Finding a Happy Ending for Foreign Investors: the Enforcement of Arbitration Awards in the People\u27s Republic of China

The Chinese judicial system has long been criticized for its rampant local protectionism and corruption and its lack of protections for foreign parties. To avoid litigation in China, most foreign investors insist on arbitration clauses in their contract. But even if they win the arbitration, foreigners must return to the Chinese courts to enforce the arbitration awards. Western lawyers, scholars and business people have repeatedly criticized the Chinese courts for their unwillingness to enforce arbitration awards in favor of foreign investors in favor of Chinese parties. Over the last ten years, the Chinese Supreme People’s Court has attempted to address this dilemma by promulgating a series of regulations, including the 1995 Reporting Mechanism; the 1995 Judges Law; 1998 Regulations Regarding the Issues of Fees and Investigation Periods; and the 2003 Directive Limiting Jurisdiction over Arbitration Awards with Foreign Elements. Furthermore, the Chinese government has taken the unprecedented step of allowing Western educational programs within its borders to educate Chinese judges, attorneys and legal officials in order to improve judicial fairness for foreign investors. The Chinese government has also recently permitted domestic tribunals to accept foreign-related arbitral disputes, resulting in increased competition and quality among the arbitral bodies. In this paper I will briefly describe the history of arbitration in China and the current Chinese arbitration bodies, including the rapidly growing presence of domestic arbitral tribunals such as the Beijing Arbitration Commission (BAC). I will then describe the structural and procedural weaknesses in the Chinese judicial system which may lead to foreigners’ difficulty in collecting arbitration awards. I will describe the steps taken by the Chinese government, judicial system arbitral bodies, including CIETAC and BAC, in order to improve the climate for foreign businesses, as well as foreign parties’ attempts to assist in this process. I will evaluate the purported success of these efforts and the reasons why further documentation is needed for a more complete evaluation. Finally, I will propose further suggestions which would improve fairness within the Chinese judicial branch