A New Era for Chinese Arbitration: the 2025 PRC Arbitration Law
On 12 September 2025, the State Council Standing Committee of the National People’s Congress passed a revision of the Arbitration Law of the People’s Republic of China (the 2025 PRC Arbitration Law), which will take effect on 1 March 2026.
Following the consultation process in 2021 and various draft proposals in 2024, the 2025 PRC Arbitration Law marks the first major overhaul of the current Arbitration Law since it came into force in 1995. The reforms introduced in the 2025 PRC Arbitration Law form part of a wider effort to enhance the appeal and credibility of international arbitration in China, as it vies for greater involvement in the resolution of cross-border commercial and investment treaty disputes.
In this article, we look at some of the most significant changes in the 2025 PRC Arbitration Law and assess the key advantages and potential pitfalls of opting for Chinese arbitration as a means of resolving cross-border disputes.
Choice of institutional and ad hoc arbitration
International arbitral institutions in China
Under Article 86 of the 2025 PRC Arbitration Law, international arbitral institutions can now set up business in certain pilot free trade zones in China (the FTZs), Hainan Free Trade Port (the Hainan FTP) and other areas approved by the State Council of China.
It is worth mentioning that both the International Chamber of Commerce (ICC) and Singapore International Arbitration Centre (SIAC) already have a representative office in Shanghai, for the purpose of forging closer ties with businesses and the arbitration community in the PRC[1]. The 2025 PRC Arbitration Law intends to open up the Chinese arbitration market further to international arbitral institutions, offering a wider choice of institutional arbitration to parties involved in foreign-related disputes in the PRC.
Expanded scope of foreign-related arbitration
The current Arbitration Law in China maintains a distinction between foreign-related arbitrations and purely domestic disputes. Currently non-Chinese arbitral institutions are not permitted to administer domestic cases and this remains unchanged under the 2025 PRC Arbitration Law. The increased presence and offering of international arbitral institutions in the PRC is not expected to have a material impact on the dominance of Chinese institutions in domestic cases[2].
Notably, Article 78 of the 2025 PRC Arbitration Law broadens the current definition of “foreign-related” disputes (even though this has walked back from the previous drafts which proposed to encompass all disputes with a “foreign element”). The expanded scope of “foreign-related” disputes under the new law will be welcome news to both Chinese and international firms who will be able to refer such disputes to institutional (and, in some circumstances, ad hoc) arbitration in the PRC.
Recognition of ad hoc arbitration
Ad hoc arbitration, i.e. conducted without the involvement or oversight of an arbitral institution, is common practice in international arbitration. It is generally seen as an alternative to institutional arbitration, particularly in circumstances where the parties value flexibility and are prepared to manage the arbitral process themselves in order to minimise the overall costs of the arbitration. Given this, ad hoc arbitration is particularly prevalent in such sectors as shipping and maritime and is widely used in jurisdictions based on the UNCITRAL Model Law, which expressly permits the use of ad hoc arbitration.
Historically, China has favoured institutional arbitration over ad hoc arbitration which is not formally recognised under the current Arbitration Law[3]. In an attempt to align with international best practice, Article 82 of the 2025 PRC Arbitration Law now provides that ad hoc arbitration is permitted in China for: (i) foreign-related maritime disputes; and (ii) disputes between enterprises both registered in the designated FTZs, the Hainan FTP and other areas prescribed by the state.
These changes would give parties the option of choosing ad hoc arbitration for the right cases, which is good news. However, given its limited scope, ad hoc arbitration will likely remain unavailable in the PRC for the majority of foreign-related disputes (except for those arising from the shipping and maritime sectors), nor for domestic cases.
Ambitions of Chinese arbitral institutions
The 2025 PRC Arbitration Law also appears to encourage Chinese arbitral institutions to break new ground, literally. For example, Article 86 pledges support for Chinese arbitral institutions to establish outside the PRC, and Article 94 confirms that Chinese arbitration institutions and tribunals may handle investor-treaty cases.
Notably, in recent years a number of Chinese arbitral institutions have taken steps to position themselves for investment treaty arbitration. For example, the China International Economic and Trade Arbitration Commission (CIETAC) launched its Investor-Treaty Arbitration Rules in 2017, and the Shenzhen Court of International Arbitration (SCIA) has also introduced specific rules in respect of investment disputes.
This is against the backdrop that the PRC has signed a total of 148 bilateral investment treaties with over 130 countries, in addition to another 33 treaties with investment provisions. Despite the substantial investments from Chinese companies across the world, the number of investment treaty claims brought by Chinese investors remains disproportionately low. It remains to be seen whether the 2025 PRC Arbitration Law will lead to more willingness from Chinese investors to avail themselves of their rights and protections under international law.
Alignment with international best practice
Recognition of the concept of the “seat”
A much-noted feature of the current Arbitration Law is that it does not recognise the concept of the “seat” (i.e., legal place) of arbitration. This is at odds with the widely accepted position in international arbitration that the seat of arbitration is distinct from the physical location of the administering arbitral institution or the venue of any hearings. Critically, it is the seat that determines the procedural law (lex arbitri) of the arbitration, with important implications both for the conduct of the arbitration itself and for finality and enforcement of any arbitral award issued pursuant to it. The lack of formal recognition of the arbitral seat in Chinese law has led to uncertainty and inconsistent court decisions as to the validity of arbitration clauses that provide for PRC-seated arbitrations to be administered by non-Chinese arbitral institutions[4].
The 2025 PRC Arbitration Law formally recognises the seat of arbitration, though only in relation to foreign-related arbitrations. Article 81 of the 2025 PRC Arbitration Law provides that parties may agree the seat in writing and this will be the basis for determining both the procedural law applicable to the arbitration and the court with supervisory jurisdiction, unless the parties have agreed otherwise. Article 81 also confirms that arbitral awards are deemed to be issued at the seat, and that where parties do not specify the seat, it shall be determined in accordance with the agreed arbitral rules, failing which the tribunal shall decide.
These amendments align China with international practice (e.g. Article 20(1) of the UNCITRAL Model Law) and provide much needed clarity for foreign parties who wish to arbitrate their disputes in the PRC. Critically, legislative confirmation regarding the nationality of arbitral awards made at the seat will pave the way for Chinese courts to assist more readily (for example, in granting interim relief) in support of arbitration proceedings in the PRC.
Separability of arbitration agreements
Under the doctrine of separability, an arbitration agreement is regarded as a separate agreement to the main contract of which it forms a part. This ensures that the validity and enforceability of the arbitration agreement is not dependent on the validity of the underlying contract.
The 2025 PRC Arbitration Law maintains the current position, in that the existence and validity of an arbitration agreement is independent of that of the main contract in which it is contained. Article 30 further confirms that any dispute as to the existence, variation, validity, termination or revocation of the main contract does not affect the validity and legal effect of the arbitration agreement “already formed”[5].
Notably, the 2025 PRC Arbitration Law also adopts the current position that a party wishing to challenge the existence of an arbitration agreement must do so prior to the arbitral tribunal's first hearing. Additionally, Article 27 of the new law provides that where no objection is raised at the first hearing (and after the tribunal has reminded the parties and recorded the position), an arbitration agreement will be deemed to exist between the parties. This is a welcome development which will help reduce the number of late, tactical challenges that are directed at undermining the enforceability of arbitral awards.
Partial adoption of the Kompetenz-kompetenz principle
The principle of Kompetenz-kompetenz, namely that an arbitral tribunal is authorised to rule on issues relating to its own jurisdiction (as part of challenges to the existence and/or validity of the arbitration agreement), is a cornerstone of modern international arbitration law and practice and is widely accepted internationally. In particular, the principle is set out in the UNCITRAL Model Law and has been adopted in the national laws of many leading arbitral jurisdictions (e.g., see Article 34 of the Hong Kong Arbitration Ordinance).
Article 31 of the 2025 PRC Arbitration Law now allows the arbitral tribunal (as well as the arbitral institution in question) to rule on the validity of the arbitration agreement. However, parties can also apply to a Chinese court for a ruling on the same issue – notably, where there are competing applications both to the arbitral tribunal and to a local court, it is the Chinese court’s decision that will prevail.
This means that, notwithstanding reforms in the 2025 PRC Arbitration Law, there is still ample scope for the issue of jurisdiction to be taken out of the arbitral tribunal’s hands, for example, by a recalcitrant party racing to the local court to try to disrupt or delay proceedings in the arbitration. Although the new regime undoubtedly moves towards international best practice, parties should keep in mind that the Chinese law position as regards the arbitral tribunal’s jurisdiction is not fully aligned with the UNCITRAL Model Law.
Arbitrator disclosure obligations
Article 45 of the 2025 PRC Arbitration Law now requires disclosure of circumstances that may cause parties to have reasonable doubts as to an arbitrator’s independence and impartiality. This formulation is broadly in line with Article 12 of the UNCITRAL Model Law as well as General Standard 2 of the IBA Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines).
This new general duty of disclosure supplements the four existing scenarios under the current regime which are said to require or justify an application for the recusal of an arbitrator, namely: (i) where the arbitrator is, or is related to, a party or its representative; (ii) where the arbitrator has a personal interest in the case; (iii) where the arbitrator has some other relationship with a party or its representative thereby affecting the impartiality of the arbitral process; and (iv) where the arbitrator has privately met with or received gifts or hospitality from a party. These provisions are adopted in Article 46 of the 2025 PRC Arbitration Law.
The first two categories would most likely fall within the non-waivable Red List of the IBA Guidelines and should not be controversial; the last two categories encompass a wide range of circumstances and may provide fertile ground for disputes. Notably, under Article 50 of the 2025 PRC Arbitration Law, a serious breach of Article 46 above carries personal legal liability for arbitrators and could result in their removal from the arbitral institution’s panel. It is therefore important that parties involved in arbitration proceedings in China tread carefully in their communication and engagement with arbitrators to avoid falling foul of these provisions.
No tribunal power to order interim relief
The 2025 PRC Arbitration Law continues to provide that it is the Chinese courts only that have the power to award interim or conservatory measures in support of arbitration. Article 39 provides that applications for interim relief for the preservation of assets or mandatory or prohibitive injunctions are to be submitted to the court by the arbitral institution, and that in cases of urgency, such applications may be made directly to the court prior to commencement of the arbitration.
Although earlier draft amendments in 2024 contemplated Chinese courts and arbitral tribunals both having the power to order interim measures (which would have aligned with Article 17 of the UNCITRAL Model Law), the 2025 PRC Arbitration Law reverts to court-ordered interim relief.
This is at odds with leading pro-arbitration jurisdictions such as England and Wales, Singapore and Hong Kong where arbitral tribunals are empowered to grant interim and conservatory measures. Moreover, such decisions are generally capable of being recognised and enforced not only by the courts in the jurisdiction in which the arbitration is seated but also by foreign courts[6]. Given the potential difficulty in enforcing interim measures ordered by Chinese courts outside the PRC, the lack of tribunal-ordered interim relief is a factor that should be kept in mind by those considering whether to opt for arbitration in the PRC.
Efficiencies in arbitral and enforcement actions in the PRC
Support for online arbitration
Although the existing Arbitration Law does not address the issue of online arbitration, since the COVID pandemic, many institutional arbitration rules have been updated to provide for virtual hearings. For example, Article 37(5) of the 2024 CIETAC Rules provides that the arbitral tribunal has the power, following consultation with the parties and taking into consideration the circumstances of the case, to conduct an oral hearing by remote virtual conference or other appropriate electronic means.
Article 11 of the 2025 PRC Arbitration Law now expressly permits the use of online arbitration proceedings, unless parties disagree. This is a useful update that improves efficiency and flexibility for parties, counsel and arbitrators alike. That said, more practical guidance will be needed on the operation of Article 11, for example, to clarify whether parties are required to set out their objections to online proceedings in the arbitration clause itself or whether they can do so after the dispute has arisen.
Shortened timeframe for setting aside of arbitral awards
Under Articles 72 and 73 of the 2025 PRC Arbitration Law, a party seeking to set aside an arbitral award in the PRC must do so within three months of receipt (as opposed to six months under the current regime), after which the court will have two months to rule on the application.
The three-month time limit for applying to set aside an arbitral award is consistent with Article 34(3) of the UNCITRAL Model Law. This improves the certainty and finality of arbitral awards but does require parties who have legitimate grounds to challenge an award to act more quickly than before.
Conclusion
The 2025 PRC Arbitration Law has introduced extensive reforms including formally recognising the “seat” of an arbitration, permitting ad hoc arbitrations in free trade zones and for certain disputes, and aligning arbitrator disclosure obligations with international best practice. Additional measures such as allowing arbitrations to be conducted online and shortening timeframes to set aside awards will help improve efficiencies of the arbitral process and enforcement actions in the PRC. These reforms will be well-received by arbitration practitioners and users alike.
However, the final package of reform is less extensive than draft amendments previously consulted and the 2025 PRC Arbitration Law represents a significant yet cautious step towards alignment with international best practice. Given this, parties considering arbitration in China should assess the new regime carefully and weigh up the potential pitfalls such as the lack of tribunal-ordered interim relief and the continued role of Chinese courts on the issue of jurisdiction.
[1] See Practical Law update, available here
[2] For example, CIETAC administered 6,013 cases in 2024, 758 (i.e. 12.6%) of which were foreign-related, while the ICC administered a total of 831 cases in the same period.
[3] That said, following the promulgation of the Opinions on Provision of Judicial Support for the Development of Pilot Free Trade Zones by the Supreme People’s Court (SPC) on 30 December 2016, entities registered in the pilot FTZs can submit their disputes to ad hoc arbitration, provided certain conditions are met.
[4] In the landmark 2015 case of Anhui Longlide Packaging and Printing Co. Ltd v. BP Agnati SRL, the Chinese Supreme People’s Court (SPC) upheld the validity of an arbitration clause providing for an ICC arbitration seated in the PRC, reversing the first instance decision by the Hefei Court that the clause in question was invalid. Although the SPC decision did not bind other Chinese courts, it was widely seen as a significant, pro-arbitration authority from the Chinese SPC, which has helped to allay concerns about the validity of similar arbitration clauses in China.
[5] The words “already formed” have been added in the 2025 PRC Arbitration Law, which supports the independence and separability of the arbitration agreement under Chinese law, as acknowledged in the current Arbitration Law.
[6] See, for example, Article 17H(1) of the UNCITRAL Model Law
