CIETAC Arbitration Rules Amended

On 4 November 2014, the China International Economic and Trade Arbitration Commission (CIETAC) issued its revised Arbitration Rules (2015 Rules), replacing the previous version of the CIETAC Arbitration Rules issued on 3 February 2012 (2012 Rules). The 2015 Rules entered into effect on 1 January 2015 and are aimed at adapting to the newest development in international arbitration practice and better accommodating the needs of the parties in the arbitration proceedings. We highlight below the most significant changes introduced by the 2015 Rules:

1. Under the current CIETAC arbitration regime, only upon the agreement of all parties can multiple proceedings be consolidated into a single arbitration. The 2015 Rules provide that upon the request of a party, CIETAC has the power to consolidate different arbitrations into a single arbitration if:
   
   a) The claims in different arbitrations are made under the same arbitration agreement;
   b) The claims are made under multiple arbitration agreements that are identical or compatible and the arbitrations involve the same parties and the legal relationships are ‘of the same nature’; or
   c) The claims are made under multiple arbitration agreements that are identical or compatible, and the multiple contracts involved consist of a principle contract and its ancillary contracts.
   
   
2. The claimant can apply for a single arbitration concerning multiple contracts provided that:
   
   a) The contracts comprise a principal contract and ancillary contracts, or the contracts involve the same parties having a legal relationships of the same nature;
   b) The disputes arise out of the same transaction or the same series of transactions; and
   c) The arbitration agreements in these contracts are identical or compatible.
   
   
3. Additional third parties can be ordered to join an ongoing arbitration according to the 2015 Rules. Either party to the arbitration may request CIETAC to order a third party to join the arbitration proceedings. That applicant has to prove that the arbitration agreement invoked in the arbitration prima facie binds that third party. However, CIETAC has the power to refuse ordering a joinder where it deems circumstances exist that make the joinder inappropriate.
   
   If applied properly by CIETAC in practice, the above options in items 1 to 3 to consolidate and combine arbitration proceedings can be efficient, save the resources of the arbitration commission and of the parties, and lead to faster relief for the parties.
   
   
4. In the Shanghai Free Trade Zone, according to the China (Shanghai) Pilot Free Trade Zone Arbitration Rules, emergency arbitration procedures before the Shanghai International Economic and Trade Arbitration Commission (SHIAC) are available for the parties since 1 May 2014. The 2015 Rules now also introduce an emergency arbitration procedure into CIETAC arbitration, allowing the parties to apply for an emergency arbitrator to grant preliminary injunctions. According to the amended PRC Civil Procedure Law, which came into effect on 1 January 2013, injunctive relief can take the form of preservation of property, prohibitory injunctions (orders prohibiting the party from certain acts), mandatory injunctions (orders to perform certain acts), and preservation of evidence. The 2012 Rules had already included a provision on CIETAC’s power to issue interim injunctions.
   
   However, enforcement of such interim injunctions in Mainland China can only be carried out by PRC courts. The PRC Civil Procedure Law and the PRC Arbitration Law still do not contain any provisions on the enforcement of interim injunctions issued by arbitration commissions such as CIETAC. Therefore, the CIETAC emergency arbitrator will probably mainly be important in practice in cases administered by the CIETAC Hong Kong Branch, as enforcement of arbitration commissions’ preliminary injunctions is only possible under foreign law and Hong Kong law, and not within Mainland China.
   
   
5. The CIETEC Hong Kong Branch was established in September 2012, i.e. seven months after the 2012 Rules came into effect. The 2015 Rules now introduce a new chapter for special provisions applicable to arbitrations administered by CIETAC Hong Kong Branch. In particular, the arbitration administered by the CIETAC Hong Kong Branch will be deemed to have its seat in Hong Kong and be governed by the Hong Kong Arbitration Ordinance, unless otherwise agreed by the parties. The award made in the arbitration will be deemed as a Hong Kong award.
   
   
6. The 2015 Rules increase the threshold for applying summary procedure from RMB 2 million to RMB 5 million. Such change aims at improving the efficiency of CIETAC due to the high case load of arbitration proceedings.
   
   
7. Finally, the 2015 Rules go in line with recent organizational changes within CIETAC. All functions and powers of the former CIETAC Secretariat have now been transferred to the CIETAC Arbitration Court, which is reflected in various provisions throughout the 2015 Rules.

The 2015 Rules show CIETAC's efforts to bring its rules more in line with those of other major institutions including the ICC and SIAC. The changes make CIETAC a more competitive option if the parties wish to adopt the arbitration proceeding as the dispute resolution method. However, the fact that CIETAC’s preliminary injunctions are not enforceable within Mainland China still account for a major shortcoming of all arbitration proceedings involving Chinese parties, not only of CIETAC arbitration. This shortcoming cannot be overcome by any changes to the CIETAC rules, but only by Chinese legislators in the future.