On 1 August 2012, the China International Economic and Trade
Arbitration Commission ("CIETAC") issued the Announcement
on the Administration of Cases by CIETAC Shanghai and South China
Sub-Commissions("Announcement"). According to the
Announcement, CIETAC headquarters in Beijing will be severing ties
with its two largest sub-commissions in Shanghai and
Shenzhen.
1. The Announcement states that as of 1 August 2012, CIETAC has
suspended the authorisation given to the Shanghai Sub-Commission
and the South China Sub-Commission in Shenzhen. From this date,
parties who have agreed to arbitrate their disputes before the
CIETAC Shanghai Sub-Commission or the South China Sub-Commission
will have to submit their request for arbitration to CIETAC
headquarters in Beijing. The CIETAC Secretariat will accept these
arbitrations and administer the cases. Unless otherwise agreed by
the parties, cases that were to be arbitrated by CIETAC's
Shanghai Sub-Commission will take place in Shanghai and cases that
were to be arbitrated by CIETAC's South China Sub-Commission
will take place in Shenzhen. This means that the both the place of
arbitration and the place of oral hearing will be in Shanghai and
Shenzhen, respectively.
2. The CIETAC Secretariat has branches in both Shanghai and
Shenzhen. Thus, according to CIETAC, cases can be handled in both
cities without involvement of the sub-commissions. According to
unofficial information obtained from the Shanghai branch of the
CIETAC Secretariat cases will be administered as follows:
a) For arbitration agreements concluded prior to 1 August 2012 where the parties agreed to have their disputes arbitrated by the CIETAC Shanghai Sub-Commission, the arbitration agreements are still valid. However, if the parties filed the request for arbitration after 1 August 2012, this request must be submitted to CIETAC headquarters in Beijing. The CIETAC Secretariat will accept such cases and appoint its Shanghai branch (not the CIETAC Shanghai Sub-Commission) to administer them.
b) According to suggestions made by the Shanghai branch of the CIETAC Secretariat, for arbitration agreements concluded after 1 August 2012 the parties must stipulate in the arbitration agreement that disputes have to be submitted to CIETAC (not CIETAC Shanghai Sub-Commission) for arbitration, and Shanghai can be stipulated as the place of arbitration.
3. The Announcement explains that the above-mentioned suspension
of authorisation was due to the refusal by the CIETAC Shanghai
Sub-Commission and South China Sub-Commission to apply the
amended CIETAC Arbitration Rules which came into effect
as of 1 May 2012, as well as their refusal to remain under the
leadership of CIETAC in respect of case administration. From
CIETAC's perspective, this violated the basic principles set
out in the CIETAC Articles of Association and the CIETAC
Arbitration Rules.
4. Earlier this year, in an announcement on 30 April 2012 and a
statement on 2 May 2012, the CIETAC Shanghai Sub-Commission
declared itself to be an independent arbitration commission. The
South China Sub-Commission did the same at a Shenzhen Municipal
People's Government ceremony on 16 June 2012. Further, the
CIETAC Shanghai Sub-Commission has even adopted its own arbitration
rules and established its own panel of arbitrators, both of which
became effective on 1 May 2012.
5. On 4 August 2012, in response to the Announcement, the CIETAC
Shanghai Sub-Commission and South China Sub-Commission jointly
issued another announcement ("Joint Announcement"). In
the Joint Announcement, both sub-commissions stated that they were
independent arbitration institutions, established subject to
approval by the Shanghai Municipal Government and the Shenzhen
Municipal Government respectively, and their rights to accept
requests for arbitration did not depend on CIETAC's
authorisation.
6. Since CIETAC is China's largest arbitration institution,
its internal conflict is conspicuous and has led to confusion among
the business community. Further developments should be closely
monitored. In fact, all participants involved should be interested
in a solution that provides a legal basis for valid arbitration
agreements. The PRC Arbitration Law does not recognise ad hoc
arbitration and requires a definitive arbitration institution to be
designated in the arbitration agreement. Otherwise, the arbitration
agreement is invalid. The worst case would be that due to
conflicting opinions within CIETAC over the handling of the case,
an arbitration agreement will be regarded as invalid and the
competent People's Court will be in charge of the case.
Arbitration agreements concluded as of 1 August 2012 designating
the CIETAC Shanghai Sub-Commission or South China Sub-Commission as
the arbitration institution may be particularly prone to the above
risk. It could happen that a party submits the dispute to a court
by arguing that such sub-commissions no longer exist and the court
declares the arbitration agreement invalid. Therefore, if the
parties agree on CIETAC arbitration as of 1 August 2012, for the
time being in order to avoid an invalid arbitration agreement it is
recommended that CIETAC headquarters in Beijing are designated as
the competent arbitration institution.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 24/08/2012.
