Fears are growing that arbitration decisions made in two of China’s economic powerhouses may be impossible to enforce as a result of a feud between rival arbitration centres.
The dispute began with the release of new arbitration rules by the Beijing-based China International Economic and Trade Arbitration Commission (Cietac) last May. ‘Sub-commissions’ in the commercial centres of Shanghai and Shenzhèn refused to adopt the revised rules.
Last August, Cietac Beijing moved to assert its authority. Any arbitral decisions reached in the dissenting centres, it insisted, would have to be submitted to Beijing for approval.
Shanghai and Shenzhèn’s Cietac sub-committees moved swiftly to declare their independence, each citing the backing of their municipal governments.
In December, Cietac Beijing hit back, invoking the mandate of the ‘Central People’s Government’ and stating that the subcomittees’ independence was ‘without lawful procedure null and void by law’.
With the dispute deadlocked, faith in commercial dispute resolution in China has been shaken, and nervous companies are reviewing their contracts.
Although Cietac Beijing is the single largest arbitration centre in China, Shanghai and Shenzhèn hear more arbitrations annually combined.
Simon Morgan, a disputes partner at Simmons & Simmons, told the Gazette: ‘It is unfortunate that the matter could not be resolved within Cietac and is now at the point where there is a very public dispute.’
The concern, Morgan said, is around the enforceability of arbitration decisions from Shenzhèn and Shanghai. ‘Users of those centres will be very wary,’ he added. ‘Where possible, many are seeking to negotiate changes to dispute resolution clauses to specify Cietac Beijing to remove this risk.’