DDefining “administrative agreements” is an issue that has puzzled the legal community for many years. The type and scope of an administrative agreement will determine whether arbitration can be used to resolve disputes arising therefrom.
Sections 2 and 3 of the Arbitration Act define the types of disputes that can and cannot be submitted to arbitration. These not only emphasize the civil and social nature of arbitration, but also distinguish the mechanism of arbitration, by which disputes are resolved by social power, from the judicial mechanism which resolves disputes by the power of the state. .
Arbitration can only resolve social disputes, but not administrative disputes. Otherwise, he will walk on the authority of state power. This stipulation of arbitrability in arbitration law relates to the scope of judicial power and its exercise. Its nature is imperative, meaning that an arbitral award that violates this stipulation will be revoked.
The second part of article 3 explicitly states that “disputes which the law has stipulated must be settled by administrative bodies” cannot be submitted to arbitration. Point 11 of Article 12 of the Law on Administrative Disputes brings administrative agreements within the scope of administrative disputes, which excludes the possibility that arbitration can apply to administrative agreements.
However, there remain differences of opinion between academics and legal practitioners on the definition and types of administrative agreements. In November 2019, the Supreme People’s Court issued the Provisions of the Supreme People’s Court on Several Matters Concerning the Trial of Administrative Agreement Cases (SCC Interpretation on Administrative Agreements), clarifying the definition and types of agreements. It also stipulates that disputes arising from administrative agreements concluded after May 1, 2015 will be subject to the law on administrative disputes. Article 26 of the CPS interpretation on administrative agreements also provides that any arbitration clause in the administrative agreement is invalid.
However, the dispute was not settled. In judicial practice, there is no unified standard of judgment for determining administrative agreements. There are even diametrically opposed ones. For example, point 3 of article 2 of the CPS interpretation stipulates an agreement on the transfer of the right to use state-owned natural resources such as mineral rights as an administrative agreement, and by extension, a contract on the transfer of the right to use state-owned building land must be subject to an administrative agreement.
However, the provisions of the Supreme People’s Court on several issues concerning the trial of cases involving disputes over contracts over the right to use state-owned land define it as a civil contract, and arbitration is naturally applicable. . Prior to the promulgation of the CPS Interpretation, some rulings treated administrative agreements as civil contracts, and therefore disputes could be settled through arbitration. Others considered them administrative agreements, and therefore outside the scope of arbitration. After the promulgation of the interpretation of the CPS, contracts for the transfer of State lands are excluded from the scope of arbitration, in accordance with the application of the law according to the principle that the new law prevails over the old.
However, the legal issues related to administrative agreements are not fully resolved. Indeed, the CCP’s interpretation is not appropriate for defining certain types of administrative agreements. The authors believe that in some areas, administrative agreements can still be defined as civil contracts and settled by arbitration.
In China, the types of administrative arrangements are primarily influenced by social ideology. One of the starting points of the administrative agreement is that the public service can be developed by the market mechanism, and the introduction of market value can effectively solve the chronic problems of low efficiency and insufficient expertise of the authorities. administrative.
The Third Plenary Session of the 18th Communist Party of China Central Committee fully recognized the decisive role of the market in resource allocation. In this context, the private law mechanism can and should be applied in areas where administrative resources are allocated by the market, such as the transfer of state-owned natural resources and cooperation between the state and private capital.
Secondly, the first criterion for distinguishing an administrative agreement from a civil agreement is the role of the administrative authority at the time of the conclusion of the agreement, that is to say whether it acts as administrator or as as a civil party. The rapid expansion of the central government’s economic functions has made the state the largest buyer and seller in the market. Therefore, the role of administrative authorities as a market player is increasingly important.
The most important criterion for determining the role of the administrative authority when concluding the agreement is the object of the agreement: if the object is the subject of a market transaction, for example, the land use right as a factor of production, the administrative authority must be defined as a civil party.
It is still difficult to determine the types of administrative agreements, not only because too many disputes clutter the courts, but also because the duties and functions of administrative authorities are constantly changing.
However, four main categories can be considered: agreements legally concluded between the administrative authority and any qualified entity authorizing the latter to exercise part of the administrative power; agreements within administrative authorities, such as contracts setting performance penalties and incentives based on the completion of certain works; agreements between the administrative authority and a person who is subject to administrative action when the authority exercises its administrative power, such as compensation agreements for expropriation, which may have the appearance of mutual consent but are not necessarily the product of mutual consent between the two of the evenings; and agreements between different administrative authorities, where the goal of the parties is to achieve administrative objectives, such as horizontal compensation for interprovincial watershed services.
Given the importance that types of administrative agreements have on capacity to arbitrate, as well as the limitations of current judicial definitions, any review of arbitration law would benefit from an addition to Article 2 that provides:
“Contractual disputes and other disputes relating to property rights and interests that arise between the administrative authorities as civil parties and the other civil parties may be submitted to arbitration.
Such a revision would align the law with the current economic and social development of the country.
Xie Hongfei is an Arbitrator at the Beijing Arbitration Commission/Beijing International Arbitration Center (BAC/BIAC) and Director of the Department of Civil Law, Institute of Law, Chinese Academy of Social Sciences. Gao Zhuang, case manager at BAC/BIAC, also contributed to the article