New opportunity of Arbitration

  for multinational companies in China



By Siying Yao

SKEMA Business School

Paris, France



As there is more and more international business in China, a dispute is inevitable to happen because of unfamiliar with local law and culture. It is important to choose an appropriate dispute resolution. With the absence of right resolution, there would lead to big cost, wasting time and even, breaking the business relationship. So far, many companies solve the dispute through arbitration. Nevertheless, it is inefficient to a certain extent. This paper answers why inefficient arbitration is in China. With the application of the MADM method, it suggests an alternative solution of mediation-arbitration hybrids which ultimate the efficiency of arbitration, ensuring the fairness and maintaining the business relationship. This recommendation considers the benefit of both parties.

Key words: ADR, dispute in China, multinational business dispute, arbitration, hybrids resolution, opportunity>


Over the past few years, China has been one of the fastest developing countries. It has a great impact on the economics of all countries around the world. Plus, with the announcement of “The Belt and Road initiative” recently, there will be more and more business opportunity in China. However, when a foreign company does business in China, it is inevitable to meet dispute problems because of the unfamiliar of country laws and cultural awareness. According to the Arcadis global construction disputes report, we knew that dispute issues were increasing globally on both the cost of time and money. If a dispute takes a long time and is costly to solve, it is not efficient for business development neither benefit.

There is four main type of Alternative dispute resolution (ADR) in China: negotiation, mediation, arbitration, and litigation. If taking consideration of time, cost, fairness, relationship and privacy, each ADR presents different advantages according to various cases. However, as international companies need more concern about power balance, relationship and privacy aspects. In these points, arbitration shows its advantage. It has formal procedures that can keep the privacy of parties but less time and cost than litigation. It successfully maintains the business relationship with the participation of third parties. Mediation seems appropriate as well, but its informal procedures may lead a power imbalance between parties. Therefore, most of the international companies prefer to use arbitration.

Although arbitration is a quite good choice and is widely used, it still takes a longer time to solve disputes than mediation and negotiation. Even, in some cases, it may be too complicated to do reasonably. From a business benefit perspective of both parties, it is important to know which is a better way to solve dispute issue and which mechanism is more efficient and benefits for both parties.

To summarize, this paper has been undertaken to answer the following question,

1)     The reasons for why arbitration is inefficient;

2)     The new opportunities for arbitration to improve efficiency


To read entire paper, click here


Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director, at [email protected]

About the Author

Siying Yao

SKEMA Business School
Paris, France


Siying YAO
is a MSc student of SKEMA business school in Paris. She studies Project and Programme Management & Business Development (PPMBD) as major. She has bachelor degree from INSEEC business school, Paris, major in marketing. She has been in France for 4 years and she speaks Chinese, English and French. During the MSc study, she obtained PRINCE2 foundation certificate in project management and Agile PM foundation certificate. She had internship experience both in China and France. She is a proactive and social person. Please feel free to contact her via email: [email protected]