China

Arbitration In China: Different, Yes; Biased, Probably Not

With equity so central to China disputes, potential litigants should stop reviewing their cases strictly on the law and instead start looking at them from an equitable perspective as well.

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US china flagsChinese companies are increasingly requiring that their contracts with foreign companies provide for disputes to be resolved by arbitration in China. In these situations, we are seeing mostly CIETAC and BAC arbitration clauses.

Many of our American and European clients are uncomfortable with arbitrating against a Chinese company in China as they are convinced they cannot “get a fair trial.” Our China lawyers explain how in our experience, the nationality of the parties to a Chinese arbitration is far less important to the ruling than the overall way in which Chinese arbiters (both judges and arbitrators) view cases. We then explain how Chinese courts focus much more on the equities of a case (as opposed to the law) than American courts, and that is even more true of Chinese arbitrators.

With equity so central to China disputes, potential litigants should stop reviewing their cases strictly on the law and instead start looking at them from an equitable perspective as well. In determining the strength or weakness of your case, you should ask yourself the following: Who in all fairness should win this case and whose winning it would be best for the people of China?

Many years ago, an American company asked my law firm to compete for a China arbitration matter. We told this company that our strategy would be to try to settle its case as quickly as possible because we saw little likelihood of winning because the equities were so against it. The American company chose a law firm “confident about winning based on the law” and ended up resoundingly losing at arbitration.

Last year, I testified before a Congressional Committee on how China treats foreign companies and on how American companies sometimes confuse “the Chinese way of doing things” with bias, with arbitration and litigation as an example of this. I am not going to say that foreign companies are always treated fairly in China, because they are not. But it is important to distinguish between China actions that stem from bias as compared to those that stem from American misunderstandings of how China operates.

Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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