Rift emerges within major Chinese international arbitration centre

The Shanghai branch of CIETAC (China International Economic and Trade Arbitration Commission) has split from the institution in the aftermath of the launch of new CIETAC Arbitration Rules.

The Shanghai branch, or "sub-commission", has declared itself an independent institution with its own arbitral rules and panel of arbitrators. It is understood that the Shanghai sub-commission signalled its intentions by writing to CIETAC arbitrators in April to invite them to join a new panel.

On 1 May, the day that the CIETAC Arbitration Rules 2012 came into force, CIETAC published a statement and an open letter to CIETAC arbitrators on its website. The statement declares that Shanghai's conduct in setting up on its own, its panel of arbitrators, and its arbitral rules, are all null and void.

The open letter apologises to CIETAC arbitrators for any trouble or confusion imposed on them by the "inappropriate conducts of its sub-commission" and urges them to "continue to strictly follow the laws and CIETAC’s Arbitration Rules in their arbitration activities and work in unison to bring CIETAC arbitration to a new height."

Shanghai's decision to break from Beijing appears to have been prompted by the changes brought in by the 2012 Rules, particularly the changes to Article 2. In the previous (2005) version of the CIETAC Rules the sub-commissions were described as an integral part of CIETAC with the power to administer cases under the directive of their respective secretariats. Article 2 of the 2012 Rules describes the sub-commissions as branches of CIETAC which accept applications and administer arbitrations "with CIETAC's authorization".

Article 2(6) of the 2012 Rules provides that the Secretariat of CIETAC (Beijing) shall administer arbitrations unless the parties have clearly agreed to administration by a sub-commission. If their agreement is ambiguous or the sub-commission specified does not exist, Beijing will administer the arbitration. General references to "CIETAC arbitration" will result in Beijing administering the arbitration.

The changes in Article 2(6) are described in the open letter as being designed to prevent parties from "forum shopping" between the CIETAC branches and the delays that this can entail, and have in fact been welcomed by many commentators.

CIETAC was established in 1956 and administered 1,282 cases in 2011. The Shanghai sub-commission was established in 1987 and administered 417 of the 2011 cases. There are three other sub-commissions of CIETAC in addition to Shanghai; these are based in Shenzen, Chongqing and Tianjin. CIETAC is the dominant arbitration centre in China and the 2012 Rules, which modernise and enhance the flexibility of the CIETAC arbitral process, seem set to increase its influence further.

The 2012 Rules were launched after an extensive consultation and will apply to all CIETAC arbitrations commencing on or after 1 May 2012.

Parties commencing CIETAC arbitration from 1 May should check their arbitration clause and what it says about which CIETAC branch should administer the dispute. If the clause does not specify a branch or is unclear then the arbitration should be administrated by the Beijing office of CIETAC. If the clause specifies a different branch parties should make sure that the sub-commission adopts the official CIETAC 2012 Rules and that arbitrators are drawn from the panel of arbitrators that was adopted by CIETAC and became effective as of 1 May 2011 or, where this is not the case, are confirmed by the Chairman of CIETAC.