What can a foreign party expect in relation to dispute resolution when doing business in China?
If a dispute arises, negotiation is the best initial method of resolution. Most business contracts in China will include a clause requiring negotiation before other dispute settlement mechanisms are pursued. Negotiation might require attempts to enlist the help of local government officials by emphasising the importance of the foreign company’s investment. If negotiation fails, it is arbitration that has for many years been the preferred method of resolution for foreign-related commercial disputes in China. Arbitrators have, at least until recently, been more experienced and better qualified in the subject matter than judges, and procedures have been more flexible and predictable. Arbitration also has the advantage of finality, in that awards are not subject to appeal whereas court rulings may result in a lengthy appeal process. Arbitration in China is governed principally by the Arbitration Law 1995 and the Civil Procedure Law 1991. The most striking characteristic is that only instit
