The persistent internal struggle between the China International Economic and Trade Arbitration Center (CIETAC) and its Shanghai and South China sub-commissions has reached a new phase, now that the sub-commissions have split off into the Shanghai International Arbitration Center (SHIAC) and the Shenzhen Court of International Arbitration (SCIA). Although various questions remain with respect to existing arbitrations and arbitration clauses, the new developments do clarify how to address arbitration clauses in new contracts.

The secession of the Shanghai and Shenzhen sub-commissions is the result of a dispute that started in early 2012, when CIETAC introduced a new set of arbitration rules. In response to their dissatisfaction with the new rules, the Shanghai and Shenzhen sub-commissions declared themselves to be independent arbitration commissions, on 30 April 2012 and 16 June 2012 respectively. We previously reported on this in the August 2012 China Update.

This is the current situation:

  • For new arbitration clauses to be executed, parties can select to submit their disputes to one of the three arbitration institutions by copying a clause to that effect from the respective Model Arbitration Clauses. Alternatively, parties can refer their disputes to any other arbitration institute in China by using the relevant clauses as prescribed by those institutes.
  • For existing arbitration clauses which designate CIETAC Shanghai or CIETAC South China as arbitration institution, the situation is unsure. SHIAC and SCIA are willing to accept referrals to CIETAC Shanghai or CIETAC South China, respectively. Local regulators support this view. CIETAC Beijing, however, has strongly opposed to such interpretation. If feasible, parties should therefore amend and clarify the contract. If modification is not feasible, parties run the risk that wherever they instigate arbitration proceedings the other party will challenge the submission.
  • On-going cases that have been submitted to CIETAC Shanghai (now: SHIAC) or CIETAC South China (now: SCIA) prior to the start of the "jurisdictional turf war" will also remain subject to debate. This has been proven by two local Chinese courts making opposite rulings on the same issue. On the one hand, a local court in Shenzhen has upheld a decision of the SCIA where the agreement designated CIETAC South China. On the other hand, a local court in Suzhou ruled that SHIAC, after its separation from CIETAC, had no right to continue to hear and render an award over a case in which the agreement designated CIETAC Shanghai. This stresses that a tailored approach is required for any arbitration at these institutes.

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