China Arbitration Update: The Shanghai International Aviation Court of Arbitration and its significance

18 December 2014

Richard Keady, Leo Fattorini

On 28 August 2014 the Shanghai International Aviation Court of Arbitration (“SHIACA”) was established by the execution of a Cooperation Agreement between the China Air Transport Association, the Shanghai International Arbitration Center, and the International Air Transport Association (“IATA”).

The signing ceremony was attended by over 70 representatives from Airbus, Boeing, Lufthansa, Air China, China Southern Airlines, China Eastern Airlines, China National Aviation Fuel Group, Shanghai Airport Group, the Commercial Aircraft Corporation of China and other well-known players in the aviation industry.

The establishment of SHIACA follows the implementation of China’s recent policies for economic reform and the creation of the Shanghai Free Trade Zone. It appears to be a further sign of China's commitment to developing Shanghai into a truly global city on a par with the likes of Hong Kong, Singapore, London and New York. The Mayor of Shanghai in his inaugural speech expressed his hope for Shanghai to become "the centre of international shipping and air transport".

Traditionally, disputes involving airlines, aircraft manufacturers, maintenance providers, fuel suppliers and other industry groups have been resolved through litigation in domestic courts (predominantly in London and New York) or ad hoc arbitration. When dealing with Chinese entities, parties to agreements now have a further option in SHIACA. SHIACA is said to be the first specialist civil aviation arbitration institution in the world and is managed by an Experts Committee, comprising highly qualified individuals with specialised knowledge of the aviation industry.

Although IATA has already developed a set of arbitration rules for its members, arbitration references adopting IATA arbitration rules are frequently conducted on an ad hoc basis. Under Chinese law, arbitration must be institutional and ad hoc arbitration references are not deemed to be valid. As such, despite China being a party to the New York Convention, awards obtained from foreign ad hoc tribunals are not enforceable in China. An exception to this is ad hoc arbitration awards arrived at in Hong Kong.

As China's aviation industry continues to grow, disputes involving Chinese parties are expected to rise. Such disputes can now be resolved by way of institutional arbitration at SHIACA. By adopting SHIACA procedures, a claimant can ensure that any award obtained from SHIACA will be prima facie enforceable against a Chinese party.

While SHIACA promises a great deal, for the time being it is likely that mainly aviation disputes between Chinese parties will be resolved there. However the wider global aviation community will undoubtedly keep a keen eye on developments.



Richard Keady

China and Hong Kong

Call me on: +852 2248 6000
Image of Leo Fattorini

Leo Fattorini

Head of Asia Pacific Aviation Group

Call me on: +65 6534 5266