How Arbitration Makes A Difference

I  Definition

Arbitration refers to an alternative mechanism of dispute resolution in which the subjects of equal status and citizens, legal persons or other organizations seek a final award given upon examination by independent and impartial arbitrators appointed jointly by both parties or by the arbitration agency as both parties have reached an agreement on arbitration in written form or signed a contract containing clauses with reference to arbitration in case of any dispute arising out of honoring the contract or other property ownership to be settled by the arbitration agency established in compliance with laws and regulations.

Arbitration means 仲裁 in Chinese, of which 仲 refers to impartiality, and 裁 stands for making judgments. It is explained in Modern Chinese Dictionary as “to identify and make a decision on the dispute by the third party whose authority both parties involved acknowledge.” It was a practice to solve disputes long ago in China, yet in modern times was it seen as a mechanism. The characters 仲裁 were borrowed from Japanese in early years of the People’s Republic, when it was called 公断 at first. It was then renamed as 仲裁 that has prevailed till today.

II  Merits

1. Autonomy of Will

As the top merit that makes arbitration stands out, autonomy of will allows parties in dispute to decide of their own accord whether to make a request for arbitration, to whom the case will be brought, who will be selected as the court members, and to which the procedure, rules and laws the case should be applied etc. Everything is to be done at the parties’ own will, determined through negotiations, and demonstrated by the principle of autonomy of will. 

2. Short Procedure

There is a single ruling system in arbitration that makes an award given by the arbitrational court legally effective. Aside from the procedural shortness, rights and interests of the parties at dispute will be eventually secured in arbitration with no necessity of other proceedings. By contrast, cases brought to court will be identified through the first and second instance and even more, which costs a long period. Alternative dispute resolutions like mitigation fails to completely address the problem, if unsuccessful, without the necessity of requesting for a court decision.

3. Cost-effectiveness

Arbitration costs less time and money, proceeds at the parties’ own will, and treasures confidentiality. It is in general an amicable process of dispute resolution, and means quite low possibility of confrontation that may affects the future business cooperation.

4. Flexibility

Arbitration requires no jurisdiction in term of territory or levels. Wherever can be the place of arbitration provided both parties agree. To the convenience of both parties involved, the procedure in arbitration is simple and can even be customized with less documents and quick formality. The lawyer appointed by the party concerned shall not necessarily be from its own country. By contrast, the court needs a complex formality that at times everything has to be restarted for even a single bit of procedural inappropriateness, which also makes the party significantly occupied.

5. Professionalism

Civil and commercial disputes that seek help from arbitration involve the complexity of legislature, trade and other technical problems, therefore arbitrational agencies are accordingly staffed with a group of specialists and scholars in a wide range of business known for their professional identity and authority.

6. Confidentiality

As arbitration usually proceeds in private sessions, commercial secrets, activities and personal information of parties involved will not be disclosed that they may still coexist for future cooperation since the award is given.

7. Effectiveness

The awards or mediations given by the tribunal will be law enforceable and more effective than other replacements to law suits.

8. Global Enforcement

Arbitration is one of the dispute resolutions accepted worldwide. Based on the New York Convention, arbitrational awards given in China are widely acceptable and enforceable in over 160 countries and regions. The higher global enforcement and enforceability make arbitration an easy access to the party’s own interests and benefits out of China.

9. Independence

Arbitrational agencies are independent from organs of public governance, and even are not affiliated to each other. The independent procedure shall not be blocked by any governing authorities, social groups and individuals, and not by another arbitrational agency. Less interference means being fair. Since an award shall be of the same effect to a verdict, the former must be honored by the court. 

10. Standardization

An arbitrational award must be given only in compliance with the Law of Arbitration of PRC and the Law of Civil Procedure of PRC, and with a set of rules and supporting codes independent from the laws, which ensures the strictness and standardization of its procedure.

11. Better Trained Staff

Arbitrational agencies have their own name lists of arbitrators. The Law of Arbitration makes a very strict requirement on the qualification of them, including a higher education, more profound social experience and more practices.