China International Economic and Trade Arbitration Commission (CIETAC) has revised its 2005 Arbitration Rules (Old Rules). The new CIETAC Arbitration Rules 2012 (2012 Rules) came into force on 1 May 2012. The changes respond to some practical issues encountered in international arbitrations and enhance various aspects of the Old Rules.
This note highlights some important changes introduced in the new rules.
Modification to CIETAC Rules and Adoption of Other Arbitration Rules
The Old Rules permit parties submitting to CIETAC arbitration to agree on a modification of the CIETAC Rules or the application of other arbitration rules, but only to the extent that such agreement is operative and is not in conflict with a mandatory provision of the law of the place of arbitration.
The same rules continue to apply under the 2012 Rules, with two improvements. Mindful of the concerns over the feasibility of an arbitration institution administering arbitrations in accordance with the arbitration rules of other institutions, the 2012 Rules expressly provide that CIETAC will perform the relevant administrative duties provided for in the agreed arbitration rules. It also clarifies the scope of the mandatory provisions to be those of the law that applies to the arbitration proceedings.
Seat / Place of Arbitration
The seat of an arbitration has legal implications. It often determines the applicable arbitration law for the arbitration proceedings, the courts with supervisory jurisdiction over the arbitration and the applicability of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Sometimes, the law of the seat of arbitration is also the applicable law to determine the validity of an arbitration agreement.
The Old Rules provide that where the parties have no or no clear agreement on the place of arbitration, the place of arbitration will be China by default, that being the place where CIETAC or its sub-commission is located. The 2012 Rules introduce a significant change under Article 7(2). Rather than applying the default provision mechanically, CIETAC may now determine a place other than China as the place of arbitration, having regard to the circumstances of the case.
Consolidation of Arbitrations
Multiple CIETAC arbitration proceedings on related issues may now be consolidated under Article 17 of the 2012 Rules. Consolidation of arbitration proceedings is not a new concept. The parties can by agreement apply that to their arbitration proceedings. Article 17 explicitly endorses the concept and provides food for thought to parties embroiled in multiple arbitrations.
In order to invoke the provision, the agreement of all parties concerned has to be obtained. A request for consolidation can be initiated by any party to the arbitration proceedings or by CIETAC. CIETAC will decide whether to consolidate after having regard to the relevant factors, including whether all of the claims in the different arbitrations are made under the same arbitration agreement, whether the different arbitrations are between the same parties, or whether one or more arbitrators have been nominated or appointed in the different arbitrations. If a consolidation is made, all arbitrations will be consolidated into the arbitration that was first commenced, unless the parties agree otherwise.
Consolidation has the advantages of eliminating the risk of inconsistent decisions by different tribunals in different arbitrations and potentially reducing the overall length and costs of arbitrations.
Appointment of Arbitrators for Multi-Party Arbitrations
Under the Old Rules, where three arbitrators are involved in a multiple-claimant or multiple-respondent arbitration, the claimant side and the respondent side each have to jointly appoint or entrust the Chairman of CIETAC to appoint one arbitrator. If joint appointment fails, the Chairman of CIETAC will make appointment for the relevant side.
Under the 2012 Rules, if any joint appointment fails, all three arbitrators will be appointed by the Chairman of CIETAC. The change seeks to ensure that each party to the proceedings has equal opportunity to nominate its own arbitrator.
Language of Arbitration
The 2012 Rules introduce some flexibility in terms of language to be used in arbitration proceedings in default scenarios.
The parties can agree on the language of the arbitration. In the absence of such agreement, Chinese is the default language under the Old Rules. Article 71 of the 2012 Rules has changed that. In case of no agreement, the language can be Chinese or any other language as may be designated by CIETAC. CIETAC will take into account the circumstances of the case when deciding the language to be used. Such decision will often be made at the outset of the proceedings, and it is important for the parties to provide as much relevant information to CIETAC as possible to enable it to choose a language that is conducive to a fair and effective resolution of disputes by arbitration.
Where conservatory measures are sought in accordance with PRC law, under current PRC law, only the People’s Courts of PRC have power to grant such measures. Under both the Old Rules and the 2012 Rules, a party wishing to apply for such measures will have to submit its application to CIETAC which will then forward the application to the relevant People’s Court for determination.
To serve situations where interim measures are sought in a jurisdiction other than China, the 2012 Rules expressly empower arbitral tribunals to grant interim measures in accordance with the applicable law. Such interim measure may take the form of a procedural order or an interlocutory award. This important change has brought the new rules in line with the international arbitration rules of the major arbitration institutions.
Suspension of the Arbitration Proceedings
The 2012 Rules expressly give arbitral tribunals and CEITAC the power to suspend arbitration proceedings when justified. This is a useful provision and introduces transparency and certainty to the arbitral process. Any party wishing to suspend the proceedings will have to make an application to the arbitral tribunal or CIETAC (as the case may be) upon which the other party should have the right to comment. Although the Rules do not articulate the precise grounds upon which a suspension will be ordered, when it comes to procedures the duty is on the arbitral tribunal or CIETAC to be satisfied that a suspension is warranted.
Conciliation in Arbitration
The 2012 Rules retain the unique feature under the CIETAC arbitration rules that allows arbitral tribunal, with the parties’ consent, to conciliate or mediate the case during the course of the arbitration proceedings.
There are always concerns that knowledge gained by an arbitral tribunal during a failed conciliation may influence their judgment of the merits of the case. This also inhibits free exchanges between the parties and discourages the making of concessions which could be misinterpreted as admissions of weakness in one’s case. Article 45(8) of the 2012 Rules has addressed this issue – it provides an option for the parties to conciliate their dispute through the assistance of CIETAC rather than the tribunal. The Rules do not specify the kind of assistance that would be offered, and the effectiveness of it for the parties remains to be seen.
The 2012 Rules have relaxed the threshold for cases subject to the summary procedure. The main features of the summary procedure are the case will be heard by a sole arbitrator and the time limits for different steps are shorter. The objective is to resolve low value dispute more quickly and at lower costs. Previously, unless the parties agree otherwise, the summary procedure will be automatically applied to claims where the amount in dispute was less than RMB 500,000. The new rules have increased the amount to not more than RMB2,000,000.
Applicability to CIETAC’s Shanghai Sub-Commission
The new rules will apply to arbitrations administered by CIETAC and its sub-commissions or centres from 1 May 2012 onwards. However, due probably to some internal issues, CIETAC’s Shanghai Sub-Commission has not accepted the new rules and has issued public statements announcing that it will not use the new rules. It is not certain whether CIETAC’s Shanghai Sub-Commission will change its position, but in the interim, parties choosing to adopt the new rules should take notice of this development.
CIETAC’s Arbitration Rules give the parties flexibility in designing procedures of their choice. As noted above, the parties are free to modify CIETAC’s arbitration rules to suit their special needs. In fact, many provisions of the CIETAC’s Arbitration Rules (some of which are discussed above) are subject to the agreement of the parties. Parties wishing to take benefit of the flexibility should give careful thoughts to the issues early on at the contract drafting stage and seek specialist advice where needed.