CIArb News

China International Commercial Court

18 Oct 2018

Given the value, complexity, location and sheer number of projects which comprise China’s Belt and Road Initiative (BRI), it is highly likely that disputes will arise between parties involved in BRI projects, whether it be the states involved themselves, investors, lenders and other funders, contractors and subcontractors or companies in the vast supply chains that will be engaged by the initiative.

With this in mind, several dispute resolution institutions have begun to place greater focus on the BRI.  These include the ICC with its Belt and Road Commission and HKIAC with its Belt and Road Advisory Committee.  The recently announced memorandum of understanding between SIAC in Singapore and the Shenzhen Court of International Arbitration also appears to be motivated in part by the potential for disputes arising from the BRI.

Against this backdrop, the formal inauguration on 29 June 2018 of a new Chinese court specifically focussed on resolving BRI disputes (the Court) is another step, this time by China itself, to stake its claim as a forum for resolving BRI disputes.   BRI projects are generally financed wholly or largely by Chinese funders, and constructed by Chinese contractors using largely Chinese workforces, so these entities might try to negotiate for dispute resolution in China.

However, whether non-Chinese parties will be willing to submit to the jurisdiction of the Court remains to be seen.  The Court’s experience and procedures are untested, and doubts will linger over its independence and impartiality (whether fairly or unfairly).  The obvious lack of neutrality, just in terms of location, will always be a big factor making other dispute resolution jurisdictions attractive.  And then there is the problem of enforcement, in which arbitration reigns supreme.  China does have a number of reciprocal court judgment enforcement treaties in place with countries in Eastern Europe, Central Asia and South-east Asia, but their coverage is far from universal.

To help persuade non-Chinese parties of the merits of the Court, engagement with foreign governments, courts and legal practitioners will be necessary to build awareness and help ease concerns. The proposed establishment by the Court of an international commercial expert committee comprised of foreign lawyers appears to be a step in this direction.

It is also possible that, in wholly Chinese-funded projects, submission to the jurisdiction of the Court may be a condition of funding. The Chinese-funded Bar-Boljare highway project in Montenegro, for example, requires disputes to be resolved by arbitration in China.  China may now put forward the Court instead of, or as its first negotiating position before, arbitration in China. 

In any event, as the BRI progresses, we can expect to see further developments in this space.  It’s one that’s worth watching.

Given the value, complexity, location and sheer number of projects which comprise China’s Belt and Road Initiative (BRI), it is highly likely that disputes will arise between parties involved in BRI projects, whether it be the states involved themselves, investors, lenders and other funders, contractors and subcontractors or companies in the vast supply chains that will be engaged by the initiative.

With this in mind, several dispute resolution institutions have begun to place greater focus on the BRI.  These include the ICC with its Belt and Road Commission and HKIAC with its Belt and Road Advisory Committee.  The recently announced memorandum of understanding between SIAC in Singapore and the Shenzhen Court of International Arbitration also appears to be motivated in part by the potential for disputes arising from the BRI.

Against this backdrop, the formal inauguration on 29 June 2018 of a new Chinese court specifically focussed on resolving BRI disputes (the Court) is another step, this time by China itself, to stake its claim as a forum for resolving BRI disputes.   BRI projects are generally financed wholly or largely by Chinese funders, and constructed by Chinese contractors using largely Chinese workforces, so these entities might try to negotiate for dispute resolution in China.

However, whether non-Chinese parties will be willing to submit to the jurisdiction of the Court remains to be seen.  The Court’s experience and procedures are untested, and doubts will linger over its independence and impartiality (whether fairly or unfairly).  The obvious lack of neutrality, just in terms of location, will always be a big factor making other dispute resolution jurisdictions attractive.  And then there is the problem of enforcement, in which arbitration reigns supreme.  China does have a number of reciprocal court judgment enforcement treaties in place with countries in Eastern Europe, Central Asia and South-east Asia, but their coverage is far from universal.

To help persuade non-Chinese parties of the merits of the Court, engagement with foreign governments, courts and legal practitioners will be necessary to build awareness and help ease concerns. The proposed establishment by the Court of an international commercial expert committee comprised of foreign lawyers appears to be a step in this direction.

It is also possible that, in wholly Chinese-funded projects, submission to the jurisdiction of the Court may be a condition of funding. The Chinese-funded Bar-Boljare highway project in Montenegro, for example, requires disputes to be resolved by arbitration in China.  China may now put forward the Court instead of, or as its first negotiating position before, arbitration in China. 

In any event, as the BRI progresses, we can expect to see further developments in this space.  It’s one that’s worth watching.

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