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Continuing with our arbitration theme and following on from last week's consideration of the Caribbean court holding an LCIA arbitration award unenforceable, in this week's analysis post we consider the latest news and developments relating to the China International Economic and Trade Arbitration Commission (CIETAC)'s relationship with its former sub-commissions in Shanghai and Shenzhen.
The China International Economic and Trade Arbitration Commission (CIETAC) is a permanent arbitration institution, which administers domestic and international arbitrations. CIETAC has its headquarters in Beijing, and, historically, had sub-commissions in Shenzhen, Shanghai, Tianjin and Chongqing, which were known respectively as the CIETAC South China Sub-Commission, the Shanghai Sub-Commission, the Tianjin International Economic Financial Arbitration Center (Tianjin Sub-Commission) and Southwest Sub-Commission.
CIETAC's website explains the relationship between these entities as follows: 'CIETAC and its sub-commissions constitute a single arbitration institution. They adopt the same set of Arbitration Rules and the same Panel of Arbitrators. That sub-commissions are branches of CIETAC was explicitly stipulated in CIETAC’s Articles of Association of 1993, and has remained so ever since.'
Following the introduction of CIETAC's Arbitration Rules 2012 (which came into force on 1 May 2012), CIETAC's Shanghai and Shenzhen branches declared themselves independent institutions with separate rules. The two former sub-commissions are now known as the Shanghai International Arbitration Center (SHIAC) and the Shenzhen Court of International Arbitration (SCIA). It is understood that SHIAC and SCIA objected to a new provision in the CIETAC Arbitration Rules 2012, which provided for CIETAC Beijing to be the default administrator of all CIETAC cases unless the parties expressly referred the dispute to a particular sub-commission. CIETAC has objected forcefully to the conduct of its former sub-commissions and the split has introduced an unwelcome level of uncertainty regarding the jurisdiction of these 'new' institutions to hear certain disputes independently of CIETAC.
The schism detailed above is of interest to anyone involved with arbitrating disputes in China. It will also be of significant interest to parties who have agreed to submit their disputes for arbitration before either SHIAC or SCIA or are considering doing so.
On 7 May 2013, the Intermediate People’s Court of Suzhou made a ruling of non-enforcement in relation to an arbitral award made by SHIAC. The court held that the parties had chosen CIETAC Shanghai to settle their disputes and, after SHIAC separated from CIETAC, it was no longer the institution which had been chosen by the parties and SHIAC had no right to continue with the case and to render the award without obtaining the parties' confirmation that it was their chosen institution. However, on 20 November 2012, the Intermediate People’s Court of Shenzhen confirmed the validity of an arbitration agreement submitting disputes to SCIA and recognising SCIA’s jurisdiction over the case.
The fact that local Chinese courts have reached opposing decisions on similar jurisdiction issues has introduced uncertainty into this area. As a result, it remains unclear whether SHIAC or SCIA have jurisdiction over cases where the parties had agreed on the CIETAC Sub-Commissions’ jurisdiction before they announced their separation from CIETAC. There is a risk that increased numbers of aggrieved parties will apply to local courts for the cancellation or non-enforcement of an arbitral awards.
Due to this uncertainty, if parties wish to arbitrate in China, it may be advisable to explicitly state in the arbitration agreement that any disputes are to be referred to CIETAC in Beijing. If it is more convenient for the hearing to take place in either Shanghai or Shenzhen, then parties should indicate this preference in the agreement. If you have already agreed to arbitration administered by one of the affected CIETAC sub-commissions, it may be prudent to obtain specialist legal advice on this issue and perhaps to consider amending the arbitration agreement.
On 1 August 2013, CIETAC issued an announcement regarding the relocation of the offices of its Shanghai and Shenzhen commissions. CIETAC also made the following announcement regarding its administering jurisdiction in these locations:
Accordingly, there remains considerable uncertainty regarding which institution has jurisdiction over which disputes as it appears that both CIETAC and its former sub-commissions have asserted jurisdiction over the same categories of cases.
Has this affected your decision as to whether to arbitrate in China? Let us know your thoughts below.
This practice note was first published for subscribers of LexisPSL. If you are not a subscriber, please click here to find out more and to access a free trial.
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