New CIETAC arbitration rules

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On 4 November 2014, the China International Economic and Trade Arbitration Commission (CIETAC) adopted its new Arbitration Rules, which apply to all domestic and international arbitration references commenced on or after 1 January 2015. In this article, we set out a brief introduction to the key changes.

Chapter VI contains special provisions for the new Hong Kong Arbitration Center in the Hong Kong SAR. Article 74 makes it clear that arbitrations administered by the CIETAC Hong Kong Arbitration Center are Hong Kong awards, that the seat of the arbitration is Hong Kong and that the arbitration law of Hong Kong is the applicable governing law unless the parties agree otherwise. In the ordinary course, Hong Kong judgments are enforceable in mainland China under reciprocal agreement legislation.

The 2015 Rules contain new procedures for arbitrations concerning multiple contracts. Article 14 now allows a claimant to start a single arbitration for disputes arising out of or in connection with multiple contracts, provided that the contracts satisfy certain criteria. This is an important development. In the past, parties with multiple disputes arising out of the same set of facts but under separate contracts had to commence a separate arbitration for each contract. That involved the risk that different tribunals would reach inconsistent conclusions. This risk can now be avoided. In addition, Article 19 now expands on the old rules on consolidation of arbitrations, previously set out at Article 17. Whereas before, CIETAC required the consent of all parties before consolidating two or more arbitrations, Article 19.1 potentially gives CIETAC the power to consolidate at the request of just one party, provided certain conditions are met. In deciding to consolidate, CIETAC must take into account the opinions of all parties. This of course raises the question of whether claimants in multiple arbitrations against non-responsive respondents might use the new provisions at Article 19 to get those arbitrations consolidated.

Other changes include the provision at Article 2 for an Arbitration Court to handle references, rather than a Secretariat. It remains to be seen what this will mean in practical terms for the administration of cases. The Arbitration Court enjoys new powers, including the power under Article 45.1 to suspend an arbitration at the request of just one party. Perhaps most significantly, the Arbitration Court can grant emergency relief under the CIETAC Emergency Arbitrator Procedures at Appendix III of the 2015 Rules. In suitable cases, the Arbitration Court will appoint an Emergency Arbitrator within one day of receiving a party’s application for an Emergency Arbitrator and its advance on costs. The Emergency Arbitrator must make his decision within just 15 days of his acceptance of appointment.

The rules try to address the difficulties caused by the schism between CIETAC Beijing and the Shanghai and South China (Shenzhen) sub-commissions. Article 2 provides that, where a CIETAC sub-commission no longer exists or its authorisation has been terminated, the case will be administered by the Arbitration Court. Article 2 also tries to reserve CIETAC’s right to decide these jurisdictional questions. Current thinking is that these rules are not binding on the PRC courts. As a result, the risk of inconsistent judicial decisions remains. Caution is still needed when drafting arbitration clauses, to make sure that the clause is effective and to avoid expensive satellite litigation.

Paul Ho

Paul Ho Head of Greater China, Partner & Chief Representative, Shanghai