Differences in enforcement and arbitral rules could cause difficulties for unwary parties engaged in or considering arbitration in mainland China.

China’s economic growth has attracted significant foreign investment in recent years. However, as commercial ties between mainland China and the rest of the world broaden and deepen, the number of China-related commercial disputes has also increased. Arbitration is widely recognized as an effective and efficient method of dispute resolution, providing a neutral decision maker as well as the ability to enforce against the assets of the counter-parties. Unlike court proceedings, arbitrations are generally confidential, which can help protect reputation, proprietary information and client identities. Arbitrators are often specialists chosen by the parties on the basis of their industry experience, so are often better suited than judges to resolving disputes involving complex business transactions or sophisticated investment products and structures. Aside from these general considerations, parties should understand specific characteristics particular to arbitration in mainland China and within the wider region. We describe five considerations parties can use to enhance their chances of award enforcement, or which may create difficulties in their commercial dispute resolution.

Background: The Chinese Court System -

The Chinese court system is divided into four levels: Basic People’s Court, Intermediate People’s Court, Higher People’s Court and Supreme People’s Court (SPC). Generally, for international arbitrations, the Basic Court is not involved. Generally, the Intermediate People’s Court is responsible for hearing challenges to the validity of the arbitral agreement and the enforcement of foreign arbitral awards. In compliance with a pre-reporting scheme implemented by the SPC, if an Intermediate Court decides not to enforce a New York Convention arbitral award or a foreign-related arbitral award, the Intermediate Court must submit the case to the High People's Court for further review. If the High People's Court agrees with the decision of the Intermediate Court not to enforce such an award, the High People’s Court must submit the case to the SPC for review. In this way, China ensures that it complies with its New York Convention obligations and that arbitral awards are not enforced only in exceptional cases.