A review by Xu Qian of G. Matteo Vaccaro-Incisa’s new book
China’s success in attracting foreign direct investment (FDI) in the past decades is unprecedented. It is currently the second largest FDI recipient in the world, which is a success partially due to China’s efforts to enter into international investment instruments, such as BITs and free trade agreements (FTAs). Since its first bilateral investment treaty (BIT) with Sweden in 1982, China has signed BITs with more than 130 countries. In addition, Chinese investment treaties have typically provided international forums for settling investment disputes such as the International Centre for the Settlement of Investment Disputes (ICSID). Being both a capital importing and a capital exporting nation, China is in a need to maintain a balance of such dual role through its international investment instruments, attracting inward FDI and, at the same time, protecting outward FDI.
In the early stage, China’s BITs mainly follow the template as established by western countries, yet with the rapid economic growth, China is more willing to set up its own discourse. The Belt and Road Initiative, and the separate negotiations with the EU and US regardless their ultimate fate reveal China’s proactive approach to participate in the global economic governance. China’s dual role regarding FDI and its investment strategies is efficiently transforming its role as a reliable rule-maker in the global economy. China has also reviewed its BIT policy and practices owning to the experience in dealing with the cases filed by foreign investors against China. Against this background, Dr. Vaccaro-Incisa’s book offers the most comprehensive and detailed account of China’s treaty policy and practice in international investment law and arbitration published to date.
Through his comparative and analytical study, this book reviews the changing role of China in international investment. It provides a detailed analysis of the contents of all of China’s agreements from 1982 to 2015 by considering the role of investment treaties in China’s economic policy. This book also provides a summary of key literature in discussing China’ BITs and their characteristics, application and pitfalls. By interpreting the key provisions of the BITs and discussing the evolution and features of these investment treaties, this book successfully identifies trends in major areas of Chinese investment treaty making. It produces objective assessment of investment arbitration of China’s treaty practice. This book without doubt represents a significant accomplishment in clearly laying out the content and systemically examining China’s treaty making practices in a broader context. Overall, this book represents not only a valuable and necessary addition to the literature but also a point of departure that invites further research in China’s practice in this area.
Dr. Xu QIAN is Associate Professor & “Hundred Talents Program Fellow” at Zhejiang University (ZJU), School of Law and Affiliated Expert, Asia Pacific FDI Network (APFN). She is also an active member of Asia Society of International Law, and Academic Forum on Investor-state Dispute Settlement. She specialises in transnational law and researches in a diverse range of cutting-edge cross-border issues, including water and sanitation law, Alternative Dispute Resolution (ADR), International Economic Law and Public International Law. She may be contacted via email at: qianxuxu [at] zju.edu.cn.
The world has witnessed significant developments in the institutions, mechanisms and processes of dispute resolution in China since the introduction of Open Up and Reform policies in 1978. Legal reforms since then have restored the court system and the legal profession. In commercial law, China’s WTO accession has further significantly facilitated the modernisation of legal institutions and the commercial law legal framework. With economic development and the strengthening of the legal system, there has also been significant growth in litigation, a development that does not sit comfortably with the traditional view in China that direct conflict should be averted and mediation or other non-confrontational means should be applied to resolve disputes. Additionally, under Xi’s leadership, China has begun to assert its own model of governance which has been presented to the world as a potential alternative global governance model.
At a practical level, ever increasing court caseloads in civil, commercial and administrative disputes have put major pressure on the court system and its resources. Indeed, according to a recent Supreme People’s Court Report, Chinese courts adjudicated some 28 million cases (of which more than half were civil and economic cases) in 2018. Not surprisingly, major reforms of dispute resolution mechanisms have been carried out in the last decade and continue until this day. In the last ten years or so, the dispute resolution system in China under Xi has been elevated to a mechanism treated as part of the new governance model, and its capacity as indicative of governance capacity.
The new system promoted by the Chinese government is described by Chinese authorities as a ‘Mechanism for Pluralist Dispute Resolution’ (PDR)(Duoyuanhua Jiufeng Jiejue Jizhi 多元化争端解决机制). The Chinese term ‘duoyuanhua’ has been variously translated as ‘multiple’ and ‘diversified’; however, in the book I co-authored with Prof Jianfu Chen, Dispute Resolution in the People’s Republic of China: The Evolving Institutions and Mechanisms, we decided after careful consideration that ‘pluralist’ is a better translation, since it indicates that the ‘duoyuanhua’ system is new and different, and the ‘multiple’ or ‘diversified’ dispute resolution methods it refers to are not just independent alternatives but interrelated components in an integrated and coordinated system.
The term ‘Mechanism for PDR’ first appeared in 2004 in the 2nd Five Year Reform Plan of the People’s Courts, and again in 2008 in the judicial reform scheme coordinated by the Communist Party of China (CPC) Central Committee on Judicial Reform. The most important policy measures, however, emerged in 2013 and 2014. The CPC Central Committee in 2014 stipulates that:
Mechanisms for prevention and resolution of social conflicts and disputes shall be strengthened, and a pluralist dispute resolution mechanism, in which mediation, arbitration, administrative ruling, administrative reconsideration, and litigation shall be organically linked and their operations be coordinated, shall be improved.
– Item 5 (4), Decision Concerning Certain Major Issues in Comprehensively Moving Forward Ruling the Country According to Law, CPC Central Committee, 2014
This 2014 CPC Decision makes the reform task clear: to develop a comprehensive dispute resolution system in which the various dispute resolution methods are not treated as separate alternatives, but as mutually supportive components in an integrated system of PDR.
In Chinese literature and policy documents the term ‘Mechanism for PDR’ has been used in both a broad and narrow context.
The 2014 CPC Decision refers to strengthening mechanisms for the prevention and resolution of social conflicts and disputes and emphasises building and improving the interconnection and coordination of all kinds of dispute resolution methods. These measures include alternative dispute resolution (ADR), litigation and administrative measures and a great variety of organisations, including the judiciary (courts and procuratorates) and many government authorities such as administrative law enforcement agencies (public security authorities) and offices of Comprehensive Control and Social Management (Zongzhi Ban 综治办), as well as mass/social organisations (Trade Unions, Women’s Federations, Youth Leagues, Neighbourhood Committees). In this broad context, the term refers to a system of mechanisms for comprehensive social control and the prevention of social conflict and instability (Weiwen 维稳) under the general umbrella of social governance, which is clearly more political than legal. These reforms aim at establishing an integrated dispute resolution system that forms part of China’s new governance model, addressing not only dispute resolution but also the prevention of social conflict and maintenance of social stability.
Conversely, the term is also used in a narrow sense, referring to an integrated system of legal mechanisms, the reform of which is led by the Supreme People’s Court, which focuses on building links between ADR, administrative review, adjudication and litigation. These include judicial confirmation of mediation agreements, support for arbitration and the enforcement of arbitral awards, appointing mediators and arbitration institutions as court-sanctioned mediators and arbitrators, establishment of ‘one-stop’ (Yizhanshi一站式) dispute resolution mechanisms within the court system, and shared platforms for litigation and ADR.
The comprehensive approach, under the umbrella of strengthening PDR as a dispute resolution mechanism, is innovative yet full of uncertainties. It is probably well-intended that all social forces are mobilised to prevent and resolve social conflicts and disputes, and the one-stop approach may provide convenience and efficient and effective dispute resolution solutions.
It is uncertain and potentially risky, not just because the Mechanism for PDR may be used as an instrument for social control, but because this may politicise an otherwise innovative reform. On the other hand, however, efforts towards building and strengthening the PDR, in the narrow sense of the term, led by the Supreme People’s Court, are to be welcomed. These efforts have seen the strengthening and further development of mediation and arbitration, as well as the establishment of various mechanisms for ADR and litigation to work together as a ‘united force’ for dispute resolution.
Zhiqiong June Wang (PhD) is Associate Professor of Law, Western Sydney University, Australia. June’s research interests are in Chinese law, international economic law, dispute resolution and comparative law. Her China-related research focuses on original observation and analysis of the various institutional reforms in the area of commercial law in China. June is also an arbitrator of the Shenzhen International Court of Arbitration.
In June 2018, the China International Commercial Court (CICC) was established within China’s Supreme People’s Court. It is a top-down capacity-building effort in establishing dispute resolution infrastructure and represents the ambition to create a lex mercatoria in the context of the Belt and Road Initiative (BRI). This blogpost highlights some salient features of the CICC and sheds light on its significance in China’s Law and Development.
First, CICC installed an International Commercial Experts Committee (ICEC) to make up for the lack of non-Mainland Chinese judges among its personnel. It draws on experts from both civil law and common law jurisdictions with diverse backgrounds (Eastern, Western and African legal culture). Members of the ICEC will provide foreign legal expertise to engage in the CICC mediation work, the outcome of which could be turned into a CICC judgement equivalent to “semi adjudication.” The ICEC has two main functions: first, presiding over mediation proceedings of international commercial cases which can be converted into a CICC judgement; second, providing advisory opinions on proof of foreign law and on international treaties, international commercial rules. The ICEC is argued as emblematic of the “paradigm shift” of the Beijing Consensus which traditionally emphasises soft law in international legal ordering such as what has happened in the Belt and Road context. Scholars have argued about a rising new Chinese economic legal order that is characterized by China’s decentralized mode of trade governance through a pragmatic, incremental development policy grounded in soft law and norm-based networks (Shaffer & Gao 2020). This is shown in China’s approach toward the BRI (yidaiyilu 一带一路) as China largely relies on memoranda of understanding and soft law agreements. There is no stringent cross-border legal framework or rigid regulatory structure in China’s approach toward the BRI. The advent of the ICEC however points to a new focus on institution-building which is somewhat a departure of the previous soft-law approach. Apart from that, the ICEC also showcases a breakthrough in the Chinese legal system in light of the existing statutory impediments found in, for example, China’s Judges Law, which allows only Mainland Chinese nationals to sit on the Chinese judicial benches. It reflects a more proactive, experimental, and innovative mentality adopted by the Chinese government and judiciary in seeking to incorporate overseas judicial expertise so as to compete in the global dispute resolution market.
The CICC signifies China’s major step towards a dual-track model which places equal emphasis on both soft-law instruments and hard-law capacity-building of legal infrastructure. Second, the CICC brands itself as a “one-stop shop” for diversified dispute resolution, incorporating alternative dispute resolutions (ADRs) into conventional litigation. Under this vision, international commercial litigation, arbitration and mediation are blended and integrated to facilitate the resolution of international commercial disputes brought before the CICC. The CICC also links with China’s five most market-driven arbitration institutions – China International Economic and Trade Arbitration (CIETAC), Beijing Arbitration Commission (BAC), Shenzhen Court of International Arbitration (SCIA), Shanghai International Arbitration Centre (SHIAC), China Maritime Arbitration Commission (CMAC), and two leading commercial mediation institutions – China Council for the Promotion of International Trade (CCPIT) Mediation Center and Shanghai Commercial Mediation Centre (SCMC). If disputing parties have reached a mediation settlement agreement before the CCPIT Mediation Center or SCMC, the CICC may also make a CICC judgment based on the mediation agreement if it is requested by the parties. This conversion of the institutional mediation settlement agreement into a CICC judgment is an unprecedented arrangement, evidencing the experimental and law-positive nature of China’s approach to the BRI and the new Beijing Consensus.
From the Law and Development perspective, the establishment of the CICC exemplifies a turning point in the Beijing Consensus to move away from the heavy reliance on norm-based instruments in international legal ordering.
Third, the CICC has a guaranteed caseload. Structurally, the CICC is within the hierarchy of the Chinese domestic judiciary. It forms part of China’s Supreme People’s Court of which both the first CICC in Shenzhen and the second CICC in Xi’an are permanent branches. Flowing from this structure, it is ensured that the CICC continuously has a high caseload as the Supreme People’s Court in Beijing directly refers cases to them. In fact, the case flow under the CICC Provisions includes “other international commercial cases that the Supreme People’s Court considers appropriate to be tried by the CICC.” (Provisions of the Supreme People’s Court on Several Issues Regarding the Establishment of the International Commercial Court, Article 2(5), English here). Comparative studies show that the feature of “rooting” the international commercial courts within the domestic judicial system is similarly found in other jurisdictions, such as the Singapore International Commercial Court and the Chamber for International Commercial Disputes of the Frankfurt Regional Court in Germany.
The establishment of the CICC arguably represents a paradigm shift of the “Beijing Consensus”, which traditionally placed emphasis on informal alternatives to law (i.e. a soft-law and norm-based approach). The CICC signifies China’s major step towards a dual-track model which places equal emphasis on both soft-law instruments and hard-law capacity-building of legal infrastructure. From the Law and Development perspective, the establishment of the CICC exemplifies a turning point in the Beijing Consensus to move away from the heavy reliance on norm-based instruments in international legal ordering (such as Memorandum of Understandings, Memorandum of Agreements, Joint Statements etc. involved in the BRI) to hard-law institutional infrastructure capacity-building.
For details, please find Weixia Gu’s forthcoming article regarding the CICC and Law and Development Study at Harvard International Law Journalhere. Please also find her recent monograph, Dispute Resolution in China: Litigation, Arbitration, Mediation and Their Interactions published by Routledge in 2021 here.
Weixia Gu is Associate Professor at the Faculty of Law, University of Hong Kong and immediate past Co-Chair of the American Society of International Law (ASIL) Asia-Pacific Interest Group. Her research focuses on arbitration, dispute resolution, private international law and cross-border legal issues. Her scholarship is published by leading comparative and international law journals and cited by leading judiciaries in the world. She is the recipient of University of Hong Kong’s Outstanding Young Researcher Award and three times the awardee of China Society of Private International Law Best Research Output Prize. Her recent books include The Developing World of Arbitration (Hart, 2018); Dispute Resolution in China (Routledge, 2021); Multi-tiered Approaches to the Resolution of International Disputes (CUP, 2021). Contact her at email@example.com.
Cross-border dispute resolution is changing as a part of the Belt and Road Initiative (BRI) development. With the BRI, Chinese interest in international commercial arbitration has gained a new dimension as BRI promotes the expansion of Chinese dispute resolution institutions and their international competitiveness. Ulla Liukkunen finds that these developments challenge the current narrative of international arbitration, underlining the connection between the legal regime of arbitration and endeavours by the state. In her recent paper (PDF), she explores private international law as a framework for discussion of noteworthy characteristics of the Chinese legal system and legal culture that are present in international commercial arbitration.
The People’s Republic of China has made initiatives to develop a joint dispute resolution circle for BRI countries so that there would be an area in the BRI sphere which offers effective and foreseeable dispute resolution based on jurisdictions close to the disputing parties. In 2016, upon an order by the State Council, Shanghai pressed forward with the creation of an international commercial arbitration system which has since then developed rapidly: The Shanghai International Arbitration Centre has witnessed an increase in the number of cases, and has launched a series of initiatives to promote the development of arbitration. In 2018, the CCP’s Central Committee and the State Council issued an Opinion calling the Supreme People’s Court to set up international commercial courts, to take the lead in setting up a committee of international commercial experts, and to support a BRI-related international commercial dispute resolution mechanism. The aim is that the BRI dispute resolution mechanism would form a convenient, speedy and low-cost “one-stop” dispute resolution centre to provide high-quality and efficient legal services for parties involved in BRI construction.
In the theory of international commercial arbitration, elaboration of a doctrine based on the claimed autonomous nature of international arbitration exists, resting on views of self-standing transnational legal standards that distance arbitration from state-bound laws as well as a state-bound setting. The growing role of China in international arbitration ‒ and the state interest embedded therein ‒ challenges this picture which has been built within international arbitration doctrine and which has resulted in loosening the scene of the role of state law in arbitration.
A rethink of comparative methodology is proposed in order to promote an understanding of Chinese law in the arbitration process. This article argues for adopting micro-macro comparison as a methodological approach in arbitration. Micro-macro comparison as a process penetrates the decision-making of arbitrators, also governing the conflict-of-law dimension.
Moreover, considerations of the Chinese private international law and arbitration regime speak for a broader comparative research perspective towards international commercial arbitration. In the international commercial arbitration frame under scrutiny, we can see the conception of party autonomy placed in a Chinese context where the state is shaping the still relatively young private international law frame for exercise of that freedom and certain institutional structures are advocated where party autonomy is placed. Chinese development underlines the connection between the legal regime of arbitration and endeavours by the state, thereby requiring assessment of party autonomy from the perspective of the regulatory framework of private international law that expresses the complex dichotomy between private and public interests.
Professor Liukkunen examines international commercial arbitration from the perspective of Chinese developments, noting that, in global terms, the organization of cross-border dispute resolution is changing as a part of the Belt and Road Initiative (BRI) development. With the BRI, Chinese interest in international commercial arbitration has gained a new dimension as BRI promotes the expansion of Chinese dispute resolution institutions and their international competitiveness.