The Overhaul of the People’s Republic of China’s 1995 Arbitration Law: unveiling its ambitions on the world stage
2026 International Arbitration Outlook Uría Menéndez, n.º 16
Historical context: the 1995 Arbitration Law
Before enacting the 1995 Chinese Arbitration Law ('1995 CAL'), the People's Republic of China ('PRC') did not have a unified statutory framework for arbitration involving foreign parties. Instead, arbitration was governed by a patchwork of central government decrees,[1] regulations issued by arbitration authorities,[2] and established practice.
The raison d'être for this fragmented approach is largely historical. Following the proclamation of the PRC in 1949, a succession of political and economic campaigns — most notably (i) the Great Leap Forward (1958-1962); and (ii) the Cultural Revolution (1966-1976) — coupled with Chairman Mao's strict 'self-reliance policy' entrenched a predominantly inward-looking, rather than international, approach. As a result, the PRC had little incentive to develop a legal framework that would require relinquishing sovereignty over trade dispute resolution, whether by offering procedural safeguards to foreign states and entities seeking to trade with China, or by undertaking commitments under international trade agreements.
The PRC's centrally planned economy conferred upon the State a near-total monopoly over trade, production and pricing, thereby excluding private actors from having any meaningful role in commercial activity. This stood in stark contrast to the foundational premise of arbitration: a market-based economic order in which parties — whether state-owned or private entities — operate on relatively equal footing and may, on that basis, submit their disputes to a neutral third party. In the absence of such parity, and where the State unilaterally dictated the terms of all economic activity, there was no compelling reason for the PRC to develop commercial arbitration.
A decisive turning point emerged in 1978 with the introduction of Deng Xiaoping's 'Reform and Opening Up' policy. This marked the beginning of a profound transformation of the PRC's economic model from a centrally planned economy to a socialist market economy. This entailed (i) dismantling agricultural communes; (ii) recognising property rights; (iii) introducing market-oriented pricing mechanisms; and, critically, (iv) opening China's domestic market to foreign trade and investment.[3] It was within this evolving economic landscape that the need for a structured and neutral mechanism for resolving commercial disputes became increasingly apparent.
It was against this backdrop that the 1995 CAL[4] was adopted to “ensure the fair and timely arbitration of economic disputes, protect the lawful rights and interests of the parties concerned, and safeguard the sound development of the socialist market economy". It was, by any measure, a landmark enactment insofar as it established, for the first time, a unified framework for commercial arbitration in the PRC, consolidating previously disparate norms and practices.
To that end, the 1995 CAL incorporated features distinctive to the Chinese legal system. These included a robust supervisory role for state organs (particularly the People's Court) over both the conduct and outcome of arbitral proceedings, and a strict prohibition on arbitrations not directly administered by an authorised arbitration commission, thereby effectively excluding the possibility of ad hoc arbitration.
The 2026 amendment to the 1995 CAL
At the time of the enactment of the 1995 CAL, China's economy was still relatively modest in global terms.[5] In the mid-1990s, its GDP was approximately USD 735 billion, while its total merchandise trade amounted to roughly USD 280 - 330 billion.[6] Although foreign trade had grown substantially in the wake of the Reform and Opening-Up policy, it still accounted for only 2 to 3% of global exports.[7]
However, over the next three decades China underwent a profound economic transformation. By the mid-2020s, its GDP had risen approximately USD 17 trillion, total foreign trade had reached USD 5.9 trillion, and the country accounted for approximately 13% of global exports.[8] This trajectory both drove, and was reinforced by, the internationalisation of Chinese enterprises, many of which have become key actors in global supply chains, infrastructure development and outward foreign direct investment, most notably through initiatives such as the Belt and Road Initiative.
Against this backdrop, the 1995 CAL soon proved inadequate to the demands of contemporary cross-border trade. In effect, it had outgrown its original scope, prompting mounting calls for a more modern and internationally aligned framework for the resolution of commercial disputes.[9]
It was within this context that, following several minor amendments to the 1995 CAL in 2009 and 2017, a public consultation process was initiated in July 2021 with a view to undertaking the most ambitious reform of the 1995 CAL to date.[10] Revised drafts were circulated over the next four years, until, in September 2025, the Standing Committee of the National People's Congress adopted the definitive text of the amended law, which entered into force on 1 March 2026 (“2026 CAL").[11]
The most important modifications under the 2026 CAL are outlined below:
Nomenclature reform
The 2026 CAL replaces the term “arbitration commissions" with “arbitration institutions" to align the terminology of domestic arbitral bodies with international practice. Article 89 of the 2026 CAL clarifies that “arbitration institutions" encompass: “arbitration committees, arbitration courts and other institutions established in accordance with the law".[12]
Appointment of foreign arbitrators
Article 22 of the 2026 CAL introduces the possibility for foreign nationals to be appointed as arbitrators by Chinese arbitration institutions, provided they possess “specialised knowledge in fields such as law, economics and trade, maritime affairs and maritime commerce, or science and technology". This is a notable departure from the PRC's longstanding reticence towards foreign participation in domestic institutional processes.
Online arbitration proceedings
Article 11 of the 2026 CAL establishes that (i) in the absence of any agreement to the contrary, arbitration proceedings may be conducted online; and (ii) such proceedings shall have the same legal effect as those conducted in person.[13]
This is a notable change from the prior regime. While online arbitration was not unheard of before the 2026 CAL, especially within the CIETAC,[14] it required express party agreement to this effect. The 2026 CAL reverses this default position by establishing that online proceedings are permissible unless the parties agree otherwise.
Presumption of existence of an arbitration agreement
Article 27 of the 2026 CAL amends article 16 of the 1995 CAL by introducing a rebuttable presumption in favour of the existence of an arbitration agreement. This presumption may only be displaced by an express objection that is raised prior to the commencement of the first hearing.
See the following comparison:
| 1995 CAL | 2026 CAL |
| Article 16 An arbitration agreement shall include an arbitration clause stipulated in a contract and an agreement to request arbitration reached in other written forms either before or after the occurrence of a dispute. An arbitration agreement shall contain the following elements: (1) An expression of intent to submit the dispute to arbitration; (2) The subject matter of arbitration; (3) The selected arbitration commission. | Article 27 An arbitration agreement shall include an arbitration clause stipulated in a contract and an agreement to request arbitration reached in other written forms either before or after the occurrence of a dispute. An arbitration agreement shall contain the following elements: (1) An expression of intent to submit the dispute to arbitration; (2) The subject matter of arbitration; (3) The selected arbitration institution. Where one party asserts the existence of an arbitration agreement when applying for arbitration and the other party does not deny it before the first hearing, it shall be deemed that an arbitration agreement exists between the parties upon the arbitral tribunal's prompting and recording thereof. |
Modest expansion of arbitral tribunal powers
The 2026 CAL expands arbitral tribunal powers in two principal respects: (i) a limited recognition of the Kompetenz-Kompetenz principle; and (ii) the tribunal's ability to seek third-party assistance in evidence collection.
On the first point, article 31 of the 2026 CAL empowers arbitral tribunals to rule on the validity of an arbitration agreement where a party raises an objection thereto (under the 1995 CAL this power was reserved to the arbitration institution and the competent People's Court). This development is a step towards recognising the Kompetenz-Kompetenz principle. However, such recognition remains limited rather than complete, as the tribunal's authority is not exclusive. Where both the arbitral tribunal and the competent People's Court are seised of the matter, the latter retains priority in determining the validity of the arbitration agreement.
See the following comparison:
| 1995 CAL | 2026 CAL |
| Article 20 Where a party objects to the validity of an arbitration agreement, it may request a decision from the arbitration commission or seek a ruling from the People's Court. Where one party requests a decision from the arbitration commission or tribunal and another seeks a ruling from the People's Court, the matter shall be determined by the People's Court. | Article 31 Where a party objects to the validity of an arbitration agreement, it may request a decision from the arbitration institution or tribunal or seek a ruling from the People's Court. Where one party requests a decision from the arbitration institution or tribunal and another seeks a ruling from the People's Court, the matter shall be determined by the People's Court. |
On the second point, article 55 of the 2026 CAL authorises the arbitral tribunal to collect evidence on its own initiative and, where necessary, request the assistance of relevant authorities. This constitutes a meaningful expansion of the corresponding provision under the 1995 CAL, which recognised only the tribunal's power to collect evidence on its own initiative, without expressly contemplating the possibility of enlisting external assistance for that purpose.
See the following comparison:
| 1995 CAL | 2026 CAL |
| Article 43 The parties shall furnish evidence in support of their claims. Where the arbitral tribunal deems it necessary to collect evidence, it may do so on its own initiative. | Article 55 The parties shall furnish evidence in support of their claims. Where the arbitral tribunal deems it necessary to collect evidence, it may do so on its own initiative; where necessary, it may request the assistance of relevant authorities in accordance with the law. |
Ante causam interim measures
Article 39 of the 2026 CAL introduces the possibility for parties to apply for interim measures — including asset preservation, orders to perform certain acts, and orders to cease certain conduct — on an ante causam basis (i.e. prior to the filing of an application for arbitration); a mechanism absent from the 1995 CAL.
This type of applications must be submitted to the People's Court, which is required to handle requests for interim measures in a timely manner.
Shortened time limit to set aside arbitral awards
Article 59 of the 1995 CAL afforded parties a period of six months from the date of receipt of the arbitral award to file a set-aside application before the competent court.[15] Article 72 of the 2026 CAL reduces this period to three months.[16]
Given that post-award proceedings often entail significant direct and indirect costs, the shortening of the time limit to challenge awards is a clear incentive for parties seeking a swift final resolution to disputes.
Foreign disputes: seat of arbitration
The 2026 CAL introduces, for the first time, the concept of “seat of arbitration".
Under the former rules, the applicable arbitration law was determined on a purely territorial basis: any arbitration physically conducted within the PRC was governed by the 1995 CAL, irrespective of the parties' intentions or the international nature of the dispute. Article 81 of the 2026 CAL departs from this framework by adopting a seat-based approach whereby the lex arbitri is now determined by the parties' chosen seat of arbitration.
This reform aligns Chinese arbitration law more closely with the widely adopted UNCITRAL Model Law and signals an effort to enhance doctrinal familiarity for the international arbitration community.
Ad hoc arbitration: limited recognition
Under the previous framework, a notable asymmetry existed with regard to ad hoc arbitration. Following the PRC's accession to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in January 1987, foreign ad hoc arbitral awards could be recognised and enforced within China; yet, paradoxically, the 1995 CAL prohibited domestic ad hoc arbitration proceedings.
Article 82 of the 2026 CAL partially addresses this inconsistency by recognising domestic ad hoc arbitration, albeit in two narrowly defined cases: (i) foreign-related maritime disputes; and (ii) foreign-related disputes between enterprises registered within Free Trade Zones, the Hainan Free Trade Port, or such other areas as may be designated by the State Council.[17]
Domestic administration of investor-state disputes
Article 94 of the 2026 CAL expressly recognises the competence of arbitration institutions and arbitral tribunals to administer international investment arbitration proceedings in accordance with the arbitration rules agreed upon by
the parties.
This provision is significant in that it extends the jurisdictional reach of Chinese arbitration institutions and tribunals to encompass investor-state disputes, thereby broadening the range of available forums for the resolution of disputes arising under the PRC's bilateral investment treaties. That said, the practical uptake of this mechanism will likely depend on the extent to which foreign investors perceive Chinese arbitration institutions as sufficiently neutral and independent, particularly when compared with established alternatives such as the International Centre for Settlement of Investment Disputes and the Permanent Court of Arbitration.
What is next for international arbitration in China?
The 2026 CAL represents a significant departure from the PRC's historically protectionist and insular arbitration framework, marking a cautious yet deliberate move towards internationally harmonised standards.
Yet, for all the ambition underpinning the reform, the way in which certain amendments have been introduced cannot be overlooked. Taken as a whole, they suggest that the 2026 CAL is best understood as a controlled pilot initiative, designed to test the feasibility of a calibrated reduction in regulatory oversight and in the dominance of domestic institutions, in exchange for greater alignment with international norms and enhanced procedural transparency.
However, for a country long characterised by prudence and discretion, the signal is unmistakable: China is positioning itself to compete for the coveted status of a forum of choice for the resolution of international commercial disputes.
The timing of this reform is unlikely to be coincidental and may be attributed to two converging factors. First, China's sustained economic expansion over the past three decades has rendered the prior arbitration framework ill-suited to its current needs. Second, and not least, this reform comes at a time in which major trading nations have, due to the vagaries of geopolitics, experienced a relative contraction in their share of global exports — thereby creating space within the international commercial landscape that China is poised to fill.
If our assessment proves to be accurate, its logical corollary would be a gradual further relaxation of the conditions governing arbitral proceedings in China — whether ad hoc or institutional — as well as a more liberal approach to the recognition and enforcement of arbitral awards.
China's transition from the “world's manufacturer" to a potential leading arbitral forum may only just be beginning.
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[1]. Governmental Decree of 6 May 1954 by means of which the Foreign Trade Arbitration Commission was created which, under the guidance of the China Council for the Promotion of International Trade, was entrusted with administering foreign trade disputes regarding specific contractual matters
[2]. China International Economic and Trade Arbitration Commission ('CIETAC') rules (1956)
[3]. ASEAN+3 Macroeconomic Research Office. (AMRO). China's reform and opening-up: Experiences, prospects, and implications for ASEAN. (2019)
[4]. China Arbitration Act (adopted 31 August 1994, promulgated by Presidential Order No. 31 on 31 August 1994, effective 1 September 1995)
[5]. For reference, although China's GDP (USD 735 billion) was roughly one-tenth that of the United States, it already ranked as the world's eighth-largest economy, just ahead of Spain (in ninth place). World Integrated Trade Solution (WITS), 'GDP by Country, in Current US$ 1995–1999'
[6]. Countryeconomy.com, 'China GDP – Gross Domestic Product 1995'
[7]. AMRO, China's Reform and Opening-Up (no. 3).
[8]. State Council of the People's Republic of China, 'China Ranks First in Driving World Economic Growth from 1979 to 2023' (1 October 2024)
[9]. A. Ware, T. Gao and G. Yang, 'Proposed Amendments to the PRC Arbitration Law: a Panacea?', Kluwer Arbitration Blog (9 September 2021)
[10]. Ministry of Justice of the People's Republic of China, Notice of Public Solicitation of Comments, (30 July 2021)
[11]. Arbitration Law of the People's Republic of China (12 September 2025)
[12]. 2026 CAL, Art 89: Arbitration commissions, arbitration courts and other institutions established in accordance with the law.
[13]. 2026 CAL, Art 11: Arbitration proceedings may be conducted online via information networks, except where the parties expressly disagree. Arbitration proceedings conducted online via information networks shall have the same legal effect as offline arbitration proceedings.
[14]. China Council for the Promotion of International Trade/China Chamber of International Commerce, 'China International Economic and Trade Arbitration Commission Online Arbitration Rules' (adopted 8 January 2009, effective 1 May 2009)
[15]. 1995 CAL, Art 59: A party seeking to set aside an award shall file its application within six months of receiving the award.
[16]. 2026 CAL, Art 72: A party seeking to set aside an award shall file its application within three months of receiving the award.
[17]. The latter merely crystallises a long-running pilot initiative that began in 2016 with the issuance of the 'Opinions of the Supreme People's Court on Providing Judicial Guarantee for the Development of Free Trade Zones'. LexChina, 'Ad Hoc in the PRC: the Cautious Embrace of Flexible Arbitration in China's Legal Reforms', LexChina (26 September 2025)