'It shows the Chinese authorities have taken into account feedback from foreign investors and local and foreign arbitration practitioners,' he said.

For foreign companies, arbitration was becoming an increasingly popular form of settling disputes instead of going to court because of the cross-border recognition of arbitration awards in more than 130 countries, said Mr Chow.

In contrast, for example, a US company that won a court case at home against a Chinese company might not be able to claim assets on the mainland because US judgments were not recognised there, he said.

In a typical arbitration, each party appoints an arbitrator, while a third is appointed by common agreement. The arbitration tribunal arrives at a judgment - or award - by majority decision.

While China had more than 170 arbitration agencies, the China International Economic and Trade Arbitration Commission was the main one for foreign companies and the world's busiest, said Mr Chow.

In 2003, it handled 709 cases, including 422 international cases. Among the new rules, parties will be able to appoint arbitrators from outside the commission's own panel, including those from their own countries.

'Not allowing non-CIETAC arbitrators has long been a common complaint from foreign businesses. Most major arbitration centres in the world give parties a free hand in appointing their own tribunal, while China was a major exception,' said Mr Chow, adding that the quality of the commission's arbitrators varied.

The arbitration period will be shortened from nine months to six months. The new rules will also require the dissenting arbitrator to attach his opinion on the judgment. This would act as a check on majority arbitrators and prevent them from making judgments without proper basis, said Mr Chow.

The authorities were committed to bringing mainland arbitrations in line with international standards, including those of Hong Kong, and they had been improving over the years, Mr Chow said.

The worries some foreign companies had about the impartiality of mainland arbitration was not justified, as the record showed foreign parties had a decent chance of getting a fair and favourable outcome, he said.

In 2001 in Beijing, the majority of arbitration cases were won by foreign firms, the commission said. However, even with the new rules, the long-standing difficulty of enforcing awards in China would remain, Mr Chow said.

Local protectionism often results in long delays and difficulties in obtaining assets in China, according to a paper by Randall Peerenboom of the UCLA School of Law.

He cited a case of a Hong Kong party that tried to enforce an award by the commission for US$400,000 against a state-owned enterprise. Chinese officials refused to let the court seize the assets - equipment sold by the Hong Kong firm to the state-owned firm - as it would result in the mainland company's closure. As a result, the Hong Kong firm recovered only US$20,000.

As a sign that Chinese arbitration has a long way to go before achieving fairness and independence, Wang Sheng Chang, the commission's secretary-general, last year called on authorities to 'interfere less with arbitration in order to respect the parties' autonomy'.

Talking it over

Foreign companies favour arbitration over the court system

The main panel for foreign firms handled 709 cases in 2003

Its caseload makes it the world's busiest arbitration commission