CIETAC clears the air on sub-commissions

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Starting in April, the Shanghai sub-commission and the South China sub-commission of the China International Economic and Trade Arbitration Commission (CIETAC), without authorisation, declared themselves to be independent local arbitration institutions, perplexing arbitration law circles both inside and outside China. After the passage of more than a year, numerous questions continue to trouble concerned parties and colleagues in the arbitration sphere, making it imperative for CIETAC to clear up the facts and clarify its stance. I would like to thank China Business Law Journal for providing the forum in which to do this.

DDmainpicThe history

CIETAC is a foreign-related arbitration commission established by the China Council for the Promotion of International Trade (the China Chamber of International Commerce, which we will refer to as CCPIT) pursuant to a 1954 decision of the Government Administration Council of the central people’s government. The South China sub-commission and Shanghai sub-commission were originally CIETAC sub-commissions, established in 1982 and 1988 in Shenzhen and Shanghai by CCPIT, with the approval of the State Council. Their administrative, personnel and financial matters were under the control of the local people’s governments, but in terms of their business they were directly under the leadership of CIETAC. Pursuant to the CIETAC charter, CIETAC and its sub-commissions are a single arbitration commission and the sub-commissions are agencies of CIETAC. This status of the sub-commissions is in keeping with the spirit of China’s Arbitration Law and relevant regulations of the State Council, in keeping with history and in keeping with the objective facts.

The unique and important historical contributions made by CIETAC to the establishment of the China’s arbitration law system in the past 50 years are obvious to all. CIETAC has now become one of the world’s important commercial arbitration institutions. However, it is equally clear that CIETAC faces various problems due to systemic, historical and other reasons, which hold back its development. These problems mainly include the financial management system of “division of receipts and expenditures” that is divorced from the realities of CIETAC; and in the relationship between CIETAC and its sub-commissions, there exists such problems as impediment of operations, low efficiency, weak overall expression of co-operation, insufficient mobilisation and realisation of the sub-commissions’ dynamism and subjective initiative, etc.

With a view to further intensifying reform and driving the CIETAC modernisation and internationalisation process, CCPIT began to reform the financial management system and also decided to: comprehensively streamline relationships (including the business relationship between CIETAC and its sub-commissions); enhance work efficiency and standards so as to give rise to in-system co-operation; strive to promote the transformation, upgrading and joint development of CIETAC and its sub-commissions; and better serve Chinese and foreign parties. The reform of CIETAC’s financial management system was completed in 2010, and CIETAC now implements an enterprise management financial management system.

Perching on the heights of history, and moving forward from the perspective of seeking the comprehensive, long-term and sustainable development of CIETAC, CCPIT further strengthened the centralised and compliant management system, and clarified the relationship of responsibilities, rights and obligations of CIETAC and its sub-commissions.

The rules

Pursuant to the Arbitration Law and the Official Reply of the State Council on Changing the Name of the Foreign Economic and Trade Arbitration Commission to the China International Economic and Trade Arbitration Commission and the Revision of its Arbitration Rules of 1988, CCPIT amended the CIETAC charter and CIETAC arbitration rules in February 2012. Article 66 of the Arbitration Law authorises CCPIT to arrange for the establishment of a foreign-related arbitration commission, while article 73 authorises CCPIT to formulate foreign-related arbitration rules, and the above-mentioned 1988 official reply of the State Council also authorises CCPIT to revise the CIETAC arbitration rules.

Accordingly, the revision of the CIETAC arbitration rules by CCPIT falls fully within its statutory duties and complies with laws and regulations. With respect to the relationship between CIETAC and its sub-commissions, the adjustments made by the CIETAC arbitration rules only involve the issues of the division of responsibilities for, and the management of, business, while leaving the sub-commissions’ administration, personnel matters and financial matters untouched, thus complying with the documents of the local governments at the time of the establishment of the two sub-commissions. The legality of the comprehensive reform of CIETAC and the revision of its arbitration rules by CCPIT is beyond doubt.

With respect to the relationship between CIETAC and its sub-commissions, three major revisions were made in the 2012 CIETAC arbitration rules: i) the provision that “a sub-commission is an agency of CIETAC”, specified in the 1993 CIETAC charter, was added to the arbitration rules; ii) active implementation of article 54 of the Arbitration Law, which specifies that all awards are to bear the “China International Economic and Trade Arbitration Commission” stamp; and iii) the new allocation of the responsibility for acceptance of so-called “wide clause” arbitration cases – “wide clause” meaning an arbitration clause in which the parties specify that arbitration is to be conducted by CIETAC, but do not state whether cases are to be accepted by CIETAC headquarters or a sub-commission – where it is specified that such cases are to be accepted by CIETAC headquarters, changing previous practice where the choice was left to the parties.

The main reason for the adjustment in the division of responsibilities for the acceptance of “wide clause” arbitration cases is to address a problem that has become quite acute in the past, where certain parties have taken advantage of loopholes in the rules to “forum shop” between CIETAC and its sub-commissions, thus harming the lawful rights and interests of other parties, damaging arbitration efficiency, and undermining the authoritativeness of arbitration.

CIETAC and its sub-commissions were seriously harmed, parties and arbitrators reacted strongly, and people’s courts demanded that the problem be duly resolved.

arbitratesidebarpicCareful revision

CCPIT prudently carried out the work of revising the CIETAC arbitration rules in strict accordance with procedure. During the revision process, CIETAC sought in writing, and seriously listened to, the opinions of relevant central functional authorities, and held several conferences attended by legal experts, arbitrators and lawyers. CIETAC additionally “revised the law with the doors open”, making the draft revision of the CIETAC arbitration rules available to the public, widely seeking the opinions of all sectors of society. With respect to the comments and proposals made by the two sub-commissions, CIETAC studied them, referred them to experts for discussion and adopted some of them.

From the long-term perspective, the revision of the CIETAC arbitration rules and the smooth completion of the comprehensive reforms are conducive to the expansion and broadening of CIETAC’s business, and are conducive to the comprehensive development of its business, ensuring that the sub-commissions will be beneficiaries of the reforms.

Taking into consideration the possibility of a short-term reduction in the number of cases accepted by the sub-commissions after the implementation of the CIETAC arbitration rules, CIETAC expressed its willingness to pay economic compensation and assist the sub-commissions in overcoming their short-term difficulties. After exhaustive research and study, fact-finding with various parties, careful consideration and two years of concerted effort, the revision of the CIETAC arbitration rules was completed.

It can be said that this revision was one that took the longest time, of which the breadth of discussion was the widest, in which the participants were the most numerous, for which the procedure was the most stringent, and on which the decisions were the most careful. There is no room for doubt as to the impartiality of CCPIT’s revision of the CIETAC arbitration rules.

Since the South China and Shanghai sub-commissions declared independence, CCPIT has communicated on several occasions with the two local governments in an effort to quickly and duly resolve the problem. As China is currently in the process of establishing a country ruled by law, the gravitas of the law needs to be duly safeguarded. We hope that this incident can be quickly and thoroughly resolved in accordance with the law.

The author, Yu Jianlong, is Vice Chairman and Secretary General of the China International Economic and Trade Arbitration Commission