In What Cases Will an Arbitration Agreement Be Deemed Invalid

An arbitration agreement is deemed invalid if:

(1)   the issues to be arbitrated agreed upon under the arbitration agreement are beyond the scope of arbitration specified by law;

Disputes that may not be referred to arbitration include:

a.       disputes over marriage, adoption, guardianship, child maintenance, or inheritance; and

b.      administrative disputes which shall be subject to the jurisdiction of competent administrative authorities according to law.

(2)   the arbitration agreement was entered into by a person without capacity or with limited capacity for civil acts; or

A person without capacity for civil acts refers to a minor who has not attained to the age of 8 years or an adult who is not capable of understanding the nature of his acts. And an adult refers to a person who has attained to the age of 18 years or a minor who has attained to the age of 16 years and earns his source of livelihood mainly through his own work.

A person with limited capacity for civil acts refers to a minor who has attained to the age of 8 years or an adult who is not capable of fully understanding the nature of his acts.

(3)    the arbitration agreement was entered into by a party under duress by the other party.

Where an arbitration agreement only specifies the arbitration rules applicable to arbitration of the disputes, it shall be deemed that no arbitration institution has been specified unless the parties reach a supplementary agreement or an arbitration institution can be determined according to the arbitration rules specified in the arbitration agreement.

Where two or more arbitration institutions are specified in an arbitration agreement, the parties may agree to choose one of them for arbitration, and the arbitration agreement shall become invalid if the parties fail to reach an agreement on the choice of an arbitration institution.

Where an arbitration agreement specifies that arbitration shall be conducted by an arbitration institution in a certain place and there is only one arbitration institution in the place, the arbitration institution shall be deemed as selected by the parties. Where there are two or more arbitration institutions in the place, the parties may agree to choose one of them for arbitration, and the arbitration agreement shall become invalid if the parties fail to reach an agreement on the choice of an arbitration institution.

Where an arbitration agreement specifies that either party may file a request for arbitration with an arbitration institution or a lawsuit with a people's court, the arbitration agreement shall be invalid. Provided, however, that the arbitration agreement shall be deemed valid if either party files a request for arbitration with an arbitration institution and the other party fails to challenge the validity of the arbitration agreement within the time period specified in the second paragraph of Article 20 of the Arbitration Law.

If an arbitration agreement does not contain the issues to be arbitrated or expressly designate a sole arbitration commission, the parties may amend the arbitration agreement or reach a new arbitration commission. Otherwise, it will be held to be invalid, in which case they may bring a lawsuit with a court of competent jurisdiction.

In practice, an arbitration agreement signed by an agent or representative who has not been duly authorized by his employer will be held invalid as it is not a manifestation of the true intention of his employer (see Reply of the Supreme People’s Court dated September 24, 2015 ([2015] Min Si Ta Zi No. 36)).