The ongoing dispute between, on the one hand, CIETAC (China’s premier institutional arbitration body) and, on the other, SHIAC (the new Shanghai International Arbitration Center) and SCIA (the new Shenzhen Court of International Arbitration) has caused some confusion as to the enforceability of arbitration awards arising out of arbitration agreements that specify CIETAC Shanghai or CIETAC South China (Shenzhen) as the arbitration body. In particular, it is not clear whether SHIAC or SCIA awards will receive the same degree of recognition as CIETAC awards.
SHIAC and SCIA evolved out of CIETAC’s sub-commissions in Shanghai and South China respectively, having declared “independence” earlier this year.
A provincial court in Suzhou (in Jiangsu, an eastern coastal province of China, just north of Shanghai) has recently refused to enforce an arbitral award made on 7 December 2012 pursuant to a CIETAC Shanghai arbitration. The parties in dispute had agreed to CIETAC Shanghai as the seat of their arbitration. They applied for arbitration before CIETAC Shanghai in July 2010.
In the meantime, CIETAC Shanghai (at the time a sub-commission of CIETAC headquartered in Beijing) applied for registration as a separate institutional arbitration body in 2011; that is, after the arbitration in question had commenced but before the award was made. The Suzhou court decided that, while CIETAC Shanghai had jurisdiction over the dispute when it was submitted to arbitration, its subsequent change in status to SHIAC meant that the new body was no longer the agreed arbitration forum. Therefore, SHIAC did not have jurisdiction over the arbitration by the time the award was handed down. Accordingly, the “losing” party was successfully able to resist enforcement of the award in Suzhou; its local base and, presumably, where it had assets.
This decision, no doubt, comes on the back of other commercial arbitrations which, while commenced before SHIAC and SCIA (the previous CIETAC sub-commissions) declared independence, have yet to result in awards.
Interestingly, last year a Shenzhen court took a different route and decided that CIETAC South China (Shenzhen) should be taken to be SCIA (the new body to have evolved out of CIETAC South China).
There is no formal system of case law precedent in China. One can expect more conflicting local court decisions with respect to arbitral awards arising of agreements to arbitrate concluded before the two new arbitration bodies declared independence.
In the meantime, it may be that an element of “home advantage” in some provincial courts is not to be unexpected; for example, depending on whether recognition of a CIETAC arbitral award of one of the new arbitration bodies assists a local party in enforcing or resisting enforcement in China. For now, some practical points to take from this include:
- Until the Supreme People’s Court, State and Provincial authorities issue a decree as to the formal status and jurisdiction of SHIAC and SCIA, if parties are concerned and wish to continue using CIETAC for China arbitrations, they should expressly choose CIETAC Beijing in their agreements to arbitrate. They should also review their terms and conditions of doing business accordingly. Such arbitrations can still be “seated” in Shanghai or Shenzhen (for venue and oral hearings).
- If parties wish to use the new arbitration bodies, their agreement to arbitrate should refer to their new names.
- If parties agree that an existing arbitration agreement, which specifies CIETAC Shanghai or CIETAC Shenzhen, should be arbitrated by SHIAC or SCIA, this should be set out in a simple supplemental arbitration agreement. If the parties cannot so agree, they may well have to dispute jurisdiction and, as a result, incur substantial resources and costs.