CIETAC raises its game

“The EA procedure was pioneered by the Stockholm Chamber of Commerce (SCC), and soon after that leading institutions followed suit, such as the SIAC [Singapore International Arbitration Centre], HKIAC [Hong Kong International Arbitration Centre], ICC [International Chamber of Commerce] and KLRCA [Kuala Lumpur Regional Centre for Arbitration],” he said.

Emergency arbitrator

The EA procedure will cut time and give parties urgent relief where appropriate. In litigation, parties can apply for interim measures to the court to freeze the counterparty's assets. Although arbitration tribunals also have the power to impose these measures, “parties would seek assistance from the courts because it takes some time for the tribunal to be set up,” said Yang. “Appointing an EA beforehand who will not be part of the tribunal allows the parties to seek emergency relief without having to go to court.”

CIETAC had intended to first implement the EA mechanism at its Hong Kong centre, as parties are allowed to invoke the mechanism under the Hong Kong Arbitration Ordinance, said Cao. Eventually the Rules extended the EA mechanism to where there is an agreement between the parties or the relevant laws permit, thus opening the door for parties in mainland arbitration to apply for EA (in cases where there is an agreement between the parties).

CIETAC Hong Kong

The CIETAC Hong Kong centre's relevance has been officially recognised in the new Rules. The seat of arbitration has been clarified as Hong Kong, and the presiding law as the city's Arbitration Ordinance. “The legal status of a CIETAC Hong Kong award is certain now,” said Cao. “As a Hong Kong award, the legal ground for mainland enforcement is the Mainland-Hong Kong Agreement on the Mutual Enforcement of Arbitral Awards,” he added.

“CIETAC Hong Kong still administers an arbitration under the CIETAC Rules, but the only difference is that the Hong Kong law governs the process and therefore the award is a Hong Kong award, which is definitely enforceable in the mainland,” said Yang.

With respect to deciding between CIETAC Hong Kong and HKIAC, “Parties who want a more heavily administered arbitration may choose CIETAC Hong Kong over HKIAC, as the latter has a lighter touch,” he said. Whether the counterparty's assets are in the mainland is an important consideration as well. As for enforcement, “PRC courts may be more familiar with CIETAC than HKIAC, particularly in second and third tier cities,” he added.

Summary procedure

The summary procedure provides for quick action for cases under a certain threshold, which has been raised from Rmb2 million (US$326,000) to Rmb5 million (US$816,000) in the new Rules. This means a larger proportion of cases are now subject to the procedure, which practitioners say will streamline and enhance the arbitration process in light of increasing claim amounts and a rapidly rising caseload.

“When I worked at CIETAC six years ago, the average dispute amount was Rmb8 million to 9 million (US$1.3 million to 1.5 million), but in recent years the figure is around Rmb30 million (US$4.9 million),” said Cao. According to its website, CIETAC accepted 1,256 cases in 2013, up 196 cases from the previous year. The total claim amount of cases accepted in 2013 was Rmb24.4 billion, a 58% increase from 2012. The number of foreign countries involved also rose from 10 to 56.

“Arbitrations around the world have become increasingly costly and slow, as they have become more complex and technical,” said Yang. “Arbitration is starting to look more and more like litigation, in terms of challenges to jurisdiction, the tribunal and arbitrators nominated by the other party, objections taken to the clause itself and even a flood of requests to the other side during the document production phase.”

The summary procedure provides a speedier and cheaper way of resolving disputes. Arbitration under the normal rules can take 12 to 18 months, whereas the time period between the filing and rendering of an award under the summary procedure is roughly three months and 15 days, he explained.

Complex disputes

The 2012 Rules contained just one provision to address complex disputes, which was the consolidation of multiple cases under one tribunal. The new Rules amend this to allow CIETAC to consolidate without the agreement of all parties.

Other major changes relate to multi-party and multi-contract arbitration. The new Rules include provisions on joinder, which allows parties to request CIETAC to add a third entity to the proceedings if they can prove the third party is also bound by the arbitration agreement, as well as those for single arbitration under multiple contracts.

“While in litigation you can have third party claims, in arbitration you cannot,” said Cao. “These new rules are innovations in the arbitration system to resolve issues that arise from complex transactions efficiently and consistently,” he explained.

Arbitration court

An arbitration court has been set up to take over case management and administration roles from the secretariat. CIETAC appears to be following in the footsteps of ICC and the SIAC, which restructured a few years ago to create an arbitration court, Yang said.

The court's main function is to appoint arbitrators and scrutinise awards, while the secretariat now focuses more on external liaison and internal administrative matters. All CIETAC branches now have an arbitration court, but CIETAC Beijing is the only centre to also have a secretariat.

Keeping up to speed

CIETAC is generally the first choice for most Chinese parties seeking commercial arbitration, said Cao. The system works quite well and is acceptable to PRC lawyers, and increasingly to foreign ones as well, he added.

“Some international companies may have reservations about CIETAC, but its panel has so many international arbitrators, and parties are allowed to choose whatever arbitrator they prefer. I have sat in on a number of cases with two foreign arbitrators,” Cao said. He noted, however, that the quality of individual arbitrators matters just as much as that of the institution.

Some practitioners noted that inefficiencies remain.

“Currently CIETAC arbitrations are heavily administered by the secretariat,” Yang said. All correspondence goes through the secretariat, which sends copies to the tribunal. He hopes that “the parties and tribunal can interact directly, while sending copies to the secretariat instead, to improve administration and give the tribunal a bigger role in running the cases.”

Also, CIETAC hasn't handled some of the newly-added complex procedural elements, i.e. those that allow for multi-contract and multi-party arbitration. “The practice in these aspects is still evolving, like at other institutions such as the HKIAC, SIAC and SCC,” Cao said.

The new Rules are nonetheless a big step forward for CIETAC in managing its growing international presence and productivity. “I was in a hearing at CIETAC just last week and saw the hearing rooms were all filled up,” said Yang.

By Katherine Jo