Validity Issues Of Arbitration Agreements Choosing Foreign Arbitration Institutions And China As Seat

Foreign arbitration institutions conducting arbitration in China can be construed as containing three different layers of interpretations:(1)that the institutions conduct hearing of the case in China;(2)the institutions accept cases abroad but the parties choose China as seat of arbitration;and(3)the institutions establish branches in China and independently take and administer cases in China.Recently,the State Council issued the 2019 “Overall Plan for the Lin-Gang Special Area of the China(Shanghai)Pilot Free Trade Zone”,which enables foreign arbitration institutions to set up business offices in Lin-Gang Special Area and take and administer foreign-related arbitration cases.Therefore,this thesis will focus on the third interpretation.Now that policies has already entitled foreign arbitral institutions to conduct business in China,the wording in the policy document that allows foreign arbitral institution to set up business office and conduct business within Lin-Gang Area,as long as the legal tradition to impose a restrictive interpretation on the validity of such arbitration agreements,question emerge that whether parties can only choose Lin-Gang as seat of arbitration or otherwise the agreement would be invalidated.I do not agree with this view.First of all,there is no point in choosing Lin-Gang as seat if viewed with a legal sense.Selecting seat is selecting the law of the seat,whereas in this case choosing LinGang and choosing other cities in China would lead to the same result to apply Chinese arbitration legal system to the arbitration.Second,institutions administering arbitration outside the place where it is legally founded does not constitute a violation of mandatory statute and therefore would not invalidate the arbitration agreement.There is no law in china prohibiting arbitral institutions from conducting arbitration outside its home,and the measures regulating arbitral institutions do not reach the hierarchy of statute,breaching which would lead to invalidation.Moreover,these measures regulate the institutions but does not impose any restrictive influence on party's autonomy of selecting seats.Third,the pathological clause with an uncertain seat would not impact the formation of a valid arbitration agreement,so long as the agreement contains parties' consent to arbitration.Lack or uncertainty of seat would not impair the formation of the agreement as a whole.Finally,the adoption of a restrictive approach of interpretation is unreasonable.The approach does not conform to the mainstream practice of presumptive validity and may be breaching international obligations under the New York Convention.It is advisable that China also interprets arbitration agreement with general principles of contract law since its contract law is moving to respect party autonomy.On top of the abovementioned legal issues,there are still some problems revealed by the question of validity regarding the administrative management over the institutions,such as the government shall exert management over the institutions within a cautious level to ensure the neutrality of the institutions and validity of arbitration agreements choosing these institutions.Policy concerns of opening up to foreign institutions exist,such as the speed and method,under which the domestic market would not be negatively impacted while opening up.These questions could be addressed through modification of Arbitration Law.Also,since courts have always been playing a vital role in the development of Chinses arbitration legal system,some of these questions can actually be solved by courts through interpretations of law and guiding cases.This could be a more convenient and economic way of improving the judicial system related to arbitration and making China a popular seat than modifying the law.