The China International Economic and Trade Arbitration Commission (“CIETAC“) has recently published its revised Arbitration Rules, which come into force on 1 May 2012 (the “2012 Rules“).  The rules are available on CIETAC’s website (http://www.cietac.org/index.cms).

The 2012 Rules aim to address the increasing complexity of contemporary arbitration proceedings, to provide greater autonomy to parties and to codify and clarify CIETAC’s existing practice. The changes are designed to ensure that CIETAC remains competitive among other international arbitration centres, all of which have witnessed a rapid development in China-related business.

Key amendments include:

  • CIETAC tribunals now have power to grant interim measures in certain circumstances;
  • Expert witnesses are now required to give oral evidence if the tribunal considers it necessary;
  • CIETAC arbitrations can now be consolidated, with consent of all parties;
  • CIETAC may specify a seat outside China where the parties are silent on the point (previously, the seat could only be a place inside China);
  • CIETAC will administer arbitrations under the rules of other arbitral institutions, as well as ad hoc arbitrations and arbitrations under its own rules;
  • Where the parties have not specified the language of the arbitration, CIETAC is now free to determine the language (previously, the default language was Chinese);
  • If the arbitration clause does not specify which CIETAC sub-commission is to administer the proceedings, CIETAC Beijing will administer the arbitration (previously, such a clause would be considered invalid);
  • Multi-party appointment of arbitrators: where either the Claimants or Respondents fail jointly to nominate an arbitrator, CIETAC will appoint the entire tribunal; and
  • CIETAC can now conduct mediation during the arbitration, with the parties’ agreement and not involving the arbitrators.
  1. Interim measures may be granted by Arbitral Tribunal in certain circumstances

Under the PRC Arbitration Law and the PRC Civil Procedure Law, the power to grant conservatory measures (including orders for the preservation of property or the protection of evidence) is reserved to the competent Chinese court.  Article 21.1 of the 2012 Rules complies with these mandatory provisions, and maintains the position under the current rules.  However, where a procedural law other than PRC law applies in a CIETAC arbitration (for example, where the parties agree a seat outside Mainland China), for the first time the 2012 Rules state expressly that the Arbitral Tribunal has power to grant interim measures – in the form of a procedural order or an interlocutory award – in accordance with the applicable law (Article 21.2).  In such circumstances, the scope of “interim measures” will depend on the types of interim measures available under the law of the seat.

  1. Expert witnesses required to give oral evidence if called by Arbitral Tribunal

Under the current CIETAC Rules, expert witnesses can decide whether to attend any hearing in arbitral proceedings in order to give oral evidence.  This frequently limits parties’ opportunities to cross-examine experts on their written reports.  The 2012 Rules make clear that it is now mandatory for experts to give oral evidence if called to do so by the Tribunal. However, this requirement is limited to experts and does not extend to factual witnesses (Article 42.3).

  1. Consolidation of related arbitration proceedings

Like the new ICC Rules, the 2012 Rules provide a mechanism for parallel proceedings to be consolidated into a single arbitration (for example, arbitrations involving multiple parties under a suite of related contracts).  In determining whether a consolidation application is allowed, CIETAC has wide discretion to take into consideration “any factors it considers relevant” (Article 17.2). A non-exhaustive list of factors includes: (i) whether all of the claims are made under the same arbitration agreement; (ii) whether the arbitrations are between the same parties; and (iii) whether one or more arbitrators have been nominated or appointed in the arbitrations.

  1. New rules for determining the seat of arbitration

Under the current Rules, where parties have not agreed on the seat of arbitration it is deemed to be the city where CIETAC (or any of its sub-commissions) is located.  The 2012 Rules, however, provide that CIETAC can determine the seat of arbitration to be a place other than “the domicile of CIETAC or its sub-commission”, taking into account the circumstances of the case (Article 7.2).  This, for the first time, allows the seat to be a city outside Mainland China, although only where the dispute is “foreign-related”. A dispute may be “foreign-related” where (i) at least one of the parties is “foreign”; (ii) the subject matter of the contract is or will be wholly or partly outside Mainland China; or (iii) there are other legally relevant facts “as to occurrence, modification or termination of civil rights and obligations” which occurred outside Mainland China).  This is a significant change, at least on paper, given that the seat determines both the governing law of the arbitration and the courts that retain supervisory jurisdiction over the proceedings. Users of CIETAC arbitration will watch with interest to see whether – and how – these rules are invoked in practice.

  1. Use of other arbitration rules in CIETAC-administered arbitrations

Under the 2012 Rules, CIETAC will administer proceedings commenced under the rules of other arbitral institutions, as well as ad hoc arbitrations (Article 4.3).  This could potentially conflict with rules of other arbitration institutions, for example, the ICC, which explicitly provides that only the ICC is authorised to administer ICC arbitration proceedings (Article 1(2), ICC Rules).  Despite this provision, therefore, it is advisable to avoid arbitration clauses which purport to permit one arbitral institution to administer proceedings brought under the rules of another institution. In addition to the obvious uncertainty it may bring to the conduct of the proceedings, it may also expose the award to challenge (as in Insigma Technology Co Ltd v Alstom Technology Ltd [2009] SGCA 24).

  1. Default language no longer Chinese

Chinese is no longer the default language of the arbitration if parties have not expressly agreed on language. The 2012 Rules allow CIETAC to choose “any other language… having regard to the circumstances of the case” (Article 71.1).   This is a development of particular use in cases where the majority of relevant documents are in a language other than Chinese.

  1. Administration by CIETAC Beijing where the clause is ambiguous

If a clause does not validly specify administration by CIETAC Beijing or a different CIETAC sub-commission, CIETAC Beijing will administer the arbitration (Article 2.6).  Previously, in such circumstances, the party that filed the arbitration was entitled to propose CIETAC Beijing or a sub-commission to administer the arbitration. The other party could agree or disagree, a system that often resulted in unnecessary delay. If a party prefers its arbitration to be administered by a specific sub-commission of CIETAC, it should state the relevant CIETAC entity expressly and in full in its arbitration clause.

  1. Multi-party appointment of arbitrators

Where there are multiple parties on either the claimant side or respondent side, if the multi-party side fails jointly to nominate an arbitrator, CIETAC will now appoint all members of the tribunal and designate the presiding arbitrator (Article 27.3).  Previously, CIETAC would appoint only the arbitrator for the side which failed to do so.  This brings CIETAC into line with other institutions, including the ICC and SIAC.  The aim is to avoid a situation where one side has been able to choose its own arbitrator, whilst the other side has had its arbitrator imposed on it by CIETAC, and the respondent subsequently relies on this to bring a challenge based on unfair treatment (as in the case of Siemens AG/BKMI Industrienlagen GmBH v Dutco Construction Company).

  1. Mediation in CIETAC arbitrations

With the parties’ agreement, CIETAC can now conduct mediation during the arbitration process if the parties do not wish to involve the tribunal (e.g. in order to preserve the neutrality of the arbitrators) (Article 45.8).  This article aims to give parties maximum flexibility to adopt a mediation process with which they are comfortable, with a view to achieving a mutually agreeable settlement wherever possible.  However the 2012 Rules provide no information on who will be conducting the mediation, i.e. the administrative staff of CIETAC or professional mediators to be engaged externally by CIETAC, so it remains to be seen how this will operate in practice.

  1. New criteria for selection of arbitrators

Among other criteria, Article 28 of the 2012 Rules allows the Chairman of CIETAC to consider the nationalities of the parties when appointing an arbitrator in the absence of party agreement. The 2012 Rules do not, however, require that the presiding or sole arbitrator be of a nationality other than the nationality of the parties.  Parties should therefore make express provision in their arbitration clauses if they want the arbitrators to be of a different nationality to the parties.