CIETAC releases new arbitration rules | Practical Law

CIETAC releases new arbitration rules | Practical Law

The China International Economic and Trade Arbitration Commission (CIETAC) has recently issued revised arbitration rules which come into force on 1 May 2012.

CIETAC releases new arbitration rules

Practical Law UK Legal Update 4-518-8014 (Approx. 4 pages)

CIETAC releases new arbitration rules

by John Choong and Adam Silverman, Freshfields Bruckhaus Deringer
Published on 03 Apr 2012China
The China International Economic and Trade Arbitration Commission (CIETAC) has recently issued revised arbitration rules which come into force on 1 May 2012.

Speedread

The China International Economic and Trade Arbitration Commission (CIETAC) has for many years been the leading arbitration commission for foreign-related arbitrations in China. To meet this demand and to improve CIETAC's arbitration procedure, it has recently issued revised arbitration rules. The new rules come into force on 1 May 2012.
The following are some of the main changes:
  • Interim measures: Under the People's Republic of China (PRC) law, there are only two types of interim measures available in arbitrations in China: preservation of property and evidence. Only the Chinese courts (not the tribunal or arbitration commission) can grant such measures. The new CIETAC rules include provisions empowering the tribunal, on a party's application, to order any "necessary or proper” interim measure in accordance with the applicable law. This will be useful for arbitrations outside China, although it remains to be seen if such orders can be enforced in China. For arbitrations seated in China, under the current law, it is unlikely that more extensive interim measures will be available from the tribunal.
  • Language of the arbitration: Under the previous CIETAC rules, where parties failed to agree on the language of the arbitration the default language would be Chinese, thus limiting the pool of foreign arbitrators to those fluent in Chinese. The new rules now give CIETAC the power to designate any language, in the absence of party agreement. In theory, this is sensible because it seeks to ensure that a suitable language is adopted by CIETAC for each case.
  • Seat (place) of arbitration: In the absence of party agreement on the seat (place) of arbitration, or where the agreement is ambiguous, CIETAC can now choose any location as the seat. This reflects the fact that each year, CIETAC administers cases seated outside mainland China (although only a small number).
  • Summary procedure: This has been revised, with the main change being that, in the absence of party agreement, the summary procedure will now apply to any case where the amount in dispute does not exceed RMB2m (previously, RMB500,000). This takes into account the demand among arbitration users for expedited procedures and is in line with the higher threshold brought in by the new SIAC rules.
  • Multi-party appointment of arbitrators: The previous rules could lead to unfairness in a deadlock situation, in that if one side (typically, the respondent) failed to appoint its party-appointed arbitrator, it could lose its right to appoint, while the other side (typically, the claimant) could retain this right. The new rules now provide that if either side defaults in appointing its party-appointed arbitrator (or if both sides fail jointly to entrust the Chairman of CIETAC to appoint), then the Chairman will appoint all three arbitrators.
  • Consolidation: CIETAC may now consolidate two or more CIETAC arbitrations into one arbitration, either:
    • on request of one party and with the agreement of all other parties, or
    • if CIETAC considers it necessary to consolidate, and all parties consent.
    However, as consent of all parties is required in either case, a recalcitrant party can still easily derail or delay an arbitration by refusing to agree to consolidation.
  • Arbitration and mediation: According to CIETAC, each year between 20 and 30 per cent of its caseload is resolved through a combination of mediation and arbitration. Given this relative success, the new CIETAC rules seek to clarify this process further. For example, once a tribunal has been constituted, parties can choose to mediate their dispute without the tribunal, and may seek help from CIETAC to conduct the mediation (if the mediation fails, then the arbitration continues).
  • Substantive law: The new CIETAC rules now expressly provide that the parties are free to agree on the governing law of the contract and, where there is no agreement or the agreement is in conflict with a mandatory provision of law, then the tribunal shall determine such law. PRC law provides that domestic contracts must always be governed by PRC law. Although the parties to a foreign-related contract are in general free to choose the governing law, this is subject to exceptions. For example, PRC law must apply to Sino-foreign equity (or cooperative) joint venture contracts.
In revising its rules, CIETAC has considered recent changes in other international arbitration rules, such as the UNCITRAL, SCC, ICC, HKIAC and SIAC rules. Naturally, due in part to the constraints of PRC law and CIETAC's distinctive character, CIETAC has not adopted all the amendments made to other arbitration rules (for example, there are no provisions for appointing emergency arbitrators). Overall, the latest amendments are less significant than those introduced in the previous version in 2005. Nonetheless, the main amendments will likely be welcomed by CIETAC users and are in line with amendments to other international arbitration rules.