Arbitration players across the border in row of their own
Warren Ganesh and Gary Yin of Smyth & Co, in association with RPC, look at the dispute between rival mainland arbitration bodies
Warren Ganesh and Gary Yin
The dispute between, on the one hand, CIETAC (China's oldest and best known institutional arbitration body) and, on the other, SHIAC (the new Shanghai International Arbitration Centre) and SCIA (the new Shenzhen Court of International Arbitration), has recently come to a head.
The two new international institutional arbitration bodies appear to have evolved out of CIETAC's representative offices in those cities and they have gone in for something of a "unilateral declaration of independence" (UDI).
Generally, parties are free to agree where to arbitrate in China, as in most other jurisdictions; arbitration being underpinned by contractual freedom to choose the forum and procedures.
CIETAC is China's oldest and most experienced permanent international arbitration institution, resolving economic and trade disputes with the approval of the Chinese government since 1956.
CIETAC's head office is in Beijing. It has (or had) representative offices in important commercial centres, such as Shanghai, Shenzhen, Tianjin and Chongqing.
Why has the dispute arisen?
The origins of the dispute appear to have arisen last year when CIETAC adopted new arbitration rules which said CIETAC Beijing would have jurisdiction over arbitrations, unless the parties specifically provided for one of CIETAC's representative offices to arbitrate. But CIETAC's offices in Shanghai and Shenzhen refused to apply the new rules.
The dispute also reflects competing financial interests and issues of independence in Shanghai and Shenzhen.
What has recently happened?
During the course of 2012-13, CIETAC Beijing purportedly suspended CIETAC Shanghai and CIETAC Shenzhen and established new secretariats in Shanghai and Shenzhen.
Not to be outdone, CIETAC Shanghai and CIETAC Shenzhen (in effect) declared UDI. They recently named themselves SHIAC and SCIA. Both have their own websites, logos and branding, having, apparently, been forbidden from using CIETAC's. Rather cheekily, perhaps, SHIAC also goes by the name "Shanghai International Economic and Trade Arbitration Commission" (SIETAC).
SHIAC adopted its own arbitration rules and panel of arbitrators, effective from May 1. SCIA adopted its own rules in December last year.
CIETAC has (for now) refused to accept the legality of SHIAC and SCIA or their authority to determine arbitrations.
Some points to look out for
Parties proposing to arbitrate in China, or entering into written agreements to arbitrate there, through CIETAC or SHIAC or SCIA, now face some additional considerations. For now, if parties have concerns and wish to continue using CIETAC for China arbitrations they should consider expressly choosing CIETAC Beijing in agreements to arbitrate and review their terms and conditions of doing business accordingly. Such arbitrations can still be "seated" in Shanghai or Shenzhen. Of course, the scope to amend or negotiate existing arbitration clauses will be limited.
The dispute also raises the risk of challenges to arbitrations using SHIAC or SCIA.
CIETAC arbitration awards have generally received widespread recognition in the courts of China and overseas, as a result of CIETAC's reputation and China being a party to the New York Convention (Recognition and Enforcement of Foreign Arbitral Awards).
It is not yet entirely clear whether arbitral awards arising out of SHIAC or SCIA will receive the same degree of recognition. Much may depend on whether the courts in Shanghai and Shenzhen recognise orders and awards arising out of arbitrations conducted by SHIAC or SCIA.
Which arbitration rules?
Parties wishing to enter into institutional arbitrations already face a wide choice of rules. Knowing the difference requires expertise. As regards institutional arbitrations in China, that choice has (for now) become a tad more complex.