The competitive nature of the international arbitration field is not to be underestimated. For decades, the Hong Kong International Arbitration Centre and Singapore International Arbitration Centre have been asserting their credentials to be recognised as the most prestigious in the Asia-Pacific region with shameless displays of one-upmanship. The People’s Republic of China (PRC) has moved to insert itself into that rivalry.
In September 2025, after a consultation period of just over four years, the new iteration of the PRC Arbitration Law was unveiled – the first major overhaul of the legislation since its inauguration in 1995. The legislation came into force on 1 March 2026. This updated framework is designed to bring China’s international arbitration capability into line with other arbitration centres. It also aims to encourage foreign parties to more confidently engage in arbitration proceedings in the PRC in cross-border matters. Much emphasis has been placed on the ‘foreign’ element of the new regulations.
‘I have, in the past, been critical of the PRC arbitration system as administered by CIETAC [China International Economic and Trade Arbitration Commission],’ said Hong Kong-based Denis Brock, chair of O’Melveny’s international disputes and arbitration practice. ‘But I think the new legislation is a very positive step forward.’
‘Foreign’ disputes
The new legislation permits overseas arbitral institutions (as opposed to PRC institutions) to oversee ‘foreign-related’ disputes, a phrase which is not in itself defined but encompasses more than maritime and foreign trade, to which it was previously by-and-large restricted. By opening the interpretation of ‘foreign’ disputes, the legislation gives foreign parties greater autonomy in establishing the structure of the arbitration.
Key developments include the formal recognition of the ‘seat’ of arbitration which determines the procedural law applicable to the arbitration distinct from the physical location of the hearing, which both parties can agree on ahead of proceedings. The seat also establishes where the arbitral award is made and the court with supervisory jurisdiction. In another nod to modernity, online hearings are permitted so long as neither party objects.
The legislation also provides for non-Chinese arbitral institutions to establish offices and administer foreign-related arbitrations in free-trade zones, and establishes a clear framework for the recognition and enforcement of foreign arbitral awards.
None of these was alien to the previous Chinese international arbitration landscape. But the new legislation codifies and clarifies the system with the intention of making foreign parties more comfortable entering into hearings there. Domestic arbitration, save for some logistical and terminology tweaks, has been largely left alone and remains the preserve of the local market.
One theory behind the broadening of the scope of foreign disputes is a reflection of China’s increasing number of bilateral investment treaties, and the legislation giving it the capability to host investment treaty disputes in Chinese arbitral institutions.
However, China’s economy has pivoted its focus in recent years from inbound to outbound investment. The vaunted ‘Belt and Road’ initiative has been the guiding light of the economy, encouraging China’s vast array of state-owned enterprises to engage in large-scale infrastructure projects, primarily in developing countries around the world.
As inbound investment has tailed off, observers note, it is unlikely that new China inbound investment disputes will account for many international arbitrations under the new regulations in the short term. But the framework is in place and can be more comfortably relied upon.
There is also increased scope for ad hoc arbitrations in limited situations (maritime disputes and disputes where both parties are located in free-trade zones), whereby the opposing parties can elect to bypass the administration of an arbitral institution. This allows for greater flexibility and cost-efficiency.
Previously, China had heavily favoured institutional arbitration – and that will remain overwhelmingly the preferred method. But the willingness to compromise and align itself with the rest of the world has been welcomed by international arbitration counsel in the region.
Brock has highlighted the official greenlighting of ad hoc arbitrations as a development which has implications that reach beyond the purely practical. ‘The most notable change is the introduction of ad hoc arbitration. In practice, no responsibly drafted arbitration clause should contain a provision for ad hoc – you would always want a high-stakes arbitration to be under the administration of a solid, respected, experienced institution,’ he said. ‘But the fact that it’s been recognised shows that there is a willingness to embrace internationally accepted concepts. It’s a philosophical change as much as anything, but a very important one. There really isn’t anything to complain about (in the new legislation). They couldn’t have been much more adventurous while still being reasonable.’
Sherlin Tung, consultant at Withers in Hong Kong, was similarly effusive: ‘Broadly speaking, the new legislation brings everything more into line with other jurisdictions. Previously, foreign parties were often unwilling to agree to an arbitration seated in mainland China. There was too much uncertainty about whether the national courts would be supportive of an international arbitration and foreign parties, from procedural applications to enforcement of awards.’
The legislation makes it more ‘modern’, Tung added: ‘It puts it ahead of Dubai, Abu Dhabi and India [in terms of credibility] which some parties are still wary about. The fact that China has passed these regulations shows it is mature enough to align itself with the international landscape rather than stubbornly holding on to its own methodologies.’
Sam Kenworthy is a freelance journalist
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