01/23/2024 | News release | Distributed by Public on 01/23/2024 08:36
The China International Economic and Trade Arbitration Commission ("CIETAC") has announced that all arbitrations initiated on or after 1 January 2024 shall be governed by the new CIETAC Arbitration Rules ("the 2024 Rules"). The 2024 Rules attempt to improve efficiency while fostering institutional innovation and enhancing the autonomy, flexibility, fairness and transparency of arbitration proceedings.
Sherina Petit and Vijaya Singh present an overview of the key amendments and updates introduced in the 2024 Rules.
Following two years of consultation, over 30 provisions in the old rules have been revised. These take into account contemporary developments in international arbitration, such as the use of digital tools and third-party funding. According to Mr Wang Chengjie, the Vice-Chairman and Secretary-General of CIETAC: "These improvements will help provide high-level institutional support for the high-quality development of CIETAC arbitrations, offering Chinese and foreign parties more international and professional dispute resolution."
Some of the major reforms introduced by the 2024 Rules are summarised below.
Over the past few years, CIETAC has actively made efforts to regulate third-party funding, including issuing the Guidelines for Third-Party Funding in 2017 and incorporating relevant rules into the CIETAC International Investment Arbitration Rules. In 2022, the People's Republic of China's courts upheld that the involvement of third-party funding does not necessarily breach the principle of confidentiality in arbitration. Building upon these developments, Article 48 of the 2024 Rules mandates that a funded party must disclose to the CIETAC Arbitration Court the existence of the third-party funding arrangement, the financial interest therein, the name and address of the third-party funder and other relevant information. Compliance with this disclosure requirement will be considered while determining the arbitration costs or any other fees.
To provide safeguards against unmeritorious claims and to increase efficiency, Article 50 of the 2024 Rules provides that a party may request the early dismissal of a claim or counterclaim where the claim or counterclaim is manifestly without legal merits or beyond the jurisdiction of the tribunal. The adoption of guidance text on early dismissal and preliminary determination by the United Nations Commission on International Trade Law was one of the influencing factors in introducing rules on early dismissal in the 2024 Rules.
The 2024 Rules have expanded the power vested in CIETAC by granting authority to forward interim measures applications outside of mainland China. Previously, Articles 28, 46, and 68 of the Chinese Arbitration Law 1995 required arbitration institutions to forward applications for interim measures to the People's Republic of China courts.
There is an attempt to align with the international principle of 'Kompetenz- Kompetenz' ('competence-competence') and diverge from the Chinese Arbitration Law 1995, which stipulates that the arbitration commission or the court determines the tribunal's jurisdiction. In a significant change, the 2024 Rules delegate such power to the arbitral tribunal when deemed necessary. Further, it is specified that the power to determine jurisdiction shall be delegated to the tribunal only after its constitution.
The new rules clarify the position of CIETAC on pre-arbitration procedures or multi-tiered dispute resolution clauses. Unless the law applicable to the arbitral proceedings or the arbitration agreement expressly requires otherwise, CIETAC's acceptance of the arbitration case will not be affected by a failure to negotiate or mediate as required by the arbitration agreement.
CIETAC has broadened the parameters for consolidating arbitrations to enhance efficiency and flexibility, aiming to reduce both costs and time. Where parties are dealing with multiple contracts in a complex international dispute, the 2024 Rules allow the consolidation of multiple contracts involving related subject matters. Article 14.2 of the 2024 Rules allows the claimant to apply to join additional contracts after the commencement of a case.
To enhance justice and efficiency, the 2024 Rules empower CIETAC to override the parties' agreement on the tribunal's formation and determine the procedure for forming the tribunal or appointing any member of the tribunal when the parties' agreement is manifestly unfair or unjust or if a party abuses its rights in a way that results in undue delay.
The 2024 Rules embrace technological advancements and incorporate lessons learned by CIETAC from conducting online hearings during Covid-19. Article 8.2 of the 2024 Rules prioritises electronic submissions and communication in an effort to minimise needless printing and improve environmental friendliness. Additionally, Article 37.5 allows the tribunal, following consultation with the parties, to determine whether to conduct a hearing in person, virtually through videoconference or by any other suitable mode of communication. CIETAC has successfully conducted nearly 3,000 hearings remotely since the onset of Covid-19.
To promote arbitration and make it cost-effective, the 2024 Rules set a cap on fees for domestic cases by no longer charging arbitration fees for the portion of disputed amounts exceeding RMB3 billion yuan.
According to the Queen Mary University of London and White & Case LLP 2021 International Arbitration Survey, CIETAC is regarded as one of the top five arbitral institutions globally. After conducting almost 60,000 arbitrations over the past 70 years, this reform is a strategic move to maintain CIETAC's relevance and leadership in the People's Republic of China and worldwide. The overarching objective of this reform is to increase the visibility of CIETAC as a more affordable, effective and competitive institutional service.
Sherina Petit, Head of Stewarts' International Arbitration Practice and India Practice, says: "The CIETAC Arbitration Rules 2024 increase the institution's appeal. The reform is notable for many reasons, including its emphasis on artificial intelligence and digitalisation in arbitration procedures. It will be interesting to see how this plays out. While it is too soon to say for sure, given Chinese technological know-how, it may drive arbitration into an unprecedented digital dimension."
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