China Arbitration War: CIETAC Announced Its Shanghai Brunch Illegal

By Albert Chen

China International Economic and Trading Arbitration Committee (CIETAC), the well-known China based international arbitration chamber, has been on the front page of local medias these days for it hearing the trademark dispute of Wang Lao Ji and the chamber’s internal strife. And by the latest news known to us, CIETAC holds the currently heard or adjudicated cases by its previous Shanghai Branch may face the risk of invalidity.

I. The conflict

The battle was triggered by the publishing of the chamber’s new rules of association and the arbitration rules (the “new rules”), which was rejected by CIETAC Shanghai Branch with the defenses that vote of the new rules did not base on the most wills. Moreover, to Shanghai Branch’s opinions, the clauses of the new rules also damage the free will to choose the arbitration committee and hearing place, and considering the vastly improved arbitration fees and the applicable scope of the sole arbitrator hearing. What’s worse, the new rules may also jeopardize the independence of the Shanghai Branch. For these reasons, Shanghai Branch stated on 4^th May (Note: the link is in Chinese) of 2012 to denounce CIETAC and restate it as an independent committee.

To strike back, CIETAC published its Management Announcement (Note: the link is in Chinese) in recent, saying that the Shanghai Branch shall no longer be authorized as the local chamber of CIETAC, and from 1^st August 2012, any arbitration agreed in Shanghai Branch shall be filed directly to CIETAC, and meanwhile the tribunal may hear the case in Shanghai.

II. The definition of independent arbitration committee and the consequence of the remove of the authorization

What interests or concerns me most after reading the news report is whether Shanghai Branch will lose its status as the arbitration committee on the announcement of CIETAC?

Although by the Arbitration Law, once after the registration of institution and judicature, and with “its own name, domicile, articles of associations, necessary property, personnel and arbitrators”, an arbitration committee could be duly and legally established, the Shanghai Branch was set up in 1984 before the promulgation of the Arbitration Law in 1994, under the approval document of Hufuban (1987) No.67 and Hufuban (1988) No.188. And in fact, including the South China Branch involved in the dispute of this time, the CIETAC and these two branches have independent

Yet, whatever the approval is, Shanghai Branch has been operating under the name of CIETAC and to the public opinions as a local chamber of CIETAC. Therefore, with the remove of the authorization, the following questions bumping into my mind:

(1) When the there have agreed the arbitration clauses with Shanghai Branch involved before 1^st August, will the effect of such agreements be influenced or even invalid with the announcement of CIETAC?

(2) If the case could be heard in Shanghai Branch and judged there, will the arbitral award be defected in its effect? And what about its enforcement?

To these questions, I also make a call inquiry to CIETAC, and the reply is: 1) the clauses of arbitration in Shanghai remains effective, but it shall be handled by Shanghai Secretariat of CIETAC rather than the previous Shanghai Branch; 2) Any cases filed or adjudicated after 1^st May of 2012 may face the risk of invalidity due to the illegal “composition of the arbitration tribunal or the arbitration”. However, I tend to reserve my opinions on such a unilateral argument.

Actually, according to the Arbitration Law, all the arbitration committees shall be the member of the China Arbitration Association, and the articles of associations of the committees shall be made under the one of the Association. But regretfully, the Association has not been found so far for reasons, and that makes the settlement through the above rules infeasible.

As the biggest arbitration committee in China, the inner strife of CIETAC has stirred up the public opinions, for the possible settlement of the dispute, either reconciliation or separation, though remains unknown, we will keep a close look on it.

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