On August 28, 2014, the China Air Transport Association (“CATA”), the International Air Transport Association (“IATA”), and the Shanghai International Arbitration Center (“SHIAC”) signed a cooperation agreement on international aviation arbitration in Shanghai. They announced that the Shanghai International Aviation Court of Arbitration (“SHIACA”) and the Shanghai International Aviation Arbitration Experts Committee (“SHIAAEC”) were officially established.

SHIACA is affiliated with SHIAC. After the Court of Arbitration of the Shanghai Free Trade Zone was initiated, SHIACA was regarded as another marvelous innovation by SHIAC and the world’s first arbitration agency specialized in aviation disputes. It means that international aviation arbitration system is officially established in Shanghai, which provides great convenience and advantages to domestic and foreign enterprises in the resolution of global disputes through SHIAC.

(1) Background of SHIACA

Since 2005, the volume of Chinese civil aviation transportation has ranked second place in the world. Currently, Shanghai is committed to becoming an international economic center, financial center, trade center, and shipping and air transportation center. Establishing an international shipping center is one of the most essential tasks. At the same time, Shanghai has placed great importance on the free trade zone’s development, which will help develop Shanghai into an international shipping center and an aviation hub.

(2) Functions of SHIACA

Arbitration has an inherent advantage in aviation dispute resolution because it is flexible, confidential, autonomous, professional and enforceable. Ad hoc arbitration is the common form of arbitration in aviation industry worldwide regarding disputes between airline companies and airports, oil and catering companies. However, China still only allows institutional arbitration. As a result, many civil aviation enterprises have to go abroad for an ad hoc arbitration or file a lawsuit in domestic courts, which is very expensive and time-consuming. With the establishment of SHIACA, there will be effective communications and connections between international and domestic arbitration rules, thus providing resolutions to recognition and enforcement of arbitration awards.

With the strategic cooperation of three parties, SHIACA will spare no efforts to promote alternative aviation dispute resolution. SCATA and IATA have promised to recommend SHIACA to their members as a dispute resolution agency. The three parties will involve SHIACA in the dispute resolution clauses of their Chinese and international standard agreements.

(3) Influence of SHIACA

As the world’s first arbitration agency specializing in civil aviation, SHIACA will promote the development of international aviation arbitration, and help Shanghai build an international and market-oriented business environment under the rule of law. And its establishment creates a new horizon for the Chinese legal service industry. However, opportunities also come with challenges. Problems like the sharp increase in arbitration cases and gaining the trust of arbitral parties will be the important problems in future.

Based on current reports, whether SHIACA will be an independent entity remains a question for us. The public’s concern is how much it can change the Chinese traditional arbitration model, such as whether it will bring in many international arbitration concepts, like consolidation of arbitration and whether it can offer a new platform to solve the disputes of aviation accident compensation based on contracts. However, it is believed all these questions will be answered by future practice.