13 April 2015

Rulings confirm jurisdiction of sub-commissions following CIETAC split

After the Shanghai and South China sub-commissions split from the China’s arbitration institute CIETAC, there was uncertainty about the interpretation and validity of existing arbitration clauses referring to these sub-commissions. Two recent judgments now clarify that if an arbitration clause refers to the Shanghai or South China sub-commission, SHIAC or SCIA has jurisdiction instead of CIETAC. Where parties have a preference for CIETAC as the competent arbitration institute, we recommend exploring whether the existing arbitration clause that refers to the Shanghai or the South China sub-commission of CIETAC can be amended.

In 2013, the internal struggle within China’s arbitration institute CIETAC resulted in a split off by the Shanghai sub-commission and the South China sub-commission in Shenzhen. The Shanghai sub-commission changed its name to Shanghai International Arbitration Centre (SHIAC), and the South China sub-commission to Shenzhen Centre of International Arbitration (SCIA). CIETAC established new offices in Shanghai and Shenzhen.

Since the split off, there has been uncertainty regarding the interpretation of arbitration clauses agreed prior to the split off and referring to the Shanghai or the South China sub-commission of CIETAC. The question was whether disputes should be referred to the Shanghai or Shenzhen office of CIETAC or to the newly formed arbitration institutes (SHIAC or SCIA)? Judgments by local courts led to different outcomes, creating uncertainty about the enforceability of arbitral awards.

The Shanghai No. 2 Intermediate People’s Court ruled  on 31 December 2014 that SHIAC was the competent arbitration institute under an arbitration clause that referred disputes to the CIETAC Shanghai sub-commission. One week later, on 6 January 2015, the Shenzhen Intermediate People’s Court ruled that an arbitration clause referring to the South China sub-commission gave jurisdiction to SCIA. Both recent judgments therefore resulted in the same outcome: arbitration clauses referring to the Shanghai or the South China sub-commission give jurisdiction to the new arbitration institute and not to CIETAC.

On 4 September 2013, the Supreme People’s Court issued a notice instructing all local courts to first consult with the Supreme People’s Court before ruling on the competence of CIETAC or its former sub-commission. This notice suggests that the judgments of the Shanghai Court and the Shenzhen Court have been approved.

Where parties have a specific preference for CIETAC as the competent arbitration institute instead of SHIAC or SCIA, we recommend reviewing existing arbitration clauses and exploring whether clauses referring to either the Shanghai or the South China sub-commission of CIETAC can be amended.

For new arbitration clauses, we recommend careful drafting and using the model arbitration clauses provided by the relevant arbitration institute. If the intention is to choose CIETAC as the competent arbitration institute, the clause should appoint CIETAC Beijing as the arbitration institute. Parties can subsequently choose to have the seat of arbitration in Shanghai or Shenzhen.

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