The China International Economic and Trade Arbitration Commission (“CIETAC”) is the main arbitration body for sino-foreign disputes in China. Its existing rules have been in use since 2005, and a set of new Arbitration Rules have just been published and they came into effect on 1 May 2012 (the “2012 Rules”). The 2012 Rules are aimed at maintaining CIETAC’s competitiveness amongst other arbitration centres in Asia. For cases filed with CIETAC before 1 May 2012, the prevailing rules at the time of filing would still be applicable unless the parties agree otherwise. There are a number of the significant changes in the 2012 Rules and they are examined as follows.
1. Interim Measures by Tribunal
Under the former rules, an arbitral tribunal shall refer any request for preservation of property or evidence of a party to the competent People’s Court, since only a People’s Court has jurisdiction to grant such orders.
Under Article 21.2 of the 2012 Rules, where the procedural law other than PRC law applies, an arbitral tribunal may now order any interim measures it deems necessary or proper in accordance with the applicable laws. Moreover, the tribunal may require a party to provide security for such interim measures.
2. Summary Procedure
Previously, parties may apply for the summary procedure, which is an expedited arbitration process, if the amount in dispute is below RMB500,000. In this summary procedure, a sole arbitrator will hear the case and will make an award within 3 months of his appointment. Under Article 54 of the 2012 Rules, the threshold for the summary procedure has been increased to RMB 2 million. Even if the amount in dispute later exceeds the above limit due to subsequent amendments to the statement of claim or counterclaims, the summary procedure will continue unless otherwise agreed by the parties or ordered by the tribunal. This will certainly encourage the use of the summary procedures for arbitration involving initial disputes of less than RMB2 million.
3. Seat of Arbitration
Under the former rules, where the parties have not agreed on the seat of arbitration, it is deemed to be a city where CIETAC or any of its sub-commissions is located, which must be within China.
Article 7.2 now allows CIETAC to decide the arbitration seat on “other places” having regard to the particular circumstances of the case. This new provision technically implies that CIETAC arbitration can be conducted in a location where CIETAC does not have a presence and may be outside China when the dispute is “foreign related”.
4. Use of other Arbitration Rules
Article 4.2 retains the provision that the parties shall be deemed to agree to arbitration in accordance with CIETAC rules if they have agreed to arbitration by CIETAC. However, Article 4.3 provides that “CIETAC shall perform the relevant administrative duties, where the parties agree to refer their dispute to CIETAC for arbitration but have agreed on the application of other arbitration rules”. Some arbitration practitioners are skeptical of this new provision since it would imply that CIETAC may administer proceedings using the rules of other arbitral institutions.
While the intention of this new provision is to provide flexibility by allowing the parties to choose the procedural rules of another arbitration institution, this choice may lead to conflict between CIETAC and the rules of other arbitration bodies such as the ICC Rules of Arbitration. It is advisable therefore to avoid arbitration clauses which seek to allow one arbitral institution to administer proceedings under the rules of another body.
5. Governing Law of the Arbitration Agreement
While the 2012 Rules continue to require a valid arbitration agreement to be in writing, Article 5.3 expressly states that if the governing law of the arbitration agreement contains different requirements as to the form and effect of such agreement, such requirements shall prevail. Therefore, in the event that the agreement to arbitrate is set out in a separate agreement, parties should state expressly the law governing the arbitration agreement for clarity.
6. Language
The old rules provide that Chinese shall be the language for arbitration in the absence of any agreement between the parties. Under Article 71, the arbitral tribunal is given the right to use a language other than Chinese for arbitration taking into account the circumstances of the case. This should facilitate arbitration involving foreign parties and documents written in a foreign language.
If you have any questions of the above update or other issues on dispute resolutions or doing business in China, experienced lawyers in our China Business and Litigation Department will be happy to assist you.