CIETAC and HKIAC arbitration rules compared (part 1)

The China International Economic and Trade Arbitration Commission (CIETAC), established in 1956, and the Hong Kong International Arbitration Centre (HKIAC), established in 1985, are now well known commercial arbitration organizations. With the rapid development of the Chinese economy and the increasing acceptance of arbitration as a means of resolving disputes, arbitration by both bodies has increasingly drawn the attention of domestic and foreign investment enterprises in the PRC.

This article compares the main features of the arbitration rules of CIETAC and HKIAC, in the hope that it will assist readers in making an informed choice between the two, should the need arise.

Objections to validity, jurisdiction

Under the CIETAC rules, if a party to an arbitration agreement raises an objection as to the existence or validity of the arbitration agreement, or jurisdiction over the arbitration, CIETAC itself has the right to rule on the matter. If necessary, CIETAC may authorize the arbitration tribunal to make a decision on jurisdiction.

At HKIAC, only the arbitration tribunal, not HKIAC itself, has the right to render a decision in respect of an objection, including any objections as to whether an arbitration clause or standalone arbitration agreement exists or is valid.

The deadlines for raising an objection to jurisdiction should be noted. The rules of both bodies specify that an objection to jurisdiction must be raised before the first response or countersuit. If a party fails to raise an objection to jurisdiction by this time, it will be deemed to have accepted the jurisdiction of the arbitration institution and will be bound by the award.

Selection of arbitrators

The selection of arbitrators and the composition of the arbitration tribunal have a direct impact on the costs and outcome of the arbitration, and must be carefully considered.

Following amendments made in 2005, the CIETAC rules no longer apply a strict registry system for the selection of arbitrators. This gives parties more leeway in their selection: parties may freely select arbitrators other than those on CIETAC’s register, although the presiding arbitrator or a sole arbitrator needs to be confirmed in accordance with the law by the chairman of CIETAC.

The arbitration tribunal should be composed of one or three arbitrators. If the parties have not agreed otherwise, the tribunal will be composed of three arbitrators.

If an arbitrator fails to perform his or her duties, the chairman of CIETAC has the discretion to replace the arbitrator in question without giving any reason. If an arbitrator cannot perform his or her duties due to death, removal from the registry, recusal, voluntary withdrawal or any other reason, a replacement arbitrator should be selected.

Once the replacement arbitrator has been selected, the arbitration tribunal may decide whether all or part of the preceding hearings need to be repeated.

Like CIETAC, the HKIAC rules do not require arbitrators to be selected from a list. The one difference is that all selected or designated arbitrators must be confirmed by the HKIAC Council. If the parties have not agreed upon the number of arbitrators, the HKIAC Council will decide whether it is to be one or three, based on the relevant circumstances of the dispute. If the parties are of different nationalities, the sole presiding arbitrator may not be of the same nationality as either of the parties.

This issue is not addressed in the CIETAC rules. Accordingly, the parties should ensure that the arbitrators they select are suitably qualified.

If an arbitrator designated by a party dies, is unable to perform his or her duties, is successfully challenged, is dismissed, resigns or is not confirmed by the HKIAC Council, the party that designated that arbitrator may designate a replacement within a period of time specified by the HKIAC secretariat. If the party fails to designate a replacement during that period of time, the HKIAC Council will do so.

Once the arbitrator has been replaced, the arbitration will continue from the point at which the replaced arbitrator ceased to perform his or her duties, unless the arbitration tribunal decides otherwise.

Language

Under the CIETAC rules, the parties may agree upon the language to be used in arbitration. If they have not agreed, Chinese will be used. If translation is required, CIETAC or a party itself may provide a translator. Any party that is unable to work in Chinese will need to meet the cost of translation.

In contrast, under the HKIAC rules, unless the parties have agreed between themselves, the arbitration tribunal will decide on the language or languages that are to be used. Chinese will not necessarily be adopted.

Preservation of evidence, property

Under the CIETAC rules, if a party applies for preservation of evidence or property, CIETAC is required to forward the application to the competent court of the place where the party against which the preservation application is being made is resident, or of the place where its property is located. CIETAC does not itself have the power to make such a ruling.

For the applicant, the time required for this procedure increases the risk that the evidence or property concerned may be destroyed, lost or concealed. However, CIETAC arbitration has the basic advantage that CIETAC is able to apply to a PRC court for the preservation of evidence and property in this manner, while a foreign arbitration tribunal has no way of obtaining such court assistance.

Under HKIAC rules, if a party applies for the preservation of evidence or property, the arbitration tribunal has the right to make an interim award without referring to a court. This can enhance the effectiveness of preservation and the timeliness of the remedy for the concerned party, thereby helping to ensure the effective enforcement of the award. (To be continued next month.)

Jim Qiu is a partner in the Shanghai office of Yao Liang Law Offices