Dispute Resolution Forum Selection Uncertain with Arbitration Commission Secession

By Alexander May

Arbitration has become a fundamental mechanism to resolve commercial disputes as an alternative to courts, particularly in the context of international trade and investment.  As a result of judicial impracticalities in Mainland China, arbitration has long been the favored method of dispute resolution, using tribunals within and outside of China.

The Shanghai branch of the China International Economic and Trade Arbitration Commission (CIETAC) recently split from CIETAC after the launch of its 2012 arbitration rules.  The Shanghai branch (Shanghai CIETAC) declared itself an independent adjudication body with its own arbitration rules and its own panel of arbitrators.  However, CIETAC denies the validity of the secession.

Shanghai CIETAC’s attempted divorce is rooted in CIETAC’s revisions to its 2012 rules.  Under CIETAC’s 2005 rules, CIETAC branches are described as entities able to administer cases under their respective mandates.  The 2012 Rules describe CIETAC branches as bodies that merely accept applications and administer arbitrations with CIETAC's authorization.

Under Article 2(6) of the 2012 Rules, the CIETAC Secretariat (Beijing) must administer any arbitration unless the parties to the arbitration have clearly agreed to adjudication by a specific branch.  Therefore, if an arbitration agreement or clause is ambiguous, or the branch specified does not exist, Beijing reserves the exclusive right to administer the arbitration.  Consequently, general references to "CIETAC arbitration" in a forum selection clause will likely result in Beijing CIETAC claiming the exclusive right to administer the arbitration regardless of the intent of the parties.

While Shanghai CIETAC objects to Article 17 of the 2012 rules, which permits the consolidation of arbitration claims upon the request and consent of the parties to arbitration, it also challenges new rules permitting interim relief. Such relief can be used to preserve and protect property and evidence. Under the 1995 Arbitration Law, such relief could only be granted by a court. The 2012 rules allow an adjudicating panel to either apply to the court for interim relief or issue such relief itself via a provisional order or judgment.

Shanghai CIETAC also opposes a four-fold increase in the threshold for expedited summary proceedings under the new rules, which have been raised from RMB500,000  to RMB2,000,000. The new rules allow for smaller cases to be expedited via a sole arbitrator and a three month time limit, unless the parties to the arbitration request a tripartite tribunal and time extension.

CIETAC is based in Beijing, with four branches in Shanghai, Shenzhen, Chongqing and Tianjin.  It is the leading alternative dispute resolution body in China.  While the 2012 rules may modernize and improve the CIETAC arbitration process, whether Shanghai CIETAC can successfully maintain its independence remains to be seen.

The 2012 Rules are applicable to all CIETAC arbitrations beginning on or after 1 May 2012. Therefore, parties to any CIETAC arbitration commencing as of 1 May 2012 should check all relevant arbitration clauses in any pertinent agreements to confirm which CIETAC branch has been selected to administer the arbitration.  If an arbitration clause fails to specify a branch or is unclear, then Beijing CIETAC may claim primacy over the arbitration.  Due to the fragmentation of CIETAC, it is advisable that all outstanding and effective contracts with respect to arbitration in China are reviewed to ensure CIETAC forum selection is without ambiguity.