Shanghai and South China Sub-commissions Declare Independence from CIETAC

On August 4, 2012, the Shanghai and South China (located in Shenzhen) sub-commissions of China International Economic and Trade Arbitration Commission (CIETAC) issued a joint announcement declaring their independence from CIETAC.  This move is in response to CIETAC headquarters’ announcement on August 1, 2012 revoking its authorization to the two sub-commissions for accepting and administering arbitration cases because they refused to apply CIETAC’s new arbitration rules. CIETAC also stated that parties that have agreed to arbitrate their disputes by the two sub-commissions should instead submit their applications for arbitration to the CIETAC headquarters.

The dispute between CIETACs and the two sub-commissions arose as a result of the latter’s refusal to accept CIETAC’s new arbitration rules that took effect on May 1, 2012 (“2012 Rules”). CIETAC Shanghai released a declaration on May 2, 2012 stating the reasons for its refusal to accept the 2012 Rules, saying that they are invalid because they seriously violated procedures and laws. As an example, the 2012 Rules provide that where it is not clearly specified that the case should be arbitrated by a sub-commission, the case should be administered by the Secretariat of CIETAC. Meanwhile, the 2005 rules provided that where it is not clearly specified which body will administer the case, the applicant can choose among CIETAC or one of its sub-commissions. CIETAC Shanghai’s declaration states that this amendment violates the original intent of the parties when they entered into the relevant agreements that consisted of the arbitration clauses, as well as their freedom to choose a venue that is the most convenient for them.

CIETAC Shanghai also released its own arbitration rules on April 30, 2012, asserting that it is an arbitration institution independent of CIETAC with its own chairman and vice chairman. It also set up its own panel of arbitrators and promulgated its own rules, which are inconsistent with the 2012 Rules in certain key aspects such as staff arrangements and summary procedure. CIETAC has declared in response that these conducts by CIETAC Shanghai conduct are null and void.

The dispute between CIETAC and the two sub-commissions has led to uncertainties as to the enforceability of awards by the two sub-commissions. To eliminate any risks, it may be advisable to revise arbitration clauses to provide for arbitration by CIETAC.

We will continue to monitor the situation and report any new developments.

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