Why the Shanghai International Economic and Trade Arbitration Commission (SHIAC) May Be a Better and More Cost-Effective Option

Arbitration has become an essential method for resolving disputes in international commerce, providing a more flexible and efficient alternative to court litigation. When dealing with commercial disputes involving Chinese companies, one of the key considerations for foreign enterprises is choosing an arbitration body that ensures both fairness and cost-effectiveness. In this context, the Shanghai International Economic and Trade Arbitration Commission, also known as the Shanghai International Arbitration Center (SHIAC), emerges as a particularly advantageous option. Here are three primary reasons why SHIAC may be a superior and more cost-effective choice for foreign enterprises engaged in trade with China.

1. SHIAC’s Strong Reputation and Well-Established Framework

SHIAC is a reputable arbitration institution that has been operating for several decades. It is widely recognized among domestic and international stakeholders for its credibility, professionalism, and efficiency in handling arbitration cases. The center follows international standards and arbitration practices, making it a reliable option for foreign companies unfamiliar with Chinese legal procedures.

A foreign company seeking a neutral, well-respected body to arbitrate a dispute with a Chinese entity can feel confident in SHIAC’s ability to handle complex cases. The institution offers a broad range of arbitrators with expertise across various industries and fields, ensuring that disputes are addressed by professionals who understand the nuances of both the Chinese and international business environments.

2. Easier and More Cost-Effective Enforcement of Arbitration Awards

One of the most critical aspects of arbitration is the ability to enforce an award. In the scenario where a foreign enterprise wins an arbitration case at SHIAC and seeks to enforce the award against a Chinese enterprise, SHIAC provides a more streamlined and cost-effective process. According to Chinese law, if an arbitration award made by a domestic institution like SHIAC is not voluntarily enforced, the winning party can apply to the intermediate court where the losing party is located for enforcement.

This local enforcement process is much more straightforward and less costly than attempting to enforce an award from a foreign arbitration institution. Foreign enterprises save both time and legal fees by working through the established Chinese judicial system, reducing potential roadblocks that may arise when trying to enforce a foreign arbitration award.

3. Challenges for Chinese Companies in Enforcing Foreign Arbitration Awards

In cases where a foreign enterprise loses arbitration proceedings, the situation is reversed, and Chinese companies face considerable hurdles. If a Chinese enterprise wins the arbitration at SHIAC, but the foreign company refuses to honor the award, Chinese companies have no choice but to pursue enforcement through the foreign court system. This can be a lengthy and expensive process, as it requires navigating the legal framework of the foreign jurisdiction, which can involve significant legal fees and delays.

This dynamic makes SHIAC a particularly attractive option for foreign enterprises, as the risk of facing complex and costly foreign legal procedures is minimized. Instead, both parties are working within a Chinese legal framework, which is often more efficient for resolving disputes involving Chinese companies.

Conclusion

For foreign enterprises engaged in business with Chinese companies, SHIAC offers a more practical and cost-effective approach to arbitration. Its strong reputation among domestic and international stakeholders, coupled with the convenience of enforcing awards within the Chinese legal system, makes it an ideal option for resolving disputes. Additionally, by avoiding the complications and expenses associated with enforcing foreign arbitration awards, foreign companies stand to benefit greatly from choosing SHIAC for arbitration proceedings. Overall, SHIAC provides a balanced, reliable, and financially prudent solution for foreign businesses looking to navigate the complexities of the Chinese business environment.

Frequently Asked Questions (FAQ) on the Shanghai International Economic and Trade Arbitration Commission (SHIAC)

1. What is SHIAC? SHIAC, or the Shanghai International Economic and Trade Arbitration Commission, also known as the Shanghai International Arbitration Center, is a reputable arbitration institution in China. It provides a platform for resolving commercial disputes, particularly those involving Chinese and international parties.
2. Why should I choose SHIAC for resolving disputes with Chinese companies? SHIAC is a well-established institution with a strong reputation among domestic and international stakeholders. It follows international arbitration practices and has a wide range of experienced arbitrators across different industries. Additionally, the process for enforcing awards made by SHIAC in China is more straightforward and cost-effective than enforcing foreign arbitration awards.
3. What are the advantages of using SHIAC over foreign arbitration institutions? The primary advantages of using SHIAC include:
   • Easier and more cost-effective enforcement of awards in China.
   • Reduced legal costs and delays associated with international arbitration.
   • Access to arbitrators experienced in Chinese and international business matters.
4. How are arbitration awards enforced in China? If an arbitration award made by SHIAC is not voluntarily enforced, the winning party can apply to the intermediate court where the losing party is located for enforcement. This process is more convenient for foreign enterprises than enforcing a foreign arbitration award.
5. What happens if a foreign company refuses to honor an award made by SHIAC? In the event a foreign company loses the arbitration and refuses to honor the award, the Chinese enterprise will have to apply to a foreign court to enforce the award. This process can be time-consuming and expensive, as it requires navigating the legal system of the foreign jurisdiction.
6. Is SHIAC recognized internationally? Yes, SHIAC is recognized both domestically and internationally as a credible and reliable arbitration institution. It adheres to international arbitration standards and is known for its fair and transparent procedures.
7. What types of disputes can be resolved through SHIAC? SHIAC handles a wide range of commercial disputes, including trade, investment, intellectual property, construction, finance, and other business-related matters. It is particularly suited for disputes involving Chinese enterprises.
8. Can foreign enterprises apply to SHIAC for arbitration? Yes, SHIAC accepts cases involving both Chinese and foreign enterprises. Foreign companies can file for arbitration with SHIAC in the same way as domestic Chinese companies.
9. How long does the arbitration process typically take at SHIAC? The length of the arbitration process depends on the complexity of the case. However, SHIAC is known for its efficiency in resolving disputes in a timely manner compared to traditional court proceedings.
10. Is the arbitration award issued by SHIAC final and binding? Yes, arbitration awards issued by SHIAC are final and binding on both parties. Once the award is issued, the losing party is expected to comply with it. If they do not, the winning party can apply for enforcement through the Chinese courts.
11. How much does arbitration at SHIAC cost? The cost of arbitration at SHIAC depends on various factors, including the complexity of the case, the amount in dispute, and the duration of the arbitration. SHIAC is generally considered more cost-effective compared to foreign arbitration institutions.
12. What happens if both parties do not agree on arbitration through SHIAC? Arbitration at SHIAC, like any other arbitration institution, requires mutual agreement between the parties involved. If the parties do not agree to arbitrate through SHIAC, the case may need to be resolved through other means, such as litigation or another arbitration institution.
13. Can SHIAC arbitrate disputes involving parties from multiple countries? Yes, SHIAC handles international disputes involving parties from multiple countries. It provides arbitration services that adhere to international standards, making it suitable for complex, cross-border commercial disputes.
14. How can I initiate an arbitration case with SHIAC? To initiate an arbitration case, parties need to submit a request for arbitration to SHIAC. The submission should include a description of the dispute, relevant contracts or agreements, and any supporting documentation. The institution will then guide the parties through the arbitration process.
15. Does SHIAC offer online arbitration services? Yes, SHIAC offers online arbitration services, which is particularly useful for parties located in different countries or regions. This option can save time and reduce travel-related costs.