China of a judgment in an ad hoc proceeding outside China. You can agree to conduct an ad hoc arbitration outside of China even with a Chinese party and that should be enforced in China.

Editor: Are any of the arbitration associations in China foreign institutions?

Moser: No. Foreign institutions like the ICC are not able to establish a presence in China and may not conduct arbitration in China. That has been a sore point with the ICC. For this purpose, Hong King is considered a separate jurisdiction. The Hong Kong International Arbitration Center (HKIAC), of which I am a Vice-Chairman, does not have a presence in mainland China. However, although there is no real evidence to show that there are fewer Chinese enforcement problems with arbitration awards from certain foreign arbitration centers like the HKIAC, it is true, from the perspective of people doing business in China, that Hong Kong is very much a preferred alternative venue for arbitration. There are a lot of practical benefits to arbitrating to Hong Kong as opposed to somewhere else.

Editor: Could you outline some of the reforms by CIETAC that were adopted in May?

Moser: There were numerous changes in the new CIETAC rules. There are several key changes that have captured people's attention. China now permits parties to appoint anyone they wish as their arbitrator. They are no longer restricted to appointing arbitrators from the official government list. This provides greater play to party autonomy. Previously, if you had a three party tribunal each of the parties could appoint one arbitrator and the third was appointed by agreement of the parties. Failing agreement by them, CIETAC would appoint the third one. As a practical matter this meant that the parties had little input in how the third arbitrator was selected. Under the new rules there is a list system so that the parties can give a number of candidates to CIETAC and indicate their preferences. Then the third arbitrator could be selected based on a common candidate appointed by the parties. This is an indication of giving greater weight to what the parties think. Another important change has to do with the place of the arbitration. Before the May 1 rules, any arbitration which was administered by CIETAC had to take place within China. Under the new rules the arbitration can take place anywhere in the world. The parties can agree to conduct the arbitration in San Francisco, New York, Zurich, Bangkok or anywhere and that is a big change. Another point is that the parties have freedom to deviate from the rules. The parties now have the power to add to or subtract from the CIETAC rules as they wish in the conduct of the arbitration. They do not have to follow every provision and can agree to take out some parts or change others. You can now include provisions where one arbitrator must come from a neutral country or limit discovery.

Editor: Can the parties agree to the governing law under a CIETAC arbitration?

Moser: One of the issues is the substantive law of the contract. That is what the arbitrators look to in trying to decide how to properly interpret a contract when a dispute arises. Chinese law makes it clear that the parties can agree on the substantive law governing their contract, except that joint venture agreements and contracts dealing with natural resources must be governed by Chinese law. By virtue of the ability available under the new rules to hold a CIETAC arbitration outside China, the parties can now also determine what procedural rules will be applicable. Thus, the law of the place of the arbitration would govern things like awarding interest, etc. By allowing parties the freedom to go outside China, CIETAC arbitrations can now be governed by the procedural laws of countries other China.

Editor: Are the new CIETAC rules applicable to the other Chinese arbitration bodies?

Moser: They are not. Those are just CIETAC changes, but I assume that each of the other organizations will be looking at their own rules since they are all in competition with one another. I know that some of the other bodies are amending their rules.

Editor: I gather that you are satisfied with the way things are developing in China?

Moser: I think that there is always room for improvement. The fact that ICC arbitration is not available in China is very unfortunate. I hope that Chinese authorities change that policy to create a genuine level playing field. We now have CIETAC amending its rules to allow it to go anywhere in the world to conduct arbitrations. Yet, China does not let other arbitration bodies into China and that is unfair. ICC should be allowed to conduct arbitrations in China if the parties wish to. But the problem is with its Arbitration Law, not with CIETAC.

Editor: Is that issue being revisited in China?

Moser: The country needs to amend its arbitration laws. A group of us set up a body known as the China Arbitration Forum. It was co-founded by myself and Dr. Wang Sheng Chang, the head of CIETAC. The Forum acts as a bridge organization between the foreign and international arbitration community. Its aim is to improve the arbitration environment in China for the benefit of both sides. We are going to be organizing seminars and developing a website. We will be organizing training programs. On the advisory board, we have the heads of the ICC, CIETAC, the various other Chinese Arbitration bodies, justices from the Chinese Supreme Court, and others. We are looking forward to this organization playing an important role.

Please email the interviewee at michael.moser@freshfields.com with questions about this interview .