HKIAC CIETAC session – Tips for arbitrating in the mainland
October 24, 2013 | BY
clpstaff &clp articles &This week HKIAC hosted the second annual Hong Kong Arbitration Week. The China session looked at how to choose a commission, the effects of the CIETAC split and how to get the right presiding arbitrator
CIETAC's session during the Hong Kong International Arbitration Week, which took place on Tuesday this week, featured a panel of experts providing advice on some of the most important issues that businesses need to consider when planning their arbitration.
|Choosing an arbitration commission
Ariel Ye of King & Wood Mallesons did a question and answer presentation with Fei Ning of Beijing Hui Zhong Law Firm. Ye asked: “With more than 200 arbitration institutions in China – how can parties select one to hear their disputes?”
Fei provided four considerations for parties when deciding mainland seated arbitration:
- First, foreign-related disputes can only be heard before CIETAC and its branches. However, parties should consider the history and experience of each institution.
- Second, parties need to look at the panel of arbitrators, because they will be assessing the dispute.
- Third – independence, as not all arbitration bodies are fully independent
- Lastly, look at the institution's arbitration rules because these rules are the law governing the procedure. Parties should check that the rules comply with international practices.
CIETAC split
The CIETAC dispute between its Shanghai and Shenzhen sub-commissions that caused a dent in its reputation over the past year was only mentioned once at the event.
In the same question and answer session, Fei explained that: “the split from one to three bodies is a fact and we have to admit it.”
The split has caused confusion for parties. In the short term, different courts have issued Interpretations over the validity of awards from CIETAC and the sub-commissions in Shanghai and Beijing.
Fei noted that the split had caused a “negative impact” but pointed out that the existence of more professional arbitration bodies would help to create a more competitive market and raise standards.
Fei believed that the Supreme People's Court (SPC) would solve this issue in the short term. The Court has noted this issue and has set up a notice system. This means that lower level courts that hand down any decisions related to CIETAC Shenzhen and Shanghai have to report their decision to the SPC.
|Appointing arbitrators
“People always say arbitration is as good as its arbitrators” said Helen Shi of Fangda Partners, who was also speaking at the event. Shi shared an unconventional approach on how users of CIETAC can appoint arbitrators.
If the parties have not previously agreed on how the presiding arbitrator will be selected, the CIETAC Arbitration Rules will step in. The Rules allow both parties to nominate one to five arbitrators to be the presiding arbitrator.
CIETAC reviews both sets of nominations and when there is one common candidate they will be the presiding arbitrator. If there is more than one common candidate, the Chairman of CIETAC shall choose from among them.
“In practice, counsel does not advise their clients to do this because if both parties submit their nominations and there is no common arbitrator – who will be the presiding arbitrator? It is very possible that all the candidates will be excluded from being the presiding arbitrator,” said Shi at the session.
This leaves both parties at a disadvantage with none of their preferred arbitrators ending up as the presiding arbitrator.
Shi recalled a recent CIETAC case over the transfer of a shopping centre in downtown Beijing. The value of that building was Rmb2 billion ($328 million). Such a large value under dispute meant that the identity of the presiding arbitrator was critical.
After speaking with opposing counsel, the Beijing-based lawyer proposed that CIETAC prepare a list of seven arbitrators and each party will select four candidates to be the presiding arbitrator. This meant that there would at least be one arbitrator in common.
If there are two or more common candidates, then the Chairman of CIETAC would choose among them.
“I want to use this example to inform the users of CIETAC that the Commission is supportive and flexible. Parties should consider utilising this mechanism or be creative and seek CIETAC's assistance,” said Shi.
Shi's example provides a new way for parties to ensure the selection of a presiding arbitrator that they are both happy with. In addition, it means that they have not excluded their preferred presiding arbitrator.
By David Tring
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