The updated arbitration rules of the China International Economic and Trade Arbitration Commission (“CIETAC”), one of the leading PRC arbitral institutions, come into effect today.
The CIETAC 2024 Arbitration Rules feature extensive revisions, including various new provisions to reflect developments in international best-practice and anticipate possible changes to the PRC Arbitration Law.
Key developments include:
- Expanded tribunal powers, such as those in relation to decisions on jurisdiction, early dismissal, interim awards, and the application of the CIETAC Guidelines on Evidence.
- Enhanced provisions on commencement and consolidation of proceedings, including a new ground for commencing a single arbitration under multiple contracts or consolidating arbitrations, and a new provision addressing non-compliance with escalation clauses.
- A continued trend of alignment with international standards, including the ability for parties to seek conservatory measures from non-PRC courts and prior to the service of the Notice of Arbitration, and new provisions permitting the nomination of the presiding arbitrator by the party-nominated arbitrators and addressing third party-funding and the limitation of liability.
- Future-proofing measures, including provisions for the digitalisation of CIETAC arbitrations and in relation to ad hoc arbitration in the event that ad hoc arbitration with a Mainland PRC seat is permitted in the future.
Further details and commentary are provided below.
EXPANDED TRIBUNAL POWERS
- Decision on jurisdiction (Article 6). After the constitution of the tribunal, the tribunal will have the power to determine its own jurisdiction (in contrast to the position under the previous 2015 version of the CIETAC rules, which conferred the right to determine the tribunal’s jurisdiction on CIETAC by default and only provided for the tribunal to determine its jurisdiction where CIETAC judged this to be necessary).
- Early dismissal (Article 50). For the first time, tribunals are empowered (at the request of a party) to dismiss a claim or counterclaim in whole or in part on the ground that it is manifestly without legal merit or outside the jurisdiction of the tribunal. Such a ruling must be made in the form of a reasoned decision or award within 60 days of the early dismissal request.
- Interim award (Article 49). The rules now make clear that tribunals may render interim awards on any issue before the final award, either on the tribunal’s own initiative (where the tribunal deems a partial award to be “necessary”) or at the request of a party.
- CIETAC Guidelines on Evidence (Article 41(4)). The tribunal now has the express power (unless otherwise agreed by the parties) to apply the CIETAC Guidelines on Evidence, which were introduced in 2015 and influenced by the IBA Rules on the Taking of Evidence in International Arbitration as well as principles of evidence in PRC civil litigation.
COMMENCEMENT AND CONSOLIDATION
- Multiple contracts involving related subject matters (Articles 14 and 19). A new ground for commencement of a single arbitration under multiple contracts and consolidation of arbitrations has been added where the relevant contracts have “related subject matters” (in addition to the previous grounds where the contracts (i) consist of a principal contract and its ancillary contract(s) or (ii) involve the same parties as well as legal relationships of the same nature), provided that the other requirements for a single arbitration under multiple contracts or consolidation are also met.
- Addition of contracts (Article 14). Even if a claimant does not commence a single arbitration under multiple contracts at the outset, it can now apply to add contracts to an arbitration after the arbitration has commenced.
- Non-compliance with escalation clauses (Article 12). Where the contract stipulates that the parties must negotiate or mediate before commencing arbitration, a failure to do so shall not prevent the claimant from applying for arbitration or prevent CIETAC from accepting the case (unless the law applicable to the arbitration proceedings or the arbitration agreement provides otherwise).
ALIGNMENT WITH INTERNATIONAL STANDARDS
- Conservatory measures from non-PRC courts (Article 23). CIETAC is now permitted to forward party applications for conservatory measures to courts outside the Mainland PRC as well as to Mainland PRC courts. Users should be aware that the rules use the term “conservatory” in a distinct sense, referring to measures to preserve property, evidence and conduct which are granted by a court as opposed to an arbitral tribunal. This matches the scope of interim relief which is enforceable as a matter of PRC law. Although the broader concept of “interim relief” granted by an arbitral tribunal is not enforceable as a matter of PRC law, the rules nevertheless make provision for such relief (Article 23(3)), which is binding as between the parties and may be enforceable in other jurisdictions.
- Pre-arbitration conservatory measures (Article 23). The rules now expressly state (reflecting long-standing practice) that CIETAC may forward a party application for conservatory measures to a court before issuing the Notice of Arbitration to the parties. In CIETAC arbitration, a Request for Arbitration is filed by the claimant with CIETAC, which then sends a “Notice of Arbitration” enclosing the Request for Arbitration and certain other documents to the respondent. The new provision therefore essentially provides for pre-arbitration court-ordered conservatory measures in urgent cases (such as where dissipation of assets is threatened).
- Nomination of presiding arbitrator by party-nominated arbitrators (Article 27). The parties may now agree that the party-nominated arbitrators shall jointly nominate the presiding arbitrator. Previously, the presiding arbitrator was appointed by CIETAC on the basis of a list procedure. That procedure can still apply where the parties do not opt for the presiding arbitrator to be nominated by the party-nominated arbitrators, although the new rules now give the parties greater choice by providing two alternative approaches for the list procedure.
- Third party funding (Article 48). Following the lead of the CIETAC Investment Arbitration Rules (see our previous article here), the rules now include provisions on third party funding for the first time. These comprise: (i) an obligation on funded parties to disclose information in relation to funding arrangements to CIETAC (which will then forward that information to the other parties and the tribunal); and (ii) tribunal powers to order the funded party to disclose such additional information regarding the funding as the tribunal deems necessary, and take account of the funding arrangement (and the compliance of the funded party with its disclosure obligations) in any decision on costs. The introduction of these provisions is consistent with the fact that, although the legality of third party funding under PRC law remains uncertain, some recent PRC court decisions suggest a growing (if cautious) acceptance of its use in the arbitration context (see our previous blog here).
- Limitation on liability (Article 86). There is an express exclusion of civil liability for acts and omissions in connection with the arbitration, and any obligation to testify in relation to the arbitration, on the part of CIETAC, its staff members, arbitrators, emergency arbitrators and relevant persons engaged by the tribunal, unless otherwise provided by the law applicable to the arbitration.
FUTURE-PROOFING
- Digitalisation (Articles 8, 21, 37 and 52). New measures encouraging the use of technology have been introduced. These include rules expressly permitting arbitration documents to be filed by electronic means, including as a “preferred way of delivery” (Articles 8 and 21), the discretion for the tribunal to decide, after consultation with the parties, to hold any oral hearing by remote virtual conference (Article 37), and provisions permitting awards to be signed by the arbitrators and delivered to the parties in electronic form (Article 52).
- Ad hoc arbitration (Article 2). There is provision for CIETAC to provide a wide range of administrative and support services for ad hoc arbitration (including offering guidance and consultation on the application of the arbitration rules, appointing arbitrators, deciding on challenges to arbitrators, providing hearing services, scrutinising draft awards and managing arbitrators’ remuneration), provided the agreement for ad hoc arbitration is not inoperative or in conflict with a mandatory provision of the law applicable to the arbitral proceedings. This provision looks ahead to the possible relaxation of the current prohibition on ad hoc arbitration with a Mainland PRC seat as part of proposed revisions of the PRC Arbitration Law which are currently under consideration by PRC lawmakers (albeit these are still in draft form and have not yet been enacted).
COMMENT
The CIETAC 2024 Arbitration Rules are a significant update reflecting many of the key trends in international practice since the CIETAC rules were last revised nearly a decade ago in 2015.
It is clear that CIETAC has paid close attention not only to best practice as reflected in the rules of leading international institutions such as the HKIAC, SIAC and the ICC, but also to the latest judicial approaches to arbitration-related issues in leading seats of arbitration, including Hong Kong. The new provision on non-compliance with escalation clauses (Article 12) comes into force just six months after the ground-breaking ruling of the Hong Kong Court of Final Appeal on this issue in C v. D [2023] HKCFA 16 (see our blog on the case here), and the new provision on limitation of liability (Article 86) follows the recent decision of the Hong Kong Court of First Instance in Song Lihua v. Lee Chee Hong [2023] HKCFI 1954 (see our blog here), in which the court confirmed that arbitrators cannot be compelled to give evidence in proceedings to challenge their awards). Taken together with the new rules on early dismissal, third party funding and digitalisation, these provisions represent a clear effort by CIETAC to incorporate some of the latest developments and practices into the new rules.
The empowerment of tribunals with additional tools to resolve disputes and the continued modernisation of the rules will be welcome developments for parties. The international arbitration community will no doubt watch with interest how the new features of the rules are utilised in practice and the way in which they interact with any updates to the PRC Arbitration Law which are introduced in due course.
For further information, please contact:
Helen Tang, Partner, Herbert Smith Freehills
helen.tang@hsf.com
