The Beijing/Guangdong CIETAC dispute is rearing its head again,
as in a recent notification ("Notification"), the
Department of Justice of Guangdong Province mandated that the
re-organized South China Branch of China International
Economic and Trade Arbitration Commission ("Guangdong
CIETAC") immediately cease its "illegal" arbitration
activities. The Notification states that the re-organized Guangdong
CIETAC has been conducting "illegal" arbitration
activities without registration and under a name identical to that
of an existing arbitration institution (see this
Chinese-language article in The Paper).
In a reply letter, China International Economic and Trade
Association ("CIETAC"), which is the Beijing Head Office
of the re-organized Guangdong CIETAC, characterises
the Notification as "incorrect, groundless and mistaken",
and requests the Department of Justice of Guangdong Province to
immediately withdraw it. (
Chinese-language letter available online)
According to CIETAC, in 2011, the original Guangdong CIETAC
separated from CIETAC and registered as a new arbitration
institution under the name of Shenzhen Court of International
Arbitration (SCIA). In 2012, it changed its name to South China
International Economic and Trade Arbitration Commission ( SCIETAC)
but has continuously used the name "Shenzhen Court of
International Arbitration". In response to the spin-off,
in 2014 CIETAC "re-organized" its South China Branch,
being the re-organized Guangdong CIETAC that has been
allegedly conducting illegal arbitration activities according to
the Notification (see above).
According to an opinion issued by the Supreme People's Court
in 2015, where the Guangdong CIETAC was designated as the
arbitration entity, the original Guangdong CIETAC (ie,
SCIA) may continue to arbitrate in cases if the designation took
place before it changed its name to SCIA (Chinese-language
communication available online). For cases where the
designation took place on or subsequent to the day of name change,
the re-organized Guangdong CIETAC will arbitrate.
Referring to this opinion, CIETAC claims that the original
Guangdong CIETAC is a different entity from the re-organized
Guangdong CIETAC and has no capacity to continue to act under the
name thereof. Further, CIETAC suggests that the
re-organized Guangdong CIETAC, as a branch of a
pre-existing arbitration institution, does not have to register
with the Department of Justice of Guangdong Province.
It remains to be seen how the Department of Justice of Guangdong
Province is going to react to CIETAC's letter and whether the
re-organized Guangdong CIETAC will be
"illegalized". However, the reality is that currently
there are two arbitration institutions in the city of Shenzhen in
The Chinese law provides that, where an arbitration agreement
only identifies the designated arbitration entity by location and
where there exists more than one arbitration institutions in said
location, the arbitration agreement will be deemed to be invalid
insofar as the parties to the agreement are unable to agree on
which institution is designated (
details online). As such, if the re-organized or the
original Guangdong CIETAC is to be designated, it would be prudent
to specify in the arbitration agreement the specific name of the
designated entity to avoid the agreement being invalidated.
Going forward, to avoid the uncertainty of any issues with the
various arbitration entities in Southern China, it may be prudent
for foreign entities to simply designate Beijing's CIETAC
entity as the arbiter in licensing contracts.
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.
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Parties have agreed on the resolution themselves, so it is often more practical for their own particular circumstances.
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