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On 29 December 2007, the National People's Congress passed a new PRC Law on Mediation and Arbitration on Labour Disputes (the "Labour Arbitration Law") that will come into force on 1 May 2008. The law applies to an employer in the People's Republic of China (the "PRC") and their employees.

When such labour disputes occur, it is common practice for the dispute to be referred initially to mediation. Often issues concerning the neutrality of the mediator may lead to the failure of the mediation to result in settlement and the next stage will be for the employer or employee to apply to the local labour arbitration commission for arbitration.

The Labour Arbitration Law expands the power of the local labour arbitration commissions, allowing them to issue legally binding awards. Awards against the employer are non-appealable on the following issues:

a) Remuneration;

b) Medical expenses for work-related injuries;

c) Monetary compensation or damages (not exceeding 12 times the local minimum monthly salary); and

d) Disputes arising from implementation of state standards on work hours, holidays and social insurance.

Perhaps the most significant change under the Labour Arbitration Law is to extend the period by which a party must commence a labour arbitration from 60 days from the occurrence of the labour dispute (under the existing regime) to one year (pursuant to Article 27). Additionally, there are a number of events that can, if they occur within the one-year limitation period, cause the limitation period to run afresh. Article 27 also provides for extension of this one-year limitation period when a force majeure event or other justifiable causes prevent the potential claimant from commencing a labour arbitration.

The White & Case International Disputes Quarterly is prepared for the general information of our clients and other interested persons. It should not be acted upon in any specific situation without appropriate legal advice.

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