Search for:

Recent developments

China’s Supreme People’s Court (“SPC”) has clarified the jurisdiction of China International Economic and Trade Arbitration Commission (“CIETAC“), the Shanghai International Economic and Trade Arbitration Commission (also known as the “Shanghai International Arbitration Center”) (“SHIAC”) and South China International Economic and Arbitration Commission (also known as the “Shenzhen Court of International Arbitration”) (“SCIA”).

The SPC provides guidance by way of the Reply of the Supreme People’s Court to the Request of Shanghai High People’s Court and Other Courts for Instruction on the Judicial Review Case Concerning the Arbitral Awards Made by the Arbitral Institutions Including China International Economic and Trade Arbitration Commission and its Former Sub-Commissions/最高人民法院关于对上海市高级人民法院等就涉及中国国际经济贸易仲裁委员会及其原分会等仲裁机构所作仲裁裁决司法审查案件请示问题的批复 (the “Reply“). The Reply became effective on 17 July 2015 and among other things, provides a practical solution for handling arbitrations selecting CIETAC’s Shanghai and Shenzhen sub-commissions.

Implications for clients

Our previous alert discussed that due to the rift with CIETAC in 2012, the former CIETAC South-China and Shanghai sub-commissions were renamed as SCIA and SHIAC on 22 October 2012 and 16 April 2013 respectively (the “Name Changes“). Court rulings in Shanghai and Shenzhen earlier this year held that agreements providing for arbitration before “the CIETAC Sub-commission in Shanghai or Shenzhen” (“CIETAC Shanghai/South-China Arbitration Agreements“) entered into prior to the dates of the Name Changes are valid, and that SHIAC and SCIA have jurisdiction to administer such cases.  However, a few issues remained uncertain, for example, the jurisdiction of SHIAC and SCIA after the Name Changes.

The Reply addresses the unresolved issue over cases involving CIETAC  Shanghai/South-China Arbitration Agreements entered into after the dates of the Name Changes. The Reply confirms that CIETAC has jurisdiction over cases which involve CIETAC  Shanghai/South-China Arbitration Agreements entered into after the Name Changes.

However, the Reply has no retroactive effect on arbitral awards made by CIETAC, SHIAC or SCIA in existing arbitrations accepted by these institutions before the effective date of the Reply, unless CIETAC and SHIAC or SCIA accepted the same dispute between the parties before that date.

In view of the complexities of the issues brought about by the CIETAC rift, we will be keeping a close watch on how the local courts will apply the guidance under the Reply.

Summary of the Reply

Article 1 of the Reply clarifies the SPC’s position on the jurisdiction of CIETAC, SHIAC and SCIA in cases involving CIETAC Shanghai/South-China Arbitration Agreements as follows:

  1. SHIAC or SCIA has jurisdiction over cases where the CIETAC Shanghai/South-China Arbitration Agreements were entered into by the parties before the Name Changes;
  2. CIETAC has jurisdiction over cases where the CIETAC Shanghai/South-China Arbitration Agreements were entered into by the parties after the Name Changes and before the effective date of the Reply;
  3. CIETAC has jurisdiction over cases where the CIETAC Shanghai/South-China Arbitration Agreements are entered into by the parties after the effective date of the Reply.

In respect of existing cases involving CIETAC Shanghai/South-China Arbitration Agreements and which have been accepted by CIETAC, SHIAC or SCIA before the effective date of the Reply (the “Existing Case“), the Reply provides a practical solution:

  1. If the Existing Case has been accepted by one arbitral institution among CIETAC, SHIAC and SCIA, the parties cannot challenge the arbitral award as being in violation of Article 1 of the Reply;
  2. If the Existing Case has been accepted by both CIETAC and SHIAC or SCIA, and none of the parties has applied to the court for deciding on the validity of the CIETAC Shanghai/South-China Arbitration Agreement before the first arbitration hearing, the arbitral institution who accepted the case first has jurisdiction;
  3. If the Existing Case has been accepted by both CIETAC and SHIAC or SCIA, and a party has applied to the court for deciding on the validity of the CIETAC Shanghai/South-China Arbitration Agreement before the first arbitration hearing, the court will decide the case subject to Article 1 of the Reply.

Actions to consider

  1. Parties who prefer CIETAC arbitrations can select CIETAC, or its sub-commissions (e.g., the CIETAC Shanghai / South-China Sub-Commissions) to administer their disputes.As the Reply provides clear guidance on the jurisdiction of CIETAC, SHIAC and SCIA, parties now have increased options and can take the following steps:
  2. Parties opting for SHIAC or SCIA arbitrations should clearly stipulate the name of SHIAC or SCIA in their agreements.
  3. If enforcement is required in Hong Kong, we recommend that clients select CIETAC instead of SHIAC or SCIA. For a Mainland award to be enforced in Hong Kong, the relevant institution should be included in the list of recognized Mainland arbitral authorities as published by notice in the Gazette in Hong Kong. SHIAC and SCIA are not yet on this list.

Conclusion

The SPC has made its position clear on the jurisdiction of CIETAC and its former Shanghai and Shenzhen sub-commissions, pre and post change of names. This confirms that parties seeking to arbitrate in China now have increased options in their choice of arbitral institutions.

Author

Cynthia Tang is a Partner at the Dispute Resolution team at Baker & McKenzie Hong Kong. Cynthia has substantial experience in domestic and international commercial disputes and regulatory work for financial services clients. Chambers Asia Pacific, PLC Which Lawyer? and Asia Pacific Legal 500 rank her as one of the leading lawyers in the Financial Services/Regulatory field. She is a former senior government counsel of the Department Justice. Ms. Tang is also a Council Member of the Hong Kong Institute of Directors, and currently serves as a member of the Securities and Futures Appeals Tribunal. She also sits on a number of committees in the Securities and Futures Commission, and is a China-Appointed Attesting Officer. Cynthia Tang can be reached at [email protected] and + 852 2846 1708.

Author

Simon Hui is a member of the Dispute Resolution team at Baker & McKenzie Hong Kong. Simon Hui is a partner in Baker & McKenzie's Dispute Resolution Practice Group in Shanghai. Mr. Hui has 18 years of experience and focuses his practice on commercial and insurance dispute resolution, and regulatory and compliance matters. He also has extensive experience representing clients in both domestic and international arbitration institutions including CIETAC, SHIAC, HKIAC. Simon Hui can be reached at [email protected] and + 61 2 8922 5221.

Author

Peng Shen is a member of the Dispute Resolution team at Baker McKenzie Beijing . Peng Shen is a special counsel in Baker & McKenzie's Beijing office. Before joining the Firm in October 2010, he worked as a senior associate in one of the largest China-based law firms. He also served as a judge at a Beijing court, worked for the Docketing Division and No. 2 Civil Division, and served as the secretary of the court’s judicial committee. Mr. Shen is seasoned in PRC contract law, and an experienced litigator and skilled investigator. Mr. Shen’s practice focuses on US Foreign Corrupt Practices Act (FCPA) investigations, compliance, commercial litigation and international arbitration matters. Peng Shen can be reached at [email protected] and + 61 2 8922 5221.