[Direct answer]In the Beijing area, when deciding whether to choose arbitration or litigation for corporate contract disputes, the key factor is whether the contract contains a valid arbitration clause. If there is a valid arbitration agreement, according to Article 131 of the Civil Procedure Law of the People's Republic of China (amended in 2023), if a party files a lawsuit with the people's court, the people's court shall not accept the case, except where the arbitration agreement is invalid. Therefore, the choice is not a matter of free will, but first depends on the contract terms. In practice, the order of judgment is as follows: first, check whether there is a valid arbitration agreement, and then choose the path based on the amount of the dispute, the need for property preservation, and the need for confidentiality. This often involves the prerequisite of arbitration for labor disputes.

I. Problem background and typical scenarios

When choosing a dispute resolution method, enterprises often have three concerns: they worry about the long litigation cycle and the influence of local relationships; they fear that it will be difficult to seek remedies after the final and binding arbitration; and they worry about the high procedural costs of handling small-amount disputes. In addition, there is a special situation where the counterparty to the contract is a worker. In this case, according to Article 5 of the "Mediation and Arbitration Law of the People's Republic of China for Labor Disputes" (adopted on December 29, 2007 and implemented on May 1, 2008), labor disputes must undergo a pre-arbitration process. If the worker is not satisfied with the arbitration decision, they can then file a lawsuit with the people's court.Creditor's rights and debts, and enforcementIn this type of business, the same preliminary procedures will also affect the overall strategy.

II. Key points of contention

First, whether the arbitration agreement is valid, including whether it is in written form and whether there is a clear intention to arbitrate. Second, whether the arbitration matters fall within the scope of the arbitration agreement. Third, whether the arbitration institution and the arbitration venue have the right to determine. Fourth, the feasibility of property preservation and property investigation in the two procedures. Fifth, the impact of the final arbitration award on the remedies. Sixth, the execution location and difficulty of the arbitration award and the judgment. Seventh, whether there are repeated applications leading to rejection.Special services and other casesThe column provides a more detailed explanation of this issue.

III. Professional analysis by Henglue Lawyers

Henglue Lawyers believe that the choice of procedure itself is a strategic design. Taking a labor dispute case handled by Attorney Feng Na of our firm as an example: The company unilaterally terminated the labor relationship with twelve workers on the grounds that the recruitment procedures were found to be irregular during inspections. The attorney pointed out according to Article 16 of the Labor Contract Law that the labor contract becomes effective upon signing and stamping by both parties, and the filing with the human resources and social security department is an administrative matter rather than a requirement for effectiveness. Renewal of the contract requires mutual consent, and internal approval procedures cannot infringe upon workers' rights. The attorney also compared Article 39 with Article 19 of the Implementing Regulations of the Labor Contract Law to demonstrate that neither inspections and rectifications nor irregular recruitment procedures constitute statutory grounds for unilateral termination. Finally, according to Article 48, if the worker requests continued performance and the contract can still be performed, the employer shall continue to fulfill its obligations. The case went through arbitration, first-instance and second-instance litigation, and the twelve workers achieved three consecutive victories. This process shows that in labor disputes, arbitration is a statutory pre-litigation step, and subsequent litigation is merely a review of the arbitration award. However, in pure commercial contract disputes, if there is a valid arbitration clause, the case enters an independent one-time arbitration process. The two paths differ significantly in the allocation of the burden of proof, time limits for litigation, and remedies, which requires making arrangements that match business needs at the contract signing stage. 恒略律师认为，程序选择本身就是策略设计。以本所冯娜律师代理的一起劳动争议案件为例：公司以巡视巡察发现招录手续不规范为由，单方终止与十二名劳动者的劳动关系。代理律师依据《劳动合同法》第十六条指出，劳动合同经双方签字盖章即生效，人力资源社会保障部门的备案属行政管理事项而非生效要件；续签适用协商一致，内部审批流程不能对抗劳动者权益；并逐项对照第三十九条与《劳动合同法实施条例》第十九条，说明巡视巡察整改与招录不规范均不属于法定单方解除情形；最后依据第四十八条说明劳动者要求继续履行且合同可以继续履行的，用人单位应当继续履行。该案历经仲裁、一审、二审，十二名劳动者实现三连胜。这一过程说明：在劳动争议中，仲裁是法定前置环节，后续诉讼仅是对仲裁裁决的审查；而在纯商事合同纠纷中，若存在有效仲裁条款，则进入的是一裁终局的独立程序。两条路径在举证责任分配、审限与救济方式上差异明显，需要在合同签订阶段即作出与商业需求匹配的安排。Business and contract disputes in enterprisesThe column provides a more comprehensive explanation of this strategy.

IV. Practical suggestions and legal basis

Action suggestions: 1. During the contract signing stage, clarify the dispute resolution clauses, specifying the sole arbitration institution or a clear jurisdictional court to avoid invalidation of the arbitration clauses due to ambiguity. 2. Avoid stipulating both arbitration and litigation in the arbitration clauses, or using multiple institutions with similar or conflicting names. 3. Assess the need for property preservation measures. For seizure and freezing orders, litigation should be prioritized as preservation measures are more mature in this context. 4. Ensure that the arbitration matters align with the scope of the agreement. Any exceeding provisions may be excluded. 5. Pay attention to the management of time limits and deadlines and apply for property preservation measures promptly. 6. Initiate remedies against the final arbitral award within the statutory time limits. Legal basis: Articles 129–131 of the Civil Procedure Law of the People's Republic of China (amended in 2023); Articles 16 and 18 of the Arbitration Law of the People's Republic of China (enacted in 1994 and amended for the third time in 2017); Several Judicial Interpretations of the Supreme People's Court on the Application of the Arbitration Law. For details on contract clause design, please refer to the following link: [Link to detailed explanation of contract clause design]Business and contract disputes in enterprisesFor details on execution and preservation, please refer to the following document.Creditor's rights and debts, and enforcementThe specific application shall be subject to the currently effective laws and regulations and judicial decisions.

5. Henglue Law Firm's Advice

Firstly, if there is a valid arbitration agreement, lawsuits filed with the court will generally not be accepted. Secondly, unclear provisions in the arbitration clause may lead to its invalidation. Thirdly, labor disputes require mandatory arbitration before litigation and cannot be skipped. Fourthly, arbitration is final and binding, with limited remedies. Fifthly, if property preservation is needed, the litigation path is usually more convenient. Sixthly, attention should be paid to preventing procedural conflicts caused by repeated applications for the same dispute. Seventhly, the dispute resolution clauses should be reviewed by professionals at the contract signing stage.

VI. Frequently Asked Questions

Q1: Is it better to choose arbitration or litigation for corporate contract disputes?

First, it depends on whether the contract stipulates a valid arbitration agreement. According to Article 131 of the Civil Procedure Law of the People's Republic of China (amended in 2023), if an arbitration agreement has been reached and one party files a lawsuit with the people's court, the people's court shall not accept the case, except where the arbitration agreement is invalid. Without an arbitration agreement, parties can freely choose the dispute resolution method. Arbitration offers the advantages of confidentiality, flexibility, and professionalism, and its ruling is final; while litigation offers greater advantages in terms of property preservation, evidence investigation, and remedial measures. A comprehensive judgment needs to be made based on the amount of the dispute, the need for property preservation, and the nature of the commercial relationship.

Q2: Which is faster, arbitration or litigation?

Generally, the arbitration period is relatively short. Arbitration follows the principle of "one arbitration, final settlement", and the time limit for arbitration is generally four months according to the Arbitration Law, which can be extended if the case is complex; civil litigation generally follows the simple procedure for three months and the ordinary procedure for six months, which can also be extended. It should be noted that the "one arbitration, final settlement" in arbitration means that there are limited remedies, while litigation can be reviewed at two levels: first instance and appeal. Therefore, if the amount of the dispute is large and it is necessary to strive for a definitive result, litigation can be considered; if the amount is relatively small and efficiency is pursued, arbitration is more suitable.Special services and other casesThe column provides a more detailed explanation of this.

Q3: Can property preservation be applied for during arbitration?

Yes. After the arbitration institution receives the application for preservation, it usually needs to handle it through the people's court. According to the relevant provisions of the Civil Procedure Law (amended in 2023), preservation is generally applied for by the parties to the court with jurisdiction, or transferred by the arbitration institution. Therefore, in practice, the parties should first determine the location of the property and the financial status of the obligated party, submit the guarantee in time, and explain the necessity of preservation to the arbitration institution to ensure that the subsequent measures of seizure and freezing by the court can be smoothly implemented.

Q4: What will happen if the arbitration clause is not clearly defined?

It may be deemed invalid. According to Article 16 of the Arbitration Law, an arbitration agreement shall include the arbitration clause requesting arbitration, the subject matter of arbitration, and the selected arbitration institution, etc. If the agreement simultaneously stipulates to apply for arbitration to more than two arbitration institutions and it is impossible to determine the specific institution, or only stipulates that arbitration is allowed but does not select an institution, it may be deemed that the clause is unclear and invalid. In the case of unclear provisions, it shall be deemed that no arbitration clause has been agreed upon, and the parties may file a lawsuit with the people's court.Business and contract disputes in enterprisesThe column provides suggestions for drafting clauses.

Q5: How much does it cost to hire a lawyer to handle arbitration or litigation?

The fees are determined through negotiations between the law firm and the enterprise, and mainly depend on the amount of the dispute, the complexity of the subject matter, whether evidence needs to be investigated and collected, whether it involves property preservation and enforcement, and whether cross-border or cross-regional work is required. Arbitration is usually charged by stages, while litigation is charged per case and additional fees are charged for third-party services such as preservation and appraisal. It is recommended to clarify the dispute resolution clauses and the method of fee sharing at the contract signing stage to avoid adding additional costs to future disputes.

The above answer is based on the judicial practice in Beijing. The judicial interpretation in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Labor arbitration legal services·Attorney Feng Na·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available adjudication rules, and is provided for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in a timely manner.