On 19 November 2014, the China International Economic and Trade Arbitration Commission (CIETAC) officially unveiled its revised arbitration rules (the 2015 Rules), which take effect from 1 January 2015. This is less than three years after its previous 2012 Rules, which resulted in a split within CIETAC (discussed below).
There are two highlights in the 2015 Rules:
- First, they introduce new or extended provisions which are similar to recent innovations introduced by other institutions, including provisions dealing with the appointment of emergency arbitrators and joinder/consolidation of arbitrations.
- Second, they introduce special provisions for arbitrations administered by the CIETAC Hong Kong Arbitration Center (CIETAC Hong Kong).
Overall, CIETAC remains the leading arbitral institution in China for resolving foreign-related disputes and the changes are positive, in bringing CIETAC closer to accepted arbitral practice elsewhere.
Do the 2015 Rules apply to existing arbitration agreements?
Unless otherwise agreed, the 2015 Rules apply to all CIETAC arbitrations commenced on or after 1 January 2015, irrespective of the date of the arbitration agreement. For arbitrations commenced before 1 January 2015, the parties may agree that the 2015 Rules apply.
Do the 2015 Rules now provide for emergency arbitrator relief?
Yes, a key change under the 2015 Rules is that parties may apply to an emergency arbitrator to grant urgent interim relief, before the arbitral tribunal is constituted.
Appendix III of the 2015 Rules sets out the procedure, which requires that, once the Arbitration Court (discussed below) has decided that Appendix III shall apply, the emergency arbitrator is to be appointed within one day of receipt of the relevant documents and payment, and the emergency arbitrator is to make an order within 15 days from the date of his/her acceptance of appointment, unless an extension is granted. The emergency arbitrator procedure is in line with similar provisions from other leading arbitral institutions, although in the China context, it remains to be seen if PRC law will give full effect to these provisions.
How do the 2015 Rules deal with multiple contracts, joinder and consolidation of arbitrations?
Parties are increasingly entering into related contracts which govern a single transaction. The 2015 Rules introduce extensive provisions dealing with multiple contracts, joinder and consolidation:
- Multiple contracts: Parties may commence a single arbitration concerning disputes arising out of multiple contracts, provided, among others, that (a) such contracts consist of a principal contract and its ancillary contracts or they involve the same parties and legal relationships of the same nature; and (b) the arbitration agreements are identical or compatible.
- Joinder: CIETAC may now join in third parties to the arbitration at any stage, if the third party is prima facie bound by the same arbitration agreement invoked in the arbitration. Notably, a third party can be joined in over its objections.
- Consolidation: CIETAC’s power to consolidate two or more arbitrations has been expanded, and now includes the power to consolidate arbitrations even absent consent from all parties – for example, where the claims are made under multiple arbitration agreements that are identical or compatible, and they involve the same parties and legal relationships of the same nature.
How do the 2015 Rules impact on CIETAC Hong Kong?
CIETAC launched its CIETAC Hong Kong in September 2012, to administer cases in Hong Kong. Significantly, the 2015 Rules introduce a new chapter dealing with CIETAC Hong Kong.
For cases accepted and administered by CIETAC Hong Kong:
- The place of arbitration will be Hong Kong, unless otherwise agreed.
- The arbitration procedure will be governed by Hong Kong law.
- Parties are expressly empowered to nominate arbitrators who do not appear on CIETAC’s panel of arbitrators without requiring consent from the other party (by contrast, consent is required in arbitrations administered by CIETAC Beijing or its other branches/centres in Mainland China.)
- The arbitration award will be a Hong Kong award - this means that CIETAC Hong Kong awards will be foreign awards for the purposes of PRC law and should be enforceable in Mainland China under the reciprocal enforcement arrangement between those two jurisdictions.2
Do the 2015 Rules affect arbitrators’ fees?
Yes - whilst the fee schedules contained in the 2012 Rules remain essentially unchanged, the 2015 Rules now contain a separate fee schedule (Schedule III) for CIETAC Hong Kong arbitrations.
This fee schedule contains:
- Lower and upper limits for the fees of an arbitrator (which can be exceeded if the parties agree or if CIETAC determines), based on the amount in dispute; and
- Provisions allowing the parties to agree to remunerate an arbitrator based on hourly rates.3
The Hong Kong-specific fee schedule is significant, because CIETAC arbitrators have historically been paid less than those in arbitrations before other international arbitration institutions.4 There was a concern that this affected the pool of leading arbitrators available in CIETAC arbitrations. The improved fee scale/rates under Schedule III should help address this issue and add to the attractiveness of choosing CIETAC Hong Kong for arbitrations.
Do the 2015 Rules address the well-publicised split between CIETAC Beijing and its Shanghai and South China (Shenzhen) sub-commissions?
No. CIETAC’s former Shanghai and South China (Shenzhen) sub-commissions broke away from CIETAC in 2012, which led to conflicting court decisions on the jurisdiction of CIETAC’s former sub-commissions. The Supreme People’s Court subsequently introduced measures to ensure a consistent approach in dealing with similar cases, but uncertainties remain.
The 2015 Rules, however, do confirm that where an arbitration agreement provides for arbitration before the old CIETAC Shanghai or South China (Shenzhen) sub-commissions, the arbitration will fall under the jurisdiction of, and will be administered by, CIETAC (Beijing). However, this provision is not binding on the PRC courts, and it remains to be seen how the PRC courts will deal with this issue in the future.
Are there any other major amendments?
The 2015 Rules refer to a new body called the “Arbitration Court”, which, among others, takes over the functions performed by the CIETAC Secretariat under the 2012 Rules.
The 2015 Rules also increase the threshold for the application of its summary procedure, from RMB 2 million (about USD325,000) to RMB 5 million (about USD820,000) – an adjustment we have also seen in the rules of other institutions.
The 2015 Rules introduce a number of new provisions which practitioners and users of CIETAC arbitration will welcome. CIETAC Hong Kong has also become a more attractive option, as a result of the latest rules. The recent CIETAC split, discussed above, caused a number of uncertainties in CIETAC arbitrations, but it is hoped that the 2015 Rules will help to enhance CIETAC’s reputation, and bring its procedure and practice closer to that of international arbitration institutions outside Mainland China.