Journal of International Arbitration 17(6): 47–105, 2000.

© 2000 Kluwer Law International. Printed in The Netherlands.

One Country, Two—International Commercial

Arbitration—Systems

Xiaobing XU* and George D. WILSON**0

VII. INTRODUCTION
Three things prompted us to write this article. First, in the last 15 years of the
twentieth century, both China and Hong Kong rose prominently on the international
arbitration scene. As a result, there is wider interest in attempting to understand just
what has been accomplished by both and what still lies ahead of them. Second, the
return of Hong Kong to the People’s Republic of China (PRC) on 1 July 1997, as the
Hong Kong Special Administrative Region (HKSAR), has created concern over Hong
Kong’s status as an international arbitration venue. This concern represents one of the
many tests the HKSAR has faced in its first three years of existence. Third, although
the beginning of a new century perhaps always provides a convenient excuse to write
something, we do believe that now is indeed a good time to attempt an informative
assessment of the international commercial arbitration systems in the PRC and the
HKSAR, as China and Hong Kong have already taken major steps not only to
modernize and internationalize their respective international arbitration systems, but
also to solve the most vexing arbitration issues left over by the reunification.
Aware that the subject-matter could easily occupy an entire book, we have
limited our discussion to the major similarities and differences between the
international commercial arbitration systems in the PRC and HKSAR, and the
question of how they have adapted to the change of sovereignty and co-existed since
July 1997. This study is not a detailed account of legal particularities and recent
developments in the two systems. Nor is it an updated practical guide for international
lawyers and practitioners. Instead, it provides an analysis of major characteristics and
future trends. The intention here is to test how well the concept of “one country, two
legal systems” has been put into practice so far in this particular area of law and how
successfully the concern over Hong Kong’s status as an international commercial
arbitration centre has been addressed.

0 * Master of International Law, Foreign Affairs College, Beijing, 1982; LL.M., Harvard Law School, 1994;
J.S.D. Candidate, Stanford Law School, 2002.
** J.D., Georgetown University Law Center, 1986; Research Fellow, Hoover Institution, Stanford University.
The authors would like to extend special thanks to Mr Christopher To, Secretary-General of the Hong
Kong International Arbitration Centre (HKIAC), and Professor Robert Morgan of the University of Hong Kong
and the Secretariat of the China International Economic and Trade Arbitration Commission (CIETAC) for all the
valuable information they have provided to us. Any errors or mistakes in the article are solely the responsibility of
the authors themselves.

MBT: DISK: PIPs No. 313897 JOIA1 7/6 JOIA 52

MBT: DISK: PIPs No. 313897 JOIA 17/6 JOIA52

48 JOURNAL OF INTERNATIONAL ARBITRATION

As there is no generally accepted definition of what is an “international”

arbitration,1 the term “international commercial arbitration system” used here needs to
be defined with reference to the legal terminology of the PRC and the HKSAR. In
China, the term “international” is seldom used in legislation. Instead, it is “foreign-
related”, or “foreign elements”, that is the favoured term. Chapter 7 of the PRC
Arbitration Law2 is titled “Special Provisions Concerning Foreign Related Arbitration”.
Article 65 of that chapter states that “Provisions in this chapter are applicable in the
arbitration of economic, trade, transport, and maritime disputes involving foreign-
related elements.” Similar terms can also be found in, for example, the PRC’s Civil
Procedure Law and its General Principles of Civil Law, among others. However, none
of these laws provides explicit definition.
The Supreme People’s Court has, however, issued an opinion as to the definition
of “foreign related civil litigation” as follows:
“Civil cases in which either or both parties are a person of foreign nationality or a stateless
person, or a company or organization domiciled in a foreign country; or in which the legal facts
that establish, change or terminate the civil legal relationships between the parties take place in a
foreign country; or in which the subject matter of the dispute is situated in a foreign country,
shall be civil cases involving foreign-related parties.”3
Based on this opinion, it is established that an arbitration in China shall be
foreign-related, or international, if it involves a dispute between:
(4) a Chinese party and a foreign party;
(5) two foreign parties; or
(6) two Chinese parties, but the legal relationship between them or the subject-
matter in dispute takes place or is situated in a foreign country.4
In Hong Kong, the 1982 Arbitration Ordinance began to establish a distinction
between domestic arbitrations and international arbitrations. 5 This earlier distinction
was later replaced by the more liberal definition in the Model Law on International
Commercial Arbitration of the United Nations Commission on International Trade
Law (UNCITRAL Model Law or Model Law) adopted by the Arbitration

1 See Mark Huleatt-James and Nicholas Gould, International Commercial Arbitration: A Handbook (2nd

edition) (LLP, London, 1999), at 8. For a general discussion of the definition of the terms “international” and
“commercial”, see also Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration
(3rd edition) (London: Sweet & Maxwell, 1999), at 12–19.
2 For a detailed discussion of the PRC’s 1994 Arbitration Law, see Part IV.B Arbitration Laws of the People’s

Republic of China, below.

3 See Point 304, Some Opinions on Several Questions Concerning Implementation of the Civil Procedure Law, issued

by the Supreme People’s Court of the PRC, 14 July 1992, as reported in China L. & Prac. (14 January 1993), with
an English translation, at 40.
4 See Wang Shengchang, Resolving Disputes in the PRC: A Practical Guide to Arbitration and Conciliation in

China (Hong Kong: FT Law & Tax Asia Pacific, 1996), at 20.
5 Under the 1982 Arbitration Ordinance, an arbitration would be treated as “international” only if it

involved at least one party whose residence, place of incorporation, or place of central management and control
was located outside Hong Kong. See Arbitration Ordinance, 1982, ch. 341 (H.K.), reprinted in [Commercial
Arbitration Law in Asia and the Pacific] Int’l Com. Arb. (Oceana Publications) No. 4, H.K.1 (September 1987),
§ 23B(8); W. Laurence Craig, et al., Hong Kong Law, in [International Chamber of Commerce Arbitration] Int’l
Com. Arb. (Oceana Publications) No. 5, § 34.01, at 595 (January 1990).
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 49

(Amendment) (No. 2) Ordinance 1989.6 Under Article 1(3) of the UNCITRAL

Model Law, an arbitration is international if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of
that agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties
have their places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration
agreement;
(ii) any place where a substantial part of the obligations of the commercial
relationship is to be performed or the place with which the subject-matter
of the dispute is most closely connected; or
(c) the parties have expressly agreed that the subject-matter of the arbitration
agreement relates to more than one country.
In addition, if a party has more than one place of business, its place of business for
the purpose of a particular arbitration will be that which has the closest relationship to
the arbitration agreement (Article 1(4)(a)). In cases where a party does not have a place
of business, reference is made to the party’s habitual residence (Article 1(4)(b)).
Clearly, both Hong Kong’s and China’s definitions of international arbitration are
similar in that they are both based on a mixture of the subject-matter of the legal
relationship and the locality of the parties. Such a definition is broad enough to cover
disputes between two domestic parties if a substantial part of the underlying obligation
is to be performed outside China or Hong Kong.7 However, the two definitions differ
in two special ways. First, Article 1(3)(c) of the Model Law provides parties with
greater autonomy by allowing them to expressly agree that the subject-matter of the
arbitration agreement relates to more than one country, and thus categorize their
arbitration as “international” in nature. No such rule exists in China. Second, parties
from Hong Kong, Macau, and Taiwan are treated on an equal footing with foreign
parties in the PRC.8 Even though Hong Kong and Macau have now returned to
China, an arbitration continues to be deemed foreign-related or international if it

6 See Arbitration (Amendment) (No. 2) Ordinance 1989, reprinted in Neil Kaplan, Jill Spruce and Teresa

Y.W. Cheng, Hong Kong Arbitration Cases and Materials (Butterworths, Hong Kong, 1991), App. B2, at 277.
7 The Hong Kong High Court held in Fung Sang Trading Ltd. v. Kai Sun Sea Prods. & Food Co. that, while

both parties had their places of business in Hong Kong, the arbitration was within the scope of the UNCITRAL
Model Law because a substantial part of the underlying contract obligation was to be performed outside Hong
Kong: the fact that the goods had to be delivered in China. See Fung Sang Trading Ltd. v. Kai Sun Sea Prods. & Food
Co., 1992 (1) Hong Kong L. Rep. 40, 40–41. An excerpt of the opinion is reprinted in Hong Kong, 17 Y.B. Com.
Arb. 289 (1992). For a discussion of a similar criterion to establish foreign elements in China, see Wang
Shengchang, Resolving Disputes in the PRC: A Practical Guide to Arbitration and Conciliation in China, note 4 above, at
21–22.
8 See, e.g., Article 20 of the Regulations of the State Council Concerning Encouragement of Foreign

Investment (11 October 1986), 2 China Laws for Foreign Bus.: Bus. Reg. (1988)) (CCH), ¶13-509, at 16,704,
also available online at <http://www.ccpit.org/engVersion/indexEn.html>; Article 5 of the Regulations of the
State Council Concerning Encouragement of Investment from Overseas Chinese and Hong Kong and Macao
Compatriots (19 August 1990), 2 China Laws for Foreign Bus.: Bus. Reg. (1998) (CCH), ¶13-550, at 17,132, also
available online at <http://www.moftec.gov.cn/moftec/official/html/laws and regulations/investment17.html>.
See also Susan Finder, The Status of Hong Kong Compatriots under Chinese Law, 26 Hong Kong L.J. 234 (1996).
50 JOURNAL OF INTERNATIONAL ARBITRATION

involves a party from or in connection with Hong Kong and Macau. No similar
treatment for mainland, Macanese and Taiwanese parties exists in Hong Kong.
Having a clearly defined distinction between international and domestic
arbitrations is important because in many countries the term “international”
determines not only whether a particular tribunal has jurisdiction over a dispute but
also which arbitration rules apply. In China, before the 1994 Arbitration Law,
international arbitrations were exclusively dealt with by the China International
Economic and Trade Arbitration Commission (CIETAC) and the China Maritime
Arbitration Commission (CMAC)9 and governed by the CIETAC and
CMAC arbitration rules. However, this is not, and has not been, the case in Hong
Kong. Although the Arbitration (Amendment) (No. 2) Ordinance 1989 provides that
domestic arbitrations in Hong Kong apply the UNCITRAL Model Law under Part
II10 and international arbitrations there apply provisions under Part IIA, parties are
granted freedom to choose either Part II or Part IIA to be applied to their arbitration
no matter whether their disputes are international or domestic in nature.11
Having a clearly defined distinction between international and domestic
arbitrations is also important because it is indispensable for collecting reliable statistics.
For example, according to Article 2 of the 1998 CIETAC Rules,12 CIETAC has the
power to resolve the following types of disputes:
(i) international or foreign-related disputes;
(ii) disputes related to Hong Kong, Macau, or Taiwan;
(iii) disputes between enterprises with foreign investment, and disputes between
an enterprise with foreign investment and another Chinese legal person,
physical person, and/or economic organization;
(iv) disputes arising from project financing, invitations to tender, bidding,
construction and other activities conducted by Chinese legal persons, physical
persons, and/or other economic organizations through the use of the capital,
technology or services from foreign countries, international organizations, or
from Hong Kong, Macau and Taiwan; or
(v) disputes that may be taken cognizance of by the Arbitration Commission in
accordance with special provisions of, or upon special authorization from,
China’s laws or administration regulations.
Among these five types of disputes, only the first two categories of cases may be
counted as CIETAC “international” arbitration cases.

9 The two institutions are specifically called “foreign-related arbitration commissions”. See, e.g., Article 66

of the 1994 Arbitration Law and Article 260 of the 1991 Civil Procedure Law. For a detailed discussion of the two
institutions, see Part III Institutional Development, below.
10 This part of the 1989 Ordinance was largely based on English legislation, which provides wide-ranging

judicial oversight of challenges to arbitrators and their awards; e.g., §§ 3 (revocation of arbitrator’s authority), and
23 (appeal against award on a point of law).
11 For more details of the opt-in or opt-out clauses, see Part IV.A. Hong Kong Special Administrative Region

Arbitration Ordinance (Chapter 341), below.

12 The text of the 1998 CIETAC Rules is available at <http://www.jurisint.org/pub/03/en/F_7032.htm>.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 51

In addition, our use here of the term “international arbitration system” is

particularly for the purpose of narrowing the scope of this study and excluding the
domestic arbitration systems in China and Hong Kong. However, we are fully aware
that in both China and Hong Kong an absolute separation of the international and
domestic commercial arbitration systems is unrealistic in terms of both institutional and
legal frameworks. In China, since the enactment of the 1994 Arbitration Law, the strict
division of jurisdictions between China’s domestic and foreign-related, or international,
arbitration commissions has been relaxed. On the one hand, CIETAC can now handle,
and in fact has expanded its jurisdiction over, some special kinds of domestic arbitration
cases13 and, on the other hand, the domestic arbitration commissions are also allowed to
handle international arbitration cases. According to a notice of the State Council of
1996, if parties to a foreign-related dispute were to voluntarily submit a dispute to a
newly-established domestic arbitration commission for arbitration, that institution
could accept it.14 In Hong Kong, not only does the Hong Kong International
Arbitration Centre (HKIAC)15 handle both domestic and international arbitration
cases, but also, as pointed out above, parties have the autonomy to choose which part
of the Arbitration Ordinance and what arbitration rules apply to their arbitration.
Moreover, although domestic and international arbitrations continue to apply different
laws in China and Hong Kong, the disparity between the two sets of laws has been
reduced since the passage of the 1994 Arbitration Law in China and the Arbitration
(Amendment) Ordinance 1996 in Hong Kong.16
The term “commercial” has two aspects of significance. First, it relates to the issue
of arbitrability, or the domain of arbitration, which determines which types of disputes
may be resolved by arbitration and which belong to the domain of the courts.17 Thus,
for example, if national legislation requires that an international dispute that is
arbitrable should be commercial in nature,18 then the term determines that an
international arbitration tribunal has jurisdiction only over a dispute of a commercial
nature. Second, the “commercial” nature of a dispute is also of particular importance in
recognizing and enforcing an arbitral award pursuant to the New York Convention on
the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York
13 See Article 2(3)–(5) of the 1998 CIETAC Rules. As an example of the special authorization under

Article 2(5), on 26 August 1994, the China Securities Regulatory Commission (CSRC) officially designated
CIETAC as the sole arbitration institution in China for handling all securities disputes where the parties have
entered into an arbitration agreement. See Cheng Dejun, Michael J. Moser and Wang Shengchang, International
Arbitration in the People’s Republic of China: Commentary, Cases and Materials (Butterworths Asia, Hong Kong, 1995),
at 28.
14 See Point 3, Notice of the General Office of the State Council Concerning Clarification of Certain Issues

in Implementation of the Arbitration Law of the PRC, 8 June 1996, published in 18 State Council Gazette
(Zhonghua Renmin Gongheguo Guowuyuan Gongbao) (1996), at 702.
15 For a detailed discussion of HKIAC, see Part III, Institutional Development, below.
16 The Arbitration (Amendment) Ordinance 1996 was passed by the HKSAR Legislative Council (LegCo)

on 18 December 1996, and took effect on 27 June 1997. For a summary see 12 Mealey’s Int’l Arb. Rep.
(September 1997), at B-1.
17 See Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, note 1 above,

at 148–154.
18 The qualification of “commercial” is generally used in civil law countries. See id., at 18.
52 JOURNAL OF INTERNATIONAL ARBITRATION

Convention),19 because many States have made “commercial” reservations under the
Convention to the effect that an arbitral award can be enforced under the Convention
only when the subject-matter that is arbitrated is of a commercial nature.
In both aspects, the term is only relevant in China, not in Hong Kong. When
Hong Kong adopted the UNCITRAL Model Law in 1989, it completely eliminated
the definition of “commercial” arbitration.20 Hong Kong also made no commercial
reservations under the New York Convention.21 The complete absence of any
commercial dispute requirement in Hong Kong’s international arbitration has not been
changed after the handover of the former British colony back to the PRC.22 In China,
although both the 1994 Arbitration Law and the 1998 CIETAC Arbitration Rules have
instituted no commercial dispute requirement, the term that is used, “economic and
trade transactions”, has been interpreted to include most kinds of “commercial”
disputes.23 The PRC, moreover, made the commercial arbitration reservation when
ratifying the New York Convention in 1986.24 To assist People’s Courts at lower levels
to implement the Convention, the Supreme People’s Court provided guidance in the
form of a judicial interpretation, which states that commercial legal relations are those
“concerning economic rights and obligations arising out of contract, tort or relevant provisions
of law, including disputes concerning the sale and purchase of goods, lease of property,
contracting for project work, processing arrangements, technology transfer, equity joint
ventures, cooperative joint ventures, exploration and exploitation of natural resources,
insurance, financing, labor, agency, consultancy services and transportation by sea, air, railway
or road, as well as product liability, environmental pollution, accidents at sea and ownership,
but not including disputes between foreign investors and government bodies.”25

19 For more discussion of the New York Convention, see Part IV The Legal Framework, below.
20 §34C(2) of the 2000 Arbitration Ordinance states that “Article 1(1) of the UNCITRAL Model Law shall
not have the effect of limiting the application of the UNCITRAL Model Law to international commercial
arbitrations.” The 2000 Arbitration Ordinance is available at <http://www.justice.gov.hk/Home.htm>. For the
underlying reasons for this section, see the Law Reform Commission of Hong Kong, Report on the Adoption of the
UNCITRAL Model Law of Arbitration (1987), ¶¶ 4.11–4.16. The fact that there is no commercial requirement does
not mean every dispute is arbitrable in Hong Kong. The following are not subject to arbitration: (1) Fraud (see
§26.2 of the 2000 Hong Kong Arbitration Ordinance), (2) disputes involving the validity or infringement of
intellectual property, (3) disputes relating to marriage, divorce, and relations between parents and children, (4)
disputes reserved to particular courts or tribunals for resolution, such as bankruptcy, company liquidation and
winding up, liability to taxation and questions of personal status, such as nationality or residence, and (5) disputes
in which the contract underlying the arbitration is void ab initio, whether by statute or at common law. See Neil
Kaplan and Robert Morgan, Hong Kong, in International Council for Commercial Arbitration, International
Handbook on Commercial Arbitration (Jan Paulsson, general editor, with the assistance of International Bureau of the
Permanent Court of Arbitration, The Hague, Boston: Kluwer Law International), Supp. 29 (December 1999), at
21.
21 When the UK extended the Convention to Hong Kong, 23 April 1977, it also extended its reservation:

“The United Kingdom will apply the Convention only to the recognition and enforcement of awards made in the
territory of another Contracting State. This declaration is also made on behalf of Gibraltar, Hong Kong and the
Isle of Man to which the Convention has been extended.” See <http://untreaty.un.org/ENGLISH/bible/
englishinternetbible/partI/chapterXXII/treaty1.asp>.
22 See the discussion in Part II.B. New Constitutional Order—One Country, Two Systems, below.
23 See Cheng Dejun et al., note 13, above, at 27.
24 See paragraph (2), Decision of the Standing Committee of the National People's Congress on Ratification of the

Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted 2 Dec. 1986. For the Chinese and
English texts of the Decision, see Cheng Dejun, et al., note 13, above, at 753.
25 See Point 2, Supreme People's Court Notice on the Implementation of China's Accession to the Convention on the

Recognition and Enforcement of Foreign Arbitral Awards (10 April 1987), reprinted in Cheng Dejun, et al., note 13
above, at 754–757.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 53

To a large extent, this guideline is similar to the definition provided in a footnote

to Article 1(1) of the UNCITRAL Model Law.26 And, as “the term ‘commercial’
should be given a wide interpretation so as to cover matters arising from all
relationships of a commercial nature, whether contractual or not”,27 so should the
judicial interpretation of the Supreme People’s Court. In other words, neither the
footnote nor the Supreme People’s Court’s notice is intended to be an exhaustive list.28
On the other hand, CIETAC’s jurisdiction may not be extended to all of the
commercial disputes enumerated by the Supreme People’s Court because the 1994
Arbitration Law provides other limits to the domain of arbitration.29

VIII.THE HISTORICAL, CONSTITUTIONAL, ECONOMIC AND CULTURAL BACKGROUND

A. HISTORICAL ORIGINS AND PRE-1997 REFORMS

Although Hong Kong and China share a long history and common culture and
traditions, their current legal systems differ profoundly. In addition to the obvious
differences resulting from the disparate influences of the common law (in Hong Kong)
and civil law (in China) traditions, as well as from contrasting ideological principles,
HKSAR and PRC international arbitration law and practice have also been marked by
the distinct styles of the West and the East.
Hong Kong’s arbitration system naturally owes much to that of its former
colonial ruler, Britain. England is known as a country with a rich tradition of
arbitration.30 Today, the London Court of International Arbitration (LCIA), founded
in 1892, the world’s oldest existing arbitral institution, is among the leading
international arbitration institutions in the world. 31 However, the British colonial
government failed to introduce formal arbitration legislation to Hong Kong until the
26 The footnote states that “… relationships of a commercial nature include, but are not limited to, the

following transactions: any trade transaction for the supply or exchange of goods or services; distribution
agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering
licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other
forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road.”
27 See id.
28 See Cheng Dejun, et al., note 13 above, at 27.
29 Under Article 3 of the 1994 Arbitration Law, (1) marital, adoption, guardianship, support and succession

disputes and (2) administrative disputes are not subject to arbitration. As the 1994 Arbitration Law does not
exclude disputes over intellectual property rights, disputes concerning bankruptcy, and disputes relating to
antitrust from the scope of arbitrability, they should now be subject to arbitration despite earlier laws and
regulations of the PRC that require such disputes to be resolved by relevant governmental authorities or by the
competent People’s Courts. See Tang Houzhi and Wang Shengchang, The People’s Republic of China, in
International Council for Commercial Arbitration, International Handbook on Commercial Arbitration, note 20,
above at 17. It has already been reported that disputes over intellectual property have been among CIETAC’s
cases. See Cheng Dejun, Working Report of the 13th Committee of CIETAC, China Int’l Commerical Arb. Y.B. 87
(1997–1998), at 87.
30 England has for many centuries been one of the world’s major centres of international commerce, and

consequently the law and practice of international commercial arbitration there has ancient origins. For a short
history of English arbitration, see Neil Kaplan, Jill Spruce and Michael J. Moser, Hong Kong and China Arbitration:
Cases and Materials (Hong Kong: Butterworths; Salem, N.H.: Butterworth Legal Publishers, 1994), at xlii–lxv.
31 See Gary B. Born, International Commercial Arbitration in the United States: Commentary & Materials (Boston:

Kluwer Law and Taxation Publishers, 1994), at 15–16.

54 JOURNAL OF INTERNATIONAL ARBITRATION

1960s.32 As Neil Kaplan has pointed out, although arbitration practice emerged in
Hong Kong as early as in 1843, Hong Kong did not have any formal arbitration law
until the enactment of its first Arbitration Ordinance (Chapter 341) in 1963.33
Moreover, the 1963 Arbitration Ordinance basically mirrored the English Arbitration
Act 1950, as it was traditional for English laws simply to be transposed onto the
colonial Hong Kong statute books without being tailored to the particular needs of
Hong Kong.34 The 1963 Arbitration Ordinance provided a unitary arbitration system
that applies to both domestic and international arbitrations. 35 The British style of
arbitration law and practice in Hong Kong was first modified in 1982 by the passage
of the 1982 Arbitration Ordinance. As the Law Reform Commission of Hong Kong
formed in 1979 recommended,36 the new Arbitration Ordinance adopted not only
new features of the English Arbitration Act 1979, but also other reforms that
represented the beginning of Hong Kong’s departure from its previously strict English
model.37
Many reforms provided in the 1982 Arbitration Ordinance, such as permitting
foreign counsel to handle international arbitrations in Hong Kong on behalf of their
clients (§ 20) and a conciliator to continue to serve as an arbitrator if the conciliation
fails (§ 2A), were aimed at making Hong Kong a more attractive venue for
international arbitration. In the early 1980s, few international arbitrations were
conducted in Hong Kong. Although the Hong Kong branch of the Chartered Institute
of Arbitrators, established in 1972, had grown to more than 200 members,38 the
“branch was fairly inactive”.39 It was reported that the members of the Hong Kong
branch conducted only about five arbitrations annually between 1978 and 1980. In
about the same period (1976–80), the arbitration committee of the Hong Kong
General Chamber of Commerce conducted only about four arbitrations yearly as the
agent in Hong Kong of the International Chamber of Commerce (ICC). The total
estimated figure of arbitrations for this period was only around 14 a year.40

32 For a description of some earlier Hong Kong laws that applied to arbitration in Hong Kong, see Robert

Morgan, The Arbitration Ordinance of Hong Kong: A Commentary (Butterworths Asia, Hong Kong, 1997), at 2–3.
33 See Neil Kaplan, The History and Development of Arbitration in Hong Kong, Y.B. Int’l Fin. & Econ. L.

1996, at 205. See also Robert Morgan, The Arbitration Ordinance of Hong Kong: A Commentary (Hong Kong:
Butterworths Asia, 1997), at 2–3. For an account of early arbitration activities in Hong Kong, see Derek
Roebuck, Captain Charles Elliot RN, Arbitrator: Dispute Resolution in China Waters 1834–36, 14 Arb. Int’l 89–
116 (1998).
34 See Judith O’Hare, Arbitration and Alternative Dispute Resolution: A Hong Kong Perspective, 7 Am. Rev. Int’l

Arb. 1 (1996), at 2.
35 See Robert Morgan, note 32 above, at 3.
36 See The Law Reform Commission of Hong Kong, Report on Commercial Arbitration (Topic 1), 11 Dec.

1981. Commercial arbitration was the first topic the Law Reform Commission considered.
37 For a description of these departures, see Neil Kaplan, The History and Development of Arbitration in Hong

Kong, Y.B. Int’l Fin. & Econ. L. 1996, note 33, above, at 206–207.
38 The figure is quoted from Law Reform Commission of Hong Kong, Report on Commercial Arbitration

(Topic 1), 11 December 1981, at 3.

39 See Neil Kaplan, note 33, above, at 221.
40 See the Law Reform Commission of Hong Kong, Report on Commercial Arbitration (Topic 1), 11 Dec.

1981, at 3–4.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 55

The Law Reform Commission believed that the basic reason why comparatively
few arbitrations were taking place in Hong Kong was the lack of convenient
arbitration facilities and suggested that “ready arbitration facilities should be provided
through private institutions”.41 In response to this need, Hong Kong set up its
international commercial arbitration institution, the HKIAC, in 1985, with the clear
aim to become a leading international commercial arbitration centre in Asia. During
the same year, the UNCITRAL Model Law was adopted by the United Nations. Even
though the United Kingdom itself initially rejected the Model Law, 42 the Law Reform
Commission recommended in 1987 that it be adopted in Hong Kong with only minor
changes.43 This was done by the passage of the Arbitration (Amendment) (No. 2)
Ordinance 1989, a major achievement in Hong Kong’s history of arbitration
legislation, which created a dual arbitration system in Hong Kong.44
Three years later, as the debate on the Model Law in the United Kingdom
engendered a change in attitude in favour of absorbing the Model Law into a new
Arbitration Act,45 another important arbitration law reform followed in Hong Kong.
In 1992, an Arbitration Law Committee was formed by the HKIAC to consider
further reform of the Arbitration Ordinance, particularly in light of arbitration law
reform proposals in England and Wales,46 the Netherlands Arbitration Act 1986,47 and
Singapore’s International Arbitration Act.48 The Committee’s efforts were finalized by
the passage of the Arbitration (Amendment) Ordinance 1996 on 18 December
1996.49 The 1996 Ordinance enacted the proposals of the Arbitration Law Committee
to harmonize Hong Kong’s domestic and international arbitration laws by introducing
provisions of common application to both domestic and international arbitrations and
applying certain provisions of the UNCITRAL Model Law to domestic arbitrations.50
In the same year, still a year before the British handover of Hong Kong to the PRC,
the Hong Kong Institute of Arbitrators (HKIarb), the first truly local arbitration
institute, was established. All these developments showed that, although Hong Kong’s
international commercial arbitration law originated from the English common law
41 See id., at 4–5, and 31.
42 The Model Law was rejected by the Departmental Advisory Committee on Arbitration Law formed in
1986. See Robert Morgan, note 32, above, at 6, 9.
43 See Law Reform Commission of Hong Kong, Report on the Adoption of the UNCITRAL Model Law of

Arbitration (Topic 17), Sept. 1987.

44 See Arbitration (Amendment) (No. 2) Ordinance 1989, reprinted in Neil Kaplan, Jill Spruce and Teresa

Y.W. Cheng, note 6, above, App. B2, at 277. For other new changes to the Arbitration Ordinance by the
Arbitration (Amendment) (No. 2) Ordinance 1989, see Neil Kaplan, note 33, above, at 210–213.
45 See Robert Morgan, note 32, above, at 9.
46 These proposals finally became the UK Arbitration Act 1996. The text of the Act is available at <http://

www.epms.nl/arbit/England_Arbitration_Act_1996.html>.
47 See Pieter Sanders and Albert Jan van den Berg, The Netherlands Arbitration Act 1986: English text and notes

(Deventer; Boston: Kluwer Law & Taxation Publishers, 1987).

48 The Singapore International Arbitration Act (Chapter 143A) was passed in 1994 and took effect 25 Jan.

1995. The text of the Act is available at <http://www.siac.org.sg/c143a.html>.

49 The Arbitration (Amendment) Ordinance 1996 was passed just two days after the UK Arbitration Act

1996 (Commencement No. 1) Order 1996, was issued 16 Dec. 1996. For the text of the Order, see 12 Mealey’s
Int’l Arb. Rep. (Jan. 1997), at E-1.
50 For a detailed discussion of the Arbitration (Amendment) Ordinance 1996, see Robert Morgan, Hong Kong

Arbitration in Transition: The Arbitration (Amendment) Ordinance 1996, 13 Mealey’s Int’l Arb. Rep. 18 (April 1998).
56 JOURNAL OF INTERNATIONAL ARBITRATION

tradition, its modern version significantly departed from the English model.51 Hong
Kong has, in fact, adopted many features of contemporary international arbitration
law and practice through the 1982, 1989 and 1996 and other Arbitration
(Amendment) Ordinances, as well as through the establishment of new arbitration
institutions.
China’s international arbitration law and practice were originally modelled on that
of the Foreign Trade Arbitration Commission (FTAC) of the Soviet All-Union
Chamber of Commerce.52 Like its Soviet counterpart, China established its FTAC in
1956 within and under the auspices of the PRC’s trade promotion body, the China
Council for the Promotion of International Trade (CCPIT).53 Under Article 2 of the
FTAC rules, FTAC was vested with the exclusive authority to administer arbitrations
in connection with foreign trade disputes arising between foreign firms, companies, or
other economic organizations on the one hand and Chinese firms, companies, or other
economic organizations on the other.54 Until the PRC embarked upon its reform and
open-door policy in the late 1970s, FTAC remained basically an international-trade
disputes arbitration institution.
China’s international arbitration law and institutional reforms took quite different
paths. In Hong Kong, the arbitration law reform came first and the institution building
followed, whereas in China, the strengthening of existing institutions came first and
the arbitration law reform followed. The economic reform and the new openness to
the world quickly expanded China’s international commercial relations. The expansion
of the PRC’s international economic activities first eliminated the limitation of
FTAC’s jurisdiction to simple “trade” disputes. On 26 February 1980, the State
Council changed FTAC’s name to the Foreign Economic and Trade Arbitration
Commission (FETAC) and expanded its jurisdiction to include, in addition to foreign
trade disputes, disputes “arising from various kinds of China’s economic cooperation
with foreign countries”.55

51 It should be noted that, by adopting the Arbitration Act 1996, the UK itself has departed from its own past

and moved closer in line with international standards. The Arbitration Act 1996 is intended to establish a unitary
“non-interventionist” system for commercial arbitration in England, both national and international (abolishing
the old distinction between “domestic” and “non-domestic” under the Arbitration Acts 1950–1979). For detailed
discussions of the new UK arbitration law, see Johan Steyn, England’s Response to the Model Law of Arbitration,
10 Arb. Int’l 1 (1994) and Mark Saville, The Arbitration Act 1996 and Its Effect on International Arbitration in England,
13 Arb. Int’l 237 (1997).
52 The FTAC was formed in Moscow in 1932 to resolve disputes in foreign trade. Also attached to the Soviet

All-Union Chamber of Commerce was another arbitration body, the Maritime Arbitration Commission (MAC),
formed in December 1930. See Kaj Hobér, Arbitration in Moscow, 3 Arb. Int’l 119 (1987), at 122.
53 It has been asserted that one difference between them was that the FTAC of the CCPIT was non-

governmental in nature while the FTAC of the Soviet All-Union Chamber of Commerce was not. See Legislative
Affairs Commission of the Standing Committee of the National People’s Congress of the PRC, ed., Arbitration
Laws of China (Hong Kong: Sweet & Maxwell Asia, 1997), at 106, n. 14.
54 See Cheng Dejun et al., note 13 above, at 7–8.
55 FETAC’s expanded jurisdiction included disputes involving “joint ventures using Chinese and foreign

investment, foreign investment to build factories in China, [and] credits and loans between Chinese and foreign
banks”. See Notice of the State Council Concerning the Renaming of the Foreign Trade Arbitration Commission as the
Foreign Economic and Trade Arbitration Commission, issued by the State Council on 26 Feb. 1980, reprinted in Cheng
Dejun, et al., note 13, above, at 331.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 57

The first major effort to strengthen China’s international arbitration institutions

came in 1988. On 21 June 1988, FETAC was formally renamed to its current name
CIETAC.56 On 12 September 1988, new arbitration rules for CIETAC were adopted
to expand its jurisdiction further and allow foreign nationals to be appointed to
CIETAC’s Panel of Arbitrators, among many other reforms. The new rules (the
1988 CIETAC Rules) took effect on 1 January 1989.57 The second major effort to
enhance CIETAC’s role came in 1994. Based on the work of a drafting group formed
by CIETAC in early 1992,58 CCPIT formally adopted the revised CIETAC
Arbitration Rules (the 1994 CIETAC Rules) on 17 March 1994,59 which were again
amended on 4 September 1995 (the 1995 CIETAC Rules)60 in accordance with the
PRC’s 1994 Arbitration Law. These reform efforts have truly modernized and
internationalized China’s international arbitration system.61
After China’s international arbitration institutions were strengthened, and with
the rapid development of domestic economic reform, which demanded reform of
China’s domestic arbitration system, there emerged a need for enacting a
comprehensive and uniform arbitration law governing both domestic and international
arbitrations in China. To meet this need, the PRC enacted its first formal Arbitration
Law on 31 August 1994, which became effective on 1 September 1995. While the
new arbitration law brought fundamental changes to China’s domestic arbitration
system, it largely conformed to and then strengthened international arbitration
institutions and practices that already existed.
It is clear today that, from 1980 to Hong Kong’s return to China in 1997,
international arbitration systems in both China and Hong Kong experienced major
reform and progressive change. Although they have different historical origins and
reform paths, both have significantly departed from their historical origins and come
more closely in line with modern international practice. As a result, as will be shown
below, they have both—in the context of international commercial arbitration—
developed from “lightweight” to “heavyweight” status.

B. NEW CONSTITUTIONAL ORDER—ONE COUNTRY, TWO SYSTEMS

Hong Kong’s post-1997 constitutional order was provided in its mini-

constitution, the Basic Law of the Hong Kong Special Administrative Region (Basic
Law).62 The Basic Law implements in detail the statements of principles set out in the
56 See State Council’s Official Reply Concerning the Renaming of the Foreign Economic and Trade Arbitration

Commission as the China International Economic and Trade Arbitration Commission and the Amendment of Its Arbitration
Rules, issued by the State Council, 21 Jun. 1988, reprinted in Cheng Dejun et al., note 13 above, at 332.
57 The text of the 1988 CIETAC Rules is reprinted in Cheng Dejun et al., note 13 above, at 333.
58 See Michael J. Moser, China’s New International Arbitration Rules, 11 J.Int.Arb. 3 (September 1994), at 6.
59 The text of the 1994 CIETAC Rules is reprinted in Cheng Dejun et al., note 13 above, at 383.
60 The text of the 1995 CIETAC Rules is reprinted in Wang Shengchang, note 4, above, at 226.
61 For a more detailed account of these reforms, see Part III.A. PRC International Arbitration Institutions, below.
62 Adopted by the Seventh National People’s Congress, 4 Apr. 1990. The text of the Basic Law is available at

<http://www.info.gov.hk/basic law/english/f02.htm>.
58 JOURNAL OF INTERNATIONAL ARBITRATION

Sino-British Joint Declaration of the Government of the United Kingdom of Great

Britain and Northern Ireland and the Government of the People’s Republic of China
(Joint Declaration).63 Under the Joint Declaration and the Basic Law, the HKSAR
enjoys a high degree of autonomy and China and the HKSAR maintain separate legal
and judicial systems.
Article 8 of the Basic Law provides that the laws previously in force in Hong
Kong—i.e. the common law, rules of equity, ordinances, subordinate legislation, and
customary law—shall be maintained, except for any that contravene the Basic Law,
and subject to any amendment by the legislature of the HKSAR. Even provisions of
UK Acts of Parliament formerly applied to Hong Kong may remain in force if being
re-enacted as Ordinances through the localization process. Under Article 18 of the
Basic Law, the laws in force in the HKSAR shall be the Basic Law, the laws previously
in force in Hong Kong as provided for in Article 8, and the laws enacted by the
Legislative Council (LegCo). The PRC’s laws do not apply to Hong Kong, except
those that are listed in Annex III of the Basic Law, according to the procedure under
Article 18 of the Basic Law.64
The Basic Law has, however, made important structural changes to Hong Kong’s
judicial system. The new judiciary received a tremendous boost from the establishment
of a Court of Final Appeal based in Hong Kong to replace the Privy Council as the
court of last recourse. In addition, the former Supreme Court (comprising the Court of
Appeal and the High Court) was replaced with a High Court comprising a Court
of Appeal and a Court of First Instance.65 Despite these structural changes, the pre-
handover judicial system has been kept basically intact and hence continues to function
as a foundation of stability. Today, the new judiciary is to a large extent applying the
same laws as were applied in the past. Foreign judges continue to be appointed to, and
apply common law precedents in, Hong Kong courts (not only in the lower courts,66
but also in the Court of Final Appeal67), and English continues to be the dominant
court language.
Although the Joint Declaration and the Basic Law do not mention Hong Kong’s
arbitration system, by granting a high degree of autonomy to the HKSAR and by
63 The Joint Declaration was signed 19 Dec. 1984 and entered into force 27 May 1985. The text of the Joint

Declaration is available at <http://www.info.gov.hk/trans/jd/jd2.htm>.

64 The current list includes the following PRC laws: (1) Resolution on the Capital, Calendar, National

Anthem and National Flag of the People’s Republic of China; (2) Resolution on the National Day of the PRC;
(3) Declaration of the Government of the PRC on the Territorial Sea; (4) Nationality Law of the PRC; (5)
Regulations of the PRC Concerning Diplomatic Privileges and Immunities; (6) Law of the PRC on the National
Flag; (7) Regulations of the PRC Concerning Consular Privileges and Immunities; (8) Law of the PRC on the
National Emblem; (9) Law of the PRC on the Territorial Sea and the Contiguous Zone; (10) Law of the PRC
on the Garrisoning of the Hong Kong Special Administrative Region; and (11) Law of the PRC on the Exclusive
Economic Zone and the Continental Shelf. See Annex III to the Basic Law and the two decisions of the Standing
Committee of the National People’s Congress on the addition to or deletion from the list of national laws in
Annex III to the Basic Law, adopted respectively on 1 July 1997 and 4 November 1998, available online at <http:/
/www.info.gov.hk/basic_law/english/f02.htm>.
65 Basic Law, Article 81.
66 Basic Law, Article 92.
67 Basic Law, Article 82. See also Hong Kong Court of Final Appeal Ordinance (Ordinance No. 79 of 1995),

available online at <http://www.justice.gov.hk/Home.htm>.

 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 59

solemnly undertaking to maintain Hong Kong’s legal system unchanged until the
middle of the next century, they have, in fact, obligated China to guarantee that the
rapid development of Hong Kong’s international arbitration system undertaken during
the transition period68 and continued after 1997 will not be affected by the change in
Hong Kong’s status.
It is only natural, albeit accidental,69 that Hong Kong’s modern international
arbitration law and institutions were to a large extent formed—and made an integral
part of the legal system—after the Joint Declaration was concluded, given “the
substantial development of autonomous features in implementing the Joint Declaration
during the transition period”.70 Since 1997, both China and the HKSAR have
continued to take separate steps to improve their respective international arbitration
systems. For example, the LegCo passed the Arbitration (Amendment) Bill 1999 on
5 January 2000 to implement the Memorandum of Understanding (MOU) on the
Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the
Mainland and the HKSAR,71 as well as the Arbitration (Amendment) Bill 2000 on
14 June 2000 to facilitate the enforcement in Hong Kong of awards made in countries
or territories that are not parties to the New York Convention.72 In China, the 1995
CIETAC Arbitration Rules were further amended in 1998 to bring them even closer
in line with international practice.73 And on 24 January 2000, the Supreme People’s
Court issued an announcement publishing, in the form of a judicial interpretation, the
Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the
Mainland and the HKSAR in the Mainland China, which took effect on 1 February
2000.74
Moreover, to fulfil its obligations under the Joint Declaration, and in
accordance with the spirit of the Basic Law, China has taken steps to ensure that the
Hong Kong international arbitration system remains intact. In June 1997, the PRC
government formally notified the UN Secretary-General that the New York
Convention would continue to apply to the HKSAR as it had been applied in the

68 According to Article 4 of the Joint Declaration, the transition period was “between the date of the entry

into force of this Joint Declaration and 30 June 1997”.

69 As Robert Morgan has pointed out, “[a]lmost by accident, the transition of sovereignty over the territory

has coincided with major reform of its arbitration law”. See Robert Morgan, note 50, above, at 18.
70 See Xiaobing Xu and George D. Wilson, The Hong Kong Special Administrative Region as a Model of Regional

External Autonomy, 32 Case W. Res. J. Int’l L. 1, (Winter 2000), at 35.

71 The Bill is available online at <http://www.legco.gov.hk/yr98-99/english/bills/c177_e.htm>.
72 See “Arbitration (Amendment) Bill 2000 passed”, the story is available online at <http://

www.info.gov.hk/gia/general/200006/14/0614234.htm>. The text of the bill was published in 4 Government of

the HKSAR Gazette, 26 May 2000, no. 21, Legal Supp. 3. It is also available online through the official Hong
Kong government website <http://www.info.gov.hk>. While the Arbitration (Amendment) Ordinance (No. 2 of
2000) facilitates the enforcement of mainland awards, the Arbitration (Amendment) (No. 2) Ordinance (No. 38
of 2000), effective 23 June 2000, will facilitate the enforcement of Macanese and Taiwanese awards in Hong Kong.
However, the enforcement of the former is based on the New York Convention, while the enforcement of the
latter is based on the same terms as domestic awards.
73 For a detailed discussion, see Part III.A PRC International Arbitration Institutions, below.
74 The Arrangement was passed 18 Jun. 1999, at the 1069th meeting of the Judicial Committee of the

Supreme People’s Court. The announcement and the Arrangement were published 28 Jan. 2000 in the People’s
Court Daily, available online at <http://www.rmfyb.com.cn/html/2000/01/28/00120000128021.htm>.
60 JOURNAL OF INTERNATIONAL ARBITRATION

past,75 and this has ensured that there will continue to be no commercial arbitration
requirement in enforcing a foreign arbitral award in Hong Kong. Most importantly,
after hesitation and delay, which led to a legal vacuum for more than two years after
the handover,76 in June 1999 the PRC signed the MOU with the HKSAR
government to ensure mutual enforcement of Hong Kong arbitral awards in China
and PRC arbitral awards in Hong Kong, essentially in accordance with the New
York Convention.77
Not only do the two international arbitration systems remain separate and
continue to develop separately, but they also continue to be supported by their
respective, albeit different, judicial systems. While, in general, both judicial systems are
supportive of international arbitration,78 it is China, not Hong Kong, that has often
been criticized for having problems in enforcing arbitral awards.79 Compared to the
PRC’s judiciary, for instance, the HKSAR’s judiciary enjoys far better legal training, is
not burdened by corruption and local protectionism, and has clearly been equipped
with well-established precedents and more sophisticated procedures to handle setting
aside or enforcing arbitral awards. Without the many problems that have often been
seen as the underlying cause for the failure of enforcement of arbitral awards in
mainland China—and hence have subjected the PRC’s judiciary to heightened
scrutiny abroad—Hong Kong’s judiciary has provided strong support to international

75 On 6 June 1997, the Government of China notified the Secretary-General of the following: “In

accordance with the Declaration of the Government of the People’s Republic of China and the United Kingdom
of Great Britain and Northern Ireland on the question of Hong Kong signed on 19 December 1984, the People’s
Republic of China will resume the exercise of sovereignty over Hong Kong with effect from 1 July 1997. Hong
Kong will, with effect from that date, become a Special Administrative Region of the People’s Republic of China
and will enjoy a high degree of autonomy, except in foreign and defense affairs, which are the responsibility of the
Central People’s Government of the People’s Republic of China. The Convention will apply to Hong Kong
Special Administrative Region with effect from 1 July 1997. The Convention will be applied in the Hong
Kong Special Administrative Region only to the recognition and enforcement of awards made in the territory of
another Contracting State. The Government of the People’s Republic of China will assume responsibility for the
international rights and obligations arising from the application of the Convention to Hong Kong Special
Administrative Region.” Subsequently, on 10 June 1997, the Government of the United Kingdom of Great Britain
and Northern Ireland notified the Secretary-General of the following: “In accordance with the Joint Declaration
of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the
People’s Republic of China on the Question of Hong Kong signed on 19 December 1984, the Government of
the United Kingdom will restore Hong Kong to the People’s Republic of China with effect from 1 July 1997. The
Government of the United Kingdom will continue to have international responsibility for Hong Kong until that
date. Therefore, from that date the Government of the United Kingdom will cease to be responsible for the
international rights and obligations arising from the application of the [said Convention] to Hong Kong.” See
<http://untreaty.un.org/ENGLISH/bible/englishinternetbible/partI/chapterXXII/treaty1.asp>.
76 Compared to the difficulties faced by the Berlin Court of Arbitration (formerly the Court of Arbitration

attached to the Chamber of Foreign Trade of the former German Democratic Republic) after the reunification of
the West and East Germany in 1990, the hesitation and delay in reaching the agreement between China and Hong
Kong has been much less problematic. See Jörg Kirchner and Arthur L. Marriott, International Arbitration in the
Aftermath of Socialism: The Example of the Berlin Court of Arbitration, 10 J.Int.Arb. 1 (Mar. 1993), at 5.
77 For a more detailed discussion, see Part V Mutual Enforcement of Arbitral Awards, below.
78 It is beyond the scope of this article to provide a detailed assessment of the enforcement of arbitral awards

by the judiciaries in China and Hong Kong. However, a limited discussion of the enforcement issue of
“convention awards” is offered in Part IV.C. Role of the UNCITRAL Model Law and the New York Convention,
below.
79 For a recent, critical study of the enforcement of arbitral awards in China, see Randall Peerenboom, The

Evolving Regulatory Framework for Enforcement of Arbitral Awards in the People’s Republic of China, published online in
the University of Hawaii’s 1 Asia Pac. L. & Pol’y J. (June 2000), available at <http://www.hawaii.edu/aplpj/>.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 61

arbitration in Hong Kong.80 While China is striving to improve its enforcement

mechanism in regard to the enforcement of arbitral awards, it can only be expected
that—particularly with the passage of the Arbitration (Amendment) Bill 2000—Hong
Kong’s new judiciary will play an even more supportive role in the future.

C. ECONOMIC DEVELOPMENT AS THE DRIVING FORCE FOR ARBITRATION

An important factor that has helped push China and Hong Kong into their
current prominent status in the international arbitration landscape is the rapid
economic development in Asia. In other words, the rapid development of new
arbitration laws and practices in China and Hong Kong can be attributed to economic
necessity. Arbitration is essentially a service industry. On the one hand, international
arbitration services follow international trade and commerce. Economic development
demands arbitration services. On the other hand, international arbitration services in
turn help to promote the economic development, for they provide a degree of legal
certainty to the international business community.81 It is almost self-evident that
international commercial arbitration has been well-developed in almost all advanced
industrial countries and regions in the world. As was pointed out nearly 10 years ago,
“there is a growing feeling in Asia that, as the balance of trade power shifts from West
to East, so should the arbitral facilities”.82
When considering Hong Kong’s arbitration law reform proposals in the early
1980s as part of the territory’s ongoing legal reform, the Law Reform Commission
noted that there was a strong and widespread belief that Hong Kong had the potential
to develop into the leading international arbitration centre in the region, and that the
driving forces behind such a belief were several interrelated economic factors.83
According to the Law Reform Commission, Hong Kong by then had already
developed into a leading financial and commercial centre in Asia, and in such a centre,
international arbitration facilities were arguably among the services that should have
been readily available. Moreover, the vitality and increased size of the economy of
Hong Kong itself—evidenced by its position as the world’s third-busiest container
port, the size of the shipping fleets owned there, the number and scope of building and
engineering contracts, the international trade financially serviced by local and
international institutions based in Hong Kong, and the size and sophistication of the
financial and commercial sectors—all pointed to a potential market arising within
Hong Kong for arbitration services.

80 As has been pointed out, Hong Kong’s “judiciary is supportive of arbitration and … parties will find a

judiciary well attuned to the needs of the international commercial community”. See Neil Kaplan et al., note 6
above, at 239.
81 See Wang Guiguo, The Unification of the Dispute Resolution System in China: Cultural, Economic and Legal

Contributions, 13 J.Int.Arb. 2 (June 1996), at 5.

82 See Neil Kaplan, et al., note 6 above, at 238.
83 See generally Law Reform Commission of Hong Kong, Report on Commercial Arbitration (Topic 1), 11 Dec.

1981, at 5–6.
62 JOURNAL OF INTERNATIONAL ARBITRATION

TABLE 1: CIETAC ANNUAL CASELOAD, 1984–89

1984 1985 1986 1987 1988 1989

No of cases 20 37 75 129 162 231

Source: CIETAC

Added to Hong Kong’s economic development is the fact that China’s reform and
opening to the world since the late 1970s has rapidly increased its foreign trade and
other co-operative economic activities, such as joint ventures. Parties thereto generally
prefer arbitration as a means of resolving disputes that may arise rather than court
proceedings.84 Thus, China’s sizeable economic development created a huge potential
for increased arbitration services.85 Although China had set up its own international
commercial arbitration institutions, such as CIETAC, arbitration in China had not
always been acceptable to foreign contracting parties, who preferred—for reasons of
convenience, cost, perceived neutrality, etc.—venues outside China, such as
Stockholm, London, Zurich, and Geneva, Paris and New York. However, these
venues abroad were, and are still, usually not preferred by Chinese parties for similar
reasons. Therefore, both foreign and Chinese parties’ quests for a convenient neutral
venue have provided Hong Kong, traditionally a bridge between the East and the
West, with an opportunity to become an attractive, alternative choice for international
arbitration services.86
Also added to Hong Kong and China’s economic development is the fact of rapid
economic development throughout Asia. Such development has produced large,
supra-national contracting parties, who also need, and prefer, international arbitration
to resolve disputes. Nevertheless, the increased demand for international arbitration in
the region has not been met by existing international arbitration centres there. For
instance, the Regional Centre for Arbitration in Kuala Lumpur (KLRCA), established
in 1978 by the Asia-African Legal Consultative Committee, had its first international
arbitration case only in 1986.87 Compared to Kuala Lumpur, Hong Kong can be

84 As has been pointed out, “while arbitration in China is imperfect, it remains the best alternative for

international investors”. See Fredrick Brown and Catherine A. Rogers, The Role of Arbitration in Resolving
Transnational Disputes: A Survey of Trends in the People’s Republic of China, 15 Berk. J. Int’l Law 329 (1997), at 330.
85 This potential has been proved, at least partially, by the caseload statistics of CIETAC between 1984 and

1989: see Table 1. By way of historical comparison, it is interesting to note that, according to Wang Shengchang,
CIETAC handled a total of 177 cases between 1956 and 1986. See Wang Shengchang, note 4 above, at 68. If one
subtracts the total number of 132 cases between 1984 and 1986, CIETAC handled only 45 arbitration cases during
1956 and 1983.
86 Indeed, as has been pointed out, “Hong Kong has become a major international arbitration centre within

the South East Asia region over the past ten years, in relation particularly to commercial contracts involving parties
from the People’s Republic of China.” See Robert Morgan, note 32, above, at 1.
87 See The Center’s Statistics—Year Ending 1999, The Regional Center for Arbitration in Kuala Lumpur Arb.

News (May 2000), at 2. For recent figures, see Table 4, below.

 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 63

viewed, and has seen itself, as having many advantages to meet the increasing demand
in the region.88
In the PRC, economic considerations are also the major reason for
government promotion of international arbitration as the favoured means for
dispute resolution. While commenting on the fact that the formulation of the PRC
Arbitration Law demonstrates that China’s arbitration system has come into line
with predominant arbitration systems worldwide, the Legislative Affairs
Commission of the Standing Committee of the National People’s Congress of the
PRC has asserted that the Arbitration Law will play an important role in promoting
China’s commerce with other countries, its participation in competition in the
world market, and economic growth and trade internationally. 89 It also seems
obvious why China’s international arbitration system provides legal and/or natural
persons from Hong Kong, Macau, and Taiwan with the same treatment as legal
and/or natural persons from foreign countries. As Hong Kong, Macau and Taiwan
are all on the top-ten list of major sources of “foreign” investment in the PRC,
bestowing equal treatment upon them encourages a continued inflow of that
substantial investment.90
As the US Supreme Court said in Scherk v. Alberto-Culver Co., 417 US 506, 507
(1974), the right of parties to agree to arbitrate a broad range of disputes is “an almost
indispensable precondition to achievement of the orderliness and predictability
essential to any international business transaction”. Clearly, as arbitration is the
preferred way to solve disputes by the international business community, Hong Kong
and China, like many other countries in the Pacific Rim, have viewed the
development of their own arbitration laws and institutions as a means to help the
continued and smooth growth of their foreign trade and economic relations.
88 It is perhaps for similar reasons that there has been a rapid increase in the number of international

arbitration institutions throughout the Pacific region. Australia established the Australian Centre for
International Commercial Arbitration (ACICA) in 1985 on the initiative of the Institute of Arbitrators of
Australia. Singapore set up its own Singapore International Arbitration Centre (SIAC) in May 1990. See David
Weber, International Arbitration Is Gaining Acceptance Among Pacific Rim Traders, 7 Cal. Law. (Mar. 1987), at 29.
89 See Background of and Guidelines for the Formulation of China’s Arbitration Law, in Legislative Affairs

Commission of the Standing Committee of the National People’s Congress of the PRC, ed., Arbitration Laws of
China, note 53, above, at 18. After CIETAC’s caseload topped 900 in 1995, Guo Dongpo, President of the
CCPIT, was reported as having said that “foreign arbitration, mediation and trademark agency services carried out
by the CCPIT have helped to improve China’s investment climate, as well as Sino-foreign economic, trade and
technological co-operation”. See Non-Governmental Foreign Economic, Trade Ties Advance, Xinhua News Agency, 30
Jan. 1996, available in LEXIS, ASIAPC Library, Xinhua File, Item No: 0130218. Indeed, in the early years of
PRC reform, many western lawyers and scholars criticized China’s domestic methods of dispute resolution as
lacking speed, coherence, uniformity, and predictability—all features necessary for continued expansion of
international trade—and warned that if China could not handle international commercial disputes in a
satisfactorily neutral manner, foreign investor confidence in China would diminish. See, e.g., Comment,
Commercial Dispute Resolution Between the United States and the People’s Republic of China: Problems and Prospects, 7
Suffolk Transnat’l L. Rev. (1983), at 346; Jerome Cohen, The Role of Arbitration in Economic Cooperation with China,
in Michael J. Moser, ed., Foreign Trade, Investment, and the Law in the People’s Republic of China, Oxford University
Press, New York, 1984, at 296–297.
90 According to figures provided by China’s Ministry of Foreign Economic and Trade Cooperation, as of the

end of May 2000, the top ten sources of foreign investments in China are Hong Kong, the United States, Japan,
Taiwan, Singapore, the Virgin Islands, Korea, the UK, Germany and Macau. See Actual Foreign Investment in China
Tops $320 Billion, People’s Daily (Overseas Edition), 19 June 2000, at 1.
64 JOURNAL OF INTERNATIONAL ARBITRATION

The mutually beneficial relationship between economic development and

arbitration services also includes the direct economic benefits that a busily
functioning service industry of international arbitration can bring to a local
economy through achieving the arbitration institutions’ economic self-sustenance
as well as other benefits. Arbitration in the HKIAC is such a case in point.91 As one
commentator has pointed out, as a result of the rapid development of international
arbitration in Hong Kong, a considerable amount of international arbitration
activity takes place there, contributing to the territory’s “invisible” earnings.92
Indeed, HKIAC initially relied on private donations and government funds. Now it
is self-supporting.93

D. THE COMMON HERITAGE FAVOURING MEDIATION WITHIN ARBITRATION94

Although China, including Hong Kong, has a relatively short history of
international arbitration,95 it has a long tradition of using mediation and conciliation
(tiaojie)96 as the favoured means of dispute resolution. Chinese and foreign scholars
studying China’s dispute resolution practices are in universal agreement that the
Chinese practice is to prefer dispute settlement by mediation or conciliation
between disagreeing parties.97 Mediation/conciliation has not only played a
prominent role in settling disputes among people and enabling the members of a

91 The busy arbitration schedule of CIETAC should arguably make it a case even more on point. As one

CIETAC arbitrator has pointed out, CIETAC is fully supported financially by its own operations. See John Mo,
Probing the Uniformity of the Arbitration System in the PRC 17 J.Int.Arb. 3 (June 2000), at 19.
92 See Robert Morgan, The Transition of Sovereignty to the People’s Republic of China and the Arbitration Regime

in Hong Kong: The Issues and Their Management, 12 Mealey’s Int’l Arb. Rep. (May 1997) (special report), at 5. Such
“invisible” earnings include the income for the HKIAC (if involved), local hotels, and other relevant service
providers that is generated from holding an arbitration in Hong Kong.
93 HKIAC originally received government assistance in a sum equal to that raised by the private sector, as

well as public premises at a nominal rent. In 1989, it again received HK$ 19 million from the government, which
was provided by the Finance Committee of the LegCo. HKIAC’s income is now solely from the fees it receives
for hiring out its hearing rooms and for making appointments of arbitrators. See Neil Kaplan, et al., note 6 above,
at 237–238.
94 The term means the combination of arbitration with conciliation during arbitration proceedings. It does

not refer to other combinations of arbitration and conciliation, such as conciliation followed by arbitration—with
the conciliator continuing to serve as arbitrator for the same case. For a discussion of possible forms of combining
arbitration and conciliation, see, e.g., James T. Peter, Med-Arb in International Arbitration, 8 Am. Rev. Int’l Arb. 83
(1997), at 90–102; Michael E. Schneider, Combining Arbitration with Conciliation, in International Dispute Resolution:
Towards An International Arbitration Culture, (General editor Albert Jan van den Berg; with the assistance of the
International Bureau of the Permanent Court of Arbitration, The Hague, Boston: Kluwer Law International,
1998), at 67–77.
95 Studies on China’s history of international arbitration are rare. For an interesting description of some

international arbitration practices in the Qing Dynasty (1644–1911), see William T. Rowe, Hankow: Commerce and
Society in a Chinese City, 1796–1889 Stanford, Stanford Univ. Press, 1984, at 146–147, 150–151 and 294.
96 “Mediation” and “conciliation” are used interchangeably in this article. For a discussion of the difference

between the two terms, see Kenji Tashiro, Conciliation or Mediation during the Arbitral Process: A Japanese View, 12
J.Int.Arb. 2 (June 1995), at 119, n. 1.
97 For some more recent studies, see, e.g., Johannes Trappe, Conciliation in the Far East, 5 Arb. Int’l 173

(1989); James V. Feinerman, The History and Development of China’s Dispute Resolution System, in Chris Hunter, ed.,
Dispute Resolution in the PRC: A Practical Guide to Litigation and Arbitration in China (Hong Kong: Asia Law &
Practice, 1995), at 5–21; Wang Guiguo, note 81 above, at 5–9; Stanley B. Lubman, Dispute Resolution in China after
Deng Xiaoping: “Mao and Mediation” Revisited, 11 Colum. J. Asian L. 229 (Fall 1997).
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 65

community to live in peace in both traditional98 and contemporary China,99 but it

has also been employed to deal with international commercial disputes arising from
Chinese-foreign economic relations. In practice, not only does ad hoc and
institutional mediation continue to be used for settlement of international
commercial disputes,100 but also, more importantly, mediation is employed
innovatively in combination with arbitration. Although China and Hong Kong have
joined other nations in internationalizing their arbitration systems in recent years,
their common heritage of a culture that favours mediation has enabled them to lead
the way in the world in using the technique of “mediation within arbitration”.
The use of mediation in combination with, or “within”, arbitration is a
distinctive feature of China’s international arbitration system.101 Although FTAC
applied this technique from the beginning of its work, its Provisional Rules of
Procedure (1956) did not include such a feature. The practice was first provided in
Article 19 of the Provisional Rules of Procedure of the Maritime Arbitration
Commission (MAC) of the CCPIT, adopted on 1 August 1959.102 Only after many
years of experimenting and practising this technique103 did the 1988 CIETAC Rules
for the first time stipulate in Article 37 that both CIETAC and the arbitral tribunal
may conciliate cases under their cognizance. Then the 1994 CIETAC Rules made
some important changes and set forth more detailed rules.104 Under the new rules,
only the arbitral tribunal, not CIETAC, may conciliate the case under its cognizance
98 Stories of mediation appeared as part of the oldest Chinese folklore in China’s earliest historical record.

Many real-life mediation cases were also recorded in the authoritative history books of each dynasty. During the
Ming Dynasty (1368–1644), each village was to build a Shenming Ting (Public Notice Pavilion), where the local
elders/officials listened to the disputes of the people as judges and interceded for them to arrive at peaceful
solutions. See Cao Pei, The Origins of Mediation in Traditional China, 54 Dispute Resolution J. 32 (May 1999).
99 According to Ren Jianxin, Chief Justice of the Supreme People’s Court, the people’s mediation

committees in the PRC have settled cases covering a wide array of topics such as divorce, inheritance, parental and
child support, alimony, debts, real property, production, and torts, as well as other civil and economic disputes and
criminal misdemeanour cases. They have also played an important role in preventing crime, reducing litigation in
the courts, enhancing the people’s unity, and promoting social stability. Over seven million disputes are
satisfactorily resolved through the use of mediation each year in China, far surpassing the number of cases brought
in Chinese courts. See Ren Jianxin, Mediation, Conciliation, Arbitration and Litigation in the People’s Republic of China,
15 Int’l Bus. Law. 395 (Oct. 1987).
100 For a brief discussion of ad hoc and institutional mediation in international commercial dispute resolution

in China, see Wang Shengchang, note 4 above, at 34–47.

101 Although China is the strongest advocate of this technique, similar practices have also been developed and

promoted in other countries, such as Japan. For example, in as early as September 1962, Section 24 of the Rules
of the Maritime Arbitration of Japan Shipping Exchange Inc. (Ordinary Rules) provided that “[a]t any stage of
the arbitration proceeding the Arbitrators may, with the consent of the parties, settle the whole or part of the
dispute by mediation”. However, this practice has yet to be formally enacted into Japan’s Code of Civil
Procedure, which has long supported mediation in court as well as mediation prior to litigation since it was
adopted in 1891. According to the latest available statistics, out of all the applications the Tokyo Maritime
Arbitration Commission (TOMAC) accepted from April 1985 to December 1995, 44.9 percent were settled by
mediation initiated either by the parties or arbitrators during arbitral proceedings. See Takao Tateishi, Mediation
as a Pre-Stage to Arbitration—Is it the Way Ahead for ADR in Japan? 41 Bulletin of the Japan Shipping Exchange,
Inc. 17 (September 2000), at 20.
102 Article 19 states: “The Maritime Arbitration Commission may endeavour to settle by conciliation any

dispute of which it has taken cognizance.” The text of the MAC Provisional Rules is reprinted in Cheng Dejun
et al., note 13 above, at 440–448.
103 For an early report on the use of this technique, see Jen Tsien-Hsin and Liu Shao-Shan, National Report:

People’s Republic of China, 3 Y.B. Com. Arb. 153 (1978), at 154–156.

104 See Articles 46–51 of the 1994 CIETAC Rules.
66 JOURNAL OF INTERNATIONAL ARBITRATION

in the process of arbitration if both parties have a desire for conciliation, or if one
party so desires and the other party agrees to it (Articles 45 and 47). There is no fixed
procedure for this technique. The arbitration tribunal may conciliate cases in any
manner it deems appropriate (Article 46). The arbitration tribunal may help the
parties reach a voluntarily amicable agreement and then end the case by making an
arbitral award in accordance with the contents of such agreement—unless otherwise
agreed by the parties (Article 49). Should conciliation fail, the arbitration procedure
resumes (Articles 47 and 51), and
“any statement, opinion, view or proposal which has been made … accepted or rejected by
either party or by the arbitration tribunal in the process of conciliation shall not be invoked as
grounds for any claim, defense and/or counterclaim in the subsequent arbitration, proceedings,
judicial proceedings or any other proceedings.” (Article 50).105
Finally, Articles 51 and 52 of the 1994 Arbitration Law provides unambiguous
legislative support to this practice. Under Article 51, both written conciliation
statements and arbitral awards based on settlement agreements reached by the parties
through the arbitrators’ conciliation during arbitration proceedings are judicially
enforceable.106
Based on China’s own experience, Chinese scholars strongly believe that the
combination of the two procedures has more advantages than does keeping them
apart.107 First, separate procedures can be avoided and substantial time and money
can be saved;108 second, the Chinese experience shows that more of the successful
conciliation cases are conducted by arbitrators during arbitration proceedings than by
conciliators in the process of stand-alone conciliation;109 third the combination of
arbitration with conciliation can make good use of the advantages of both. An
arbitral award based on a settlement agreement may not only satisfy both parties’

105 For an empirical account of CIETAC practice, see Huang Yanming, Mediation in the Settlement of Business

Disputes: Two Typical Examples of Cases Settled by Mediation at the CIETAC’s Shenzhen Commission, 8 J.Int.Arb. 4
(1991), at 23.
106 As written conciliation statements and arbitration awards based on settlement agreements have equal legal

effect in China, it is not necessary to obtain the latter for performance or enforcement purposes in China.
However, if a settlement agreement reached by the parties through the arbitrators’ conciliation needs to be
performed or enforced abroad, an arbitral award shall be made. See Legislative Affairs Commission of the Standing
Committee of the National People’s Congress of the PRC (ed.), Arbitration Laws of China, note 53, above, at
79–80. Thus Article 49 of the 1998 CIETAC Rules stipulates that “the arbitration tribunal shall end the case by
making an arbitration award in accordance with the contents of the settlement agreement unless otherwise agreed
by the parties”.
107 See Tang Houzhi, Developing An Asia-Pacific Arbitration System, in CIETAC and CMAC, China Int’l Com.

Arb. Y.B. 1992, at 136. See also Cheng Dejun et al., note 13 above, at 60.
108 See also Alan Shilton, Med-Arb?—Why Not Try Arb-Med? 62 Arbitration 161 (August 1996), at 162;

Harold I. Abramson, Protocols for International Arbitrators Who Dare to Settle Cases, 10 Am. Rev. Int’l Arb. 1 (1999),
at 3.
109 Indeed, as one commentator has pointed out “[t]he best time to settle an international business dispute can

be after the international arbitration proceeding has been commenced. Just like in court litigation, parties may be
ready to settle only after the adjudicatory process has begun and even has progressed.” See Harold I. Abramson,
id., at 1.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 67

needs and thus transform antagonists into friends but may also be enforced in
court.110
Hong Kong was among the first to formally adopt this Chinese-style practice. The
1982 Arbitration Ordinance took the initial step of allowing a conciliator to continue
to serve as arbitrator if the parties made no objection (Section 2A). However, the 1982
Ordinance only allowed conciliation as an independent proceeding prior to arbitration,
and the conciliator-turned-arbitrator served only as a means for making an easy
transition from conciliation to arbitration. It was the Arbitration (Amendment) (No. 2)
Ordinance 1989 that formally adopted the Chinese practice of combining arbitration
and conciliation proceedings on a voluntary basis.111 Under Section 2B of the 1989
Ordinance, an arbitrator can act as a conciliator in an effort to reach a settlement of the
dispute during the course of, i.e. within, an arbitration.112 Section 2C provides that
“the settlement agreement shall, for the purpose of its enforcement, be treated as an
award on an arbitration agreement and may, by leave of the Court or a judge thereof,
be enforced in the same manner as a judgment or order to the same effect.” So far, the
experience of the combination of mediation and arbitration in Hong Kong has also
been viewed as favourable.113 It has been rather proudly proclaimed that “Hong Kong
is uniquely placed to provide dispute resolution services. Its empathy with the Asian
traditions of mediation and its skill at blending the best of east and west have created
the prime centre in Asia for the resolution of disputes.”114
The success of this approach as used in China, Hong Kong and some other
countries has received increased attention but mixed reactions from international
arbitration circles.115 To its critics, who, in the words of the general counsel of the

110 As one Australian commentator has pointed out, the combined use of conciliation and arbitration can on

the one hand “help breathe new life into arbitration”, which is often seen as being out of touch with the real
issues and unable to satisfy the parties’ needs, and on the other hand “add backbone to conciliation”, which on
its own lacks binding force. The practice “can deliver not only justice but also practical and sensible awards. In
particular, the model allows the arbitrator to get to the very heart of the dispute and reach proper conclusions
on the law and merits.” See Russell Thirgood, A Critique of Foreign Arbitration in China, 17 J.Int.Arb. 4 (June
2000), at 95–97, 101.
111 See Sections 2B and 2C of the 1989 Ordinance. See also Law Reform Commission of Hong Kong, Report

on the Adoption of the UNCITRAL Model Law of Arbitration (Topic 17), Sept. 1987, at 37–39; Neil Kaplan, et al.,
note 6 above, at 225–226.
112 It should be noted that Section 2B also provides that: “(2) An arbitrator or umpire acting as conciliator (a)

may communicate with the parties to the reference collectively or separately; (b) shall treat information obtained
by him from a party to the reference as confidential, unless that party otherwise agrees or unless subsection (3)
applies. (3) Where confidential information is obtained by an arbitrator or umpire from a party to the reference
during conciliation proceedings and those proceedings terminate without the parties reaching agreement in
settlement of their dispute, the arbitrator or umpire shall, before resuming the arbitration proceedings, disclose to
all other parties to the reference as much of that information as he considers is material to the arbitration
proceedings. (4) No objection shall be taken to the conduct of arbitration proceedings by an arbitrator or umpire
solely on the ground that he had acted previously as a conciliator in accordance with this section.”
113 See, e.g., an assessment, on file with the authors, made by the Secretary-General of the HKIAC,

Christopher To, and sent via e-mail dated 17 July 2000.

114 This is quoted from HKIAC’s web page at <http://www.hkiac.org/hongkong.htm>.
115 For some US discussions of the pros and cons of this practice, see, e.g., Barry C. Bartel, Med-Arb as a

Distinct Method of Dispute Resolution: History, Analysis and Potential, 27 Willamette L. Rev. 661 (1991); M. Scott
Donahey, Seeking Harmony: Is the Asian Concept of the Conciliator/Arbitrator Applicable in the West? 50 Dispute
Resolution J. 74 (April 1995); Stephen J. Burton, Combining Conciliation with Arbitration of International Commerce
Disputes, 18 Hastings Int’l & Comp. L. Rev. 637 (1995).
68 JOURNAL OF INTERNATIONAL ARBITRATION

American Arbitration Association, believe the “conventional wisdom that arbitration

and mediation operate best when employed as separate processes, since each has its
own purpose and ultimate morality”,116 the practice is risky because it raises the due
process and natural justice concern that the private caucus meetings, or “shuttle
diplomacy”, conducted by the arbitrator-turned-conciliator in the conciliation process,
violate the right to know and be able to answer an opponent’s case if the information
provided during private caucus remains confidential in the following arbitration
proceedings after attempts at conciliation fail;117 that the impartiality of the conciliator-
arbitrator in the remaining arbitration process is in doubt as he may prejudge the case
during conciliation efforts;118 and that a conciliator-arbitrator may confuse his dual
role.119 But to its proponents, who think that the conventional wisdom is unnecessarily
cautious and conservative and “symptomatic of a Western view that completely
distinguishes conciliation from arbitration rather than seeing the two modes as part of a
larger dispute resolution system”,120 not only does the practice offer many benefits, but
also the concerns and critics can be addressed if conciliation is conducted on a fully
informed121 and voluntary122 basis.123
Despite this seemingly persistent controversy, it seems that the practice has
gradually expanded to other parts of the world and found more and more supporters in
international ADR circles. As one commentator has pointed out, “if there is an open
door, one can use it both ways”.124 In response to this development, the International
Arbitration Conference held in Seoul on 10–12 October 1996, sponsored by the

116 Michael F. Hoellering, Mediation & Arbitration: A Growing Interaction, 52 Dispute Resolution J. 23 (1997),
at 25.
117 See, e.g., James T. Peter, Med-Arb in International Arbitration, 8 Am. Rev. Int’l Arb. 83 (1997), at 94.
118 See, e.g., Gerold Herrmann, Conciliation as a New Method of Dispute Settlement, in New Trends in the
Development of International Commercial Arbitration and the Role of Arbitral and Other Institutions (ICCA Congress
Series No. 1) (Kluwer Law International, Deventer, The Netherlands, 1983), at 161; Christian Bühring-Uhle,
Arbitration and Mediation in International Business: Designing Procedures for Effective Conflict Management (Kluwer Law
International, The Hague, The Netherlands, 1996), at 203, 204.
119 See Lon L. Fuller, Collective Bargaining and the Arbitrator, 1962 Proc. of the 15th Ann. Mtg of the Nat’l Acad.

of Arb. 8 (1962), at 29–30, 33, (arguing that a mediator-arbitrator may confuse the two distinctive roles of
mediator and arbitrator, each of which calls for different purposes and moralities—with mediation focused on
settlement and arbitration focused on decisions according to the law). For specific concerns regarding CIETAC
practice, see Stanley Lubman and Gregory Wajnowski, International Commercial Dispute Resolution in China: A
Practical Assessment, 4 Amer. Rev. Int’l. Arb. 107 (1993), at 127 (suggesting that the arbitrators may be more likely
to base their decision on equity rather than strict application of the law when mediating a case, and thus unduly
benefit the disputant with the weakest legal argument); Luming Chen, Some Reflections on International Commercial
Arbitration in China, 13 J.Int.Arb. 2 (1996), at 121, 152 (reporting that once the arbitrators have indicated their
views, the parties may feel pressured to settle even if they think they are entitled to a more favourable award under
the law, for fear of angering the arbitrators).
120 See, e.g. Thirgood, note 110 above, at 95–96.
121 See David C. Elliott, Med-Arb, Fraught with Danger or Ripe with Opportunity? 62 Arbitration 175 (August

1996) at 176–177. In China, in spite of the fact that both the 1994 Arbitration Law and the 1998 CIETAC Rules
do not require the arbitral tribunal to disclose information obtained during a caucus, the actual practice of
conciliation is said to be conducted on a fully informed basis. See Tang Houzhi, Is There an Expanding Culture that
Favors Combining Arbitration with Conciliation or Other ADR Procedures?, in International Dispute Resolution: Towards
an International Arbitration Culture, note 94, above, at 112.
122 See the opinion of Neil Kaplan, quoted in Tang Houzhi, note 94, above, at 113.
123 For suggestions of more detailed protocols that a conciliator-arbitrator should adopt when conducting

conciliation, see Harold I. Abramson, note 108, above, at 7–17.

124 See Johannes Trappe, note 97, above, at 188.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 69

International Council for Commercial Arbitration, devoted one of its four topics to the
question: “Is there an expanding culture that favours combining arbitration,
conciliation or other dispute resolution procedure?”125 According to two major
speakers at that conference, combinations of arbitration with conciliation have indeed
become more acceptable and possibly been used more frequently.126 In addition to
China and Hong Kong, a number of countries, such as Australia, Canada, Singapore,
India and Germany have adopted similar mechanisms to combine arbitration and
mediation/conciliation in their arbitration laws, and a number of international
arbitration bodies in Japan, Switzerland and other countries have done the same in
their arbitration rules. 127

IX. INSTITUTIONAL DEVELOPMENT

This part of the article will provide a general overview of all of the PRC’s and
HKSAR’s arbitration organizations. However, the primary focus will be on CIETAC
and HKIAC, the two administrative arbitration institutions in China and Hong Kong.

A. PRC INTERNATIONAL ARBITRATION INSTITUTIONS

These institutions consist of CIETAC (1956), CMAC (1959) and the China
Arbitration Association (CAA).

3. CIETAC (1956)

The China International Economic and Trade Arbitration Commission

(CIETAC)128 is the best-known international commercial arbitration institution in
China. Originally, it was set up in April 1956 as an arbitration body within the China
125 See International Council for Commercial Arbitration, International Dispute Resolution: Towards An

International Arbitration Culture, note 94 above, at 57–135.

126 See Michael E. Schneider, note 94, above, at 57. Tang Houzhi, note 94 above, at 101.
127 For national arbitration laws, see, e.g., § 27 of the Australian Commercial Arbitration Act, as adopted by

states, available online at <http://www.internationaladr.com/e.htm>; § 17 of the Singapore 1994 International

Arbitration Act; ch. 6 of the 1996 Indian Arbitration and Conciliation Act, available online at <http://
www.ficci.com/icanet/chapter6b6.htm>; and § 1053, Book X of the German Code of Civil Procedure, available
at <http://www.dis-arb.de/>. In Canada, the International Commercial Arbitration Acts adopted by the various
provinces have an identical provision stipulating that “for the purpose of encouraging settlement of a dispute, an
arbitral tribunal may, with the agreement of the parties, employ mediation, conciliation or other procedures at any
time during the arbitration proceedings and, with the agreement of the parties, the members of the arbitral
tribunal are not disqualified from resuming their roles as arbitrators by reason of the mediation, conciliation or
other procedure.” See, e.g., § 5 of Alberta International Commercial Arbitration Act 1986, available online at
<http://www.gov.ab.ca/qp/ascii/acts/I06P6.TXT>. For arbitration rules, see, e.g. Rule 39 of the Rules of the
JCAA (1997), available online at <http://www.jcaa.or.jp/e/arbitration-e/kisoku-e/shouji-e.html>; § 28 of the
Rules of the Maritime Arbitration of Japan Shipping Exchange Inc. (Ordinary Rules) (1996), available online at
<http://www.jseinc.org/en/tomac/index.htm>; Art. 21 of the Arbitration Rules of the Geneva Chamber of
Commerce and Industry, available at <http://www.cci.ch/geneve/en/arules.htm#Procedure>; and Art. 45 of the
International Arbitration Rules of the Zurich Chamber of Commerce, available at <http://www.zurichcci.ch/
int_arb_rules.htm>. For more examples, see Tang Houzhi, note 94, above, at 103–107.
128 The official CIETAC website is at <http://www.ccpit.org/engVersion/indexEn.html>.
70 JOURNAL OF INTERNATIONAL ARBITRATION

Council for the Promotion of International Trade (CCPIT) or China Chamber of

International Commerce (CCOIC) to resolve China’s foreign trade disputes. Now its
jurisdiction has been expanded to resolving international or foreign-related, contractual
or non-contractual, economic and trade disputes (Article 1, CIETAC Rules).
As a non-governmental organization, CIETAC is a full-fledged international
arbitration institution and perhaps one of the largest in terms of size in the world. At its
highest level, CIETAC is composed of one Chairman, several Vice-Chairmen and a
number of other members. The main functions of the Commission are to set
important policies for its work, adopt annual work reports, and draft reorganization
plans and amendments to its arbitration rules in accordance with Article 4 of the
Articles of Association of CIETAC,129 as well as perform specific powers vested in it by
the CIETAC Arbitration Rules in arbitration proceedings. The Commission also has
one Honorary Chairman and several advisers (Article 8, CIETAC Rules). Its day-to-
day work is managed by its Secretariat. Relatively new to its structure is an Expert
Consultants Committee set up in August 1994 (Article 9, CIETAC Rules) and an
Arbitration Institute set up in July 1994 under its Secretariat. According to Article 7 of
the 1993 Articles of Association of CIETAC, the Arbitration Institute is responsible for
conducting research on arbitration issues, sponsoring publications such as its yearbook
and case reports, and organizing conferences.
CIETAC has its headquarters in Beijing, a Shenzhen Sub-Commission in
Shenzhen Special Economic Zone, and a Shanghai Sub-Commission in Shanghai.
The Shenzhen and Shanghai Sub-Commissions were established, respectively, in
1984130 and 1990,131 in view of the expansion of arbitration activities in those locales.
Prior to 1994, the Shenzhen and Shanghai Sub-Commissions each maintained their
own Panels of Arbitrators, Arbitration Commissions and Secretariats. Today, although
CIETAC’s Sub-Commissions continue to have their own Arbitration Commissions
and Secretariats to handle their day-to-day work under the leadership of their
respective Secretaries-General, they no longer have their own Panel lists. The 1994
CIETAC Rules clearly provide that CIETAC Headquarters and its Shenzhen and
Shanghai Sub-Commissions constitute a single institution; they not only apply the same
Arbitration Rules but also maintain the same Panel of Arbitrators (Article 11, CIETAC
Rules). On 1 June 1999, CCPIT/CCOIC approved CIETAC’s decision to establish
five liaison offices in Dalian, Fuzhou, Changsha, Chengdu and Chongqi. These liaison

129 See the 1993 Articles of Association of CIETAC, reprinted in Cheng Dejun et al., note 13 above, at 372.
130 In February 1984, with the approval of the State Council, the CCPIT decided to set up the Shenzhen
Office of the CIETAC (then FETAC). The office was formally established on 2 April 1984. The purpose of
setting up the Shenzhen Office was to provide convenient arbitration services to the foreign business community
in the region, especially businesses and business persons from Hong Kong and Macau. For this reason, the office
had on its own list of 39 arbitrators eight Hong Kong members. This was the first time that CIETAC (then
FETAC) had appointed members from outside the PRC in its 28-year history. The Shenzhen Office was changed
into the CIETAC Shenzhen Commission on 1 January 1989. See Huang Yanming, Some Opinions about
“Arbitration Under Chinese Law”, 8 J.Int.Arb. 1 (Mar. 1991), at 51–52.
131 The Shanghai sub-commission was set up on 2 April 1990. It had a list of 72 arbitrators of its own before

the 1994 CIETAC Rules took effect. See Cheng Dejun et al., note 13 above, at 18.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 71

offices are responsible only for promoting and assisting CIETAC’s arbitration work,
and are not authorized to conduct arbitration themselves. Their operation is directly
under CIETAC’s supervision.132
In many ways, CIETAC is a typical “success story” of modern PRC economic
and legal reform since the late 1970s. It has led the way to the development of China’s
international arbitration law and practices and its experience was largely written into
the 1994 Arbitration Law. If CIETAC was, arguably, stagnant in its first 20 years or
more, it has since then experienced a “sea change” from China’s opening its door to
the world. Taking CIETAC’s arbitration rules as an example, the Provisional Rules of
Procedure of the Foreign Trade Arbitration Commission of the CCPIT, formulated by
the CCPIT on 31 March 1956 (1956 Provisional Rules)133—i.e. the PRC’s first
formal, international arbitration procedural rules—had been in service for more than
30 years (1956–87) without change, but were then changed four times within the next
10 years (between 1988 and 1998).
The 1988 CIETAC Rules, effective on 1 January 1989,134 were the first attempt
to internationalize and modernize the CIETAC Rules. Some of their notable
improvements over the 1956 Provisional Rules include: (i) foreign nationals can be
appointed to the Panel of Arbitrators (Article 4); (ii) arbitrators who have personal
interests in the case shall withdraw themselves or be challenged by the parties
(Article 18); (iii) all hearings shall be held in private unless the parties agree otherwise
(Article 25); and (iv) formal provision for CIETAC’s long-standing practice of
combining arbitration with conciliation (Article 37).
The 1994 CIETAC Rules, effective on 1 June 1994,135 were the second attempt
to bring the CIETAC Rules more fully in line with international practice, especially
the UNCITRAL Model Law. Their major improvements over the 1988 CIETAC
Rules include: (i) both contractual and non-contractual disputes are clearly covered
(Article 2);136 (ii) an arbitration clause is one that is separated from other clauses of the
contract or is an arbitration agreement attached to a contract separate from other parts
of the contract (Article 5); (iii) waiver of the right to object is provided for (Article 45);
(iv) a new summary arbitration procedure is added in Chapter III (Articles 64–74); (v)
any language agreed upon by the parties other than Chinese—the official language of
CIETAC—may be used in an arbitration (Article 75); and (vi) five more rules

132 See Wang Shengchang, Working Report of the CIETAC for 1999 and Working Plan for 2000, Arb. & L. 6

(February 2000), at 7.
133 The 1956 Provisional Rules are reprinted in Cheng Dejun et al., note 13 above, at 322–330.
134 The Rules were adopted 12 Sept. 1988 at the Third Session of the First National Congress of the CCPIT.

For the text of the 1988 CIETAC Rules, see id., at 333–345.
135 The Rules were adopted on 17 March 1994 at the First Session of the Standing Committee of the Second

National Congress of the CCPIT. For the text of the 1994 CIETAC Rules, see id., at 383–404.
136 In the 1998 case of China National Technical Import & Export Corp. v. Industrial Resources Corp. (IRC) of

Switzerland, the Shanghai Intermediate Municipal People’s Court held that a claim involving fraud was based in tort,
not contract, and thus fell outside the scope of CIETAC’s jurisdiction. See Michael J. Moser, note 58 above, at 8.
72 JOURNAL OF INTERNATIONAL ARBITRATION

concerning the tradition of conducting conciliation in the course of arbitration are

added to improve that special practice (Articles 47–51).137
The main purpose of the 1995 CIETAC Rules, effective on 1 October 1995,138
was to conform the 1994 CIETAC Rules with the PRC’s 1994 Arbitration Law.139
The major changes included: (i) the chairman of CIETAC no longer has the power to
appoint the presiding arbitrator except when the parties fail to do so;140 (ii) CIETAC
continues to have power to decide on the existence and validity of arbitration
agreements and the scope of its arbitral jurisdiction, but the final decision shall be made
by the People’s Court;141 (iii) CIETAC shall transmit the parties’ application for taking
interim measures of protection of evidence to the intermediate People’s Court in the
place where the evidence is located;142 and (iv) an award shall be scrutinized on issues
related to its form by CIETAC before it is signed.143
The 1998 CIETAC Rules, effective 10 May 1998,144 made three further
significant changes to the PRC’s international arbitration system.145 First, they
represented the latest expansion of CIETAC’s jurisdiction to include disputes
involving enterprises with foreign investment such as wholly foreign-owned
enterprises and Chinese-foreign joint ventures146 and thus solved a problem that had
long troubled foreign investors and lawyers. Under the previous CIETAC rules, only
disputes arising from contracts with “foreign elements” could be submitted to
CIETAC arbitration. However, it was unclear whether disputes arising from a contract
between enterprises with foreign investment or between such enterprises and local
Chinese companies could be arbitrated through CIETAC as foreign-related cases.
Foreign investors in China generally wanted CIETAC to take their disputes of this
nature. CIETAC once took the view that these disputes were foreign-related and thus
under its jurisdiction. The People’s Court, however, took a different view in China
137 For a detailed discussion of changes, see Cheng Dejun, Report on the Draft Amendment to the Arbitration Rules

of the China International Economic and Trade Arbitration Commission, in CIETAC and CMAC, China Int’l Com. Arb.
Y.B. 1993–94, at 3–9 (Chinese) and 76–86 (English).
138 The Rules were adopted on 4 September 1995 by the CCPIT. For the Chinese and English texts of the

Rules, see Chris Hunter, ed., note 97, above, Appendix 2A.
139 For a detailed discussion of changes, see Michael J. Moser and Zhang Yulin, The New Arbitration Rules of

the China International Economic and Trade Arbitration Commission, 13 J.Int.Arb. 1 (Mar. 1996), at 15.
140 See Articles 31 and 32 of the 1994 Arbitration Law and Article 24 of the 1995 CIETAC Rules.
141 See Article 20 of the 1994 Arbitration Law and Article 4 of the 1995 CIETAC Rules.
142 See Article 68 of the 1994 Arbitration Law and Article 23 of the 1995 CIETAC Rules.
143 See Article 54 of the 1994 Arbitration Law and Article 56 of the 1995 CIETAC Rules. Article 55 of the

1995 CIETAC Rules provides the detailed requirements for the form of an award. An arbitral award has to state
the claims, the facts of the dispute, the reasons on which the arbitral award is based, the result of the arbitral award,
the allocation of the arbitration costs, and the date on which and the place at which the arbitral award is made.
144 The 1998 CIETAC Rules were adopted 6 May 1998. The text of the rules is available online at <http://

www.jurisint.org/pub/03/en/F_7032.htm>.
145 For a detailed discussion of the 1998 CIETAC Rules, see Wang Shengchang, Explanation of the Revisions to

the Arbitration Rules of the China International Economic and Trade Arbitration Commission, China Int’l Commercial
Arb. Y.B. (1997–1998), at 18–22 (Chinese version) and 103–108 (English version).
146 Foreign-invested enterprises established in mainland China are considered Chinese legal persons.

Economic and trade contracts they enter into between themselves or with other Chinese legal persons are
considered to be domestic contracts, not foreign-related contracts. As a result, when disputes arise and arbitration
is sought, there may be disputes over whether the Arbitration Commission has the authority to take cognizance
of the cases.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 73

International Engineering Consultancy Company v. Lido Hotel, Beijing, where the Beijing
Intermediate People’s Court held on 23 December 1992 that the dispute between the
two parties had no foreign-related element—despite the argument that Lido’s being a
Sino-foreign joint venture itself implied a foreign-related element—and the dispute
was thereby ruled beyond the arbitral authority of CIETAC.147 The revised Article 2
does not challenge the People’s Court’s interpretation. In fact, it reaffirms that
interpretation by treating these types of disputes as domestic disputes.148 The change
represents part of CIETAC’s effort to expand its jurisdiction over some particular kinds
of domestic disputes as it faces increasing competition from domestic arbitration
commissions over foreign-related cases.
Second, the revised Article 7 provides greater autonomy to parties in regard to
their choice of arbitration rules. The previous Article 7 stipulated that “once the parties
agree to submit their dispute to the Arbitration Commission for arbitration, it shall be
deemed that they have agreed to have the arbitration conducted under these rules”. As a
result, CIETAC was only rendering administrative services for arbitration under its own
arbitration rules. The new version has added that “[i]n the case where the parties have
agreed otherwise, which is also agreed to by the Arbitration Commission, the parties’
agreement shall prevail”. This means that CIETAC may administer arbitrations under
other arbitration rules chosen by the parties to a dispute, such as the UNCITRAL
Model rules, or under the CIETAC Rules modified by the parties. Although this
particular new rule still requires the consent of the Arbitration Commission for the
stipulation of arbitration rules, it has substantially liberalized one important aspect of
China’s international arbitration system. However, it remains to be seen what practical
effect this new rule will have on CIETAC arbitration. According to one commentator,
the new rule remains on paper today precisely because it conflicts with the PRC’s 1994
Arbitration Law, which does not provide the parties with the autonomy to deviate from
statutory procedure or arbitration rules of the Chinese arbitration commissions.149
However, if the rule is indeed implemented in CIETAC arbitration, CIETAC will
once again lead the way in reforming international arbitration practice in China.
Third, Article 35 of the 1995 CIETAC Rules stipulated that “[c]ases taken
cognizance of by the Arbitration Commission shall be heard in Beijing, Shanghai, and
Shenzhen, and may only be heard in other places with the approval of the Secretary-
General of the Arbitration Commission or of its sub-commissions”. In the new
version, the parties can choose the place of arbitration, other than Beijing, Shanghai,
and Shenzhen, without first obtaining the approval of the Secretary-General of the
147 As a result, the CIETAC award against Lido was denied enforcement. For a summary of the case, see Song

Huang, Several Problems in Need of Resolution in China by Legislation on Foreign Affairs Arbitration, 10 J.Int.Arb. 3
(Sept. 1993), at 98–99.
148 For example, CIETAC is currently considering adopting separate arbitration rules for these domestic

disputes and setting up a panel of arbitrators exclusively composed of Chinese nationals to handle these cases. See
Wang Shengchang, note 145 above, at 106.
149 See Li Hu, Enforcement of the International Commercial Arbitration Award in the People’s Republic of China, 16

J.Int.Arb. 4 (December 1999), at 14.

74 JOURNAL OF INTERNATIONAL ARBITRATION

Arbitration Commission or its sub-commissions. Due to China’s geographic size, the

issue of the location of the arbitration is important—whereas it has almost no
significance in Hong Kong.
Despite these efforts to make CIETAC’s arbitration practices more consistent with
international practices, CIETAC continues to be unique among major international
arbitration bodies in several aspects. For example, the parties and the Chairman of
CIETAC are bound to select arbitrators from among those who are listed in the
CIETAC’s Panel of Arbitrators.150 CIETAC’s limitation to the parties’ complete
autonomy in selecting arbitrators of their choice departs not only from general
international practice but also, arguably, from the PRC’s 1994 Arbitration Law. Articles
11 and 13 of the 1994 Arbitration Law provide that “arbitration commissions shall
appoint arbitrators but there is no requirement that an arbitration tribunal be formed
only from an arbitration commission’s list of arbitrators. 151 Thus, this is an area where the
1994 Arbitration Law is silent and currently self-regulated by arbitration commissions.
Although all arbitration commissions require that parties choose arbitrators only from
their lists of arbitrators,152 arguably, the 1994 Arbitration Law does not foreclose the
possibility of future reform if arbitration commissions wish to change their rigid
appointment practice. At the same time, to address the criticism that its practice limits
the autonomy of the parties, CIETAC has gradually internationalized its institutional
composition by appointing a growing number of foreign nationals to its Panel of
Arbitrators. It now lists 124 foreign nationals from 25 countries, and 29 arbitrators from
Hong Kong, four from Taiwan, and one from Macau, among its nearly 500 arbitrators
eligible to hear disputes.153 CIETAC’s list of potential arbitrators also includes many
younger Chinese legal professionals, who have substantial exposure to foreign legal
systems.154 Nevertheless, to a number of observers, this particular CIETAC practice
remains an unsatisfactory one.155
Moreover, CIETAC maintains a continuing and decisive involvement in many of
the critical aspects of the arbitral process. Many of CIETAC’s powers are normally
vested in the arbitral tribunal, as in the practice of other international arbitration
150 See Articles 16, 24–27 and 31 of the 1998 CIETAC Rules.
151 Article 31 of the 1994 Arbitration Law states: “If the parties agree that the arbitration tribunal shall be
composed of three arbitrators, they shall each appoint, or entrust the chairman of the arbitration commission to
appoint, one arbitrator. The parties shall jointly select, or jointly entrust the chairman of the arbitration
commission to appoint, the third arbitrator, who shall be the presiding arbitrator. If the parties agree that the
arbitration tribunal shall be composed of one arbitrator, they shall jointly appoint, or jointly entrust the chairman
of the arbitration commission to appoint, such arbitrator.”
Article 32 states: “If the parties fail to agree on the method of formation of the arbitration tribunal or to
select the arbitrators within the time limit specified in the rules of arbitration, the arbitrators shall be appointed by
the chairman of the arbitration commission.”
152 See e.g., Articles 16, 24–27, and 31 of the 1998 CIETAC Rules; Articles 19–20 of the Beijing Arbitration

Commission Arbitration Rules (26 January 1998), available online at <http://www.china.org.cn/cibtc/

BusinessGuide/1999/disputes/rule/indexe.html>.
153 See CIETAC Panel of Arbitrators (2000 edition), on file with the authors.
154 According to the present authors’ review, they are a substantial, and ever-increasing, minority of all

Chinese arbitrators listed by CIETAC.

155 For a critical comment, see Michael J. Moser, CIETAC Arbitration: A Success Story? 15 J.Int.Arb. 1 (March

1998), at 30–31.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 75

bodies. For example, under Article 4 of the 1998 CIETAC Rules, it is the Arbitration
Commission, not the arbitral tribunal, that “has the power to decide on the existence
and validity of an arbitration agreement and the jurisdiction over an arbitration case”.
Under Article 23, a request for interim measures of protection made by a party must be
submitted to the Arbitration Commission, rather than to the arbitral tribunal, which
will then pass them to the relevant People’s Court. And under Article 81, the power to
interpret the CIETAC arbitration rules is vested in the Arbitration Commission, not
the arbitral tribunal. As to what is the proper role for the Arbitration Commission,
there are apparently different opinions among Chinese and foreign arbitration
authorities.156
It should also be emphasized that CIETAC is perhaps the only major
international arbitration body that is operating in a national legal system that is in
transition. There exist several problematic aspects in regard to China’s international
arbitration system in general, and CIETAC in particular—such as in the areas of
enforcement of arbitral awards and detailed evidence rules—which can
be attributed to deficiencies in other areas of the Chinese legal system and need to
be addressed there. Until these areas are improved, the continued negative
coverage of these problems abroad by the news media157 and legal literature may
impose a hidden cost on CIETAC in the sense of preventing it from being able to
fully realize its potential, even though what it has achieved so far is arguably quite
impressive.

4. CMAC (1959)
The China Maritime Arbitration Commission (CMAC)158 is a sister arbitration
institution to CIETAC established within CCPIT/CCOIC. In accordance with the
decision made by the State Council on 21 November 1958,159 CMAC was set up on
22 January 1959 and originally named the Maritime Arbitration Commission
(MAC). In 1988, it was renamed CMAC.160 It is very much like a downsized
CIETAC. Compared to CIETAC, it has a smaller structure with no sub-
commissions,161 handles substantially fewer cases, which typically involve smaller

156 For an opinion supporting CIETAC’s practices, see Wang Shengchang, A Comparative Survey of the Rules of

the Arbitration Institute of the Stockholm Chamber of Commerce and the Arbitration Rules of the China International
Economic and Trade Arbitration Commission, in CIETAC and CMAC, China Int’l Com. Arb. Y.B. 1992, at 155–156;
9 J.Int.Arb. 4 (Dec. 1992), at 108. For a critical opinion, see Michael J. Moser, id., at 31–32.
157 For a recent story, see David Evans, Arbitration Concerns Remain, S. China Morning Post, 21 Feb. 2000,

Business Post, at 1.
158 The official website of the CMAC is at <http://www.ccpit.org/engVersion/indexEn.html>.
159 The Decision is reprinted in Cheng Dejun et al., note 13 above, at 436.
160 See State Council’s Official Reply Concerning the Renaming of the Maritime Arbitration Commission as the China

Maritime Arbitration Commission and the Amendment of its Arbitration Rules, issued on 21 June 1988, reprinted in
Cheng Dejun et al., note 13 above, at 450.
161 However, like CIETAC, CMAC has since July 1999 established three liaison offices in Dalian, Guangzhou

and Shanghai. See Cai Hongda, Working Report of the CMAC for 1999 and Working Plan for 2000, Arb. & L. 12
(February 2000), at 14.
76 JOURNAL OF INTERNATIONAL ARBITRATION

claims,162 and is thus lesser known163 due to its specialized jurisdiction over
arbitration cases involving only contractual and non-contractual maritime disputes
arising from, or in the process of, transportation, production and navigation by or at
sea, in coastal waters and other waters connected with the sea.164
The organization and procedural rules165 of CIETAC and CMAC mirror each
other to a large extent. Like CIETAC, CMAC is composed of one Chairman, several
Vice-Chairmen and a number of Commission members. The Commission members
are experts, scholars, and noted personages selected and appointed by CCPIT/CCOIC
from among the Chinese legislature, judicial organs, and shipping, insurance, and other
departments and companies. CMAC also has an Honorary Chairman and several
consultants attached to it by CCPIT/CCOIC invitation. CMAC’s secretariat, directed
by the secretary general, handles the day-to-day work.
CMAC maintains a different and much shorter list as its Panel of Arbitrators. Like
CIETAC, the CMAC Arbitration Rules allow not only Chinese citizens but also foreign
citizens to be appointed, but parties must choose their arbitrators only from the Panel list.
Currently, CMAC has a list of 117 arbitrators (16 of whom are from ten different foreign
countries, and three from Hong Kong) while CIETAC’s list includes nearly 500 arbitrators
(124 of whom are from 25 different foreign countries, 29 from Hong Kong, four from
Taiwan, and one from Macau).166 The arbitrators of CMAC are selected and appointed by
CCPIT/CCOIC from among individuals with special knowledge and practical experience
in shipping, insurance, law and other relevant fields. Besides legal knowledge, the special
knowledge of the arbitrators covers carriage of goods by sea, maritime insurance,
chartering and purchasing of vessels, ship repair and shipbuilding, ship inspection, agency,
navigational skills, engineering, harbour superintendence, harbour administration, pilotage,
environmental protection at sea, marine collision (including salvage and towing of vessels),
raising wrecks, and averaging adjustments, among other particularized areas.
Although CMAC handles far fewer cases each year than CIETAC, it is still one of
the major maritime institutions in Asia. The following table shows the caseload of
HKIAC, CMAC, and TOMAC167 in the 1990s:
162 See id., at 12. In fact, compared to the rapid development of CIETAC, CMAC’s caseload has been largely

static and has become a major issue in CMAC’s continued development. It has been pointed out that “the low
caseloads imply that CMAC has been financially relying on CIETAC’s subsidy” to maintain its independent operation,
because the two institutions share the same facilities in Beijing. See John Shijian Mo, Non-judicial Means of Dispute
Settlement, in Wang Guiguo and John Mo, China Law (Kluwer Law International, The Hague, 1999), at 799.
163 Indeed, compared to a large and up-to-date body of studies on CIETAC, studies on CMAC are few and

old in the English language literature. For relevant studies in the United States, see, e.g. Curtis E. Pew, Robert M.
Jarvis and Mark Sidel, The Maritime Arbitration Commission of the People’s Republic of China: Options and Strategies, 18
J. Mar. L. & Com. 351 (1987); Shujian Liu, The New Rules Governing Maritime Arbitration in China, 21 J. Mar. L.
& Com. 129 (January 1990).
164 For these and other reasons, the discussion here of CMAC is limited to a brief introduction.
165 The Provisional Rules of Procedure of the Maritime Arbitration Commission were adopted on 8 January

1959 and are reprinted in Cheng Dejun et al., note 13 above, at 440. The Provisional Rules were later revised in
1988 and 1995. For the 1995 CMAC Arbitration Rules, see Wang Shengchang, note 4 above, at 267. Note that
CMAC did not revise its rules in 1994 and 1998 as CIETAC did.
166 See CMAC Panel of Arbitrators (2000 edition), on file with the authors.
167 For more information on TOMAC, organized in the Japan Shipping Exchange, Inc. (JSE), see JSE’s official

website at <http://www.jseinc.org/index_e.htm>.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 77

TABLE 2: CMAC, HKIAC AND TOMAC ANNUAL MARITIME ARBITRATION CASELOAD, 1990–1999
(TO THE EXTENT OF AVAILABLE FIGURES)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

HKIAC 8 8 74 42 33 41 21 30 31 13

CMAC 10 10 13 9 10 21 23 28 18 22

TOMAC 4 9 5 7 5 11 4 8 3 8

(Source: HKIAC,168 CMAC, TOMAC)

5. China Arbitration Association (CAA)168

The China Arbitration Association (CAA) was introduced in the PRC’s 1994
Arbitration Law to be established as a new national arbitration institution. As part of
the reform and reorganization of China’s arbitration system, CAA was deemed
necessary to provide nationwide supervision to and regulation of newly reformed
domestic arbitration commissions. CAA is said to be a non-governmental, self-
regulating organization, consisting of all of China’s arbitration commissions (either
domestic or foreign-related). According to the Notice of the Office of the State
Council on Reorganization of Arbitration Institutions and Preparation for the
Establishment of China Arbitration Association, issued on 13 November 1994,169 the
Office of Legislative Affairs of the State Council is responsible for organizing and
co-ordinating the preparatory work for the establishment of the CAA. However, no
specific timetable has been set in the Notice for this purpose. Today, although more
than five years have passed since the 1994 Arbitration Law entered into force on
1 September 1995, and although some 150 domestic arbitration commissions have so
far been established,170 CAA has yet to be formally created.
Pursuant to Article 15 of the Arbitration Law of the PRC,171 the principal aims of
CAA will be to supervise arbitration commissions and their members and arbitrators as

168 The figures are quoted from a breakdown in numbers of different kinds of cases in HKIAC’s overall

caseload.
169 The Notice is reprinted in 11 Quanguo Renda Fazhi Gongzhuo Weiyuanhui, Zhonghua Renmin

Gongheguo Falu Fagui Huibian [Collection of Laws and Regulations of the People’s Republic of China], (Zhongguo
Minzhu Fazhi Chubanshe, Beijing, 1994–1996), at 269.
170 A list of newly established domestic arbitration commissions was attached to the Arrangement Concerning

Mutual Enforcement of Arbitral Awards Between the Mainland and the HKSAR, published 28 January 2000, in
the People’s Court Daily, available online at <http://www.rmfyb.com.cn/html/2000/01/28/
00120000128021.htm>.
171 Article 15 of the 1994 Arbitration Law of the PRC provides: “The China Arbitration Association is a

social organization with the status of a legal person. Arbitration commissions are members of the China
Arbitration Association. The charter of the China Arbitration Association shall be formulated by its national
congress of members. The China Arbitration Association is a self-regulated organization of arbitration
commissions. It shall, in accordance with its charter, supervise arbitration commissions and their members and
arbitrators as to whether or not they breach discipline. The China Arbitration Association shall formulate rules of
arbitration in accordance with this law and the relevant provisions of the Civil Procedure Law.”
78 JOURNAL OF INTERNATIONAL ARBITRATION

to breaches of discipline. In addition to this supervisory function, CAA will have the
authority to formulate arbitration rules for domestic arbitration commissions in
accordance with the 1994 Arbitration Law and the relevant provisions of the PRC’s
Civil Procedure Law. CAA will affect China’s international commercial arbitration in
performing its dual functions, and it can be expected that CIETAC’s practice will have
a strong influence on CAA’s initial work in this regard.
It is not clear whether CAA will establish uniform ethical rules for all arbitration
commissions in China, including CIETAC and CMAC, or leave CIETAC/CMAC
alone—as they have already formulated their own, joint Code of Ethics.172 Either way,
the CIETAC/CMAC Code of Ethics will remain influential, as CIETAC and CMAC
are, in fact, pioneers in the PRC in prescribing ethical rules for their arbitrators, and
these ethical rules have already been used as authoritative guidance by many domestic
arbitration commissions in drafting their own rules.173
Although CAA has no authority to formulate arbitration rules for CIETAC and
CMAC,174 since domestic arbitration commissions are authorized to accept foreign-
related arbitration cases, CAA will affect foreign-related arbitration directly by
adopting arbitration rules for domestic arbitration commissions. Pending the adoption
of permanent rules of arbitration by CAA, Article 75 of the 1994 Arbitration Law
allows the domestic arbitration commissions to formulate provisional rules in light of
practical needs. For this purpose, the State Council promulgated the Model Provisional
Arbitration Rules, according to the 1994 Arbitration Law, on 28 July 1995, to be
adopted as provisional arbitration rules by domestic arbitration commissions.175 The
model rules are similar, but not identical, to CIETAC’s rules. Although the model
rules do not provide special rules for arbitration involving foreign elements, the Beijing
Arbitration Commission (BAC) has adopted special rules in Chapter 6 of its
Arbitration Rules titled “Special Provisions for Procedure of Arbitration Involving
Foreign Elements”.176 These “special” rules are almost identical to the relevant
CIETAC rules.

B. HKSAR ARBITRATION INSTITUTIONS

These institutions consist of HKIAC (1985), the Hong Kong branch of the
Chartered Institute of Arbitrators (1972) and HKIArb (1996).

172 See the CIETAC/CMAC Code of Ethics for Arbitrators. The latest edition was adopted 6 May 1994. For

a summary of the CIETAC Code of Ethics, see Wang Shengchang, note 4 above, at 115–117. For a discussion of
ethics issues in CIETAC arbitrations, see Yanming Huang, The Ethics of Arbitrators in CIETAC Arbitrations, 12
J.Int.Arb. 2 (June 1995), at 5.
173 See Wang Shengchang, note 4 above, at 114.
174 Article 73 of the 1994 Arbitration Law provides that “[f]oreign-related arbitration rules may be formulated

by the China Chamber of International Commerce in accordance with this law and the relevant provisions of the
Civil Procedure Law.”
175 The Model Rules are reprinted in Wang Shengchang, note 4 above, at 312.
176 See Beijing Arbitration Commission Arbitration Rules (revised and adopted by BAC 26 Jan. 1998),

available at <http://www.china.org.cn/cibtc/BusinessGuide/1999/disputes/rule/indexe.html>.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 79

1. HKIAC (1985)

The Hong Kong International Arbitration Centre (HKIAC)177 is among the

newest of the major international arbitration centres. Opening its doors just 15 years
ago in September 1985, it was founded by a group of the leading business and
professional people in Hong Kong, with assistance from the Hong Kong government
to promote Hong Kong as a venue for international arbitration. As an independent and
non-profit organization limited by guarantee178 with charitable status, it has received
generous funding from the business community and the Hong Kong government, but
it is independent of both and is now financially self-sufficient. Thus, HKIAC is distinct
from CIETAC and CMAC, which are “independent” only in the sense of being
autonomous parts of CCPIT/CCOIC.
HKIAC has an effective management. It operates under a Council composed of
business and professional people of many different nationalities and with a wide
diversity of skills and experience. The Council has delegated management to a
Management Committee made up of arbitration experts. The day-to-day
administration of HKIAC arbitration activities is conducted by a Secretary-General,
who is its chief executive and registrar and answerable to the Management Committee.
With a small organization, HKIAC nevertheless effectively performs the functions of
both CIETAC and CMAC, as it co-operates actively with the Hong Kong
Shipowners Association to promote maritime arbitration in Hong Kong.179 To assist
disputants in resolving their disputes by arbitration and by other means of dispute
resolution, HKIAC provides premises and administrative support to arbitration and
mediation hearings held in Hong Kong, as well as information services.
Compared to CIETAC, HKIAC was internationalized from the beginning. The
original members (including US lawyers) of the Steering Committee formed to
consider the possibility of establishing an arbitration centre in Hong Kong eventually
all became members of the Council of the Centre. Major trading nations (including
China) are represented on HKIAC’s panel of arbitrators, and this panel has been
periodically updated to ensure both quality and wide country representation.180 But
most importantly, HKIAC operates in an internationalized and very liberal
international arbitration system.
An important function of HKIAC is to appoint or assist parties in the appointment
of arbitrators and mediators. In addition to serving as an appointing authority
according to the parties’ agreement, HKIAC also has statutory appointment duties. As
a result of an amendment to the Arbitration Ordinance brought about by the
Arbitration (Amendment) Ordinance 1996, which came into effect on 27 June 1997,
HKIAC is authorized to carry out two significant functions: (1) by replacing “the court
177
The official website of HKIAC is at <http://www.hkiac.org/>.
178
The term “limited by guarantee” means limited exposure.
179
For a description of maritime arbitration in Hong Kong, see Peter S. Caldwell, Maritime Arbitration in Hong
Kong, 22 Mar. Law. 155 (Winter 1997).
180 See Neil Kaplan, et al., note 6 above, at 238.
80 JOURNAL OF INTERNATIONAL ARBITRATION

or a judge” it may appoint arbitrators or umpires where the parties have failed to agree,
or have not designated an appointing authority, or the designated appointing authority
fails to carry out its function (§§12 and 34C(3), Arbitration Ordinance); and (2) it may
determine whether a tribunal of one or three arbitrators should consider a dispute
under the international (UNCITRAL Model Law) regime (§34C(5), Arbitration
Ordinance).
When exercising its appointment duties—unlike CIETAC’s appointment
practice, which requires arbitrators to be appointed only from CIETAC’s Panel of
Arbitrators—HKIAC has adopted a more liberal method. The Hong Kong
Arbitration Ordinance is based on the principle that “the parties to a dispute should
be free to agree how the dispute should be resolved” (§2AA(2)(a)). Under Article 11
of the UNCITRAL Model Law, no person shall be precluded by reason of his
nationality and the parties are free to agree on a procedure of appointing the
arbitrator(s).181 Although HKIAC maintains a Panel list of about 130 arbitrators
from all over the world, it is free to appoint anyone else outside the list in
accordance with the Arbitration (Appointment of Arbitrators and Umpires)
Rules.182
As the only local arbitration centre in Hong Kong, HKIAC administers both
domestic and international arbitration proceedings and its procedural rules of
arbitration are bifurcated. For domestic arbitration, HKIAC has formulated its own
domestic arbitration rules: the latest version is the HKIAC Domestic Arbitration Rules
(1993). For international arbitration, it has adopted the Procedures for Arbitration
(including the UNCITRAL Rules (1976)), which include additional rules to the
UNCITRAL Rules and will apply to international arbitrations administered by
HKIAC unless the parties choose other procedural rules.183
In addition to HKIAC’s arbitration rules, Hong Kong’s international arbitration
system provides the parties with full autonomy to choose any other arbitration rules to
conduct their arbitration. Under Article 19(1) of the UNCITRAL Model Law, the
parties have the freedom to agree on the arbitral procedure to be followed by the arbitral
tribunal. They may adopt an established set of international arbitration rules, such as the
UNCITRAL Arbitration Rules, and are free to change them, or even make their own
rules. Moreover, in the absence of agreement between the parties, Article 19(2) of the
181 See also Articles 6–8 of the UNCITRAL Arbitration Rules (1976). The UNCITRAL Arbitration Rules

(1976) were adopted by the United Nations under General Assembly Resolution 31/98, 15 Dec. 1976. They are
available at <http://www.uncitral.org/english/texts/arbconc/arbitrul.htm>.
182 Under Part III of the Arbitration (Appointment of Arbitrators and Umpires) Rules, HKIAC shall appoint

a suitable person by considering “(a) the nature of the dispute; (b) the availability of arbitrators or umpires, as the
case may be; (c) the identity of the parties; (d) the independence and impartiality of the arbitrator or umpire; (e)
any stipulation in the relevant arbitration agreement; and (f) any suggestions made by the parties themselves.” The
Arbitration (Appointment of Arbitrators and Umpires) Rules were made by HKIAC under Sections 12 and 34C
of the Arbitration Ordinance (Cap.341) with the approval of the Chief Justice. They are reprinted in: HKIAC, A
Guide to Applying for the Appointment of an Arbitrator or for a Decision as to the Number of Arbitrators, at 8.
183 None of these HKIAC rules is publicly available. They have to be purchased through HKIAC—a practice

unique among major international arbitration centres. In response to the authors’ inquiry, the Secretary-General
of the HKIAC has stated that the HKIAC intends to make these rules available online soon.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 81

UNCITRAL Model Law confers on the arbitral tribunal the power to determine what
procedure is appropriate to conduct the arbitration, including the power to determine
the admissibility, relevance, materiality and weight of any evidence. Clearly, the
autonomy enjoyed by parties and the powers vested in the arbitral tribunal in Hong
Kong in choosing procedural rules are greater than those in China.

2. The Hong Kong Branch of the Chartered Institute of Arbitrators (1972)

The Chartered Institute of Arbitrators (CIA) is a well-established international

organization of arbitrators. It was founded in London in 1915 with the aim of
promoting arbitration as an alternative method of dispute resolution to litigation. Now
it has developed into a professional body with more than 9,000 members from 84
countries around the world, and it is perhaps the largest organization of its kind in the
world.184 It has a multidisciplinary membership, including practitioners in law,
construction, shipping, finance, insurance, commodities, agriculture, accounting and
medicine, among other fields. In achieving its principal object of promoting
and facilitating the determination of disputes by arbitration and other ADR other than
through litigation in court, it provides services such as maintenance of a register of
arbitrators, appointment of qualified persons to act as arbitrators, and training
programmes for potential and practising arbitrators. The Institute has examinations that
members have to pass to become associates and fellows.185
The CIA’s Hong Kong branch was established in 1972, and is one of the CIA’s
oldest overseas branches. It was the first arbitration institution in Hong Kong. Since its
foundation, its rapid growth has made it the largest among the overseas branches of the
Institute today. In 1977, its members numbered 64, of whom half were Fellows. In
July 1985, that number increased to 482, including 36 Fellows.186 Today, members of
the branch total 1,421, including 261 Fellows.187 In June 1999, the branch was
renamed the Chartered Institute of Arbitrators (East Asia Branch) and started to serve
members not only from Hong Kong, but also from other East Asian locales. The
branch is managed by an elected committee, under the leadership of the branch
chairman, and its contact point is through HKIAC.
As a local branch, it has played an important role in promoting Hong Kong’s
arbitration and other ADR methods. It was represented on: the Commercial
Arbitration Sub-Committee of the Law Reform Commission of Hong Kong, which
led to the passage of the Arbitration (Amendment) Ordinance 1982; the Steering
Committee, which resulted in the establishment of HKIAC in 1985; and, again, the
Law Reform Commission Sub-Committee, which led to the adoption of the
184 As of 1 June 2000, there were 9,533 members, among them 2,342 “Fellows”, 2,852 “Associates”, 3,771

“Members”, and 568 “Retired”. This was further broken down into: 5,818 UK members and 3,715 overseas
members. The figures were provided by CIA, and are on file with the authors.
185 For more information on CIA, see its official website at < http://www.arbitrators.org/>.
186 See Neil Kaplan, et al., note 6 above, at 241.
187 The figure was provided by HKIAC, and is on file with the authors.
82 JOURNAL OF INTERNATIONAL ARBITRATION

UNCITRAL Model Law in Hong Kong in 1989. It has also been represented on
HKIAC’s Management Committee.188 In addition to its own training programmes, it
also assists the City University of Hong Kong in that institution’s master’s degree
programme in arbitration and dispute resolution.189
As a regional branch, its functions are similar to its parent, such as providing training
programmes and organizing seminars. The new East Asia branch is actively organizing
many activities both in Hong Kong and throughout the region. At the time of writing this
article, it was planning to hold a joint forum in Singapore with the Singapore Institute of
Arbitrators on 11 November 2000, and a joint seminar with CIETAC in Beijing in early
2001. Also scheduled was an Entry Course to be held in Hong Kong by the end of
2000.190 The branch will continue to serve as a CIA examination centre. Like its parent, it
maintains a panel of arbitrators and has a standing committee that, upon request, will make
nominations of arbitrators for consideration by parties to a dispute.

3. HKIArb (1996)

The Hong Kong Institute of Arbitrators Limited (HKIArb) is the newest member
of Hong Kong’s arbitration institutions. It was established in 1996 by a group of Hong
Kong professionals in the field of arbitration. As a non-profit organization limited by
guarantee, it is run by a Council elected annually by its members. The Council has a
number of committees covering such areas as membership, finance, corporate affairs,
education, and training programmes. It has two grades of multidisciplinary
membership: associates and fellows. Since its establishment, its membership has grown
rapidly. As of August 1999, it had 124 associates and 140 fellows.191 It does not itself,
however, provide administrative services for arbitration. It maintains no panel of
arbitrators and does not serve as an appointing authority. Its contact point is also
through HKIAC.
HKIArb’s principal objectives are to promote arbitration and other ADR practice
in Hong Kong. In many aspects, HKIArb’s aims and activities are similar to those of
the CIA’s Hong Kong branch. For example, it will offer courses based on its own
course materials for the education and training of arbitrators and mediators as well as
other professional bodies in Hong Kong. As a local institute, it has a close relationship
with the HKSAR government and will organize courses for the HKSAR government.
It has been involved in setting appropriate standards of conduct for arbitrators and
mediators in Hong Kong. Most importantly, with the approval of the Secretary for
Justice, it has established a Committee on Hong Kong Arbitration Law in co-operation
188See Neil Kaplan, et al., note 6 above, at 241.
189See id., at 299.
190This information was provided to the authors by Terence Wong, Secretary for the Chartered Institute of
Arbitrators (East Asia Branch), via e-mail dated 2 August 2000.
191 According to Christopher To, Secretary-General of the HKIAC, the original number of members of the

HKIArb in 1996 was 80 (20 fellows and 60 associates). The figure, as of August 1999, is available at <http://
www.tdctrade.com/main/si/sparbi.htm>.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 83

with HKIAC, with the object of making further recommendations to the HKSAR
government on reform of Hong Kong arbitration law.
HKIArb has also aimed at fostering co-operation with regional and international
arbitration organizations. It has signed co-operation agreements with a number of
arbitration institutions in Asia, such as the Japan Commercial Arbitration Association
(JCAA) on 10 May 1999,192 and the Korea Commercial Arbitration Board (KCAB) on
9 January 2000.193 It has also established co-operative relations with CIA’s Hong Kong
branch and maintained strong links with arbitration institutions in mainland China and
Taiwan.

C. INSTITUTIONAL RELATIONSHIPS
From its beginnings, Hong Kong has received support from China’s trade194 and
arbitration organizations in its efforts to establish a widely-utilized and effective
international arbitration forum. It was reported that, in May 1985, a Hong Kong
delegation returned from Beijing with the news that CCPIT had pledged full support
for the arbitration project and offered the services of its experienced arbitrators to sit on
the arbitration panels of Hong Kong’s new centre.195 In March 1987, 12 members of
the CIETAC panel of arbitrators were listed on the HKIAC’s panel of arbitrators.196
This made HKIAC the first arbitration centre outside mainland China to have on its
panel arbitrators from the PRC.
Since then, the co-operation between CIETAC and HKIAC has been strong. In
1989, 13 foreign nationals were named as members of the CIETAC’s panel of
arbitrators. Of these, eight were Hong Kong Chinese.197 Currently, CIETAC has 29
arbitrators from the HKSAR198 and HKIAC has around 10 arbitrators from the
PRC.199

192 The Co-operation Agreement was signed on the occasion of the visit by Norihiko Maeda, President of

JCAA, to HKIArb. The agreement seeks co-operation in the promotion of arbitration and other alternative
means of dispute resolution in the Asia-Pacific and wider regions, providing that JCAA and HKIArb shall work
together in the selection, education, and training of potential and practising arbitrators, in the setting up and
running of conferences and seminars on arbitration and other ADR, and in exchanging information on and
recommendations of persons suitable to act as arbitrators, mediators, or conciliators. See New Japanese-Hong
Kong Cooperation Agreement Signed, available at <http://www.jcaa.or.jp/e/arbitration-e/syuppan-e/newslet/
news5.html>.
193 This is reported at KCAB’s website at <http://www.kcab.or.kr/e/note4.html>.
194 As has been reported, in 1985, officials in Hong Kong estimated that the HKIAC should have sufficient

funding, due in large part to private contributions from the Chinese business community, including, significantly,
from the Bank of China and other mainland enterprises. See Anne Judith Farina, “Talking Disputes into Harmony:”
China's Approaches to International Commercial Arbitration, 4 Am. U. J. Int’l L. & Pol’y 137 (1989), at 166.
195 Id.
196 See Seth Falson, Hong Kong Arbitrators Face Battle to Prove their Worth, S. China Morning Post, 22 Sept.

1987, at 2.
197 See Michael J. Moser, note 58 above, at 9.
198 See China International Economic and Trade Arbitration Commission Arbitrators (1 Mar. 2000), on file with the

authors.
199 As the HKIAC’s panel is not published, this number is based on an estimate of the HKIAC’s Secretary-

General.
84 JOURNAL OF INTERNATIONAL ARBITRATION

On 15 June 1991, CIETAC and HKIAC entered into a formal co-operation

agreement.200 According to the agreement, they have undertaken to provide each
other with assistance in: (i) the selection of persons of suitable experience and integrity
to be included on their respective panels of mediators, conciliators and arbitrators; (ii)
the appointment of experts or assessors; (iii) the appointment of mediators, conciliators
and arbitrators; (iv) the provision of facilities and support services, such as hearing
rooms, administrative services, translation and transcription; (v) obtaining information,
publications and advice; and (vi) any other matter relating to dispute resolution.
Currently, both sides foster such co-operation on a half-year basis, including mutual
visits and exchanges of experience. Officials of CIETAC regularly visit Hong Kong
and enjoy good working relationships with all those concerned about arbitration in
Hong Kong.201
In addition to arbitration personnel and financial support from the Chinese
institutions, there are also signs that China has encouraged Chinese companies to
choose Hong Kong as a venue for arbitration. For example, according to the
Memorandum of Regulatory Understanding of 19 June 1993 between the Hong Kong
Securities and Futures Commission and the China Securities Regulatory Commission
—in relation to the listing on the Hong Kong Stock Exchange of a number of
mainland companies—China has agreed that shareholders’ disputes with mainland
management can be arbitrated in Hong Kong at HKIAC under the Securities
Arbitration Rules of the HKIAC.202
Both sides have also promised to co-operate in organizing seminars, conferences
and educational programmes. Examples of such co-operation include: (i) in February
1993, HKIAC, CIETAC and the City Polytechnic University of Hong Kong jointly
sponsored a major conference in Hong Kong to discuss the issue of cross-straits
disputes settlement;203 and (ii) on 11–13 November 1998, HKIAC, CIETAC, CIA
(East Asia branch), CMAC, HKIArb, the City University of Hong Kong, the
International Chamber of Commerce—Asia, and the Inter-Pacific Bar Association co-
organized the 1998 International Dispute Resolution Conference in Hong Kong,
which drew a total of 120 participants.204

D. MAJOR VENUES FOR INTERNATIONAL COMMERCIAL ARBITRATION

Although both Hong Kong and China are latecomers to formal, international
arbitration, from their early days of copying the British and Russian models they have

200
For the text of the Co-operation Agreement, see Cheng Dejun et al., note 13 above, at 371.
201
Id., Introduction.
202
For this purpose, the Security Arbitration Rules of the HKIAC were adopted to take effect from 1 July
1993. For the English and Chinese texts, see id., at 813–835.
203 See Neil Kaplan, et al., note 6 above, at 361.
204 The information was provided by Shirley Cho of HKIAC via email, dated 20 September 2000.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 85

progressed to the point of—in many ways—out-performing their teachers,205

becoming two of the most prominent arbitration venues in the world.
CIETAC’s importance as an international arbitration forum has expanded with
China’s development as an economic power and the rapid modernization and
internationalization of its arbitration system. In 1985, CIETAC handled only 37 cases.
Ten years later, that number had grown to over 900. Since then, its annual caseload has
steadily declined to 609 in 1999.206 However, indisputably CIETAC is still one of the
major international commercial arbitration institutions in the world. In terms of the
annual number of cases, it has ranked first in the world since 1993. While CIETAC’s
caseload is declining, the total amount of funds disputed in its arbitration cases reached
a historic level of nearly RMB6.89 billion (USD 840 million) in 1999.207 Parties from
more than 40 countries and regions other than China have been involved in CIETAC
arbitration cases.208 The awards made by CIETAC have already been recognized and
enforced in more than 20 countries or territories, including Japan, New Zealand,
Germany, France, the United States, Canada and the HKSAR.209 All these
achievements have naturally earned CIETAC a reputation worldwide.
HKIAC’s story is equally, if not more, telling. Since its establishment in
September 1985, HKIAC has quickly achieved its goal of becoming a major arbitration
centre in Asia. Table 3, showing HKIAC’s caseload since 1985, is clear and convincing
evidence:

TABLE 3: HKIAC ANNUAL CASELOAD 1985–99

’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99

No. of 9 20 43 24 45 54 94 185 139 150 184 197 218 240 257

cases

(Source: HKIAC)

205 It should be noted that Russia has also made substantial improvements in the area of international

arbitration. For a study of recent Russian reforms, see Burke McDavid, Arbitration Alternatives With A Russian
Party, 32 Int’l Law. 119 (Spring 1998).
206 The decline of CIETAC’s caseload in recent years can be attributed partly to the competition of China’s

domestic arbitration commissions. It has been reported that because of its lower fees, compressed resolution
period, and desire to conform to international practice, the Beijing Arbitration Commission (BAC)—one of the
most active domestic arbitration commissions in China—is becoming an attractive alternative to CIETAC and
overseas arbitration. As of 25 May 1999, the BAC had accepted a total of 683 cases since its establishment in 1995,
and among them more than 20 cases have involved either a foreign party or a Chinese enterprise with foreign
investment. See Donald C. Clarke and Angela H. Davis, Dispute Resolution in China: The Arbitration Option, in Asia
Law and Practice (ed.), China 2000: Emerging Investment, Funding and Advisory Opportunities for a New China (Hong
Kong: Euromoney Publications (Jersey) Limited, 1999), at 151–162, available online at <http://
www.asialaw.com/bookstore/china2000/chapter12.htm>. It has also been reported that CIETAC has assisted in
the conduct of arbitrations in Beijing by the International Chamber of Commerce International Court of
Arbitration. See Wang Shengchang, note 132 above, at 8. If foreign arbitration institutions are allowed to conduct
arbitrations in China, CIETAC may face competition from them as well.
207 See Wang Shengchang, note 132 above, at 6.
208 See Michael J. Moser, note 155 above, at 35.
209 See Li Hu, note 149 above, at 6.
86 JOURNAL OF INTERNATIONAL ARBITRATION

Amazingly, if accounting only by caseload, the HKSAR should also rank among
the most important international commercial arbitration centres in the world today—as
Table 4, an international arbitration caseload comparison chart of major regional and
international arbitration institutions in the 1990s, indicates.210 211 212 213 214 215 216 217 218

TABLE 4: ANNUAL CASELOAD OF MAJOR INTERNATIONAL AND REGIONAL ARBITRATION INSTITUTIONS,

1990-99

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

CIETAC210 238 274 267 486 829 902 778 723 645 609

ICC211 365 333 337 352 384 427 433 452 466 529

AAA212 205 262 252 207 187 180 226 320 430 453

HKIAC213 54 94 185 139 150 184 197 218 240 257

SCC214 35 63 44 78 74 70 75 82 92 104

LCIA215 28 23 28 29 29 40 37 52 70 60

SIAC216 N/A 2 7 15 22 37 25 43 67 67

KCAB217 19 17 30 28 33 18 36 51 59 40

KLRCA218 8 5 4 3 8 11 6 8 15 19

JCAA219 N/A 6 5 3 4 7 8 13 14 12

(Sources: various)

219

210
The figures are from CIETAC, and are on file with the authors.
211
The figures are quoted from the Statistical Reports published in the International Chamber of Commerce
International Court of Arbitration Bulletin from 1990 to 1999, provided by ICC and on file with the authors.
212 The figures were provided by the American Arbitration Association, and are on file with the authors.
213 The figures were provided by the Hong Kong International Arbitration Center, and are on file with the

authors.
214 The figures are available online at the Arbitration Institute of the Stockholm Chamber of Commerce

website: <http://www.chamber.se/arbitration/english/>.
215 The figures were provided by the London Court of International Arbitration, and are on file with the

authors.
216 The figures were provided by the Singapore International Arbitration Center, and are on file with the

authors. Note that SIAC was founded in May 1990.

217 The figures for 1995–99 are available online at the Korea Commercial Arbitration Board’s official website:

<http://www.kcab.or.kr/e/index_e.html>. The figures for 1990–94 were provided by Jong-Hee Kim, President
of KCAB, via e-mail to the authors dated 7 August 2000.
218 See note 87, above.
219 The figures are quoted from Michael Pryles (ed.), Dispute Resolution in Asia (The Hague, Boston: Kluwer

Law International, 1997, at 23), for 1991–94, and provided by the Japan Commercial Arbitration Association for
1995–99 (on file with the authors).
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 87

Moreover, compared to other venues for arbitration in the region, the HKSAR
claims that it probably handles the largest number of cases in which neither party is
local.220 Indeed, Hong Kong enjoys unique conditions that enable it to compete most
effectively with other economic powers in offering international arbitration services.
Obviously, Hong Kong itself has a robust economy. Geographically convenient,
superbly well-equipped in communications, transport, and accommodations, Hong
Kong has for some time been the de facto international financial and commercial capital
of East Asia. Moreover, by virtue of being a leading commercial centre in Asia, Hong
Kong has strong expertise in finance, law, shipping, and construction, and many other
areas—with an enormous pool of experienced professionals available in support of
dispute resolution. Along with accountants, architects, bankers, engineers, insurance
experts and lawyers, there are thousands of other specialists who may be called on to
assist in particular disputes. In addition to lawyers qualified to advise on Hong Kong
law, there are many experienced lawyers resident in the HKSAR hailing from most
major international trading nations, who are qualified to advise on the laws of their
respective jurisdictions. When necessary to supplement its own arbitral experience,
Hong Kong can draw on this remarkable international reservoir of specialist
knowledge. It is also important to emphasize that arbitration in Hong Kong is fully
supported by its judiciary, as well as by its truly internationalized and very liberal
international arbitration system.
Busy international arbitration venues that they are, there are still many things to
be desired before both CIETAC and HKIAC can be considered truly major
international arbitration centres. The PRC still has a long way to go in general to
achieve legal sophistication. It cannot simply rely on the hard work and rate of progress
of CIETAC and CMAC to date.221 China also awaits the formal establishment of a
professional organization of arbitrators to provide the education and training
programmes that are indispensable for existing and prospective arbitrators, as well as for
information exchange.222 Meanwhile, in Hong Kong, the effort to harmonize
domestic and international arbitration laws has yet to be fully accomplished to form a
truly advanced arbitration system. The HKIAC has yet to make its panel, rules and
other aspects of its operation available to the public.
In addition, there is also a need for greater research and information efforts.
Although authoritative books have been published in regard to the international
arbitration systems in China and Hong Kong, there is still an urgent need, in light of
the fast pace of their development, to upgrade the websites of both CIETAC and
220 See HKIAC’s website at <http://www.hkiac.org>.
221 As has been pointed out, “CIETAC is widely credited by the foreign business community as a relatively
inexpensive, expeditious, and fair forum for resolving disputes with Chinese parties.” However, the hard-won
respect for CIETAC is seemingly being squandered by China’s judicial system. See Matthew D. Bersani, The
Enforcement of Arbitration Awards in China, 10 J.Int.Arb.2 (June 1993), at 47.
222 One commentator has suggested that the CAA is the best body to assume this function in the future “in

view of the CAA’s central supervisory role and the legislative intention to unify and upgrade the system of PRC
arbitration”. See Katherine L. Lynch, Chinese Law: The New Arbitration Law, 26 Hong Kong L.J. 104 (1996), at
107–108.
88 JOURNAL OF INTERNATIONAL ARBITRATION

HKIAC to make more recent, detailed, and analytical information accessible to a wider
group of readers. Like other major international arbitration venues around the world
that provide high-quality publications, it would also be very desirable for these two
leading arbitration venues in East Asia to consider jointly launching an arbitration
periodical in English to report not only on their own significant developments in
international arbitration but also on those of the entire Asian region.

X. THE LEGAL FRAMEWORK

A. HONG KONG SPECIAL ADMINISTRATIVE REGION ARBITRATION ORDINANCE

(CHAPTER 341)

Hong Kong’s formal arbitration laws came into being with the adoption of the
Hong Kong Arbitration Ordinance (Chapter 341 of the Laws of Hong Kong) in 1963.
Since then, the Hong Kong arbitration system has undergone numerous statutory
modifications, especially in 1982, 1989, 1996 and 1999.223 Following the common-law
tradition of having only a single statute to regulate arbitration,224 the ordinance remains
the major source of arbitration law in Hong Kong and provides the foundational
legislative support underlying arbitration and mediation in Hong Kong.
The Ordinance, as amended in 2000, has seven parts and four Schedules225 and
may be summarized as follows:
– Part I—Preliminary. This states basic definitions in, and objectives and principles
of, the Ordinance. See §§1–2AC.
– Part IA—Application. This provides rules applicable to both domestic and
international arbitration, such as the power of the arbitrator to act as conciliator
(§2B), powers of arbitration tribunals (§2GB(f)) and courts (§2GC(1)(c)) to
grant interim injunctions or direct other interim measures to be taken, etc. See
§§2AD–2GN.
– Part II—Domestic Arbitration. This, the oldest and largest part of the Ordinance,
remains very much under the influence of the English Arbitration Act (1950–
1996). See §§2L–34 and Schedule 4.
– Part IIA—International Arbitration. This part applies the UNCITRAL Model
Law to international arbitrations conducted in Hong Kong. See §§34A–34C.
The Model Law is set out in Schedule 5 and, to assist the interpretation of the
Model Law by arbitral tribunals and by the courts, three related documents such
as the Analytical Commentary on Draft Text of a Model Law on International
223
For an account of modifications made before the handover, see Robert Morgan, note 32, above.
224
See, e.g., the 1996 UK Arbitration Act and the 1955 US Uniform Arbitration Act.
225
There are also two pieces of subsidiary legislation: Chapter 341A Arbitration (Parties to New York
Convention) Order and Chapter 341B Arbitration (Appointment of Arbitrators and Umpires) Rules, available
online at <http://www.justice.gov.hk/blis.nsf/CurAllEngDoc?OpenView&Start=341&Count=25&Expand=341
.2#341.2> and <http://www.justice.gov.hk/blis.nsf/CurAllEngDoc?OpenView&Start=341&Count=25&
Expand=341.3#341.3>.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 89

Commercial Arbitration by the Secretary-General on 25 March 1985 (UN Doc.

A/CN.9/264) are set out in Schedule 6.
– Part IIIA—Enforcement of Mainland Awards. This new part applies the MOU to
enforce arbitral awards made by mainland arbitration institutions in the
HKSAR. See §§40A–40G.226
– Part IV—Enforcement of Convention Awards. This applies the New York
Convention to enforce foreign arbitral awards made under that Convention set
out in Schedule 3. See §§41–46.
– Part V—General. This last part provides miscellaneous rules. See §§47–48.
The Ordinance’s more notable features are summarized below.
First, the development of the Ordinance has experienced an interesting U-turn.
The Arbitration (Amendment) (No. 2) Ordinance 1989 broke up Hong Kong’s
unitary arbitration system and created a dual one. Recently, however, there has been a
movement towards gradual unification of the dual system for domestic arbitration and
international arbitration in Hong Kong. Based partly on certain provisions of the
English Arbitration Act 1996, and partly on the UNCITRAL Model Law, the 1996
Amendment started a process of harmonizing Hong Kong’s domestic and international
arbitration regimes with the aim of formulating a single, unified system for domestic
and international arbitrations.227
Second, even the Ordinance’s separation of domestic and international arbitration
regimes is not absolute. When the Arbitration (Amendment) (No. 2) Ordinance 1989
introduced the Model Law for international arbitration in Hong Kong, it also provided
rules that allow parties to domestic arbitrations to opt out of Part II and into Part IIA,
so that the Model Law will apply (§2L), or parties to international arbitration to opt
out of Part IIA and into Part II, so that the rules governing domestic arbitration will
apply (§2M).228
Third, by the Ordinance, Hong Kong is among the first few countries and regions
in the world, and the first in Asia, to adopt the UNCITRAL Model Law.229 Hong
Kong (on 6 April 1990) was the ninth jurisdiction to enact the Model Law in its own

226 Part III Enforcement of Certain Foreign Awards (§§35–40) and the 1st and 2nd Schedules were completely

repealed by the passage of the Arbitration (Amendment) Ordinance 1999. “Certain foreign awards” are awards
made under the Geneva Protocol on Arbitration Clauses (1923) set out in the 1st Schedule and the Geneva
Convention on the Execution of Foreign Arbitral Awards (1927) set out in the 2nd Schedule. The two treaties
were superseded by the New York Convention and are for practical purposes moribund today. Moreover, the
PRC has not signed the two Geneva treaties, so they ceased to apply to Hong Kong from 1 July 1997.
227 For a detailed discussion on Hong Kong’s movement towards a unified arbitration system, see generally

Robert Morgan, note 50, above.

228 See also related rules §§34A–34B in Part IIA.
229 As of 8 June 2000, legislation based on the UNCITRAL Model Law had been enacted in Australia,

Bahrain, Bermuda, Bulgaria, Canada, Cyprus, Egypt, Germany, Guatemala, Hong Kong Special Administrative
Region of China, Hungary, India, Iran, Ireland, Kenya, Lithuania, Macau Special Administrative Region China,
Malta, Mexico, New Zealand, Nigeria, Oman, Peru, the Russian Federation, Singapore, Sri Lanka, Tunisia,
Ukraine, within the UK: Scotland; within the United States: California, Connecticut, Oregon, and Texas; and
Zimbabwe. The status of enactments of the Model Law is available at <http://www.uncitral.org/english/status/
>, issued by the International Trade Law Branch, United Nations Office of Legal Affairs, servicing the United
Nations Commission on International Trade Law (UNCITRAL).
90 JOURNAL OF INTERNATIONAL ARBITRATION

legislation, after only Canada (10 August 1986), Cyprus (29 May 1987), the state of
California in the United States (4 March 1988), Nigeria (14 March 1988), Bulgaria
(5 August 1988), Australia (12 June 1989), the state of Texas in the United States
(1 September 1989), and the state of Connecticut in the United States (1 October
1989).230
Fourth, under the Ordinance, not only was Hong Kong among the first to enact
the Model Law, but it was also among the earliest to adopt the Model Law almost in its
entirety. Hong Kong can be called a true “Model Law territory”.231 The major
changes were adding the Chinese practice of combining mediation within arbitration
and dropping the requirement of “commercial”, which enabled Hong Kong to apply
the Model Law to its furthest possible scope.232
In addition to the Ordinance and subsidiary legislation, there are also “judge-
made” arbitration laws in Hong Kong. As the HKSAR continues to be a common-law
jurisdiction under the “one country, two systems” formula, case law (precedent)
continues to be part of the Hong Kong laws. Not only are HKSAR’s lower courts
bound by the cases decided by higher courts, especially the Court of Final Appeal, but
also the cases decided in the UK and other common-law jurisdictions continue to be
persuasive, even if not binding, precedents.233 Moreover, Order 73 (Arbitration
Proceedings) of the Rules of the High Court (Chapter 4A) governs the procedural
requirements for applications of the arbitration—related matters (such as interim
measures of protection determination of a preliminary point of law, and appeal against
or setting aside or enforcement of awards) to the High Court under the Arbitration
Ordinance.234 Order 73 is further supplemented by the Practice Directions issued by
the Chief Justice.235

230 All dates are the effective dates of the domestic legislation that enacted the Model Law. The information

on these effective dates is provided by UNCITRAL, and on file with the authors.
231 For a study of national enactment of the Model Law, see, e.g., Pieter Sanders, Unity and Diversity in the

Adoption of the Model Law, 11 Arb. Int’l 1 (1995).

232 For all the changes made to the Model Law, see Law Reform Commission of Hong Kong, Report on the

Adoption of the UNCITRAL Model Law of Arbitration (Topic 17), September 1987, at 28–29, ¶¶4.11–4.16. Note
that there have been other changes to the Model Law made by later amendments to the Arbitration Ordinance.
For example, the Arbitration (Amendment) Ordinance 1996 gives HKIAC the power to decide whether a tribunal
of one or three arbitrators should decide international cases, where the parties have not provided for the number
of arbitrators and cannot agree [34C(5) of the Arbitration Ordinance], while under Article 10(2) of the Model
Law one is deemed to intend a tribunal of three arbitrators.
233 See Neil Kaplan and Robert Morgan, note 20, above, at 6.
234 The text of Order 73 is available in Neil Kaplan and Robert Morgan, id., Annex II. It is also available

online at <http://www.justice.gov.hk/Home.htm>.
235 Practice Directions provide guidelines for the Hong Kong legal profession on matters of practice and

procedure. For Practice Directions concerning arbitration, see Practice Direction No. 6.1, Construction and
Arbitration List [1999] The Authorised Law Reports and Digest (HKLRD) (PD) 39, available at <http://
www.hklawsoc.org.hk/hklslolbin/lolgateway2/black.airnet.com.hk/bin/search?form=Lsattach.all&link=99-1a1>;
and Practice Direction No. 6.2, Application for Leave to Appeal Against Arbitration Awards [1999] The Authorised
Law Reports and Digest (HKLRD) (PD) 48.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 91

B. ARBITRATION LAWS OF THE PEOPLE’S REPUBLIC OF CHINA

Whereas in Hong Kong the single statute of the Hong Kong Arbitration
Ordinance regulates the arbitration system, the arbitration laws in China were
fragmented from the start. It has been reported that from 1949 to the end of 1993,
there existed 14 laws, 82 administrative regulations and nearly 200 local regulations in
which provisions concerning arbitrations were incorporated.236
Today, this situation continues in China, albeit to a lesser extent. As a civil-law
jurisdiction, one important source of arbitration law in China is its Civil Procedure
Law, formally adopted by the Fourth Session of the Seventh National People’s
Congress on 9 April 1991.237 However, departing from the civil-law tradition to enact
arbitration law in one comprehensive code of civil procedure,238 China adopted a
piecemeal approach when enacting arbitration provisions in its Civil Procedure Law.
Although Chapters 21 (Application for and Referral of Enforcement), 28 (Arbitration),
and 29 (Judicial Assistance) of that Law provide important provisions concerning
arbitration agreements, provisional measures of protection, stays of court proceedings,
and the setting aside and enforcement of arbitral awards, other matters—such as
jurisdiction, arbitration procedure and the making of awards—are left untouched.
Then, the PRC turned to a common law-style approach to adopt a comprehensive
arbitration law, which has since become the most important source of arbitration law
in China.
The 1994 Arbitration Law was adopted by the 9th Standing Committee Session
of the 8th National People’s Congress on 31 August 1994 and took effect on 1
September 1995.239 It represents a major effort to unify and reform the fragmented
arbitration laws in China. It consists of eight chapters, 80 articles, and one annex, and
may be summarized as follows:
– Chapter 1 General Provisions. This concerns arbitrability and basic principles of
arbitration. See Articles 1–9.
– Chapter 2 Arbitration Commissions and the Arbitration Association. This provides for
the reorganization of domestic arbitration commissions, qualifications for
arbitrators and the functions of the new China Arbitration Association (CAA).
See Articles 10–15.

236 See Legislative Affairs Commission of the Standing Committee of the National People’s Congress of the

People’s Republic of China (ed.), Arbitration Laws of China, note 53, above, at 27.
237 The Law took effect on the same day it was adopted. Note that the Law was first enacted for Trial

Implementation in 1982. The text of the Law is reprinted in Cheng Dejun et al., note 13 above, at 498–583.
238 See, e.g., Book X, Arbitration Procedure (Sections 1025–1066) of the Code of Civil Procedure of

Germany, as amended by the Act on the Reform of the Law relating to Arbitral Proceedings of 22 December
1997, effective 1 Jan. 1998, available online at <http://www.internationaladr.com/germany1.htm>; Chapter VIII
Arbitration Procedure (Sections 786–805) of the Civil Procedure Code of Japan, as revised and promulgated 26
June 1996, available online at <http://www.jseinc.org/en/laws/index.htm>.
239 For a detailed discussion of the Arbitration Law, see Legislative Affairs Commission of the Standing

Committee of the National People’s Congress of the People’s Republic of China, ed., Arbitration Laws of China,
note 53, above. See also Ben Beaumont, Danny Choi and John Luk, Commentary on the Chinese Arbitration Act,
London : Simmonds & Hill Pub., 1995; Katherine L. Lynch, note 222, above.
92 JOURNAL OF INTERNATIONAL ARBITRATION

– Chapter 3 Arbitration Agreement. This describes the form and validity of

arbitration agreements. See Articles 16–20.
– Chapter 4 Arbitration Proceedings. This deals with applications, acceptances,
formation of arbitration tribunals, hearings, and awards. See Articles 21–57.
– Chapter 5 Application for Setting Aside Arbitration Award. This provides the
grounds for the setting aside of arbitral awards, as well as remedy measures. See
Articles 58–61.
– Chapter 6 Enforcement. This concerns enforcement and refusal of both domestic
and international arbitral awards. See Articles 62–64.
– Chapter 7 Special Provisions for Arbitration Involving Foreign Elements. This sets up
special, favourable rules for international arbitration. See Articles 64–73.
– Chapter 8 Supplementary Provisions. This deals with miscellaneous rules. See
Articles 74–80.
The 1994 Arbitration Law has been called “a major milestone in the development
of China’s legal system”.240 Among its notable features are the following.
First, while the 1994 Law has substantially changed China’s domestic arbitration
system and brought it closer to standard international practice, 241 China’s foreign-
related arbitration system as a whole has remained largely as it was. In other words,
contrary to the fundamental reforms done to domestic arbitration institutions and
practices,242 the 1994 Law by and large simply writes into law existing international
arbitration institutions and practices and further strengthens them. For example, Article
66 states that “[f]oreign-related arbitration commissions may be organized and
established by the China Chamber of International Commerce”. This basically
confirms and guarantees the continued operation of CIETAC and CMAC, which
were formerly “organized and established by the China Chamber of International
Commerce”.
Second, under the 1994 Law, China’s international arbitration continues to
enjoy favourable treatment in spite of the fact that domestic arbitration is now
more closely in line with international standards.243 For example, there is no limit
on the number of members of foreign-related arbitration commissions under
Article 66, while the maximum number of members for domestic arbitration
commissions is 16 under Article 12. The competent court for deciding arbitral
240See Michael J. Moser, China’s New Arbitration Law, 6 World Arb. & Mediation Rep. 7 (Jan. 1995), at 9.
241The 1994 Arbitration Law provides even less leeway to the People’s Courts to intervene in arbitration than
the New York Convention allows. Under Article 5 of the 1994 Arbitration Law, the People’s Courts cannot
intervene “unless the arbitration agreement (clause) is void”, while under Article II of the Convention, a court
shall “refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or
incapable of being performed”.
242 The major reforms include: (i) domestic arbitration commissions are all reorganized and no longer

subordinate to the governmental authorities; (ii) domestic arbitration awards, which formerly were not final, are
now final; (iii) not only contractual, but also non-contractual, disputes are now arbitrable; and (iv) an arbitration
agreement is now required;
243 The PRC’s 1994 Arbitration Law embodies almost all the major, basic principles of modern arbitration.

See Chen Min, The Arbitration Act of the People’s Republic of China: A Great Leap Forward, 12 J.Int.Arb. 4 (December
1995), at 29.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 93

jurisdiction, taking interim protection measures in support of foreign-related

arbitration, reviewing an application for setting aside a foreign-related award, or
reviewing an application for enforcement of a foreign-related award, is a People’s
Court at the intermediate level, while in domestic arbitration, the competent
People’s Court is at the lowest level—except in the case of the setting aside of
domestic awards.244 Moreover, according to Articles 58 (setting aside of domestic
awards) and 63 (enforcement of domestic awards) of the Arbitration Law and
Article 217 (enforcement of domestic awards) of the Civil Procedure Law annexed
to the 1994 Arbitration Law, competent People’s Courts can review the merits of
an award rendered by a domestic arbitration commission; but under Articles 70
(setting aside of foreign-related awards) and 71 (enforcement of foreign-related
awards) of the Arbitration Law and Article 260(1) (enforcement of an award
rendered by a foreign-related arbitration commission) of the Civil Procedure Law
annexed to the 1994 Arbitration Law, competent People’s Courts are able to
review only the procedural matters in connection with foreign-related awards and/or
an award rendered by a foreign-related arbitration commission—on a restricted list
of grounds that are geared to international standards. 245
Third, in spite of its overall significant legislative reform achievements, Chapter 7
of the 1994 Law does not completely replace all the arbitration provisions of previous
laws and regulations. The 1994 Arbitration Law has to be read together with the 1991
Civil Procedure Law. Indeed, Articles 217 and 260 of the 1991 Civil Procedure Law
are annexed to the 1994 Arbitration Law.246 There are also other laws and regulations

244 There is no such differential treatment in Hong Kong. All applications of arbitration-related matters—

such as interim measures of protection, determinations of a preliminary point of law, and appeals against or the
setting aside or enforcement of awards (but excepting stays of proceedings)—to the Hong Kong judiciary are to be
dealt with by the Court of First Instance (formerly the High Court) according to Order 73 Arbitration
Proceedings of the Rules of the High Court (Chapter 4A).
245 See Wang Shengchang, note 4 above, at 24.
246 Reading the 1994 Arbitration Law and the 1991 Civil Procedure Law together does not always produce

clear-cut understanding, however. For example, it has been argued that there is an inconsistency between Articles
70 and 71 of the 1994 Arbitration Law on the one hand and Article 260 of the 1991 Civil Procedure Law on the
other, and that there is also a dilemma in determining which provision of the 1991 Civil Procedure Law applies
to a domestic arbitration award made by CIETAC—a foreign-related arbitration commission—as Article 217
applies to a domestic arbitral award and Article 260 to an award made by a foreign-related arbitration commission. See
John Mo, note 91, above, at 34–36. However, in our view, there can be a very different reading. Judging from its
wording, the 1991 Civil Procedure Law distinguishes only arbitral awards made by foreign-related arbitration
commissions from domestic awards made by domestic arbitration institutions, and sets up different enforcement
regimes for each category. In reality, it appears that when the 1991 Civil Procedure Law was adopted, all awards
made by foreign-related arbitration commissions were foreign-related awards and all awards made by domestic
arbitration commissions were domestic awards. Then, the 1994 Arbitration Law opened the door for two new
categories. One is, as interpreted by the State Council in its 1996 Notice, foreign-related awards made by domestic
arbitration commissions; the other concerns, as decided by CCPIT in adopting the 1995 and 1998 CIETAC
Rules, special kinds of domestic awards made by CIETAC. Reading together the two laws, there should be no
difficulty covering the latter category under Article 260 of the Civil Procedure Law, which regulates any
“arbitration award made by a foreign-related arbitration institution”. Similarly, there is no issue of inconsistency in
using the same standard set forth in Article 260 of the 1991 Civil Procedure Law for the setting aside or
enforcement of the former category, which neither existed nor needed to be regulated before.
94 JOURNAL OF INTERNATIONAL ARBITRATION

that have relevant arbitration provisions.247 Where the 1994 Arbitration law is silent,
these previous laws and regulations continue to apply. And, when there is a conflict
between the provisions of the 1994 Arbitration Law and the previous laws and
regulations concerning international arbitration, the former are to prevail (Article
78).248
Moreover, the 1994 Arbitration Law should also be read together with the
Supreme People’s Court’s judicial interpretations relevant to international arbitration.
Although China has no case law tradition of judicial precedents, the Supreme People’s
Court’s judicial interpretations are generally viewed as having the same force of law as
legislation.249 The following are several important Supreme People’s Court’s judicial
interpretations involving international arbitration: (1) the Notice of the Supreme
People’s Court on the Implementation of China’s Accession to the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (10 April 1987);250 (2)
Some Opinions on Several Questions Concerning Implementation of the Civil
Procedure Law (14 July 1992);251 (3) the Notice of the Supreme People’s Court
Concerning Handling of Certain Issues of Foreign Related Arbitration and Foreign
Arbitration (28 August 1995);252 (4) the Notice of the Supreme People’s Court
Regarding the Issues on the Setting Aside of the Foreign-Related Arbitration Awards
by the People’s Court (23 April 1998);253 (5) the Regulation of the Supreme People’s
Court Concerning the Charges and the Time Limits for Review of Recognition and
Enforcement of Foreign Arbitral Award (21 November 1998);254 and (6) the

247 They include: the 1979 Law on Chinese-Foreign Equity Joint Ventures (amended in 1991); the 1985

Foreign Economic Contract Law; the 1986 Law Concerning Enterprises with Sole Foreign Investment; the 1988
Law on Chinese-Foreign Cooperative Joint Ventures; the 1982 Regulations Concerning the Exploitation of
Offshore Petroleum Resources in Cooperation with Foreign Enterprises; the 1983 Implementing Regulations for
the Law on Chinese-Foreign Equity Joint Ventures; the 1984 Regulations of Shenzhen Special Economic Zone
on Economic Contracts Involving Foreigners; the 1988 Regulations of the State Council for the Encouragement
of Investment by Taiwanese Compatriots; the Measures for the Charging of Court Costs by People’s Courts; the
1990 Regulations of the State Council Concerning the Encouragement of Investment by Overseas Chinese and
Hong Kong and Macau Compatriots; the 1993 Regulations Concerning the Exploitation of Onshore Petroleum
Resources in Cooperation with Foreign Enterprises; and the 1999 Contract Law. For the relevant provisions of
these laws, except the 1986 Law on Wholly Foreign-Owned Enterprises and the 1999 Contract Law, see Cheng
Dejun et al., note 13 above, at 498–616. For the 1986 Law Concerning Enterprises with Sole Foreign Investment,
see 2 China Laws for Foreign Business: Business Regulation (1998) (CCH) ¶13-506, at 16,651. For the 1999
Contract Law, see 1 China Laws for Foreign Business: Business Regulation (1998) (CCH) ¶5-650, at 7,006.
248 However, the 1991 Civil Procedure Law should be an exception. The 1991 Civil Procedure Law is a basic

law and, under the Chinese legislative hierarchy, a higher law than the 1994 Arbitration Law. A basic law needs to
be passed by the general session of the National People’s Congress, while other laws can be passed by the NPC’s
Standing Committee. See the PRC Constitution, Arts 62 and 67.
249 See Cheng Dejun et al., note 13 above, at 10. In one of its judicial interpretations, the SPC has stated that

its regulations are legally binding, provided that they do not contravene national regulations. See Certain Provisions
on Judicial Interpretation, issued by the SPC 23 June 1997.
250 Translated and reprinted in Cheng Dejun et al., note 13 above, at 754–757.
251 See note 3, above.
252 Printed in 2 Collection of Judicial Interpretations of the Supreme People’s Court 1993–1996 [Zhonghua Renmin

Gongheguo Zuigao Renmin Fayuan Sifa Jieshi Quanji] (Beijing: People’s Court Publishing House, 1997) (in
Chinese), at 548. See also CIETAC and CMAC, China Int’l Com. Arb. Y.B. (1996), at 115.
253 See CIETAC and CMAC, China Int’l Com. Arb. Y.B. (1997–98), at 76 (Chinese version) and 186–187

(English version).
254 For the text of the Regulation, see 1 Gazette of the Supreme People’s Court of the People’s Republic of

China 1999, at 22.

 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 95

Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the

Mainland and the HKSAR in the Mainland China (18 June 1999).255
Today, the legal sources of arbitration laws in the HKSAR and in the PRC
continue to diverge, and a clear reflection of this difference is the way the
PRC and the HKSAR chose to implement the MOU on Arrangement for Mutual
Enforcement of Arbitral Awards of June 1999. The HKSAR enacted the
Arbitration (Amendment) Ordinance 1999 to amend its Arbitration Ordinance for
this purpose, while in the PRC it was up to the Supreme People’s Court to issue a
circular, in the form of a judicial interpretation, rather than for China’s legislature
to amend the Arbitration Law. Further, in addition to the difference in sources of
arbitration laws, the substance of arbitration laws in the HKSAR and the PRC
continues to differ in many aspects.
For example, arbitral tribunals formed in Hong Kong and China have
different powers in regard to interim measures of protection. Under Article 17
of the UNCITRAL Model Law, “unless otherwise agreed by the parties, the
arbitral tribunal may, at the request of a party, order any party to take such
interim measure of protection as the arbitral tribunal may consider necessary in
respect of the subject-matter of the dispute. The arbitral tribunal may require any
party to provide appropriate security in connection with such measure.” 256 Under
Articles 28 and 46 of the 1994 Arbitration Law, only the People’s Court has the

255 The Arrangement was published on 28 January 2000 in the People’s Court Daily, available online at

<http://www.rmfyb.com.cn/html/2000/01/28/00120000128021.htm>. The English version of the

Arrangement is available online at <http://www.info.gov.hk/gia/general/199906/15/0615181.htm>. There
are also several judicial interpretations issued by the Supreme People’s Court concerning the People’s Courts’
enforcement work in general. They include: Regulations of the Supreme People’s Court Concerning Several Issues
Related to the Unified Administration of Enforcement Work by the High People’s Courts (adopted by the Judicial
Committee of the SPC, 30 December 1999, which was issued and took effect on 14 January 2000), reprinted
in People’s Court Daily, 25 January 2000, available online at <http://www.rmfyb.com.cn/html/2000/01/25/
00120000125001.htm>; and Certain Regulations for Strengthening and Improving Entrustment Enforcement Work
(adopted by the Judicial Committee of the SPC, 24 February 2000, which was issued and took effect on 11
March 2000), reprinted in People’s Court Daily, 11 March 2000, available online at <http://
www.rmfyb.com.cn/html/2000/03/20/01020000320003.htm>. The latter regulation attempts to address the
problem of lack of enforcement by a local court asked to enforce a judgment or order of another PRC court
against a local company. It also clarifies jurisdictional issues and how enforcement cases are to be handled
when a party has assets in more than one jurisdiction.
256 See also Article 26 of the UNCITRAL Rules, which states: 1. At the request of either party, the arbitral

tribunal may take any interim measures it deems necessary in respect of the subject-matter of the dispute,
including measures for the conservation of the goods forming the subject-matter in dispute, such as ordering their
deposit with a third person or the sale of perishable goods. 2. Such interim measures may be established in the
form of an interim award. The arbitral tribunal shall be entitled to require security for the costs of such measures.
3. A request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible
with the agreement to arbitrate, or as a waiver of that agreement.
96 JOURNAL OF INTERNATIONAL ARBITRATION

power to grant interim measures of protection in relation to property and

evidence.257
Again, under Article 43 of the 1994 Arbitration Law, “the arbitration tribunal
may of its own motion collect evidence as it considers necessary”.258 This arbitral
tribunal activism is consistent with China’s civil-law tradition and common to China’s
judicial system as well. Nevertheless, when exercising this discretion, the arbitral
tribunal shall, in a timely manner, instruct the parties to be present on the spot if it
deems it necessary (Article 38 of the 1995 CIETAC Rules). Such activism is absent in
the Hong Kong Arbitration Ordinance. Under Article 24 of the UNCITRAL
Arbitration Rules,259 the arbitral tribunal has extensive power to request the parties to
produce evidence, but lacks power to take evidence through its own investigation.
Yet, again, while Article 28 of the UNCITRAL Model Law states that “the
arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties
have expressly authorized it to do so”, Article 7 of the 1994 Arbitration Law provides
that arbitrators in China shall resolve disputes not only “in compliance with the law”
but also “in an equitable and reasonable manner”, that is, decide as amiable compositeur
without the parties’ authorization.
A further difference is that China has only institutional arbitration, while Article 2
of the UNCITRAL Model Law clearly allows both ad hoc and institutional arbitration.
No provision for ad hoc arbitration is laid down in the 1994 Arbitration Law. Article 16
of the 1994 Arbitration Law requires that an arbitration agreement shall designate an
arbitration commission. Article 18 states that “if an arbitration agreement contains no,
or unclear, provisions concerning the matters for arbitration or selection of the
arbitration commission, the parties may reach a supplementary agreement. If no such

257 Article 28 states: “A party may apply for interim measures of protection of property if it may become

impossible or difficult to implement the award due to an act of the other party or other causes. If a party applies
for interim measures of protection of property, the arbitration commission shall submit the party’s application to
the People’s Court in accordance with the relevant provisions of the Civil Procedure Law. If the application is
wrongful, the party who applies for interim measures shall compensate for the losses suffered by the party against
whom the interim measures have been taken.” Article 46 states: “Under circumstances where evidence may be
destroyed or lost or be difficult to obtain at a later time, a party may apply for interim measures of protection of
evidence. If the evidence is perishable or if the evidence may be hard to obtain in the future, the litigants may
request that the evidence be preserved. Where the litigants request preservation of the evidence, the arbitration
commission shall submit the request to the grass-roots people’s court of the location where the evidence is
obtained.” See, similarly, Article 23 of the 1995 CIETAC Rules, which states that “When a party applies for
property preservation measures, the Arbitration Commission shall transmit the party’s application for a ruling to
the intermediate People’s Court in the place where the domicile of the party against whom the property
preservation measures are sought is located or in the place where the property of the said party is located. When
a party applies for taking interim measures of protection of evidence, the Arbitration Commission shall transmit
the party’s application for a ruling to the intermediate People’s Court in the place where the evidence is located.”
258 See also Article 38 of the 1995 CIETAC Rules, which states that an “arbitration tribunal may undertake

investigations and collect evidence on its own initiative, if it deems it necessary”.

259 Article 24 of the UNCITRAL Rules provides: 1. Each party shall have the burden of proving the facts

relied on to support his claim or defence. 2. The arbitral tribunal may, if it considers it appropriate, require a party
to deliver to the tribunal and to the other party, within such a period of time as the arbitral tribunal shall decide,
a summary of the documents and other evidence which that party intends to present in support of the facts in issue
set out in his statement of claim or statement of defence. 3. At any time during the arbitral proceedings the arbitral
tribunal may require the parties to produce documents, exhibits or other evidence within such a period of time
as the tribunal shall determine.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 97

supplementary agreement can be reached, the arbitration agreement shall be void.”

The effect of this institutional arbitration requirement has led to another difference
between the 1994 Arbitration Law and the Model Law. Although the 1994 Arbitration
Law does not require arbitrators to be selected only from arbitration commissions’
panels of arbitrators, it requires a designated arbitration commission—and all
arbitration commissions in China require parties to choose arbitrators from their
panels.260

C. ROLE OF THE UNCITRAL MODEL LAW AND THE NEW YORK CONVENTION
The Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (1958), together with the UNCITRAL Arbitration Rules (1976) and the
UNCITRAL Model Law (1985),261 are the major achievements in the United
Nations’ effort to establish a unified international legal framework for the fair and
efficient settlement of disputes arising in international commercial relations. The
Convention creates a uniform structure through which national enforcement of
foreign arbitral awards should follow. The two UNCITRAL models are set: (1) for
nations to adopt in their arbitration legislation, and (2) for the world’s arbitration
bodies and parties to choose in their arbitration.
The UNCITRAL Model Law is the most important international standard that
Hong Kong and China262 have faced in their efforts to modernize and internationalize
their international arbitration systems. The Model Law has been an integral part of Hong
Kong arbitration law for 10 years now. Although China has not adopted the
UNCITRAL Model Law, it was used as a guide in the course of drafting the 1994
Arbitration Law and, in substance, the fundamental principles of the Model Law have
been written into the law in the PRC.263 There is no doubt that the Model Law has been
an essential factor in modernizing international arbitration laws in both Hong Kong and
China. To say the least, despite the continued differences between the international
arbitration laws in China and Hong Kong, the goal of the Model Law to minimize the
differences among international arbitration laws is, to a large extent, realized in these two
jurisdictions under the principle of “one country, two systems”.264
The same can be said for the goals of the New York Convention. The New York
Convention is also an important source of arbitration law in both China and Hong

260 See, e.g., Articles 16, 24–27 and 31 of the 1998 CIETAC Rules.
261 Note that sometimes the UNCITRAL Model Law is confused with the UNCITRAL Arbitration Rules.
See, e.g., John Mo, note 91, above, at 13.
262 For consideration of the Model Law as a major source of reference in drafting the PRC’s 1994 Arbitration

Law, see Zhang Yulin, Towards the UNCITRAL Model Law: A Chinese Perspective, 11 J.Int.Arb. 1 (1994), at 121.
263 See Wang Shengchang, note 4 above, at 14–15.
264 On 11 December 1985, the United Nations General Assembly passed Resolution 40/72, recommending

that “all States give due consideration to the Model Law on International Commercial Arbitration, in view of the
desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial
arbitration practice.” See UN Doc. A/Res/40/72 (1985), available online at <http://www.un.org/gopher-data/
ga/recs/40/a40r072.txt>.
98 JOURNAL OF INTERNATIONAL ARBITRATION

Kong. The British government extended the application of the New York Convention
to Hong Kong on 23 April 1977. China became a party to the New York Convention
10 years later on 22 April 1987. Another 10 years later, on 1 July 1997, when Hong
Kong returned to China, the New York Convention continued to apply to Hong Kong
on the same terms—while both reciprocity and commercial reservations were made by
China,265 only the reciprocity reservation was made on behalf of Hong Kong by the UK
government in 1977 and restated by the Chinese government in 1997.
The New York Convention brings to China and Hong Kong the benefit that
their arbitral awards can be recognized and enforced around the world in more than
120 countries,266 but on the other hand it obligates them to recognize and enforce
foreign arbitral awards according to the terms of the Convention.267 This is the one
area in which China’s system of international arbitration has caused the greatest
concern abroad. According to China’s own investigation, conducted in August–
September 1997 by the Arbitration Research Institute (ARI),268 from 1990 to the end
of August 1997, out of a total of 14 foreign awards filed to the People’s Courts for
enforcement, one was still pending at the time and three were refused (one for the
non-existence of the party subject to enforcement, one for lack of assets available for
enforcement, and one for another difficulty).269 Although this record is not perfect, it
may still be interpreted as indicating that—while problems exist—there has been
general enforcement of foreign awards in China. Such a “positive” record, however,
was turned completely upside down by the notorious case Revpower Ltd. v. Shanghai
Far East Aerial Technology Import and Export Corporation (the Revpower case)270 which
underlined the major issues identified generally with the reluctance of China’s judiciary
to enforce foreign-related as well as foreign arbitral awards. These issues include local

265 China has made the following reservations: 1. The People’s Republic of China will apply the Convention,

only on the basis of reciprocity, to the recognition and enforcement of arbitral awards made in the territory of
another Contracting State; 2. The People’s Republic of China will apply the Convention only to differences
arising out of legal relationships, whether contractual or not, which are considered as commercial under the
national law of the People’s Republic of China. The reservations are reported at <http://untreaty.un.org/
ENGLISH/bible/englishinternetbible/partI/chapterXXII/treaty1.asp>.
266 As of 7 June 2000, the 42nd anniversary of its entry into force, 123 countries had become parties to the

New York Convention. The figure is available online at <http://untreaty.un.org/ENGLISH/bible/

englishinternetbible/partI/chapterXXII/treaty1.asp>.
267 China has also entered into a number of bilateral judicial assistance agreements with other countries, which

apply to the enforcement of arbitral awards. See, e.g., Convention between the Kingdom of Belgium and the People’s
Republic of China for Mutual Judicial Assistance in Civil Matters, translated and reprinted in Cheng Dejun et al.,
note13 above, at 806. China is also a party to the Washington Convention, which applies to the recognition and
enforcement of arbitral awards rendered by tribunals established within the World Bank’s International Center for
the Settlement of Investment Disputes (ICSID).
268 ARI was set up in July 1993 by CCOIC.
269 See Wang Sheng Chang, Enforcement of Foreign Arbitral Awards in the People’s Republic of China, in Improving

the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention (general ed.
Albert Jan van den Berg, ICCA Congress Series No. 9, Kluwer Law International, 1999), at 482–483.
270 The case is not officially reported. For a brief summary and commentary of the case, see Wang Guiguo,

One Country, Two Arbitration Systems: Recognition and Enforcement of Arbitral Awards in Hong Kong and China (1997)
14 J.Int.Arb. 1 (1997), at 27–28. For a detailed description of the case, see Wang Sheng Chang, id., at 496–499.
For overseas commentary, see, e.g., The Revpower Dispute: Chinese Courts Allegedly Delay Enforcement of Foreign
Award, 6 World Arb. & Mediation 146 (1995); Alberto More, The Revpower Dispute: China’s Breach of the New York
Convention?, in Chris Hunter (ed.), note 92, above, at 151–158.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 99

protectionism, poor judicial personnel training, and lack of procedural rules for
enforcement—all of which can cause undue delay, as evidenced in Revpower.271
In Revpower, the Shanghai Intermediate People’s Court refused to recognize and
enforce a foreign arbitral award made by a tribunal in the Arbitration Institute of the
Stockholm Chamber of Commerce (SCC) against a Shanghai factory in 1993. The
Court accepted a separate lawsuit filed by the factory on the same subject-matter after
the date of the final hearing of the arbitration was set. The Court did so on the ground
that the arbitral clause contained in the agreement was ambiguous and incapable of
being performed because the arbitration clause: (1) only stated that arbitration should
take place in Stockholm but failed to refer specifically to the SCC institute (recall that
PRC law requires that the arbitration agreement should designate a specific arbitration
commission), and (2) did not specify the law applicable to the arbitration agreement.
However, Article V(1)(a) of the New York Convention272 clearly pointed to the
Swedish law as the law applicable to the arbitration agreement. Therefore, the Court
should not have applied Chinese law to determine the validity of the arbitration
agreement and disregarded the arbitral tribunal’s interlocutory award holding that the
SCC had jurisdiction over the dispute. The Court also used certain delaying tactics and
did not correct its mistake until after the Supreme People’s Court exerted pressure
and the Shanghai factory was declared bankrupt in 1996. The Court’s mishandling and
intentional delay in enforcing the foreign award dealt a serious blow to the PRC’s
commitment to its international obligations.
To address this concern, the Supreme People’s Court adopted new rules against
unlawfully setting aside, or refusing to enforce, foreign arbitral awards. According to
the Regulation of the Supreme People’s Court Concerning the Charges and the Time
Limits for Review of Recognition and Enforcement of Foreign Arbitral Award, issued
on 21 November 1998,273 if the People’s Court before which the enforcement was
sought decides to enforce the arbitral award, the ruling shall be issued within two
months after the acceptance of the application for enforcement, and if no special
circumstances exist, the enforcement should be completed within six months after the
issuance of the above ruling.
But if refusal of enforcement is intended, according to the Notice of the Supreme
People’s Court on the People’s Court’s Handling of the Issues in Relation to Foreign-
Related Arbitration and Foreign Arbitration issued on 28 August 1995,274 an
Intermediate People’s Court should first report its tentative ruling of refusal to the
High People’s Court of the province for approval. Should the High Court agree on
271 Li Hu, note 149 above, at 23–24, 32–33.
272 Article V(1)(a) states: “1. Recognition and enforcement of the award may be refused, at the request of the
party against whom it is invoked, only if that party furnishes to the competent authority where the recognition
and enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the
law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.”
[emphasis added].
273 See note 254, above.
274 See note 252, above.
100 JOURNAL OF INTERNATIONAL ARBITRATION

the lower court’s refusal, a further report must be made to the Supreme People’s
Court. A refusal to enforce may not actually be rendered by a lower court in the PRC
until the Supreme People’s Court approves it.275 This reporting system has effectively
put any refusal to enforce a foreign arbitral award under heightened scrutiny by the
highest court of the PRC.276 It was reported that since the adoption of the pre-
reporting mechanism, about 80 percent of cases where both the intermediate People’s
Court and the Higher People’s Court contemplated refusing enforcement were
eventually overturned by the Supreme People’s Court in favour of enforcement or
recognition and enforcement.277
Another overseas concern is that China’s courts may abuse the “public policy”
grounds provided for in the New York Convention278 to set aside or refuse to enforce
foreign awards.279 This concern, however, has not been substantiated so far in regard to
foreign awards.280 It was reported that both the Guangzhou Maritime Court in
Guanzhou Ocean Shipping Company (China) v. Marships of Connecticut Company Limited
(US)281 and the Dalian Maritime Court in Dalian Ocean Transportation Company (China)
v. Tekso Pte. (Singapore)282 have enforced foreign arbitral awards rendered by two ad hoc
and two-arbitrator tribunals. It is clear that ad hoc arbitration and the even-arbitrator
tribunal are contrary to China’s long-standing policy favouring institutional arbitration
and the uneven-arbitrator tribunal. In PRC arbitration law and practice, ad hoc
arbitration and the even-arbitrator tribunal have never been allowed.283 Nevertheless,
the Chinese courts did not invoke public policy reasons to denounce these
domestically unfavoured, but internationally accepted, practices.284
It is generally recognized that Hong Kong has had a good record of enforcing
foreign awards under the New York Convention. Hong Kong’s judiciary has given
275 See Point 2 of the Notice, quoted in Li Hu, note 149 above, at 10. A similar system was established in

regard to the setting aside of the foreign-related arbitration award. See Notice of the Supreme People’s Court Regarding
the Issues on the Setting Aside of the Foreign-Related Arbitration Awards by the People’s Court (23 Apr. 1998), note 253,
above.
276 However, one major loophole in the mechanism is that it fails to provide a time-limit within which the

People’s Courts must decide whether to enforce or refuse to enforce an arbitral award. Thus, the courts can still
delay enforcement by not making timely decisions on whether to enforce or not. See Wang Sheng Chang, note
269, above, at 503. See also Randall Peerenboom, note 79, above.
277 See Wang Sheng Chang, note 269 above, at 475–476.
278 Article V(2)(b) states: “2. Recognition and enforcement of an arbitral award may also be refused if the

competent authority in the country where recognition and enforcement is sought finds that: … (b) The
recognition or enforcement of the award would be contrary to the public policy of that country.” [emphasis added].
279 See, e.g., Benjamin P. Fishburne III and Chuncheng Lian, Commercial Arbitration in Hong Kong and China:

a Comparative Analysis, 18 U. Pa. J. Int’l Econ. L. 297 (Spring 1997), at 331; Alastair Crawford, Plotting Your Dispute
Resolution Strategy: From Negotiating the Dispute Resolution Clause to Enforcement against Assets, in Chris Hunter (ed.),
note 92, above, at 42.
280 However, according to the same investigation conducted by the ARI concerning the enforcement of

CIETAC awards in China for the same period, two refusals made by the Intermediary People’s Courts were based
on the ground that enforcement would be contrary to social and public interest. See Wang Sheng Chang, note
269 above, at 480–481.
281 See Guanzhou Ocean Shipping Company v. Marships of Connecticut Company Limited (US), Guangzhou

Martime Ct., 17 Oct. 1990, World Arb. & Med. Rep. 109 (1991), 17 Y.B. Com. Arb. 485 (1992). For a summary
of this case, see Wang Sheng Chang, note 269 above, at 492–493.
282 For a summary of this case, see Wang Sheng Chang, note 269 above, at 501.
283 See Li Hu, note 149 above, at 31.
284 For a similar conclusion, see Randall Peerenboom, note 79, above.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 101

broad and favourable interpretation to the Convention. It favours enforcement by

discouraging challenges to enforcement based on minor procedural shortcomings.
Only a real risk of injustice, such as a denial of an opportunity to cross-examine
tribunal-appointed experts or to respond to a tribunal investigation result which was
kept secret, could lead to a refusal of enforcement. A further deterrent is that the High
Court (now the Court of First Instance) has power to order the party challenging the
enforcement to give security for the sum awarded as a precondition to allowing
the challenge. The High Court has also set stringent standards for the application of the
concept of “public policy” contained in the Convention. The High Court has shown
no hesitation in rebuking or reprimanding parties who act in bad faith. It should be
emphasized that, as case law continues to be part of Hong Kong law, these well-
established precedents will largely guarantee that the future judiciary in Hong Kong
will continue to support the enforcement of foreign awards.285

XI. MUTUAL ENFORCEMENT OF ARBITRAL AWARDS

The issue of mutual enforcement of arbitral awards between the PRC and the
HKSAR was a by-product of Hong Kong’s return to China. Before the reunification,
the New York Convention provided guidance for mutual enforcement of arbitral
awards made in China and Hong Kong. But with the July 1997 handover, the New
York Convention was no longer applicable to the relationship between China and the
HKSAR, and “mainland awards” and “HKSAR awards” could no longer be enforced
as Convention awards. Nor could they be treated as either domestic or foreign awards
under the principle of “one country, two legal systems”. Clearly, a need had arisen to
structure the arbitration laws on both sides to provide a new basis to enforce such
awards.
Unfortunately, such action was a long time coming. Until the MOU on the
Arrangement Concerning Mutual Enforcement of Arbitral Awards between the
Mainland and the HKSAR (MOU) was signed on 21 June 1999,286 almost two years
after the handover, there was, in effect, a legal vacuum. The impact of this vacuum was
felt widely and caused great concern in Hong Kong’s legal and business community. It
was reported that Hong Kong was potentially losing millions of dollars in business due
to slow progress by the PRC and HKSAR governments in finalizing the MOU.287
Law firms substituted other Asian jurisdictions, including Singapore and Tokyo, and
traditional arbitration centres such as London and New York, for Hong Kong as the

285 For a study of Hong Kong’s experience in enforcing the Convention awards, see Stephen D. Mau, Hong

Kong’s Experience with the New York Convention: An Introduction, 9 Transnat’l Law. 393 (Fall 1996).
286 The MOU was signed by Secretary for Justice Elsie Leung Oi-sie for the HKSAR and the Vice President

of the Supreme People’s Court, Shen Deyong, for the PRC, in Shenzhen, 21 June 1999, and gazetted 28 Jan.
2000. For a detailed discussion of the MOU, see Xian Chu Zhang, The Agreement between Mainland China and the
Hong Kong SAR on Mutual Enforcement of Arbitral Awards: Problems and Prospects, 29 Hong Kong L. J. 463 (1999).
287 See Christine Chan, Mainland Moves to Resolve Arbitral Status of Territory, S. China Morning Post, 26 Sept.

1994, at 1.
102 JOURNAL OF INTERNATIONAL ARBITRATION

arbitration venue of choice when drawing up business contracts.288 Industry

practitioners also warned of the consequences of failing to resolve the issue. Arthur
Bowring, director of the Hong Kong Shipowners Association, stated: “The word that
I’m getting back is that lawyers find it difficult to recommend Hong Kong as a venue
for arbitrations when dealing with mainland clients.”289 Indeed, HKIAC recorded only
13 maritime disputes referred to arbitration in 1999, its lowest since 1992.
The problem was highlighted by the refusal of the courts on both sides to enforce
each other’s awards. In Hong Kong, companies which won arbitration awards from
CIETAC could not turn to the Hong Kong courts to get them enforced.290 In China,
it was reported that on 31 January 1998 the Taiyuan Intermediate People’s Court
indefinitely suspended enforcement of a Hong Kong arbitral award on the ground of
lack of a clear legal basis.291 Subsequently, People’s Courts in Beijing, Anhui,
Shandong and Guangdong all followed suit in more than 10 proceedings to enforce
Hong Kong awards.292
Although the governments on both sides were criticized for not settling this
unfortunate legal uncertainty sooner, when the MOU, based on the principles of the
New York Convention, was finally signed, the conclusion of the drama was hailed as
helping Hong Kong to restore its reputation as an international arbitration centre.293
And after the Hong Kong Arbitration (Amendment) Ordinance 1999 was passed, there
were reportedly some initial positive effects of the MOU. According to Christopher
To, HKIAC Secretary-General, at least two commercial contracts were moved from
Singapore to Hong Kong soon after the MOU entered into effect.294
The MOU applies to arbitral awards made in mainland China and the HKSAR. If
a party fails to perform an arbitral award made in the PRC or the HKSAR, the other
party may apply to the relevant courts in the place where the domicile of the party
against whom the application is filed is located, or where the property of that party is
located, for enforcement. The relevant courts are, for the mainland, the Intermediate
People’s Court of the place where the domicile of the party against whom the
application is filed is located, or where the property of that party is located, and, for the
HKSAR, the High Court of HKSAR.295

288 See Johnathan Rostron, Arbitration Law Helps to Repair Global Standing: Legal Limbo of the Handover Ends, S.

China Morning Post, 1 May 2000, at 1, available at 2000 WL 18454226.

289 Karen Cooper and Jane Moir, Millions “Lost” as Settlements Go to Singapore; Slow Progress on Awards

Agreements Forces Business Overseas, S. China Morning Post, 30 Nov. 1998, at 3.

290 See Ng Fung Hong Ltd v. ABC, [1998] 1 HKC 213, and Hebei Import-Export Corp v. Polytek Engineering Co.

Ltd. (No. 2), [1998] 1 HKC 192.

291 See Robert Morgan, Mutual Enforcement of Arbitral Awards between Hong Kong and the People’s Republic of

China—One Country, Still No System, 14 Mealey’s Int’l Arb. Rep. (Feb. 1999), at 33.
292 See Zhang Xian Chu, note 286, above, at 465.
293 See, e.g., Christopher Kidd, Enforcement of International Arbitration Awards in Hong Kong, 41 Bulletin of the

Japan Shipping Exchange, Inc. 26 (September 2000), at 32; David Evans, Ruling to Close up Post-97 Loophole, S.
China Morning Post, 29 January 2000, at 2.
294 May Sin-Mi Hon, Mediation Law Boost for SAR, S. China Morning Post, 9 February 2000, at 3.
295 Article 2 of the MOU.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 103

The MOU has two significant characteristics. First, it maintains the spirit of the
New York Convention. Article 7 of the MOU virtually repeats Article V of the New
York Convention word for word, except for a few minor deviations. It articulates
seven grounds on which a court can set aside an arbitral award:
(1) A party to the arbitration agreement was of some incapacity under the law
applicable to him, or the arbitration agreement was invalid under the
governing law that was agreed upon by the parties in their agreement, or the
arbitration agreement was invalid under the law of the place of the arbitration
due to the absence of any indication of the governing law.
(2) The party subject to enforcement did not receive any appropriate notice of
the arbitrator appointment, or was unable to present his case for other
reasons.
(3) The subject-matter in the dispute dealt with by the arbitral award was not
contemplated by the parties’ submission, or was not covered by the
arbitration agreement, or the award includes rulings over the subject-matter
outside the scope of arbitration agreed by the parties. (Nevertheless, an award
over the submitted subject-matter may be enforced partially if the matters
disposed of by the award are severable from the ultra vires part.)
(4) The composition of the arbitration tribunal or its procedure violates the
arbitration agreement, or fails to comply with the law of the place of the
arbitration if the parties did not indicate any agreement in these matters.
(5) The arbitral award in question has not become binding on the parties, or it
has been set aside or its enforcement has been suspended by the court in the
place of the arbitration or in accordance with the law of the place of the
arbitration.
(6) The relevant court believes that the subject-matter dealt with by the award is
not arbitrable in accordance with the law where the enforcement is sought.
(7) The award violates social public interest of the mainland or public policy of
the HKSAR.
Second, the MOU respects the differences between the two legal systems of the
HKSAR and PRC. During its negotiation, some mainland scholars suggested that the
appeal procedures in proceedings to enforce mainland awards in Hong Kong be
abolished.296 This would have required substantial revision of the Hong Kong
Arbitration Ordinance. The MOU simply does not take this approach, however. In
addition, the PRC term “social public interest”297 and the common-law term “public
policy” are used to label the two similar, but not identical, policy doctrines of the
296 See Yu Xianyu and Zhu Shiqiang, Issues Concerning Recognition and Enforcement of Arbitral Awards between

Hong Kong and the Mainland [Guanyu Xianggang yu Neidi Zhongcai Caijue Chengren yu Zhixing Wenti] (1998) 6 Pol.
Sci. & L. [Zhengzhi yu Falu] 72 (December 1998), at 76.
297 The term is not defined in Chinese legislation and is widely viewed as vague. According to one study, the

term is used to refer to harm to State sovereignty, destruction of China’s natural resources, heavy pollution of the
environment, injury to people’s health and safety, deterioration and corruption of Chinese moral values, etc. See
Wang Chenguang and Zhang Xianchu, Introduction to Chinese Law (Sweet & Maxwell Asia, 1997), at 257.
104 JOURNAL OF INTERNATIONAL ARBITRATION

mainland and Hong Kong, respectively, for setting aside arbitral awards (Article 7(7)).
Moreover, local procedures and statutes of limitations continue to be applied in
enforcement proceedings. The requirement of Chinese translation and the restriction
on arbitrability in the mainland are also recognized by the MOU.
Finally, the importance of the MOU goes beyond the mutual enforcement of
arbitral awards made in China and Hong Kong. As the second “fruit”298 in the area
of mutual legal assistance between the two jurisdictions, it is the latest example of
successful implementation of the “one country, two systems” principle in Hong
Kong299 and underscores the legal aspect of the remarkable autonomy that HKSAR
enjoys. It also demonstrates one of the unique, Chinese dimensions of the HKSAR’s
external autonomy, i.e., it treats China–Hong Kong relations, in the areas where the
HKSAR is authorized by the Basic Law and Joint Declaration to possess external
autonomy, like China’s foreign relations, and then makes arrangements to apply similar
rules (here, those of the New York Convention).300

XII. CONCLUDING REMARKS

Hong Kong and China have long shared an ancient, Chinese tradition of ADR,
but their modern, international commercial arbitration systems—like their modern
legal systems—possess disparate origins. Now, however, after some 15 years of
progressive legal reform, the two systems have come to share many features of standard
international arbitration practice, as well as the traditional Chinese practice of
mediation within arbitration. In addition, due to their outstanding overall economic
performance and zealous promotion efforts, both the HKSAR and the PRC have
rapidly developed from relative “unknowns” in the international arbitration
community into two of the most prominent international arbitration centres in the
world.
Nevertheless, although they have come together in many ways—particularly with
Hong Kong’s transformation from British colony to become once again a formal part
of China—the special “one country, two systems” constitutional design has guaranteed
the continuation of differences between the HKSAR and the PRC, including separate
international arbitration laws and institutions that are supported by distinct judicial
systems. This separation means that both the Hong Kong and mainland systems will
retain their own features and respond to their own needs, adjusting and developing in
the future in their own manner and at their own pace.
Today, the international arbitration systems in Hong Kong and China are
undeniably robust and impressive. This can be said with confidence, despite the fact
298 The first “fruit” was the Arrangement for Mutual Service of Judicial Documents in Civil and Commercial

Proceedings between the Mainland and Hong Kong Courts, signed in January 1999. For the English version of
the Arrangement, see the Law Society of Hong Kong, Circular 99-75 (PA), available online at <http://
www.hklawsoc.org.hk/members/index/shtml>.
299 See Zhang Xian Chu, note 286, above, at 485.
300 For a more detailed discussion, see Xiaobing Xu and George D. Wilson, note 70, above, at 18–19.
 ONE COUNTRY, TWO—INTERNATIONAL COMMERCIAL ARBITRATION—SYSTEMS 105

that certain areas of international arbitration practice in the PRC—such as the

enforcement of awards, the formation of the tribunals, the combination of mediation
and arbitration, the role of arbitration commissions in arbitration proceedings, and
evidence rules—continue to cause concern abroad. In general, there is still a long road
ahead before China achieves overall legal sophistication, and in particular much work
remains to be done before “CIETAC is ultimately to realize its ambition to become a
truly international arbitration centre,”301 it is also highly likely that it will retain its
unique arbitration practices—such as mediation within arbitration and a greater role
for the arbitration commission in arbitration proceedings.302
As long as Hong Kong and China continue to be strong economic forces in Asia
and to improve their international arbitration systems, it seems safe to conclude that
both are likely to further enhance and consolidate their current status in the world
arbitration landscape with the passage of time. There are few, if any, signs indicating
that the progress of international commercial arbitration in the HKSAR and the PRC
has lost any of its impetus. Although CIETAC apparently reached its peak in 1995 in
terms of caseload, as China continues with its inexorable integration into the world
economy, and as its accession to the World Trade Organization membership appears
imminent, there are plenty of reasons to be optimistic about the future of international
commercial arbitration, whether on the mainland or in Hong Kong.

301See, e.g., Michael J. Moser, note 155 above, at 35.

302For example, on 18 January 2000, the Joint Chairmen’s Meeting of CIETAC and CMAC adopted the
Procedure for Jurisdictional Decisions. See Wang Shengchang, note 132, above, at 8.