CIETAC's 2015 Arbitration Rules analysed
January 05, 2015 | BY
CLP Temp &CIETAC's new Rules prove the institution is keeping up with international trends, but integration into China's legislative framework is needed before the Rules can be fully functional
Almost three years after the most recent amendment of its arbitration rules in 2012, the China International Economic and Trade Arbitration Commission (CIETAC), China's premier arbitration institution, has introduced further innovations. Entering into force on January 1 2015, the new CIETAC Arbitration Rules contain revisions to 20 articles and include several procedural advances that firmly align CIETAC with the latest trends in international arbitration. These include an emergency arbitrator mechanism as well as more detailed procedures for the consolidation of arbitral proceedings and the joinder of additional parties. The increased flexibility offered under the New Rules underlines CIETAC's continuing efforts to ensure that its arbitral procedures keep pace with changes in the international arbitration landscape.
|Emergency arbitrator mechanism
First implemented by the Stockholm Chamber of Commerce (SCC), emergency arbitration procedures have been adopted by almost all of the major international arbitration institutions in recent years, including the Singapore International Arbitration Centre (SIAC), the Hong Kong International Arbitration Commission (HKIAC) and the International Chamber of Commerce (ICC). Broadly speaking, emergency arbitrator procedures enable the parties to an arbitration agreement to seek urgent interim relief before the constitution of the formal tribunal for the main proceedings, which significantly reduces the time required for the parties to obtain relief. The most common forms of interim relief sought are: interim conservatory orders with respect to important assets and evidence; and orders for injunctive relief requesting that a party take or refrain from taking certain actions. In practice, interim relief of these kinds is generally only granted in circumstances where there is an immediate risk of irreparable damage to, or loss of, the relevant assets or evidence.
Although PRC law is silent on whether an arbitral tribunal has the power to order interim relief, CIETAC's 2012 Arbitration Rules for the first time expressly empowered CIETAC tribunals to grant any interim measures deemed “necessary and proper” in support of an arbitration. The new Rules, following a strong trend in international arbitration, go a step further in allowing the parties to apply for interim relief from an emergency arbitrator before the constitution of the tribunal for the main proceedings and authorising the emergency arbitrator to order urgent interim relief as deemed necessary or appropriate in the circumstances.
There remains some uncertainty as to the extent to which the emergency arbitrator procedures will be available in arbitrations seated in mainland China. Reflecting the relevant provisions of the PRC Civil Procedure Law, Article 23.1 of CIETAC's Arbitration Rules clearly states that, where an applicant seeks interim relief in the form of “conservatory measures” with respect to assets or evidence, CIETAC is required to refer any such application to the Chinese courts. The Rules appear to exclude the possibility of a party to an arbitration agreement governed by PRC law availing itself of the emergency arbitrator mechanism in order to obtain conservatory measures. It is less clear whether a party seeking injunctive relief in the same circumstances would be permitted to use the emergency arbitrator mechanism. Practitioners in China would therefore benefit from a clearer statement of the position under PRC law, whether in the form of a legislative amendment or a binding judicial opinion.
Given the uncertainties surrounding the position under PRC law, it is expected that the emergency arbitrator mechanism will be most commonly utilised in proceedings seated in Hong Kong and administered by CIETAC's Hong Kong Arbitration Centre, which was established in 2012. In addition, parties to a CIETAC arbitration seated in mainland China may opt to seek interim relief from an emergency arbitrator in circumstances where the assets or evidence against which such interim relief is sought are located in a jurisdiction which recognises interim awards rendered by emergency arbitrators (such as Hong Kong and Singapore).
|Proceedings involving multiple parties and multiple contracts
Owing to the growing complexity of international trade and commerce, it is increasingly common in international commercial transactions and projects for multiple contracts to be signed, with each governing different aspects of the overall project and each potentially involving different parties. If disputes emerge in relation to the underlying project, this often means having to begin multiple parallel arbitration proceedings, as even the simplest of disputes can have ramifications for the entire suite of agreements. Parallel arbitration proceedings of this kind are not only time-consuming and costly, but also create the risk of inconsistent judgments on the common factual and legal issues involved under each agreement.
The new Rules provide a series of procedural developments aimed at avoiding the duplication of cost and complexity involved in conducting multiple arbitration proceedings with respect to a single commercial project.
Single arbitration under multiple contracts
In order to streamline arbitration proceedings at the case initiation stage, Article 14 of the new Rules now enables claims under multiple contracts concerning the same transaction or series of transactions to be initiated in a single set of arbitration proceedings. It is essential that the arbitration agreements in all relevant contracts are identical or compatible, while the contracts must either involve the same parties or legal relationships of the same nature, or consist of a principal contract and its ancillary contracts. Notably, CIETAC's provisions in respect of proceedings under multiple contracts are more expansive than the corresponding provisions of other international arbitral institutions, allowing these proceedings to be initiated even where the parties to each contract are different (unlike, for example, the HKIAC) and irrespective of whether the other parties agree (unlike, for example, the ICC). In order to determine whether multiple cases should be streamlined in this way, CIETAC will need to undertake a substantive examination of the claimant's legal claims under the various agreements, thus potentially creating a significant procedural hurdle, particularly if challenges are raised by any of the parties to the prospective arbitration.
Consolidation
Consolidation refers to the process whereby two or more arbitrations simultaneously underway are merged into a single proceeding. Although the CIETAC Arbitration Rules have long allowed for consolidation, previous versions only permitted it when all parties to the concurrent proceedings had agreed. By contrast, Article 19 of the new Rules now enables CIETAC to consolidate two or more pending arbitrations at the request of any party (normally upon the respondent's request in practice), regardless of whether the other parties agree.
The new Rules also specifically prescribe the circumstances in which applications for consolidation may be granted. In addition to where all parties agree, consolidation may also be granted where: all of the claims in the arbitrations are made under the same agreement; or the claims in the arbitration are made under multiple agreements that are identical or compatible, and the arbitrations involve the same parties as well as legal relationships of the same nature; or the claims in the arbitrations are made under multiple agreements that are identical or compatible and the multiple contracts involved consist of a principle contract and its ancillary contract(s).
One of the most delicate issues in the context of consolidation is its potential effect on the composition of the arbitral tribunal. If consolidation occurs after the formation of a tribunal in each of the concurrent proceedings, there is an obvious difficulty for the institution in deciding whether one of these tribunals should take over the consolidated proceedings (and if so, which one) or whether the parties should be entitled to re-appoint their respective arbitrators. This problem is especially pertinent where the parties to the concurrent proceedings are different. In this context, the new Rules state that, in deciding whether to consolidate multiple arbitration proceedings, CIETAC must take into account the nomination and appointment of arbitrators in the separate arbitrations. Although this provision stops short of expressly prohibiting the consolidation of arbitrations currently heard by tribunals with different panel members, in practice it is extremely difficult to consolidate proceedings in these circumstances.
Joinder
Finally, Article 18 of the new Rules allows for the joinder of additional parties to an arbitration proceeding when the relevant arbitration agreement binds that party and CIETAC is otherwise satisfied that joinder is appropriate. Again, by allowing joinder without the consent of the parties being joined, the new Rules adopt a more aggressive approach than some of CIETAC's international counterparts, including the ICC.
Unlike those on consolidation, CIETAC's new provisions on joinder provide clear guidance as to the effect of joinder upon the appointment of the arbitral tribunal: Article 18.5 clearly provides that if joinder takes place after the formation of the arbitral tribunal, the newly joined party has the right to request that the existing tribunal be dissolved and the tribunal reconstituted in accordance with Article 29. This is an important safeguard of the newly joined party's procedural rights.
|Further developments
In addition to the major procedural innovations discussed above, CIETAC's new Rules also contain the following notable amendments:
Clarified status of Hong Kong
CIETAC established its first sub-commission outside of mainland China in September 2012 – the Hong Kong Arbitration Centre. As the last update of CIETAC's Arbitration Rules predated this development, there had been some uncertainty surrounding the legal status of arbitrations carried out by CIETAC in Hong Kong. In particular, it was unclear whether the applicable arbitral seat in cases handled by the Hong Kong Arbitration Centre is in mainland China or Hong Kong, and hence whether the award issued by CIETAC Hong Kong is a Hong Kong or mainland award. The new Rules resolve this ambiguity by expressly stating that all arbitrations handled by the Hong Kong Arbitration Centre will be seated in Hong Kong and subject to Hong Kong procedural law, and that the arbitral award is a Hong Kong award, unless otherwise agreed by the parties. This not only means that arbitrations administered by the Hong Kong Arbitration Centre will not be subject to the PRC law limitations on interim measures and emergency relief discussed above in the context of the new emergency arbitrator mechanism, but also that CIETAC Hong Kong awards will be readily enforceable in mainland China in accordance with the Mainland-Hong Kong Agreement on the Mutual Enforcement of Arbitral Awards.
Raised threshold for summary proceedings
The new Rules increase the upper limit for the application of CIETAC's summary procedures from Rmb2 million (roughly US$320,000) to Rmb5 million (roughly US$800,600). This change reflects the general increase in the value of claims filed with CIETAC in recent years and should significantly expand the application of the summary procedure. The procedure provides expedited timelines for the completion of the various steps of an arbitration, which must be completed within three months of the constitution of the tribunal.
Internal administrative changes
CIETAC has followed the ICC and the SIAC in establishing a court to take over the case management function from the secretariat, which will now focus on external liaison with other institutions and governments and will not be involved in the day-to-day administration of cases.
|Complementing the law
By revising its rules, CIETAC has ensured that it is fully equipped with all the tools available to other international arbitration institutions. However, unlike in Hong Kong and Singapore, Chinese lawmakers have not yet moved to establish a comprehensive supportive legislative framework for CIETAC's new arbitration rules. CIETAC is clearly setting the pace for arbitration reforms in China, but it remains to be seen how effective these reforms will be without complementary changes to the PRC Arbitration Law.
Helen (Hong) Shi and Michael Edwards, Fangda Partners, Beijing
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