New China International Economic Trade Arbitration Commission (CIETAC) Rules were published in November 2014 and will come into effect on 1 January 2015 (the 2015 Rules).

The amendments incorporated into the 2015 Rules include:

  • New procedure for appointing emergency arbitrators.
  • Mechanism for a claimant to appoint one arbitrator in respect of a dispute arising from multiple contracts, in certain circumstances.
  • Powers to consolidate arbitrations and join third parties.
  • New special provisions for arbitrations administered by CIETAC Arbitration Centre Hong Kong (CIETAC Hong Kong).

Application

The 2015 Rules will apply to CIETAC arbitrations commenced on or after 1 January 2015. Where arbitration proceedings are commenced prior to 1 January 2015, parties may agree to apply the 2015 Rules.

Split between CIETAC Beijing, Shanghai and Shenzhen sub-commissions

CIETAC last amended its Rules on 1 May 2012 (the 2012 Rules). This, at least in part, resulted in a split between CIETAC’s arbitration commission in Beijing and the sub-commissions in Shanghai and Shenzhen (South China office).

CIETAC Beijing subsequently announced that CIETAC Shanghai and CIETAC Shenzhen no longer had authorisation to accept and administer CIETAC arbitrations.

It then set up new sub-commissions in Shanghai and Shenzhen. Meanwhile, the breakaway Shanghai and Shenzhen sub-commissions set up their own independent commissions, known as SCIA and SHIAC respectively.

In September 2013, the Supreme People’s Court (SPC) issued a “Notice on Certain Issues Relating to Correct Handling of Judicial Review of Arbitration Matters”. This Notice required that any lower court hearing cases arising from SCIA or SHIAC should refer the matter to the SPC before making a decision, whether that decision was a positive or negative one.

This was an attempt to deal with the risk of inconsistent decisions from lower courts as to the validity of arbitration agreements providing for CIETAC Shanghai or Shenzhen arbitration and the enforceability of arbitration awards issued by the breakaway institutions. However, inconsistencies and a lack of clarity as to how best to deal with such cases remained. The 2015 Rules have made efforts to deal with this.

First, the structure of CIETAC “post split” is set out in Appendix I of the 2015 Rules. It provides details of the Beijing Commission and the various sub-commissions/arbitration centres. The Shanghai and Shenzhen sub-commissions are referred to as the “Shanghai Office, Arbitration Court of CIETAC” and the “South China Office, Arbitration Court of CIETAC” respectively. Reference to “arbitration center” is to CIETAC Hong Kong.

In addition, Article 2 (6) of the 2015 Rules provides:

“The Parties may agree to submit their disputes to CIETAC or a sub-commission/arbitration center of CIETAC for arbitration. Where the parties have agreed to arbitration by CIETAC for arbitration the Arbitration Court shall accept the arbitration application and administer the case. Where the parties have agreed to arbitration by a sub-commission/arbitration center, the arbitration court of the sub-commission/arbitration center agreed upon by the parties shall accept the arbitration application and administer the case. Where the sub-commission/arbitration center agreed upon by the parties does not exist or its authorization has been terminated, or where the agreement is ambiguous the Arbitration Court(i.e. the former Secretariat of CIETAC in Beijing) shall accept the arbitration application and administer the case. In the event of any dispute a decision shall be made by CIETAC.” (our emphasis)

The effect of the new Article 2 (6) is for arbitrations commenced under an arbitration agreement providing for CIETAC Shanghai or Shenzhen to be administered by CIETAC Beijing. (This provision is not binding on the PRC Courts.)

Emergency arbitrators (Article 23 and Appendix III)

The 2015 Rules include provisions to allow parties to apply for the appointment of an emergency arbitrator to grant interim relief, including orders for preservation of evidence, early disclosure and the provision of security.

The emergency arbitrator’s powers cease on the appointment of the arbitral tribunal. The fact that the emergency procedures are now incorporated into the CIETAC Rules does not preclude a party from applying to a competent court for interim relief subject to the laws of that local jurisdiction.

This brings the CIETAC Rules in line with other international arbitration rules, including the HKIAC and SIAC Rules.

Consolidation of related arbitration proceedings (Article 19)

The new Article 19 provides that CIETAC may consolidate into a single arbitration two or more arbitrations pending under the Rules if the following conditions are met:

  • All of the claims are made under the same arbitration agreement.
  • The claims are made under multiple arbitration agreements that are identical or compatible and the arbitrations involve the same parties, as well as legal relationships of the same nature.
  • All the parties to the arbitrations have agreed to the consolidations.

Single arbitral proceedings arising out of multiple contracts (Article 14)

Subject to the following conditions, it is now possible for a claimant to commence one arbitration relating to multiple contracts:

  • The contracts consist of a principal contract and its ancillary contracts.
  • The contracts involve the same parties, as well as legal relationships of the same nature.
  • The dispute(s) arise out of the same transaction or the same series of transactions.
  • The arbitration agreements in the contracts are identical or compatible.

Tribunal’s powers to join third parties. (Article 18)

The 2015 Rules include an entirely new power to join third parties to arbitration proceedings.

This is done by the party wishing to join a third party making a formal “Request for Joinder” to CIETAC, setting out why that party considers the subject arbitration agreement binds the third party.

Where the “Request for Joinder” is filed after the formation of the arbitral tribunal, a decision shall be made by CIETAC after the tribunal has heard from all parties, including the potential third party, if necessary.

Summary procedure (Article 56)

The summary procedure existed under the 2012 Rules. However, the 2015 Rules have increased the threshold for its application to cases where the amount in dispute does not exceed RMB5 million. It may also apply where the sum in dispute exceeds RMB5 million, but both parties agree to apply the summary procedure. This amendment will hopefully increase the efficiency of the administration of disputes which are capable of being resolved under this procedure.

CIETAC Hong Kong (Articles 73 to 80)

One of the main features of the 2015 Rules is the inclusion of specific rules for the administration of CIETAC arbitrations in Hong Kong.

Hong Kong maintains its own judicial and arbitration regime under the “one country two systems” arrangement made after the handover of Hong Kong to PR China on 1 July 2007.

Where the seat of an arbitration is Hong Kong, the legislation applicable to arbitration proceedings is the Arbitration Ordinance (Cap 609). The Arbitration Ordinance adopts much of the UNCITRAL Model law on International Commercial Arbitration. This legislation (together with other legislation applicable where the “seat” or arbitration is Hong Kong) applies to arbitrations administered by CIETAC Hong Kong.

CIETAC set up a sub-arbitration commission in Hong Kong in September 2012. The 2015 Rules include a new chapter containing provisions that deal with arbitrations administered by CIETAC Hong Kong. These include:

  • Parties may nominate an arbitrator who is not on the CIETAC panel, with such nomination to be approved by the Chairman of CIETAC.
  • The emergency appointment procures and the powers to order interim measures also apply to CIETAC Hong Kong arbitrations.
  • A separate fee scale for arbitrations administered in Hong Kong. (The “administrative” fee and the arbitrators’ fee scale are higher for CIETAC Hong Kong administered arbitrations than for arbitrations administered by CIETAC in China. The purpose of this fee structure is to attract high calibre arbitrators onto the CIETAC panel and in turn increase the number of arbitrations commenced with CIETAC Hong Kong.)

It will be interesting to see whether going forward, parties adopt a “CIETAC Hong Kong” arbitration clause in their contracts and the extent to which parties choose to have their disputes administered by CIETAC Hong Kong rather than the long established HKIAC.

Summary

The addition of a number of new procedures and powers to CIETAC tribunals brings CIETAC arbitrations in line with other international arbitration rules, including the HKIAC and SIAC rules. It remains to be seen how many CIETAC administered arbitrations are commenced in Hong Kong compared with those commenced under the HKIAC rules.

It also remains to be seen how effective the 2015 Rules are in dealing with the “split” between CIETAC Beijing, Shanghai and Shenzhen.