Original author: Jin Jianzhi - senior lawyer at Shanghai Mankiw Law Firm

No matter what industry they invest in, investors need to pay attention to dispute resolution, especially in the encryption industry, which is a mixed bag of great players. Although no serious investor is willing to trigger the dispute resolution clause, once the parties reach the point of close combat, dispute resolution will be the last line of defense to protect the rights and interests of investors and the safety of investment assets.

01. A system more suitable for the encryption industry: arbitration

When the situation reaches the stage of dispute resolution, the subsequent direction is basically determined by the participants in the court, among which the referee plays a very important role. Ensuring that referees are familiar with and open to the crypto industry is a major benefit.

There are two traditional methods of dispute resolution: litigation and arbitration.

Litigation is an official dispute resolution process, while arbitration is a private dispute resolution process. Therefore, their qualitative nature determines that there are differences between the two in terms of procedures, substantive trials, etc. The details can be seen in the following table:

As can be seen from the above table, although arbitration also has many constraints, only arbitration can select referees, which is crucial for dispute resolution in the ever-changing encryption industry. The obvious benefits are:

1. Ensure the dispute is properly understood: Choosing an arbitrator with domain expertise and extensive experience in the crypto industry can ensure that the dispute is well understood and heard.

2. Understand the needs of the parties: Choosing an arbitrator that is favorable to you can ensure that the arbitrator better understands our position and needs, thus helping to resolve the dispute favorably.

3. Ensure the impartiality and neutrality of the arbitrator: Ensure that they do not favor any party by researching the arbitrator’s background and record.

4. Quickly resolve disputes: Arbitrators with relevant experience can usually understand the facts of the case more quickly and reduce the hearing time of the case. Thereby reducing the cost and delay of dispute resolution.

5. Reduce uncertainty: Choosing favorable arbitrators can reduce uncertainty and we can expect them to be more likely to support our point of view in the award.

In short, arbitration can enable all parties to start working hard before the formal hearing by selecting arbitrators, so as to prepare in advance for the smooth resolution of disputes.

02. Mainland arbitration VS overseas arbitration, choose overseas

Generally speaking, cases within China are subject to mainland arbitration, while cross-border and international cases are subject to offshore arbitration. The main reason is that mainland arbitration is usually governed by mainland China's laws and regulations, including China's legal procedures and court rules, and awards are usually effective within mainland China. Overseas arbitration can apply international law, international contracts, international arbitration rules and laws from different countries or regions. Arbitral awards are generally governed by international conventions and are enforced worldwide.

For investors in the crypto industry, after determining that arbitration is the best solution, the main considerations when choosing a place for arbitration are two points: Are the applicable laws and regulations friendly to the crypto industry? Can a successful judgment be enforced globally?

As of now, the United States, Japan, Singapore and Hong Kong are the only countries and regions that have a sound legal environment, are relatively friendly to the encryption industry, and are more concerned by insiders. Their main regulatory attitudes and related policies that have been introduced are shown in the table below.

As can be seen from the above table, currently, Singapore is friendly to the encryption industry and its policies have predictable stability. However, since Hong Kong announced the "Hong Kong Virtual Asset Development Policy Declaration" on November 1, 2022, its relevant systems have also changed to the naked eye. Visibly constantly improving.

As far as the enforceability of awards is concerned, since both Singapore and Hong Kong have signed the New York Convention, in principle awards made in Singapore and Hong Kong can be enforced in any court that is a member state of the New York Convention. In particular, awards issued in Hong Kong have the significant advantage that they are easier to enforce in mainland China.

In addition, the Singapore International Arbitration Center (SIAC) and the Hong Kong International Arbitration Center (HKIAC) also enjoy international reputation in the field of arbitration and are both the best arbitration centers in the world. The Singapore International Arbitration Center and the Hong Kong International Arbitration Center have both established representative offices in Shanghai. Although the main role of the representative offices is to liaise with external parties and do not accept arbitration cases, they still provide a great opportunity for conducting arbitration business in mainland China. convenient.

Taking into account the mainland’s regulatory policies and a guidance case involving the encryption industry in the 36th batch issued by the Supreme Court on December 27, 2022 (Gao Zheyu vs. Shenzhen Yunsilu Innovation Development Fund Company and Li Bin’s application to annul the arbitration award (2018) Guangdong 03 Minte No. 719), after an arduous arbitration process, was eventually dismissed by the court. So, why not choose mainland arbitration, which is cheaper, more convenient and more familiar? It is impossible to weigh the pros and cons.

03. Chinese lawyers are the first choice for overseas arbitration

Through the previous analysis, I hope that investors have understood that under the current supervision of the encryption industry, although overseas arbitration is expensive and unfamiliar to investors, choosing overseas arbitration is still the best way to resolve disputes in the encryption industry.

There is no doubt that overseas arbitration is a complex legal process. Its complexity covers the clarity of the arbitration agreement, the appropriateness of the arbitration rules, the selection of arbitrators, case strategy, language requirements, international legal knowledge, cultural differences, evidence requirements, and enforcement of the award. , expenses and budget, etc., and any mistakes in each aspect may have serious consequences.

However, given that investors are unfamiliar with foreign arbitration environments and foreign laws and regulations, they may also fall into big pits if they rashly hire foreign lawyers. When facing such complex and large-scale overseas arbitration, hiring Chinese lawyers to intervene in advance and throughout the process can ensure that the case is handled in the best interests.

Because Chinese lawyers will use their own legal expertise and international arbitration experience, language communication skills, familiarity with the Chinese market and Chinese clients, and extensive contacts with international law firms to fully mobilize various resources to ensure the facts and laws of the case. Obtain comprehensive analysis and demonstration, and improve the probability of Chinese companies winning in overseas arbitration on the basis of controlling legal costs.

04, Article Easter Egg

Finally, the model arbitration clauses from the Singapore International Arbitration Center and the Hong Kong International Arbitration Center are attached for reference.

1. Singapore International Arbitration Center:

Any dispute arising out of or in connection with this contract, including any issue regarding the existence, validity or termination of the contract, shall be submitted to the Singapore International Arbitration Center (referred to as the "Center") and shall be settled in accordance with its currently effective rules. Singapore conducts final arbitration. After the signing of this contract, if the Center modifies its arbitration rules, the arbitration will be conducted in accordance with the latest revised rules that have been adopted by the Center and are in effect. The existing rules of the Center or the above-mentioned revised rules shall be deemed to be part of this Article.

The arbitral tribunal will consist of _________________ arbitrators appointed by the Chairman of the Center.

The arbitration language is _________________.

This contract shall be governed by the laws of _________________.

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause.

The seat of the arbitration shall be [Singapore] .

The Tribunal shall consist of _________________ arbitrator(s).

The language of the arbitration shall be ________________.

This contract is governed by the laws of _________________.

2. Hong Kong International Arbitration Center

Any dispute, controversy, disagreement or claim arising out of or in connection with this contract, including its existence, validity, interpretation, performance, breach or termination, or any non-contractual dispute arising out of or in connection with this contract Sexual disputes shall be submitted to arbitration for final resolution in accordance with the Local Arbitration Rules of the Hong Kong International Arbitration Center in effect at the time the arbitration notice is submitted.

The law applicable to this arbitration clause is... (Hong Kong law)

The place of arbitration shall be... (Hong Kong)

The number of arbitrators shall be... (one or three). The arbitration proceedings shall be conducted in (select language).

We, the undersigned, agree to refer to arbitration under the HKIAC Domestic Arbitration Rules in force when the Notice of Arbitration is submitted any dispute, controversy, difference or claim (including any dispute regarding non-contractual obligations) arising out of or relating to:

(Brief deion of contract under which disputes, controversies, differences or claims have arisen or may arise).

The law of this arbitration agreement shall be … (Hong Kong law).

The seat of arbitration shall be... (Hong Kong).

The number of arbitrators shall be... (one or three). The arbitration proceedings shall be conducted in... (insert language).

Special Statement

This article is an original article by Shanghai Mankiw Law Firm. It only represents the personal views of the author of this article and does not constitute legal consultation or legal opinions on specific matters. If you need to reprint the article, please contact Mankun Law Firm staff: MankunLawFirm