Dear Sir or Madam,

Please find below our update on the latest developments in Chinese dispute resolution.

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CMS, China

CIETAC prepares for more active resolution of disputes – New CIETAC Arbitration Rules adopted

On 3 February 2012, the China Council for the Promotion of International Trade and the China Chamber of International Commerce revised and adopted the new arbitration rules (“New Rules”) of the China International Economic and Trade Arbitration Commission (“CIETAC”). The New Rules will enter into effect on 1 May 2012.

Seven years after the former revised CIETAC Arbitration Rules came into force on 1 May 2005, the largest international arbitration institution in the People’s Republic of China is now setting up a new procedural framework.

The most significant changes introduced by the New Rules are as follows:

1.   The arbitration tribunal now has the power to issue interim measures itself. This is a significant improvement.

If there is the risk that a party will conceal property or destroy evidence, the other party to a dispute must often act fast. Sometimes they need to obtain interim preservation measures within a few hours. Formerly, in CIETAC arbitration proceedings every application for preservation of property or evidence had to be forwarded by the arbitration tribunal to the competent court.

Under the New Rules, the arbitration tribunal may still forward a party’s application for conservatory measures to the competent Chinese court. However, Article 21 of the New Rules for the first time entitles the arbitration tribunal to grant interim measures itself. Such interim measures can take the form of a procedural order or alternatively an interlocutory award.

This new competency of the arbitration tribunal can save time for the applicant, avoiding the need to rely on a Chinese court for interim measures. However, as in the past, only the Chinese courts will be responsible for enforcing interim measures in China. It remains to be seen in practice whether Chinese courts will enforce interim measures granted by CIETAC arbitration tribunals, and whether they will implement them in the speedy manner required to be effective. It might be helpful if the PRC Supreme People’s Court issued guidance on the enforcement of interim measures ordered by arbitration institutions.
2.   As in the past, the parties are free to agree the language of the arbitration proceedings. Previously, in the absence of an agreement the default language was Chinese. Now the New Rules allow CIETAC to designate any language, but the language must have a connection to the circumstances of the case. Since the New Rules do not contain details of the criteria for selection of a foreign language by CIETAC, it remains to be seen how often CIETAC will actually select a language other than Chinese in the future.
3.   The New Rules now explicitly stipulate that if the claimant does not rectify any formal deficiencies of his request for arbitration within the time designated by the Secretary of CIETAC, the claimant shall be deemed not to have submitted a request for arbitration. Furthermore, if the respondent files a counterclaim, he must pay the corresponding arbitration fee in advance. If he fails do so, he will be deemed not to have filed a counterclaim.

The above indicates a stricter attitude by CIETAC towards getting the parties to comply with the applicable procedural requirements in time.
4.   The New Rules introduce a time limit for submission of an application for postponement of an oral hearing of 5 days after receipt of the notice of such hearing (3 days in domestic or summary proceedings). Under the old CIETAC Arbitration Rules, no fixed time limit applied. In return for these stricter requirements, the New Rules grant the arbitration tribunal the right to treat a party’s delay as excused and to accept the application or statement notwithstanding such delay. The precondition is that the respective party can demonstrate justified reasons for the delay. The same exception for excused delay has also been newly established for failure to submit a statement of defence or a counterclaim in time.

The above change grants the arbitration tribunal more flexibility to consider the individual circumstances of a party concerned. However, such flexibility also makes the procedural timeline less predictable for the other party.
5.   In certain cases, a respondent cannot meet the deadline for submitting a statement of defence and needs more time for preparation. In such a case, he may file an application for extension of the time limit for submitting his statement of defence. However, at the time of filing the arbitration tribunal may not have been established yet. In the past, it was unclear who could decide such an application. Now, Article 14 of the New Rules stipulates that if the arbitration tribunal has not yet been established the Secretary of CIETAC shall decide.
6.   The New Rules contain an express provision in Article 43 that arbitration proceedings can be temporarily suspended if necessary. There are no further definitions as to when a suspension is necessary. When calculating the time limit for issuing the arbitration award (6 months for international disputes and 4 months for domestic disputes), periods of suspension are not counted.
7.   Unlike before, the New Rules no longer contain an explicit provision that only one oral hearing should be held unless absolutely necessary. This might reflect the reality that in practice more than one oral hearing is quite common.
8.   The summary arbitration procedure can now be applied for in cases with an amount in dispute of up to RMB 2,000,000. Formerly, the threshold was RMB 500,000. This shows CIETAC’s intention to make the summary procedure, which is typically less time-consuming and expensive, available in a larger number of disputes.
9.   Other procedural changes and clarifications include the appointment of arbitrators in bilateral and multi-party disputes, service of documents and consolidation of arbitration proceedings.

The New Rules reflect the tendency of CIETAC proceedings to become more modern and flexible and further strengthen CIETAC’s prominent role in dispute resolution in China. Concerning the most important innovation, i.e. the power of the CIETAC arbitration tribunal to issue its own interim measures, it is still uncertain if such interim measures will actually be executed by Chinese courts in practice.

In case you have questions or for further information, please contact

Dr Falk Lichtenstein
Head of Dispute Resolution PAG
Senior Associate
CMS, China
T +86 21 6289 6363

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

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