CIETAC split update: Chinese courts' approach to enforcing awards rendered by SCIA and SHIAC

Since CIETAC announced on 1 August 2012 that it had suspended the authorisation of its Shanghai and South China (Shenzhen) sub-commissions to accept and administer arbitrations,there have been a number of developments.

The former Shanghai and South China sub-commissions have asserted that they have been approved and established by their respective municipal governments as independent arbitral commissions, and that they will continue to administer arbitrations. Each commission has introduced new rules and a new panel of arbitrators.  Further, following in the footsteps of the Shenzhen Court of International Arbitration (SCIA) (previously the South China sub-commission), in April this year the Shanghai sub-commission announced its new names, alternatively the "Shanghai International Economic and Trade Arbitration Commission" or the "Shanghai International Arbitration Center" (SHIAC).  SHIAC asserted that it would accept cases where the parties had agreed to refer disputes to CIETAC Shanghai.

However, there appears to be considerable doubt about whether such a designation would be a valid reference to arbitration administered by the Shanghai entity, particularly in light of a recent case before the Suzhou courts.

In May 2013, the Suzhou Intermediate People's Court held that an arbitration award issued by SHIAC could not be enforced.  The parties had agreed for disputes to be heard by CIETAC, with the place of arbitration being Shanghai.  In July 2010, the CIETAC Shanghai sub-commission accepted the case; however, the arbitral tribunal did not render its award until December 2012 (after the Shanghai sub-commission had split from CIETAC).  In refusing to enforce the award, the court held that the parties had chosen CIETAC to settle their disputes and, once SHIAC had declared its independence from CIETAC, it was no longer the institution which had been chosen by the parties.  SHIAC therefore had no right to continue with the case and to render the award without further confirmation from the parties that it was their chosen institution. 

This is a very different approach to that taken by the Shenzhen Intermediate Court, which held in November 2012 that SCIA had jurisdiction over a case when the arbitration clause specified the Shenzhen sub-commission of CIETAC.  It is unclear why the courts have issued different decisions on this issue; it may be because the local courts in Shanghai and Shenzhen support SHIAC and SCIA while the courts in other provinces have a different attitude.  Whatever the reason, the conflicting approaches create yet further uncertainty for parties wishing to submit their disputes to arbitration in China.       

Following these decisions, we continue to recommend that parties who wish to submit future disputes to CIETAC arbitration state expressly in the arbitration clause that disputes shall be submitted for arbitration to "The China International Economic and Trade Arbitration Commission  (CIETAC)", and that the seat of the arbitration be Beijing. Parties may designate Shanghai or Shenzhen as the hearing venue for the arbitration if those cities are more convenient, but are not advised to select Shanghai or Shenzhen as the seat of arbitration.

Parties who have entered into an arbitration agreement that refers disputes to the CIETAC Shanghai or South China sub-commissions should consider amending such clauses, and should take specialist legal advice before commencing the arbitration to ensure (as far as possible) that any award will be enforceable.