CIETAC announced in a statement: “CIETAC’s authorisation to the CIETAC Shanghai Sub-Commission and the CIETAC South China Sub-Commission for accepting and administering arbitration cases is hereby suspended.”
This is the latest development in a disagreement that has cast a shadow over dispute resolution arbitration in China. In March, CIETAC released amended arbitration Rules that became effective on May 1.
As the new Rules became effective, the Shanghai sub-commission of CIETAC announced that it was an independent arbitration body and would follow its own rules. This prompted a response from CIETAC in Beijing reinforcing that all sub-commissions and branches were under their remit.
“It seems the situation is not under control at all, both Shanghai and Shenzhen have been trying to be independent and administer cases at their own discretion – this is why CIETAC Beijing is has suspended arbitration,” said Wilson Huo, a partner at Zhong Lun Law Firm in Beijing who specialises in disputes and is an arbitrator.
According to the statement, from August 1, all parties shall submit their applications for arbitration before CIETAC in Beijing, who will administer the cases. However, where parties have previously stated that Shanghai or the South China Sub-Commission in Shenzhen shall handle disputes they will continue to administer such cases.
“CIETAC Beijing has just indicated that disputes have to go through them. They are trying to further control the situation by placing contact information for their people in Shanghai and Shenzhen in the statement,” commented Huo.
After the breakaway in May, China Law & Practice spoke to Xu Guojian, a senior partner at Boss & Young in Shanghai who specialises in dispute resolution: “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.”
Xu also stated that Shanghai’s split centred on the new Rules and how they allowed for interim measures, but could not be enforced by CIETAC, as according to the PRC Arbitration Law (中华人民共和国仲裁法), only People’s Courts have the exclusive authority to issue interim measures.
“Shanghai will not want to take the risk that interim measures issued by its arbitral tribunal will not be executed in China,” said Xu.
However, Huo believes that the split is due to economic reasons, among others. “Beijing currently has been trying to control the overall situation and retain the integrity between CIETAC headquarters and branches in the unforeseeable future,” said Huo.
Chinese courts have so far remained silent on the situation, but it is likely both sub-commissions will take their cases to court. Shanghai will probably be the first to initiate legal proceedings, drawing this dispute out even further.
“It is possible Shenzhen and Shanghai will become independent arbitration bodies, but that is the worst situation for CIETAC and even for arbitration in China. The friction and its consequences will give rise to endless disputes among parties and courts, and even ruin the reputation CIETAC holds and damage China’s 60-year arbitration legacy,” commented Huo. He has also reminded his clients to be cautious with CIETAC arbitration clause in Shanghai or Shenzhen.
The Commission is the world’s busiest arbitration institution, but its role in international arbitration is being questioned as this dispute continues.
By David Tring
CIETAC goes global
CIETAC allows interim measures
PRC Arbitration Law (中华人民共和国仲裁法)
Shanghai CIETAC cuts ties with Beijing