CIETAC and HKIAC arbitration rules compared (part 2)

By Jim Qiu, Yao Liang Law Offices
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In the last issue, we compared the arbitration rules of the China International Economic and Trade Arbitration Commission (CIETAC) and the Hong Kong International Arbitration Centre (HKIAC) in terms of objections to an arbitration agreement and/or the jurisdiction of an arbitral tribunal, the appointment of arbitrators and formation of an arbitral tribunal, the language of arbitration, and preservation orders.

This article examines the differences between the two sets of rules in terms of evidence, time periods, fees and costs, and the enforcement of arbitral awards.

Evidence

Jim Qiu 邱靖, Yao Liang Law Offices 耀良律师事务所, Partner 合伙人
Jim Qiu
Partner
Yao Liang Law Offices

There is no substantial difference between the two sets of rules with regard to evidence. In both, the burden of proof lies with the party who claims, and both set out regulations on the time limits for producing evidence, cross-examination, and the competence of the arbitral tribunal. However, each set of rules has its own characteristics. The CIETAC rules empower an arbitral tribunal to undertake investigations and collect evidence, which is helpful to parties that encounter difficulty collecting evidence. The HKIAC rules allow witnesses to testify by written statement, which is cheaper than having witnesses attend in person.

Time periods

According to the CIETAC rules, an arbitral tribunal shall normally make an arbitral award within six months of the date of its formation. Exceptionally, at the request of the arbitral tribunal, the chairman of CIETAC may extend the six-month period if he or she considers it necessary and the reasons for the extension justified. These explicit time limits will, undoubtedly, help claimants to predict how long arbitral proceedings may last and weigh the time cost against the potential benefits of
arbitration.

In contrast, HKIAC in its rules does not specify a time limit for making an arbitral award in a normal procedure.

Fees and costs

Deposits for costs

CIETAC requires arbitration fees to be paid in advance by the claimant when submitting an application for arbitration, and by the respondent when lodging a counterclaim. The amount payable is calculated based on the amount in dispute and the applicable rates in CIETAC’s Arbitration Fee Schedule. For a foreign-related arbitration case, there is an additional registration fee of RMB10,000 (US$1,500). CIETAC arbitration fees are generally lower than those of other international arbitration institutions.

At HKIAC, a claimant pays an initial registration fee of US$1,000. Upon the establishment of the tribunal, each party must deposit an equal amount as an advance for the costs of arbitration. If one party fails to pay, another party may make the payment. If neither party pays, the tribunal may order the suspension or termination of the proceedings, or may continue with the proceedings on such basis as it sees fit. Before the fees and costs are paid in full, the tribunal may refuse to release the details of any arbitral award to the parties. For more details, please refer to HKIAC’s Schedule of Fees and Cost of Arbitration.

Allocation of costs

All fees and costs payable will be listed in CIETAC’s arbitral award. In practice, such fees and costs are normally borne by the losing party. The tribunal also has the power to order the losing party to compensate the winning party for the expenses it reasonably incurred in the case, such as lawyers’ fees, travel and witnesses’ costs.

The HKIAC rules also state that in principle, the unsuccessful party shall bear the cost of the arbitration. However, the tribunal may apportion such costs between the parties, taking into account the circumstances of the case.

Wherever they choose to arbitrate, the parties should agree on the payment of costs in advance in order to avoid any uncertainty in the event that a dispute arises.

Enforcement of awards

The parties must comply with an arbitral award within the period of time specified by the award. If one party fails to comply with an award made by CIETAC, the other party may, depending on where the defaulting party is domiciled or its assets located, apply for enforcement of the award to a Chinese court according to PRC law, or to a foreign court according to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or other international treaties concluded or acceded to by the Chinese government, or to courts in Hong Kong according to the Arrangement Concerning Mutual Enforcement of Arbitral Awards between Mainland China and Hong Kong.

At HKIAC, if the unsuccessful party is from mainland China and fails to fulfil its obligations under an award, the winning party can, according to the Arrangement, apply to people’s courts in the mainland where the losing party’s domicile or assets are located.

No official statistics are available to show the percentage of Hong Kong arbitral awards that are enforced in the mainland. However, in its report to the Supreme People’s Court on 15 November 2008 on the application of Zhoushan Zhonghai Food & Oil for the non-enforcement of an arbitral award made by HKIAC, Zhejiang Higher People’s Court stated that “there is not yet a single precedent for an HKIAC award not to be enforced in the mainland”. On 30 December 2009, the Supreme People’s Court issued the Certain Issues Concerning the Enforcement of Hong Kong Arbitral Award in Mainland China Notice, in which it re-emphasized that people’s courts shall hear applications for the enforcement of arbitral awards made in Hong Kong according to the Arrangement, and shall allow such applications as long as the arbitral award is valid.

Pros and cons

There are differences between the rules of CIETAC and HKIAC, which by and large stem from the different legal systems and arbitration practices in Hong Kong and mainland China. Each has its pros and cons. The parties to arbitration are encouraged to choose the one which suits them best, on the basis of the differences mentioned above and taking into account the subject matter involved.

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

701/702 Huaxia Bank Tower

256 Pudong Nan Road

Pudong New Area

Postal code: 200120

Tel: + 86 21 5155 0338

Fax: + 86 21 5155 0051

E-mail: jim.qiu@yaolianglaw.com

www.yaolianglaw.com

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