Arbitration vs. Litigation: Which Is Better in Resolving Disputes With Business Partners in China
The most important difference between litigation and arbitration in China is that judges and arbitrators have different ways of thinking.
When most people refer to the difference between Chinese litigation and arbitration, they are likely to say that arbitration is fairer than litigation because Chinese judges may render unfair judgments, while arbitrators in Chinese arbitration institutions are relatively better.
Indeed, in a few cases, judges may be affected by external factors and render unfair judgments. However, in most cases, the judge is fair, or the judge wants to make a fair judgment and therefore makes a judgment that he believes to be fair. Given that Chinese courts impose strict supervision over the judges, external factors that can affect the judges in most cases do not exist, and most of the judges are also required to adhere to judicial justice in view of their legal education, in most cases the judges will not deliberately make an unfair judgment.
I believe that the difference between litigation and arbitration in China is that judges and arbitrators have different understandings on justice, and thus the way of thinking in case trials is different.
1.The judge pursues the legal effect, while the arbitrator needs not
Judges tend to apply the law strictly. Therefore, if the parties do not agree on the terms of the transaction or the agreement is unclear, the judge may not try to explore the authentic agreement (genuine intention) of the parties as much as possible, but prefer to adopt the terms of the transaction stipulated by the law; even though the Chinese law clearly stipulates that when judging the parties’ terms of the transaction, if the parties have agreed thereupon, such agreed terms shall prevail.
The arbitrator is more concerned about the agreement of the parties. Most arbitrators are familiar with commercial transactions, so even if the parties do not agree on the terms of the transaction or the agreement is unclear, the arbitrator can understand the actual agreement through the hearing, and then make a ruling according to the agreement. In contrast, most Chinese judges have been admitted to the court since graduating from law school and have no other professional experiences, so they are not familiar with various commercial transactions.
In addition, the workload of Chinese judges is extremely heavy, which also causes them to not have enough energy to fully understand the parties’ transactions, and therefore choose to strictly apply the law, which is the most time-saving and least likely to be accused.
2.The judge pursues social effects, while the arbitrator needs not
When a Chinese judge hears a case, he will consider what the public attitude may be towards the case in order to avoid the public’s distrust of the court, the judicial system, and the governing authority. In recent years, the online court judgments and online court trials broadcasts have put the work of Chinese judges under more public supervision, which further increases pressure on judges in this area.
While arbitration is not open to the public, which makes the arbitrators not subject to the public opinion. Therefore, the arbitrator only needs to gain the trust of the parties to the case.
3.The judge pursues political effects, while the arbitrator needs not
Judges need to reflect specific political objectives in the trial of cases based on certain judicial documents issued from time to time. These political objectives set standards for fair judgment in specific situations, for example, to make China’s business environment better.
Arbitrators are not affected by political goals. On the one hand, Chinese laws clearly stipulate that an arbitration institution is independent of and not affected by the administrative organ. In order to enhance the competitiveness of Chinese arbitration institutions, the Chinese government does respect the independence of arbitration institutions. On the other hand, arbitrators are mostly served by Chinese and foreign university professors, lawyers, and retired judges. Their professional identities are more independent from politics and therefore do not consider specific political objectives when hearing cases.
Do you need support in cross-border trade and debt collection? CJO Global's team can provide you with China-related cross-border trade risk management and debt collection services, including: (1) verification and due diligence; (2) trade contracts drafting; and (3) dispute resolution and debt collection. If you need our services, or if you wish to share your story, you can contact our Client Manager Susan Li (firstname.lastname@example.org). If you want to know more about CJO Global, please click here. If you want to know more about CJO Global services, please click here. If you wish to read more CJO Global posts, please click here.
- 3 Things You Have to Know About How Chinese Judges Think in Commercial LitigationChinese judges lack commercial knowledge, flexibility and time to understand transactions beyond the contract text.
- Sue a Company in China: Who Can Give Me a Lawyer-Network in China?You are very likely not to file a lawsuit with a court in Beijing or Shanghai, but in a city with many factories, an airport, or a seaport hundreds of kilometers or thousands of kilometers away. It means that the elite lawyers gathered in Beijing and Shanghai may not be able to help you any better.
- How Do the Chinese Courts Interpret Commercial Contracts?Chinese judges like to see a formal contract with well-written terms signed by both parties. In the absence of a contract, the court may accept purchase orders, emails, and online chatting records as a written informal contract.
- What if a Chinese Supplier Does Not Deliver the Products?You probably want to terminate the contract and get a refund or even compensation.
- Sue a Company in China: Which Chinese Court Should I File My Case?It is very likely that you are not going to file a lawsuit with a court in Beijing or Shanghai, but in a small or medium-sized Chinese city unfamiliar to you.
- Execute a Contract With a Chinese Company: Which Language Is Better?You will need a bilingual contract, preferably with the same content in both languages.
- Execute a Contract with a Chinese Company: How to Make it Legally Effective in ChinaYou shall have the Chinese company stamp on the contract and have its legal representative sign hereon.
- Sue a Company in China: You May Consider Arbitration to Claim Against Chinese SuppliersAs we said before, you can turn to Chinese courts for disputes with Chinese suppliers. In fact, if you need to settle disputes in China, China’s arbitration is also a good option, even better than litigation.
- Sue a Company in China: How Much Does It Cost?The costs you need to pay mainly include three items: Chinese court costs, Chinese attorney’s fees and the cost of notarization and authentication of some documents in your country.
- Why Can You Turn To Chinese Courts for Disputes With Chinese Suppliers?It costs less to sue in Chinese courts. Moreover, Chinese courts are trustworthy for enforcement of commercial contracts.
- Time and Expenses – Recognition and Enforcement of Foreign Arbitral Awards in ChinaFor the recognition or enforcement of foreign arbitral awards in China, the average length of proceedings is 596 days, the court costs are no more than 1.35% of the amount in controversy or 500 CNY, and the attorney’s fees are, on average, 7.6% of the amount in controversy.
- Time and Expenses – Recognition and Enforcement of Foreign Judgments in ChinaFor the recognition or enforcement of foreign judgments in China, the average length of proceedings is 584 days, the court costs are no more than 1.35% of the amount in controversy or 500 CNY, and the attorney’s fees are, on average, 7.6% of the amount in controversy.
- Can Foreign Judgments Be Enforced in China?Some countries’ judgments can be enforced in China, while others cannot.
- 4 Things You Have to Know on How to File a Dispute on AlibabaAlibaba provides Online Dispute Resolution (ODR) through its Complaint Center. It has built a complex dispute resolution. If you want to resolve disputes through Alibaba, you need to know what role Alibaba will play and what position it will take.
- How Does Alibaba Dispute Work: How to Preserve Evidence During CorrespondencesBe sure to specify the conditions for terminating the contract and refunding the advance payment in the contract.
- How can I avoid being scammed on Alibaba: Take the seller’s refusal to shipment as an exampleBe sure to specify the conditions for terminating the contract and refunding the advance payment in the contract.
- How Can I Avoid Being Scammed on Alibaba: Take Product Nonconformity as an ExamplePlease don’t just rely on the introduction of the product page and the presumptive consensus. Be sure to specify the details of the product in the contract and order.
- How Does Alibaba Dispute Work: Alibaba’s Role and Its ImpartialityIf you want to resolve disputes through Alibaba, you need to know what role Alibaba will play and what position it will take. Alibaba provides dispute resolution services for both buyers and sellers. In this dispute resolution system, Alibaba plays two roles in fact: service provider and judge.
- How Does Alibaba Dispute Work: System of RulesAlibaba has built a complex dispute resolution system. If you want to resolve disputes through Alibaba, you need to understand these rules in the system.
- How Does Alibaba Dispute Work: FrameworkAlibaba provides Online Dispute Resolution (ODR) through its Complaint Center. If you want to resolve disputes through Alibaba, you may encounter the following four stages: online mediation, making decisions, enforcing decisions, and raising objections to decisions.
- 8 Tips on How to Sue a Company in ChinaYou can sue a company in a Chinese court, and you do not use it in China. However, the Chinese court should have jurisdiction over your case, and you can tell the court the Chinese legal name and address of this company.
- Sue a Company in China: What Documents Do I Need to Prepare to File a Lawsuit in China?Apart from pleadings and evidence, foreign companies in Chinese courts need to complete a series of formalities, which can sometimes be somewhat cumbersome. Therefore, it is necessary to spare sufficient time and costs to get ready.
- How Much Can I Claim When a China-Related Trade Dispute Arises?You are entitled to claim compensation for loss and the agreed liquidated damages, and may under some circumstances receive a punitive damages award.
- Do I Have the Legal Right (Standing) To Sue When a China-Related Trade Dispute Arises?As long as you are ‘directly affected’ pursuant to Chinese law, you may file a lawsuit with the court. First, you must be directly affected by the defendant. Second, you must be a natural person or a legal entity.
- Where Should I Sue When a China-Related Trade Dispute Arises?You need to identify the address of the person or business you want to sue when preparing and filing a complaint before Chinese courts.
- Whom Should I Sue When a China-Related Trade Dispute Arises?You need to know whom you can sue and then identify its legal name in Chinese.
- Arbitration vs. Litigation: Which Is Better in Resolving Disputes With Business Partners in ChinaThe most important difference between litigation and arbitration in China is that judges and arbitrators have different ways of thinking.
- If I Am Not in China, Can I Still File a Lawsuit With Chinese Courts?YES, but you need to hire a Chinese lawyer to file a lawsuit with Chinese courts on your behalf.
- Can I File a Lawsuit With Chinese Courts?Certainly YES. As long as the Chinese court has jurisdiction over the case in question, foreigners or foreign enterprises, like any other Chinese litigant, can file a lawsuit with Chinese courts.
- Can I Sue a Supplier in China?Yes, you can sue a Chinese supplier in Chinese courts.