Commentary No. 22

China’s Guiding Cases System and Its Potential Impact on Arbitration

Date of Publication:
2018/03/15
Author(s):
  • Guilherme Rizzo Amaral, Partner at Souto, Correa, Cesa, Lummertz & Amaral Advogados
Attachment:
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Commentary

I. Introduction

Through the implementation of the Guiding Cases System (“GCS”),[1] China seems to be taking a step towards integrating its own brand of case-law into the nation’s rule of law.[2] This step comes at an important time, with China launching an ambitious program of economic expansion, the Belt and Road Initiative, and assuming a leading role in the world’s economy.

Arbitration is often seen as an important tool both for the promotion of the rule of law and for economic development.[3] As such, it must interact with and adapt to changes such as those China is going through.

In common law jurisdictions, where judicial precedents are recognized as binding sources of law, arbitrators are just as bound by them as they are by statutes. How will China’s Guiding Cases work in the arbitration setting? Can Guiding Cases be compared to common law precedents in this context? How do they differ? In what ways is it possible for Guiding Cases to affect domestic arbitration in China or international arbitration where Chinese law is applied to the substance of the dispute? This Commentary offers answers to these questions from a comparative perspective.

II. Why Do Precedents Matter in Arbitration?

It has been said that “[f]or the most part, […] our understanding of the role of precedent in domestic arbitration remains stuck at the level of ‘folklore'”.[4] The same can be said of precedent in international arbitration, and the issue gains importance as more and more civil law countries adopt precedent-like systems.

In a recent book,[5] I attempted to address some of the arbitral community’s most common questions regarding the influence of judicial precedents on arbitration.

For instance, it is well established that one of the cornerstones of arbitration is the finality of arbitral awards.  Save in rare exceptions, arbitral awards are not subject to appeals on the merits.  If no such appeal is available, can an arbitrator have a duty to follow precedents?

In addition, when parties agree to resolve their disputes outside the judicial arena, should they expect a private arbitrator to abide by the standards of a system which they have opted out of?  Is the choice of arbitration not a choice of an entirely different legal system, not bound by so-called judge-made law?

These questions relate to the core of arbitration and pose serious doubts as to how, to what extent, and in some circumstances even whether judicial precedents exercise any influence on arbitration.  One could also be skeptical about such influence when looking into the way judicial precedents work.

The function of precedents can be viewed from two perspectives.  Viewed from the vertical perspective, lower courts are bound by precedents from higher courts covering the same jurisdiction.  While a court might find persuasive force in a precedent from a lower or a parallel court, binding force is generally only found when hierarchy is at play, at least within different courts.

As seen from the horizontal perspective, on the other hand, any given court must follow its own precedents, even when they arise from decisions rendered by an entirely different panel of judges. This is the basic idea behind stare decisis (“stand by what has been decided”).[6]

The problem with these perspectives is that they are not suitable to explain the power of judicial precedents over arbitrators.

For one thing, there is no hierarchy between arbitral tribunals and judicial courts.    In general, not even the highest court has a say over what arbitrators decide to do, nor does it perform any hierarchical function in relation to arbitrators.  In short, arbitrators are not part of the judicial system.

For another, stare decisis obviously does not solve the problem because one would always be dealing with different “courts” (judicial court and arbitral tribunal).  The fact that arbitrators and arbitral tribunals do not as a rule belong to a formal organization the way judges and judge panels do, and moreover that arbitrators are not subject to courts, means that precedents cannot function among arbitrators or between arbitrators and courts in the way that they do within a particular court.

Hence, vertical and horizontal perspectives cannot justify any binding effect of judicial precedents on arbitrators.

As for the claim that the absence of an appeal against arbitral awards renders the arbitrator free to disregard judicial precedent, it stems from the general idea that for every binding duty—such as the duty to follow precedents—there should be a correlative sanction.  This idea, however, is overly simplistic.  It stands upon Kelsen’s notion that the law is made of orders (or commands) backed by threats or sanctions.[7]  Hart’s seminal work, The Concept of Law,[8] dismantled this notion by demonstrating that there are other types of legal norms, such as those granting legal powers to adjudicate or legislate, which cannot be construed as “orders backed by threats”.  Hence, arbitrators could indeed be bound by precedent even in the absence of a remedy to address non-compliance with such a duty.  In fact, there are such remedies in at least some countries that accept precedent as a binding source of law, such as the “manifest disregard of the law” and “appeal on the point of law” grounds for review in the United States and the United Kingdom, respectively.[9]  Yet the above reconceptualization of legal norms and “duty” renders a review of such remedies unnecessary here, as arbitrators may be bound by precedents even in their absence.

As mentioned above, another frequent claim is that the reason why parties opt for arbitration is that they wish to avoid the application of national (“state-made”) law entirely.  By choosing arbitration, the parties’ actual intent would be to have the outcome of their dispute determined by a private arbitrator’s sense of justice or fairness, rather than by the courts’.

However, in western arbitration, there is a lack of evidence to back this assertion. Actually, a look at the development of western arbitration reveals a different reality. In the United States, for example, the Federal Arbitration Act of 1925 was called for by businesspersons and traders who were dissatisfied with time-consuming and sometimes Kafkaesque court proceedings and inefficiencies in the judicial machinery, not with the legal principles applied by the judiciary. [10]

When analyzing the case of China, one cannot find a direct link between the development of arbitration and any dissatisfaction with recognized legal principles.[11]  According to Wei Sun and Melanie Willems,

Article 7 [of the Chinese Arbitration Law] codifies the principle of reliance on facts, that tribunals should disregard their subjective views or opinions, and instead decide all disputes referred to them objectively, on the basis of the law and the evidence before them, having regard to the applicable procedural rules and in a manner that is fair and reasonable. [12]

I will return to “fair and reasonable” later in this Commentary. For the moment, it suffices to say that there is nothing wrong with devising arbitration as a different method of dispute resolution, with its own set of rules and principles. That, however, has no bearing on an arbitrator’s duty, when deciding on the merits of a case, to abide by the applicable law chosen by the parties, unless he or she has been authorized to decide in equity, ex aequo et bono, or as amiable compositeur.

Be that as it may, arbitral awards cannot be set aside due to ordinary errors of law: mistakes arbitrators make in applying the law—including precedents—are, with few exceptions, immune from judicial review.  But what about a disregard of the law?  What if the arbitrator, confronted with the applicable law—be it statutory law or a precedent—decides to ignore it?  When and how would that differ from a decision in equity and, therefore, not be authorized by the parties when the arbitration is in law?

It is true that choosing arbitration involves a trade-off.  Final awards come with the risk of final mistakes.  Yet this trade-off does not entail arbitrariness.  Thus, ignoring statutory law and wrongly applying it are not the same thing; neither are ignoring precedents and wrongly distinguishing them.  This distinction is widely recognized in common law jurisdictions.[13]

Finally, several commentators have argued that arbitrators are not bound by precedents for the simple reason that there is no hierarchy between courts and arbitrators.

Arbitrators do not belong to the judiciary, but they do not need to be in order to be bound to it in certain ways.  Arbitrators draw their powers from the parties and are bound by the parties’ will.  If the parties’ will is to have an arbitration in law rather than in equity, under no circumstance may the arbitrator disregard the applicable law and fashion the law himself/herself.  That would go against the parties’ expectations.[14]  Any attempt by the arbitrator to go beyond the choice of law made by the parties would be an unwarranted expedition, as the arbitrator would be exceeding his powers.  Hence, if the law applicable to the substance of an arbitral dispute encompasses not only statutes but also precedents as binding sources, the arbitrator is bound by precedents, regardless of his or her independence from the judicial hierarchy.[15]

The only instance in which an arbitrator can fashion the law is when the parties expressly authorize him or her to do so.  This is widely recognized in practically all arbitration institutions’ rules as well as in the UNCITRAL Model Law (“Model Law”),[16] which inspired most of the modern national laws on arbitration.

III. Using Judicial Precedents in Arbitration: a Tale of Three Jurisdictions

Even though there are marked distinctions between traditional judicial precedents and Guiding Cases, the existing similarities suggest that something may be learned from other jurisdictions’ experiences in dealing with the issue of judicial precedents in arbitration. Therefore, for this Commentary, I have chosen to review how judicial precedents affect arbitrations in two jurisdictions with a long track record of adherence to precedent–the United States and the United Kingdom–and a civil law country that recently adopted a precedent-like system, Brazil. In this way, China, a civil law country now exploring some of these ideas, may benefit from both tradition and innovation.

1. The United States

A thorough study published in 2012 analyzed more than 800 U.S. arbitral awards (from 1980 to 2009) in the areas of labor, employment, class action, and securities. It concluded not only that arbitrators made extensive use of precedents but also that almost all those precedents were published judicial opinions rather than arbitral precedents. Moreover, evidence gathered in the study provided “little support for the view that arbitrators and judges engage in qualitatively different kinds of decision-making or opinion-writing”.[17]

The study went further by randomly selecting 25 arbitral awards in each of the cited areas [18] for a deeper qualitative analysis. The analysis concluded that although sometimes precedents were only cited to be distinguished, “there were no cases in which arbitrators simply rejected a precedent out of hand-for example, on the theory that arbitrators are not bound by legal rules announced by courts”.[19]

This conclusion presents the influence of judicial precedents on U.S. arbitrators in a very explicit way. The behavior of U.S. arbitrators indicates a strong tendency towards revering precedents.[20]

Furthermore, case law shows that courts largely recognize the binding effect of precedents on arbitrators:

For there to be ‘manifest disregard of the law’ the arbitrators must have been presented with controlling precedents which they refused to apply. [21]

Examples of manifest disregard therefore tend to be extreme, such as ‘explicitly reject[ing] controlling precedent‘ or otherwise reaching a decision that ‘strains credulity’ or lacks even a ‘barely colorable’ justification. [22]

Only an arbitrator’s explicit rejection of controlling precedent or willful flouting of governing law or some similar egregious impropriety suffices to justify judicial vacatur of an arbitration award. [23]

Regarding the mechanisms of control of the arbitrators’ adherence to precedents, there is an ongoing debate as to whether courts can set aside arbitral awards which are in “disregard of the law” (including precedent). In 1953, a dictum of the Supreme Court of the United States (SCOTUS) suggested that arbitral awards could be set aside when in “manifest disregard of the law”.[24] Half a century later, another dictum from SCOTUS [25] was said to have banned this possibility, though two years later that assertion too was dismissed in yet another SCOTUS case. [26]

Nowadays, though there is a clear circuit split, the majority of Federal Circuits entertain, explicitly or implicitly, the possibility of reviewing arbitral awards based on the “manifest disregard” standard. [27]

2. The United Kingdom

It is also undeniable that precedents play a crucial role in arbitration and in the way arbitrators adjudicate disputes in the United Kingdom.  Yet, interestingly enough, it is not easy to find authority even for the proposition that arbitrators have a duty to apply the law.  It is viewed much more as a matter of logic.[28]

Some cases can be cited, though, to support the existence of an arbitrator’s duty to apply the law.  In the context of the Arbitration Act of 1979, the House of Lords once pondered that the “prima facie duty of an arbitrator is to act in accordance with the law of the land”, [29] which includes common law precedents.[30]

As it is established that arbitrators have a duty to apply the law, the binding effect of precedents follows naturally, given that precedents are also a binding source of law in the United Kingdom.

Unlike the United States, the United Kingdom has a specific provision (called “appeal on point of law”) in its Arbitration Act (Section 69 of the EAA) which allows parties to appeal domestic awards in court unless they waive the right.  However, the standard of review in such cases is very strict: in the process of issuing an award, the arbitrator ascertains the fact, ascertains the law, and applies the law, and only the second stage (ascertainment of the law) is deemed reviewable by courts.[31]

In decisions of English courts setting aside or confirming awards under Section 69 of the EAA, the discussion often concerns whether the arbitrator followed a precedent rather than whether s/he followed statutory law.  When it comes to the arbitrator’s duty to apply the law, there seems to be no difference whatsoever in whether the law has its source in statutes or in cases.

A few examples may help illustrate this point.  The arbitrators in Kriti Akti Shipping Co. SA v Petroleo Brasileiro SA, [32] in their own words, followed a precedent “somewhat reluctantly”.  The reason for their reluctance is clear: the recognition of the duty to follow the law, including case law, despite the arbitrators’ disagreement with the courts’ rulings.  In Carboex SA v Louis Dreyfus Commodities Suisse SA,[33] the court set aside an award due to the arbitral tribunal’s failure to follow a precedent from the Court of Appeal, stating that the precedent “was binding on the arbitral tribunal and binds this court unless the reasoning of the Court of Appeal is inconsistent with that of House of Lords in [another precedent]”.  In Ocean Marine Navigation Ltd. v Koch Carbon Inc,[34] the court remitted an award—for further consideration by the arbitrator—due to the lack of clarity on the part of the arbitrator who, as expressly stated by the court, was himself bound by the principles of law set forth in yet another precedent.

3. Brazil

Brazil enacted a new Code of Civil Procedure in 2015 (“NCPC”), in which a precedent-like system was devised as a means to optimize the use of the judiciary.  Article 926 of the NCPC states that all courts must bring their case-law into uniformity and keep it stable, consistent, and coherent.  Furthermore, Article 927 Subsection V provides that judges and courts should render decisions in line with the position of the court they belong to. Paragraph 5 of the same Article states that courts are to publish their precedents.[35]

It should be noted, though, that the legislature did not use the expression “will be bound” when referring to judges and courts in Article 927, opting for the much more vague expression “will observe” (“judges and courts will observe”).[36]  This has caused some scholars to deny the binding effect of precedents based on a literal interpretation of the term observe.

Yet this literal interpretation is incompatible with the norm contained in Article 489 Paragraph 1 Subsection VI, which states that a judicial decision is to be deemed null and void for lack of motive whenever it does not follow a precedent invoked by one of the parties and at the same time fails to distinguish it or demonstrate that it has been overruled.

Referring to the Brazilian system as being precedent-like is justified, even though not all of the decisions that are binding on judges will work exactly in the form of common law precedents.  While it is possible to extract a ratio decidendi from a superior court decision in Brazil—hence giving rise to a precedent—some techniques adopted in the NCPC[37] are more similar to Guiding Cases, e.g., courts being able to select representative cases whose decisions will give rise to a general proposition that must be followed in future adjudications.

The idea of binding precedents or of binding propositions issued by the judiciary should not be perceived as an impingement on the doctrine of the separation of powers or the Brazilian civil law tradition.  There is a considerable difference between the actions of legislating (creating general and abstract norms) and of precedent-making (creating general yet concrete norms).[38]  While it is widely recognized that the judiciary may not create general and abstract norms, the recognition of ways for the judiciary to render the interpretation of law more uniform, thereby affecting individuals other than the parties, is part of the Brazilian juridical tradition.[39]  For example, alongside precedents and case-law in general, courts in Brazil may issue statements called súmulas through a working method that can be described as follows: once any given court identifies a series of precedents that follow the same reasoning regarding the same matters, it issues a statement (súmula) which sums up the conclusions arising from the interpretation of the law.

What has been subject to much more controversy is whether arbitrators, as well as judges, are to be bound by judicial precedents.  In Brazil, case-law on this matter is very scarce and cannot come even close to covering the issue of disregarding precedents, given that binding precedents are such a recent feature in Brazilian law.  Scholars are split on the issue.  Nevertheless, the potential mechanisms for review already exist.  To apply them effectively, a standard and a method of review must be conceived.

In a recent study,[40] I devised a three-step method by which arbitrators’ adherence to judicial precedents could be assessed by courts.  I have further suggested that the standard of “conscious disregard of the law”—inspired by the U.S. and UK systems—should be applied by Brazilian courts in this method.

The method by which courts should assess challenges to arbitral awards based on the conscious disregard of precedents can be described as follows:

1. The court must verify that the question of law has been previously raised to the arbitrator in accordance with the applicable procedural rules. If it has not, the challenge must be denied; in other words, the disregard of the precedent must be conscious.

2. If the answer is affirmative, the court must then verify that the precedent is in fact binding on the arbitrator, since there can be precedents or judicial decisions of different natures (persuasive precedents, dicta from court decisions, etc.). If the precedent is not binding, the challenge must be denied.

3. If the precedent is binding, the court must then proceed with the more complex analysis of how the arbitrator dealt with the precedent in the award.

3.1. If the arbitrator recognized the binding precedent yet distinguished it through an acceptable rationale, even if the arbitrator erred in making the distinction or if the court disagrees with the result, the challenge must be denied.

3.2. If the arbitrator recognized the existence of the precedent but denied its binding effect (expressly or implicitly), the challenge must be accepted and the award must be set aside for conscious disregard of a binding precedent.

3.3. If the arbitrator did not decide on or failed to express an opinion about the precedent, the challenge must be accepted and the award must be set aside for lack of motivation and for conscious disregard of a binding precedent.

Could a similar method or the common law approach to the issue of judicial precedents and arbitration contribute to the development of the matter in China?  Can Guiding Cases and precedents be related vis-à-vis each other’s potential impact on arbitration?

IV. China’s Guiding Cases System and Arbitration: a Glimpse into the Future

It is still early to assess the impact of the Guiding Cases on arbitration. However, it has been reported that Guiding Cases have been applied as sources of substantive rules in Chinese arbitral proceedings. [41] Furthermore, some preliminary conclusions can be drawn from a comparison of China with the jurisdictions analyzed above.

For instance, while precedents are a binding source of law in common law countries and in Brazil, when it comes to China and the GCS, this is too much to contend.  Although the GCS is a clear attempt to implement the principle of “treat like cases alike”,[42] it would be an unwarranted stretch to maintain that Chinese courts exercise a law-making function similar to that of common law courts.

The introduction of the Guiding Cases has certainly sparked interest as to whether case law will become a binding source of law in China,[43] yet a majority of scholars still affirm that the Chinese judiciary “cannot make law, and judgments are not the law”.[44]  Rather than an independent source of law, a Guiding Case works as “a necessary aid to judicial reasoning”.[45]  It is within a judge’s discretionary power to refer to Guiding Cases, which, however, “cannot be the legal basis for the lower court’s judgment”.[46]  The only formally binding source of law in China is still the written law,[47] even if the Guiding Cases may be considered de facto binding, which means “adjudications in the future are bound by the guiding cases”.[48]  Judge GUO Feng, Deputy Director of the Research Office of the Supreme People’s Court, declared in his lecture at a seminar held in the Stanford Center at Peking University that Guiding Cases “are of authoritative, normative, exemplary, and uniformly applicable nature.  They are de facto binding”.[49]

Nevertheless, there is one element of the GCS that cannot be overlooked, and that is its educational effect.  As Deng explains, Guiding Cases “can also educate people as to how the law functions in reality, and further promote legal mobilization”.[50]  How could Guiding Cases produce an educational effect if they were not to be followed by judges?  If Guiding Cases are to have an educational effect, they ought to be followed by judges and adjudicators in general.  If adjudicators were allowed to ignore Guiding Cases meant to educate parties, the latter would neither trust nor accept such education.

We can conclude that while Guiding Cases are not yet formally binding in China and are not an independent source of law, they ought to be considered de facto binding on future adjudications by the Chinese judiciary if they are to fulfill their potential in educating people and promoting the principle of treat like cases alike.

Yet how should arbitrators deal with Guiding Cases when arbitrating in China (Chinese seat) or when Chinese law is applicable to the merits of a dispute?  To answer these questions, we need to delve into some important features of Chinese arbitration.

To begin with, whereas the above-mentioned Model Law contains a highly detailed provision (Article 28) allowing arbitral tribunals to decide ex aequo et bono or as amiable compositeur[51] “only if the parties have expressly authorized it to do so” (Article 28 Paragraph 3), the Chinese Arbitration Law (“CAL”)[52] is more laconic.  It establishes that, in arbitration, “disputes shall be resolved on the basis of facts, in compliance with the law and in a fair and reasonable manner” (Article 7; emphasis added).  When interpreting this provision of the CAL, most commentators agree that arbitral tribunals seated in China are allowed to decide ex aequo et bono or as amiable compositeur even in the absence of party consent.[53]

This anomalous element in Chinese arbitration can affect the links between Guiding Cases and arbitration.  It is now a good time to recall what has been stated previously in this Commentary (see Section III): it is the parties’ consent to an arbitration in law rather than in equity that gives rise to the arbitrator’s duty to apply the law, be it statute or precedent.  Therefore, once the CAL frees the arbitrator to decide ex aequo et bono or as amiable compositeur even in the absence of party consent, the duty to apply the law is extremely weakened, to say the least.

A second important element in Chinese arbitration derives from the division of arbitrations in China into five distinct types: (i) domestic arbitrations, (ii) arbitrations with a foreign element, (iii) foreign or international arbitrations, (iv) arbitrations relating to Hong Kong, Macau, or Taiwan, and (v) Hong Kong, Macau, or Taiwan arbitrations.  Each one of these types of arbitrations entails different levels of judicial review.  For example, while Chinese courts can review substantive matters decided by arbitral tribunals in domestic arbitration,[54] in foreign or international arbitrations, judicial review of awards is limited to procedural matters.[55]

In any case, while it is true that Chinese courts have shown deference to arbitrators’ decisions on the merits, generally refraining from reviewing substantive issues,[56] their ability to do so cannot be overlooked.  This difference from other jurisdictions calls for arbitrators to exercise heightened care when interpreting Chinese written law to prevent their interpretation from differing from the one provided by Chinese courts, especially when provided by Guiding Cases.

Furthermore, predictability plays an important role when parties choose arbitration.  It is essential to entrepreneurs and citizens alike and, as such, it constitutes a factor of progress, providing legal certainty and allowing for further economic growth.  Hence, despite the concession the CAL makes to “fair and reasonable” arbitral awards, it is my contention that arbitrators should follow Guiding Cases to provide predictability[57] and legal certainty, thereby contributing to the development of arbitration and of the rule of law in China.

Endnotes

*          The citation of this Commentary is: Guilherme Rizzo Amaral, China’s Guiding Cases System and Its Potential Impact on Arbitration, Stanford Law School China Guiding Cases Project, Mar. 15, 2018, http://cgc.law.stanford.edu/commentaries/22-guilherme-amaral.  This Commentary was edited and finalized by Dimitri Phillips and Dr. Mei Gechlik, with assistance from Sean Webb.  The information and views set out in this Commentary are the responsibility of the author and do not necessarily reflect the work or views of the China Guiding Cases Project.  Parts of the Commentary have been extracted from the author’s latest book, Judicial Precedent and Arbitration: Are Arbitrators Bound By Judicial Precedent? A Comparative Study of UK, US and Brazilian Law and Practice (Wildy, Simmonds & Hill Publishing, 2017).

[1]           The term “Guiding Cases System” (“GCS”), as used herein, refers to the system of Guiding Cases, de facto binding precedents re-issued by the Supreme People’s Court of China.  To date, 92 Guiding Cases have been released.  For more information on China’s GCS, see Mei Gechlik, China’s Guiding Cases System: Review and Recommendations, Stanford Law School China Guiding Cases Project, Guiding Cases Analytics™, Issue No. 5, Aug. 2016, http://cgc.law.stanford.edu/guiding-cases-analytics.

GCS is part of a broader system called “Case Guidance System” (“案例指导制度”), the primary goal of which is to ensure uniform application of law in China through the issuance of select important cases to guide the adjudication of subsequent cases that are similar to these important cases.  Apart from Guiding Cases, select important cases issued to date under the Case Guidance System include Belt and Road Typical Cases and more than 500 judgments selected by the Beijing Intellectual Property Court.  For more discussion of this topic, see Mei Gechlik, Chenchen Zhang, & Li Huang, China’s Case Guidance System: Application and Lessons Learned (Part I), Stanford Law School China Guiding Cases Project, Guiding Cases Surveys™, Issue No. 3, Mar. 1, 2018, http://cgc.law.stanford.edu/guiding-cases-surveys.  This commentary will not address the IP Case Guidance System, Belt and Road Typical Cases, or other case systems in use or under consideration in China.

[2]           See Mo Zhang, Pushing the Envelope: Application of Guiding Cases in Chinese Courts and Development of Case Law in China, 26 Wash. Int’l L.J. 269, 304 (2017); Jocelyn E.H. Limmer, China’s New “Common Law”: Using China’s Guiding Cases to Understand How to Do Business in the People’s Republic of China, 21 Willamette J. Int’l L. & Dis. Res. 96, 123 (2013).

[3]           Andrea Menaker, International Arbitration and the Rule of Law: Contribution and Conformity (Wolters Kluwer, 2017).

[4]           W.C. Mark Weidemaier, Judging-Lite: How Arbitrators Use and Create Precedent, 90 N.C. L. Rev. 1091, 1101 (2012).

[5]           Guilherme Rizzo Amaral, Judicial Precedent and Arbitration: Are Arbitrators Bound By Judicial Precedent? A Comparative Study of UK, US and Brazilian Law and Practice (Wildy, Simmonds & Hill Publishing, 2017).

[6]                Even though stare decisis has been associated with both the vertical and horizontal perspective of precedents, I follow Schauer in using it to refer to horizontal precedent only: “Precedent is centrally about the (not necessarily conclusive) obligation of a decision maker to make the same decision that has been made on a previous occasion about the same or similar matters.  That seems straightforward enough, but it is nevertheless important to distinguish two different dimensions of precedent.  One, which we can label vertical precedent, describes the obligation of a court to follow the decision made by a court above it in the judicial hierarchy on the same question, even if that question has arisen in a different case […]. [….] To be contrasted with this sense of vertical precedent is horizontal precedent, conventionally referred to as stare decisis (typically translated as “stand by what has been decided”) […].  Understood horizontally, the obligation of a court is not the obligation to obey a decision from above, but is instead the obligation to follow a decision by the same court (although not necessarily by the same judges) on a previous occasion.  And thus the obligation is, by definition, not one of obeying an institution higher in some hierarchy.  Rather, the obligation to follow precedent in its horizontal dimension is, in essence, about treating a prior decision as if it came from above, even if it did not, and is accordingly about following an earlier decision solely because it came earlier.”  Frederick Schauer, Precedent, in Routledge Companion to Philosophy of Law 123–36 (Andrei Marmor ed., 2012), at 123–24.

[7]           Hans Kelsen, General Theory of Law and State (Russell & Russell, 1961).

[8]           H.L.A. Hart, The Concept of Law (Oxford University Press, 2012).

[9]           For Brazil, see Amaral, supra note 5.

[10]           See, e.g., William L. Ransom, The Layman’s Demand for Improved Judicial Machinery, 73 The Annals of the American Academy of Political and Social Science 132, 148–149 (1917).

[11]           For the origins of Chinese arbitration, see Arthur J. Gemmell, Western and Chinese Arbitration: The Arbitral Chain (University Press of America, 2008).

[12]           Sun Wei & Melanie Willems, Arbitration in China: A Practitioner’s Guide (Wolters Kluwer, 2015), at 19.

[13]           “It is only when [an] arbitrator strays from interpretation and application of the agreement and effectively ‘dispense[s] his own brand of industrial justice’ that his decision may be unenforceable.”  Stolt-Nielsen S. A. et al. v. Animalfeeds Int’l Corp., 559 U.S. 662, 671 (2010) (citing Major League Baseball Players Assn. v. Garvey, 532 U.S. 504, 509 (2001)).  See also Amaral, supra note 5, at 88–134.

[14]           “When parties have made no choice of law in respect of the merits of the dispute and occasionally even if they have made a choice, international arbitrators are faced with conflict of laws problems and the need to determine the law or the rules according to which the dispute can be decided. [….] In this regard it is essential that the tribunal’s choice does not defeat reasonable expectations of the parties as expressed in their agreement.”  Julian D.M. Lew, Loukas A. Mistelis, & Stefan Kröll, Comparative International Commercial Arbitration (Wolters Kluwer, 2003), at 424.

[15]           “If a national (or international) legal system accords binding, precedential weight to judicial decisions, then arbitral tribunals should give those decisions no less legal effect than would a court in that system […].”  Gary B. Born, International Commercial Arbitration (Wolters Kluwer, 2014), at 3821.  See also Lew, Mistelis, & Kröll, supra note 14, at 44.

[16]           U.N. Comm’n Int’l Trade L., UNCITRAL Model Law on International Commercial Arbitration 1985: with amendments as adopted in 2006, Article 28 Paragraph 3 (2008), www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html: “The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so.”  See also ICC, ICC Rules of Arbitration, Article 21 Paragraph 3 (2017), https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration; LCIA, LCIA Arbitration Rules, Article 22 Paragraph 4 (2014), http://www.lcia.org/dispute_resolution_services/lcia-arbitration-rules-2014.aspx; SIAC Rules 2016, Rule 31.2 (Aug. 1, 2016), http://siac.org.sg/our-rules/rules/siac-rules-2016; HKIAC, HKIAC Administered Arbitration Rules, Rule 35.2 (2013), http://www.hkiac.org/arbitration/rules-practice-notes/administered-arbitration-rules; ICDR, International Dispute Resolution Procedures (Including Mediation and Arbitration Rules), Article 31 Paragraph 3 (June 1, 2014).

[17]           Weidemaier, supra note 4, at 1091.  This is not Weidemaier’s position on the matter, but rather his description of the position of skeptics.

[18]           Except for securities, an area in which, according to Weidemaier, arbitrators need not provide reasons for the award and in which state courts rarely produce any precedents at all.

[19]           Id. at 1122.

[20]           Analyzing the use of precedents by arbitrators in the United States, Weidemaier suggests that the pattern followed by arbitrators would in fact be an indication of the parties’ desire: “Arbitrators are market actors whose future income depends on litigant satisfaction.  If arbitrators demonstrate a pattern of citing judicial precedent, it is reasonable to infer that parties want their disputes governed by the law as articulated by courts.  By contrast, a pattern of citing to no precedent would provide some evidence that parties are content for arbitrators to resolve disputes in an ad hoc, discretionary manner.”  Id. at 1110.

[21]           Detroit Auto. Inter-Insurance Exchange v. Gavin, 331 N.W.2d 418 (Mich. 1982).

[22]           Countrywide Financial Corp. v. Bundy, 187 Cal. App. 4th. 234 (Cal. Ct. App. 2010).

[23]           Williams v. Mexican Restaurant, Inc., No. 1:05–CV–841, 2009 WL 531859 (E.D. Tex. Feb. 27, 2009).

[24]           Wilko v. Swan, 346 U.S. 427 (1953).

[25]           Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008).

[26]           Stolt-Nielsen S. A. et al. v. Animalfeeds Int’l Corp., 559 U.S. 662, 671 (2010).

[27]           The Second, Fourth, Sixth, Seventh, Ninth, and DC Circuits openly apply the “manifest disregard” standard.  The First, Third, and Tenth Circuits have dicta suggesting it is a viable standard.  Finally, the Fifth, Eight, and Eleventh Circuits deny the standard, though they review awards based on “excess of powers” by arbitrators in circumstances that are similar to manifest disregard of the law.

[28]           Sir Michael J. Mustill & Steward C. Boyd, The Law and Practice of Commercial Arbitration in England (Butterworths, 1989), at 69.

[29]           D. Rhidian Thomas, The Law and Practice Relating to Appeals from Arbitration Awards (Lloyds of London Press Ltd., 1994), at 19 (citing Podar Trading Co. v. Tagher [1949] 2 K.B. 277, 288).

[30]           Id. at 19–20.

[31]           Vinava Shipping Co Ltd v Finelvet AG (The Chrysalis) [1983] 1 WLR 1469; 1 Lloyd’s Rep. 503.

[32]           [2004] EWCA Civ 116.

[33]           [2011] EWHC 1165 (Comm).

[34]           [2003] EWHC 1936 (Comm).

[35]           The term “precedents” was not used accurately by the legislator.  Actually, the courts’ “decisions”—from which precedents can be extracted by the subsequent courts—are the ones that will be published.

[36]           “Judges and courts will observe: […].”  NCPC, Article 927.

[37]          Such as repetitive appeals.  See NCPC, Article 1036.

[38]           Mauro Cappelletti, Juízes legisladores? (Carlos Alberto Alvaro de Oliveiram trans., Sérgio Antonio Fabri ed., 1989), at 73–74; Sir Rupert Cross & J.W. Harris, Precedent in English Law (Clarendon, 1991), at 34; Hermes Zaneti Jr., O Valor Vinculante dos Precedentes: Teoria dos Precedentes Normativos Formalmente Vinculantes (JusPodivm, 2016), at 368.

[39]           Humberto Theodoro Jr., Jurisprudência e Precedentes Vinculantes no Novo Código de Processo Civil – Demandas Repetitivas, 41 Revista de Processo 359 (2016).

[40]           Amaral, supra note 5.

[41]           “[…] according to one arbitration expert, guiding cases have also been applied as sources of substantive rules in a number of arbitral proceedings.”  Mark Jia, Chinese Common Law? Guiding Cases and Judicial Reform, 129 Harv. L. Rev. 2213, 2226 (2016).

[42]           “The main purpose [of the guiding cases] is to unify judicial decisions, to resolve the ‘similar-case-different-judgment’ problem, and to regulate the exercise of judicial discretion.” Deng Jinting, The Guiding Case System in China’s Mainland, 10 Frontiers L. China 449, 454 (2015) (footnote omitted).  “To a large extent, the system of guiding cases is created to address problems arising from the non-uniform application of the law.”  Vai Io Lo, Towards the Rule of Law: Judicial Lawmaking in China, 28 Bond L. Rev. 149, 155 (2016).

[43]           See generally Lo, supra note 42.

[44]           Deng, supra note 44, at 451.  See also Limmer, supra note 2, at 124; Lo, supra note 42, at 158; JIANG Xiaoyi & SHAO Ling, The Guiding Case System in China, 1 China Legal Sci. 106, 117 (2013); Zhang, supra note 2, at 278.

[45]           Jia, supra note 41, at 2224.

[46]           Jiang & Shao, supra note 44, at 116.

[47]           Id.

[48]           Jiang & Shao, supra note 44, at 117.  As Deng explains, “[…] most agree that guiding cases are not formal legal authority; but they have general effect, although under different names, such as ‘factual binding force’, ‘quasi-judicial interpretations’, ‘binding judicial rules’, ‘persuasive effects supported by certain institutional power’, etc.” Deng, supra note 42, at 468 (footnotes omitted).

[49]           郭锋法官 (Judge GUO Feng), 中国法院指导性案例的编选与用 (The Compilation and Application of China’s Guiding Cases), 斯坦福法学院中国指导性案例项目 (Stanford Law School China Guiding Cases Project), Jan. 27, 2017, http://cgc.law.stanford.edu/commentaries/18-guo-feng.

[50]           Deng, supra note 42, at 455.

[51]           In other words (and simplifying a complex subject), deciding in accordance with the arbitrator’s own sense of justice and fairness, yet not necessarily in accordance with the law.

[52]           《中华人民共和国仲裁法》 (Arbitration Law of the People’s Republic of China), passed and issued on Aug. 31, 1994, effective as of Sept. 1, 1995, amended two times, most recently on Sept. 1, 2017, effective as of Jan. 1, 2018, http://www.npc.gov.cn/npc/xinwen/2017-09/12/content_2028692.htm.

[53]           Gemmel, supra note 11, at 164.

[54]           Gemmel, supra note 11, at 159.

[55]           Sun & Willems, supra note 12, at 103.

[56]           SONG Lianbin, YANG Ling, & Helena H.C. Chen, Annual Review of Commercial Arbitration in China, 32 Const. L.J. 3, 27 (2016).

[57]           Commenting on the importance of the respect for the rule of law in investment arbitration, David Rivkin explains: “[…] why should we care about the rule of law, or anything else beyond the interests of the parties?  I think the answer here is legitimacy. [….] States and investors must be able to count on predictability and consistency so that they can base their conduct on the interpretations of the treaty obligations that have gained a resonance in the authorities.”  David W. Rivkin, The Impact of International Arbitration on the Rule of Law. 29 Arb. Int’l. 327, 354 (2013).