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China – Going Global: CIETAC Introduces New Arbitration Rules 2015.

8 December, 2014

 

Legal News & Analysis – Asia Pacific – China –  Dispute Resolution

 

The China International Economic and Trade Arbitration Commission (“CIETAC”) has recently published its revised Arbitration Rules, which come into force on 1 January 2015. The 2015 Rules are available on CIETAC’s website.

 

According to the Secretary General of CIETAC, the changes are designed to improve the efficiency of CIETAC arbitral proceedings and bring the CIETAC Rules further into line with international best practice. The new rules also aim to address the confusion and ambiguity that followed the so-called “CIETAC split” in the wake of the 2012 Rules update, when CIETAC’s former Shanghai and Shenzhen sub-commissions broke away from the Beijing commission and declared their independence as separate arbitral commissions.

 

Key amendments include:

 

  • Extended grounds for consolidating arbitrations into a single arbitration, in addition to consolidation with the consent of all parties;
  • Where disputes arise out of or in connection with multiple contracts, the Claimant may commence a single arbitration under certain circumstances;
  • Addition of a mechanism for joining an additional party to the arbitration;
  • Mechanism for appointing emergency arbitrators under the applicable law or by agreement of the parties;
  • Increased threshold for applying the summary procedure;
  • Introduction of special provisions in relation to arbitrations administered by the CIETAC Hong Kong Arbitration Center, including Hong Kong as the default seat and Hong Kong law as the applicable law of the arbitral proceedings, power for Hong Kong seated tribunals to order interim relief, and separate provisions for administrative and arbitrator fees; and
  • Further improvement or clarification of procedural matters, including methods for serving arbitration documents, and increased powers to the presiding arbitrator of the tribunal.

 

1. Administration Of Cases Following The CIETAC “Split” (Article 2)

 

Article 2 of the new Rules clarifies the structure of CIETAC, including how the CIETAC Hong Kong Center and CIETAC sub-commissions fit within the overall structure, following the 2012 secession of the former Shanghai and Shenzhen sub-commissions from CIETAC.

 

Article 2(6) states expressly 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 [CIETAC Beijing] Arbitration Court shall accept the arbitration application and administer the case. In the event of any dispute, a decision shall be made by CIETAC”. This provision aims to address the confusion and ambiguity that followed the split, which left parties doubtful as to the efficacy of their CIETAC clauses, particularly those clauses that provided for arbitration to be administered by CIETAC Shanghai or CIETAC Shenzhen.

 

Where the parties have agreed to submit their disputes to the CIETAC Hong Kong Arbitration Center for arbitration or to CIETAC for arbitration in Hong Kong, the CIETAC Hong Kong Arbitration Center shall accept the arbitration application and administer the case (Article 73).

 

2. Consolidation Of Related Arbitration Proceedings (Article 19)

 

The 2012 CIETAC rules provide a mechanism for parallel proceedings to be consolidated into a single arbitration upon the agreement of all parties. Article 19 of the 2015 Rules further provides that, at the request of a party, CIETAC may consolidate arbitrations into a single arbitration if:

 

  1. all claims in these arbitrations are made under the same arbitration agreement; or
  2. the claims in the arbitrations are made under multiple arbitration agreements that are identical or compatible and
    • the arbitrations involve the same parties and the legal relationships are “of the same nature”; or
    • the multiple contracts involved consist of a principal contract and its ancillary contracts.

 

3. Single Arbitration Concerning Multiple Contracts (Article 14)

 

The 2015 Rules codify CIETAC’s approach to disputes arising out of or in connection with multiple contracts. The Claimant may initiate a single arbitration concerning multiple contracts if all the conditions below are met:

 

  1. the contracts consist of a principal contract and ancillary contract(s), or the contracts involve the same parties as well as “legal relationships of the same nature”;
  2. the disputes arise out of the same transaction or the same series of transactions; and
  3. the arbitration agreements in such contracts are identical or compatible.

 

4. Joinder Of Additional Parties (Article 18)

 

The 2015 Rules introduce a mechanism for joining additional parties to an ongoing arbitration. A party wishing to join an additional party may file a request at CIETAC, on the basis that the arbitration agreement prima facie binds the additional party. The request for joinder is determined by CIETAC.

 

5. EmergencyAarbitrator (Article 23 And Appendix III)

 

In line with other international arbitral institutions, CIETAC has introduced an emergency arbitration procedure. The procedure allows parties to apply for an emergency arbitrator to grant urgent 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). In ordinary arbitrations, the arbitrators are nominated by the parties or appointed by the Chairman of CIETAC. In emergency arbitrations, the emergency arbitrators are appointed by the President of CIETAC’s “Arbitration Court”, a body newly introduced in the 2015 Rules. The emergency arbitrator’s powers cease on appointment of the arbitral tribunal, and the existence of emergency proceedings does not preclude a party from applying to any competent court for interim relief. Detailed procedures are set out in Appendix III of the 2015 Rules.

 

In mainland China, the Arbitration Law is yet to provide for emergency arbitrators. Under the current regime, a party seeking emergency relief must apply to a Chinese court for appropriate conservatory measures. The new provisions are therefore understood to apply principally to arbitrations administered by the CIETAC Hong Kong Arbitration Center (see section 6 below). According to the Arbitration Ordinance of Hong Kong, relief granted by an emergency arbitrator under the relevant arbitration rules, whether in or outside Hong Kong, is enforceable in Hong Kong in the same manner as an order or direction of the court.

 

6. Summary Procedure (Article 56.1)

 

Under the 2012 CIETAC Rules, unless otherwise agreed by the parties, the summary procedure applies to any cases where the amount in dispute does not exceed RMB 2m. The 2015 Rules increase the threshold to RMB 5m. This change, which aims to increase efficiency, is in line with the practice of other major institutions (see, e.g., 2013 HKIAC Rules Article 41, which increased the threshold for expedited arbitration almost tenfold, by comparison to the 2008 HKIAC Rules).

 

7. Special Provisions For Hong Kong Arbitration (Articles 73-80)

 

The 2012 CIETAC Rules came into effect before CIETAC set up its Hong Kong Arbitration Center in September 2012. The 2015 Rules introduce special provisions applicable specifically to arbitrations administered by CIETAC Hong Kong. In particular:

 

  1. unless otherwise agreed by the parties, the seat of an arbitration administered by CIETAC Hong Kong shall be Hong Kong, the law applicable to the arbitral proceedings shall be the arbitration law of Hong Kong, and the arbitral award shall be a Hong Kong award (Article 74);
  2. the parties may nominate arbitrators from outside the CIETAC’s Panel of Arbitrators (Article 76).
  3. in contrast to CIETAC tribunals in mainland–seated arbitrations, CIETAC Hong Kong arbitral tribunals have power to order interim relief (Article 77);
  4. CIETAC Hong Kong’s administrative fee and the arbitrator fees will be charged separately, in keeping with international practice (Article 82.1 and Arbitration Fee Schedule III). By contrast, under the existing CIETAC rules, arbitrators’ fees are usually included as part of the arbitration fees charged by CIETAC, although in special circumstances arbitrators’ “special remuneration” may be charged separately.

 

8. Other Amendments

 

The 2015 Rules improve or clarify various other procedural matters. For example, if the place of business, registration, domicile, habitual residence or mailing address of a party cannot be found, the Arbitration Court may serve the arbitration documents upon that party using a public notary (Article 8.3). With the authorisation of the other members of tribunal, the presiding arbitrator may decide on the procedural arrangements for the arbitral proceedings at his or her discretion (Article 35.5). A party may ask to engage a stenographer to make a stenographic record of an oral hearing (Article 40.3).

 

By publishing revised rules less than three years after its previous rules, CIETAC has demonstrated its continuing commitment to internationalisation and best practice and confirmed its status as the leading Chinese arbitral commission for foreign-related cases.

 

The 2015 Rules, like the rules of other major institutions including the ICC, LCIA, HKIAC and SIAC, increasingly recognise and reflect the reality and complexity of modern international arbitration, and aim to provide effective mechanisms to address them, in order better to serve the end-users of the CIETAC arbitral process.

 

herbert smith Freehills

 

For further information, please contact:

 

May Tai, Partner, Herbert Smith Freehills

may.tai@hsf.com

 

Jessica Fei, Partner, Herbert Smith Freehills

jessica.fei@hsf.com

 

Brenda Horrigan, Partner, Herbert Smith Freehills

brenda.horrigan@hsf.com

 

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