“Recently, without any approval, the CIETAC Shanghai Sub-Commission which is a branch office of CIETAC, declared that it was an independent arbitral institution, constituted its own commission, published its own arbitration rules and adopted its own panel of arbitrators,” said an official statement from the China International Economic and Trade Arbitration Commission (CIETAC) on May 1.
The Commission is the world’s busiest arbitral institution, accepting 1,435 cases last year. CIETAC released its revised rules this year, with practitioners saying the move brings the institution in line with best practices in international arbitration.
As the new rules became effective on May 1, Shanghai CIETAC unexpectedly released its own Arbitration Rules and stated that it is independent of CIETAC. Shanghai CIETAC claims it is not a branch of CIETAC and will apply its own rules during arbitration and appoint its own board of arbitrators.
“CIETAC Shanghai is handling more cases every year and wants to play a larger and more independent role in Chinese arbitration, not just as a sub-commission of CIETAC,” said Xu Guojian, a senior partner at Boss & Young in Shanghai who specialises in dispute resolution.
The granting of interim measures is one of the major differences between the two sets of rules. CIETAC permits interim measures, enabling “foreign investors to apply promptly for an interim measure to take immediate action to stop infringement,” said Sammy Fang at DLA Piper in Beijing when the rules came out (see CIETAC allows interim measures).
Shanghai’s Rules do not allow for such measures. According to the PRC Arbitration Law (中华人民共和国仲裁法) People’s Courts have the exclusive authority to issue interim measures. This means that any measures issued by CIETAC cannot be executed in China, but can be in a country where the arbitral tribunal is allowed to do so.
“Shanghai will not want to take the risk that interim measures issued by its arbitral tribunal will not be executed in China,” said Xu. He added that this was one of the main driving forces for Shanghai as they seek to establish themselves as a respected international platform for arbitration.
The Shanghai Rules also do not provide for consolidation of arbitrations and the threshold set for the application of summary procedures is different. The importance of these differences depends on the parties’ specific needs.
This breakaway highlights a problem now facing businesses and lawyers in China – where to arbitrate? “Parties need to stipulate which arbitration commission they want to handle their case, otherwise it may be submitted to a commission that the parties do not expect or want,” noted Xu.
Whether parties are more likely to opt for Shanghai or Beijing depends on the nature of the dispute. Businesses must also consider different Rules according to their specific needs.
The split has cast a shadow over arbitration in China and shows discontent between CIETAC and its sub-commissions. In addition to Shanghai, Tianjin, Chongqing and Shenzhen are also CIETAC sub-commissions. Xu told China Law & Practice: “Shenzhen is also purporting that it is an independent arbitration commission and has its own rules.”
CIETAC is adamant that its rules will prevail and all sub-commissions remain under their remit.
The outcome of this dispute is uncertain, but Shanghai and Shenzhen’s move shows discontent with current practices.
By David Tring
CIETAC goes global
CIETAC allows interim measures
PRC Arbitration Law (中华人民共和国仲裁法)