CIETAC to restructure its Shanghai and South China/Shenzhen sub-commissions

On 31 December 2014, the China International Economic and Trade Arbitration Commission (CIETAC) and the China Council for the Promotion of International Trade (China Chamber of International Commerce) (CCPIT) published announcements declaring to "restructure" the CIETAC Shanghai and South China/Shenzhen sub-commissions.  The announcements will likely put an end to the controversy and uncertainty regarding arbitration clauses that subject disputes to these two sub-commissions following CIETAC's split in 2012.

Background: CIETAC's split in 2012

On 1 May 2012, the then CIETAC Shanghai sub-commission announced that it has split from CIETAC and declared itself an independent arbitral institution. In June 2012, the then CIETAC South China sub-commission also declared independence and re-branded itself as the Shenzhen Court of International Arbitration.

In response, CIETAC announced on 1 August 2012 that it has suspended authorisation to the Shanghai and South China/Shenzhen sub-commissions to accept and administer arbitrations.  According to CIETAC, parties who have agreed to arbitrate before the CIETAC Shanghai or CIETAC South China/Shenzhen sub-commissions shall submit their disputes to CIETAC Beijing.  Despite such announcement, however, controversy remained as to which institution should be competent to accept and administer arbitration brought under clauses that direct the disputes to CIETAC Shanghai and South China sub-commissions.  News also emerged from different regions in China according to which, due to confusion caused by the CIETAC split, local courts were reported to refuse enforcement of awards rendered by these sub-commissions.

To bring consistency of court practice, the Supreme People's Court of China (SPC) issued a notice on 4 September 2013 requesting lower court to report to SPC under a level-by-level procedure if it hears a case arising out of the breakaway of the former CIETAC Shanghai and South China sub-commissions.

"Restructure" of the CIETAC Shanghai and South China/Shenzhen sub-commissions

On 31 December 2014, CCPIT announced that in light of the breakaway in 2012, CCPIT will restructure the CIETAC Shanghai and South China/Shenzhen sub-commissions.  This is to ensure that parties' right to arbitrate is properly protected and to maintain the order in China in relation to foreign related arbitrations.

CIETAC further clarified the restructuring in its announcement published on the same day that:

• the restructured Shanghai and South China/Shenzhen sub-commissions, which are branches of CIETAC, will continue operating under the CIETAC rules;
• the restructured South China/Shenzhen sub-commission will hear cases where the parties have agreed to refer disputes to CIETAC South China/Shenzhen;
• the restructured Shanghai sub-commission will hear cases where the parties have agreed to refer disputes to CIETAC Shanghai;

CIETAC also emphasised in its announcement that without CIETAC's authorisation, any other entities are not allowed to hear cases where the parties have agreed to arbitrate before CIETAC South China/Shenzhen or Shanghai.

The Chinese versions of these announcements are available on CIETAC's home page.

Comments

CCPIT and CIETAC's announcements on 31 December 2014 indicate that CIETAC has resolved to end the uncertainty surrounding arbitration clauses that designate CIETAC Shanghai and South China/Shenzhen sub-commissions as arbitration institution since the CIETAC's split in 2012.  Pursuant to the announcements, arbitration clauses that refer disputes to CIETAC Shanghai or CIETAC South China/Shenzhen sub-commissions are unlikely to be exposed to challenge as to which institution they direct the disputes to for arbitration.  The saga of CIETAC's split, after over two years, is also likely coming to an end.

For further information, please contact Jessica Fei, Partner, Arthur Ma, Counsel or your usual Herbert Smith Freehills contact.