CIETAC allows interim measures
February 15, 2012 | BY
Janice QuForeign companies before CIETAC arbitration can now obtain a procedural order for an immediate action to protect their interests.
The revised Arbitration Rules of the China International Economic and Trade Arbitration Commission (CIETAC) take effect in March 2012. For the first time they allow the tribunal to grant interim measures. These can be granted through a procedural order or an interlocutory award to suspend or prohibit a party from carrying out certain acts, such as infringement.
Joint venture or intellectual property disputes often require urgent action. Partner Sammy Fang at DLA Piper in Beijing says the new rules allow “foreign investors to apply promptly for an interim measure to take immediate action to stop infringement”.
Lawyers have noted the obvious disadvantages and negative implications with not having interim measures, especially for foreign companies, who are looking to CIETAC as a strong tribunal for international arbitration.
Article 21 represents an important incentive for foreign companies if they are faced with the limited options of arbitration before CIETAC or a Chinese court. A foreign investor's wholly owned Chinese subsidiary contracting with a domestic company is one example as there are no foreign elements and parties cannot opt for international arbitration outside China.
However, the power to determine interim measures is not an injunction order or an injunction relief, as is usually the case in international arbitration. Fang noted that the procedure order granted under Article 21 is not compulsory.
“Chinese courts have no legal basis to voluntarily enforce such interim measures. There is no law mechanism available to rectify non-enforcement,” said Fang.
But there are ways to reduce the risks. Parties can set out conditions in an arbitration agreement for the appointment of either co-arbitrators or the presiding arbitrator. These include qualifications, nationality or language. The ability to select an appropriate language and the appointments of competent arbitrators removes possible bias in the process.
“CIETAC arbitrators might not be accustomed to interim measures so the conditions for setting up the constitution of a tribunal are of particular importance,” Fang said.
He also suggested that an appropriate dispute resolution mechanism such as court proceedings or arbitration should be considered at an early stage of any contract negotiations and not just as an afterthought.
“The most appropriate choice will depend on the subject matter and what enforcement implications are envisaged, for example will interim measures be required and will intellectual property issues be involved?” he added.
Observers also noted the fundamental issues that arbitration parties should bear in mind. These include transparency, impartiality, perception of corruption and the enforcement of arbitral awards. JQ
This premium content is reserved for
China Law & Practice Subscribers.
A Premium Subscription Provides:
- A database of over 3,000 essential documents including key PRC legislation translated into English
- A choice of newsletters to alert you to changes affecting your business including sector specific updates
- Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
Already a subscriber? Log In Now