The Development of a Dispute Resolution Center...The Development of a Dispute Resolution Center...

The Development of a Dispute Resolution Center

PANEL DISCUSSION

Moderator: Sean Lim, Partner, Lee & Ko

Panelists:

Philipp Hanusch, Senior Associate, Deacons Tan Chuan Thye, Partner, Stamford Law

Hongtao (Michael) Zhang, Partner, Dacheng

2

Sean (Sungwoo) Lim

Head of International Dispute Resolution Group, Lee & Ko

International Arbitration

in Korea

16, April 2013

3

How to Manage Risk

Dispute Resolution Provisions (“Midnight Clause”)

Governing Law

Forum Litigation v Arbitration

4

Governing Law

Governing Law v Place of Arbitration

Contract Interpretation Rules Civil Law v Common Law

Korean Law

Civil Law System

Korean Supreme Court Decision on Contract Interpretation

"the court should recognize the parties' intent as it is expressed in the

written wording of the contract"

"if the written wording is ambiguous, the contract should be reasonably

interpreted based on the totality of circumstances"

5

Forum (Litigation)

"Home Court Advantage"

Familiarity

Discovery

De novo review of Appellate

Court

Enforcement

Reciprocity

6

Arbitration

Neutrality

Procedural Flexibility

e.g. service process, confidentiality

Enforceability (New York Convention)

Efficiency??

7

Arbitration in Korea

Globalized Economy

Most Preferred Method of Dispute Resolution

Proliferation of International Arbitration

8

Seoul as an Attractive Venue of Arbitration

Venue

Hearing Place

Seat of Arbitration

Arbitration-Friendly Seat

Lex Arbitri

Korean Arbitration Act

New York Convention

Court

9

Efforts to Improve International Arbitration

Galaxy 3

I phone

Black berry

Feature phone

10

Korean Arbitration Act 1996

Based on UNCITRAL Model Law

Ministry of Justice currently reviewing further

amendments to the 1996 Arbitration Act

Draft bill to amend the Arbitration Act to be

submitted to parliament in 2013

Task Force to take into account amendments of

the UNCITRAL Model Law of 2006

11

KCAB International Rules

Role of an Arbitration Institution

Formulation of Tribunal

Managing the case

Neutral Tribunal

Competent Tribunal and Remuneration

12

Seoul IDRC

Success of Maxwell Chamber (Singapore)

Support From:

KBA, KCAB,SMG, MOJ, Law Firms

Participating Institutions:

HKIAC, ICC, ICDR, KCAB, LCIA, SIAC

Opening : 27 May 2013

13

What’s Where

1. Seoul IDRC

2. Lee & Ko

3. McDermott Will & Emery

4. Paul Hastings

5. Cleary Gottlieb

6. Central Government Complex

7. U.S. Embassy

8. City Hall

9. Seoul Finance Center

10. Jonggak Subway Station

11. Samsung Securities

Headquarter

12. Namsan Seoul Tower

13. Citibank Korea

14. Standard Chartered Korea

First Bank

15. Goldman Sachs Korea

16. Chosun Westin Hotel

17. Plaza Hotel

18. Lotte Hotel

10

11

3

4

6 7

5

15

9 13

14

1

8 17 16

18

2

12

Seoul IDRC - Location

14

Seoul IDRC - State of the Art Technology

Arbitration Developments in Hong Kong

Philipp Hanusch

Seoul, 16 April 2013

Topics

Hong Kong Arbitration Ordinance

Enforcement Developments: India, Macao

Revised HKIAC Rules

Grand Pacific Holdings v Pacific China Holdings: strong

reassertion of pro-arbitration reputation of HK’s judiciary

HK Arbitration Ordinance

In force since 1.6.11, replacing old Arbitration Ordinance

One of latest and most up to date arbitration statutes in the world

Unification of domestic and international arbitration regimes on basis of UNCITRAL Model Law

To promote HK as regional centre for international commercial arbitration and support its role as a leading international finance centre, by:

Removing uncertainty as to which regime applies

Enhancing perception of HK as UML jurisdiction

Making HK arbitration law more user-friendly for local and international users

Includes most of 2006 amendments to UML

HK Arbitration Ordinance

Object: To facilitate fair and speedy resolution of disputes by arbitration

without unnecessary expense

Principles:

Maximum party autonomy

Minimum court intervention

Express provisions on confidentiality of arbitral proceedings and award,

and privacy of arbitration-related court proceedings

HK Arbitration Ordinance: How it works – Example 1

Part 4 - Composition of Arbitral Tribunal

Division 1 - Arbitrators

Section 23. Article 10 of UNCITRAL Model Law (Number of arbitrators)

1. Article 10(1) of the UNCITRAL Model Law, the text of which is set out below,

has effect-

“Article 10. Number of arbitrators

(1) The parties are free to determine the number of arbitrators.

(2) [Not applicable.]”.

2. For the purposes of subsection (1), the freedom of the parties to determine the

number of arbitrators includes the right of the parties to authorize a third party,

including an institution, to make that determination.

3. Subject to section 1 of Schedule 2 (if applicable), if the parties fail to agree on

the number of arbitrators, the number of arbitrators is to be either 1 or 3 as

decided by the HKIAC in the particular case.

HK Arbitration Ordinance: How it works – Example 2

Art 10 of UML as set out in Schedule 1:

“CHAPTER III. COMPOSITION OF ARBITRAL TRIBUNAL

Article 10. Number of arbitrators

(1) The parties are free to determine the number of arbitrators.

(2) Failing such determination, the number of arbitrators shall be three.

[Note: Article 10(2) is not applicable - see section 23.]”

HK Arbitration Ordinance: Enforcement of Awards

Convention awards:

1.7.97: territorial application of NYC extended to HK by PRC

Awards made in states or territories which are party to NYC, other than PRC or any part thereof

Mainland awards:

Awards made in any part of China other than HK, Macao and Taiwan

1.7.97: no enforcement between HK and Mainland through NYC

1.2.00: reciprocal enforcement arrangement between HK and Mainland; basically reflects NYC

Other awards:

Non-Convention and non-Mainland awards

Enforcement Developments: India, Macao

India:

Enforcement of international awards in India under NYC requires formal

notification by Indian Government

19.3.12: Indian Government notified PRC (incl. HK and Macao) that PRC

gazetted as territory to which NYC applies

Uncertainty of enforceability of HK (or Chinese) awards in India removed

Enhancement of HK’s appeal as seat for international arbitration in matters with

India connection

Macao:

7.1.13: Arrangement Concerning Reciprocal Recognition and Enforcement of

Arbitral Awards between HK and Macao

Contents of Arrangement follow spirit of NYC

Arbitration (Amendment) Bill 2013

28.3.13: Arbitration (Amendment) Bill 2013:

To implement Enforcement Arrangement with Macao

Proposes miscellaneous amendments to Ordinance, aimed at further supporting HK’s arbitral regime

Includes new Part on enforcement of emergency relief granted by emergency arbitrator

Might come into effect in 8.13

Hong Kong International Arbitration Centre (HKIAC)

Main arbitral institution in HK; established in 1985

Authorised under Arbitration Ordinance to determine number of arbitrators and

to act as appointing authority

2011:

HKIAC handled 275 arbitration cases, 65% of which were international

Top jurisdictions: HK, China, USA, Singapore, Korea, Japan and BVI

In 10.2012, HKIAC:

Hosted inaugural HK Arbitration week

Launched expanded premises with approx. double the original space

Published revised draft of HKIAC Rules; might come into effect on 1.6.13

Revised HKIAC Rules

Joinder of additional parties (Articles 8.3 and 26):

Tribunal will have power to allow parties to be joined to existing arbitration,

provided additional party is bound by valid arbitration agreement under Revised

Rules giving rise to the arbitration

Request for joinder before Tribunal is constituted: HKIAC will have prima facie

power to grant request; objections to jurisdiction heard and decided by Tribunal

after its constitution

Request after Tribunal is constituted: Tribunal determines request

Joinder before constitution of Tribunal : all parties deemed to have waived right

to designate arbitrator; HKIAC appoints Tribunal and may revoke any existing

appointment

Revised HKIAC Rules

Consolidation of arbitrations (Articles 8.4 and 27):

HKIAC may consolidate 2 or more HKIAC arbitrations into arbitration that

commenced first

Parties to all arbitrations deemed to have waived their right to designate

arbitrator

Parties waive any objection to validity and enforcement of any award made by

tribunal in the consolidated proceedings, based on HKIAC’s decision to

consolidate

HKIAC appoints Tribunal and may revoke any existing appointment

Where HKIAC revokes existing appointment (joinder or consolidation),

termination of arbitrator’s appointment is without prejudice to validity of any act

done by arbitrator before termination

Revised HKIAC Rules

Fees of arbitral tribunal (Articles 9.2 and 10, Schedules 2 and 3)

Parties have option of having Tribunal’s fees calculated in accordance with

either HKIAC’s schedule of fees, based on sum in dispute, or schedule based

on agreed hourly rates, subject to cap at HK$6,500 (approx. US$830)

Default position: remuneration on basis of hourly rates, if parties cannot agree

Removal of party representatives (Article 13.6)

Tribunal will have express power to exclude participation of party representative

in arbitration commenced under Revised Rules

Tribunal may exercise such power if conduct or appointment of representative

would put the fair and expeditious conduct of arbitration at risk

Revised HKIAC Rules

HKIAC’s prima facie power to proceed with arbitrations (Article 19.1)

Question regarding existence, validity or scope of arbitration agreement or

jurisdiction of HKIAC prior to tribunal’s constitution: HKIAC has power to

proceed with arbitration, if prima facie satisfied that arbitration agreement under

Revised Rules may exist

Otherwise, HKIAC will not proceed under the Revised Rules

Interim measures of protection (Article 23)

Provisions on interim measures expanded to cover meaning and purpose of

interim measure, and factors to be taken into account when deciding whether to

grant interim measure

Revised Rules clarify that jurisdiction to order interim measures includes

jurisdiction to grant security for costs

Revised HKIAC Rules

Emergency arbitrators (Article 23.2 and Schedule 4)

Procedure for appointing EA to deal with applications for urgent relief before

constitution of Tribunal

EA will normally be appointed within 2 days following HKIAC’s acceptance of

application for appointment

Decision on application will normally be made within 15 days from date on

which EA received file from HKIAC

Procedure contains provisions relating to:

EA’s powers to conduct proceedings

Effect of EA’s decision

EA’s ability to act as arbitrator in subsequent proceedings

Availability of judicial remedies in addition to urgent relief sought

Grand Pacific Holdings v Pacific China Holdings

Background:

ICC award rendered by 3 arbitrators in favour of Grand Pacific in 8.09

Award disposed of dispute in relation to loan agreement

Pacific China applied to CFI to set aside award on grounds that Art 34(2) UML

had been violated, claiming:

It had been denied opportunity to present its case (Art 34(2)(a)(ii))

Procedure adopted by Tribunal was not in accordance with parties’

agreement (Art 34(2)(a) (iv))

Grounds concerned Tribunal’s case management, not review of merits or

correctness of award


Pacific China raised 3 objections:

Variation of agreed procedural timetable, as Tribunal allowed Grand Pacific to

file expert evidence on foreign law before Pacific China filed its own evidence

Tribunal refused permission to admit 3 additional authorities on foreign law

Tribunal refused request by Pacific China to respond to certain submissions

made by Grand Pacific regarding applicable law, as Pacific China had already

had two opportunities to make submissions on relevant issue

Court of First Instance (29.6.12):

Set aside award due to violation of Art 34(2) in respect of each of the 3 issues

Triple negative test: Applicant had “to establish that it cannot be said that if the

violation had not occurred the result could not have been different”


Court of Appal (9.5.12):

CA unanimously allowed appeal and reinstated the award:

Tribunals have wide case management powers, which are cornerstone of

arbitral process, and found no breaches of Art 34(2)

For an award to be set aside on due process grounds, it must be shown

that any breaches of Art 34(2) were of a “serious” or even “egregious”

nature

Obiter: where violation of Art 34(2)(a) is established, HK courts have

discretion not to set aside award, if satisfied that result could not have been

different (Art 34(2): an award “may” be set aside)

CA confirmed principle that party, which unsuccessfully applies to set aside

award or resists enforcement, should in principle expect to pay other party’s

costs on indemnity basis


Court of Final Appal (21.2.13):

CA entirely correct to hold that complaints advanced by Pacific China do not

constitute viable grounds for setting aside award under relevant provisions

Rulings were made by Tribunal in proper exercise of its procedural and case

management discretions, reflecting its assessment of requirements of

procedural fairness as appropriate to circumstances

Implications:

CA’s decision strongly reasserted HK’s pro-arbitration reputation

CA’s decision indicates HK courts will be reluctant to interfere with procedural

decisions of tribunals sitting in HK

Costs principle and threshold set out by CA for establishing Art 34(2) violation

on grounds of due process should discourage parties from pursuing

unmeritorious challenges to awards in HK

References

Hong Kong Arbitration Ordinance:

http://www.legislation.gov.hk/blis_pdf.nsf/CurAllEngDoc/C05151C760F783AD482577D900541075/$FILE/CAP_609_e_b

5.pdf

Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards Between the Hong Kong Special

Administrative Region and the Macao Special Administrative Region:

http://www.legislation.gov.hk/intracountry/eng/pdf/macaoe.pdf

Arbitration (Amendment) Bill 2013: http://www.legco.gov.hk/yr12-13/english/bills/b201303281.pdf

The Revised HKIAC Rules will be available from HKIAC’s homepage: http://www.hkiac.org

Pacific China Holdings Ltd v Grand Pacific Holdings Ltd:

Court of First Instance (Mr Justice Saunders), 29.6.12, HCCT 15/2010 (reported in: [2011] 4 HKLRD 188):

http://legalref.judiciary.gov.hk/lrs/common/search/search_result_detail_frame.jsp?DIS=77101&QS=%2B&TP=JU

Court of Appeal (Mr Justice Tang VP, Madam Justice Kwan JA, Mr Justice Fok JA): 9.5.12, CACV 136/2011

(reported in: [2012] 4 HKLRD 1):


Court of Appeal (on costs), 23.7.12 (reported in: [2012] 4 HKLRD 569):


Court of Final Appeal (Chief Justice Ma, Mr Justice Chan PJ and Mr Justice Ribeiro PJ), 21.2.13, FAMV 18/2012:


http://www.legislation.gov.hk/blis_pdf.nsf/CurAllEngDoc/C05151C760F783AD482577D900541075/$FILE/CAP_609_e_b5.pdf

http://www.legislation.gov.hk/blis_pdf.nsf/CurAllEngDoc/C05151C760F783AD482577D900541075/$FILE/CAP_609_e_b5.pdf

http://www.legislation.gov.hk/intracountry/eng/pdf/macaoe.pdf

http://www.legco.gov.hk/yr12-13/english/bills/b201303281.pdf



http://www.hkiac.org/

http://legalref.judiciary.gov.hk/lrs/common/search/search_result_detail_frame.jsp?DIS=77101&QS=+&TP=JU




DISPUTE RESOLUTION IN

SINGAPORE?

I: Introduction

Supreme Court of the Republic of Singapore

Maxwell Chambers

Considerations

• Enforcement

• Arbitrability

• Jurisdiction

Types of Dispute Resolution Agreements

• An arbitration agreement

• An exclusive jurisdiction clause

• A non-exclusive jurisdiction clause

Singapore High Court

• Senior judiciary drawn mainly from a pool of experienced lawyers

• Informal specialist divisions

• 12-15 months to trial

• 3-5 months to appeal hearing

• Common law tradition

• eLitigation

Singapore as an Arbitration Centre

• International Arbitration Act – UNCITRAL Model Law and New York Convention with minor modifications;

• Supportive judiciary

• Reactive legislature

• No restrictions on non Singapore qualified lawyers

II: The International Arbitration Act (“IAA”)

Introduction

IAA - Introduction

• Gives the UNCITRAL Model Law on International Commercial Arbitration the “force of law in Singapore

• Applies if an arbitration is “international” or if parties opt in

IAA Introduction (cont.)

• Under IAA, court intervention is limited and restricted to instances expressly provided by law

• Limited instances of recourse against the arbitral award under the IAA

UNCITRAL Model Law, Article 17J “A court shall have the same power of issuing an interim measure in

relation to arbitration proceedings, irrespective of whether their place is in the territory of this State, as it has in relation to proceedings in courts. The court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration.”

Singapore courts are empowered under the IAA to grant interim

orders in aid of foreign arbitration (e.g. discovery of documents, freezing orders).

The Singapore courts may decline to make such orders where the

courts feel it would be inappropriate in all the circumstances. Singapore courts may only grant an order to the extent that the

arbitral tribunal in question had no power or was unable for the time being to act effectively. As soon as the arbitral tribunal gains the requisite power to act in relation to the subject matter of the order and expressly makes a relevant order, then the Singapore court’s order will cease to have effect.

IAA – recent changes

UNCITRAL Model Law, Article 7(1): “’Arbitration agreement’ is an agreement by the parties to submit to

arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.”

Before 2012 IAA amendments, “arbitration agreement”: “… as an agreement in writing, whether contained in an exchange of

letters, telefacsimile, communications by teleprinter or other electronic communications, including but not limited to, those made by email, telex, telegram or telecopy.”

After 2012 IAA amendments: “include agreements that are concluded orally or by conduct or by

any other means.”

IAA – recent changes

III: Supporting arbitration

Approach of

Singapore courts

Setting Aside – Limited Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd

[2007] 3 SLR 86

“… international practice has now radically shifted in favour of respecting and preserving the autonomy of the arbitral process in contrast to the earlier practice of enthusiastic curial intervention.”

“… it is important to bear in mind that it is never in the interest of the court, much less its role, to assume the function of the arbitral tribunal. To say that the court must be satisfied that a different result would definitely ensue before prejudice can be said to have been demonstrated would be incorrect in principle because it would require the court to put itself in the position of the arbitrator and to consider the merits of the issue with the benefit of materials that had not in the event been placed before the arbitrator. Seen in this light, it becomes evident that the real inquiry is whether the breach of natural justice was merely technical and inconsequential or whether as a result of the breach, the arbitrator was denied the benefit of arguments or evidence that had a real as opposed to a fanciful chance of making a difference to his deliberations.”

Setting Aside – Limited L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and

another appeal [2013] 1 SLR 125

“… the courts are subjecting arbitral awards to greater scrutiny by requiring more detailed reasoning, and to ensure the integrity of the decision-making process…

… [An] instance of greater judicial involvement has been the courts’ willingness to embark on a detailed examination on the question of the arbitrator’s jurisdiction…

This could take the form of an international system of accreditation by which arbitrators are recognised and regulated. Arbitral institutions can become the functional equivalent of Bar associations and act as gatekeepers and regulators, becoming the authority responsible for accreditation, as well as the reviewing body for complaints of misconduct.”

- Sundaresh Menon, SC Chief Justice of Singapore Former Attorney-General of Singapore

Setting Aside – Limited?

1st interim award (18 Feb 2005): Indonesian government decisions did not prevent performance of

Management Contract but only prescribed the manner of performance; Management Contract valid but incapable of performance.

New Management Contract (28 April 2006): Kempinski entered into a New Management Contract in breach of its

non-compete clause under the first Management Contract with PT Prima.

2nd interim award (12 Dec 2006): Since there were alternative methods of performing Management

Contract that were consistent with Indonesian government decision, the possibility of damages was still available to Kempinski.

New Management Contract discovered by PT Prima ; clarification

of 2nd interim award in light of this discovery sought by PT Prima

Technicalities do not dictate PT Prima International Development v Kempinski Hotels SA [2012] SGCA 35

3rd interim award (20 May 2008): New Management Contract inconsistent with Kempinski’s

obligations under the Management Contract; methods of performance that remained open to Kempinski no longer possible; damages for the time period between Management Contract and New Management Contract still available.

4th interim award (20 Oct 2008): Any award of damages for Kempinski for the time period between

Management Contract and New Management Contract would be against the public policy of Indonesia and would therefore be unenforceable.

Award of costs (15 Apr 2009): Arbitrator issued an award of costs in favour of PT Prima. Kempinski applies to High Court to set aside 3rd, 4th and costs

awards (6 Jul 2009)

Technicalities do not dictate

“33 The role of pleadings in arbitration proceedings is to provide a convenient way for the parties to define the jurisdiction of the arbitrator by setting out the precise nature and scope of the disputes in respect of which they seek the arbitrator’s adjudication…

34 … in order to determine whether an arbitral tribunal has the jurisdiction to adjudicate on and make an award in respect of a particular dispute, it is necessary to refer to the pleaded case of each party to the arbitration and the issues of law or fact that are raised in the pleadings to see whether they encompass that dispute…

35 Pleadings play a similar role in litigation…

36 Although there is an important difference between arbitration and litigation… the basic principles applicable to determine jurisdiction of the arbitrator or the court to decide a dispute raised by the parties are generally the same.”

Technicalities do not dictate

1999 FIDIC Red Book, Cl 20.6

Unless settled amicably, any dispute in respect of which the DAB’s decision (if any) has not become final and binding shall be finally settled by international arbitration. …

The arbitrator(s) shall have full power to open up, review and revise … any decision of the DAB, relevant to the dispute. …

Neither Party shall be limited in the proceedings before the arbitrator(s) to the evidence or arguments previously put before the DAB ….

CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] SGCA 33

Court’s power to set aside an arbitral award is limited to the prescribed grounds under Article 34 of the Model Law and section 24 of the IAA

Only the following concerned the Court of Appeal:

(i) Article 34(2)(a)(iii) of the Model Law (i.e. whether the Arbitral Tribunal had acted in excess of its jurisdiction)

(ii) Section 24(b) of the IAA (i.e. whether the arbitral award was made in breach of the rules of natural justice)

CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] SGCA 33 (cont.)

On the issue of jurisdiction, the Court of Appeal held that the arbitral award was not made in accordance with sub-clause 20.6 of the 1999 FIDIC COC.

The Arbitral Tribunal should have considered the merits of the dispute adjudication board’s decision.

In failing to do so, the Arbitral Tribunal had exceeded its jurisdiction and this had caused the Respondent to suffer real prejudice since it was being deprived of a contractual right.


On the issue of the rules of natural justice, the Court of Appeal held that there had been a breach of those rules.

The Respondent was denied a proper opportunity to comprehensively present its case on the dispute adjudication board’s decision when a Arbitral Tribunal made the award without considering the real dispute between the parties.


Beware though!

Astro Nusantara International BV and others v PT Ayunda Prima Mitra and

others [2012] SGHC 212

“Domestic international award”

Beware though!

UNCITRAL Model Law, Article 16(3)

“The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the [High Court] to decide the matter ....”

Passive remedies rejected

“10 … [The defendant’s] line of argument resonates with English arbitration law’s notion that passive remedies exist after an arbitral award has been made and are available to the losing party to defend enforcement proceedings. Specifically, [the defendant] argues that a post-award challenge at the enforcement stage is permissible as a matter of principle even if a party took no positive steps to set aside the award…

151 … There are no passive remedies when it comes to challenging jurisdiction under the IAA – a party wishing to oppose a jurisdictional award must act. [emphasis in original]”

Beware though!

IV: The Singapore International Arbitration Centre (“SIAC”)

SIAC 2010 Rules

New features and changes in the SIAC 2010 Rules

• Summary arbitration procedure for claims below S$6 million

• Emergency arbitrator

• Memorandum of issues

• Multi-party appointment of arbitrator(s)

• Joinder of third party

• Objection to jurisdiction

• Power to issue sanction for breach of confidentiality

• Deletion of reference to the IAA

SIAC case management

99

160

198 188

235

0

50

100

150

200

250

2008 2009 2010 2011 2012

No. of Cases

SIAC case management (cont.)

15.70%

11.90%

17.90%

0.40%

12.30%

33.20%

8.50%

Types of cases

Commercial

Construction/ Engineering

Corporate

Insurance

Shipping/ Maritime

Trade

Others

SIAC case management (cont.)

• Total sum in dispute

– S$3.61 billion = US$ 2.91 billion

• Highest claim

– S$1.5 billion = US$ 1.21 billion

• Average claim

– S$ 15.36 million = US$ 12.38 million

Disputes between

China International Economic and Trade Arbitration Commission

and its Shanghai Sub-Commission, Shenzhen Sub-Commission,

and its impact on the arbitration practice in China

DACHENG(QINGDAO)

MICHAEL HONGTAO ZHANG

April 16,2013 SEOUL

CONTENTS

1、Brief Introduction to CIETAC

2、Disputes Between CIETAC and CIETAC Shanghai,

CIETAC Shenzhen

3、The Impact on the Arbitration Practice in China

4、Suggestions

Brief Introduction of CIETAC

China International Economic and Trade Arbitration Commission

CIETAC is China‘s most important, world-renowned, and permanent

international commercial arbitration institution. In recent years, the

number of cases raised before CIETAC have increased to well over one

thousand per year, covering over 40 countries and regions.

Brief Introduction of CIETAC

In 1954, CIETAC was established and is located in Beijing.

In 1982, CIETAC Shenzhen Sub-Commission (Hua Nan, South

China) was established.

In 1988, CIETAC Shanghai was established.

In addition, CIETAC has established Tianjin\Chongqing\Hong Kong

arbitration centers.

CIETAC and its Sub-Commissions (centers)

Disputes between CIETAC and CIETAC Shanghai,

CIETAC Shenzhen

Origin of the disputes---

The new arbitration rules (2012 rules) were implemented by CIETAC

on May 1, 2012.

These 2012 rules, now the 7th edition, were amended by CIETAC and

based on the 2005 rules.

More specifically, the disputes arise from CIETAC’s amendment to

the Jurisdictional Clause of the 2005 rules.

JURISDICTION CLAUSE

2012 rules

Article 1: The Arbitration Commission:

6. The parties may agree to submit their disputes to CIETAC or a sub-

commission/center of CIETAC for arbitration. Where the parties have

agreed to arbitration by CIETAC, the Secretariat of CIETAC shall accept

the arbitration application and administer the case. Where the parties have

agreed to arbitration by a sub-commission/center, the secretariat of the

sub-commission/center shall accept the arbitration application and

administer the case.

If no agreement exists between the parties or is ambiguous, the

Secretariat of CIETAC shall accept the arbitration application and

administer the case. In the event of any dispute, a decision shall be

made by CIETAC.

JURISDICTION CLAUSE

2005 rules

Article 2: Name and Structure

8. The parties may agree to have their disputes arbitrated by the

CIETAC in Beijing, the South China Sub-Commission in Shenzhen, or

the Shanghai Sub-Commission in Shanghai.

In the absence of such an agreement, the Claimant shall have the

option to submit the case for arbitration by the CIETAC in

Beijing, the South China Sub-Commission in Shenzhen, or the

Shanghai Sub-Commission in Shanghai. When such option is

exercised, the first choice by the party shall prevail. In case of any

dispute, the final decision shall be made by the CIETAC.

Progress of the Dispute

On April 6, 2012, CIETAC Shanghai published the "CIETAC

Shanghai: IMPORTANT NOTICE”.

In the notice, CIETAC Shanghai advocated that it is an independent

arbitration institution established by the China International Trade

Promotion Committee Shanghai Branch ("CCPIT Shanghai").

It is not in fact the same as CIETAC; instead, it has the right to

formulate and promulgate its own arbitration rules, hire its own

arbitrators, and independently carry out arbitrations.


On May 1, 2012, CIETAC, stated:

(1) CIETAC Shanghai Sub-Commission is not a independent arbitral

institution, its’ declaration is invalid;

(2) CIETAC Shanghai Sub-Commission’s cannot form its own

arbitration rules and articles of association, those creations are invalid;

(3) CIETAC Shanghai Sub-Commission’s cannot form its own panel

of arbitrators, its adoption is invalid.


On June 16, 2012, CIETAC Shenzhen (South China) announced its

new name:

“SHENZHEN COURT INTERNATIONAL ARBITRATION,” or

“SOUTH CHINA INTERNATIONAL ECONOMIC AND TRADE

COMMISSION” (SCIA), as an independent body.


On August 1, 2012, CIETAC released the “China International

Economic and Trade Arbitration Commission: Announcement On

the Administration of Cases,” which stated:

Where parties agree to arbitrate their disputes using either CIETAC

Shanghai Sub-Commission or the CIETAC South China Sub-

Commission (the CIETAC Shenzhen Sub-Commission), the parties

must submit their applications for arbitration to CIETAC and the

CIETAC Secretariat shall accept such arbitration applications and

administer such cases. Without CIETAC’s authorization, no

institution shall have the right to accept and administer the afore-

mentioned arbitration cases.


On January 21, 2013, CIETAC Shanghai and SCIA released the “Joint

Announcement of CIETAC Shanghai Commission and SCIA,” it

stated:

As independent arbitration institutions, CIETAC Shanghai and SCIA have

no affiliation with any other arbitration commission. They will accept and

administer arbitration cases based upon the agreements between the

parties.

The Impact on the Arbitration Practice in China

Consequently, since these disputes leave the jurisdiction of some cases

unclear, this may provide the respondent, in an arbitration case, the

ability to:

Challenge the jurisdiction of CIETAC;

Withdraw from the arbitration; or

Stop the enforcement of an arbitration award before a China court.

For example, a case with the arbitration clause “CIETAC Shanghai,”

where should the case apply?

No exact answer to this question until now!

Some Suggestions

When drafting an arbitration CIETAC clause, “CIETAC (BEIJING)” is

the safest choice under the circumstances.

When applying a “CIETAC” arbitration clause, take into consideration

the following before choosing a location:

Consider the jurisdictional argument and the risks.

Consider the progress of the controversy and the final results.

Consider the attitudes of:

High-level government agencies, such as the Legislative Affairs

Office of the State Council or China Council for the Promotion of

International Trade (CCPIT); and

The relevant courts, especially the Supreme Court.

THANKS

Michael Hongtao Zhang

DACHENG (Qingdao)

[email protected]

谢谢

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