China: Winds of change: CIETAC's 2012 revision of the Arbitration Rules effective 1 May 2012

Following an intensive consultative process, the China International Economic and Trade Arbitration Commission ("CIETAC") has announced revisions to its 2005 Arbitration Rules effective 1 May 2012. The 2012 Arbitration Rules are intended to further empower arbitral tribunals, and provide greater autonomy to the parties. This occurs at a time when an increasing number of parties are choosing CIETAC as a forum for dispute resolution, and brings CIETAC's processes further into line with global best practice.

Introduction

In 2011, CIETAC accepted a total of 1435 foreign and domestic related cases, up from 731 cases in 2001 and 238 cases in 1990,¹ reflecting an increase in the number of foreign and domestic parties turning to CIETAC as the forum for arbitration in China.² CIETAC's Arbitration Rules were last revised in 2005. The changes embodied in the new 2012 Arbitration Rules further bring CIETAC into line with global best practice. Below is an overview of the major changes.

Interim measures

Under PRC civil procedure law, only a PRC court is able to order an interim measure, whether for the preservation of property, or evidence. This position is reflected in Article 21.1 of the 2012 Arbitration Rules (which maintains the position under Articles 17 and 18 of the 2005 Rules) that any application for a "conservatory measure",³ pursuant to the law of the PRC, will be forwarded by the secretariat of CIETAC to the competent PRC court designated in accordance with the law.

However, a new feature of the revised Arbitration rules can be found at Article 21.2, whereby an arbitral tribunal may order "any interim measure it deems necessary or proper in accordance with the applicable law", and "...may require the requesting party to provide appropriate security in connection with the measure". Importantly, the article provides that an order of an interim measure "may take the form of a procedural order or an interlocutory award."

Whilst the term "interim measure" is not defined in the Rules, this power likely permits an arbitral tribunal to grant an order prior to the issue of the final award. However, if made by the tribunal as a "procedural order" or an "interlocutory award", it has been suggested that such an order may not be enforceable in the PRC due to a lack of finality.⁴

The distinction between an "interim measure" (Article 21.2) and a "conservatory measure" (Article 21.1) is not clear. Whilst the inclusion of Article 21.2 is a welcomed development for those parties who agree to have their arbitration seated outside of the PRC, the usefulness of these new measures for parties with PRC-seated arbitration is yet to be seen.

Appointment and resignation of arbitrators

The 2012 Arbitration Rules ensure that where either the Claimant's side or the Respondent's side fails to jointly nominate one arbitrator, the Chairman of CIETAC shall appoint all three members of the arbitral tribunal and designate one of them to act as the presiding arbitrator.⁵ This avoids the situation as under the 2005 Arbitration Rules where if one party failed to make an appointment, the other party was still able to appoint his/her own arbitrator.

In addition, the 2012 Arbitration Rules (Article 24.2) remove the requirement that the parties must select arbitrators who are on the CIETAC Register of Arbitrators, thus allowing parties greater autonomy in their selection of qualified arbitrators.

The new rules also allow CIETAC to make a decision whether arbitrators are to be replaced where arbitrators voluntarily apply for withdrawal from the tribunal (Article 31.1). The change is designed to address concerns with late resignations by arbitrators from proceedings.

There is still no rule that arbitrators must be of different nationalities, which worries foreign parties when inevitably two PRC arbitrators are appointed (one party-appointed, and one Chairman).

Language

There is more flexibility in the 2012 Rules as to the language of the arbitration. Under the new rules, in the absence of agreement between parties, CIETAC may designate Chinese, or any other language having regard to the circumstances of the case.⁶ This is a significant change from the 2005 Rules where the default language (in the absence of the parties express agreement to the contrary) was Chinese.⁷

Place of arbitration

There is also more flexibility in electing the place of arbitration. The new rules provide that where parties have not formally agreed on a place of arbitration, or where an agreement is ambiguous, CIETAC can now elect the location having regard to the circumstances of the case. It is hoped that this change will allow what is currently a nominal amount of CIETAC arbitration outside China, to expand.

Evidence and Summary Procedures

The reference to "evidence" under the new rules has been changed to "the relevant documentary and other evidence" (for example, in Articles 12.2 and 14.2(c) (cf 2005 Rules Articles 10.2 and 12.1(c)). This change is designed to encourage parties and arbitrators to include oral and real evidence in proceedings, rather than merely relying on documentary evidence (relying mostly on documentary evidence is a traditional feature of PRC arbitrations).

The monetary threshold set for CIETAC's summary procedure has also been increased from RMB500,000 to RMB2m. The change will allow CIETAC to provide expedited procedures to more arbitrations.

Correspondence

Further changes are designed to improve communication through the CIETAC Secretariat. The rules allow for direct exchange of documentation between parties (Articles 8 and 18), dispensing with the previous practice whereby documents were submitted to the tribunal and other parties via the CIETAC Secretariat.

Consolidation

Reflecting the growing complexity of arbitrations heard before CIETAC, the new rules now allow two or more arbitrations to be consolidated into a single proceeding (Article 17). The changes allow for the consolidation of proceedings either where:-

• one party requests and all the other parties agree; or
• CIETAC considers it necessary and all the other parties agree.

Conciliation

CIETAC reports suggest that approximately 20-30 per cent of its yearly caseload is now resolved through so-call "med-arb" or "arb-med", in which caseload is resolved through a combination of arbitration and mediation processes. The new rules seek to provide further scope for these proceedings, allowing parties to elect to mediate the dispute with or without the presence of the arbitral tribunal (Article 45). In the wake of the Gao Haiyan v Keeneye Holding Limited, it is advisable that med-arb be conducted with caution to avoid any appearance of bias. See our previous articles dated 10 November 2012 and 9 December 2012 on Keeneye.

Final word

Notable omissions to the rules include the absence of emergency arbitrator procedures, the enactment of which has been constrained by Chinese domestic arbitration law, and a rule that the arbitrators must be of different nationalities. It also remains to be seen whether Chinese courts will enforce the new interim measures procedure.

Nevertheless, the changes are likely to be welcomed by CIETAC users, and reflect the growing importance of the centre as an international seat of arbitration.

Footnotes

¹ CIETAC Statistics; http://www.cietac.org/index/aboutUs.cms?aboutUs=workingReport accessed: 2/4/2012
² Statistically speaking, only a small proportion of these cases (approximately 20%) involved foreign parties or law, or indeed, were seated outside of the PRC.
³As referred to in Article 21.1 of the 2012 Arbitration Rules
⁴ A possible solution to this problem may be to seek a partial award from the tribunal, which is likely to be enforceable in the PRC.
⁵ Article 27(3).
⁶ Article 71(1) of the 2012 Rules.
⁷ Article 67(1) of the 2005 Rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.