FAQ(Frequently Asked Questions)
Q1: What is arbitration?
R: Arbitration is a dispute resolution method based on the agreement of the parties, which means that the parties agree to submit the dispute to an arbitration tribunal for a final and binding award.
Q2: What is the difference between arbitration and litigation?
R: According to China's legal system, litigation and arbitration are the two main ways to resolve commercial disputes. In simple terms, litigation cases are heard by judges, while arbitration cases are heard by arbitrators.
Q3: What are the advantages of arbitration?
R: Arbitration, as a conventional mechanism for resolving commercial disputes, has the characteristics of speed, efficiency, low cost, high confidentiality, and streamlined procedures compared to litigation. It can It can balance the efficiency of the adjudication process with the rights of the parties to due process and fair treatment, and also has the advantages of stronger cross-border enforcement and international credibility in resolving cross-border disputes.
Q4: What is ad hoc arbitration?
R: Arbitration is divided into two types: institutional arbitration and ad hoc arbitration. Institutional arbitration refers to arbitration proceedings arranged by specialized arbitration institutions in accordance with their arbitration rules; ad hoc arbitration can be managed by the arbitration tribunal itself, and the parties may also agree to have the arbitration institution manage the case or apply to HNAA to designate an appointing authority to manage the case. The arbitration procedure shall be conducted by the arbitral tribunal after considering the opinions of the parties. Usually, parties to ad hoc arbitration may choose or establish arbitration procedures and rules.
Q5: Which disputes can be resolved through ad hoc arbitration?
R: According to the "Several Provisions on the Development of International Commercial Arbitration in Hainan Free Trade Port", for commercial disputes between or among, enterprises registered in Hainan Free Trade Port (HFTP), enterprises registered in HFTP and enterprises domiciled in foreign countries, the Hong Kong Special Administrative Region, the Macao Special Administrative Region, or Taiwan Region, as well as enterprises domiciled in foreign countries, the Hong Kong Special Adminitrative Region, the Macao Special Administrative Region, or Taiwan Region, if HFTP is chosen as the place of arbitration, ad hoc arbitration can be conducted within HFTP. Ad hoc arbitration can help reduce costs and increase efficiency especially in the fields of international maritime and engineering construction.
Q6: What are the advantages of ad hoc arbitration?
R: Ad hoc arbitration grants parties greater freedom of choice in the selection of arbitrators, arbitration rules, arbitration methods, and trial periods, and has advantages such as greater flexibility, lower costs, and more convenient procedures.
Q7: Is ad hoc arbitration recognized internationally?
R: As a long-standing arbitration method, ad hoc arbitration still maintains vigorous vitality and is widely applicable in the field of international commercial disputes, and has been widely recognized by laws and international conventions of various countries. Especially in the field of international maritime affairs, it is the main way to resolve disputes. Under the constraints of international conventions, the arbitral award of ad hoc arbitration is valid and enforceable against the parties, with the same legal effect as a court judgment. The parties may enforce it in accordance with international conventions or the principle of reciprocity. As of December 2023, the number of signatory countries to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards has reached 172, covering almost the vast majority of countries and regions with active international commercial activities, including China.
Q8: Would it be appropriate to choose ad hoc arbitration to quickly resolve commercial disputes?
R: The answer is YES. According to the legal system of China, litigation adopts the system of two-tier trial, which means that the longest trial process shall go through two tier of people’s courts to obtain an effective and enforceable judgment. Arbitration adopts the single ruling system, which means that the award becomes legally effective from the date it is made, and the parties should fulfill their obligations. They are not allowed to apply for arbitration to other arbitration institutions or file a lawsuit with the people's court for the same dispute, which often shortens the time periods of the final resolution of the dispute by several months or even years. If choosing ad hoc arbitration, the "Hainan Free Trade Port Ad Hoc Arbitration Rules" clearly stipulate that the arbitral tribunal shall make an award within 4 months from the date of its formation; Cases with foreign-related factors shall be judged within 6 months.
Q9: Does choosing ad hoc arbitration to resolve disputes cost less?
R: Generally speaking, YES. The cost of litigation mainly depends on the the subject matter and procedure complexity. In short, the larger the subject matter of a litigation dispute, the longer the procedure, and the more complex the evidence, the higher the litigation costs incurred. The cost of arbitration largely depends on the fees charged by the arbitration institution (if any), as well as the number and fees of arbitrators. Due to the flexible and arbitrary nature of the arbitration process, the cost of arbitration is lower than that of litigation. If there is no arbitration institution responsible for managing the arbitration progress in ad hoc arbitration, the parties only need to pay remuneration to the arbitrator, and in principle, the management fees of the arbitration institution can be waived.
Q10: Is it appropriate to choose ad hoc arbitration for disputes involving company secrets that are not intended to be disclosed to the public?
R: The answer is YES. Article 40 of the Arbitration Law of the People's Republic of China stipulates that arbitration shall not be conducted in public. So confidentiality is one of the advantages of arbitration. Choosing ad hoc arbitration can prevent the trade secrets and activities of the parties from being leaked during dispute resolution, and will not result in the loss of due business opportunities, market reputation, information resources, and business prospects.
Q11: When disputes involve very specialized fields, it is difficult for non professionals to thoroughly investigate the issues involved. Can relevant domestic or foreign professionals be chosen as arbitrators in ad hoc arbitration?
R: The answer is YES. In order to maximize the autonomy of the parties' will, the parties to ad hoc arbitration may agree on the number of arbitrators and negotiate the selection of arbitrators themselves. The parties may appoint temporry arbitrators from the list of ad hoc arbitrators recommended by the arbitration association, or agree to appoint arbitrators recommended by the arbitration institution or other personnel who meet the conditions stipulated in the Arbitration Law of the People's Republic of China as arbitrators for ad hoc arbitration cases. They only need to disclose the basic information of the arbitrator in advance and obtain confirmation from HNAA.
Q12: How to stipulate the application of ad hoc arbitration in the contract?
R: Parties may explicitly agree in the contract that any disputes arising from or related to the contract shall be resolved through arbitration, with the arbitration place located in HFTP and governed by the "Hainan Free Trade Port Ad Hoc Arbitration Rules" of HNAA. At the same time, it is recommended that parties make special agreements on the number of arbitrators, arbitration language, appointing authority, substantive law applicable to the contract and etc.
Q13: If parties have already agreed in the contract to resolve the dispute through other means, can it be changed to ad hoc arbitration for resolution?
R: The answer is YES. The parties may voluntarily reach a new ad hoc arbitration agreement through consultation and consensus. After the new ad hoc arbitration agreement takes effect, it can replace the dispute resolution clause in the original contract.
Q14: The industry in which the company operates has established industry rules. If disputes arise during the business process, can relevant rules formulated by industry associations be chosen for arbitration to determine right or wrong?
R: The answer is YES. After the formation of the ad hoc arbitration tribunal, the parties may independently formulate or agree on the arbitration rules applicable to the ad hoc arbitration procedure, including the application of internationally recognized arbitration rules or relevant arbitration rules formulated by industry associations and chambers of commerce. If the parties have not agreed on ad hoc arbitration rules, the arbitral tribunal shall formulate specific arbitration procedures or determine the applicable arbitration rules on its own. HNAA will also issue the Hainan Free Trade Port Ad Hoc Arbitration Rules for the parties to apply.
Q15: What are the main functions of the appointing authority in ad hoc arbitration?
R: The appointing authority for ad hoc arbitration generally manages the following matters and charges fees in accordance with the provisions of the fee standard: 1. Appointing arbitrators; 2. Making a decision on the application for recusal of the arbitrator; 3. Appointing a substitute arbitrator; 4. Assisting in determining and prepaying arbitrator fees; 5. Participating in reviewing fees; 6. Providing consultation opinions on advance payment. At the request of the parties or the arbitral tribunal, the designated institution may also provide other appropriate procedural assistance.
Q16: The parties have agreed to resolve the dispute through ad hoc arbitration, but cannot reach an agreement on the designation of an appointing authority. What should be done?
R: If the parties fail to reach an agreement on the designation of an appointing authority, HNAA shall serve as the appointing authority or designate an arbitration institution as the appointing authority. If there is a situation where the appointing authority refuses to act, the parties may authorize HNAA to re-designate an arbitration institution or HNAA itself as the appointing authority to manage the ad hoc arbitration process at any stage of the ad hoc arbitration procedure.
Q17: The parties have agreed to resolve the dispute through ad hoc arbitration, but neither party can provide the relevant conditions for the arbitration tribunal to hold a hearing. What should we do?
R: During the process of the ad hoc arbitration, if the parties need assistance in terms of court venue facilities, arbitration secretaries, etc., they can submit their requests to the arbitration association or the arbitration institution within HFTP, which can provide comprehensive assistance and service guarantees for the ad hoc arbitration procedure.
Q18: The company is currently undergoing ad hoc arbitration with the other party. In order to protect the interests of the company, we want to seize and freeze the other party's assets. What should we do?
R: Before applying for arbitration and during the arbitration process, in order to ensure the progress of the arbitration proceedings, ascertain the facts of the dispute, or enforce the award, the parties may apply to the people's court for measures such as property preservation and evidence preservation in accordance with the law. The parties may also apply to the arbitration tribunal for measures such as property preservation and evidence preservation. The arbitration tribunal shall submit the parties' application to the people's court with jurisdiction in HFTP, and the arbitration tribunal may provide opinions based on the circumstances of the arbitration case. The people's court shall review, make a decision and execute it in accordance with the law.
Q19: The company is currently undergoing ad hoc arbitration with the other party, but the other party refuses to provide relevant evidence to the arbitration tribunal. What should we do?
R: In arbitration cases with HFTP as the place of arbitration, if the parties and their agents are unable to collect evidence on their own due to objective reasons, and there are difficulties for the arbitral tribunal to investigate and collect it, but it is necessary to collect it, and the place where the evidence is located or can be collected is in Hainan Free Trade Port, the people's court with jurisdiction in Hainan Free Trade Port may provide assistance upon application by the ad hoc arbitral tribunal.
Q20: The company has received the award made by the ad hoc arbitration tribunal. May I apply to the people’s court for compulsory enforcement?
R: The answer is YES. According to the "Several Provisions on the Development of International Commercial Arbitration in Hainan Free Trade Port", the award made by the ad hoc arbitration tribunal can be submitted to the people's court with jurisdiction in HFTP. Within the signatory countries of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the award of an ad hoc arbitration is valid and enforceable against the parties, and has the same legal effect as a court judgment. The parties may apply to enforce it in accordance with international conventions or the principle of reciprocity.
Q21: The company has received the award made by the ad hoc arbitration tribunal, but the company believes that the award violates legal provisions and should be revoked. What should be done?
R: According to the "Several Provisions on the Development of International Commercial Arbitration in Hainan Free Trade Port", applications for judicial review of ad hoc arbitration awards such as revocation of an ad hoc arbitration award can be submitted to the people's court with jurisdiction in HFTP.
