Arbitrary Arbitration (Enforcement)

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Managing the Dragon recently wrote about arbitration in China, and where best to conduct it (referring to a Wall Street Journal Article). The article outlines some cases heard in Stockholm, won by the foreign party…however enforcement and recovery has not yet been achieved. Jack notes:

    “Arbitration is only the first, and the easiest, of the two steps. Enforcement is where the rubber meets the road in China.

    …My best advice on legal actions is to avoid them at all costs and use them only as a last resort. The outcome is uncertain, and it’s going to take time–no matter what….In my experience, negotiation is a better way to go.”

Of course, it is still a good idea to have a solid legal framework to support any negotiation, and to provide the litigation option, should it be needed.

China Law Blog has also written about arbitration problems, noting that most of them “could have been easily prevented with the right arbitration provision”. (Another post from them on this issue can be seen here).

It is certainly important to consider how disputes might be resolved (in practice, not just on paper) and to plan accordingly. For example a foreign arbitral award has to be registered in China before it is enforced there – and this process can be uncertain and costly (though if the Chinese party has assets overseas, if may be possible to enforce against those assets).

So getting (good) legal advice, from lawyers who know China, is critical when drafting an agreement. It is also a lot less costly than trying to sort it out after the fact…

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