Leading arbitration institutions in China

Due to the leading role in the field of international commercial arbitration measured by the caseload and amount in dispute in the cases involving foreign elements,¹⁷⁵ the active involvement in internationalization and promotion of arbitration, as well as due to the limits of this thesis, CIETAC and the BAC are the main objects of this thesis’ analysis. However, where relevant, the reference will be also made to the other prominent arbitration institutions in China.

a. CIETAC

CIETAC was originally created as the Foreign Trade Arbitration Commission (“FTAC”) in 1956. The FTAC was subsequently renamed to the Foreign Economic and Trade Arbitration Commission in 1980, and then CIETAC in 1988. The jurisdiction of CIETAC expanded over the years. Initially, it was created to handle only foreign-related cases, but after 1996, it was also allowed to deal with domestic disputes.

CIETAC is headquartered in Beijing and has sub-commissions in the major Chinese cities: Shenzhen, Shanghai, Tianjin, Chongqing, Hangzhou, Wuhan, and Fuzhou. Moreover, in 2012, CIETAC established its Hong Kong Arbitration Centre. All of the CIETAC’s sub-commissions apply the same set of arbitration rules and use the same Panel of Arbitrators. In 2017, CIETAC handled in total 2298 cases, out of which 476 were foreign-related cases.¹⁷⁶

173 See more Chapter 4 p. 81-84.

174 By way of example, both CIETAC and the BAC regularly serve as platforms for education and dialogue on international commercial arbitration, and organize (by themselves or in cooperation with other international arbitration organizations) numerous events, such as conferences, summits etc. See for example, the China Arbitration Week organized primarily by CIETAC: http://www.arbitrationweek.org/eng/; and the Summits on Commercial Dispute Resolution in China organized by the BAC: http://annualreport.bjac.org.cn/en (last accessed: 20 November 2018).

175 See supra notes 158 and 159.

176 For the statistics, see the official website of CIETAC:

http://www.cietac.org/index.php?m=Article&a=show&id=15422&l=en (last accessed: 20 November 2018).

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CIETAC is a related agency of the China Council for the Promotion of International Trade (“CCPIT”).¹⁷⁷ The CCPIT is a governmental agency dealing with issues of trade and investment promotion.¹⁷⁸ Article 4 of the Constitution of the CCPIT stipulates that upon the authorization of the Chinese government, the CCPIT undertakes the related work and accepts the government’s guidance.¹⁷⁹ The CCPIT’s funding comes from the government.¹⁸⁰ CIETAC is established within the CCPIT, and the CIETAC’s chairman (as well as the other key personnel) are engaged by the CCPIT.¹⁸¹ Also, arbitration rules of CIETAC come into force upon the approval given by the CCPIT.¹⁸² Hence, in that context, the CCPIT can be described as an umbrella organization of CIETAC.

Structurally, CIETAC consists of one chairman, a number of vice-chairmen, and other members. The chairman performs the functions and duties assigned to him or her by the arbitration rules. The vice-chairmen may perform the duties of the chairman, as well as those assigned by the chairman. Both the headquarter and all of the sub-commissions have their secretariats headed by secretary-generals, which deal with the daily work of the institution. There are also some specialized committees within CIETAC, which serve as advisory bodies on issues, such as complex legal matters of both procedural and substantive nature, arbitration rules, and training of the CIETAC’s arbitrators. The specialized committees also publish yearbooks with cases and awards, and also review the qualifications and performance of the CIETAC’s arbitrators.¹⁸³ According to Art. 34 of the CIETAC’s Articles of Association, the financing of CIETAC comes from: (1) arbitration fees paid by the parties; (2) income from organizing events or providing other services; (3) the government sponsorship and public donations; and (4) other

177 See the official website of the CCPIT:

http://en.ccpit.org/info/info_8a8080a94fd37680014fd3c885fc0006.html (last accessed: 20 November 2018).

178 See the official website of the CCPIT:

http://en.ccpit.org/info/info_40288117521acbb80153a75e0133021e.html (last accessed: 20 November 2018).

179 The original wording of Art. 4 of the CCPIT Constitution is : “第四条: 根据中国政府的授权，中国贸促会承 办相关工作，并接受政府的指导.” (translation by the author of this thesis: “Article 4: Upon the authorization of the Chinese government, the China Council for the Promotion of International Trade undertakes relevant work and accepts the guidance of the government.”)

180 Art. 16 of the Constitution of the CCPIT.

181 Art. 5 of the Articles of Association of CIETAC, revised and approved by the 18th Members’ Council of CIETAC (“CIETAC’s Articles of Association”).

182 Art. 28 of the CIETAC’s Articles of Association.

183 For the organizational structure of CIETAC, see Art. 5-24 of the CIETAC’s Articles of Association.

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lawful incomes. Nevertheless, CIETAC declares itself to be financially self-sufficient and independent.¹⁸⁴

CIETAC regularly revises and modernizes its arbitration rules, and the most recent version is from 2015.¹⁸⁵ Some notable changes implemented in the CIETAC’s arbitration rules over the years include:

the empowering of the arbitral tribunal to order interim measures in aid of arbitration (introduced in 2012) and adding an emergency arbitrator procedure (in 2015).¹⁸⁶ Also, although CIETAC maintains a Panel of Arbitrators to sit on a case, the appointment, subject to the confirmation by the CIETAC’s chairman, can be made outside of the panel list already since 2005.¹⁸⁷ Under the most recent CIETAC Panel of Arbitrators, 71.8% of arbitrators come from mainland China, and the remaining from Hong Kong, Macau, Taiwan, and foreign countries – representing in total 65 countries and regions.¹⁸⁸ Finally, for an overview of the CIETAC, it is important to mention the story of an internal conflict allegedly caused by a struggle of power between the CIETAC’s Beijing headquarter and its Shanghai and South-China (Shenzhen) sub-commissions. The conflict resulted in a division of the CIETAC, whereby the Shanghai and the South-China sub-commissions declared the independence from the CIETAC’s headquarter in Beijing.

It is believed that the crisis was triggered by the 2012 version of the amended arbitration rules, which gave the Beijing headquarter the exclusive power to handle cases if the parties had not expressly designated a specific sub-commission of CIETAC in their agreement. Before the proposed changes, when an arbitration agreement provided that, for example, the CIETAC rules apply, but the hearings should take place in Shanghai, this was a sufficient basis for the administration of a case by the Shanghai sub-commission. The new allocation of power could potentially reduce the caseload of the other sub-commissions to the benefit of the Beijing office, and therefore, this was not acceptable to the Shanghai and the South-China sub-commissions.¹⁸⁹

184 See Moser and Yu, 557.; Wang, in New Horizons in International Commercial Arbitration and Beyond ICCA Congress Series, 35.

185 See the CIETAC Arbitration Rules revised and adopted by the China Council for the Promotion of

International Trade/China Chamber of International Commerce on 4 November 2014, effective as of 1 January 2015.

186 For more details on the changes introduced by specific versions of arbitration rules, see Tao, 24-36.; Man Sing Yeung, "The CIETAC Arbitration Rules 2015," Asian Dispute Review 2015, no. 3 (2015), 136 et seq.

187 Art. 26 of the 2015 CIETAC Rules.

188 See the CIETAC’s Panel of Arbitrators effective from 1 May 2017 to 30 April 2020:

http://cietac.org/index.php?m=Article&a=show&id=14241&l=en (last accessed: 20 November 2018).

189 Yuen, McDonald, and Dong, 241-242.

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The conflict proceeded with the Shanghai and South-China sub-commissions declaring their independence and the CIETAC Beijing disqualifying the other two sub-commissions from accepting and administering cases. Subsequently, the Shanghai and the South-China sub-commissions changed their names to the Shanghai International Arbitration Centre/Shanghai International Economy and Trade Arbitration Commission (“SHIAC” aka. “SIETAC”) and the Shenzhen Court of International Arbitration South/China International Economic and Trade Commission (“SCIA” aka. “SCIETAC”), respectively, and adopted their own sets of arbitration rules. In the later stage of the conflict, CIETAC reorganized its previous Shanghai and South-China sub-commissions, which then continued to operate under the CIETAC’s rules. In the period of dispute, however, there were a number of conflicting announcements regarding the jurisdiction of the actors involved.

Consequently, the split caused a substantial amount of confusion and unpredictability for arbitration users and local courts concerning jurisdictional issues. As a result, different (even contradictory) rulings followed. The SPC entered into matter and initially established a system by which any case, where the jurisdictional question was caused by the CIETAC split, had to be reported to a court of a higher level for approval.¹⁹⁰ At the later stage, the SPC issued a judicial interpretation addressing the jurisdictional confusion and assigned the authority in cases involving CIETAC, its reorganized sub-commissions, and the newly created arbitration institutions in Shanghai and Shenzhen.¹⁹¹ The CIETAC split, indeed, caused uncertainty and, to some extent, might have influenced the reputation of CIETAC. However, the SPC’s interpretation from 2015 provided more predictability, and as of today, CIETAC remains one of the leading arbitration centers in China, while the newly formed commissions continue to operate as well.

190 Notice on the Certain Issues Relating to Correct Handling of Judicial Review of Arbitration Matters, No. 194

from 4 September 2013 [最高人民法院关于正确审理仲裁司法审查案件有关问题的通知, (2013) 194号, 发

布日期: 2013年9月4日].

191 The Reply of the Supreme People's Court’s on the Judicial Supervision and Review of the Jurisdiction and Arbitral Awards in Cases Involving Arbitration Agreements for Arbitration at the CIETAC South-China Sub-Commission and the CIETAC Shanghai Sub-Sub-Commission; Fa Shi [2015] No. 15, issued on 15 July 2015, effective from 17 July 2015; [《最高人民法院关于对上海市高级人民法院等就涉及中国国际经济贸易仲裁委员会及 其原分会等仲裁机构所作仲裁裁决司法审查案件请示问题的批复》, 法释〔2015〕15号, 颁布时间: 自 2015年7月15日, 实施时间: 2015年7月17日]. The SPC’s interpretation technically was a reply to the requests coming from the Shanghai High People’s Court, the Jiangsu High People’s Court, and the Guangdong High People’s Court.

See more on the CIETAC split in Yuen, McDonald, and Dong, 241-246.; Matthew Townsend, "New Judicial Guidance on the CIETAC Split – Closure after Three Years of Uncertainty?," Kluwer Arbitration Blog (5 August 2015), http://kluwerarbitrationblog.com/2015/08/05/new-judicial-guidance-on-the-cietac-split-closure-after-three-years-of-uncertainty/. (last accessed: 20 November 2018).

47 b. Alternative model: the BAC

The Beijing Arbitration Commission (“BAC”), also called the Beijing International Arbitration Center (“BIAC”), was established on 28 September 1995. It is headquartered in Beijing. The BAC can be called an “alternative model” of an arbitration institution in China.¹⁹² Its “alternativeness” lies in a number of factors. The first important issue is the way the BAC is financed. Although at the beginning of its existence, the BAC was funded by the Beijing Municipal Government, shortly after (in 1999), it declared to achieve full financial independence.¹⁹³ Further, in 2002, the BAC received a status of an “institution managed as an enterprise”, which allowed it to gain substantial freedom to dispose its revenues while paying the taxes.¹⁹⁴ This means that the BAC is not a part of the ministry financing scheme of reporting revenues and redistributing resources that the Chinese arbitration institutions are typically embraced by. Instead, the BAC pays the business tax based on its revenues, which for the BAC is approximately 23%.¹⁹⁵

The governing body of the BAC, the BAC Committee, consists of one chairperson, four vice-chairpersons, and ten other committee members. The BAC Committee members are various experts and scholars from the area of law or economics and trade.¹⁹⁶ The BAC Committee deals with the governing of the institution. This includes designing and reviewing the work plans of the BAC, appointing its secretary general, as well as reviewing and approving the financial reports submitted by the secretary general.¹⁹⁷

The BAC claims to be independent in its decision making in all areas, including the personnel-related decisions.¹⁹⁸ In order to reach that aim, a member position in the BAC Committee is unpaid, and the work is deemed to have a pro-bono character. Besides, the BAC introduced some special decision-making mechanisms, such as quorums needed to make decisions.¹⁹⁹ In further enhancing its

192 Yuen, McDonald, and Dong, 43.

193 Fuyong Chen and Wei Sun, "Looking Beyond Rules - an Analysing Insight into the Competitive Attractions of BAC," LexisNexis Dispute Resolution Law Guide (2014), 2.

194 Chen, "Striving for Independence, Competence, and Fairness: A Case Study of Beijing Arbitration Commission," 325.

195 Sun and Willems, 9-10.

196 See the official website of the BAC: http://www.bjac.org.cn/english/page/gybh/organize.html (last accessed:

20 November 2018).

197 Art. 8 of the BAC’s Articles of Association.

198 Chen and Sun, 1.

199 Chen, "Striving for Independence, Competence, and Fairness: A Case Study of Beijing Arbitration Commission," 324-25.

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independence, the BAC decided that the chairperson and the BAC staff cannot concurrently serve as arbitrators, while the BAC’s vice-chairpersons and committee members can only act as arbitrators if they are jointly appointed by the parties.²⁰⁰ The BAC’s secretary general and the secretariat deal with the daily work of the institution and with the case management. The BAC also emphasizes its high standards for selecting and training its personnel and arbitrators.²⁰¹

As of the time of writing, the BAC had 506 arbitrators on its Panel of Arbitrators from 21 different countries and regions, including 22 arbitrators from Hong Kong and Taiwan and 105 foreign arbitrators.²⁰² The most recent version of the BAC’s arbitration rules was effective from 1 April 2015.²⁰³ Similarly, like in case of CIETAC, the subsequent revisions of the BAC’s arbitration rules have incorporated numerous changes in a direction of international practice. By way of example, the most recent version of the BAC rules vests the arbitrators with the power to order interim measures and also provides for an emergency arbitrator mechanism to support international commercial arbitration proceedings.²⁰⁴ Interestingly, the BAC was recognized by the Economist Intelligence Unit (a research and analysis division of the Economist Group dealing with forecasting and advisory services) as "the only local arbitration commission which meets or surpasses global standards".²⁰⁵