How Does the BAC charge arbitration service
Zhai Xueming^*

I. Charge method

In general, there are two internationally recognized arbitration service charge methods: 1) charge in a lump sum; and 2) charge according to itemized bill.

The lump sum charge refers to the sum charged by an arbitration agency at the stage of case acceptance.This charge covers case management fees, remuneration for arbitrators, and other expenses actually incurred. The lump sum charge (including the remuneration for arbitrators) is distributed by the arbitration agency, based on the actual progress of the case. In addition, all arbitration fees are determined at the time of case acceptance (or counterclaim) unless it cannot be determined. However, the parties need not to pay arbitration fees except for commission of survey and travel expenses of arbitrators who are coming from out of town. The lump sum charge is proportionally calculated. The actual charge is calculated with reference to the charge rates under a progressive rating system. Usually, the more a case is worth, the lower the proportion is.

Currently, most of China’s arbitration agencies adopt lump sum charge method. Institutions that use this method include Beijing Arbitration Commission (BAC), China International Economic and Trade Arbitration Commission (CIETAC), and China Maritime Arbitration Commission (CMAC).

Under the itemized charging method, arbitration agencies have charging rates specific to case management, arbitrator compensation, and registration fees. Each item charged under the itemized charging method is subject to specific use. This charging method is more popular internationally. The ICC, SCC, and AAA adopt this method.

II. The charging method usually adopted by BAC

BAC adopts the lump sum charge method. Under this method, arbitration fees consist of acceptance fees and handling fees. Progressive rates are adopted in accordance with the Case Acceptance Fee Schedule and the Case Handling Fee Schedule, enforced on March 1, 2004.
For details, please refer to: http://www.bjac.org.cn/program/feiyong.html

Please note that there is a special explanation under each of the charging methods.
As for the cases with the disputed amount between 500,000 and 1,000,000, the case acceptance fee shall be charged of 13550 plus 50% of the fee charged of the amount exceeding 500,000 when the cases are handled through the summary procedure.

Parties often ask the question: “Simplified arbitration is half price, right?” In fact, this question is based on the charge method noted above. The arbitration fee calculated through our website and the computers in the Acceptance Office has taken this special circumstance into account. Be assured that the calculation result is fully in accordance with the Charging Method.

III. Factors distinguishing arbitration fees and litigation cost

Arbitration fees include remuneration for arbitrators. Judges are public servants, and their remuneration is paid through state funds. Arbitrators, however, are hired by arbitration commission, and their remuneration is directly paid from the arbitration fee. Many applicants do not realize this, and therefore feel that arbitration fees are excessively high.

In addition, remuneration for arbitrators is high due to the specialized expertise required of arbitrators. Arbitrators consist of a variety of professionals including retired judges, university professors, government officials, lawyers, experts, and scholars in various fields. In terms of a specific case, the arbitrators are usually experts in fields specific to that case, and therefore have superior knowledge that will give their decisions more authority.

Why are arbitration fees generally greater than litigation costs? To answer this question, the following factors should be taken into account: 1) Arbitration is more efficient than legal proceedings (the BAC helps to save time to a great extent by adopting the international service method of notarizing the mailing will rather than using the traditional announcement method) due to the shorter period of time required to make a final decision (according to BAC arbitration rules, the time limit of trial beginning from the organization of the court will last 75 days under summary procedure, 4 months under common procedure, 90 days under summary procedure for international commercial disputes, and 6 months under common procedure for international commercial disputes).? Therefore, the human cost associated with arbitration procedures is higher; 2) Arbitral decisions are final, relieving parties from exhaustive legal proceedings and saving attorney fees and legal costs associated with legal proceedings in the second instance; 3) Arbitration procedures are more flexible. Litigants have more choices in terms of party autonomy (for example, parties have their privilege to appoint arbitrators and choose the arbitration procedures, time of opening court, location of opening court and so on); 4) Arbitration procedures are confidential. Unless otherwise specified by parties, all persons relating to the arbitration shall hold the duty of secrecy (see Article 24 of the Arbitration Rules of the BAC); 5) Fees associated with cases having large dispute amounts are lower than otherwise charged under litigation costs; 6) According to Article 45 of the Arbitration Rules of BAC, request for attorneys' fees can be awarded in arbitration case.