China’s International Commercial Courts hear first cases

Almost a year since their high profile establishment in June 2018, the International Commercial Courts of the Supreme People’s Court (CICC) have recently conducted hearings on the first cases that were submitted to the CICC.

On 29 May 2019, the Second International Commercial Court of the Supreme People’s Court of China heard a case concerning a dispute over shareholder qualification, relating to the energy drink manufacturer Red Bull’s investment in China. On 31 May 2019, the First International Commercial Court of the Supreme People’s Court of China heard a product liability case involving an Italian pharmaceutical company and its Chinese distributor.

Background

In June 2018, the Supreme People’s Court (SPC) established two international commercial courts, in Xi’an and Shenzhen respectively, to handle international commercial cases, especially disputes arising out of projects under the Belt and Road Initiative. The courts offer a “one-stop shop” dispute resolution mechanism, with access to mediation, arbitration and litigation. See our posts of 4 July and 7 December 2018 detailed reports on the series of rules that set up the CICC and regulate the CICC’s proceedings (the CICC Rules), including:

  • Provisions of the SPC on Several Issues Concerning the Creation of the CICC (effective 1 July 2018);
  • CICC Rules of Procedure (trial implementation) (effective 5 December 2018);
  • Working Rules of the CICC Expert Committee (effective 5 December 2018); and
  • SPC’s Notification on the International Commercial Arbitration and Mediation Institutions Included in the “One-stop-shop” International Commercial ADR Mechanism (effective 5 December 2018).

Since December 2018, the CICC has accepted several cases concerning international commercial disputes, including, among others:

  • disputes over shareholder qualification and shareholder disputes concerning Red Bull’s investment in China (Red Bull Cases), and
  • a product liability dispute brought against an Italian pharmaceutical company Bruschettini S.R.L. by its Chinese distributor, Guangdong Bencao Medicine Group Co., Ltd., (Bruschettini Case).

CICC proceedings

The Red Bull Case

According to a webcast on the China Court Website (the official multimedia website managed by SPC), the case was initially accepted by a Beijing court in January 2017. Subsequently, the CICC took over this case in 2019, on the basis that the CICC had already accepted four other cases related to a shareholder dispute over Red Bull’s investment in China.

According to the webcast of the 29 May hearing, a pre-hearing conference was held on 15 and 27 May in accordance with the CICC Rules of Procedure. The procedural issues that were dealt with at the conference included:

  • clarifying the parties’ claims/defence,
  • identifying uncontroversial facts and evidence,
  • identifying the key issues in dispute that will be determined at the hearing,
  • exchange evidence and cross-examination opinion,
  • determining on the applicable law to the case,
  • determining whether the hearing will be open to the public, and
  • other procedural issues.

According to the webcast report on the SPC’s website, the CICC asked about the parties’ willingness to have their dispute mediated by the CICC Expert Committee. The parties had initially opted for mediation by the Expert Committee, but eventually the case moved on to the CICC court proceedings because one party gave up on mediation.

The 29 May hearing at the CICC Xi’an court concerned one of the Red Bull Cases, which involves a dispute over the shareholder qualifications of Ruoychai International Group Co.,Ltd.(a Thai company) and Inter-Biopharm Holding Limited (a BVI company) in the Chinese company Red Bull Vitamin Drink Co.,Ltd. The hearing was before a bench of five SPC judges, and lasted for about four hours. No judgment was rendered immediately after the hearing.

The Bruschettini Case

According to the CICC’s website, a pre-hearing conference was held on 29 April, during which, in addition to discussing and determining procedural issues, two judges of the CICC explained the “one-stop-shop” dispute resolution mechanism to the parties. The issues discussed and/or determined at the conference include:

  • procedural issues in the pre-trial mediation, including selection of the mediators and timeline for the mediation. The mediator candidates from the Expert Committee and the timeline for confirming the selection of the mediators were determined at the conference.
  • the likely hearing date, if mediation is not successful.

The 31 May hearing at the CICC Shenzhen court was a substantive hearing of the Bruschettini Case, which lasted for about three hours. Similarly, it was before a bench of five SPC judges, who did not render a judgment immediately after the hearing.

Conclusion

Even though these first two cases heard at the CICC are not specifically related to any Belt and Road projects, they are still of significant importance, as they are the first cases heard under the CICC Rules. They are helpful illustrations of how the CICC handles its cases. In particular, they help to demonstrate how the CICC uses pre-hearing conferences to ensure smooth conduct of the trial, the role that the CICC plays in mediation, and how the CICC can provide efficient resolution of international commercial disputes.

However, these cases do not show all of the interesting features of the CICC proceedings established by the CICC Rules. It remains to be seen, for example, how the CICC will interact with the one-stop-shop institutions for arbitration or mediation, and how mediation by the Expert Committee of the CICC will work in practice.

Helen Tang
Helen Tang
Partner, Shanghai
+86 21 2322 2160
Tracey Cui
Tracey Cui
Associate, Shanghai
+86 21 2322 2166
Briana Young
Briana Young
Foreign Legal Consultant (England & Wales)/Professional Support Consultant, Hong Kong
+852 2101 4214

CJEU CONFIRMS THAT CETA DISPUTE RESOLUTION PROVISION IS COMPATIBLE WITH EU LAW

On 30 April 2019, the Court of Justice of the European Union (“CJEU“) confirmed that the mechanism for the settlement of disputes between investors and states set out in the Comprehensive Economic and Trade Agreement between the EU and Canada (“CETA“) was compatible with EU law. This confirms the Attorney General’s opinion discussed here.

The CJEU’s opinion will lend support to the EU’s effort to develop the tribunals established under trade agreements like CETA into a permanent and multilateral Investment Court System (“ICS“) in future.

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AUSTRALIA AND INDONESIA SIGN COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT

On 4 March 2019, Australia and Indonesia signed the Australia-Indonesia Comprehensive Economic Partnership Agreement (“CEPA“). In this post, we briefly consider some of the noteworthy features of the CEPA chapter on investment and in particular its provisions regarding investor-State dispute settlement (“ISDS“).

Indonesia and Australia signed a bilateral investment treaty (“BIT“) containing ISDS provisions in 1992. Both States are also party to the ASEAN-Australia- New Zealand Free Trade Agreement (“AANZFTA”), signed by Australia in 2009 and Indonesia in 2012, which contains an investment chapter.

As we reported in a previous post, Indonesia announced in 2015 that it would seek to renegotiate and replace its older investment treaties with more modern agreements. The Australia-Indonesia BIT, however, will remain in force even after CEPA enters into force. This is in contrast to the Hong Kong-Australia Free Trade Agreement signed this week (see our post here) pursuant to which Australia and Hong Kong have agreed to terminate the Hong Kong-Australia BIT, which was signed in 1993 and became infamous in Australia after Philip Morris used the treaty to commence arbitration against Australia challenging the Tobacco Plain Packaging Act 2011.

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The new draft Dutch BIT: what does it mean for investor mailbox companies?

The Netherlands has released a new draft investment treaty for public comment (“Draft BIT“).  If adopted, the Draft BIT may raise questions about the Kingdom’s attractiveness for foreign investors who have long taken advantage of Dutch treaty protections by structuring their investment via companies in the Netherlands.  The Netherlands proposes to use the new model as a basis for renegotiating its existing BITs with non-EU states, and, as such, the new draft’s more restrictive provisions may be significant for existing investors with protection under existing BITs, as well as those considering future investments. Key features of the Draft BIT are considered below.

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ICSID tribunal rules that it is neither necessary nor urgent to grant security for costs from a claimant with the benefit of third-party funding

An ICSID tribunal has rejected a State's application for security for costs in circumstances in which the other party had third-party funding in the form of ATE insurance which specifically provided for cover of the State's costs.

Italy's request for security for costs

The application formed part of arbitral proceedings brought by Eskosol S.p.A. in liquidazione ("Eskosol") under the Energy Charter Treaty and the ICSID Convention against the Italian Republic ("Italy"). Italy sought security for costs in support of its ICSID Arbitration Rule 41(5) application for summary dismissal of Eskosol's claims on the basis that they are manifestly without legal merit. 

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Herbert Smith Freehills’ Response to EU Consultation: the Future of Investor-State Dispute Settlement

As discussed in our blog post here, on 21 December 2016 the EU Commission launched a public consultation on the multilateral reform of the investment dispute settlement system. The consultation closed on 15 March 2017 with a full report of the responses anticipated later this year. Herbert Smith Freehills has submitted a position paper to the Commission in response to the consultation.

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Brexit—the future of state-to-state, investor-state and domestic dispute resolution

The Brexit White Paper

The much-anticipated Brexit White Paper, ‘The United Kingdom’s exit from and new partnership with the European Union’, was published on 2 February 2017. This post focuses on a subject that has to date received relatively little attention—what it has to say about the future of dispute resolution. In its Chapter 2 (‘Taking control of our own laws’), and Annex A, the White Paper contains perhaps a surprising amount on dispute resolution, in comparison to the text devoted to the other eleven of the UK government’s 12 stated principles.

In this blog post we review the White Paper with the aim of discerning so far as possible the potential future of dispute resolution for the UK. In particular, we consider how the UK government envisages, at this relatively early stage, that disputes will be resolved under new post-Brexit UK-EU agreements, and if and how UK businesses will be able to enforce their provisions. We also consider certain implications of the end to the Court of Justice of the European Union (CJEU)’s jurisdiction in the UK and the adoption of the acquis under the Great Repeal Bill.

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Breakfast panel with TPP negotiators on 7 January 2016: Investor-state dispute settlement under the trans-pacific partnership

Join us for a panel discussion on the dispute resolution system in the Trans-Pacific Partnership (TPP), presented by experts in international arbitration, as well as members of TPP government negotiating teams from Peru and Mexico. They will discuss the controversies arising out of the TPP's adoption of investor state arbitration.

Date: Thursday, January 7, 2016

Time: Registration will begin at 8:30am. Breakfast will be served. The panel discussion will begin at 9am.

Venue: Yale Club of New York, 50 Vanderbilt Avenue, New York, NY 10017. Please click here to view map.

Registration: To register please contact Rochelle.Eades@hsf.com or Danielle.Schultz@hsf.com

For more information and the list of speakers, please see below.

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The changing landscape of Investment Treaty arbitration – Herbert Smith Freehills comments on recent developments and the future of investment arbitration

As the US Senate is poised to pass legislation granting President Obama the trade promotion authority which will facilitate the passing of the Trans-Pacific Partnership Agreement (TPP), the future of the most controversial parts of the TPP and many other recent trade agreements – investment protection and investor-state dispute settlement (or ISDS) – remains uncertain.

In our 23 June 2015 webinar, “The changing landscape of Investment Treaty arbitration”, four of our Investment Treaty arbitration specialists looked at the ongoing debate surrounding investment protection and ISDS, focusing on the TTIP and TPP and the current approaches being adopted in their negotiation. They considered what the future looks like for ISDS if these two treaties form a “blueprint” for the future of investment protection. The webinar also provides an update on recent developments in the sphere of investment arbitration, including the EU’s developing position on Intra-EU claims, provisional measures, arbitrator challenges and the annulment process.

To access a recording of this webinar, please contact Prudence Heidemans.

Speakers:

Isabelle Michou, Partner, International Arbitration, Paris (Chair)

Christian Leathley, Partner, International Arbitration, London

Andrew Cannon, Partner, International Arbitration, Paris

Iain Maxwell, Of Counsel, International Arbitration, London

Isabelle Michou
Isabelle Michou
Partner
+33 1 53 57 74 04
Christian Leathley
Christian Leathley
Partner
+44 20 7466 2532
Andrew Cannon
Andrew Cannon
Partner
+44 20 7466 2852
Iain Maxwell
Iain Maxwell
Of Counsel

 

 

Australia’s Conflicting Approach to ISDS: Where to From Here?

Keeping abreast of Australia’s stance on ISDS can be a confusing exercise. Australia’s approach to investor-state dispute settlement (ISDS) continues to be hotly debated in the wake of recent revelations by Wikileaks that the investment chapter of the Trans-Pacific Partnership (TPP) is likely to include ISDS provisions. The Australian government’s stance on ISDS has undergone a number of dramatic turnabouts since the initial controversy sparked by the first investment treaty claim to be commenced against Australia by Phillip Morris in 2011. Continue reading