Unlike litigation, which derives its authority from the coercive power of the state, arbitration relies on the neutrality and expertise of the tribunal and, crucially, the integrity of those who participate in it. The 2025 revision of China’s Arbitration Law introduces explicit provisions on good faith and the prohibition of sham arbitration, formally enshrining the principle of good faith as a cornerstone of Chinese commercial arbitration and aligning it with prevailing international norms.
Global practice
Ren Kaiyu
Deputy Director
Business Department
Langfang Arbitration Commission
Tel: +86 316 233 0095
E-mail:
rky@lfac.org.cn
In international arbitration, the principle of adverse inference, drawing negative conclusions when a party unjustifiably refuses to disclose evidence, is widely applied. This doctrine imposes a procedural duty of good faith on the parties. Articles 9.6 and 9.7 of the International Bar Association Rules on the Taking of Evidence codify this standard. Yet tribunals do not invoke adverse inference automatically. They examine both parties’ conduct carefully. To justify such an inference, the defaulting party must have breached its duty of good faith, while the requesting party must have acted honestly and co-operatively during proceedings.
In ConocoPhillips v Venezuela, the tribunal declined to draw an adverse inference, finding that both sides were bound by confidentiality agreements that prevented disclosure of negotiation records. Therefore, it cannot be concluded that the undisclosed party made false statements during the contract negotiations. The case shows that tribunals approach good faith with caution, weighing both parties’ conduct before drawing any adverse inference.
Beyond governing the behaviour of parties, good faith also guides arbitrators and the reasoning behind their awards. Systems such as amiable composition, along with frameworks such as the UN Commission on International Trade Law’s Model Law on International Commercial Arbitration and the International Chamber of Commerce’s Arbitration Rules, embody this principle. Each allows arbitrators to decide cases based not solely on strict legal formalism but also on notions of equity, fairness and honest dealing, standards that demand both professional competence and ethical judgment.
The London Court of International Arbitration goes further. Article 14.2 of its rules states that “at all times, the parties shall act in good faith and make every reasonable effort to ensure fair and efficient conduct of the arbitration, including the fulfilment of the tribunal’s general duties.”
Judicial oversight reinforces this ethos. The high court in London set aside the award in Nigeria v Process & Industrial Developments Ltd after finding it had been procured by fraud. In Contax Partners Inc BVI v Kuwait Finance House, the court similarly refused enforcement on the grounds that the award was fabricated. These rulings highlight a shared international conviction that the legitimacy of arbitration ultimately depends on a foundation of honesty, fairness and good faith.
China’s approach
As a fundamental principle of civil law, good faith also serves as a basic value in Chinese arbitral practice. Arbitral tribunals in China regard it as a guiding norm of conduct, while several institutions have gone further by translating this abstract concept into concrete procedural rules.
For example, article 2(5) of the Langfang Arbitration Commission Arbitration Rules (2025) extends the scope of the good-faith obligation beyond the parties to include both the arbitral institution and the tribunal itself. It requires institutions to avoid abusing their case management authority and arbitrators to make full disclosures of potential conflicts of interest, with the ultimate goal of resolving disputes fairly and efficiently.
In practice, the principle of good faith most commonly applies in three areas: the validity of arbitration agreements, document disclosure and the advancement of arbitral proceedings.
Good faith in confirming the validity of arbitration agreements. An arbitration agreement is, at its core, a contract reflecting the parties’ mutual intent. Accordingly, parties are expected to enter into and perform such agreements in good faith and on an equitable basis. When challenging or invoking the validity of an arbitration clause, they must not abuse procedural rights, such as filing jurisdictional objections in bad faith.
Tribunals may take a party’s conduct into account when deciding how to allocate arbitration costs. In one case before the Langzhong Arbitration Commission, the claimant’s claims were entirely dismissed, yet the tribunal ordered the respondent to bear all arbitration fees, finding that it had deliberately exploited the process of confirming the arbitration agreement’s validity to create procedural obstacles.
Good faith in document disclosure. Evidence is central to any arbitral decision and parties have a duty to co-operate with the tribunal’s fact-finding process. Concealing key documents, submitting false evidence or making misrepresentations amounts to bad faith conduct, which can lead to an adverse outcome or even the annulment of the award. In one case, a government bureau withheld information about rental reduction policies and the related agreement, both of which were essential to determining the facts. The concealment was deemed to have seriously impaired the fairness of the proceedings and the award was subsequently set aside.
Good-faith co-operation in advancing arbitral proceedings. The principle of good faith requires parties to co-operate in the conduct and advancement of arbitral proceedings and to comply with the tribunal’s procedural arrangements. In cases administered by the Langzhong Arbitration Commission, it has been observed that some parties attempt to delay proceedings by exploiting tribunal formation rules. For instance, where multiple respondents are involved, one party may request an extension of time to appoint an arbitrator on the grounds that consensus among co-respondents cannot be reached, or by filing challenges without merit or manufacturing grounds for an arbitrator’s recusal to delay the proceedings.
During the tribunal-formation process, Langzhong Arbitration ensures that both parties and the appointed arbitrators have an opportunity to express their views, while also taking into account whether each party has acted in good faith. The Supreme People’s Court involving Zhang Lan shows that Chinese courts do not support conduct inconsistent with the principle of good faith.
Good-faith conduct underpins the legitimacy and credibility of arbitration. At the case acceptance stage, institutions should implement risk screening and good-faith commitment mechanisms. They should pay special attention to mass filings or related party disputes, require parties and counsel to sign a good-faith undertaking, and clarify the legal consequences of dishonest conduct, thereby promoting good-faith participation in arbitration.
Bad-faith acts, such as procedural delay or misrepresentation, should be challenged, and tribunals should examine evidence carefully to prevent the abuse of procedural rights and address sham arbitration.
Ren Kaiyu is the deputy director of the business department of the Langfang Arbitration Commission. She can be reached by phone at +86 316 233 0095 or by email at rky@lfac.org.cn.
