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November 18, 2014
China International Economic and Trade Arbitration Commission (CIETAC) Secession: What It Means For International Arbitration in China
International arbitration in China before the country’s leading arbitration institution, the Beijing-based China International Economic and Trade Arbitration Commission (CIETAC), may be entering a period of uncertainty and risk as a result of an internal dispute over arbitration rules, which has led the two principal sub-commissions of CIETAC to declare their independence from the parent institution.
On April 18, 2013, the CIETAC Shanghai Sub-Commission officially renamed itself the Shanghai International Economic and Trade Arbitration Commission/Shanghai International Arbitration Center (SHIAC) (www.shiac.org). The SHIAC has promulgated new versions of arbitration rules and a new panel of arbitrators, both of which went into effect on May 1, 2013. SHAIC has announced that, going forward, it will accept cases where there is an agreement between the parties to submit their dispute to SHIAC or the CIETAC Shanghai Commission/Shanghai Branch.
The SHIAC announcement follows the October 22, 2012 announcement by the CIETAC South China Sub-Commission, based in Shenzhen, that it was no longer affiliated with CIETAC and had changed its name to the South China International Economic and Trade Arbitration Commission, also known as the Shenzhen Court of International Arbitration (SCIA) (www.sccietac.org). The SCIA issued new rules which mirror the 2005 CIETAC rules as well as a new panel of arbitrators on December 1, 2012. The SCIA will accept cases where the parties have agreed to arbitrate through SCIA or CIETAC Shenzhen.
The secession of the Shanghai and Shenzhen Sub-Commissions from CIETAC is the culmination of a dispute which started in early 2012, when CIETAC introduced a new set of arbitration rules which went into effect on May 1, 2012 (the 2012 Rules). One of the changes in the 2012 Rules from the previous rules is to provide that all arbitrations would be administered by the CIETAC headquarters in Beijing in the absence of an arbitration agreement which specifically named one of the sub-commissions as the arbitration administrator. Previously, if the arbitration agreement simply stated that the dispute would be submitted to CIETAC or that the CIETAC rules would apply, the claimant was free to submit the case to one of the sub-commissions as well as CIETAC Beijing. The Shanghai and Shenzhen sub-commissions saw this new rule as demoting the sub-commissions to second class outposts and questioned its legitimacy.
In response to their dissatisfaction with the 2012 Rules, the Shanghai and Shenzhen Sub-Commissions declared themselves to be independent arbitration commissions on April 30, 2012 and June 16, 2012, respectively. On August 1, 2012, in response to these declarations, CIETAC suspended its authorizations to the sub-commissions to accept and administer CIETAC arbitrations, directing all parties with agreements to arbitrate their disputes before CIETAC Shanghai or CIETAC Shenzhen to submit their cases to CIETAC headquarters for administration. In response, the sub-commissions issued a joint statement stating that they were now independent arbitration institutions that were established subject to the approvals of the Shanghai and Shenzhen Municipal Governments, and that their rights to accept requests for arbitration did not depend on CIETAC’s authorization.
After CIETAC Shenzhen rebranded itself as SCIA and issued new arbitration rules and a new panel of arbitrators, CIETAC announced on December 31, 2012 that this action was null and void and that CIETAC Shenzhen and Shanghai were forbidden to continue in any way or form to use the name, brand and logo of CIETAC. It also reiterated that, where parties have agreed to arbitrate their disputes before CIETAC Shanghai or CIETAC Shenzhen, the parties should submit their requests for arbitration to the CIETAC Secretariat and that only CIETAC had the authority to accept and administer such cases, although Shanghai and Shenzhen could still serve as the geographic seat and venue of the arbitration.
The conflict between CIETAC and its breakaway sub-commissions poses potential risks for parties with existing CIETAC arbitration clauses. Parties who have clauses which provide for arbitration to be administered by CIETAC Shanghai or CIETAC Shenzhen should consider amending such clauses to specify CIETAC Beijing as the arbitration administrator to remove any potential ambiguity which could render the clause invalid. Likewise, when negotiating a new arbitration clause, parties who wish to submit their disputes to CIETAC but want to conduct such arbitration in Shanghai or Shenzhen should explicitly state that CIETAC Beijing shall be the case administrator and that Shanghai or Shenzhen shall be the seat and venue of the arbitration.