CIETAC Beijing announced on 1 August that it had suspended the authorisation of its Shanghai and South China (Shenzhen) sub-commissions to accept and administer arbitrations. In response, the Shanghai and South China sub-commissions published a joint statement on 4 August, which declared that:
- they have been independent arbitration entities since their establishment
- the purported “authorisation” and “suspension of the authorisation” by CIETAC Beijing have no legal foundation, and therefore the “suspension” has no binding effect on the two sub-commissions [and the relevant parties]
- CIETAC Shanghai and CIETAC South China will continue to accept and manage cases submitted to them. CIETAC Shanghai will use its newly-published arbitration rules for any cases that it handles after 1 May 2012. CIETAC South China will continue using the old 2005 CIETAC rules for any cases submitted to it after 1 May 2012 until it publishes its new arbitration rules. CIETAC South China has also re-branded itself the Shenzhen Court of International Arbitration (“SCIA“).
The principal implication for investors in China is considerable uncertainty and an increased likelihood of jurisdictional challenges and/or problems with enforcement in relation to arbitrations submitted to CIETAC Shanghai or South China (SCIA).
At this stage, it is not possible to predict the final outcome of the dispute. Unless and until it is definitively resolved, we recommend that:
- When negotiating arbitration clauses, parties who wish to submit disputes to arbitration administered by CIETAC should opt for CIETAC Beijing, and state that choice expressly in the clause. (Note that if you refer disputes to be administered by CIETAC Beijing, it is still possible to elect Shanghai or Shenzhen as the seat of the arbitration.)
- Parties who have previously entered into an arbitration agreement or clause that refers disputes to the CIETAC Shanghai or CIETAC South China sub-commission should consider amending it to refer to CIETAC Beijing before a dispute arises. If you choose not to amend the agreement/clause, or cannot reach agreement with your counterparty to amend it, ensure that you take specialist legal advice if you are considering commencing arbitration under the clause.
Please click here for more detail and practical guidance on what to do if you want to refer disputes to arbitration administered by CIETAC or if you have existing clauses that refer disputes to arbitration before CIETAC’s Shanghai or South China sub-commissions.