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POLICY: CIETAC Releases New Arbitration Rules
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altThe China International Economic and Trade Arbitration Commission (“CIETAC”) is one of the major permanent arbitration institutions in the world, and has become one of the busiest arbitration commissions throughout the globe in recent years. CIETAC recently issued its revised new arbitration rules, which will come into effect on 1 May 2012(“2012 Rule”). The last revision of these arbitration rules was in 2005.

The 2012 Rules retain the same structure as the 2005 Rules, with 6 chapters under the same names, but with the number of articles increasing from 71 to 74. The 2012 Rules simply make a further fine-tuning of the previous rules in an effort to be in-line with the latest international trends.

Interim Measures

Under Article 21.2 of the 2012 Rules, the arbitral tribunal has the express authority, at the request of a party, to order “any interim measure it deems necessary or proper in accordance with applicable law”. Under Chinese laws, there are two types of interim measures available for the parties involved in the proceedings of arbitration, namely preservation of property and evidence. Neither the arbitral tribunal, nor the arbitration commission, has the power to order or enforce interim measures. The Chinese courts reserve the power to do so. CIETAC rules provide that parties may apply for interim measures but CIETAC has to forward such application to competent Chinese courts to make a decision.

altThe 2012 Rules for the first time empower the arbitral tribunal, upon a party’s application to order any interim measures it deems necessary or proper, in accordance with the applicable law, usually the law of the seat of arbitration. The applicant may be required to provide security for the cost of the application. This will be useful where parties have agreed to arbitrate outside China. It is noteworthy that it is still uncertain if such interim measures will actually be executed by Chinese courts in practice, and it remains to be seen how CIETAC and the Chinese courts will coordinate when such measure are ordered by CIETAC

Governing Laws for Arbitration Proceedings and Arbitration Agreements


In accordance with Article 4.3 of the 2012 CIETAC Rules, parties are now allowed to choose arbitration rules other than that of CIETAC when agreeing to use CIETAC-administered arbitration, in addition to allowing the parties to modify the CIETAC rules as provided under the previous CIETAC rules. In the meantime, the parties have to make sure that the arbitration rules selected by the parties do not contradict any mandatory provisions under law applicable to arbitration procedures. In practice, it is not unusual to see the law governing the substantive issues of a commercial contract being different from the law applicable to arbitration proceedings. Typically, the procedural law of the seat of arbitration (in many cases) where the arbitration takes place, in the absence of any agreement between the parties to the contrary, would be the governing law for the arbitration proceedings.

Although it is commonly presumed that the governing law for an arbitration clause or agreement would be the same as that chosen by the parties to be applied to the commercial contract containing the arbitration clause, this is not always so. When the arbitration agreement is established under a separate submission agreement, in the absence of an express choice of law clause, the law of the seat of arbitration would generally be perceived as the governing law for the agreement to arbitrate, particularly in connection with the effect and validity of the arbitration agreement. In this regard, the 2012 Rules provide under Article 5.3 that whenever there is a conflict between the law of arbitration agreement opted for by the parties and the CIETAC Rules in relation to the form and validity of an arbitration agreement or clause, the law governing the arbitration agreement chosen by the parties shall prevail. Just like the previous CIETAC rules, the 2012 Rules continue to require under Article 5.1 that an arbitration agreement has to be in writing. In the meantime, it further provides under Article 5.3 that there could be an exception if circumstances discussed above arise.

altThe seat of arbitration could be of major significance for parties involved in a commercial dispute which is well illustrated from the aforementioned discussions. Under 2012 Rules, the parties are free to agree on the seat of arbitration pursuant to Article 7.1, which is the same as previously provided for under Article 31 of the old CIETAC rules. Where the parties fail to expressly agree on the seat of arbitration, the default seat of arbitration would be the location of CIETAC or its branch that administers the case. According to Article 7.2, CIETAC may determine at its full discretion the seat of arbitration other than the location of CIETAC or its branches, taking into account the specific circumstances of the case. The arbitration award shall be deemed to be delivered at the seat of arbitration which might have influence on the “nationality” of the award, as well as enforcement procedures at a future stage when the award is to be enforced. A written agreement on the seat of arbitration would be helpful for clarification of any ambiguity since the seat of arbitration could be within China or even outside China and it could impact the parties’ substantive interests.

The Summary Procedure

altUnder the 2005 CIETAC Rules, the threshold of value of a dispute for a summary procedure is CNY 500,000 which means any dispute that involves a dispute with a value above the amount cannot be conducted under an expedited procedure. This requirement of threshold standard has, over the years, has proved to be too low for many who would like to have the dispute settled through arbitration in a much more efficient way, both in relation to time and cost. Under the 2012 Rules, the amount of value for the threshold of summary procedure has been substantially increased from CNY 500,000 to CNY 2,000,000 (approximately USD 78,750 to USD 315,000 at current exchange rates).

Under Article 57, the parties may amend their claim or file a counterclaim during the course of proceedings. Unlike the 2005 CIETAC rules, pursuant to Article 61 of the 2012 Rules, even if the amount in dispute of the amended claim or that of the counterclaim exceeds CNY 2,000,000, the summary procedure will continue to apply unless the parties agree, or the arbitral tribunal decides to change the procedure to the common procedure.

Stay of Proceedings

The 2012 Rules include an express provision under Article 43 that states arbitration proceedings can be temporarily suspended by the arbitration tribunal upon the parties application, or when the circumstances warrants a suspension of the proceedings. The discretion of evaluating when a suspension is necessary fully lies with the arbitration tribunal or the Secretariat of CIETAC before the constitution of the arbitral tribunal. When calculating the time limit for issuing the arbitration award (6 months for international disputes and 4 months for domestic disputes), periods of suspension are excluded.

Conclusion

The 2012 Rules provide welcome changes to the previous CIETAC arbitration rules. They are more aligned with international standards and will likely help make CIETAC a more preferred dispute resolution choice for international businesses. However, it might take some time before we can see how the new rules are implemented in practice.
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