The situation: A foreign company signs a contract with a Chinese partner and they subsequently face a dispute relating to non-fulfillment of contractual obligations.
Applicable law: Arbitration Law (1994): arbitration requires prior agreement in the contract or subsequently. Main arbitration bodies: CIETAC (China International Economic and Trade Arbitration Commission), BAC (Beijing Arbitration Commission). Advantages of arbitration: confidentiality, faster decisions (6-18 months vs 1-3 years for litigation), possibility of choosing foreign substantive law. International arbitration awards are recognised in China under the New York Convention.
Typical outcome: Small disputes tend towards local arbitration, while large or complex disputes go to CIETAC or international arbitration courts.
📑 Commercial cases · Awareness case
Resolving Commercial Disputes in China — Arbitration or Litigation? · Yalla China
🤝 Governing law: 人民调解法 / People's Mediation Law 2010; 仲裁法 / Arbitration Law 1994
A foreign company in a commercial dispute with a Chinese partner. What is the difference between arbitration and litigation and when is each preferable?
Illustrative, general educational examples — not real specific facts and not legal advice; for awareness only. For an actual situation, consult a licensed lawyer.
🎓 The lesson / takeaway
Lesson: Include in every commercial contract a clear dispute resolution clause specifying the arbitral body, the applicable law and the place. This clause determines the entire path of the dispute later.
🕒 Updated: 16 March 2026