Yun Zhao and Yating Ling on Extraterritorial Arbitration For Domestic Disputes In China (ILJ)

"Extraterritorial Arbitration For Domestic Disputes In China- Liberalization In The Greater Bay Area As A Prelude To The Process Of Legal Convergence"
Yun Zhao and Yating Lin (PhD 2026)
The Boston University International Law Journal, Vol 43, Spring 2025
Published online: 2025

Abstract: Extraterritorial arbitration, with domestic parties selecting a foreign jurisdiction as the seat for arbitration and applying foreign laws for the proceedings, holds theoretical and practical significance in international arbitration. China’s legislative framework imposes restrictions on extraterritorial arbitration in purely domestic cases, diverging significantly from practice in various jurisdictions. Established arbitration hubs like the UK and Singapore have long embraced extraterritorial arbitration, while India, an emerging player in the Asian arbitration market, has recently implemented reforms to support the global reach of its businesses and display its pro-arbitration attitude. This article argues that China needs to relax its restrictions on extraterritorial arbitration to enhance the internationalization and competitiveness of its arbitration mechanism under its ongoing “Foreign-Related Rule of Law” initiative. Despite empirical case analysis and political-legal analysis suggesting that China is unlikely to completely overturn the restrictions in the short term, a significant breakthrough has recently occurred. The Supreme People’s Court of China and the Department of Justice in Hong Kong are exploring avenues to ease restrictions on extraterritorial arbitration within the Greater Bay Area (GBA), serving as a valuable testing ground for China’s extraterritorial arbitration practice. This article further examines three possible legal frameworks to facilitate extraterritorial arbitration within the GBA and suggests that the most appropriate legal technique is “Regional and Mutual Arrangement.” Overall, the pilot initiative to liberalize extraterritorial arbitration within the GBA showcases the institutional advantages of the “One Country, Two Systems” and serves as a precursor to China’s future approach towards unrestricted extraterritorial arbitration.