Dispute Resolution in China 

Dispute Resolution in China – Legal Guide

The most common forms of dispute resolution in China include arbitration, litigation, and alternative dispute resolution (“ADR”). Rongkuan Yang an adjunct Professor at the School of Law, National University of Maryland (USA), and a postdoctoral in Law from the National Academy of Governance (Governments Academy in USA), is Principal and Senior Partner Lawyer of Beijing Kangda (H.K.) Law Firm who discuss' the primary methods for dispute resolution in China and their relevant jurisdictions, and provides information on recent trends.

What is the limitation period for litigation in China? 

The longest statute of limitations for litigation is generally 20 years, calculated from the date the right is infringed upon. The general statute of limitations for short-term litigation is usually 3 years, calculated from the date the right holder knew or should have known about the damage to the right and the obligor. Article 188 of the The Civil Code of the People’s Republic of China stipulates a statute of “The limitation period for a person to request the people’s court to protect his civil-law rights is three years, unless otherwise provided by law.” Exceptions to the short-term statute of limitations are as follows: (a) The statute of limitations for disputes over international sales contracts and technology import and export contracts is 4 years. (b) The statute of limitations for the contract creditor’s right to request the insurer to pay insurance benefits under a life insurance contract is 5 years, calculated from the date the insurer knew or should have known about the occurrence of the insurance accident.  

What are the requirements for cross-border litigation? 

Cross-border litigation requires that various elements of cross-border litigation meet cross-border and cross-jurisdictional characteristics. These elements include, but are not limited to, the defendant’s domicile, the place of contract performance, the place of contract signing, the plaintiff’s domicile, and the location of the subject matter. These elements are directly related to the jurisdiction of the People’s Court with practical connections to the dispute. 

Article 3 of the Provisions of the Supreme People’s Court on Several Issues Regarding the Establishment of the International Commercial Court stipulates: “A commercial case with one of the following situations can be regarded as an international commercial case under these Provisions: (a)one or both parties are foreigners, stateless persons, foreign enterprises or other organizations; (b)one or both parties have their habitual residence outside the territory of the People’s Republic of China; (c)the object in dispute is outside the territory of the People’s Republic of China; (d)legal facts that create, change, or terminate the commercial relationship have taken place outside the territory of the People’s Republic of China.” This provision fully reflects the fundamental difference between cross-border litigation and domestic litigation.  

A Meeting Between Two Professionals

What is the process for arbitration in China and when is arbitration most applied? 

Chinese commercial arbitration, as a product of the market economy, serves as a tool for the market economy. The scope of arbitration cases includes contract disputes and other property rights disputes between equal commercial subjects such as citizens, legal persons, and other organizations. Such disputes stem directly from economic exchanges and are purely property disputes. Arbitration is most suitable for disputing parties seeking efficiency, confidentiality, flexibility, and finality.  

How valuable is mediation as a non-litigation dispute resolution option in China? 

The economic costs of litigation are generally high and consist of two aspects: direct costs (costs of rendering judgments) and error costs (costs of erroneous judgments). When comparing the lower cost of mediation to litigation, it actually refers to the direct costs of mediation. Direct costs are the costs of the operation of the legal system, including public and private costs. 

The construction of the judicial field is, to some extent, influenced by the comparative position between the parties and the adjudicators.

The power relationship reflected by this comparative position is relatively stable and cannot be changed by the personal will of the parties or adjudicators. One of the reasons why parties choose arbitration/judicial mediation and submission is that they are in a position in the judicial field. Fundamentally, the types and quantities of capital that parties possess form the basis of their positions in the judicial field. At the same time, this position reinforces the capital condition that parties possess. With the development of competitive activities among actors in the judicial field, the capital condition that parties possess is constantly changing, driving changes in their positions in the judicial field. It can be seen that interest is both the preconsciousness of the game of mediation and the affirmation of the game and the strategies used in the game. In the judicial field, parties and judges maintain a state of illusion about the judicial field and constantly invest capital and generate new capital.  

What are the pros and cons of litigation v arbitration in China? 

Arbitration, as a dispute resolution mechanism, emphasizes the autonomy of the parties’ intentions and has strong characteristics of civil society, combining professionalism, speed, convenience, confidentiality, and harmony, which gives it a pivotal position in dispute resolution. The privacy and independence of arbitration emphasize the maintenance of the parties’ reputation and business reputation. In commercial disputes, there are often acts such as breach of contract, financial difficulties, or even malicious behavior violating the principle of good faith, which may adversely affect the personal reputation of the parties and the business reputation of the company, causing significant economic losses to the company.

If the confidentiality of arbitration can be guaranteed, it can restrict the dissemination of unfavorable information.

The confidentiality of arbitration cases should be seen as an interest that parties can expect, and confidentiality should be the norm in commercial arbitration, while openness should be the exception.  

Litigation, on the other hand, emphasizes publicity, is subject to multiple review constraints, and has relatively low processing efficiency.  

Chinese Skyline Featuring Commercial Offices and Residential Housing

How has Online dispute resolution (ODR) evolved in China and what are the benefits of ODR? 

ODR (Online Dispute Resolution) is a mechanism for resolving disputes through electronic communication, primarily focusing on resolving disputes arising from cross-border electronic commerce transactions. Evolving from ADR, ODR literally means Online Dispute Resolution Mechanism. 

The prominent advantage of ODR platforms lies in fully leveraging internet technologies and innovatively applying intelligent technologies such as robot mediation, asynchronous mediation, electronic negotiation, and intelligent diagnosis to meet the diverse dispute resolution needs of parties involved in cross-border e-commerce.

Using dispute question-and-answer robots, legal policy answer robots, and case index robots facilitates information collection and communication for the parties, while enhancing the service capabilities of artificial intelligence (robots). For instance, with intelligent diagnosis, based on the parties’ demands, an evaluative diagnosis of the dispute is conducted on the basis of big data analysis, informing the parties of the probability of success or failure in the dispute, as well as the economic and time costs they may need to bear. Additionally, based on historical data of similar disputes, evidence exchange, mediation participation, and judicial confirmation applications are conducted online to provide parties with the best recommendations and mediation proposals for dispute resolution, thus improving online work efficiency. 

About: Rongkuan Yang of Beijing Kangda (H.K.) Law Firm 

Principal and Senior Partner Lawyer Mr. Yang Rongkuan, an adjunct Professor at the School of Laws, National University of Maryland (USA), a postdoctoral in Law from the National Academy of Governance (Governments Academy in USA), a practice mentor for Juris Master students at the Law School of Renmin University of China, a master’s research supervisor at the Law School of China University of Political Science and Law, a part-time Professor at Zhongnan University of Economics and Law, a master’s research supervisor at the School of Law of Capital University of Economics and Business, has a profound background in law, economics, and literature education. He also serves as a mediator for the China Council for the Promotion of International Trade / China Chamber of Commerce Mediation Center, a mediator for the Belt and Road International Commercial Mediation Cente, and an arbitrator for more than ten arbitration institutions, including the Ordos Arbitration Commission. He has published six major works, including Rationality of Commercial Law (Law Press·China, 2021, 1st Edition, ISBN: 978-7-5197-5435-8). 

Beijing Kangda (H.K.) Law Firm enjoys a high reputation in the industry, providing high-quality legal services to Fortune 500 companies, including but not limited to KPMG, Deloitte Touche Tohmatsu, CNP ASSURANCES, RED BULL Castile Freire brothers, Heineken, HK New World Group, TAIWAN GLASS, Foxconn Technology, Fujitsu, COFCO, BBMG, BAIC MOTOR, EMC, etc.  



Published by: Lawyer Monthly – 1st May, 2024




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