On 12 September 2025, the Standing Committee of the 14th National People’s Congress passed the revised Arbitration Law of the PRC, taking effect on 1 March 2026. This is the first substantial revision of the Arbitration Law since its enactment in 1994. The most significant breakthrough is the formal introduction of ad hoc arbitration.
Chinese enterprises engaged in foreign-related transactions now have a third option alongside institutional arbitration and court litigation — more flexible, more autonomous and more cost-controllable, but with higher demands on contract drafting.
I. What Has Changed
Article 82 of the revised Arbitration Law provides:
Where parties agree in writing to arbitrate foreign-related maritime disputes, or foreign-related disputes between enterprises registered in pilot free trade zones approved by the State Council, in the Hainan Free Trade Port, or in other regions specified by the State, they may select an arbitration institution; or they may choose to have the dispute resolved with the PRC as the seat, by a tribunal composed of persons meeting the conditions of this Law, in accordance with agreed arbitration rules.
In plain terms: enterprises registered in a FTZ, or parties to foreign-related maritime disputes, may now resolve disputes through a self-constituted tribunal without going to an arbitration institution.
Three hard requirements apply:
- Foreign-related dispute. Foreign counterparties, subject matter abroad, or agreed foreign governing law all qualify.
- PRC seat. Domestic ad hoc arbitration must be seated in the PRC.
- Filing requirement. Within three working days after the tribunal is constituted, the tribunal must file with the China Arbitration Association.
II. Why Ad Hoc Arbitration
Flexibility. Institutional arbitration follows the institution’s rules and fixed procedure. Ad hoc arbitration is fully tailorable, suiting confidential disputes (e.g. trade secret matters) where parties prefer to keep institutional personnel uninvolved.
Cost. Institutional arbitration charges acceptance, handling and venue fees. Ad hoc proceedings need only cover arbitrator remuneration and reasonable expenses. A case worth RMB 50 million might attract close to RMB 1 million at certain institutions; ad hoc may cost only a fraction.
Free choice of arbitrators. Institutional panels are typically drawn from the institution’s roster. Ad hoc parties may appoint the world’s leading experts in the relevant industry, provided statutory conditions are met.
International recognition. New York Convention awards include ad hoc awards; enforcement is available in more than 150 contracting states — significant for cross-border transactions.
But ad hoc arbitration also has clear weaknesses.
Procedural fragility. Without an institution to backstop the procedure, everything depends on the clause. A poorly drafted clause, or an uncooperative party stalling appointment, can derail the entire process.
High professional demands. Parties must understand arbitral procedure and have professional counsel.
Limited scope. At present, the regime extends only to foreign-related maritime disputes and foreign-related disputes between enterprises within FTZs and similar pilot regions. Ordinary domestic commercial disputes remain out of scope.
III. Drafting Ad Hoc Clauses: Five Templates
Type 1 — International Sale of Goods
Any dispute arising out of or in connection with this Contract shall be finally settled by ad hoc arbitration. The parties confirm that the Contract has foreign-related elements and meets the conditions for ad hoc arbitration under the Arbitration Law of the PRC.
The seat shall be Xiamen, PRC. The arbitration shall be conducted under the UNCITRAL Arbitration Rules (2013 revision). The language shall be Chinese.
The tribunal shall consist of three arbitrators. The claimant and the respondent shall each appoint one arbitrator within 30 days of receipt of the notice of arbitration; the two co-arbitrators shall jointly designate the presiding arbitrator within 15 days of their appointment. Failing appointment, the Secretary-General of CIETAC shall designate.
The presiding arbitrator shall have at least 10 years of international trade arbitration experience.
Within three working days of constitution, the tribunal shall file the parties, seat, composition and rules with the China Arbitration Association.
Applications for property preservation or evidence preservation shall be submitted by the tribunal to the competent people’s court in Shanghai.
The award shall be final and binding.
Notes. UNCITRAL rules are internationally familiar; a recognised institutional officer provides a credible default-appointing authority.
Type 2 — Maritime Carriage
Similar structure, but adopt the China Maritime Law Association Ad Hoc Arbitration Rules (2022) and require arbitrators with maritime-law or shipping-practice background; default appointment by the Chairman of CMAC; preservation applications routed to the Shanghai Maritime Court (for ship arrests in particular).
Type 3 — Overseas Construction Contracting
UNCITRAL rules; language English (Chinese available as needed); 45-day appointment window to permit specialist arbitrators; presiding arbitrator with 15+ years’ international construction-dispute experience and of neutral nationality; default appointment by the FIDIC Chairman; governing law of the place of performance; technical expert appointment expressly permitted.
Type 4 — Technology Licensing/Transfer
UNCITRAL rules; arbitrators with IP-law or technology background; presiding arbitrator with 10+ years’ IP dispute-resolution experience; default appointment by the Director of the WIPO Arbitration and Mediation Center; strict confidentiality undertakings from all participants; preservation/injunctive relief applications routed to the Shenzhen Intermediate People’s Court.
Type 5 — FTZ Enterprises
Express recital confirming registration in the FTZ and meeting Article 82 conditions; adopt locally promulgated ad hoc rules where available (e.g. the Shanghai Arbitration Association Ad Hoc Arbitration Rules 2024) for smoother interface with local courts; PRC law governing; preservation applications to Shanghai courts.
IV. Five Recommendations for Chinese Enterprises
1. Confirm eligibility. Not every contract qualifies. The two threshold questions — FTZ enterprise? foreign-related element? — must be answered.
2. Use mature rules. Adopt UNCITRAL rules or promulgated local ad hoc rules; avoid bespoke rules.
3. Provide a default appointing authority. This is the most commonly omitted and most fatal drafting error. If the other side declines to appoint and there is no default mechanism, the procedure stalls. Designate a head of a respected arbitration institution or international organisation.
4. Build in the filing obligation. The three-day filing with the China Arbitration Association is a statutory duty.
5. Engage counsel up front. Templates are not enough; design depends on sector, deal structure and counterparty.
V. Common Misconceptions
- “Ad hoc means free.” It saves administrative fees, but arbitrator remuneration, venue and translation must still be paid.
- “Ad hoc is unsupervised.” Curial review still applies; awards are filed, preservation runs through the courts, and parties may apply to set aside.
- “All foreign-related contracts qualify.” Currently limited to foreign-related maritime disputes and foreign-related disputes between FTZ-based enterprises.
- “Ad hoc is always faster.” Without an institution to drive timelines, lack of cooperation can lengthen proceedings.
- “Ad hoc may be seated abroad.” Domestic ad hoc must be seated in the PRC.
VI. What to Do Before 1 March 2026
For contracts being signed now, a phased clause may be used: “This clause shall take effect on the effective date of the revised PRC Arbitration Law (2025 Revision). Disputes arising before that date shall be submitted to [institution] for institutional arbitration under its rules.” This preserves both immediate enforceability and the future option of ad hoc arbitration.
VII. The Drafting Matters
The introduction of ad hoc arbitration gives Chinese enterprises a meaningful new option in cross-border contracting. Whether that option pays off turns on clause design. A well-drafted clause unlocks flexibility, efficiency and economy; a poorly drafted one can stall the proceedings, or render a hard-won victory unenforceable.
A nobody-wants-to-litigate, but if a dispute arises, a well-crafted clause is the best weapon you have.
This article is for reference only and does not constitute legal advice.