China: SPC Issues Interpretation On Jurisdictional Issues Arising From CIETAC Split

In a welcome development, the PRC Supreme People's Court (the "SPC") issued on July 15, 2015 an interpretation addressing various jurisdictional issues arising from the decision in mid-2012 of the former CIETAC Shanghai and South China Sub-Commissions to become independent arbitral commissions. The interpretation provides valuable guidance from the SPC on the jurisdiction of CIETAC and the former CIETAC Shanghai and South China Sub-Commissions over disputes referred to arbitration administered by the "CIETAC Shanghai Sub-Commission" or the "CIETAC South China Sub-Commission."1 The interpretation offers welcome clarification of the jurisdictional issues arising from the split, and may help to restore confidence among users of PRC arbitral commissions.

BACKGROUND TO AND IMPACT OF THE CIETAC SPLIT

Headquartered in Beijing, the China International Economic and Trade Arbitration Commission (CIETAC) is the most commonly-used arbitral commission in the PRC. In mid-2012, its former Shanghai and South China Sub-Commissions very publicly declared their independence from CIETAC. This move followed a dispute over the implementation by CIETAC's Beijing headquarters of a new set of arbitration rules in 2012, which permitted the Sub-Commissions to accept applications and administer cases only with authorization from CIETAC headquarters in Beijing. In late 2012, the South China Sub-Commission changed its name to the South China International Economic and Trade Arbitration Commission/Shenzhen Court of International Arbitration (SCIA). In April 2013, the Shanghai Sub-Commission followed suit and changed its name to the Shanghai International Economic and Trade Arbitration Commission/Shanghai International Arbitration Center (SHIAC).

Following the split, CIETAC sought to assert jurisdiction over disputes arising from or in connection with contracts providing for arbitration administered by its former Sub-Commissions. For instance, on August 1, 2012, CIETAC announced that where parties had agreed to administration of their disputes by its former Sub-Commissions, they were required to submit their requests for arbitration to CIETAC in Beijing. Ultimately, CIETAC announced a restructuring of its Sub-Commissions, establishing new Sub-Commissions in both Shanghai and South China/Shenzhen, on December 31, 2014. The restructured Sub-Commissions are called "CIETAC Shanghai Sub-Commission" and "CIETAC South China Sub-Commission" respectively.

The split and the subsequent renaming of the former CIETAC South China and Shanghai Sub-Commissions resulted in considerable uncertainty and dispute as to the validity of arbitration agreements specifying, and the enforceability of the arbitral awards rendered by, the breakaway Sub-Commissions, SCIA and SHIAC. This caused concern among users. This concern was heightened when, in 2013, the Intermediate People's Court of Suzhou denied recognition and enforcement, on jurisdictional grounds, of an arbitral award rendered by the SHIAC.2

In recognition of these concerns, the SPC issued a notice in 2013 requiring jurisdictional disputes arising from the split of CIETAC to be reported to the SPC prior to a decision being rendered.3 Notwithstanding this notice, and subsequent rulings issued by courts in Shanghai and Shenzhen affirming the jurisdiction of SHIAC and SCIA following the name changes,4 some uncertainty remained as to whether CIETAC or SHIAC/SCIA (as appropriate) should have jurisdiction over a dispute governed by an arbitration agreement referring disputes to one of the CIETAC Sub-Commissions, i.e., "Shanghai Sub-Commission" or "South China Sub-Commission."

THE SPC'S JULY 15 REPLY AND JURISDICTION GUIDELINES

On July 15, 2015, the SPC issued a judicial interpretation in relation to arbitration agreements providing for submission of disputes to either the CIETAC Shanghai Sub-Commission or the CIETAC South China Sub-Commission (the "Reply"). The SPC issued the Reply in response to requests from the Shanghai High People's Court, the Jiangsu High People's Court and the Guangdong High People's Court. The Reply, which came into effect on July 17, 2015, has de facto precedential effect and is binding upon courts of all levels throughout the PRC. In the Reply, the SPC confirmed that jurisdiction over disputes referred to arbitration administered by the "CIETAC Shanghai Sub-Commission" or the "CIETAC South China Sub-Commission" shall be determined in accordance with the following guidelines (the "Guidelines"):

Table Showing Proper Handling of an Arbitration Agreement to Refer Disputes to “CIETAC Shanghai Sub-Commission” or “CIETAC South China Sub-Commission”

As such, where an arbitration agreement provides for reference of disputes to "CIETAC Shanghai Sub-Commission" or "CIETAC South China Sub-Commission," parties should refer such disputes to the relevant new CIETAC Sub-Commission if the arbitration agreement was concluded after the name change to SCIA or SHIAC (as appropriate).6 Some ambiguity remains, however, in respect of arbitration agreements entered into around the time of the name changes, as the SPC did not identify in its Reply the specific dates on which the name changes by SCIA and SHIAC took place. As such, there remains some potential for dispute; this is, however, likely to affect only a very small number of disputes referred to arbitration. The Reply confirms that, where the relevant arbitration agreement had been concluded prior to July 17, 2015, PRC courts shall not consider a jurisdictional challenge on the basis of the split and name change to be a valid ground to set aside or refuse enforcement of an arbitral award. The SPC further instructed that a respondent in arbitration may now apply to the PRC courts to determine the validity of an arbitration agreement, even after the relevant arbitral commission has done so, provided that the court application is made before the first arbitral hearing. This is an exception to the general position in PRC law that a court may not accept an application to determine the validity of an arbitration agreement, or to set aside an arbitral award, after an arbitral commission has decided on the validity of the arbitration agreement.7

CONCLUSION

The jurisdiction of PRC arbitration commissions remains an important consideration for foreign parties doing business in the PRC. This is especially true for business done through wholly foreign-owned enterprises (WFOEs), because PRC law requires that disputes between WFOEs and domestic PRC entities be referred for arbitration only to an officially recognized PRC arbitral commission, unless those disputes involve a foreign element. The SPC's Reply provides welcome clarification as to the jurisdictional issues arising from the CIETAC split, and should hopefully restore confidence in Shenzhen and Shanghai as seats of arbitration. The increase in the number of credible arbitral commissions is a positive development for parties arbitrating in the PRC, as increased competition in the market may improve the quality and efficiency of the administration of PRC-seated arbitrations.

Footnotes

 1 The SPC Reply only addresses the handling of clauses that refer disputes to "CIETAC South China Sub-Commission" or "CIETAC Shanghai Sub-Commission." The Reply does not address clauses that unambiguously refer disputes to SCIA or SHIAC, as no clarification is needed.

2 Jiangxi LDK Solar Hi-tech v Suzhou CSI Technology (2013).

3 Notice on Certain Issues Relating to Correct Handling of Judicial Review of Arbitration Matters(最高人民法院关于正确审理仲裁司法审查案件有关问题的通知) (Fa [2013] No. 194).

4 The ruling of No. 2 Intermediate People's Court of Shanghai Municipality on 31 December 2014 ((2012)Hu Er Zhong Min Ren (Zhong Xie) Zi Di 5 Hao)); The ruling of Intermediate People's Court of Shenzhen on 6 January 2015 ((2013) Shen Zhong Fa She Wai Zhong Zi Di 133 Hao).

5 The Reply does not identify specific dates for the name changes by SCIA and SHIAC. The name changes occurred in approximately late 2012 and April 2013 respectively.

6 Where the administering arbitration commission is unclear or ill-defined, such as "the arbitral commission in Shenzhen," PRC courts are likely to find the arbitration agreement to be invalid, as no specific arbitral commission is identified.

7 Interpretation of the Supreme People's Court on Certain Issues Concerning the Application of the PRC Arbitration Law (最高人民法院关于适用《中华人民共和国仲裁法》若干问题的解释 ) (Fa Shi [2006] No. 7), Article 13(2); Supreme People's Court's Reply to Several Questions Concerning Recognition of the Validity of Arbitration Agreements (最高人民法院关于确认仲裁协议效力几个问题的批复) (Fa Shi [1998] No. 27), Article 3.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Craig I. Celniker
Timothy Blakely
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions