Commerce & Finance Law Offices news, updates and analysis | Page 1 of 1

Commerce & Finance Law Offices navigate the most important aspects for the client to consider in the arbitration process

In modern commercial disputes, arbitration is often preferred over litigation by parties in large and complex transactions. Reasons include efficiency and economic advantages brought by the arbitration’s system of a single and final award, and, more importantly, the fact that the parties have a say in selecting arbitrators. Compared to litigation where judges are assigned by the court and parties have little room to comment, in arbitration parties are free to choose who hears their dispute instead of being at the mercy of God. As early as 1907, the Hague Convention for the Pacific Settlement of International Disputes has a precise description of the arbitral tribunal, which is the ‘judges of their own choice’. Needless to say, selecting the right arbitrator is the key to getting off to a good start in arbitration.

Arbitrators in China mainly consist of senior practitioners in the legal profession, who must satisfy requirements of both professional expertise and practical experience. Article 13 of the Arbitration Law provides the threshold qualifications for an arbitrator. Multiple Chinese arbitration institutions actively maintain and update their panels of arbitrators on a regular basis with stringent criteria for qualifications. The arbitration rules of some institutions in China do not mandate the parties to select the arbitrator only from their panel list. Nevertheless, it is advisable for the parties to choose from such panels, unless they have specific requirements, valid reasons, and a clear choice of an arbitrator outside of the panel. Generally speaking, panels of the arbitration institutions include the top and most active arbitration practitioners of the day, and can be of much help for parties to make their nomination of arbitrator.
From my experience acting as the arbitrator in hundreds of cases over the years, I have summarised some general considerations in selecting arbitrators and common mistakes in practice. The following are some general tips for the reader’s kind reference when examining the potential candidates of arbitrators.

First, legal expertise. The parties may get a first impression of a prospect arbitrator’s legal expertise by examining his or her educational background, practice experience, research publications, etc. Also, the arbitrator’s experiences in research and practice sometimes reflect his or her area of specialisation, accordingly parties may choose an arbitrator to fit their specific area of dispute.

Second, expertise in the business area or the industry relating to the dispute. Some industries have certain professional barriers, such as construction, maritime trade, bills and patents. For disputes in these areas, adequate technical expertise of the industry may be more important than knowledge of legal issues. Specifically, parties may draw their attention to whether the prospect arbitrator has relevant professional and technical qualifications, or experience in the industry.

Third, the availability to hear the case. While the professionalism and experience of top-level arbitrators are beyond doubt, it is sometimes possible that a well-known arbitrator may be preoccupied by many other cases and societal responsibilities. In some disputes, such as the ones that heavily rely on a large volume of factual evidence, parties are advised to carefully consider the availability of the arbitrator, rather than making the selection simply by the reputation or seniority of the candidate.

Fourth, previous views and inclination on disputable academic topics. Some cases involve legal issues that are still disputable. These issues are often unaddressed by existing rules in legislation. Sometimes the judicial practice over such disputes have been inconsistent for long as well. Usually, they are also topics in heavy debate in the academia. For such disputes, it is important for the parties to examine whether the candidates for arbitrators have expressed any view on relating topics, or might have certain inclinations. Academical stands or values
do not mean the arbitrators will not remain impartial when hearing the case. However, to the best interest of the party, it is better to exclude any candidate that holds or might hold a position on the relating topic that is opposing to the party.

For the parties, it is never a good idea to waive the right to choose an arbitrator. Sometimes certain parties lack experience in arbitration. Another common mistake is to exceed the time limitation of selecting arbitrators. Some parties, especially when being the respondent, often have insufficient time to hire counsels, which often results in overdue selections of an arbitrator or hasty selections without professional advice. Another situation is that the parties could misunderstand that the period for selecting an arbitrator is automatically suspended under certain circumstances. My team once encountered a case in which the respondent, in the 15-day period for selecting an arbitrator, filed a proceeding in local court to confirm the invalidity of the arbitration agreement. The respondent held misconceptions that the arbitration proceeding would be automatically suspended once the judicial proceedings were initiated, and the period for selection of arbitrators would resume from the date of resumption of the arbitration proceedings. However, it is actually the tribunal or the arbitral institution that have the power to suspend the arbitration proceeding, and the commencement of judicial proceeding does not lead to the automatic suspension of the time limits in the arbitration. Due to the misunderstanding of the arbitration rules and the legal principles, the party failed to select an arbitrator within the prescribed period. When it ultimately failed to obtain a favourable award, this party applied to cancel the arbitral award on this ground but was not upheld by the court either.

The selection of an arbitrator is a time-critical matter, involving numerous factors, but has limited public information available. It must be nonetheless considered carefully by the parties. Generally, lawyers, arbitrators, staff of arbitral institutions, corporate counsels who have the hands-on experience, are more likely to have a deeper insight of the whole picture and make appropriate selection. It is advisable for parties who are unfamiliar with the arbitration to take advice from professionals, in order to get the arbitration process off to a good start and to lay the groundwork for a good outcome.

Return to the Disputes Yearbook 2023 menu