‘Oriental experience’ for resolving investor-state disputes

“Oriental experience” or “Chinese experience” are distinctive words used to describe an uncanny dispute-resolution mechanism, which combines two well-known processes of alternative dispute resolution, namely arbitration and conciliation (or mediation). Under this mechanism, disputing parties can use conciliation within the ambit of an ongoing arbitration proceeding. As it is seen as an unusual practice, it is not extensively used worldwide (for reasons we will not cover here). Still, this mechanism is popular in arbitration in China and has been significantly successful. Almost every arbitral institution in China has integrated the mechanism in arbitration rules and has also made its way into the 1994 Arbitration Law of the People’s Republic of China and also into the Hong Kong Arbitration Ordinance (Cap 609).

Case of adopting ‘oriental experience’ to resolve investment disputes. There are abundant opportunities today for investments inside and outside China. Foreign companies are investing in China for access to the country’s consumer market and Chinese firms are trying to diversify businesses overseas. As a result, it is not surprising that China is already involved in a few investor-state disputes (eight in total; three as respondent state and five as home state of claimant). There is a good chance that many more my follow soon.

In anticipation, and to ensure efficient resolutions of investment disputes, the China International and Economic Arbitration Commission (CIETAC) introduced the CIETAC International Investment Arbitration Rules (the CIETAC Investment Arbitration Rules or the rules) in 2017. CIETAC is the first Chinese arbitral institution to do so. One of the noticeable features of the rules is the inclusion of the provision permitting the combination of conciliation with investment arbitration.

Madhav Kumar is a counsel at CIETAC Hong Kong