China’s arbitration ‘sore spot’ holding up shipbuilding ambitions amid growing need for rules
- China is a world leader in terms of shipbuilding capacity and trade volume, but it is seen to lag behind in terms of services surrounding the industry, including arbitration
- Demand is being driven by the Maritime Silk Road, which is the sea route part of China’s Belt and Road Initiative
As China looks to cement its place as the world’s largest shipbuilder, a fully functional dispute resolution process remains a particular “sore spot” amid Beijing’s soft power shift and push for a Maritime Silk Road, industry insiders said.
China is a world leader in terms of shipbuilding capacity and trade volume, but it lags far behind in services surrounding the industry despite a surge in demand, said Zhang Shouguo, executive vice-president of the China Shipowners’ Association, on Wednesday at the China International Import Expo in Shanghai.
Amid China’s transformation from a major economy to a strong economic power, insurance, consulting and finance services are essential, but arbitration remains “a particular sore spot” as it seeks to catch up with the likes of Singapore, New York and London, he added.
“What did we care about previously? It was how many ships came to register in China, and how much our throughput had increased … but now we need to focus on soft power,” he said.
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Authorities have vowed in recent years to build China into a new destination for international arbitration, and Shanghai, as one of the world’s main shipping hubs, into a centre in the Asia-Pacific region to rival Hong Kong.
It also transports nearly 40 per cent of the world’s total sea cargo, according to Zhang Shouguo.
Demand for arbitration has expanded as the shipping industry encountered significant ups and downs in the past few years, leading to an increase in disputes, Zhang Ye, president of the Shanghai Shipping Exchange, also told Wednesday’s forum in Shanghai.
This means increasing economic exchange, bigger possibility of conflicts, and growing needs for rules
A shortage of empty containers last year, as well as a slump in container demand this year, both led to a rise in breaches of contracts, Zhang Ye added, providing an example of a leading international freight forwarder which has 100 cases to tackle every year.
The demand is also being driven by the Maritime Silk Road, which is the sea route part of China’s Belt and Road Initiative – Beijing’s plan to enhance trade links with the world and expand its global influence.
“This means increasing economic exchange, bigger possibility of conflicts, and growing needs for rules,” Zhang Ye said.
Due to a lack of understanding and confidence in China’s judicial and arbitration systems, many foreign-funded enterprises and also many domestic firms have chosen to apply British law and seek arbitration in London when signing contracts or after disputes occur.
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China set up its first professional arbitration institution for maritime disputes, the China Maritime Arbitration Commission, in 1959, and has built “a certain level of influence in and outside China”, according to Chen Bo, its deputy secretary general.
Calling it an “internationally-acknowledged institution” that has dealt with nearly 10,000 cases, Chen told the forum that “a quite high proportion – about 50 per cent – of the cases we have handled involved foreign companies”.
The commission has more than 800 registered arbitrators, including 122 from overseas, covering cases in over 360 countries and regions.
“We’ve also particularly chosen arbitrators from [Belt and Road Initiative] countries to join our team,” she added.
