China's New Arbitration Law

By Manfred Elfstrom, ILRF

At around the time of the child trafficking investigations in Dongguan City that I reported on in my last post, China began implementing its new “Labor Dispute Mediation and Arbitration Law” (LDMAL or simply “The Arbitration Law”). The legislation, which went into effect on May 1, has attracted little attention abroad, aside from a good piece at the Global Labor Strategies blog in October 2007. Nonetheless, LDMAL is a significant, if incomplete, step forward.

The Arbitration Law was bound to pale in comparison with the drama that accompanied the recent drafting, passage and implementation of the “Employment Contracts Law” (ECL, also called the “Labor Contract Law”): debates between foreign businesses and labor groups, an unprecedented outpouring of public comment—over 190,000 responses in only a month—criticisms by entrepreneur-delegates to the Chinese People’s Political Consultative Committee, and continued scandals involving companies trying to shirk their new responsibilities to workers (see here, here, here, here and here).

Besides being overshadowed by the Labor Contract Law, LDMAL has disappointed some labor advocates in China. Most significantly, though the law does not explicitly prohibit collective dispute arbitration (at least to my understanding—readers who understand this better should comment), it only mentions such cases by stating that groups of more than ten workers can choose one representative to enter arbitration on their behalf (Article 7). But as Global Labor Strategies notes, “Recent studies show that group labor disputes have been on the rise and now represent roughly 60% of all workers involved in disputes.”  According to Professor Chang Kai, “If the law remains focused on solving individual labor disputes, in 10 years we will have many problems that cannot be solved under the current legal system.”

Still, LDMAL does streamline the arbitration process. Its Article 29 repeats the guarantee in the original arbitration legislation from 1994 that an arbitration commission must respond to a request for arbitration within five days, but adds that if a “commission does not accept or fails to make a decision within the time limit, the applicant may initiate litigation to the people's court in respect of such labor dispute.” Articles 30, 32, and 35 then lay out a series of five-day deadlines for different steps in the arbitration process, culminating in Article 43: “Where the arbitral tribunal makes an award to labor dispute cases, it shall do so within 45 days of the acceptance of the arbitration application by the labor dispute arbitration commission. If an extension is required due to complexity of the case, an extension may be allowed with the approval of the officer of labor dispute arbitration commission and the parties shall be informed in writing, but the extension may not exceed 15 days.”

Importantly, plaintiffs also have a longer time frame for bringing their cases to arbitration than in the past: one year “from the date the parties know or shall have known the infringement of their rights” (Article 27) versus only 60 days under the old rules. As Aaron Halegua writes in a forthcoming paper in The Berkeley Journal of International Law, “Workers rarely take action after just one or two months of wages have been withheld, choosing instead to maintain faith in employers who promise to pay them as soon as they have the money”—but bringing their cases after a few months would be too late under the old rules.

The LDMAL declares arbitral decisions to be legally binding (Article 47). It makes it easier for workers to file civil suits; they can go directly to court if the arbitration committee does not issue a decision within 45 days or 60 days in “complex” cases (Article 43again). Combined with the tougher enforcement mechanisms of the ECL, particularly the ECL’s focus on compensation by employers to employees for abuses rather than fines, the law ought to —if faithfully implemented—push bosses along through a process that they once could buck or amble their way through. 

And by setting up an essentially tri-partite dispute resolution mechanism, the Arbitration Law moreover “further clarifies the role and obligations of the union,” in the words of the All China Federation of Trade Unions (ACFTU)-linked newspaper Workers Daily (unfortunately, I cannot find the link for the original article). Once again, the ACFTU has been handed an opportunity to prove its commitment to reforming itself and more effectively representing workers.

Finally and most importantly, the law does away with the old, onerous arbitration fees, which had been the focus of large-scale petitions and that posed a significant barrier to workers using legal channels to resolve grievances (though arbitration committees were urged to waive fees for “economically troubled workers,” Halegua notes that many committees required documentation from the workers’ hometowns or their local labor union before granting a waiver—both of which were difficult to obtain).

Will the Arbitration Law solve everything? No, not by a long shot.  

And it is not the only avenue to resolving disputes. Halegua highlights the benefits to workers of savvy NGOs who “possess the authority, tools and ability to persuade employers to agree to mediate and to reach an agreement” away from the pro-management biases of local government organs and the expenses of formally launching cases—but with the mediator-NGOs holding at least some government power. He uses the Beijing organization Little Bird as a case study; Little Bird was given semi-official status when it was established as the “Little Bird People’s Mediation Committee” of the Donghuamen Sub-District of Beijing in 2004.

But with the new law, the number arbitration cases are bound to expand, for better or worse. According to China Labor Bulletin, districts of Guangzhou City have seen three to five-fold increases in arbitration cases just since the ECL went into effect on January 1. I have heard from activists in Southern China that those numbers will likely grow by multiples again as LDMAL is implemented and arbitration fees are dropped.

The question is: are we ready?