The Practical Path and Challenge of Applying Common Law to Arbitration Institutions in Chinese Mainland

In the context of economic globalization, transactions between Chinese enterprises and international business entities are becoming increasingly frequent, and the issue of legal application in cross-border dispute resolution has become a core topic. The common law is often chosen as the governing law of contracts by international commercial entities due to its flexibility, accumulation of precedents, and commercial friendliness. However, as a typical civil law jurisdiction, can Chinese Mainland's arbitration institutions apply the common law? This issue involves a complex game of legal framework, arbitration practice, and cross-border enforcement. This article combines practical experience to analyze the feasibility and operational path of this problem.

Legal Framework: The Boundary of Party Autonomy

1. At the level of substantive law: Clearly allowing the application of common law

Article 3 of the Law on the Application of Law in Foreign related Civil Relations grants parties the right to choose the governing law of the contract, including common law (such as English law, Hong Kong law, Singapore law).

2. At the level of procedural law: Chinese law is the default rule

According to the Arbitration Law and the Civil Procedure Law, the arbitration procedure is generally governed by the laws of the place of arbitration (i.e. Chinese law). For example, the validity of arbitration agreements, revocation of awards, and other matters shall be governed by Chinese law.

In exceptional circumstances, the parties may agree to apply international arbitration rules (such as the UNCITRAL rules) to enhance procedural flexibility, but shall not exceed the legal bottom line of China (such as the requirement of Article 16 of the Arbitration Law on the form of the arbitration agreement).

Practical scenarios applicable to common law

In the practice of arbitration institutions in Chinese Mainland (such as CIETAC and Shenzhen International Arbitration Court), the application of common law needs to be realized through the "three-step" strategy:

1. Contract clause design: Clarify the choice of law and arbitration rules

Example of substantive law clause: "This contract shall be governed by and construed in accordance with the laws of England" (Governing Law Clause).

Example of procedural law clause: "The arbitration procedure shall be governed by the Procedural Rules Clause of the United Nations Commission on International Trade Law.

2. Composition of the arbitral tribunal: the key role of arbitrators from a common law background

The application of common law highly relies on the familiarity of arbitrators with precedents and principles of equity. For example, when it comes to common law concepts such as "Reasonable Time" and "Implied Terms," arbitrators with common law experience are more likely to accurately apply the law.

Practical suggestion: It is explicitly required in the arbitration agreement that "at least one arbitrator shall have the qualification to practice in a common law jurisdiction", or arbitrators from places such as the United Kingdom and Hong Kong shall be directly appointed.

3. Reference to precedents: auxiliary argumentation rather than binding basis

Chinese arbitration tribunals are not obligated to follow the principle of "precedent binding", but may refer to common law precedents as reasoning tools. For example, in a CIETAC (2021) case, the arbitral tribunal cited the precedent of the UK Supreme Court on contract interpretation to support its determination of "commercial reasonableness".

Potential risks and challenges

1. Legal conflict risk: mandatory "safety valve"

If the application of common law conflicts with mandatory regulations in China (such as foreign investment access and data export control), the arbitral tribunal may exclude the effectiveness of the relevant provisions. For example, agreeing to apply British law but attempting to circumvent the data localization requirements of China's Cybersecurity Law will be deemed invalid.

Preventive suggestion: During the contract drafting stage, Chinese lawyers should conduct a compliance review of the compatibility between common law provisions and domestic law.

2. Risk of Enforcement of Adjudication: Public Policy Reservation

According to Article 5 of the New York Convention, if an arbitration award violates Chinese public policies (such as foreign exchange controls and anti-corruption regulations), Chinese courts may refuse to recognize and enforce it. For example, an arbitration award applicable to Hong Kong law was refused enforcement due to its involvement in a "gambling agreement" prohibited in mainland China.

3. Challenge of Program Efficiency: Differences between Evidence Rules and Trial Modes

The systems of discovery and cross examination in common law procedures may conflict with Chinese arbitration practices. For example, Chinese arbitration tribunals usually limit the scope of evidence disclosure to comply with the requirements of Article 43 of the Arbitration Law regarding the time limit for presenting evidence.

Practical suggestion: Establish a "dual track compatible" dispute resolution mechanism

1. Layered agreement on applicable legal terms

Example: "The substantive issues of this contract shall be governed by English law, and the procedural issues shall be governed by CIETAC arbitration rules; if there is a conflict between English law and mandatory provisions in China, Chinese law shall prevail

2. Choose an "international" arbitration institution

The Shenzhen International Arbitration Institute (SCIA), Shanghai International Arbitration Center (SHIAC) and other institutions have established bilingual arbitrators' rosters and allow the application of common law procedural rules (such as the IBA Evidence Rules), which can reduce legal application friction.

3. Introduce expert witnesses in advance

In cases involving complex common law rules such as trusts and share repurchases, common law experts can be hired to provide legal opinions to assist the arbitral tribunal in understanding foreign legal content.

Conclusion: The "Chinese solution" applicable to common law

The application of common law by arbitration institutions in Chinese Mainland has formed a practical model of "open entity, compatible procedure and case assistance". The parties can achieve effective application of common law within the current legal framework through refined clause design, selection of arbitrators, and compliance review. In the future, with the revision of the Arbitration Law (such as the introduction of ad hoc arbitration and third-party funding), the internationalization of arbitration in China will be further enhanced, and the interaction between common law and Chinese law will also become more in-depth.