Shanghai No.2 Intermediate People’s Court (the “Court”) issued a civil ruling (the “Civil Ruling”) on December 31, 2014, affirming, for the first time, that the Shanghai International Arbitration Center (“SHIAC”) has jurisdiction over disputes applying arbitration clauses that designate the Shanghai Sub- Commission of China’s International Economic and Trade Arbitration Commission (“CIETAC”).

The Civil Ruling follows the Supreme People’s Court’s Notice on Properly Hearing the Relative Issues in Judicial Reviews on Arbitration , issued on September 4, 2013, under which the Supreme People’s Court (the “SPC”) required all lower courts hearing disputes over the jurisdiction of CIETAC or its former Shanghai and Shenzhen sub-commissions to refer these cases to the SPC for its internal review and decision.

The lawsuit was brought to confirm the validity of the arbitration clause in a share purchase agreement (“SPA”). The parties had designated CIETAC’s Shanghai Sub-Commission to arbitrate any dispute arising from the SPA. When the dispute occurred, the claimant started arbitration procedures against the defendant  before  the  CIETAC  in  Beijing.  The  defendant  then  started civil proceedings before the Court to challenge the validity of the arbitration clause, on the grounds that, following CIETAC’s split, the arbitration commission designated by the parties under the SPA was now the SHIAC. The arbitration proceeding was suspended while the Court reached a decision.

In the Civil Ruling, the Court stated the following:

  1. CIETAC Shanghai Sub-Commission was established in 1988 through a formal procedure. It was registered with the Bureau of Justice of Shanghai Municipality and obtained the PRC Arbitration Commission’s Registration Certificate, issued by the Justice Bureau of Shanghai Municipality.
  2. CIETAC Shanghai Sub-Commission was officially renamed SHIAC, after receiving the necessary approvals from the Shanghai local authorities.
  3. The agreed arbitral institution, CIETAC Shanghai Sub-Commission (now SHIAC), is legally established and has the power to arbitrate and make arbitral awards based on arbitration clauses agreed by parties.

The Civil Ruling reflects the SPC’s view that SHIAC, instead of CIETAC, has jurisdiction under arbitration clauses referring to CIETAC Shanghai Sub- Commission. However, as case law is not binding under the PRC legal system, this judicial decision could be challenged and overturned in the future.