A Snapshot of Arbitration in China . . . And the Strange Case of Dr. Wang

by Hongwei Shang on May 9, 2008

in Alternative Dispute Resolution

By Ashby Jones

The leading Chinese arbitration organization, CIETAC, has made big strides in the last 20 years in an attempt to ensure that Beijing or Shanghai are places westerners feel comfortable arbitrating. But according to many western lawyers, the organization still has a ways to go.

Among the issues worrying to western companies is that the method for paying arbitrators is less transparent under CIETAC than it is under the predominant western systems. Pay for the arbitrators under CIETAC pay among arbitrators on a case can vary widely, often with western arbitrators making more. This can cause suspicion and resentment.

Wang Chengjie, CIETAC’s deputy secretary-general, resents any implication that that would make Chinese arbitrators less fair in their decisions. “Chinese salary levels are lower. But that does not mean we are irresponsible in our work.”

One case that has caused anxiety among western lawyers, though the arbitrations themselves were conducted on neutral ground, concerns two linked disputes between PepsiCo and a Chinese bottler. PepsiCo had agreed to resolve disputes with the partner through arbitration in Stockholm.

One of the three arbitrators, selected by PepsiCo, was at the time the head of CIETAC, Wang Shengchang (pictured). The Chinese company picked a Chinese arbitrator. The lead arbitrator was Swedish. Wang and the Swedish arbitrator voted for PepsiCo in both cases; the Chinese arbitrator sided with the Chinese party in both.

In March 2006, Dr. Wang was apprehended outside CIETAC’s Beijing headquarters. He has been detained ever since, and is currently awaiting trial in a Tianjin court, according to an official there. The charges against him allege financial impropriety within CIETAC, but people in the arbitration community have feared something else was at work. “It would be . . . more than disappointing if Dr. Wang were arrested and detained in prison for not deciding these two awards in favor of the Chinese parties,” said V.V. Veeder, a prominent British arbitrator, in a 2006 speech at a Dallas workshop presented by the Institute for Transnational Arbitration. “It would strike a malign blow to international arbitration everywhere.”

Wang Chengjie of CIETAC said he doubts Wang Shengchang was detained because of his decision in the PepsiCo case. “There are so many arbitration cases where the Chinese side loses,” he says.

Meanwhile, PepsiCo has yet to recover on the judgment — a figure a PepsiCo spokesman puts in the low millions of dollars and other individuals familiar with the case say approaches $100 million.

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