On 28 Nov. 2024, Beijing Fourth Intermediate People’s Court (hereinafter the “Court”) held a press conference to introduce its measures supporting the construction of an International Commercial Arbitration Center in Beijing and released the ten typical cases of judicial review of arbitration. These cases focus on frontier issues in commercial arbitration, such as third-party funding, and the use of interim measures by arbitral tribunals for property preservation.
One notable case is Case No.3—Ruili Airlines Co., Ltd. et al. v. CLC Aircraft Leasing (Tianjin) Co., Ltd. ((2022) Jing 04 Min Te No. 368 ((2022)京04民特368号) and (2022) Jing 04 Min Te No. 369) ((2022)京04民特369号)).
This case marks the first judicial review case in China involving an application to set aside an arbitral award related to third-party funding (TPF). The dispute centered on whether the participation of TPF institutions in arbitration should be disclosed and whether their participation violated the confidentiality principle of arbitration.
Upon review, the Court held that there is no prohibition against TPF institutions supporting parties in arbitration under the PRC law. It emphasized that the choice of arbitration and the use of TPF should be judged on the basis of legality and in accordance with the principle of party autonomy. The key to the confidentiality of arbitration is that case details should not be disclosed to the public, thus protecting the commercial secrets and social image of the parties. The arbitration rules prohibit disclosing information to the “outside world,” but they do not restrict relevant parties from accessing the information. Since there is no rule in the existing arbitration procedures that prohibits TPF institutions from supporting arbitration participants, the establishment of a funding relationship by a third-party institution does not violate the confidentiality principle. The applicant’s claim that the TPF institution violated the confidentiality principles of arbitration was not substantiated, and the Court therefore ruled to dismiss the application to set aside the arbitral award.
This case sets the standard for determining the disclosure obligations of TPF in arbitration and the proportionality standard for confidentiality, reflecting respect for party autonomy, and establishes the standard for judicial review of arbitration involving TPF under PRC law.
Photo by Wang xiaoqi on Unsplash
Contributors: CJO Staff Contributors Team
