CMS, China | CIETAC publishes arbitration rules for investor-state disputes

CMS, China

CIETAC publishes arbitration rules for investor-state disputes

Dear Sir or Madam,

Please find below our latest development in Chinese dispute resolution.

Kind regards,
CMS, China

On 19 September 2017, the China International Economic and Trade Arbitration Commission (“CIETAC”) published the Arbitration Rules of the China International Economic and Trade Arbitration Commission for International Investment Disputes (for Trial Implementation) (the “Rules”) which take effect on 1 October 2017. This is CIETAC’s first set of arbitration rules on investor-state international investment disputes.

The Rules were published against a backdrop of increasing foreign direct investment in China. According to CIETAC, China’s foreign direct investment increased by 43.5% to USD 183 billion in 2016. The Rules are designed according to international principles and best practices in investor-state arbitration.

I. Four Key Point

  1. Cases referred to and jurisdiction: The cases referred to and the jurisdiction of the Rules are different from the cases referred to and the jurisdiction of the CIETAC Arbitration Rules for commercial arbitration. The Rules will apply to investor-state disputes on the basis of contracts, treaties, laws and regulations. The jurisdiction of the Rules will depend on the clauses of the arbitration agreement, and/or on treaties, laws and regulations which provide for an arbitration agreement.
Register of arbitrators: To ensure that arbitrators are held to high standards, the Rules created a register of selected arbitrators to deal with international investment disputes. The selected arbitrators are deemed to be independent and impartial, and are recognised for their competence within their fields. If the parties wish to select an arbitrator that is not listed in the register, the parties will require the approval of CIETAC.
  3. Hearing in public: The Rules provide that, unless agreed otherwise by the parties, arbitration hearings will be open to the public. The public may also obtain further information about the arbitration.
  4. Third party funding: A research by the International Council for Commercial Arbitration (ICCA) showed that over 60% of ICSID cases involved third party funding. When considering the costs of arbitration, the Rules allow the arbitral tribunal to consider the third party funding arrangements and whether the funded party has complied with the necessary disclosure obligation. The Rules did not specify whether the presence of third party funding would significantly affect the allocation of costs or the recoverability of costs. The Rules are also silent on whether the arbitral tribunal will have jurisdiction to issue a costs order against a third party funder.

II. Scope of the Rule

The Rules apply under the following circumstances:

  1. Where the parties have agreed to apply the Rules in their arbitration agreement, they shall be deemed to have agreed to refer their international investment dispute to CIETAC. 
  2. Where the parties have agreed to refer their international investment dispute to CIETAC, they shall be deemed to have agreed to apply the Rules. 
  3. Where the parties have agreed to refer their international investment dispute to CIETAC for arbitration, but have agreed to modify the Rules or to apply another set of arbitration rules, the parties’ agreement shall prevail, unless such agreement is inoperative or in conflict with a mandatory provision of the law applicable to the arbitral proceedings. Where the parties haveagreed to apply another set of arbitration rules, CIETAC shall perform the relevant administrative duties accordingly.
  4. Where the parties have agreed to apply the Rules to their international investment dispute, it shall be deemed that the foreign state has waived immunity from claiming that the tribunal does not have arbitral jurisdiction over it.

III. Main Content of the Rules

In addition to its 58 articles, divided into 6 chapters, the Rules contain two annexes: (1) a fee schedule titled China International Economic and Trade Arbitration Commission Fee Schedule for International Arbitration of Investment Disputes and (2) a procedure plan for an emergency arbitration titled International Investment Disputes Emergency Procedure.

The main content of the Rules can be summarised as follows:

  1. CIETAC Beijing Headquarters and CIETAC Hong Kong Arbitration Center are responsible in managing the administrative matters of any international investment disputes referred to them.
  2. A party wishing to have recourse to arbitration under the rules shall submit a request for arbitration (the “Request”) and the applicable fees to the relevant arbitration commission in Mainland China or to CIETAC Hong Kong Arbitration Center. The date on which the Request is received by the relevant commission, shall be deemed to be the date of the commencement of the arbitration.
  3. Within 30 days from the receipt of the Request, the respondent shall submit a written reply (the “Reply”) to the relevant arbitration commission in Mainland China or to CIETAC Hong Kong Arbitration Center.  
  4. The parties may agree on the constitution of the arbitral tribunal. The parties may agree that the tribunal constitutes of one, three or any odd number of arbitrators. Where the parties have not agreed upon the number of arbitrators, the Rules provide that the arbitral tribunal shall constitute of three arbitrators.
  5. If a party challenges the existence, validity or scope of the arbitration agreement or raise a plea concerning the applicability of the Rules, the question of whether the claim may be determined in that arbitration shall be decided by the arbitral tribunal. 
  6. Prior to the commencement of the arbitration, a party may apply in writing to rebut all or part of the claim or counterclaim on the grounds that there is an apparent lack of legal basis or that the arbitral tribunal has exceeded their jurisdiction.
  7. Third party funding occurs when an individual or an entity, who is not involved in the arbitration, agrees to fund a party who is involved in an arbitration. A party receiving third party funding must disclose in writing the existence of the funding, the arrangement of the funding, the identity and address of the third party funder to the counterparty, the arbitral tribunal, and the relevant arbitration commission in Mainland China or CIETAC Hong Kong Arbitration Center.
  8. The place of arbitration shall be based on the arbitration agreement. If the parties did not specify the place of arbitration in the agreement, the arbitration shall take place in either the arbitration commission in Mainland China that administers the arbitration or CIETAC Hong Kong Arbitration Center.
  9. A party may apply for an emergency arbitrator and request the arbitral tribunal to grant interim measures in accordance to the procedure set out in the second annex of the Rules. The emergency arbitrator may adopt necessary or appropriate interim relief measures which are binding on the parties, including requiring the provision of appropriate security.
  10. If the parties agree, the arbitral tribunal may mediate and facilitate both parties to reach a settlement instead of issuing an arbitral award. If the parties reach a settlement, the parties may consent to and request that the tribunal record the settlement in the form of an award.
  11. The Rules provide that a non-party may provide evidence for use in an arbitral proceeding, and that the arbitral tribunal may invite a non-party to provide evidence.
  12. The arbitral tribunal should render its final award within 6 months, the tribunal may extend the time limit if necessary. Before signing any award, the arbitral tribunal shall submit the award in draft form to the arbitration commission to review. Without affecting the arbitral tribunal’s liberty to make a decision, the arbitration commission may draw the attention of the tribunal to points of substance. The award shall specify the reasons upon which it is based, the place of arbitration and the date stated.
  13. The costs of arbitration include the remuneration expenses of the arbitral tribunal, the remuneration and expenses of emergency arbitrators, the costs of any experts appointed by the arbitration tribunal, reasonable assistance costs, case registration fees, and case management fees.

Given the extraordinarily small number of investor-state arbitrations between foreign investors and China to date (there are reports of only two cases), it remains to be seen whether the Rules will serve as a door opener for more actual arbitration cases in this regard.

In case you have questions or for further information, please contact the authors of this newsletter:

CMS, China Dr. Falk Lichtenstein
Head of Dispute Resolution Practice Area Group
CMS, China
T + 86 10 8527 0597



This information is provided for general information purposes only and does not constitute legal or professional advice. Copyright by CMS, China.

CMS, China
“CMS, China” should be understood to mean the representative offices in Mainland China of CMS Bureau Francis Lefebvre, CMS Cameron McKenna LLP and CMS Hasche Sigle, working together. CMS, China is a member of CMS Legal Services EEIG, a European Economic Interest Grouping that coordinates an organization of independent member firms. CMS Legal Services EEIG provides no client services. Such services are solely provided by the member firms in their respective jurisdictions.   Disclaimer   Privacy Statement

Shanghai Office Beijing Office

2801 Plaza 66, Tower 2
1266 Nanjing Road West
Shanghai 200040, China



Room 1909, China Youth Plaza,
No. 19 Dongsanhuan North Road,
Chaoyang District
Beijing 100026, China