Revamping arbitration system in the Shanghai free trade zone

By Vincent Mu and Chloe Lin, Martin Hu & Partners
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The Shanghai International Economic and Trade Arbitration Commission (SHIAC) formed the Arbitration Tribunal of China (Shanghai) Pilot Free Trade Zone (FTZ) in October 2013 for providing legal services for the arbitration of business matters of enterprises in the zone.

牟笛 Vincent Mu 胡光律师事务所 资深律师 Senior Associate Martin Hu & Partners
牟笛
Vincent Mu
胡光律师事务所
资深律师
Senior Associate
Martin Hu & Partners

SHIAC published on 8 April 2014 the Arbitration Rules of the China (Shanghai) Pilot Free Trade Zone, which came into force on 1 May. The arbitration rules have introduced innovative and improved arbitration proceedings by incorporating the characteristics of the legal environment in the FTZ and learning the state-of-the-art concepts and practices of the international system.

Protecting the system

To ensure judiciary protection for the arbitration system, the Shanghai Second Intermediate People’s Court – the judicial review court designated by the Shanghai Higher People’s Court for governing arbitral cases of SHIAC – published on 4 May 2014 the Several Opinions Concerning the Application of the Arbitration Rules of the China (Shanghai) Pilot Free Trade Zone to the Judicial Review and Enforcement of Arbitral Cases, which contain a total of 20 articles mainly covering the scope of application, basic principles, case filing, judicial review and enforcement.

Particulars of the several opinions

Dedicated management. For cases involving the arbitration rules, a joint mechanism will be set up particularly designed for case filing, review and enforcement. In case filing, a particular filing counter will be set up and deployed with personnel especially responsible for accepting filing applications. During judicial review, a special collegiate bench will be formed where the president will be assigned as the presiding judge to conduct special hearings. In enforcement, an enforcement and adjudication team will be formed to carry out dedicated enforcement.

Enhancement of efficiency. Under the several opinions, the efficiency of judicial review and enforcement has been improved following the implementation of special management for special cases. For arbitration of small claims disputes, if a party applies for case filing in respect to an award made by the arbitral tribunal pursuant to small claims dispute procedures, a review must be conducted on the same date. If the requirements for case filing are met, filing must be done on the same date. In arbitration preservation, the several opinions call for commencing preservation within 48 hours after a preservation award is delivered.

Conducting a hearing

For awards to be made pursuant to small claims dispute procedures, the court will conduct a hearing, or ask the parties why they are challenging the award, within 10 days of a case filing, and deliver an award within 20 days of filing. For other awards, the court will call a hearing, or ask the parties why they are challenging the award, within 15 days of filing, and deliver an award within 30 days of filing.

林陈瑶 Chloe Lin 胡光律师事务所 律师 Associate Martin Hu & Partners
林陈瑶
Chloe Lin
胡光律师事务所
律师
Associate
Martin Hu & Partners

As to the enforcement of awards, any clues provided by the parties or others related to the assets (available for enforcement) of a person subject to the enforcement must promptly be reviewed. If these clues are clear and specific, an investigation procedure must be initiated within 24 hours. If they are not clear and specific, the parties must be notified promptly to provide supplementary materials. If necessary, an ex officio review may be conducted.

Assurance of innovation. The several opinions offer judicial support to the innovative system and stipulations under the arbitration rules. For example, as to the register of arbitrators, the several opinions provide that during a judicial review the court may select persons as arbitrators who are not in violation of Chinese laws, other than those on the register of arbitrators, according to procedures in compliance with the arbitration rules.

Consolidated hearings

In consolidated arbitration, the several opinions provide that if the arbitral tribunal combines the hearing of two or more arbitral cases suitable for consolidated arbitral procedures and delivers arbitral awards separately, and if a party applies for revocation of multiple arbitral awards, or refuses to enforce the arbitral awards, a consolidated hearing may be held and separate awards made with the consent of all parties. If a party who is not a party to an arbitration agreement voluntarily joins the arbitration procedures with the written application by, or consent of, all the parties, it may be recognised by the court as long as the joining procedures meet the requirements of the arbitration rules and are not in violation of Chinese law.

Shortcomings and gaps

The several opinions offer a strong assurance to various aspects of the arbitration rules, from filing and judicial review to enforcement of awards, reflecting the court’s full respect for a party’s autonomy of will and arbitration innovation. However, like all the institutional innovations, the several opinions inevitably have left some shortcomings and gaps as well.

First, the several opinions are applicable only to arbitration rules-related cases in which parties apply for revocation of arbitral awards and for enforcement of arbitral awards for execution of property located in Shanghai. Under this circumstance, whether a number of innovative practices under the arbitration rules could be recognised by other judicial authorities in areas outside Shanghai remains uncertain.

‘Super-national treatment’

Second, given the current state of judicial resources in China, once a court fully mobilises resources to protect a certain category of special cases, it will be inevitable for other cases to be handled improperly. In this sense, the “super-national treatment” offered by the several opinions to arbitration rules-related cases is objectively a discrimination against those cases not related to the arbitration rules. It is unfair to other arbitration institutions. Thus, a balanced allocation of resources will be a major issue to face the courts.

Vincent Mu is a senior associate and Chloe Lin is an associate at Martin Hu & Partners

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胡光 Martin Hu

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牟笛 Vincent Mu

电子信箱 E-mail: vincent.mu@mhplawyer.com

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