Significant changes to China’s arbitration law to be introduced

Rachel Turner, an arbitration expert at Pinsent Masons said, “Broadly adopting the changes from the 2024 draft law, the new law aims to modernise China’s arbitration framework and align it with international standards, endorsing significant concepts such as the ‘seat’, the separability of an arbitration agreement from the main contract and the Kompetenz-Kompetenz principles relating to a tribunal’s ability to rule as to its own competence on the issues before it.”

The law has adopted the ‘seat’ concept for foreign-related cases that is prevalent in other international arbitration rules and laws, which did not previously exist in Chinese legislation or arbitration. The ‘nationality’ of the arbitral award was previously often determined by the location of the arbitration institution. 

The 2025 Arbitration Law reaffirms the principle of the independence of arbitration agreements. It also consolidates provisions from the current 2017 Arbitration Law and the Civil Code, while expanding the scope to clarify that an arbitration agreement remains valid even if the underlying contract is not formed, has not taken effect, or has been rescinded. The law also reinforces the arbitral tribunal’s authority to determine the validity of the contract where relevant to the dispute.

It has also endorsed the ‘Kompetenz-Kompetenz principle’ introduced in the 2021 draft, however, it has included an important caveat: the tribunal holds the power to review the validity of an arbitration agreement, but if the parties are in disagreement, the court will retain the power to decide. 

The scope of the provisions applicable to foreign-related arbitration now extends to arbitration of foreign-related disputes. This broadens the types of disputes eligible for foreign-related arbitration provisions and allowing flexibility for future developments.

Ad hoc arbitration can advance in foreign related disputes arising from maritime matters and between enterprises registered in pilot free trade zones. This approach reflects China’s gradual alignment with international arbitration practices while considering its domestic realities.

Another key update in the 2025 Arbitration Law concerns interim measures, which now explicitly cover both property preservation and conduct preservation and injunctions. Additionally, in urgent circumstances, parties may apply to a competent court for interim measures, including property preservation, evidence preservation, and conduct preservation and injunctions, even before an application for arbitration proceedings.

Susan Wang of Pinsent Masons said: “the new arbitration law aligns with the global trend toward greater transparency and efficiency, which are key drivers in the ongoing modernisation of arbitration frameworks worldwide.”

“Together with the recent guidelines relating to AI in arbitration and the updates to Chinese arbitration institution rules, China is seeking to place itself at the forefront of arbitration thinking and practice,” she said.

The revised law expands eligibility for arbitrators to include professionals from law, economics, and science, including qualified foreign nationals. Provisions on arbitrators’ independence and impartiality and grounds for recusal are included with ethical standards reinforced.

It also affirms that arbitration commissions are independent from administrative authorities and do not form hierarchical relationships. Institutions are required to disclose operational details including rules, arbitrator rosters, fee standards, and annual reports to enhance transparency and public trust.

Shorter timeframes to set aside awards, ensuring time efficiency by shortening the period from six months to three and tribunals are empowered to dismiss arbitration requests if they find that a party has unilaterally fabricated essential facts to initiate the proceedings, significantly raising the cost of malicious arbitration.

Other changes include arbitration institutions, which had no formal recognition under the old law, can set up business institutions in the pilot free trade zones and Hainan Free Trade Port if approved by the State Council.

Finally, the new law encourages foreign arbitration parties to choose arbitration institutions in China, including Hong Kong Special Administrative Region (SAR).

Turner said: “This is a significant step for Hong Kong SAR as a seat, considering it is the most preferred in Asia.”

“The 2025 Arbitration Law represents a significant step forward in aligning China’s arbitration framework with international standards, whilst the approach to reform remains measured by balancing innovation with regulatory control,” she said.