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21 Jul 2015

New Rules Promulgated by the PRC Supreme Court to Clarify Jurisdiction of Arbitration Commissions

On 15 July 2015, the Supreme People’s Court (“SPC”) promulgated the Official Reply of the Supreme People's Court to Issues concerning Shanghai Higher People's Court and Others Requesting Instructions on the Judicial Review Case Involving the Arbitral Award Made by the China International Economic and Trade Arbitration Commission and its Original Sub-Commission and Other Arbitral Authorities (effective 17 July 2015, “Reply”), specifying the principles for determining the jurisdiction of major arbitration commissions. The background and main contents of the Reply are set out below.

Background

As major domestic commissions for commercial arbitration, the China International Economic and Trade Arbitration Commission (“CIETAC”), China International Economic and Trade Arbitration Commission Shanghai Sub-Commission (“Original CIETAC Shanghai Sub-Commission”)and China International Economic and Trade Arbitration Commission South China Sub-Commission (“Original CIETAC South China Sub-Commission”) had previously cooperated with each other on a long-term basis and adopted unified arbitration rules.

However, on 22 October 2012, the Original CIETAC South China Sub-Commission split from CIETAC and was renamed South China International Economic and Trade Arbitration Commission (“SCIA”). On 11 April 2013, the Original CIETAC Shanghai Sub-Commission was renamed Shanghai International Economic and Trade Arbitration Commission (“SHIAC”). The name changes of the two commissions are collectively referred to as the “Name Change” in this update. In response to the split and Name Change, CIETAC re-established its Shanghai Sub-Commission and South China Sub-Commission at the end of 2014.

Following the Name Change and re-establishment of the sub-commissions, each of the arbitration commissions referred to above was recognized as lawful by the local judicial organs. Therefore, the appropriate jurisdiction and commission in cases where parties had agreed to arbitrate before the CIETAC Shanghai Sub-Commission or CIETAC South China Sub-Commission became the focus of wide attention.

Content of the Reply

In relation to the issues above, the Reply provides as follows:

In order to effectively resolve these disputes, the Reply has, in addition to general examination rules, included an additional remedy, i.e. through examination for respondents, regardless of whether the arbitration application was accepted before 17 July 2015. That means, prior to the first hearing of the arbitration tribunal on substantive matters, the respondent is allowed to re-apply to the people’s court for examination of the validity of the relevant arbitration agreements, even where a decision has already been made by an arbitration commission, and the people’s court shall accept such application and rule accordingly.

Recommendations

According to the Reply, the terms and date of the arbitration agreement play a pivotal role in determining the relevant and competent arbitration commission. In light of the above, we recommend that relevant entities review their arbitration clauses in material commercial agreements and evaluate their validity based on relevant provisions of the Reply. In addition, we recommend entities seek professional legal advice in order to formulate effective and advantageous arbitration clauses and safeguard their lawful rights and interests. 

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