Focus on BAC rules appeal mechanism

On 1 October 2019, the Beijing Arbitration Commission/Beijing International Arbitration Centre Rules for International Investment Arbitration formulated by the Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC) became effective.

A highlight of the BAC investment arbitration rules is that they provide an appeal mechanism under article 46 and appendix E, allowing the parties to appeal by consent. This article introduces several procedural settings related to the appeal mechanism.

It should be noted that the article reflects the author’s own observations from her participation in making the rules, and is not endorsed by the BAC officially, nor does it constitute an interpretation of the rules in any sense.

Preconditions for the initiation of appeal proceedings

The BAC investment arbitration rules adopt the “opt-in” model, meaning that the appeal shall be based on both parties’ consent. Therefore, the appeal proceedings stipulated in appendix E shall not apply automatically unless the parties expressly agree on this.

According to article 46.2 of the BAC investment arbitration rules, the parties shall notify the BAC of their agreement to appeal in writing, no later than the deadline fixed by the arbitral tribunal for the party’s submission of comments on the draft award.

The notification referred to here only shows that the parties have reached the agreement to appeal. It does not mean that the parties have initiated the appeal proceedings, nor that the parties will initiate the appeal proceedings later for sure.

If the parties wish to initiate the appeal proceedings, they shall, within 60 days from the date on which the award is made, submit a written notice of appeal to the BAC, and the appeal proceedings shall be deemed to commence on the date on which the notice of appeal is validly submitted.

Theoretically speaking, the investor and the host state could reach agreement to appeal at any time, but nevertheless the rules require the parties to notify the BAC of their agreement to appeal as soon as possible, and no later than the deadline fixed by the arbitral tribunal for the party’s submission of comments on the draft award, which means that the parties must reach agreement in writing on the appeal no later than the time for submitting comments on the draft award as fixed by the arbitral tribunal.

The rationale behind this is to strike a balance between the parties’ reasonable use of the appeal procedure, and the possible abuse of process to cause delay. The parties should be able to determine whether to agree to appeal, as they can roughly ascertain the result of the case when receiving the draft award for their comment.

In addition, the appeal proceedings mean extra time and financial costs for the parties, therefore reaching agreement on appeal as soon as possible, and notifying the arbitration institution, can play an active role in the smooth conduct of the appeal proceedings later, and encourage the efficient settlement of the dispute.

Zhang Xi is a senior counsel of the International Case Management & Business Development Division of Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC)