China International Economic and Trade Arbitration Commission (“CIETAC”), the firstcommercial arbitration institution in China (which, for the purpose of this article, does not include Hong Kong, Macau and Taiwan),is frequently favored by domestic and overseas enterprises in commercial arbitration. In addition to its headquarter in Beijing, CIETAC also sets four sub-commissionsin China, namely South Sub-Commission in Shenzhen, Shanghai Sub-Commission, Tianjin Sub-Commission and Southwest Sub-Commission in Chongqing. Yet, many enterprises wrongly believe that there are other CIETAC sub-commissions in China and thuswrongly choose those non-existing CIETAC sub-commissions (such as “CIETAC Beijing Sub-Commission” or “CIETAC Xiamen Sub-Commission”) as arbitration institutionsin their arbitration agreements.
Consensus has not yet reached among Chinese courts as to the validity of such faulty arbitration agreements. In practice, Xiamen Intermediate People’s Court has ruled that an arbitration agreement provided for arbitration by CIETAC Xiamen Sub-Commission was invalid because “CIETAC Xiamen Sub-Commission” did not exist and therefore it was impossible to identifythe arbitration institution designated by the parties. On the other hand, the Supreme People’s Court has held that an arbitration agreement provided for arbitration by CIETAC Beijing Sub-Commission was valid because it could be inferred from “CIETAC Beijing Sub-Commission”that CIETAC in Beijing had been chosen as the arbitration institution.
Due to disagreements among Chinese courts, arbitration agreements choosing non-existing CIETAC sub-commissions as arbitration institutions may be deemed as invalid and consequently the relevant disputes may have to be submitted for court trial instead of arbitration. To avoid such risk, parties may consider the following solutions: (1) choosing CIETAC rather than CIETAC sub-commission as the arbitration institution in arbitration agreements; additionally, parties may select the place of the CIETAC sub-commission they intend to chose as the place of arbitration (for example, parties may provide “arbitration by CIETAC in Xiamen” instead of “arbitration by CIETAC Xiamen Sub-Commission” in their arbitration agreement), and (2) in case parties have to address a CIETAC sub-commission in their arbitration agreement, it is advisable for the parties to check if such sub-commission does exist beforehand via such means as telephone consultation with CIETAC or online search with CIETAC official website.