Background

The China International Economic and Trade Arbitral Commission (“CIETAC”) was established in 1956. Since its establishment, CIETAC has been the dominant arbitral institution for foreign-related arbitration in China. CIETAC is headquartered in Beijing and, over a number of years, established four sub-commissions – in Shanghai, Shenzhen, Tianjin and Chongqing.

Following the release in 2012 of its new arbitration rules, CIETAC has undergone a number of internal changes.

The CIETAC Shanghai Sub-Commission has renamed itself the Shanghai International Arbitration Center (“SHIAC”) and the CIETAC Shenzhen Sub-Commission has renamed itself the Shenzhen Court of International Arbitration (“SCIA”). Both former sub-commissions have adopted their own arbitration rules and arbitrator panels.

For its part, CIETAC has announced that parties which have agreed to submit their disputes to arbitration by either of the former sub-commissions should submit any request for arbitration to CIETAC in Beijing.

Initial reaction of local courts

Because SHIAC and SCIA are both supported by local governments, their awards are able to be enforced by their respective local courts. However, the situation is more complicated when their awards are sought to be enforced by courts in other regions.

For example, the Liaoning High People’s Court recently upheld a decision of the Dalian Maritime Court which openly sided with CIETAC. In June 2013, the Dalian Maritime Court held that, as CIETAC had revoked its authorization to the former Shanghai and Shenzhen sub-commissions, they had no jurisdiction to accept and administer arbitrations.[1] The Court asked the parties to submit their disputes to CIETAC in Beijing.

In another example, the Suzhou Intermediate People’s Court refused to enforce an award rendered by the former CIETAC Shanghai sub-commission.[2] A Suzhou company and a Jiangxi company had agreed to submit disputes to “CIETAC (with the place of arbitration in Shanghai)” under the then-valid CIETAC arbitration rules. The parties commenced their arbitration in July 2010 and the tribunal rendered its award, in favour of the Jiangxi company, in December 2012. The Suzhou company refused to comply with the award, and the Jiangxi company applied to the Suzhou Court for enforcement.

In May 2013, the Suzhou Court held that the former Shanghai sub-commission was no longer part of CIETAC. By the time of the award, the sub-commission had registered as an independent arbitral institution, and by the time of the Court hearing, it had been renamed SHIAC. The Court found that SHIAC, having separated from CIETAC and failed to explain to the parties that they had a right to either confirm or re-select their arbitral institution, had no jurisdiction over the case.

As a result of this case, it is important for parties to be aware of the separation from CIETAC of the former Shanghai and Shenzhen sub-commissions, and to take steps to ensure that these changes do not cause difficulties.

Recent reaction from Supreme People’s Court

This explains the calls for the Supreme Court to end the confusion. On 4 September 2013, the Supreme Court requested that local courts only decide cases relating to the jurisdiction dispute after consulting it. The Supreme Court’s intention is clear: all courts must speak with one voice.

As yet, the Supreme Court has not issued a public explanation of its preferred approach. Similarly, there have not been any publicly reported local court decisions since September 2013 dealing with a jurisdiction dispute arising from the changes.

Advice for parties

In the absence of clear direction from the courts, it is difficult to predict how this jurisdiction dispute will play out. We recommend that parties take a cautious approach to deciding between CIETAC and its two former sub-commissions. Parties are also advised to bear other Chinese arbitral institutions in mind as alternatives to CIETAC, such as the Beijing Arbitration Commission and the Shanghai Arbitration Commission.

  1. For a new arbitration clause

If you are drafting a new arbitration clause and you would like to choose one of the former CIETAC Shanghai or Shenzhen sub-commissions, you should use their new names – “SHIAC” or “SCIA” – and avoid using the term “CIETAC sub-commission”. You also need to specify the new institution’s rules and its arbitrator panel.

  1. For an existing arbitration clause, where there is no dispute so far

If there is an existing arbitration clause referring to one of the former CIETAC Shanghai or Shenzhen sub-commissions, and if a dispute has not yet arisen, you should approach your counterparties as soon as possible about modifying and clarifying the wording. When modifying the clause, you should clearly specify the arbitral institution – “CIETAC”, “SHIAC” or “SCIA” – and also clearly specify arbitration rules and arbitrator panels – “CIETAC Arbitration Rules (2012)”, “SHIAC Rules” or “SCIA Rules”.

  1. For an existing arbitration clause, where a dispute has been referred to a former sub-commission

For applicants: If a case has been referred to either the former CIETAC Shanghai or Shenzhen sub-commission for arbitration under the old CIETAC rules, and if the respondent has filed a defence or counterclaim, you can assume that the respondent has accepted the tribunal’s jurisdiction. Nevertheless, you should ask the tribunal to obtain written confirmation from the respondent to strengthen your hand in relation to any future disputes about jurisdiction. If the respondent has not confirmed the tribunal’s jurisdiction, but has continued participating in the arbitration proceedings, you should ask the court to decide the jurisdiction issue before proceeding further.

For respondents: You should submit your objection against the tribunal’s jurisdiction, at the latest, before the first hearing. You should then ask the court to decide the jurisdiction dispute. In any of these scenarios, you should seek advice from local counsel. The suggestions in this article are a good starting point, but the best course will always draw on up-to-date and localised knowledge.