We have previously reported on the jurisdictional turf war between CIETAC and its former sub-commissions and the recent decisions of the Shanghai and Shenzhen courts confirming the legitimacy of the newly established Shanghai International Arbitration Centre (“SHIAC”) and Shenzhen Court of International Arbitration (“SCIA”) (see our previous blog post).
The approach adopted in these cases was confirmed in two recent decisions by the Shenzhen court (on 21 January 2015) and the Beijing court (on 13 February 2015) (“the Recent Decisions“). In both cases, the court ruled that the SCIA (as opposed to CIETAC Beijing) has jurisdiction over the arbitration.
The Recent Decisions arose from the same dispute between Walmart (Anhui) Commercial Retail Limited (“Walmart Anhui“) and Huangshan Tianyinfudi Property Development Company (“Huangshan“) over a lease agreement dated 10 February 2011. Pursuant to the agreement, disputes are to be resolved by arbitration at “CIETAC’s South China sub-commission”. The jurisdictional issue resulted from the parties referring the dispute to different bodies for arbitration: Walmart Anhui commenced arbitration proceedings at SCIA in May 2014; Huangshan began proceedings at CIETAC Beijing in July 2014. Huangshan argued before the Beijing No. 2 Intermediate Court that SCIA did not have jurisdiction to hear the arbitration, and that instead, the arbitration should be submitted to the CIETAC South China office in Shenzhen. After it was notified of the arbitration proceedings at CIETAC Beijing, Walmart Anhui sought a ruling on the issue from the Shenzhen Intermediate Court.
The Shenzhen court gave its decision first, upholding the validity of the arbitration clause and ruling that SCIA has jurisdiction to hear the arbitration. The Beijing court subsequently reached the same conclusion. It considered that SCIA is an arbitration commission duly established by the Shenzhen Municipal government, and recognized the legitimacy of the name change from “CIETAC South China sub-commission” to SCIA. The Beijing court referred to article 12(1) of the Supreme People’s Court Interpretation on the PRC Arbitration Law, under which any objection to validity of an arbitration clause must be made to the intermediate court where the arbitration commission is located. The Beijing court therefore concluded that it lacked jurisdiction to hear the case and transferred it to the Shenzhen Intermediate Court.
Whilst the recent decision of the Beijing court (a court in the capital city of the PRC) seems to suggest that the Supreme People’s Court in Beijing has now recognised the legality of SHIAC and SCIA, there remains to be some uncertainty with regard to clauses that provide for arbitration at “CIETAC Shanghai sub-commission” or “CIETAC South China sub-commission”.
In particular, it is to be noted that the arbitration clause in the Beijing case was entered into in February 2011, before the former CIETAC South-China sub-commission changed its name to “SCIA” in December 2012. It therefore remains unclear whether the current “CIETAC Shanghai sub-commission” or “CIETAC South China sub-commission” (re-organized by CIETAC after the breakaway of the former sub-commissions) or the “SHIAC”/ “SCIA” would have jurisdiction where the arbitration clause provides for submission of disputes to “CIETAC Shanghai sub-commission”/ “CIETAC South China sub-commission” after the name changes of the SHIAC and the SCIA.
To avoid the risk of jurisdictional challenges, parties who wish to arbitrate in Shanghai or Shenzhen should have their arbitration clauses carefully drafted, and may consider choosing less controversial arbitration institutions such as CIETAC’s headquarters in Beijing to administer the arbitration.