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CIETAC's role in China arbitration and choice of venue

China arbitration lawyer

China has a relatively well-developed body of law in relation to arbitration, which is in most respects largely consistent with international practice. However, some gaps still exist between the letter of the law and its application. The Arbitration Law of the People's Republic of China, promulgated on August 31, 1994, unified arbitration practices across the country and harmonizes China's arbitration system with internationally accepted principles, systems and practices.

CIETAC's role in Chinese arbitration system

Arbitration plays a significant role in international trade when disputes arise between business partners. The background for the importance is that the partners often are reluctant to use the state courts of one of the party´s countries. Moreover, issues of enforcement of an arbitral award come into play as such award are enforceable in countries that are member states of the New York Convention 1958 whereas the enforcement of a foreign judgement would cause much more difficulties or could end as impossible. The development and current state of the legal provisions and practices concerning arbitration
shall be considered in respect of the ways the Chinese government drafted and implemented its resepctive program.

The development of the rules of Arbitration, especially the CIETAC rules, show that Chinese legislation and practice are improving the legal system. The process of strengthening the arbitration governance in accordance with international accepted standards obvious. Although a number of problems are still at place ought to the local protectionism, are still to be focused. Therefore, it is to be recommended to consider the arbitration / jurisdiction clause in connection with the choice of law for each contractual untertaking seperately taking into account the relevant factors of the specific investment or transfer.

Choice of Venue

In the light of CIETAC’s current situation, companies should keep the following tips in mind:
For new arbitration agreements/clauses:

  • Avoid references to CIETAC Shanghai or CIETAC Shenzhen in all cases.
  • If choosing SHIAC or SCIA as the arbitration commission, refer to them using their new name to avoid any ambiguity.
  • If choosing CIETAC as the arbitration commission and Shanghai or Shenzhen as the seat of arbitration, specify that any disputes will be referred to CIETAC with Shanghai or Shenzhen as the seat of arbitration.
  • Parties may choose other international arbitration institutions (e.g. Hong Kong International Arbitration Centre in Hong Kong)

for foreign-related disputes1 with a seat outside mainland China. They should clearly specify the name of the arbitration commission and the seat of arbitration outside mainland China.

Existing arbitration agreements/clauses in which CIETAC Shanghai or CIETAC South China is involved should be amended as suggested above as soon as possible.
For arbitrations currently in proceeding:

  • Request, through the arbitration panel, a written agreement from the other party on the choice of the arbitration commission.
  • In case of any dispute on the jurisdiction of the arbitration commission or the validity of the arbitration clause, apply for a judicial review of the arbitration clause by the court before the arbitration begins.

Arbitration is usually a non-governmental trade activity; it represents a private action. Together with composition, mediation and action, it is a common way to settle civil (commercial) disputes. Arbitration, however, is subject to state supervision. The State intervenes through courts in accordance with legal provisions of the place where the arbitration takes place in the validity of the arbitration award, the making of arbitration procedures, the enforcement of awards and in the case of involuntary enforcement by a party. Arbitration, therefore, is a judicial activity and a part of China's judicial regime.

Read 454 times Last modified on Sunday, 15 September 2013 14:40
Shenzhen Lawyer

A Shenzhen lawyer practicing in one of the best Shenzhen law firms handle commercial and family law matters across the country. Free preliminary legal consultation. Tel: +86 188 19019636. Email: peterzhulaw@hotmail.com

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