China’s Arbitration Law Undergoes Historic Transformation: Modernization, Internationalization, and the Path to Global Competitiveness

In a landmark legislative achievement that has been decades in the making, China has fundamentally overhauled its Arbitration Law, enacting the most comprehensive reforms to its dispute resolution framework since the original law’s promulgation in 1994. Adopted by the Standing Committee of the National People’s Congress on September 12, 2025, and scheduled to take effect on March 1, 2026, the revised law introduces transformative changes aimed at modernizing China’s arbitration regime, enhancing its international credibility, and positioning the country as a premier global hub for commercial dispute resolution.

The new Arbitration Law, comprising 96 articles across eight chapters—an increase of 16 articles from the previous version—represents the culmination of a multi-year legislative process that involved extensive consultation with domestic and international stakeholders, multiple draft revisions, and careful consideration of China’s unique institutional context alongside international best practices. The result is a sophisticated legal framework that seeks to balance party autonomy with institutional oversight, embrace technological innovation while maintaining procedural integrity, and assert China’s arbitral sovereignty while aligning with global standards such as the UNCITRAL Model Law on International Commercial Arbitration.

This legislative overhaul comes at a pivotal moment in the evolution of international arbitration. As global trade patterns shift, geopolitical tensions rise, and technological capabilities expand, the institutions and frameworks governing cross-border dispute resolution are under increasing scrutiny. China, as the world’s second-largest economy and a central node in global supply chains, has a strategic interest in ensuring that its arbitration system is not only robust and efficient but also trusted and respected by international parties. The 2025 Arbitration Law is Beijing’s comprehensive response to this imperative.

The Long Road to Reform: Context and Evolution

To fully appreciate the significance of the 2025 amendments, it is essential to understand the historical context and the evolution of arbitration in China. The original Arbitration Law, enacted in 1994, was itself a groundbreaking piece of legislation. It established the basic framework for commercial arbitration in China, creating a system of arbitration commissions independent from administrative agencies and providing for the finality and enforceability of arbitral awards.

However, the 1994 law was a product of its time. China was in the early stages of its transition to a market economy, and the law reflected a cautious approach that emphasized institutional administration and judicial supervision. Notably, the law required all arbitrations to be administered by recognized arbitration commissions, effectively prohibiting ad hoc arbitration. It also lacked clarity on several issues that would become increasingly important in the era of globalization and digitalization, such as the concept of the arbitral seat, the validity of arbitration agreements formed electronically, and the standards for arbitrator disclosure and challenge.

Over the subsequent three decades, as China’s economy grew and internationalized, the limitations of the 1994 law became increasingly apparent. Chinese courts developed sophisticated jurisprudence to fill gaps in the legislation, and arbitration institutions innovated within the constraints of the existing framework. However, there was growing recognition that fundamental legislative reform was necessary to keep pace with international developments and to realize China’s ambition of becoming a leading arbitration center.

The Draft Process: Ambition, Pushback, and Compromise

The reform process began in earnest with the release of a draft amendment in July 2021. This initial draft was remarkably ambitious, proposing sweeping changes that would have brought Chinese arbitration law closely in line with the UNCITRAL Model Law. It included provisions for broad recognition of ad hoc arbitration, extensive court assistance for arbitral proceedings, and liberal standards for the validity of arbitration agreements.

However, the 2021 draft encountered significant resistance from various quarters. Some domestic arbitration institutions worried that liberalization would undermine their role and create regulatory challenges. Judicial authorities expressed concerns about the capacity of courts to provide extensive assistance to ad hoc proceedings. There were also broader debates about whether China should fully embrace international norms or maintain distinctive features that reflected its institutional context and developmental stage.

These concerns led to a substantially revised draft in November 2024, which walked back many of the more radical proposals. The scope of ad hoc arbitration was narrowed, court assistance powers were curtailed, and several provisions were made more conservative. A further revision in May 2025 made additional adjustments, and the final version adopted in September 2025 represents a carefully calibrated compromise between the forces of internationalization and those favoring a more cautious, incremental approach.

The Arbitral Seat: Anchoring Arbitration in Legal Space

One of the most significant innovations in the revised Arbitration Law is the formal introduction and definition of the concept of the “arbitral seat” (仲裁地). This concept, which is fundamental to international arbitration practice, determines the legal framework governing an arbitration and identifies which courts have supervisory jurisdiction over the proceedings.

Article 16 of the new law establishes a clear hierarchy for determining the arbitral seat:

1. Party Agreement: If the parties have agreed on the seat, their choice governs.
2. Arbitration Rules: If the parties have not specified a seat but have agreed to arbitration rules that provide for seat determination, those rules apply.
3. Tribunal Determination: In the absence of party agreement or applicable rules, the arbitral tribunal determines the seat.

This provision brings Chinese law into alignment with international practice and resolves longstanding ambiguities. Under the previous law, the concept of “place of arbitration” existed but was not clearly defined or consistently applied. Some courts interpreted it as merely the physical location where hearings were held, while others gave it jurisdictional significance. The new law makes clear that the seat is a legal concept with important consequences for the law governing the arbitration and for court jurisdiction.

Implications of the Seat Concept

The introduction of the seat concept has several important implications:

• Choice of Law: The law of the arbitral seat will govern procedural matters not addressed by the parties’ agreement or the applicable arbitration rules. This provides greater predictability and allows parties to select a legal framework that suits their needs.
• Court Jurisdiction: The courts at the seat have exclusive jurisdiction over certain matters, including applications to set aside awards. This prevents forum shopping and ensures that judicial review is conducted by courts familiar with the arbitration.
• Delocalization: By clearly distinguishing the seat (a legal concept) from the place of hearings (a physical location), the law facilitates “delocalized” arbitrations where hearings may be held in multiple locations or online, while the arbitration remains legally anchored at a single seat.

It is worth noting that the final version of the law removed a provision from earlier drafts that would have subjected the validity of arbitration agreements to the law of the seat. This deletion avoids potential conflicts with Article 18 of the Law on the Application of Laws to Foreign-Related Civil Relations, which already provides a choice-of-law framework for arbitration agreements. The removal reflects a desire to maintain consistency across China’s legal system and avoid creating new ambiguities.

Ad Hoc Arbitration: A Cautious Opening

Perhaps the most closely watched aspect of the Arbitration Law revision was the question of whether and to what extent China would recognize ad hoc arbitration—arbitration conducted without the administration of an institutional arbitration commission. The 1994 law effectively prohibited ad hoc arbitration by requiring parties to select an arbitration commission in their arbitration agreement. This requirement was seen by many international practitioners as a significant limitation, as ad hoc arbitration is widely used in international commercial disputes and is explicitly contemplated by instruments such as the UNCITRAL Arbitration Rules.

The 2025 law represents a significant, albeit carefully circumscribed, liberalization. Article 17 permits ad hoc arbitration, but only in two specific contexts:

1. Foreign-related maritime disputes
2. Foreign-related commercial disputes between enterprises registered in designated areas, specifically:
   • Pilot Free Trade Zones authorized by the State Council
   • Hainan Free Trade Port
   • Other districts as permitted by relevant regulations

This scope is substantially narrower than what was proposed in the 2021 draft, which would have allowed ad hoc arbitration for all “foreign-related cases.” The restriction reflects ongoing concerns about the capacity of Chinese courts to supervise ad hoc proceedings and about the potential for abuse in a system where parties are not subject to institutional oversight.

Conditions and Limitations

Even within these permitted categories, ad hoc arbitration is subject to significant conditions:

• Arbitrator Qualifications: Arbitrators in ad hoc proceedings must meet the same statutory qualification requirements as institutional arbitrators. This is a stricter standard than applies in many jurisdictions and may limit the pool of available arbitrators.
• Filing Requirement: The arbitral tribunal must file a notice with the China Arbitration Association (a body that is yet to be established) within three working days of its constitution. This requirement provides a degree of regulatory oversight even for ad hoc proceedings.
• Limited Court Assistance: Critically, the final version of the law deleted provisions from earlier drafts that would have allowed courts to assist ad hoc arbitrations by appointing arbitrators when parties deadlock or by accepting deposits of awards. Without these mechanisms, ad hoc arbitrations may face practical difficulties if parties are uncooperative.

The Significance and Limitations of the Ad Hoc Provisions

The recognition of ad hoc arbitration, even in limited form, is symbolically and practically significant. It demonstrates China’s willingness to embrace international norms and to provide greater flexibility for sophisticated commercial parties. For maritime disputes and for commercial disputes in Free Trade Zones—areas where China is particularly keen to attract international business—the option of ad hoc arbitration may be a valuable tool.

However, the practical impact of these provisions remains to be seen. The narrow scope, strict arbitrator qualifications, and lack of court assistance mechanisms may limit uptake. Moreover, the requirement that disputes be “foreign-related” introduces an additional layer of complexity, as parties and tribunals must assess whether a given dispute meets this criterion.

Some commentators have suggested that the ad hoc provisions are primarily aspirational, signaling China’s long-term direction rather than immediately transforming practice. Others argue that even limited recognition is an important first step that can be expanded over time as experience is gained and confidence builds.

Modernizing Arbitration Agreements: Flexibility and Formality

The revised Arbitration Law introduces important changes to the rules governing the formation and validity of arbitration agreements, seeking to balance the need for certainty and formality with the realities of modern commercial practice.

Implied Consent by Conduct

One of the most significant innovations is the recognition of implied consent to arbitrate based on conduct. Article 27(2) provides that an arbitration agreement can be deemed to exist if:

1. One party files a request for arbitration claiming that an arbitration agreement exists;
2. The other party participates in the arbitration on the merits without objecting to the existence of the agreement before the first hearing; and
3. The tribunal records the party’s silence in writing after providing express notice.

This provision, which draws on international practice and the UNCITRAL Model Law, addresses a common problem: parties who initially agreed to arbitrate but later seek to evade their commitment by challenging the existence or validity of the arbitration agreement on technical grounds. By allowing tribunals to infer consent from conduct, the law promotes efficiency and prevents tactical abuse.

However, the provision also includes important safeguards. The requirement that the tribunal provide express notice and record the party’s silence in writing ensures that parties have a clear opportunity to object and that there is a documented basis for finding implied consent. This higher threshold compared to some international standards reflects a desire to balance efficiency with due process.

Electronic Arbitration Agreements

The law also explicitly validates arbitration agreements formed electronically. While this may seem like a straightforward modernization, it has important implications in a legal system that has traditionally placed great weight on written formalities. The provision makes clear that arbitration clauses in electronic contracts, including those formed through online platforms or via email, are valid and enforceable, provided they meet the substantive requirements for arbitration agreements.

This change is particularly important for e-commerce and for international transactions conducted digitally. It removes a potential source of uncertainty and aligns Chinese law with international practice.

Clarifying Institutional Designation

The revised law retains the requirement that arbitration agreements specify an arbitration institution (except in the limited cases where ad hoc arbitration is permitted). However, it provides greater flexibility in how institutions are designated. If the parties’ designation is ambiguous, Article 27(1) allows them to reach a supplementary agreement to clarify their intent. Only if such clarification fails is the arbitration agreement rendered invalid.

This provision reflects a pro-arbitration policy, seeking to give effect to parties’ intent to arbitrate even when their agreement is imperfectly drafted. It also places a burden on parties to attempt to resolve ambiguities before resorting to court challenges.

Online Arbitration: Embracing the Digital Future

The COVID-19 pandemic accelerated the adoption of online dispute resolution mechanisms worldwide, and China was no exception. Many Chinese arbitration institutions successfully conducted hearings and managed cases entirely online during the pandemic. The revised Arbitration Law provides a solid legislative foundation for these practices by explicitly recognizing online arbitration.

Article 48 states that arbitration proceedings may be conducted through online systems, and that electronic data exchanges have the same legal effect as written documents. This provision validates not only online hearings but also the electronic filing of documents, the digital exchange of evidence, and the issuance of awards in electronic form.

Benefits and Challenges of Online Arbitration

The formal recognition of online arbitration offers several benefits:

• Efficiency: Online proceedings can be faster and more flexible, eliminating the need for parties and arbitrators to travel to a physical hearing location.
• Cost Savings: Reduced travel and venue costs make arbitration more accessible, particularly for smaller disputes.
• Accessibility: Parties and arbitrators from different jurisdictions can participate more easily, facilitating international arbitration.

However, online arbitration also presents challenges:

• Technology Access: Not all parties may have equal access to the necessary technology or digital literacy.
• Procedural Fairness: Ensuring due process in an online environment requires careful attention to issues such as the authentication of participants, the security of communications, and the ability of parties to present their cases effectively.
• Cultural Adaptation: Some parties and arbitrators may prefer face-to-face interaction, particularly in complex or high-stakes disputes.

The law’s recognition of online arbitration is permissive rather than mandatory, allowing parties and tribunals to choose the format that best suits their needs. This flexibility is appropriate, as different types of disputes may call for different approaches.

Arbitrator Standards: Enhancing Professionalism and Impartiality

The revised law introduces stricter standards for arbitrators, aimed at enhancing the professionalism, independence, and impartiality of arbitral tribunals.

Disclosure Obligations

Article 45 establishes a clear obligation for arbitrators to disclose any circumstances that might give rise to justifiable doubts about their impartiality or independence. This disclosure must be made in writing to the arbitration institution (or to the parties in ad hoc proceedings) promptly upon the arbitrator becoming aware of such circumstances.

This provision aligns Chinese law with international standards, such as the IBA Guidelines on Conflicts of Interest in International Arbitration. It provides a framework for assessing arbitrator conflicts and gives parties the information they need to decide whether to challenge an arbitrator.

Challenge and Removal

The law also clarifies the procedures for challenging and removing arbitrators. Parties may challenge an arbitrator based on circumstances that give rise to justifiable doubts about impartiality or independence, or based on a lack of required qualifications. The challenge must be made within a specified time period and decided by the arbitration institution (or, in ad hoc cases, by a mechanism agreed by the parties or determined by the appointing authority).

These provisions provide greater procedural clarity and ensure that challenges are resolved efficiently, without unduly disrupting the arbitration.

Qualifications for Ad Hoc Arbitrators

As noted earlier, the law requires arbitrators in ad hoc proceedings to meet the same statutory qualification requirements as institutional arbitrators. This is a stricter standard than applies in many jurisdictions, where parties in ad hoc arbitrations have broad freedom to appoint any individual they trust.

The qualification requirements, set forth in Article 14, include:

• Being a Chinese citizen with full civil capacity;
• Having at least eight years of experience in a relevant field (law, economics, trade, etc.) and holding a senior professional title, or having equivalent professional knowledge;
• Being impartial and of good character.

For foreign-related arbitrations, foreign nationals may serve as arbitrators, but they must still meet comparable qualification standards.

These requirements reflect a policy choice to prioritize professionalism and expertise over party autonomy in arbitrator selection. While this may limit flexibility, it also provides assurance of arbitrator quality.

Shortened Annulment Period: Promoting Finality

One of the practical changes in the revised law that will have immediate impact is the shortening of the time limit for applying to set aside an arbitral award. Under the previous law, a party had six months from the date of receiving the award to file an application for annulment. The new Article 72 reduces this period to three months.

This change promotes the finality of arbitral awards and reduces the period of uncertainty for prevailing parties. It aligns Chinese law more closely with international practice, as many jurisdictions have similar or even shorter time limits for post-award challenges.

For parties, this change means that vigilance is required immediately upon receiving an award. Any grounds for challenge must be identified and pursued promptly, as the window for action is now significantly narrower.

Judicial Review: Balancing Supervision and Autonomy

The relationship between courts and arbitral tribunals is a perennial tension in arbitration law. Too much judicial intervention can undermine the efficiency and autonomy that make arbitration attractive; too little can leave parties without recourse against serious procedural irregularities or substantive injustices.

The revised Arbitration Law seeks to strike an appropriate balance. It maintains the grounds for setting aside awards that existed under the previous law, which are relatively narrow and focused on procedural fairness rather than substantive review. Awards may be set aside if:

• There is no valid arbitration agreement;
• The tribunal was improperly constituted;
• The tribunal exceeded its authority;
• There were serious procedural irregularities;
• The award was procured by fraud or coercion;
• The award violates public policy.

The law does not expand these grounds, reflecting a policy of respecting arbitral autonomy and limiting judicial second-guessing of arbitral decisions.

However, the law does clarify certain aspects of judicial review. For example, it specifies that courts should conduct a formal review of arbitration agreements and should not lightly find them invalid. It also provides clearer procedures for courts to follow when reviewing applications to set aside awards, promoting consistency and predictability.

International Alignment and Domestic Innovation

Throughout the revised Arbitration Law, there is a clear tension between the desire to align with international standards and the need to accommodate China’s unique institutional context and policy priorities. This tension is evident in several areas:

• Ad Hoc Arbitration: The law recognizes this international norm but limits its application to specific contexts.
• Arbitral Seat: The law adopts this fundamental concept but removes certain choice-of-law provisions that might have created conflicts with existing legislation.
• Arbitrator Qualifications: The law maintains relatively strict qualification requirements even as it seeks to internationalize the arbitrator pool.

These compromises reflect a pragmatic approach. China is not simply transplanting international norms wholesale, but rather adapting them to fit its legal system and developmental stage. This approach has both strengths and weaknesses. On the one hand, it ensures that reforms are sustainable and compatible with existing institutions. On the other hand, it may limit the extent to which the reforms achieve their stated goals of internationalization and competitiveness.

Implications for Stakeholders

The revised Arbitration Law has significant implications for various stakeholders:

For International Parties

The law makes arbitration in China more attractive and predictable for international parties. The introduction of the seat concept, the recognition of online arbitration, and the clarification of procedural rules all contribute to a more familiar and user-friendly framework. However, international parties should be aware of the limitations, particularly the narrow scope of ad hoc arbitration and the continued emphasis on institutional administration.

For Chinese Arbitration Institutions

The law presents both opportunities and challenges for Chinese arbitration institutions. On the one hand, the overall strengthening of the arbitration framework should enhance the credibility and attractiveness of institutional arbitration in China. On the other hand, the limited recognition of ad hoc arbitration introduces a new form of competition, and institutions will need to demonstrate their value proposition.

For Arbitrators

The stricter disclosure requirements and clearer challenge procedures place greater obligations on arbitrators to maintain independence and impartiality. Arbitrators will need to be more proactive in identifying and disclosing potential conflicts, and more attentive to procedural fairness.

For Courts

The law clarifies the role of courts in supporting and supervising arbitration, but it also limits their involvement in certain respects. Courts will need to develop expertise in applying the new provisions, particularly those relating to the arbitral seat and to the validity of arbitration agreements.

Looking Ahead: Implementation and Evolution

The revised Arbitration Law will take effect on March 1, 2026, providing a transition period for stakeholders to prepare. In the coming months, we can expect:

• Implementing Regulations: The Supreme People’s Court and other authorities will likely issue judicial interpretations and implementing regulations to clarify ambiguous provisions and provide guidance on application.
• Institutional Rule Revisions: Arbitration institutions will need to revise their rules to align with the new law, particularly regarding online proceedings, arbitrator disclosure, and procedural matters.
• Capacity Building: Training will be needed for arbitrators, institutional staff, and judges to ensure effective implementation of the new provisions.

The long-term success of the reforms will depend on how they are implemented in practice. The law provides a framework, but the details will be filled in through judicial decisions, institutional practices, and the accumulated experience of the arbitration community.

Conclusion: A Milestone in China’s Arbitration Journey

The 2025 Arbitration Law represents a milestone in China’s journey to build a world-class arbitration system. It reflects a sophisticated understanding of international best practices, a pragmatic assessment of domestic institutional capacities, and a strategic vision of China’s role in global dispute resolution.

For businesses and legal practitioners, the law offers a more modern, flexible, and predictable framework for resolving commercial disputes. While it may not go as far as some had hoped in embracing international norms, it represents significant progress and positions China as an increasingly attractive venue for arbitration.

As the law takes effect and its provisions are tested in practice, continued dialogue between domestic and international stakeholders will be essential to ensure that China’s arbitration system continues to evolve and improve. The 2025 reforms are not the end of the journey, but an important step forward.