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12 May 2005
The China International Economic and Trade Arbitration Commission (CIETAC), China's main international arbitration body, has amended its arbitration rules. The revised rules - which came into effect on May 1 2005 - provide for a major overhaul of CIETAC arbitration procedures and are likely to have a profound influence on the future of arbitration in China.
The new rules introduced key changes to the earlier version of the CIETAC rules which came into force on October 1 2000.
One unusual feature of CIETAC arbitrations was the requirement that arbitrators be chosen exclusively from the CIETAC panel of arbitrators. The new rules allow the parties to appoint arbitrators from outside the panel of arbitrators, provided that the parties agree to do so and that the appointment is confirmed by the chairman of CIETAC.
The new rules also revise the procedure for appointing the tribunal's chairman. Given that a CIETAC arbitration award is final and cannot be appealed, the choice of presiding arbitrator is critical. Indeed, in the absence of a majority decision, the presiding arbitrator's decision prevails. The 2000 rules provide that CIETAC shall appoint the chairman where the parties fail to agree on a candidate. Critics have argued that this has allowed CIETAC to stack tribunal membership in favour of Chinese nationals.
The new rules adopt a novel approach by providing for a 'list' procedure, under which each side nominates one to three candidates and provides their names to CIETAC. Where one candidate appears in common on both lists, such candidate will be appointed as the chairman of the tribunal. If more than one candidate is nominated by both sides, CIETAC will appoint the nominee it believes is best suited to act in light of the circumstances of the case. CIETAC will make the appointment only if no common candidate is nominated by both sides. However, in such case CIETAC will appoint an individual who has not been nominated by either side.
Under the 2000 rules, China was the seat of all arbitrations conducted by CIETAC. Therefore, Chinese procedural law applied to all arbitration proceedings.
Under the new rules, a distinction is drawn between the place or seat of arbitration and the place of hearing. Parties are now free to select the seat of arbitration. This is a significant development for CIETAC, as it allows the conduct of CIETAC arbitrations outside China, making CIETAC - in theory at least - a competitor to the International Chamber of Commerce.
Under the 2000 rules, the parties to an arbitration administered by CIETAC were permitted to conduct proceedings under arbitration rules other than CIETAC rules. CIETAC was vested with the discretion to decide whether to approve the parties' agreement, but the 2000 rules did not specify what would happen if CIETAC did not approve the parties' choice of arbitration rules. This discretionary power has been removed under the new rules, giving full effect to the parties' agreement - except where such agreement is incapable of performance or is in conflict with the mandatory law of the place of arbitration.
Under the new rules, although CIETAC continues to be primarily responsible for determining any issue relating to the validity of the arbitration agreement (and hence any question as to CIETAC's jurisdiction), CIETAC may, if it deems necessary, authorize the tribunal to make determinations on any question regarding the jurisdiction of the tribunal. Furthermore, any decision on a question of jurisdiction made by CIETAC based on initial evidence submitted by the parties at the start of the arbitration will not prevent CIETAC from making another decision on the same question, should any new fact or evidence come to light in the course of the proceedings.
Foreign critics of CIETAC have frequently questioned the independence and impartiality of CIETAC arbitrators. The new rules address these concerns by imposing a positive obligation on all arbitrators to treat the parties equally, fairly and independently. Moreover, new provisions require that: (i) arbitrators declare to CIETAC any matters which might raise reasonable doubts as to their independence and impartiality, whether such matters arise before or during the arbitral proceedings; and (ii) the parties be informed of these matters.
The new rules seek to improve CIETAC's arbitration process. They contain features that are more in line with accepted international practices. These features include the imposition of time limits on the exchange of statements and supporting documents, and the granting of power to the tribunal to disallow any evidence which is filed untimely.
As regards the procedure for oral hearings, the new rules have also taken into account international practices by providing that the tribunal may:
Significantly, arbitrators are now expressly permitted to conduct inquisitorial or adversarial proceedings.
Under the 2000 rules, the amount of costs or expenses which a party could claim against the losing party was artificially capped at 10% of the total amount awarded to the winning party. Under the new rules, the 10% cap on costs is abolished. Costs will be assessed by the tribunal according to various factors, including:
This assessment of costs is in line with international practice.
The new rules represent a leap forward in CIETAC's effort to establish itself as a global arbitration institution. Although they do not address all of the concerns frequently voiced by CIETAC's critics, the changes introduced in the new rules are a marked improvement over the 2000 rules, and clearly demonstrate CIETAC's determination to improve its services and competitiveness. The new rules will enhance CIETAC's position as a leading player in the resolution of Chinese-foreign business disputes.
For further information on this topic please contact Michael J Moser at Freshfields Bruckhaus Deringer by telephone (+8610 6505 3448) or by fax (+8610 6505 7783) or by email (email@example.com).
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Michael J Moser