Doing Business in China For Dummies®

Resolving Disputes through Arbitration

You’ve probably heard that enforcing contracts in China is difficult. Westerners have the perception that the Chinese courts are protectionist and unsophisticated. True? It really depends on where you’re going to court. The court system is getting better, but a number of smaller cities’ courts have judges who are ex-army officers with little or no legal training. Therefore, you can be taking your chances in court. So are contracts unenforceable as a practical matter? Nope!

Almost every contract you enter into in China or with a Chinese company should select binding arbitration for dispute resolution. Arbitration is like a private court system. A tribunal of arbitrators — almost always licensed attorneys — hears cases. Typically, arbitration is faster and less expensive than litigation. This section explains the arbitration process.

Understanding arbitration clauses

To select binding arbitration, include a binding arbitration clause in the governing contract. At a minimum, an arbitration clause should specify the following:

✓	Arbitration body (see the next section)
✓	Place of arbitration
✓	Arbitration language
✓	That the arbitration is binding
✓	The number of tribunal members and the selection process
✓	Procedural rules
✓	That the award may be enforced in any court of competent jurisdiction
✓	Governing law of the contract, which we discuss later in “The rulebook: Determining governing law” (this point doesn’t have to be in the arbitration clause itself but ...