Arbitration court hears first case

The court of arbitration for the China (Shanghai) Pilot Free Trade Zone heard its first case on Tuesday, as experts said arbitration will play a bigger role in resolving commercial disputes as more foreign businesses pour into the FTZ.

The case was a dispute over a gas-supply contract. Wen Wanli, vice-chairman of Shanghai International Economic and Trade Arbitration Commission, which set up the court of arbitration in October, said one of the enterprises was a Fortune 500 company, and the other is a domestic giant in the photovoltaic sector.

Details of cases cannot be disclosed, according to the Arbitration Law.

The arbitral tribunal that heard the case was composed of three arbitrators, including presiding arbitrator Peter Howard Corne, who has dual British and Australian nationality.

Yao Hongmin, assistant secretary-general of the arbitration commission, said that one big difference between arbitration and hearings in regular courts is that people can choose arbitrators themselves, but cannot pick judges in court.

"Many foreign businesses tend to choose arbitrators from their home countries as they may have more in common in beliefs, culture and law," Yao said. The commission has a panel of more than 600 arbitrators, including 199 from nearly 40 foreign countries and regions, he added.

The presiding judge is selected by the two sides together or assigned by the arbitration court if the two sides cannot agree on one, he said.

The expert panel is another crucial reason that some foreign enterprises opt for arbitration, said Chen Naiwei, executive dean of Advanced Institute of Lawyers at Shanghai-based Fudan University and an arbitrator of the case.

"Regular courts may decline to accept a dispute over some innovative products and services as judges may not be knowledgeable in the specific field in the case," Chen said.

"But arbitrators come from different professions and have experience on the front lines so they can make proper judgments that conform to industrial standards and practice when no applicable law is available," he said.

Arbitrators at an arbitration center come from different backgrounds, including business, research institutions, law firms and governmental departments, with their expertise and capabilities touching upon traditional and new areas in trade and commercial industries, arbitration insiders say.

Moreover, Corne said, arbitration is more flexible than the court system in permitting evidence.

"Some evidence that is not notarized may be declined in court, but is effective in arbitration as long as it is persuasive," he said.

Legal experts said arbitration gives companies the right to make various decisions, including the place to have the case heard, the applicable laws, and arbitrators, to maximize the protection of their legitimate interests.

"The two companies involved in a case can reach an agreement to have the case heard at a place in which neither of them is based, and choose a foreigner as the presiding arbitrator to ensure fairness and avoid local protectionism," said Huang Qi, vice-president of the Shanghai Bar Association.

Statistics from Shanghai High People's Court showed a stronger willingness of enterprises to opt for arbitration in recent years.

Huang said arbitration will be an important approach to resolving commercial disputes in the FTZ as arbitration is widely accepted internationally, especially in cargo trade, which will be a key sector in the FTZ.