A Brief Discussion of the Subjects That Determine the Validity of the Arbitration Agreement in China – from the Perspective of the Relationship between Litigation and Arbitration（Part I）
Tan Siyu¹

Summary:
The arbitration agreement is the basis for arbitration activities. The dispute over the validity of the arbitration agreement occurs in practice from time to time, and determining such validity involves the allotment of the jurisdiction between the arbitration subject (the arbitration commission or the arbitration tribunal) and the court, as well as the relationship between arbitration and litigation. This article will, from the perspective of the relationship between arbitration and litigation, analyze current effective regulations on the subjects which determine the validity of the arbitration agreement in China, reveal the problems in current legislation, and provide some suggestions for amending current legislation and regulations, hoping to serve as inspiration for the improvement of legislation in China.

Key Words: Validity of the Arbitration Agreement, Arbitration Subject, Relationship between Litigation and Arbitration

Arbitration is based on the authorization of both parties and is the result of the choice of the parties. When the parties resort to arbitration, it means that the court no longer has jurisdiction over the dispute; therefore, the arbitration agreement, which reflects the consensus of the parties, is the cornerstone of arbitration procedure.
The dispute between the parties over the validity of the arbitration agreement occurs in practice from time to time, and in other words, the dispute is about the jurisdiction for dispute settlement; at the time when such validity is determined, it will involve the allotment of jurisdiction between the arbitration subject (including the arbitration commission or the arbitration tribunal) and the court, as well as the relationship between arbitration and litigation

Arbitration and litigation are two independent approaches to settling a dispute and play an irreplaceable role in their respective dispute settlement mechanisms, mutually contributing to dispute settlement; nonetheless, they are very different in nature. Litigation is a judicial approach with the support of state power, demonstrating the judicial property; whereas arbitration has a combined non-governmental and judicial property, in which the non-government part plays a bigger role. The non-governmental property of arbitration, which can impede rendering a just and fair award to a certain degree, necessitates judicial involvement in arbitration, and that means the court has to support and supervise arbitration. From a global point of view, judicial involvement includes a number of aspects, such as the appointment of arbitrators, the preservation of assets and evidence, and the determination of the validity of the arbitration agreement.

1. China’ Related Regulations

Section 1 of Article 20 of the Arbitration Law of the People's Republic of China (hereinafter referred to as “Arbitration Law “) provides that “If a party challenges the validity of the arbitration agreement, he may request the arbitration commission to make a decision or apply to the people's court for a ruling. If one party requests the arbitration commission to make a decision and the other party applies to the people's court for a ruling, the people's court shall give a ruling.” This provision tells us that Chinese law renders the right to determine the validity of the arbitration agreement to both the arbitration commission and the court, and the court prevails when there is a conflict between them. Article 3 of the Clarification of the Supreme People’s Court on Several Matters Concerning the Determination of the Validity of the Arbitration Agreement, issued in October 1998, provides that “If a party challenges the validity of the arbitration agreement, where one party requests the arbitration commission to determine such agreement as valid and the other party requests the people's court to determine the agreement as invalid, and where the arbitration commission has accepted the application before the people’s court and made a decision, the people's court shall refuse the request; where the arbitration commission has not made a decision after the acceptance of the application, the people's court should accept the request and simultaneously notify the arbitration commission to terminate the arbitration.” This piece of judicial interpretation provides a more detailed explanation of Arbitration Law, and that means the court may not only accept the litigation request before the arbitration commission, but it may also simultaneously notify the arbitration commission to “terminate” the arbitration. Section 2 of Clause 13 of the Interpretations of the Supreme People’s Court for Several Matters Concerning the Application of Arbitration Law of the People’s Republic of China issued in August, 2008 provides that “After the arbitration commission has determined the validity of the arbitration agreement, if a party requests for the people’s court to determine the validity or to set aside the validity, the people’s court may refuse the application.” This piece of judicial interpretation also explains the Arbitration Law in more detail, and it further clarifies the right of the arbitration organ to determine the jurisdiction when there is a challenge to jurisdiction and the right to make the final decision in special circumstances.

It can be seen from the foregoing legislation that China’s regulations on the arbitration jurisdiction have the following characteristics: 1. the arbitration commission is entitled to determine the validity of the arbitration agreement directly and therefore determine the jurisdiction of the arbitration tribunal; 2. the court and the arbitration commission are simultaneously entitled to directly determine the validity of the arbitration agreement; 3. Where there is a conflict between the court and the arbitration commission, the jurisdiction of the court prevails.

2. Comments and Analysis on Current Chinese Regulations from the Perspective of the Relationship between Arbitration and Litigation

As mentioned before, determining the validity of the arbitration agreement involves the allotment of jurisdiction between the arbitration subject (the arbitration commission or the arbitration tribunal) and the court, as well as the relationship between arbitration and litigation.

The relationship between arbitration and litigation is mainly reflected in the role played by the court in arbitration. ²Historically speaking, there were roughly three phases in the relationship between arbitration and litigation in China: the court did not intervene in arbitrations; the court excessively intervened and controlled arbitrations; the court appropriately supervised the arbitration. During the initial phase of the development of arbitration, the relationship between the court and arbitration was quiet tense, as the court assumed a “hostile” attitude towards arbitration and overly intervened. Because of economic development and the increasing number of litigation cases the court was incapable of handling, the relationship between the court and arbitration eased off, and the court adopted a more supportive and encouraging attitude; its intervention also gradually reduced.

The relationship between arbitration and the court is found wherever the two overlap. Of course, it is also reflected in the determination of the validity of the arbitration agreement. Based on the current regulations of China, the court is overly supervising arbitration when determining the validity of the arbitration agreement, demonstrating the excessive intervention of the judicial system in arbitration. The reasons for this are two-fold: 1. the structure of this supervision system shows that the supervision of the court over arbitration is based on mistrust. Although the court has the right to directly determine the validity of the arbitration agreement, Arbitration Law is more about the concern that determining the validity of the arbitration agreement is related to the jurisdiction of the court; however, such regulations are obviously founded upon the assumption that the arbitration organ is likely to misuse its powers to determine the validity of the arbitration agreement or the arbitration organ is more likely to make mistakes in determining such validity. It reveals that the judicial system mistrusts the arbitration organ in its fairness, and a supervision system based on mistrust will certainly result in excessive intervention in the arbitration process. 2. This supervision structure of many checks undermines the independence of arbitration. The court certainly has the judicial power to review arbitration, and it is an important approach for the court to supervise arbitration through determining the validity of the arbitration agreement so as to determine the jurisdiction of the arbitration tribunal; however, the tense internal relationship between the independence of arbitration and the supervision of the court over the arbitration calls for appropriate methods and timing of court supervision. In light of the supervision mechanisms of set-aside and refusal to enforce an award that are already in place, the setting up of a pre-intervention ?mechanism that checks arbitration at all levels, undermines the independence of arbitration and is, undoubtedly, excessive intervention.

1. secretary for the Beijing Arbitration Commission
2. Qiao Xin, Li Li: Research on the Feasibility of Settling Disputes Through Arbitration , published in Beijing Arbitration, page 38, No. 2, 2004

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