The entering into force of CIETAC (China International Economic and Trade Arbitration Commission) new arbitration rules on 1 May, 2012 has prompted a fierce dispute between CIETAC Beijing and its Shanghai Sub-Commission (CIETAC Shanghai).
CIETAC Shanghai has publicly refused to apply the new arbitration rules. It has also announced the adoption of its own arbitration rules and list of arbitrators.
CIETAC Beijing has strongly condemned this move by CIETAC Shanghai. In particular, CIETAC Beijing has underlined that CIETAC Shanghai (like CIETAC Shenzhen) is a sub-commission and, as such, an arbitration body subject to CIETAC Beijing. (CIETAC Beijing’s statements are available on www.cietac.org.)
On the other hand, in a long statement published on its website (www.cietac-sh.org), CIETAC Shanghai has made the following points clear:
- CIETAC Shanghai is an independent arbitration body;
- CIETAC Shanghai was established directly by the Shanghai Government (not by the China Council for the Promotion of International Trade, which established CIETAC Beijing);
- there is no subordination relationship between CIETAC Beijing and CIETAC Shanghai;
- therefore, CIETAC Shanghai has the powers to adopt its own arbitration rules and list of arbitrators.
But what has triggered off this dispute between CIETAC Beijing and CIETAC Shanghai?
The reason is very likely business. Both CIETAC Beijing and CIETAC Shanghai are competing for the same business. Now, due to the new arbitration rules, business opportunities, i.e. arbitration disputes, are diverted to CIETAC Beijing, unless the parties have expressly chosen a sub-commission.
Under previous 2005 arbitration rules, if the parties did not clearly set out whether CIETAC Beijing or a sub-commission had jurisdiction over the dispute in the arbitration clause or agreement, then the claimant had the right to choose whether to submit the dispute to CIETAC Beijing or a sub-commission for arbitration (clause 2(8).
Now, under the current arbitration rules, the dispute will be devolved to CIETAC Beijing for arbitration, unless the parties expressly set out that a sub-commission has jurisdiction over the dispute (clause 2(6).
According to CIETAC Shanghai, such a provision is unfair and harmful to the interest of the parties. This is because a dispute will be devolved to CIETAC Beijing even when the parties have agreed that arbitration will, for instance, take place in Shanghai but did not expressly chose CIETAC Shanghai sub-commission as the arbitration body. Therefore, according to CIETAC Shanghai, this will lead to an arbitration in Beijing, very likely a location inconvenient for both the claimant and the respondent.
Obviously this dispute between CIETAC Beijing and CIETAC Shanghai does not help CIETAC to establish its reputation as an international arbitration institution among companies and businesses.
Further, there are two main issues, prompted by this dispute, that from the perspective of the parties to a contract, need to be addressed:
- it is extremely important, given the internal competition within CIETAC and its sub-commissions to have jurisdiction, that the parties very clearly set out which is the arbitration commission, whether CIETAC Beijing or one of its sub-commissions. It is also very important that the parties specify the applicable arbitration rules and arbitrator list as CIETAC Beijing and CIETAC Shanghai are adopting different arbitration rules and arbitrator lists.
- This is an issues also for already stipulated agreements whereby the relevant arbitration clause did not clearly spell out which is the arbitration body. In such a situation, it is advisable for the parties to consider entering into a new arbitration agreement, or amending the existing arbitration agreement, to clarify, among other things, whether the dispute will be devolved to CIETAC Beijing or to a sub-commission.
For more on the new arbitration rules of CIETAC, check out: New CIETAC Arbitration Rules: a Step Forward to CIETAC internationalization?