It is widely known that an arbitration agreement is the basis and core of the commencement of an arbitration.  The jurisdiction of the arbitral tribunal over the case comes from an effective arbitration agreement.

Pursuant to Chinese law, an arbitration agreement is independent from the main contract.  In other words, the change, dissolution, termination or invalidity of the main contract does not affect the validity of the arbitration agreement.  Normally, an arbitration agreement can be concluded in a separate agreement attached to the main contract, or the parties can conclude an arbitration clause in the main contract.

If the parties choose to submit disputes to arbitration to an arbitration institution in mainland China, key elements of drafting an arbitration agreement for the commencement of arbitration are as follows:

1. Arbitration Agreement Should Be Concluded in Writing

According to China’s Arbitration Law, for institutional arbitration, an arbitration agreement should be in writing.  The written form of an arbitration agreement includes contracts, fax, email correspondences and electronic data interchanges, etc.

2. Clear Selection of Specific Arbitration Institution

If the arbitration agreement only specifies the place of arbitration without a specific arbitration institution, Chinese law will deem the arbitration invalid unless a) there is only one arbitration institution in that place; or b) the parties can reach a supplementary agreement on the exact arbitration institution.

For example, Beijing has two large and main arbitration institutions.  One is China International Economic and Trade Arbitration Commission (“CIETAC”), and the other is Beijing Arbitration Commission (“BAC”).  If the arbitration agreement stipulates that “any disputes related to this contract shall be submitted to an arbitration commission in Beijing for arbitration”, without specific reference to CIETAC or BAC or a supplementary agreement by and between the parties on the choice of CIETAC or BAC, according to Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Arbitration Law of the PRC, the above arbitration agreement will be deemed invalid due to the lack of a specific arbitration institution.

It should be noted that the legal application of law in international commercial arbitration in the mainland is often more complicated than litigation in Chinese courts. When arbitrating in the mainland, different laws may be applied in various stages of arbitration proceedings, with regard to the issue of jurisdiction, substantive disputes and enforcement, etc.

In particular, in the arbitration practice in mainland China, the validity of an arbitration agreement for institutional arbitration is often the first and one of the main disputes in the arbitration proceedings.

Drafting a clear arbitration agreement is the first step to the success of arbitration. 

(Photo credit: the statesman. com)