In August 2012, we reported on growing tensions between the China International Economic and Trade Arbitration Commission (“CIETAC”) and its sub-commissions in Shanghai and Shenzhen.
On 31 December 2012, CIETAC issued the Announcement on Issues concerning CIETAC Shanghai Sub-Commission and CIETAC South China Sub-Commission (“Announcement”).
- According to the Announcement, CIETAC headquarters in Beijing has terminated its authorisation to its sub-commissions in Shanghai and Shenzhen. This authorisation had been suspended on 1 August 2012. This escalation from “suspension” to “termination” appears to represent the final split of CIETAC headquarters in Beijing from its two largest sub-commissions.
- The Announcement states that due to the termination of authorisation, parties who have agreed to arbitrate their disputes before the two sub-commissions will have to submit their request for arbitration to CIETAC headquarters in Beijing. The CIETAC Secretariat will accept these arbitrations and administer the cases. Unless otherwise agreed by the parties, the arbitration venue for cases that were to be arbitrated by CIETAC Shanghai Sub-Commission will be Shanghai and for cases that were to be arbitrated by CIETAC South China Sub-Commission it will be Shenzhen.
- The Announcement explains that the above-mentioned termination of authorisation was due to the refusal by the two sub-commissions to apply the amended CIETAC Arbitration Rules (2012), adoption of their own arbitration rules and panel of arbitrators, as well as their refusal to remain under the leadership of CIETAC in respect of case administration. The CIETAC South China Sub-Commission even changed its name to Shenzhen Court of International Arbitration and South China International Economic and Trade Arbitration Commission (“SCIA”).
- On 21 January 2013, in response to the Announcement, the CIETAC Shanghai Sub-Commission and SCIA jointly issued an announcement (“Joint Announcement”) which was also published in the People’s Court Daily newspaper dated 29 January 2013. In the Joint Announcement, both sub-commissions restated that they are independent arbitration institutions, established subject to approval by the Shanghai Municipal Government and the Shenzhen Municipal Government respectively, and when either of the two sub-commissions is designated by the parties as the arbitration institution for a case, the case will be accepted and administered by the sub-commission in question. According to the Joint Announcement, the Shanghai Municipal Bureau of Justice and the Department of Justice of Guangdong Province, i.e. the competent registration authorities for arbitration institutions of these two sub-commissions, have separately confirmed the above in official documents.
The CIETAC Shanghai Sub-Commission and SCIA restated their status as independent arbitration institutions in another announcement published in the People’s Daily newspaper dated 4 February 2013.
- On 25 January 2013, the Legislative Affairs Commission of the Standing Committee of Shanghai Municipal People’s Congress (“LAC”) issued a reply to the Shanghai Bar Association concerning the practical implementation of Article 37 of the Regulations of Shanghai Municipality for Reinforcing Shanghai’s Role as a Hub for International Trade (“Reply”). According to the Reply, the LAC confirms that the local arbitration institutions mentioned in Article 37 must include the CIETAC Shanghai Sub-Commission. Therefore, the LAC as a local legislative body upholds the legitimacy of the CIETAC Shanghai Sub-Commission as an arbitration institution.
- The Shenzhen Municipal Intermediate People’s Court ruled on 20 November 2012 that arbitration agreements in which SCIA is designated by the parties as the arbitration institution are legitimate and SCIA has jurisdiction over such cases. Since SCIA is located in Shenzhen, it appears probable that this ruling will be upheld by local Shenzhen courts. However, it is too early to ascertain whether or not the People’s Courts in other locations will have different opinions, especially those in Beijing.
- It appears that the tensions within CIETAC that have been building since last year have reached boiling point and the breakaway of its two largest sub-commissions is inevitable. For the time being, there are no obvious indications that the participants will settle their dispute. Therefore, in the absence of clarification from the PRC Supreme People's Court or a government authority at national level, if the parties in a dispute wish to choose CIETAC arbitration, for the time being the safest solution is to designate CIETAC headquarters in Beijing as the arbitration institution in order to avoid further disputes regarding the competent arbitration institution.