Since the splitting of the Shanghai and South China sub-commissions from China’s arbitration institute CIETAC in 2012, we have seen many disputes concerning the interpretation and validity of arbitration clauses that refer to the Shanghai and South China sub-commissions. Two higher courts ruled in earlier cases that references to the former sub-commissions of CIETAC should be interpreted as references to the new arbitration institutes established by the former sub-commissions after the split. The Supreme People’s Court of China has now confirmed this interpretation, bringing to an end the uncertainty caused after the CIETAC split. The SPC appears to recognise the independent position of the two former CIETAC sub-commissions. Even though the recent decision provides clear guidance, we still recommend the careful drafting of arbitration clauses, including referring to the specific arbitration institute with its most recent name in accordance with the standard arbitration clause provided by each arbitration institute.
In 2012, the internal struggle within China’s arbitration institute, CIETAC, resulted in a split-off by the Shanghai sub-commission and the South China sub-commission in Shenzhen. The Shanghai sub-commission changed its name to Shanghai International Arbitration Centre (SHIAC), and the South China sub-commission to Shenzhen Centre of International Arbitration (SCIA). CIETAC established new offices in Shanghai and Shenzhen.
Since the split-off, there has been uncertainty regarding the interpretation of arbitration clauses agreed prior to the split and referring to the Shanghai or the South China sub-commission of CIETAC. The question was whether disputes should be referred to the Shanghai or Shenzhen CIETAC office or to the newly formed arbitration institutes, SHIAC and SCIA.
In our In context article Rulings confirm jurisdiction of sub-commissions following CIETAC split published in April this year, we mentioned two higher court judgments which confirmed that a reference to the Shanghai or the South China sub-commission of CIETAC in arbitration clauses agreed prior to the split should be read as a reference to SHIAC and SCIA, respectively.
After the two judgments were issued, the SPC issued a “Reply to the Request of the Shanghai High People’s Court etc. for Judicial Review over Arbitration Awards Made by the CIETAC and its Former Sub-Commissions” on 15 July 2015. The Reply, which took effect two days later, confirms the interpretation of the higher courts in the two judgments. For parties which have agreed to submit their disputes to the “CIETAC South China Sub-Commission – renamed as the South China International Economic and Trade Arbitration Commission on 22 October 2012 and also known as the Shenzhen Court of International Arbitration (SCIA) – or to the “CIETAC Shanghai Sub-Commission – renamed as the Shanghai International Arbitration Center (SHIAC) for arbitration on 17 April 2013 – the following applies:
- If the arbitration clause was agreed prior to the renaming, SCIA or SHIAC, as the case may be, have jurisdiction over the dispute.
- If the arbitration clause was agreed after the renaming, CIETAC has jurisdiction over the dispute.
- In the case of an arbitration clause agreed after the renaming but prior to the Reply taking effect, if a party applies to the SCIA or the SHIAC for arbitration and the respondent raises no objection to the jurisdiction of the SCIA or the SHIAC at that time, the parties cannot, after the arbitration award is made, apply for revocation or non-enforcement of the arbitration award on the ground that the SCIA or the SHIAC had no jurisdiction.
This long-expected interpretation published by the SPC finally brings an end to the uncertainty of the interpretation and validity of arbitration clauses after the split of the Shanghai and South China sub-commissions from CIETAC.