‘Transplant’ of the arbitration agreement

Arbitration is one of the most important approaches of commercial dispute resolution. Together with litigation, they are known as the two carriages of dispute resolution over 100 years, and have worked perfectly in harmony.

The arbitration agreement is undoubtedly the starting point of the arbitration proceeding. It is no exaggeration to say that, as the cornerstone, an effective arbitration agreement is bound to exclude the jurisdiction of all courts and other arbitration institutions around the world.

According to current international conventions and the arbitration law of most countries, the arbitration agreement should clearly express the parties’ willingness to arbitrate. The expression should be active and in writing. The arbitration agreement can be inherited or transferred under certain circumstances.

Is the arbitration agreement entitled to be “transplanted”? And would the transplanted one still be recognized as an effective arbitration agreement? This article interpret and analyzes these questions, starting with a newly issued court ruling:

China International Economic and Trade Arbitration Commission’s South China Sub-Commission (CIETAC South China Sub-Commission, formerly known as CIETAC Shenzhen Sub-Commission) accepted a case arising out of the purchase and installation of equipment in September 2019, in which company A was the claimant and companies B and C were the respondents, according to the arbitration agreement incorporated in the sales contract of mobile phones signed by A and B, and the sales contract of mobile phones – tripartite co-operation agreement signed by A, B and C.

A claimed that B and C should reimburse the deposit and the service fee for developing the project. Upon the receipt of the notice of arbitration, C immediately brought an action in Shenzhen Intermediate People’s Court on the grounds of confirmation of the validity of the arbitration agreement.

According to article 20(1) of the Arbitration Law, the validity of the arbitration agreement in this case shall be determined by Shenzhen Court. In the meantime, in accordance with article 3 of the Supreme People’s Court’s Reply on Issues on Conformation of the Validity of the Arbitration Agreement, the arbitral tribunal decided to suspend the arbitration proceedings and cancel the original arrangement of an oral hearing.