The 17th Session of the 14th Standing Committee of the National People’s Congress has passed a comprehensively revised Arbitration Law. Enacted on 12 September 2025 and effective from 1 March 2026, this marks the first comprehensive overhaul of the 1994 law, introducing significant breakthroughs for foreign-related and ad hoc arbitration.
Seat of arbitration
The new Arbitration Law introduces, for the first time, the concept of the “seat of arbitration” and uniformly adopts the term “arbitral institution” in place of the previous “arbitration commission”. It also allows eligible overseas arbitration institutions to operate in designated areas, including pilot free-trade zones for international cases.
Shen Peng
Partner
Guantao Law Firm
Tel: +86 186 1810 6591
E-mail: peng.shen@guantao.com
The legal concept of the “seat of arbitration” is central to international arbitration, determining the legal nationality (or lex arbitri) of an award, as distinct from the mere physical venue of hearings. This principle underpins both the UN Commission on International Trade Law’s Model Law on International Commercial Arbitration and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). As per article V(1) of the latter, non-compliance with the procedural law of the seat is a recognised basis for refusing the recognition and enforcement of an arbitral award.
Under the former Arbitration Law, the applicable procedural law and the nationality of an award are determined by the “location of the arbitral institution”, as the statute did not define the “seat of arbitration”. This approach revealed limitations as China sought to internationalise its arbitration regime: firstly, the physical hearing proceedings may not take place at the institution’s domicile; secondly, the model was incompatible with ad hoc arbitration; and third, it risked conflict with international norms, potentially triggering jurisdictional challenges during recognition and enforcement proceedings.
The evolution of judicial practice in China shows a growing acceptance of the “seat of arbitration” principle. Landmark cases illustrate this shift. In Brentwood Industries v Guangdong Fa-anlong Mechanical Equipment Manufacture et al (2015), the Guangzhou Municipal Intermediate People’s Court classified an award made in Guangzhou by the International Chamber of Commerce’s (ICC) International Court of Arbitration as a Chinese foreign-related award, mandating enforcement under Chinese law and not subject to review under the New York Convention.
Eva Zhou
Partner
Guantao Law Firm
Tel: +86 138 1915 7811
E-mail: zhouwn@guantao.com
This position was later cemented by the Beijing Municipal No. 4 Intermediate People’s Court in China First Heavy Machinery v Aktiebolaget Sandvik Materials Technology (2021). The court declared that an award issued by a Swedish institution in China must be treated as a Chinese foreign-related award and examined under Chinese law.
China’s new Arbitration Law has institutionalised the concept of the “seat of arbitration” at a statutory level. Additionally, article 86(2) grants explicit permission for overseas arbitral institutions to establish a presence and undertake foreign-related arbitration in designated areas, including pilot free-trade zones and the Hainan Free Trade Port, subject to State Council approval. This provides a statutory basis for practices initiated circa 2015, where leading international institutions such as the Hong Kong International Arbitration Centre and the ICC International Court of Arbitration entered the Chinese market via the China (Shanghai) Pilot Free Trade Zone.
By introducing the “seat of arbitration”, broadening the definition of arbitral institutions and opening designated market segments, the new Arbitration Law significantly enhances the international compatibility and practical flexibility of China’s arbitration system.
Ad hoc arbitration
Article 82 of the new Arbitration Law establishes, for the first time, a limited ad hoc arbitration regime at the statutory level. It permits parties to specific categories of foreign-related disputes to opt for arbitration by a duly constituted arbitral tribunal pursuant to agreed rules, supported by a filing mechanism and access to court-ordered interim measures.
Ad hoc arbitration long lacked recognition in China. Although China, as a signatory to the New York Convention, is obligated to recognise and enforce ad hoc awards from other contracting states, its 1994 Arbitration Law only institutionalised administered arbitration. This created a divergence between its domestic system and its international commitments.
This divergence has been progressively reconciled through judicial interpretations. A significant step came in 2015 with article 543 of the Supreme People’s Court’s Interpretation on the Application of the Civil Procedure Law, which delineated the process for giving effect to foreign ad hoc awards. Further opening was achieved in 2016 when the Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones set forth the “Three Specifics” rule, thereby affording ad hoc arbitration limited judicial recognition under specified conditions.
Article 82 of the new Arbitration Law marks a transition from judicial pilot schemes to formal legislation. It permits ad hoc arbitration for foreign-related maritime disputes and for foreign-related disputes between enterprises registered in designated zones such as the Pilot Free Trade Zones and the Hainan Free Trade Port.
The design of this system reflects three key characteristics. Firstly, its scope is intentionally limited, initially applying only to the above-mentioned scenarios, reflecting a cautious legislative approach. Secondly, it balances party autonomy with judicial support, allowing parties to agree on rules and tribunal composition while enabling courts to provide interim measures. Third, it integrates with the existing legal framework through mechanisms such as the “seat of arbitration”, bringing ad hoc awards within the current system for judicial review.
Conclusion
The enactment of the new Arbitration Law signifies a major milestone in the modernisation and internationalisation of China’s arbitration system. It not only consolidates lessons learned from three decades of arbitration practice but also represents a strategic response to the evolving global landscape of dispute resolution. Its significance extends far beyond legislative reform, impacting China’s influence and competitive standing in the international dispute resolution arena.
Shen Peng is a partner at Guantao Law Firm. He can be contacted by phone at +86 186 1810 6591 and by email at peng.shen@guantao.com
Eva Zhou is a partner at Guantao Law Firm. She can be contacted by phone at +86 138 1915 7811 and by email at zhouwn@guantao.com
Zhang Chuyao, an associate at the firm, also contributed to this article.
