Briefing

The Supreme People’s Court of China (SPC) issued its long-awaited notice1 (the Notice) on the CIETAC split yesterday. The Notice clarifies the validity of arbitration agreements and the enforceability of arbitral awards involving the China International Economic and Trade Arbitration Commission (CIETAC) and its former sub-commissions, which have been subject to uncertainty since the CIETAC split in 2012. The Notice is effective from 17 July 2015.

Background

In 2012, disagreements between CIETAC (headquartered in Beijing), and its Shanghai and Shenzhen sub-commissions, resulted in the two sub-commissions declaring independence from CIETAC (the Split), and renaming themselves as the Shanghai International Arbitration Center (SHIAC)2 and the Shenzhen Court of International Arbitration (SCIA)3 .

The split caused serious concerns amongst users of CIETAC arbitration, and called into question the validity of arbitration agreements referring to the two former sub-commissions, and the enforceability of the resulting arbitral awards. A number of lower courts adopted inconsistent approaches towards this issue, creating further uncertainty.

In response, the SPC has considered the various issues and released its long-awaited Notice.

Who has jurisdiction?

The Notice stipulates that SHIAC or SCIA shall have jurisdiction over cases where the arbitration agreements were entered into before the Split and which specified CIETAC Shanghai or CIETAC Shenzhen as the arbitration commission.

As regards arbitration agreements entered into after the Split and which specify CIETAC Shanghai or CIETAC Shenzhen as the arbitration commission, CIETAC (Beijing) shall have jurisdiction. However, in cases where the arbitration agreements were entered into before 17 July 2015 (ie the effective date of the Notice), if the disputes in question have already been referred to SHIAC or SCIA, and no objection was raised by the respondent before the arbitral award was rendered, the respondent will be prohibited from challenging SHIAC/SCIA’s jurisdiction, and the enforceability of the resulting arbitral awards.

Effect on ongoing arbitrations?

The Notice will generally not affect arbitrations commenced before 17 July 2015, and parties are not permitted to rely on the Notice to challenge the enforceability of arbitral awards already obtained, except in limited circumstances where an application has been made before the first arbitration hearing.

However, where parallel arbitration proceedings have been commenced before more than one arbitration commission, the Notice stipulates that the local courts shall determine the validity of the arbitration agreements in question pursuant to the rules laid down by the Notice, provided that a challenge to the validity of the arbitration agreement has been made before the first arbitration hearing. Otherwise, the commission which first accepted the case has jurisdiction.

Significance of the Notice

The Notice has provided much needed clarity on issues arising from the Split, and is to be welcomed. It is binding on all local courts. It is also noteworthy that the Notice seeks to preserve the validity of arbitration agreements affected by the Split, and is a positive response to the difficulties caused by the Split.