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Beijing, Sept. 19, 2025 – China has passed sweeping amendments to its Arbitration Law, ushering in long-sought reforms that could make arbitrating disputes in China more flexible and globally aligned. Adopted by the Standing Committee of the National People’s Congress on September 12, the revised law will take effect March 1, 2026taylorwessing.com. Key changes include explicit recognition of the legal validity of online arbitration hearings and, for the first time, permission for certain foreign-related disputes to be resolved through ad hoc (non-institutional) arbitration within mainland Chinataylorwessing.comtaylorwessing.com. These reforms address several pain points for foreign investors and companies engaged in cross-border business, potentially enhancing the attractiveness of China as a venue for dispute resolution.
One headline change is that arbitrations may now be conducted online with the parties’ consent, and such proceedings “shall have the same legal effect as offline arbitration”taylorwessing.com. This codifies the pandemic-era shift to virtual hearings and aligns with international trends, giving parties more flexibility and efficiency in resolving cases. Another notable amendment clarifies how an arbitration agreement’s existence can be confirmed: if one party asserts an arbitration clause and the other fails to deny it before the first hearing, the clause is deemed validtaylorwessing.com. This provision prevents tactical last-minute challenges to arbitration agreements and streamlines proceedings. The new law also refines the “kompetenz-kompetenz” principle – allowing an arbitral tribunal to rule on its own jurisdiction when the validity of an arbitration agreement is in dispute, alongside the option for a court or arbitration institution to decidetaylorwessing.com. If one side goes to court and the other to arbitration, the court’s ruling will prevailtaylorwessing.com, which gives clarity on how parallel challenges are resolved.
The reform most welcomed by foreign businesses is the introduction of ad hoc arbitration on a limited basis. Historically, China has required disputes to be administered by official institutions (like CIETAC or its local counterparts), effectively barring true ad hoc arbitration. The amended law carves out two types of cases where parties can opt for ad hoc proceedings: (1) disputes related to foreign-related maritime matters, and (2) foreign-related disputes between businesses in pilot free trade zonestaylorwessing.com. In these scenarios, parties may select their own arbitrators and set their own arbitration rules, so long as the arbitration is seated in China and the tribunal files basic case details with a supervising arbitration associationtaylorwessing.com. This pilot of ad hoc arbitration – limited to maritime and FTZ cases – is a significant breakthrough. It means, for example, a Chinese and foreign company in a Shanghai Free Trade Zone contract could agree to an ad hoc arbitration in Shanghai under UNCITRAL Rules with no administering institution, something not previously permitted. Experts note that this experiment could pave the way for broader use of ad hoc arbitration in the future if it proves successful in maintaining fairness and enforcement rates.
Another modernization is the formal establishment of choosing a “seat of arbitration” for foreign-related cases. The law now allows parties in a foreign-related arbitration to designate a seat, which in turn determines the procedural law and the court with supervisory jurisdiction over the arbitrationtaylorwessing.com. The arbitral award will be deemed made at the seat of arbitrationtaylorwessing.com. If parties don’t specify a seat, it can be determined by the chosen arbitration rules or by the tribunal based on the case circumstancestaylorwessing.com. This aligns China’s practice with common international arbitration norms (as seen in jurisdictions like Hong Kong, Singapore, and London), giving clarity on an issue that previously was handled inconsistently in China. Additionally, the amendment shortens the time limit to apply for setting aside an arbitral award in China from 6 months to 3 months, expediting the post-award processtaylorwessing.com.
For foreign law firms and corporate counsel, these changes signal Beijing’s intent to make dispute resolution more user-friendly for international parties. The allowance of ad hoc arbitration in FTZs and maritime cases is particularly relevant – shipping companies and trading firms may now be more comfortable choosing China as a forum, and multinational companies investing in FTZs could have greater autonomy in crafting arbitration clauses. The recognition of online arbitration proceedings also reduces costs and hurdles for foreign witnesses or experts who previously had to travel to China for hearings. Perhaps most importantly, the concept of an agreed seat of arbitration (which could even be outside mainland China if the parties so specify in a foreign-related case) might give parties confidence that familiar procedural law will govern their arbitration, thereby improving enforceability of awards. Observers note that China handled thousands of foreign-related arbitration cases last year, reflecting its growing role in cross-border commerce. By updating its legal infrastructure – embracing digital proceedings and limited forms of non-administered arbitration – China is inching closer to international standards. Challenges remain, of course: the new ad hoc provisions will need clear implementing rules, and Chinese courts’ support for such arbitrations will be tested. Nevertheless, the 2025 Arbitration Law amendments are widely seen as a positive development for the business community, providing greater flexibility and predictability. Foreign companies in joint ventures or transactions with Chinese counterparts should consider revisiting their dispute resolution clauses to take advantage of the new options once in force.
