Beijing court backs SHIAC and SCIA

Since our last blog post on the Ni Laibao case (see here), in which Shanghai No.2 Intermediate Court ruled that Shanghai International Arbitration Centre (SHIAC) has jurisdiction over an arbitration where the parties agreed to arbitrate before the CIETAC Shanghai Sub-commission, the Shenzhen Court of International Arbitration (SCIA) has posted on its website two decisions (made by Shenzhen Intermediate Court and Beijing No.2 Intermediate Court, respectively) that confirm the approach adopted by the court in Ni Laibao.

These two recent decisions both involve a jurisdictional challenge arising out of an arbitration clause in the same underlying contract, in which disputes were referred to CIETAC's South China sub-commission. Adopting similar reasoning to that of the court in Ni Laibao, both the Beijing and Shenzhen courts have concluded that SCIA has jurisdiction over the arbitration. 

The dispute arose out of a Lease Agreement between Walmart (Anhui) Commercial Retail Limited (Walmart Anhui) and Huangshan Tianyinfudi Property Development Company (TYFD) dated 10 Feb 2011. The parties agreed to submit disputes to CIETAC's South China sub-commission for arbitration. In May 2014, Walmart Anhui commenced arbitration against TYFD at SCIA. SCIA accepted the case and notified TYFD, which sought an extension to appoint its arbitrator and submit its defence. 

In July 2014, TYFD commenced a separate arbitration against Walmart Anhui, arising out of the same Lease Agreement, at CIETAC Beijing. At the same time, TYFD also requested Beijing No.2 Intermediate Court to rule on the validity of the arbitration clause. TYFD argued that SCIA lacked jurisdiction and the arbitration should be submitted to CIETAC South China office in Shenzhen at the time. After receiving the Notice of Arbitration from CIETAC Beijing, Walmart Anhui also challenged the jurisdiction of CIETAC Beijing before the Shenzhen Intermediate Court. 

On 21 January 2015, Shenzhen Intermediate Court delivered its ruling, confirming that the arbitration clause is valid and the arbitration should be administered by SCIA instead of CIETAC Beijing. On 13 February 2015, Beijing No.2 Intermediate Court reviewed the same arbitration clause and ruled that SCIA is an arbitration commission duly established by the Shenzhen Municipal government. Its change of name from "CIETAC South China sub-commission" to SCIA was also legitimate. Beijing No.2 Intermediate Court therefore held that, pursuant to article 12(1) of the Supreme People's Court Interpretation on the PRC Arbitration Law, any objection to the validity of the arbitration clause should be made to the intermediate court where the arbitration commission is located. Consequently, Beijing No.2 Intermediate Court held that it did not have jurisdiction to hear the case and transferred it to Shenzhen Intermediate Court. 

By ruling that Shenzhen Intermediate Court has jurisdiction over the application regarding the validity of the arbitration clause, Beijing No.2 Intermediate Court in fact confirmed that SCIA has jurisdiction over the arbitration. This is consistent with the series of recent decisions, in which both Shanghai and Shenzhen courts have upheld the jurisdiction of SHIAC and SCIA. The fact that a Beijing court has now endorsed this view is strong evidence that the earlier decisions were not prompted merely by local protectionism, but represent a consistent approach to the "CIETAC split", which is in turn endorsed by the Supreme People's Court itself. Thus, we see a consistent approach emerging from all mainland Chinese courts that have been asked to rule on the jurisdiction of arbitral commissions following the "CIETAC split". 

It is worth noting, however, that the arbitration clause in the Walmart Case was entered into on 10 February 2011, before SCIA changed its name in December 2012. Therefore, the current case does not resolve the residual uncertainty about clauses in which the parties agreed to submit disputes to CIETAC Shanghai or South China sub-commission after SHIAC or SAIC had changed their names. Consequently, it remains our view that parties should avoid agreeing to arbitrate before "CIETAC Shanghai sub-commission" or "CIETAC South China Sub-commission", and prefer CIETAC Beijing wherever possible. 

For further information, please contact Justin D'Agostino, Jessica Fei, Brenda Horrigan, May Tai, Simon Chapman or your usual Herbert Smith Freehills contact.