China International Economic and Trade Arbitration Commission

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 background

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.

Short Chronology of recent events:

  • 1 May 2012: CIETAC issued a statement denouncing SHIAC's split from CIETAC (and the Beijing central administration), declaring that SHIAC had: 'violated the Arbitration Law of China and the relevant regulations of the State Council as well as CIETAC’s Articles of Association, causing confusion in the domestic and international arbitration communities and seriously affecting parties’ exercise of their arbitration rights'. On the same date, CIETAC issued an open letter to all CIETAC arbitrators denouncing the actions of Shanghai and Shenzhen
  • 1 August 2012: CIETAC announced that it had suspended SHIAC and SCIA's authorisation to accept and administer CIETAC cases and that cases already submitted to the two sub-commissions would be administered by Beijing and heard in either Shanghai or Shenzhen
  • 4 August 2012: SHIAC and SCIA issued a joint statement that CIETAC's announcement was not binding on them and they continued to invite applications for arbitration
  • 28 August 2012: SHIAC and SCIA issued a joint statement that they are independent arbitral institutions and: '[b]ased on the legal principle of party autonomy, disputes shall be submitted to CIETAC Shanghai where the arbitration agreements referring the disputes to CIETAC Shanghai. Likewise, disputes shall be submitted to CIETAC South China where the arbitration agreements referring the disputes to CIETAC South China. None of any other arbitral institution is legally entitled to accept or administrate the same.' They are in effect saying that if the parties refer in their arbitration agreements to CIETAC's operations in Shanghai or Shenzhen, they are referring to SHIAC and SCIA
  • 11 October 2012: SHIAC issues statement that it alone is permitted to hear disputes referred to China International Economic and Trade Arbitration Shanghai Commission or Sub-commission
  • 31 December 2012: CIETAC declared that:
    • SCIA's conduct, rules and panel of arbitrators are null and void by law
    • SHIAC and SCIA are forbidden from using the CIETAC name and brand
    • SHIAC and SCIA's authorisation to accept and administer cases is terminated
  • Further, the announcement advised parties who had agreed to arbitrate their disputes with CIETAC Shanghai or CIETAC Shenzhen to submit their requests for arbitration to CIETAC in Beijing and that when the CIETAC Secretariat accepts and administers such cases the arbitration will be seated in Shanghai or Shenzhen unless the parties agree otherwise
  • 21 January 2013: SHIAC and SCIA issued a joint statement reaffirming that they are valid institutions according to law and have the authority to hear arbitrations
  • 16 April 2013: SHIAC officially becomes Shanghai International Economic and Trade Arbitration Commission (also known as the Shanghai International Arbitration Center)

What's the issue?

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:

  • the South China Office of CIETAC Secretariat accepts arbitration applications and handles 'related procedural issues':
    • where the parties have agreed to submit their cases to the CIETAC South China Sub-commission (Shenzhen Sub-Commission)
    • where the parties have agreed to submit their cases to CIETAC to arbitrate in Shenzhen or to hold oral hearings in Shenzhen
  • the Shanghai Office of CIETAC accepts arbitration applications and handles 'related procedural issues':
    • where the parties have agreed to submit their cases to the CIETAC Shanghai Sub-commission
    • where the parties have agreed to submit their cases to CIETAC to arbitrate in Shanghai or to hold oral hearings in Shanghai

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 you?

Has this affected your decision as to whether to arbitrate in China? Let us know your thoughts below.

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Filed Under: Arbitration , News

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