An internal dispute between the China International Economic and Trade Arbitration Commission (“CIETAC”), China’s leading arbitration institution, and its sub-commissions, CIETAC Shanghai Commission (“CIETAC-SH”) and CIETAC South China Commission (“CIETAC-SC”), has escalated recently since it initially came to the public attention earlier in 2012.

On August 1, 2012, CIETAC released an announcement on its offi cial website (“Announcement”), declaring immediately effective, that CIETAC’s authorization for CIETAC-SH and CIETAC-SC to accept and administer arbitration cases was suspended. Additionally, where parties have agreed to arbitrate their disputes by reference to CIETAC-SH or CIETAC-SC, the parties should instead submit their applications for arbitration to CIETAC. The CIETAC Secretariat would accept such arbitration applications and administer these cases. In response to this, CIETAC-SH and CIETAC-SC issued a joint statement on August 4, 2012, asserting that both CIETAC-SH and CIETAC-SC are independent arbitration institutions and would continue to accept and manage the cases as agreed to be submitted to them.

The dispute was first triggered by CIETAC’s promulgation of the new arbitration rules effective as of May 1, 2012 (the “New Rules”), which enlarged CIETAC’s jurisdiction by stipulating that:

“Where the sub-commission/centre agreed upon by the parties does not exist, or where the agreement is ambiguous, the Secretariat of CIETAC shall accept the arbitration application and administer the case. In the event of any dispute, a decision shall be made by CIETAC.”

However, the forum for such cases was subject to the option of the party commencing the claim according to the previous rules. Both sub-commissions generally refused to apply the New Rules, and CIETAC-SH put forward its own arbitration rules and panel of arbitrators. CIETAC thereafter responded that CIETACSH’s own arbitration rules were null and void.

The ongoing dispute between CIETAC and its sub-commissions has clearly caused confusion. The enforceability of the awards issued by the two sub-commissions is uncertain.

In order to avoid inconvenience and uncertainty, in the event the parties decide to choose arbitation in China, it should provide for CIETAC rather than by one of its sub-commissions. Alternatively, to the extent permitted by the PRC law, the parties may also consider to choose offshore arbitration institutions, such as the Hong Kong International Arbitration Centre, Singapore International Arbitration Centre, or ICC in Hong Kong or Singapore. If CIETAC-SH or CIETAC-SC has already been designated as the arbitration forum in a previously executed contract, the parties may want to consider amending the forum to CIETAC or any of the offshore arbitration institutions.