The Chinese International Commercial Court: Reasons for Reform through Industrialization
(¶1) The Chinese International Commercial Court (CICC) has been erected as a “one-stop shop” for resolution of disputes arising as a result of China’s ambitious Belt and Road Initiative (BRI). The CICC is directly under the control of the Supreme People’s Court (“SPC”), owing to its establishment through a judicial interpretation order, which is lower in hierarchy to a national legislative act. Therefore, a prima facie reason for the establishment of the CICC can be related to shifting the locus of international commercial disputes to China and adjudicate them under the ambit of the “Rule of Law with Chinese Characteristics”.[i] In this article, other equally possible reasons for the existence of the CICC would be elaborated upon. Furthermore, the article will critically analyze the provisions of the interpretation order passed by the SPC.
Circumventing a Mess of Pottage.
(¶2) China’s Belt and Road Initiative (BRI) is not governed by any treaty and is regarded as an initiative in academic circles,[ii] which also means that the countries that will be participating in BRI projects, would erect complex contractual structures, the detangling of which would be a chore without an efficient dispute resolution mechanism. China has been foreshadowing the establishment of an appeal mechanism for efficient dispute redressal since the signing of the China- Australia Free Trade Agreement, which explicitly mentioned the initiation of bilateral negotiations towards the establishment of an appellate mechanism to review awards rendered after the establishment of such an appellate mechanism (Art. 9.23 of the China Australia Free Trade Agreement).
(¶3) The widely recognized United Nations Commission on International Trade Law Arbitration Rules (“UNCITRAL Arbitration Rules”) are also recognized somewhat by the Chinese International Arbitration fora, which still operate under the Chinese Civil Procedural Law (“CPL”), and therefore, do not allow foreign nationals as arbitrators. These institutions open up another route for the resolution of international commercial disputes arising out of BRI.
(¶4) However, using domestic arbitration fora for effective resolution would be a mess of pottage, as it would not do much in terms of popularizing the BRI; the establishment of international CICC courts in Xi’an (for Road Disputes), and Shenzhen (for Maritime Disputes) would provide investors with some much needed certainty, along with ready availability of interim relief,[iii] and a relatively lax evidence procedure.[iv] Further, a specialized dispute resolution institution would radiate debate regarding the legal innovation in academic circles, and would strategically move the locus of international commercial disputes to China.
Problematic Enforcement of Awards
(¶5) Problematic enforcement of arbitral awards is another reason for erecting a special, albeit integrated International Dispute Resolution Mechanism for BRI’s dispute resolution needs. China is a signatory to New York Convention, and has signed many BITs incorporating mutual enforcement provisions, and is a signatory to the Hague Convention (currently awaiting ratification by the parliament). However, dispute resolution along the belt in courts of different countries is not ideal, as the recognition of a foreign award in China depends on the following factors:
· The foreign court which has passed an award must possess jurisdiction over the same under BITs, or on the basis of the municipal law of the adjudicating court.[v]
· The award needs to be legally binding, and enforceable, to be even considered by the Chinese Courts,[vi] and the defendant in the case must be adequately represented.[vii]
· Examination of the existence of a BIT is the next step, where the competent Chinese Court may rely on the treaty to discern whether the award merits recognition.
· If no BIT exists, the principle of reciprocity is considered.[viii] If the foreign court which has passed the award, has in the past recognized Chinese decisions, and awards, the foreign judgement will be recognized.
(¶6) In the absence of a BIT, if the foreign state fails to pass the test of reciprocity, the award will not be recognized by the Chinese Judiciary. The award will also not be recognized if, on recognition, it may violate the basic principles of Chinese laws and Public Interests.[ix] Unless otherwise stipulated in the applicable SPC interpretations or any existing treaties; the period of enforcement should be within two years.[x]
To What Extent is the CICC “International”?
(¶7) The CICC’s Sino-centric obligations, however, endanger its appellation as a truly International Court, as under Article 4 of the SPC provisions, only Chinese nationals are to be considered as judges for the CICC, though, the threshold which potential judges need to overcome has been elevated by ensuring safeguards like the judges must be familiar with International Law, should be proficient in English, and Chinese languages, and must sport a certain level of seniority. Any international court which can be compared to the CICC based on its intended scope, include as a basic feature a diverse panel of judges.
(¶8) The Diversity that the CICC lacks in the composition of its judges, it may make up for in its supplemental International Commercial Expert Committee. The expert committee includes twenty foreign experts and twelve Chinese experts; the foreign experts who grace the composition of the expert committee are all well-known international arbitration experts. The inclusion of world-renowned arbitration experts implies that the system is self-aware pro tanto, it recognizes the need to be amenable to foreign elements; though it is an effort in the right direction, the intensity of this inclusion fails its originally intended objective, as the functions of the expert committee: are merely advisory, and restricted to mediating disputes.
(¶9) The expert committee has also been tasked with furnishing strategic advice to the SPC, and mediating international commercial disputes if the parties to the dispute choose them (only for mediation) over other domestic arbitration institutions linked with the CICC.[xi] Hybrid practices like arb-med would provide greater choice owing to the presence of the international expert committee, and due to their expertise, disputes might be resolved in a more docile manner, and arbitration might be considered as a last resort.
Jurisdiction of the CICC
(¶10) The CICC has been empowered to take up international commercial cases with a monetary value of over RMB300 million, only if the parties express their consent for the same in the form of a written agreement. The contours of CICC’s jurisdiction are not clearly defined as the guidelines which oversee the cases the CICC can adjudicate are somewhat ambiguous, for example, the CICC can entertain a case if it has a “significant national impact”, or if they are cases referred to the CICC by courts higher in the hierarchy to them in the Chinese judicial scheme. Further, the CICC is not currently empowered to oversee Investor-State Disputes, though a prospect of the expansion of its jurisdiction is foreseeable in the near future. Before the aforementioned expansion however, Investor-State disputes arising out of BRI, would rely on neighboring institutions like the Singapore International Arbitration Centre, and Honk Kong International Arbitration Centre, for effective resolution.
(¶11) Therefore, it can be reasonably expected, that as time goes by, and the CICC builds up a commendable docket of cases, the ambiguity surrounding its jurisdiction would clear up, and more importantly, from an academic perspective: the impact of “Rule of Law with Chinese Characteristics” on the working of the CICC would be susceptible to proper analysis. The expert committee’s functions, however, are limited to mediating cases, furnishing advice to the CICC, and all other trial courts, the method of furnishing said advice remains uncertain.
(¶11) The expert committee has also been tasked with furnishing strategic advice to the SPC, and mediating international commercial disputes if the parties to the dispute choose them (only for mediation) over other domestic arbitration institutions linked with the CICC.[xii] Hybrid practices like arb-med would provide greater choice owing to the presence of the international expert committee, and due to their expertise, disputes might be resolved in a more docile manner, and arbitration might be considered as a last resort.
(¶12) The parties who might seek resolution via the CICC will be welcomed with a relatively lax evidence procedure, ready interim relief, and an option entailing mediation by world-renowned experts. Therefore, reform through institutionalization seems to be a welcome step to alleviate the uncertainty of investors who might find China’s legal system daunting due to its Sino-centric characteristics, which do find a comfortable home even in the CICC, since the institution still follows the CPL, and can be effectively controlled by the SPC. However, the establishment of the CICC does imply that China has recognized the fact that it needs to be more amenable to foreign elements.
[[i]] Aaryan Mohan, is a third-year law student at Symbiosis Law School, Noida.
[i] See, Castelucci I. Rule of law with Chinese characteristics. Ann. Surv. Int'l & Comp. L. 13, 35 (2007). [ii] See generally, Wang, Guiguo. "The Belt and Road Initiative in quest for a dispute resolution mechanism. Asia Pacific Law Review, no. 1. Pp 1-16 (2017) [iii] See, Provisions of the Supreme People’s Court on Several Issues Regarding the Establishment of the International Commercial Court, (promulgated by the Sup. People’s Ct. on June 25, 2018, effective July 01, 2018), FA SHI  11, art. 14. [iv] id Art. 4(Admissibility of Electronic Evidence) [v]CPL, §. 282 [vi] id. (This is also reflected in a number of bilateral treaties signed by China, which provide that lack of jurisdiction of the adjudicating court can be a ground for refusal.). [vii] id. § 279. [viii] id. § 282 [ix] id [x] id § 239, accord § 547 of the Interpretation of the Supreme People’s Court on the Application of the CPL（2015）provides that: “The time period for a party concerned to apply for recognition and enforcement of a legally binding judgment or ruling rendered by a foreign court or a foreign arbitration award shall be governed by Article 239 of the Civil Procedure Law. [xi] CIETAC, SHIAC, SCIA, the BAC, and the CMAC (Notice of the Supreme People’s Court on Inclusion of the First Group of International Commercial Arbitration and Mediation Institutions in the “One-stop” Diversified International Commercial Dispute Resolution Mechanism (promulgated by the Sup. People’s Ct.), FABAN  212 (China).
[xii] CIETAC, SHIAC, SCIA, the BAC, and the CMAC (Notice of the Supreme People’s Court on Inclusion of the First Group of International Commercial Arbitration and Mediation Institutions in the “One-stop” Diversified International Commercial Dispute Resolution Mechanism (promulgated by the Sup. People’s Ct.), FABAN  212 (China).
Preferred Citation – Aaryan Mohan,“The Chinese International Commercial Court: Reasons for Reform through Industrialization”, Arbitration & Corporate Law Review, Published on 19th October, 2020.
This article was reviewed by Aditya Prakash and Yagnesh Sharma.