A dispute between the central Beijing commission of the China International Economic and Trade Arbitration Commission ("CIETAC") and its Shanghai and Shenzhen sub-commissions has arisen as the two sub-commissions refused to comply with the new arbitration rules issued by CIETAC that came into effect on 1 May 2012. The dispute has led to the suspension of the Shanghai and Shenzhen sub-commission by CIETAC's central Beijing commission effective as of 1 August 2012. As a result of the suspension, the status of the Shanghai and Shenzhen sub-commissions is uncertain and it is advised that companies that include CIETAC as arbitration institute in new contracts clearly appoint the CIETAC's central commission in Beijing as the competent administrative authority. Companies who appointed the Shanghai or Shenzhen sub-commissions in existing contracts should be aware that it is uncertain whether that appointment can be enforced in the current situation.

The direct cause of the internal dispute is the stipulation in the new arbitration rules that all arbitrations must be administered by the central Beijing commission unless contracts explicitly state an alternative. The two sub-commissions refused to go along with this provision and declared their independence. The Shanghai sub-commission has even gone one step further and published its own arbitration rules.

It is at this time unclear how the dispute will be resolved. It is expected that some additional (governmental) actions will be taken.