For more than a year, the China International Economic and Trade Arbitration Commission (CIETAC), China’s dominant arbitral institution since its founding in 1956, has been fighting a noisy and public civil war. The resulting chaos...
For more than a year, the China International Economic and Trade Arbitration Commission (CIETAC), China’s dominant arbitral institution since its founding in 1956, has been fighting a noisy and public civil war. The resulting chaos shows no signs of ending, and any company considering arbitration in China and any company that has an existing contract with an arbitration clause should take notice.
CIETAC, which is based in Beijing, has four Sub-Commissions within the PRC: Shanghai (known as CIETAC Shanghai), Shenzhen (known as CIETAC South China), Tianjin, and Chongqing. In early 2012, CIETAC issued new arbitration rules which considerably strengthened the power of CIETAC’s Beijing office (CIETAC Beijing). CIETAC Shanghai and CIETAC South China strongly opposed the new rules, and in mid-2012 both Sub-Commissions declared their independence.
A flurry of rhetoric and news releases followed. CIETAC Beijing stated that CIETAC Shanghai and CIETAC South China did not have the authority to declare independence and were no longer authorized to resolve disputes that called for arbitration by CIETAC Shanghai or CIETAC South China. CIETAC Shanghai and CIETAC South China responded by saying they had always been independent, and would continue to resolve disputes that called for arbitration by CIETAC Shanghai and CIETAC South China. These polar opposite positions placed potential litigants in a bind: who is authorized to hear their claims?
The saga continued, with the situation going from bad to worse. On October 22, 2012, CIETAC South China changed its name to the South China International Economic and Trade Arbitration Commission, or SCIETAC, with its own set of arbitration rules that went into effect on December 1, 2012. Realizing that if one new name was good, then two new names must be better, SCIETAC also gave itself a second official name: the Shenzhen Court of International Arbitration (SCIA). Then on April 18, 2013, CIETAC Shanghai changed its name to the Shanghai International Arbitration Center (SHIAC), with its own set of arbitration rules that went into effect on May 1. Naturally they needed a second name as well, and what could be less confusing than the Shanghai International Economic and Trade Arbitration Commission (SIETAC)? Meanwhile, CIETAC Beijing opened up new offices in Shanghai and Shenzhen, using the same arbitration rules that SHIAC and SCIETAC had rejected.
The result is as big a mess as it appears, and should give pause to anyone drafting a contract that contemplates arbitration with CIETAC, SHIAC, or SCIETAC. Would you hire a mechanic whose own car keeps breaking down?
A more immediate problem faces parties with already signed contracts that provide for arbitration in Shanghai administered by “CIETAC Shanghai,” or arbitration in Shenzhen administered by “CIETAC South China.” The parties to that contract now have to consider two troubling questions. First, which arbitral institution is entitled to arbitrate the dispute? Second, would a court enforce an arbitral award?
Consider a contract that provides for arbitration administered by “CIETAC Shanghai.” Both CIETAC Beijing and SHIAC currently claim they are entitled to arbitrate a dispute arising from this contract. If the contract parties can agree on which arbitral body to use, the identity of the “proper” arbitral body is a moot point. But by the time most disputes are referred to arbitration, the parties are not agreeing on much at all. Often, the status quo favors the responding party, and as a result that party will do whatever it can to delay arbitration. In such cases, the responding party will likely argue as follows:
(1) The selected arbitral institution does not have jurisdiction. For a dispute submitted to SHIAC, the responding party would argue that the parties’ intent was for CIETAC, the institution based in Beijing, to handle the arbitration, with Shanghai being merely the location o
