Initial Stage
While modern commercial arbitration originated in the West, China historically had non-litigation dispute resolution mechanisms where parties agreed to submit disputes to third parties.
During the Ming and Qing dynasties, merchant disputes were not immediately submitted to government officials. Instead, they were first handled through public deliberation by local guilds and associations. These deliberation procedures were flexible and informal without standardized formats. Although the decisions were not final (parties could still litigate in government courts), they already possessed basic characteristics of ad hoc arbitration. By the end of the Qing dynasty, with the establishment of chambers of commerce, dispute resolution procedures became more standardized and dispute resolution institutions became permanent, leading to a new form of dispute resolution called "public arbitration" that more closely resembled institutional arbitration.
Development Stage (1949-2000)
Following the significant political and socio-economic changes after the founding of New China, before the implementation of the current Arbitration Law in 1995, domestic commercial disputes could only be resolved through administrative arbitration besides litigation. Arbitration institutions were divided by industry, affiliated with administrative bodies, and their awards lacked final binding force.
The implementation of the current Arbitration Law changed the history of domestic cases being unable to be resolved through arbitration, but it did not adopt ad hoc arbitration. According to current Chinese arbitration law, a valid arbitration agreement must have a "selected arbitration institution." Ad hoc arbitration is not recognized in China's current arbitration legal system. Although China's current arbitration law framework does not recognize ad hoc arbitration, this does not mean China completely prohibits it. China joined the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in 1986, obligating it to recognize and enforce ad hoc arbitration awards from member states. Therefore, Chinese courts will enforce ad hoc arbitration awards from New York Convention member states according to the Convention's provisions. However, China is the only country among the 158 New York Convention member states that excludes ad hoc arbitration in domestic arbitration.
Arbitration is the primary means of resolving commercial disputes internationally. With the implementation of the Belt and Road Initiative, there will be more international investment, finance, construction, and trade arbitration cases involving Chinese states and enterprises. Looking back at the past thirty years of reform and opening up, Chinese enterprises have lost 95% of international arbitration cases, mainly due to unfamiliarity with rules, especially ad hoc arbitration rules. Many Chinese national enterprises still hold the misconception that ad hoc arbitration is "informal" and its awards are not binding, resulting in significant losses.
Limited Opening Stage (2016-Present)
In recent years, China has shown an increasing tendency to introduce ad hoc arbitration at the national level. It is impossible for a country or city to become an international arbitration center if its laws do not recognize the legal status of ad hoc arbitration. To build an international arbitration center, it is necessary to explore a legal path for implementing ad hoc arbitration in China.
I. Legislative Planning Level
On January 9, 2017, the Supreme People's Court publicly issued the "Opinions on Providing Judicial Safeguards for the Construction of Free Trade Zones" (Fa Fa [2016] No. 34). Article 9, Paragraph 3 clearly stipulates: Arbitration agreements between enterprises registered in the Free Trade Zone to conduct arbitration at specific locations in mainland China, according to specific arbitration rules, by specific personnel, can be deemed valid. If a people's court considers such an arbitration agreement invalid, it should report to the higher court for review. If the higher court agrees with the lower court's opinion, it should report its review opinion to the Supreme People's Court and make a ruling after receiving the Supreme People's Court's response. This is considered to have limitedly opened the door to ad hoc arbitration in China.
In 2021, the Ministry of Justice officially put ad hoc arbitration on the legislative agenda in its draft amendment to the Arbitration Law of the People's Republic of China (Draft for Comments). According to the draft released by the Ministry of Justice in 2021, ad hoc arbitration would only apply to arbitration cases with foreign elements.
II. Local Legislation Level
The Standing Committee of Hainan Provincial People's Congress passed the "Provisions on the Development of International Commercial Arbitration in Hainan Free Trade Port," which took effect on July 1, 2024. According to these provisions, commercial disputes between enterprises registered in Hainan Free Trade Port, between enterprises registered in Hainan Free Trade Port and foreign/Hong Kong/Macau/Taiwan enterprises, and between foreign/Hong Kong/Macau/Taiwan enterprises can be subject to ad hoc arbitration in Hainan Free Trade Port. The provisions specify that parties to ad hoc arbitration can agree on the number of arbitrators and procedures for selecting arbitrators. Parties can appoint arbitrators from the arbitration association's recommended ad hoc arbitrator list, or agree to appoint arbitrators from institutional rosters or other qualified persons under the Arbitration Law, provided they disclose the arbitrator's basic information and obtain confirmation from the Hainan Arbitration Association. After forming the ad hoc arbitral tribunal, parties can formulate or agree on applicable arbitration rules, including international common arbitration rules or rules established by industry associations and chambers of commerce. If parties have not agreed on ad hoc arbitration rules, the tribunal can formulate specific arbitration procedures or determine applicable arbitration rules.
On November 22, 2023, the 8th meeting of the Standing Committee of the 16th Shanghai Municipal People's Congress passed the "Shanghai Municipal Regulations on Promoting the Construction of International Commercial Arbitration Center," effective from December 1, 2023. These regulations, as local legislation passed by the Shanghai Municipal People's Congress Standing Committee, have relatively high legal effect and contain several breakthrough provisions in foreign-related arbitration that may significantly impact mainland China's foreign-related arbitration system: 1. Foreign arbitration institutions can establish business offices in Shanghai and conduct foreign-related arbitration in international commercial, maritime, and investment fields; 2. Ad hoc arbitration can be agreed upon in Shanghai for commercial and maritime matters with foreign elements; 3. Shanghai courts with jurisdiction can conduct judicial review of arbitration agreement validity, arbitration award annulment, and non-enforcement cases for foreign-related arbitration cases managed by Shanghai arbitration institutions and foreign arbitration business offices, as well as foreign-related commercial and maritime ad hoc arbitration cases with Shanghai as the seat; 4. Shanghai courts can assist in evidence collection upon request from arbitration institutions for arbitration cases seated in Shanghai; 5. Shanghai supports financial institutions in providing convenient foreign exchange, cross-border financial services, visa, and entry-exit document processing services for arbitration institutions and personnel conducting international arbitration activities.
The Shanghai Justice Bureau issued the "Shanghai Foreign-Related Commercial and Maritime Ad Hoc Arbitration Promotion Measures (Trial)" (referred to as "Promotion Measures"), effective from August 1, 2024. The Promotion Measures contain 19 articles, covering the scope of ad hoc arbitration application, selection of arbitrators and arbitration rules, services provided by arbitration institutions, and arbitration procedure advancement and safeguards.
III. Arbitration Institutions and Associations Level
In December 2016, the Supreme People's Court issued the "Opinions on Providing Judicial Safeguards for the Construction of Free Trade Zones," first clearly allowing pilot ad hoc arbitration systems in free trade zones. Subsequently, in March 2017, the Zhuhai Arbitration Commission issued the "Hengqin Free Trade Zone Ad Hoc Arbitration Rules," initiating preliminary exploration of ad hoc arbitration in China.
On September 19, 2017, the China Internet Arbitration Alliance, initiated by the Guangzhou Arbitration Commission, issued the "Rules for Connecting Ad Hoc and Institutional Arbitration." The Guangzhou Arbitration Commission subsequently revised its arbitration rules, recognizing the "Connection Rules" as part of its arbitration rules.
On March 18, 2022, the China Maritime Law Association and China Maritime Arbitration Commission jointly held a press conference in Beijing, simultaneously releasing the "China Maritime Law Association Ad Hoc Arbitration Rules" and "China Maritime Arbitration Commission Ad Hoc Arbitration Service Rules."
In September 2023, the China Maritime Arbitration Commission, together with the Xiamen Free Trade Commission, Xiamen Council for the Promotion of International Trade, and Xiamen Lawyers Association, released the nation's first ad hoc arbitration guide, the "China (Fujian) Free Trade Zone Ad Hoc Arbitration Guide," which is the first practical guide on conducting ad hoc arbitration in China.
In July 2024, under the framework of the "Provisions on the Development of International Commercial Arbitration in Hainan Free Trade Port" introducing the ad hoc arbitration system, the Hainan Arbitration Association, drawing from international rules such as the UNCITRAL Model Law on International Commercial Arbitration, formulated the "Hainan Free Trade Port Ad Hoc Arbitration Rules."
On August 1, 2024, the Shanghai Arbitration Association, based on Shanghai's arbitration development needs and international common practices, formulated and released the "Shanghai Arbitration Association Ad Hoc Arbitration Rules," providing practical guidance for the application of Shanghai's "three specifics" arbitration.
On December 2, 2024, the Shanghai Modern Service Industry Federation released the "Shanghai Modern Service Industry Federation Ad Hoc Arbitration Rules." As the first comprehensive chamber of commerce ad hoc arbitration rules, these rules systematically regulate the entire ad hoc arbitration process, emphasizing the connection and independence between mediation, arbitration, and litigation procedures, reflecting the advantages of ad hoc arbitration in respecting party autonomy and procedural flexibility and efficiency, aiming to ensure smooth and efficient arbitration proceedings with the most concise procedural provisions, further promoting the internationalization and rule of law development of the arbitration system.