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21 Mar 2011

China Law: CIETAC Arbitration or Litigation?

by Simon Zhang, China Hold Law Firm

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Recently I represented a Swedish company on an arbitration case at CIETAC (China International Economic and Trade Arbitration Commission). In this article I would like to discuss dispute resolution (without giving details of the particular case).

On the whole, for contracts or agreements containing foreign elements (for instance, one party is outside of China, the performance is outside of China), I recommend choosing arbitration over litigation. Here are the key reasons:

1. Convenience

In case of litigation, the evidence and the power of attorney formed outside China shall be notarized at that country and then legalized by the Chinese consulate there. All the files in foreign language shall be translated by translation agencies which are accepted by the court. There is no such trouble in CIETAC. The language may be in Chinese or English.

2. Efficiency and Confidentiality

The litigation may have a second instance, while the arbitration will be binding after it is rendered. The trial of the court can be heard by the public if there are no trade secrets or personal privacy involved, while the arbitration would be held in confidence.

3. Recognition

The award will be recognized and executed by many countries, if these countries are members of Convention of the Recognition and Enforcement of Foreign Arbitration Awards. The main countries in the world are all the members.

4. Compensation

Although the arbitration fees are a bit higher than the court charges, in the award the tribunal can judge that the investigation fees, travelling fees, retainer fees and so on shall be compensated by the Respondent. In case of victory, the arbitration fees shall also be borne by the loser.

When choosing arbitration, please bear in mind there must be an effective arbitration clause in that contract or agreement.

Simon Zhang is a lawyer at China Hold Law Firm, one of the oldest partnership law firms in Shanghai. He's also a member of Dragon Business Network. View Simon's profile


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