Having analyzed almost every aspects of the ADR system in China now in order to complete the description it is necessary to spend some words on the most well known institution for Arbitration in China, namely the CIETAC (
China
International Economic and Trade Arbitration Commission
,
http://www.cietac.org/index.cms
).
Introduction
In China the most important and known institution to solve commercial dispute is the so called
China International Economic and Trade Arbitration Commission
; therefore, aside from the Arbitration Law, the CIETAC Arbitration Rules (www.
http://www.cietac.org/index.cms
which were revised and adopted by the China Council for the Promotion of International Trade/China Chamber of International Commerce on February 3, 2012. Effective as of May 1, 2012) will also apply if the parties submit their dispute to the CIETAC for arbitration.
CIETAC, which has its headquarter in Beijing, was established on April 2, 1956 as the Foreign Trade Arbitration Commission (FTAC). It was established by the China Council for the Promotion of International trade (CCPIT), at that time a governmental body for the furtherance of Chinese trade promotion, operating under the auspices of the then Ministry of Foreign Trade. In June 1988, following approval by Chinese government (i.e., the State Council), the CCPIT was reorganized and established as the China Chamber of International Commerce (CCOIC) and is now known under both the names of CCPIT and CCOIC. Substantially, the State Council expanded CIETAC’s jurisdiction to cover all disputes arising from international economic and trade transactions and authorized it to revise arbitration rules thereafter. The jurisdiction of the CIETAC in 1994 was further expanded to handle “disputes arising from international or foreign-related, contractual or non-contractual, economic and trade transactions, including disputes between foreign legal person and/or natural person and Chinese legal person and/or natural persons, between foreign legal persons and/or natural persons, and between Chinese legal persons and/or natural person.”
The CIETAC independently and impartially resolves economic and trade disputes by means of arbitration. The CIETAC has its headquarters in Beijing and three sub-commissions in Shanghai, Shenzhen and Tianjin, respectively known as: (i) the CIETAC Shanghai Sub-Commission; (ii) the CIETAC South China Sub-Commission and (iii) the CIETAC Financial Arbitration Center in Tianjin.
In order to meet the needs of the development of its arbitration practices, the CIETAC also successively established 21 liaison offices in different regions and specific business sectors to provide parties with convenient arbitration advice. Throughout the past 50 years, CIETAC has made prominent contributions to the legislation of the Chinese Arbitration Law and the development of the arbitration practice in China, has maintained positive relations and cooperation with all the major arbitration institutions across the world and gained the reputation at home and abroad as an independent, impartial and efficient arbitration institution.
For foreign-related disputes where CIETAC is the selected arbitration body, parties to the contract may specify the nationality of members of the arbitration panel in the contact; CIETAC has implemented contract clauses that stipulate that two of the three arbitrators, including the presiding arbitrator, must be non-Chinese. CIETAC does not have to pre-approve any contractual stipulations on the nationality of the negotiators. CIETAC has published rules which govern the selection of a panel if the contract does not specify how the choice of arbitrators will be handled. CIETAC’s list of arbitrators for foreign-related disputes, from which CIETAC’s arbitrators must be chosen, includes many non-Chinese arbitrators. Many foreign experts believe that some aspects of CIETAC need to be improved. Companies should be aware when drafting a contract that, as an alternative to CIETAC or CMAC, they can specify an arbitration body outside China, such as Singapore, Stockholm or Geneva. In addition, Hong Kong—under one country, two systems—has a separate and well-regarded international commercial arbitration system. In 1987, China acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Under the New York Convention, arbitral awards rendered in other signatory countries are recognized and enforceable in China. By the same token, arbitral awards by Chinese arbitration bodies are enforceable in other countries signatory to the New York Convention.
To make use of CIETAC and its rules, this body must be selected in parties’ contract. The procedures of a typical CIETAT arbitration are set out as follows: (i) request for Arbitration is filed with the CIETAC in Beijing or one of its sub-commissions, along with documents to support its claim and relevant fees, as determined by quantum of claim; (ii) if the Request meets the formal requirements, CIETAC will issue a Notice of Arbitration to both parties; (iii) within 15 days of receipt of the Notice of Arbitration, the parties must nominate one arbitrator from CIETAC’s approved panel (of both foreign and Chinese arbitrators) and jointly nominate the third presiding arbitrator; if the parties are unable to do so within the time limit, CIETAC will nominate the arbitrator(s); (iv) within 45 days of its receipt of the Notice of Arbitration, the defendant must file its Statement of Defense and counter-claim, if any; (v) based on consultation with CIETAC the tribunal will hold oral hearings on a minimum of 20 days’ notice for the initial hearing only to the parties; (vi) after conclusion of oral hearings, the tribunal will render an award, not to exceed six months after the arbitration panel is formed. The mentioned dates and times are as set out in the Rules, and may be extended based on particularities of the matter.
The arbitral award is to be made independently and impartially based on the facts, in accordance with the law and terms of contract and international practices. An award must be in writing, and must specify the facts of the case, the reasoning for the award, the award and a division of arbitration costs, which will often include a portion of legal fees incurred by winning party. CIETAC rules provide that all arbitration awards will be final and binding on the parties, and may not be appealed except on grounds set out in the Arbitration Law: (i) there is no arbitration agreement between the parties; (ii) the matters of the award are beyond the scope of the arbitration agreement or not within the jurisdiction of the arbitration commission; (iii) the composition of the arbitration tribunal or the arbitration procedure was contrary to legal procedures; (iv) the evidence on which the award is based was falsified; (v) the other party has concealed evidence which is sufficient to affect the impartiality of the award; or (vi) the arbitrator(s) has (have) demanded or accepted bribes, committed graft or perverted the law in making the arbitral award.
According to the Civil Procedure Law, an arbitration award must be filed for enforcement within one year with the appropriate intermediate people’s court, where the losing party is domiciled or location of assets. China acceded to the New York Convention on April 22, 2007, and as such, will enforce all commercial arbitral awards issued by arbitration commissions in contracting States.
It must be underlined that in China nowadays, it exists a reliable new system and many options to solve a dispute. Nevertheless, it is wrong to think that traditional culture is now of no relevance (
http://blawg.lehmanlaw.com/wordpress/?p=1679
). Its influence can still be felt by a close examination of the Civil Procedure Law of the PRC. For example, some of the goals of Confucian officials appear as the aims of the Civil Procedure Law: establishing the truth; distinguishing right from wrong; educating citizens to voluntarily abide by the law (i.e., prevention of dispute); and maintaining the social and economic order (i.e., harmony). As shown, the traditional elements of tradition in today’s PRC legal system cannot be denied. Although judges in the PRC cannot and should not handle cases as Confucian officials did in the past
history may prove to be an invaluable source of thoughts to make dispute resolution institutions better and more acceptable to members of the public, provided that only the “right” is adopted and the “wrong” discarded.
As examined in the last entries, China has institutionalized methods to solve disputes, and one of the most important body to be addressed in case of a dispute is the CIETAC. Therefore parties involved in a complicated investment procedure also have at their disposal a specialized institution with experts at its internal who can help in determining respective rights and obligations if things go wrong, or even investors might decide to withdraw from their investment to look for better opportunities.
This entry completes the series on ADR in China. I hope what I have exposed is of some help for better understanding the panorama on this delicate matter and help you in organizing your agreements with your Chinese counterpart.
(I did not mentioned before, however, some of my entries are extracted from my work titled M&A and Takeovers in China, so if some of you is interested in having the complete work, please visit:
http://www.kluwerlaw.com/Catalogue/titleinfo.htm?ProdID=9041140484
).
Cristiano Rizzi