Introduction:

Generally speaking, domestic arbitration is divided into commercial arbitration and labor dispute arbitration. This series of articles on practical research into arbitration judicial review only explores commercial arbitration, namely arbitration arising from “contract disputes and other property rights disputes between citizens, legal persons, and other organizations as equal subjects” as stipulated in Article 2 of the “Arbitration Law of the People’s Republic of China” (hereinafter referred to as the “Arbitration Law”).

This series of articles is divided into three parts: Part 1 provides a brief analysis of remedies available to parties dissatisfied with domestic commercial arbitration awards; Part 2 focuses on the judicial review standards for “whether the parties have an arbitration agreement”; and Part 3 comparatively studies the similarities and differences between applications for revocation of arbitration awards and applications for non-enforcement of arbitration awards, as well as issues concerning system articulation.

I. Overview

Article 16 of the Arbitration Law stipulates: “An arbitration agreement includes an arbitration clause included in a contract and an agreement to apply for arbitration reached in written form before or after the occurrence of a dispute. An arbitration agreement shall contain the following: (1) Expression of intent to apply for arbitration; (2) Matters for arbitration; (3) The selected arbitration commission.”

According to Article 18 of the “Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Arbitration Law of the People’s Republic of China,” “no arbitration agreement” refers to the parties having not reached an arbitration agreement. If an arbitration agreement between parties is determined to be invalid or revoked, it shall be deemed as no arbitration agreement.

In judicial practice, the circumstances of “whether the parties have an arbitration agreement” are complex and varied—no single article can fully describe them. Due to space limitations, this article focuses on five typical disputes. To be as comprehensive as possible, this article, in addition to relying on relevant legal provisions, Supreme People’s Court related replies, and court work conference minutes, also combines Supreme People’s Court guiding cases, various courts’ cases, court excellent case analyses, and the “China Arbitration Judicial Review Annual Report (2019)” and “Beijing No. 4 Intermediate People’s Court Domestic Commercial Arbitration Judicial Review Annual Report (2019-2021),” to share with readers.

II. Five Typical Disputes in Judicial Practice and Their Judicial Review Standards

1. Recognition of the Validity of Agreements Where Arbitration is Selected Through Fill-in-the-Blank Methods

The parties agree in the dispute resolution clause of their contract: “If disputes occur during the performance of this contract and negotiation fails, they shall be resolved through the following method ( _ ): (1) Submitted to _ Arbitration Commission for arbitration; (2) Lawfully filed with a people’s court.” At the time of contract signing, the parties did not fill in the “method ( _ )” section, but only hand-wrote “Beijing” in the “Submitted to _ Arbitration Commission for arbitration” section. Under the aforementioned circumstances, can it be recognized that the parties have reached a valid arbitration agreement? In practice, there are two viewpoints:

The first viewpoint holds:

From the perspective of textual interpretation, that the parties hand-wrote confirming Beijing Arbitration Commission can only indicate that when choosing arbitration to resolve possible disputes, the parties selected Beijing Arbitration Commission, excluding other arbitration commissions besides Beijing Arbitration Commission. However, regarding whether disputes shall be resolved through “arbitration” or “litigation” when disputes occur, the parties have not made a choice—that is, the parties have not reached an arbitration agreement. For example, the Supreme People’s Court (2014) Min Yi Zhong Zi No. 183 adopts this viewpoint.

The second viewpoint holds:

When the parties have different interpretations of the contract’s meaning, the parties’ true intent when concluding the contract should be explored. First, the contract agreement reflects that the parties have two levels of choice: one is choosing between arbitration and litigation, and the second is when choosing arbitration, further selecting the specific arbitration institution. The parties hand-selected “Beijing Arbitration Commission arbitration,” indicating that the parties have completed both levels of choice in one step. Second, the blank in “resolved by method ( _ )” is merely a re-confirmation of the parties’ expression of intent regarding exercising the above two levels of choice. Even without this re-confirmation, it does not affect the clarity of the parties’ expression of intent regarding their already-made choice. Because if nothing is filled in the blank of “(1) Submitted to _ Arbitration Commission for arbitration,” then even if “(1)” is filled in “resolved by method ( _ ),” it would have no legal effect. Finally, handwritten clauses are often determined through negotiation after the printed clauses are formed. Hand-writing “Beijing” is already the parties’ supplement and improvement of uncertain matters in the printed clauses. “Unless the parties clearly show otherwise, handwritten contract clauses are given priority over typed or printed contract clauses”—this better aligns with the parties’ true intent when signing the contract. For example, the “Notice on Issuing the Minutes of the Arbitration and Judicial Review Work Coordination Meeting and Its Explanation” [Jing Gao Fa Fa [175]] and the “Notice of Beijing Higher People’s Court on Issuing the Key Points for Judicial Review of Beijing Higher People’s Court’s Domestic Commercial Arbitration Awards” [Jing Gao Fa Fa [2013] No. 65] consistently clarify: “When parties use a fill-in-the-blank method for dispute resolution methods and arbitration institution selection, if the parties only fill in the specific arbitration institution name in the blank for the dispute resolution arbitration institution by handwriting or printing, and other blanks are not filled, the parties shall be recognized as having selected a clear arbitration institution and the arbitration agreement is valid, except where the parties simultaneously selected filing a lawsuit with a court.”

Although there is still some dispute in practice, the author tends to favor the second viewpoint. According to Articles 142 and 466 of the Civil Code, if the parties have a dispute over the understanding of a contract clause, the meaning of the expression of intent shall be determined according to the words used, combined with relevant clauses, the nature and purpose of the act, customs, and the principle of good faith. Textual interpretation is the priority for understanding contract clauses, but mechanical textual reading should be avoided. When the text targeted by textual interpretation may have been changed or disputed, or may even deviate from the parties’ true intent, other interpretive methods should be combined to supplement textual interpretation, explore the parties’ true intent, fully respect the parties’ autonomy of will, so that the judgment result has greater rationality and stronger acceptability.

2. Recognition of the Validity of “Arbitration-Then-Litigation” Dispute Resolution Clauses

It is already a consensus that “either-arbitration-or-litigation” clauses—where parties agree that disputes can be submitted to an arbitration institution for arbitration or filed with a people’s court—are invalid. The reason is that arbitration and litigation are two mutually exclusive dispute resolution methods. If such clauses’ validity is recognized, a situation where one party applies for arbitration and the other files a lawsuit may arise, causing chaos in judicial order and waste of judicial resources.

However, regarding the recognition of the validity of “arbitration-then-litigation” arbitration clauses, there has been some dispute. Many courts have handled “arbitration-then-litigation” clauses as falling under “either-arbitration-or-litigation” circumstances. Therefore, Point 94 of the “Minutes of the National Court’s Symposium on Foreign-Related Commercial and Maritime Trial Work” (Effective Date: January 24, 2022) uniformly sets the adjudication standard, clearly pointing out: If parties agree in an arbitration agreement that “arbitration first, litigation second” after a dispute occurs, this does not fall under the circumstances of invalid arbitration agreement as stipulated in Article 7 of the Arbitration Law’s judicial interpretation. According to Article 9, Paragraph 1 of the Arbitration Law regarding the effect that after an arbitration award is made parties cannot file a lawsuit with a people’s court regarding the same dispute, the “litigation second” part of “arbitration first, litigation second” is invalid, but this does not affect the validity of the arbitration agreement.

The author believes that on one hand, this reflects the Supreme People’s Court’s positive response to the central government’s attitude supporting arbitration development; on the other hand, it also正视 (faces up to) the fundamental difference between “either-arbitration-or-litigation” and “arbitration-then-litigation.”

As Judge Bao Hongju of Pudong New Area People’s Court of Shanghai analyzed in the BY.O v. Yushang Group Co., Ltd. Service Contract Dispute jurisdictional objection case: In an “either-arbitration-or-litigation” agreement, the sequence of applying arbitration and litigation is not agreed upon—they are parallel. Applying arbitration first or applying litigation first both fall within the effective射程 (range) of the parties’ autonomous intent, but the parties’ choice has uncertainty; whereas in an “arbitration-then-litigation” agreement, it is clearly agreed or the content indicates that arbitration shall apply first, and litigation shall apply only when the conditions for litigation clauses are met—they are progressive. Arbitration procedure has priority application. “Arbitration-then-litigation” does not constitute “either-arbitration-or-litigation” because at the “arbitration first” stage, parties have already excluded court jurisdiction and reached a valid arbitration agreement; while “litigation second” violating “one arbitration finality” is another issue—an external constraint imposed by China’s arbitration system.

3. Recognition of the Validity of Arbitration Clauses Agreeing “to Arbitrate at the Arbitration Commission of City XX”

In practice, there are often unclear arbitration clauses such as “agreeing to arbitrate at the Arbitration Commission of City XX.” Regarding this, the “Reply of the Supreme People’s Court on How to Confirm the Validity of Arbitration Agreements Where the Agreed Arbitration Institution Name is Unclear” [[2005] Min Li Ta Zi No. 55] replied as follows: If one party believes the agreed arbitration institution in the arbitration agreement is unclear and directly files a lawsuit with a people’s court to resolve the substantive dispute without applying for confirmation of the arbitration agreement’s validity, the people’s court, after examination, if it can determine the arbitration institution, shall order non-acceptance and inform the party to apply for arbitration; if it determines the agreed arbitration institution is unclear and the arbitration agreement is invalid, it shall accept the case according to the law. After acceptance, if the defendant believes the agreed arbitration institution is clear and raises a jurisdictional objection, the accepting people’s court shall make a ruling on the jurisdictional objection. If the arbitration agreement agrees to arbitrate at the “XX City Arbitration Commission,” if there is only one arbitration commission in “XX City,” the agreed arbitration institution shall be recognized as “XX Arbitration Commission”; if there are multiple arbitration commissions in “XX City,” the agreed arbitration institution shall be deemed unclear.

This reply actually contains two levels. The first is the basic principle: if the arbitration institution can be determined based on the arbitration agreement, the arbitration agreement is valid; conversely, it is invalid. The second is specific guidance: for agreements to “arbitrate at the Arbitration Commission of City XX,” if City XX has only one arbitration commission, it shall be recognized that “City XX Arbitration Commission” corresponds to “City XX Arbitration Commission”; if City XX has multiple arbitration commissions, the agreement shall be deemed unclear and invalid.

Regarding this, the author believes the basic principle reflected in this reply should still apply today, but the specific guidance of “if there are multiple arbitration commissions in ‘XX City,’ the agreed arbitration institution shall be deemed unclear” is too absolute and rigid, and is to some extent not compatible with the basic principle. More precisely, even if “XX City” has multiple arbitration commissions, but after comprehensively considering various circumstances and exploring the parties’ true intent, it can still be determined that it points to a specific arbitration institution in “XX City,” then this arbitration clause should be recognized as valid. This understanding also aligns with Article 3 of the “Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Arbitration Law of the People’s Republic of China,” which stipulates: “If the arbitration institution name agreed in the arbitration agreement is inaccurate, but a specific arbitration institution can be determined, the parties shall be recognized as having selected an arbitration institution.”

For example, in case (2019) Zui Gao Fa Zhi Min Zhong No. 338, the Supreme People’s Court also held: When judging whether an arbitration clause is clear and whether an arbitration institution can be clearly determined, the parties’ autonomy of will should be respected, based on the parties’ true intent, objectively analyzing the parties’ original intent when agreeing on the arbitration clause. In this case: First, the parties’ contract agreed: “If objections and disputes arise, they shall be resolved through friendly negotiation. If negotiation fails, they shall arbitrate at the Beijing Arbitration Commission according to the Arbitration Law.” Obviously, the parties had the mutual intent to submit subsequent disputes to the arbitration institution for arbitration when signing this contract. Second, from the literal meaning of the contract, the arbitration clause agreed to “arbitrate at the Beijing Arbitration Commission,” not “arbitrate at an arbitration commission in Beijing.” From the usual meaning of the contract’s wording, “Beijing Arbitration Commission” clearly refers to a specific arbitration institution’s name, pointing to a single one. This is clearly different from expressions like “an arbitration commission in Beijing” that do not point to a specific institution. Third, upon inquiry, there are three arbitration commissions located in Beijing: Beijing Arbitration Commission, China International Economic and Trade Arbitration Commission, and China Maritime Arbitration Commission. From the literal meaning of “Beijing Arbitration Commission” in the arbitration clause of the subject contract, it is closest to Beijing Arbitration Commission among the three existing Beijing arbitration institutions, differing by only one character. The parties in this case are not legal or dispute resolution professionals, so high standards should not be imposed on them when agreeing on the arbitration institution. Synthesizing the above factors, the arbitration clause agreement should be recognized as clear. The parties’ true intent was to select Beijing Arbitration Commission as the arbitration institution. Based on the subject arbitration clause, the arbitration institution can be determined as Beijing Arbitration Commission. Similarly, in case (2022) Jing 04 Min Te No. 296, Beijing No. 4 Intermediate People’s Court held: Beijing has three arbitration institutions: Beijing Arbitration Commission, China International Economic and Trade Arbitration Commission, and China Maritime Arbitration Commission. Among them, China International Economic and Trade Arbitration Commission and China Maritime Arbitration Commission are far from the name “Beijing Arbitration Commission.” Moreover, in reality there is a situation where Beijing Arbitration Commission is often mistakenly written as “Beijing City Arbitration Commission.” Therefore, according to the arbitration clause’s content and Beijing’s arbitration institutions’ situation, the arbitration institution in the arbitration clause can be determined as Beijing Arbitration Commission.

From this, it can be known that regarding the recognition of validity of arbitration clauses agreeing “to arbitrate at the Arbitration Commission of City XX,” the focus should still be on whether the parties’ true mutual intent can point to a single arbitration institution. Even if City XX has multiple arbitration institutions, as long as the parties’ true intent can determine a single arbitration institution, the arbitration clause should be recognized as valid.

4. If the Guarantee Contract Does Not Include an Arbitration Clause, Is It Subject to the Main Contract’s Arbitration Agreement?

A guarantee contract is a subordinate contract, and its existence and performance depend on the existence and performance of the main contract. When a guarantee contract does not include an arbitration clause, whether the main contract’s arbitration clause’s validity extends to the guarantee contract, people’s courts overall handle this in the following two situations:

First:

If the debtor provides collateral with their own property or the guarantor is a signing party to the main contract, the main contract includes an arbitration clause, but the guarantee contract does not include an arbitration clause and does not clearly agree to apply the main contract’s arbitration clause, unless the parties clearly agree to exclude the main contract’s arbitration clause, it can be recognized that the main contract’s arbitration clause also binds the guarantee contract.

Second:

If a third party provides collateral with their own property for the main contract or the guarantor is not a signing party to the main contract, the main contract includes an arbitration clause, but the guarantee contract does not include an arbitration clause and does not clearly agree to be bound by the main contract’s arbitration clause, it cannot be recognized that the main contract’s arbitration clause automatically binds the guarantee contract. Regarding this, the “Reply of the Supreme People’s Court on the Request for Instructions on the Case of Chengdu Youbang Stationery Co., Ltd. and Wang Guojian Applying for Revocation of Shenzhen Arbitration Commission’s (2011) Shen Zhong Cai Zi No. 601 Arbitration Award” [[2013] Min Si Ta Zi No. 9] clearly replied: “The subject guarantee contract does not include an arbitration clause. The arbitration tribunal’s opinion that because the main contract has an arbitration clause, the guarantee contract as a subordinate contract should be bound by the main contract’s arbitration clause lacks legal basis. The arbitration tribunal heard and made an award on the guarantee contract that did not include an arbitration clause. The reason that guarantor Wang Guojian applies for revocation of the arbitration award’s part concerning him as guarantor is valid.” Later, to unify judicial trial standards, Point 97 of the “Minutes of the National Court’s Symposium on Foreign-Related Commercial and Maritime Trial Work” (Effective Date: January 24, 2022) further clarified: “If parties agree on arbitration as the dispute resolution method in the main contract, and the subordinate contract does not agree on a dispute resolution method, the main contract’s arbitration agreement does not bind the subordinate contract’s parties, unless the main and subordinate contract parties are the same.” The author believes this provision reflects both full respect for the parties’ arbitration agreement and also considers dispute resolution efficiency.

From this, it can be known that although a guarantee contract as a subordinate contract has the attribute of subordination, arbitration is based on parties having a true and valid arbitration agreement. One cannot simply infer that it is also bound by the main contract’s arbitration clause solely based on the guarantee contract’s subordination attribute. Ultimately, one must return to the essential question of whether the guarantor has the will to choose arbitration for dispute resolution. When a guarantee contract does not include an arbitration clause, if the guarantor is not a signing party to the main contract, one cannot automatically infer that the guarantor has implicitly accepted the main contract’s arbitration agreement; however, if the guarantor is also a signing party to the main contract and has not clearly excluded the main contract’s arbitration clause, it can be recognized that the guarantor also has the intent to accept being bound by the main contract’s arbitration clause.

5. Whether Statutory Successors to Rights Under an Arbitration Agreement Are Bound by the Arbitration Agreement

On one hand:

According to Article 8 of the “Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Arbitration Law of the People’s Republic of China,” if parties conclude an arbitration agreement and then merge or split, the arbitration agreement is effective on the successor to their rights and obligations. If parties conclude an arbitration agreement and then die, the arbitration agreement is effective on the heir who inherits the rights and obligations of the arbitration matters. In the circumstances described in the preceding two paragraphs, unless the parties agreed otherwise when concluding the arbitration agreement. For example, in case (2020) Jing 01 Zhi Yi No. 70, Beijing No. 1 Intermediate People’s Court held: “Huajian Industrial Company and Huajian Real Estate Company absorbed and merged on December 5, 2005. The merged Huajian Real Estate Company legally succeeded to all creditor’s rights and debts of Huajian Industrial Company according to Article 174 of the Company Law, including Huajian Industrial Company’s rights and obligations in the ‘Equity Transfer Contract’ and ‘Supplementary Contract on Equity Transfer.’ The above arbitration clause remains effective on Huajian Real Estate Company after the absorption merger of Huajian Industrial Company. Moreover, Huajian Industrial Company’s merger into Huajian Real Estate Company occurred after the arbitration agreement was concluded, and Huajian Industrial Company and Langxin Ming Company also did not agree on other matters regarding whether the arbitration agreement still applies after Huajian Industrial Company’s merger. The arbitration clause remains effective on Huajian Real Estate Company that succeeded Huajian Industrial Company’s rights and obligations. Therefore, the arbitration clause concluded between Huajian Industrial Company and Langxin Ming Company in the ‘Equity Transfer Contract’ binds Langxin Ming Company and Huajian Real Estate Company after the absorption merger.”

On the other hand:

According to Article 9 of the “Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Arbitration Law of the People’s Republic of China,” if the creditor’s rights and debts are assigned in whole or in part, the arbitration agreement is effective on the assignee, unless the parties agree otherwise, the assignee clearly objects when accepting the assigned creditor’s rights and debts, or is unaware of the separate arbitration agreement. For example, in case (2022) Hu 02 Min Te No. 331, Shanghai No. 2 Intermediate People’s Court held: “In this case, the outsides ClickTech Limited’s all creditor’s rights under the ‘Advertising Promotion Service Contract’ with Dongguan Meite Company have been assigned to Xi’an Guangzhi. The arbitration clause agreed in Article 9.2 of the contract is effective on assignee Xi’an Guangzhi.”

In practice, the following two situations require special attention:

First, the effect of arbitration agreements between the insured and a third party on the insurer.

Regarding this, Point 98 of the “Minutes of the National Court’s Civil and Commercial Trial Work Conference” [Fa [2019] 254] clearly states: “There are disputes in practice regarding whether arbitration agreements reached between the insured and a third party before insurance accidents occur bind the insurer exercising the right of subrogation recourse. The right of subrogation recourse is a statutory creditor’s rights assignment. After the insurer compensates the insured for insurance money, it has the right to exercise the insured’s right to claim compensation from the third party. The arbitration agreement reached between the insured and the third party before the insurance accident occurs binds the insurer. Considering that the handling of foreign-related civil and commercial cases often involves the application of international treaties and international practices, with special characteristics, the handling of this issue in foreign-related civil and commercial disputes is not included in the scope of this article.”

Second, whether actual constructors can invoke the arbitration agreement between the project owner and the contractor to apply for arbitration.

According to the Supreme People’s Court case (2014) Min Shen Zi No. 1575 and the Supreme People’s Court’s “Notice on Issuing the 36th Batch of Guiding Cases” [Fa [2022] 267] and Guiding Case No. 198 in that batch: If the construction contract between the project owner and the contractor includes an arbitration clause, but the actual constructor is not a signing party to that construction contract and has not concluded a valid arbitration agreement with the project owner or contractor, this situation neither constitutes the “succession” of the contract’s arbitration clause as stipulated in the aforementioned Article 8, nor constitutes the change of contract subject as stipulated in Article 9. Although Article 43 of the “Interpretation (I) of the Supreme People’s Court on Several Issues Concerning the Application of Law to the Trial of Construction Project Contract Disputes” stipulates that actual constructors can file a lawsuit with the project owner as defendant and require the project owner to bear responsibility within the scope of unpaid construction project payments, the above content only stipulates the actual constructor’s right of action against the project owner and the scope of the project owner’s responsibility. It should not be regarded as the basis for actual constructors to invoke the arbitration clause in the construction contract. This provision is a special institutional arrangement in a certain period and context to solve the problem of拖欠 (delayed payment of) migrant workers’ wages. It is not equivalent to subrogation litigation and does not have the nature of subrogation recourse. The author believes that actual constructors’ right to claim against the contractor (transferor, illegal subcontractor) is based on contractual privity, while their right to claim against the project owner is based on legal fiction. The breakthrough in the strict rule of contractual privity is fundamentally due to correcting the unfairness brought by strict privity to better protect the rights and interests of construction workers and migrant workers.

The publication of Guiding Case No. 198 has clarified this long-standing dispute in judicial practice. However, regarding whether actual constructors who borrow qualifications are bound by the arbitration clause between the project owner and the contractor (transferor, illegal subcontractor), this has not been directly clarified and there is still room for further discussion. Regarding this, the author tends to believe that this guiding case should not be applied mechanically. The core of this guiding case still lies in exploring whether the parties have reached a mutual intent to voluntarily submit all or specific disputes—contractual or non-contractual—that have arisen or may arise between them to arbitration. Therefore, if the project owner already knew at the time of signing the construction contract with the contractor that actual constructors exist who borrow qualifications, then inferring that the actual constructor has the intent to be bound by the arbitration agreement between the project owner and the contractor has rationality. This can both maintain the project owner’s normal expectation of the arbitration clause and not cause a jurisdiction surprise to the actual constructor.

III. Practical Summary

After briefly sorting out the above typical disputes and their judicial review standards, the author believes that judicial practice has now gradually formed a review thinking and standard that respects the parties’ arbitration intent and tries to make arbitration agreements valid, supporting and encouraging parties to choose arbitration for dispute resolution and promoting the development of diversified dispute resolution mechanisms.