This chapter outlines how the China International Economic and Trade Arbitration Commission (CIETAC) Arbitration Rules 2012 differ from the previous rules governing CIETAC, and considers the practical implications of the changes.
This article is part of the PLC Arbitration multi-jurisdictional guide. For a full list of jurisdictional Q&As visit www.practicallaw.com/arbitration-mjg.
The newly revised arbitration rules of the China International Economic and Trade Arbitration Commission (CIETAC) came into effect on 1 May 2012. Amendments made to the former rules, which had been in place since 2005, brought about changes that add to the international character of CIETAC, currently one of the busiest arbitration institutions in the Asia Pacific region.
This chapter highlights the significant amendments made that have resulted in the CIETAC Arbitration Rules 2012 (New Rules) and the practical implications of these amendments. In particular, it considers changes made regarding:
Applicable arbitration rules.
The law governing the arbitration agreement.
The seat of arbitration.
Interim measures.
Applications to stay arbitration proceedings.
The ability of CIETAC to conduct mediation (med-arb).
Supplementary awards.
Expedited procedures.
The former rules allowed parties to modify the CIETAC rules as applied by agreement. The New Rules retain this provision, but also allow the parties to choose arbitration rules other than the CIETAC rules when opting for a CIETAC-administered arbitration (Article 4(3), New Rules). This provides more flexibility for the parties to decide how the arbitration is to be conducted, subject to the mandatory provisions of law governing the arbitration proceedings.
The law governing the arbitration proceedings is often different from the law governing the substance of the dispute in international arbitrations. The procedural law of the seat of arbitration, typically where the arbitration takes place, usually governs the arbitration proceedings. Under the New Rules, the seat of arbitration may not necessarily be in China (see below, The seat of arbitration). It is important to ensure that the essential features of the set of arbitration rules chosen by the parties do not contradict the mandatory provisions of the law governing the arbitration procedure.
The New Rules continue to require an arbitration agreement to be in writing to be valid. They also provide that the law governing the arbitration agreement prevails if it contains different requirements regarding the form of the arbitration agreement and the effect of that agreement (Article 5(3), New Rules).
A typical arbitration clause does not always make it clear which law governs the agreement to arbitrate. The general presumption is that an arbitration clause is governed by the same law that the parties chose to govern the contract containing the arbitration clause. However, where the agreement to arbitrate is set out in a separate submission agreement, in the absence of an express choice of law clause, the usual assumption is that the law of the seat of arbitration governs the agreement to arbitrate.
To avoid satellite disputes on the effect and validity of an arbitration agreement, parties should consider making an express choice regarding the law governing the arbitration agreement.
Article 31 of the former rules stated that the seat of arbitration could be chosen by the parties by written agreement, failing which, the location of CIETAC or its branch would be designated as the seat of arbitration. The New Rules allow parties to agree to the seat of arbitration, without requiring such an agreement to be a written agreement (Article 7(1), New Rules). In addition, CIETAC is empowered to determine the seat of arbitration based on the facts of the case, which may be a place other than the location of CIETAC or its branch (Article 7(2), New Rules). The award will be deemed to be made at the seat of arbitration (Article 7(3), New Rules).
The seat of arbitration of an arbitration conducted under the New Rules may be a place in China where CIETAC does not have a presence; it may even be a place outside the territory of China. As a result, it is important for parties to bear in mind these issues when negotiating an arbitration agreement regarding the seat of arbitration.
Although the New Rules do not require the choice of the seat of arbitration to be in writing, clear expression of the parties' choice would avoid unnecessary disputes. An arbitration agreement should designate the seat of arbitration, especially when the parties are selecting a set of arbitration rules other than the New Rules to govern a CIETAC-administered arbitration.
The New Rules maintain the procedure set by the former rules, in that CIETAC will submit applications under Peoples' Republic of China (PRC) law for preservation of evidence or property to the relevant PRC court (Article 21(1), New Rules). It also confers additional power on arbitral tribunals constituted under the New Rules to grant interim measures under other applicable laws (Article 21(2), New Rules). This caters for the situation where the law governing the arbitration proceedings is not mainland Chinese law.
The former rules did not provide for options to stay a proceeding, but they did require that an award be made within six months of the constitution of the arbitral tribunal. This is retained in Article 46 of the New Rules. The new Article 43 allows parties to apply for a stay of the arbitration proceedings. Proceedings may also be stayed if there are circumstances warranting a stay. Parties may be allowed greater control over the progress of the arbitration proceedings despite the time limit on making an award imposed by the rules. The arbitral tribunal will decide the start and lift of a stay, and the Secretariat of CIETAC will decide the same before the constitution of the arbitral tribunal.
This new provision may be subject to abuse and cause delay in the proceedings, particularly when there is no provision for appealing a tribunal's decision to stay an arbitration proceeding.
The previous regime allowed the arbitral tribunal to conduct mediation. This approach is controversial as it raises questions of apparent bias and fair hearing given the contrasting roles of mediators and arbitrators. The New Rules allow parties to an arbitration to attempt mediation without engaging the arbitral tribunal (Article 45(1), New Rules). Arbitral tribunals are now required to obtain the agreement of both parties to conduct med-arb (Article 45(2), New Rules).
The amendments serve to avoid future challenges to awards made by arbitral tribunals that were involved in med-arb, especially in light of the recent case of Gao Haiyan v Keeneye Holdings Limited ([2011] HKEC 514), where the applicant sought to enforce a mainland award in Hong Kong, which was given after mediation conducted by members of the arbitral tribunal failed. With the flexibility of negotiating on its own or appointing mediators other than the appointed arbitrators, parties to a CIETAC-administered arbitration will in the future be more inclined to attempt mediation.
Arbitral tribunals must follow the same requirements for making an award when giving any supplementary awards under the new Article 52. This clarifies the uncertainty that existed under the former rules. It will help to avoid the questions of the effect of supplementary awards during enforcement, as was discussed in the Court of Appeal judgment in Shandong Hongri Acron Chemical Joint Stock Company Limited v Petrochina International (Hong Kong) Corporation Limited (unrep., CACV 31/2011, 13 June 2011).
Article 54 of the New Rules increases the maximum amount in dispute applicable for the expedited procedure from CNY500,000 to CNY2 million (as at 1 March 2012, US$1 was about CNY6.3). Parties will benefit from the raised monetary limit as more arbitrations administered by CIETAC will be eligible to be dealt with through the summary route, which involves a simpler procedure and takes less time.
It is appropriate that the CIETAC arbitration rules be amended, given the changing arbitration landscape in the Asia Pacific region; in particular, there has been a significant increase in the number of international arbitration cases involving a China element as a natural consequence of the growing strength of the Chinese economy. It remains to be seen how the New Rules will be applied and their effect on CIETAC-administered arbitrations generally.
CIETAC will strive to maintain its position as the prime choice of arbitration institution in mainland China and evolve to become a more user-friendly international arbitration venue.
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Qualified. England and Wales, 2000; Hong Kong, 1999
Areas of practice. Construction and engineering, litigation and dispute resolution.
Recent transactions
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E thomas.so@mayerbrownjsm.com
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Qualified. PRC, 2009; England and Wales, 1991; Hong Kong, 1988
Areas of practice. Litigation and dispute resolution.
Recent transactions
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Qualified. Singapore, 1992; Australia, 1991; England and Wales, 1991; Hong Kong, 1984
Areas of practice. Litigation and dispute resolution.
Recent transactions
