Recent developments
The China International Economic and Trade Arbitration Commission (“CIETAC”) has recently published its new arbitration rules (the “2015 Rules”) bringing China’s arbitration regime closer to international practices. The 2015 Rules amend CIETAC’s current rules implemented on May 1, 2012 (the “2012 Rules”) and came into effect on January 1, 2015.
The changes in the 2015 Rules are substantial. Among other things, they provide for complex arbitrations including multi-party and multi-contract arbitrations – single arbitrations under multiple agreements, procedures for consolidation, and joinder of third parties. It also provides for emergency arbitrator provisions and procedures for arbitrations conducted by the CIETAC Hong Kong Arbitration Center (“CIETAC Hong Kong”).
Our previous alerts discussed the rift between CIETAC and its former Shenzhen and Shanghai sub-commissions and the potential difficulty in relation to enforcement of awards by local PRC courts. The 2015 Rules attempt to resolve some of these uncertainties.
Clarifications
In line with providing parties with further options, CIETAC Hong Kong was established in September 2012 as CIETAC’s first branch outside Mainland China. The 2015 Rules clarify that the awards of CIETAC Hong Kong are Hong Kong awards and Hong Kong law shall apply to procedural issues unless otherwise agreed.
The 2015 Rules also endeavour to resolve the dispute over the arbitration clause caused by the split of CIETAC’s previous Shanghai and Shenzhen sub-commissions. In particular, they replace the CIETAC Secretariat with a new body called the “Arbitration Court” to take over the functions performed by the Secretariat. The 2015 Rules also provide that where the sub-commission/arbitration center agreed upon does not exist or its authorization has been terminated, or where the agreement is ambiguous, CIETAC Beijing shall accept the arbitration application and administer the case and if there is any dispute, a decision shall be made by CIETAC. However, these rules have no binding force on the courts and may not effectively remove all the problems.
New name for CIETAC
CIETAC will concurrently use the new name “Arbitration Institute of the China Chamber of International Commerce”.
The following table sets out a summary and discussion of the key changes in the 2015 Rules.
| Summary of Key Changes in the 2015 Rules | |
| “Secretariat” to “Arbitration Court” | The 2012 Rules provide that the arbitration shall be administered by the Secretariat. The 2015 Rules introduce a new body called “Arbitration Court” to take over the functions performed by the Secretariat.” After CIETAC accepts a case, the Arbitration Court shall designate a case manager to assist with the procedural administration of the case.Comment: At present, there is no information about the structure of the “Arbitration Court”. It is likely that the staff of the Arbitration Court will come from the current Secretariat and that its introduction may not materially change CIETAC’s current management practice. |
| Arbitrations by the former Shanghai and Shenzhen sub-commissions | The 2015 Rules provide that “where the sub-commission/arbitration center agreed upon by the parties does not exist or its authorization has been terminated, or where the agreement is ambiguous, the Arbitration Court shall accept the arbitration application and administer the case. In the event of any dispute, a decision shall be made by CIETAC”.Comment: While the rules have set out a mechanism for dealing with the uncertainties mentioned above, there is no guarantee that disputes caused by the split of the former Shanghai and Shenzhen sub-commission can be completely resolved. The 2015 Rules are not binding on the PRC courts and it remains to be seen how the 2015 Rules will apply to arbitration clauses agreed before the 2015 Rules. Further, where a dispute arises over the applicable rules and authority of CIETAC Shanghai / CIETAC Shenzhen to accept and administer arbitration cases, the courts are required to consult the higher level courts up to the Supreme People’s Court (“SPC”) as specified in the SPC’s Notice on Issues Regarding Judicial Review of Arbitration Cases issued in September 2013. The final power to decide the validity of such arbitration clause rests with the SPC. |
| Single arbitration under multiple contracts | Claimants will be allowed to initiate a single arbitration concerning multiple contracts if all the conditions below are met:
Comment: The new provision will improve efficiency and allow cost savings in arbitrations arising under complicated transactions involving both an umbrella agreement and individual agreements, and disputes under the master agreement and collateral agreements. |
| Joinder of additional parties | A party wishing to join an additional party to the arbitration may file a request with CIETAC, based on the arbitration agreement invoked in the arbitration that binds the additional party. The request for joinder shall be determined by the Arbitration Court if the tribunal has not been constituted.Any party can object to the arbitration agreement and/or jurisdiction over the arbitration with respect to the joinder proceedings. CIETAC has the power to decide on its jurisdiction based on the arbitration agreement and relevant evidence.
Comment: Unlike the Singapore International Arbitration Centre Rules, consent is not required for joinder under the CIETAC Rules. |
| Consolidation of related arbitration proceedings | One or more arbitrations can be consolidated into a single arbitration. A party may request CIETAC to consolidate arbitrations into a single arbitration in the following situations:
All the parties to the arbitrations have agreed to consolidation. Comment: Consent from the parties is not required. The consolidation and joinder of third parties will assist parties to avoid having to pursue multiple proceedings arising out of the same dispute which would not be cost effective, and the inherent risk of conflicting decisions. |
| Emergency arbitrator | Before composition of the tribunal, the parties can apply for an emergency arbitrator to grant urgent interim relief, either with the agreement of the parties or in accordance with the law applicable to the arbitration (i.e. the law of the arbitral seat).Unless otherwise agreed by the parties, the emergency arbitrator shall not act as arbitrator of the tribunal. The emergency arbitrator’s powers cease on composition of the arbitral tribunal, and the existence of emergency proceedings does not preclude a party from applying to any competent court for interim relief.
Comment: Under the PRC Arbitration Law, only the court has the power to grant interim measures. The courts’ attitude towards enforcement of the emergency arbitrator’s decision on interim relief is unclear. Unlike the Hong Kong Arbitration Ordinance, the PRC Arbitration Law has not been amended to address the enforcement of emergency arbitrator orders. We consider that these emergency procedures will only effectively apply to arbitrations administered by CIETAC Hong Kong and will only be enforceable in Hong Kong. |
| Summary procedure | The 2015 Rules increase the threshold for applying for summary procedure from RMB 2 million to RMB 5 million.Comment: This change, which aims to increase efficiency, is in line with the practice of other major arbitration institutions. |
| Hong Kong arbitrations | The 2012 Rules came into effect before CIETAC Hong Kong was set up. A new chapter (Chapter VI) has thus been introduced for arbitrations administered by CIETAC Hong Kong and includes the following provisions:
Comment: Two important implications arise out of the above revisions. CIETAC Hong Kong awards will be Hong Kong awards and enforceable in Mainland China under the Arrangement of the Supreme People’s Court on Reciprocal Enforcement of Arbitration Awards between the Mainland and the Hong Kong Special Administrative Region. Under the current regime, PRC courts are not able to grant interim measures to assist foreign arbitrations including CIETAC Hong Kong arbitrations. |
Actions to consider
Foreign companies doing business in China should consider the following actions when negotiating arbitration clauses:
- For those who require a Shanghai or Shenzhen seat, parties should agree that their CIETAC arbitrations be administered by CIETAC Beijing with the arbitration seat in Shanghai or Shenzhen.
- Draft consistent arbitration clauses in all agreements arising under the same transaction so that consolidation, joinder and multiple contract arbitration are possible.
- Before an application for emergency relief, consult local counsel on the pros and cons of applying before the state courts or an emergency arbitrator.
The 2015 Rules recognise and reflect many of the practices of modern international arbitration, and aim to provide effective mechanisms in order to better to serve the end-users of the CIETAC arbitral process. As these rules are now more akin to the arbitration rules of other major institutions such as the ICC, HKIAC and SIAC, parties seeking arbitration in the region will be armed with greater choices for dispute resolution.
By Cynthia Tang and James Kwan.
