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9 de octubre de 2024

CIETAC: A CENTER TO TAKE NOTES FROM

Por: Lina Marcela Mosquera Palacios*

China International Economic and Trade Arbitration Commission (CIETAC) is one of the world’s premier arbitration institutions. With a reputation for independence and impartiality, it has handled a remarkable caseload, resolving over 30,000 commercial and investment disputes involving parties from more than 70 countries and awards enforced in 159 countries.[1]  So, what makes this institution so appealing?

Despite not being the most popular center for arbitration, paling in comparison to Hong Kong, the ICC, and the LCIA, there are undoubtedly three factors that strengthen CIETAC’s role as a top arbitration institution: (i) the CIETAC Rules are keeping pace with current events in the world of arbitration; (ii) cost-effectiveness; (iii) CIETAC’s approach to commercial law.

Beforehand, it should be clear that the center of arbitration is the location or institution where the arbitration proceedings are conducted. This arbitral institution can provide administrative support and facilities for the arbitration process, as this role is more about the operational and administrative aspects rather than the legal jurisdiction. While the center of arbitration can influence logistical factors, such as the convenience of the parties and the availability of resources, it does not determine the legal framework or the procedural laws applicable to arbitration.

On the other hand, the seat of arbitration refers to the legal jurisdiction where the proceedings take place. The seat sets the legal framework for the arbitration, dictating the procedural rules, the powers granted to the arbitral tribunal, and the enforceability of the final award.[2] [MOU1] 

In international contracts, it is entirely feasible for the parties to agree that an arbitral tribunal will resolve any disputes arising from their contract. For example, the parties may choose Colombia as the seat of arbitration while selecting U.S. law as the contract’s governing law and that CIETAC will administer the proceedings. The arbitration proceedings will be conducted under Colombia’s legal framework in this case. Still, the substantive legal issues—such as contract formation, validity, privity, interpretation, breach, frustration, or remedies—would be evaluated according to U.S. law or an international treaty applicable as if it were U. S. law.

      i.         The 2024 brand new rules of the Center.

The CIETAC Arbitration Rules 2024 have just been updated to embrace technological advancements, emphasizing efficiency, innovation, and streamlining the arbitration process while adapting to the demands of modern international arbitration. These updates allow the CIETAC to forward applications for injunction measures to foreign courts, introducing third-party funding, which now requires disclosure to the Arbitration Court, and electronic submissions and virtual hearings, reflecting the growing use of technology in arbitration.[3]

    ii.         The combination of affordability and efficiency positions CIETAC as a top option for parties looking for a swift and effective resolution to their disputes.

CIETAC offers comparatively lower arbitration fees than many other international arbitration institutions, making it a highly cost-effective option for parties looking to manage dispute resolution expenses. For instance, based on the fee calculator on the CIETAC and ICC websites, the cost of international arbitration with 10,000 USD (RMB 70934.01) as the amount in dispute, estimably will cost before the CIETAC 2819.52 USD (RMB 20000), while before the ICC it will be around 7,400 USD (RMB 52491.17). [4]

 But it’s not just about saving money; it’s also about timesaving. CIETAC’s streamlined processes ensure quick outcomes, with regular proceedings typically concluding in just 153 days and summary procedures ending in an impressive 104 days.[5]

   iii.         Beyond its strengths as an arbitration center, a closer look at the awards reveals a dynamic and nuanced approach to commercial law.

The adjudicators are free to apply the principles to what extent they are pleased or not to do it at all, and adjudicators (often coming from diverse legal systems and operating under different levels of discretion and authority) tend to have varying approaches when determining the applicable law due to circumstances, such as the legal culture of their home countries. [6]

Previously, the UNIDROIT principles were not deemed as directly applicable law to the contract, but as international usages, “soft law” was not applicable at all.[7]  Notwithstanding, we are not facing a path laid in stone, and the application of the UNIDROIT Principles in the Xi’an Lijun Pharmaceutical Co. Ltd., V. New Chemic (US) Inc case indicates that changes are underway and the acceptance of those principles as a foundational tool for resolving international commercial disputes, bringing about a change in the usages given by arbitrators for the principles.

In the case mentioned above, two companies, a Chinese and an Indonesian power plant engineering firm, entered into a Sub-Contract Agreement with the Respondent, an Indonesian engineering company, for the Engineering, Procurement, and Construction (EPC) of a power plant in an Indonesian province. The agreement designated Singapore law as the governing law. However, a dispute emerged during the project’s execution over the alleged non-performance by the Respondent, and neither party could adequately demonstrate the relevant provisions of Singapore law applicable to the conflict.[8]

The Arbitral Tribunal, invoking Paragraph 49(1) of the CIETAC Arbitration Rules 2015, which mandates rendering fair and reasonable awards based on facts, contract terms, and international practices, decided to resolve the dispute by referring to international practices. Specifically, it opted to apply the UNIDROIT Principles, which it deemed representative of general contract law principles unless either party could demonstrate that Singapore law conflicted with them. Since no such evidence was provided, the Tribunal ruled that under Article 7.3.1 of the UNIDROIT Principles, the Applicants were entitled to terminate the contract and claim restitution per Article 7.3.6. Furthermore, the Tribunal assessed damages at its discretion under Article 7.4.3(3) but reduced the amount under Article 7.4.7, as it found that the Applicants’ conduct had partly contributed to their losses.[9]

Furthermore, proof of the dynamism and a thorough approach to commercial law is also provided by CIETAC’s application of the United Nations Convention on Contracts for the International Sale of Goods (CISG). When parties to a contract are based in different countries that are signatories to CISG, and they haven’t opted out of the rules governing the contract, the CIETAC tribunal will typically apply the CISG automatically. The situation is quite common, as nearly 90% of CISG-related cases handled by CIETAC involve its automatic application under Article 1(1)(a).[10]

Conclusion

CIETAC has established itself as a formidable player in international arbitration, emerging as a noteworthy center of arbitration that offers distinctive advantages in the global landscape. Its continuously evolving arbitration rules, emphasis on cost-effectiveness, and sophisticated approach to commercial law make it an appealing choice for parties involved in international disputes. While it may not yet rival the popularity of Hong Kong or the ICC, its flexibility, efficiency, and receptiveness to applying the UNIDROIT principles and the United Nations Convention on Contracts for the International Sale of Goods (CISG), positioning CIETAC as a modern and pragmatic forum for arbitration.

As international arbitration continues to grow, CIETAC’s role will likely become even more prominent. It provides parties with an adaptable and efficient dispute-resolution mechanism that balances local legal frameworks with global commercial standards.

References:

  1. China International Economic and Trade Arbitration Commission (no date) Statistics, CIETAC. Available at: https://www.cietac-eu.org/statistics/ (Accessed: 17 September 2024).
  2. China International Economic and Trade Arbitration Commission (no date) Arbitration Rules, CIETAC. Available at: https://www.cietac-eu.org/rules/ (Accessed: 17 September 2024).
  3. China International Economic and Trade Arbitration Commission (no date) Fee Calculator, CIETAC. Available at: https://www.cietac-eu.org/schedules-of-fees/ (Accessed: 17 September 2024).
  4. Embassy of China in Nepal (no date) Arbitration Law of the People’s Republic of China, Arbitration law of the People’s Republic of China. Available at: http://np.china-embassy.gov.cn/eng/78085/zchfl/200410/t20041027_1998190.html (Accessed: 17 September 2024).
  5. Freezing units case. CIETAC Case No CISG/2005/17. 2nd September 2005. Available at: https://cisg-online.org/files/cases/7631/translationFile/1712_20918633.pdf
  6. International Chamber of Commerce (2023) Costs Calculator, International Chamber of Commerce. Available at: https://iccwbo.org/dispute-resolution/dispute-resolution-services/arbitration/costs-and-payment/costs-calculator/ (Accessed: 17 September 2024).
  7. Manjiao, Chi. “Application of the UNIDROIT Principles in China: Successes, Shortcomings and Implications.” Uniform Law Review, vol. 15, no. 1, 2010, pp. 5-36. HeinOnline, https://heinonline.org/HOL/P?h=hein.journals/droit2010&i=35.
  8. People’s Republic of China: China International Economic & Trade Arbitration Commission [CIETAC] (31 December 1999). Case 805: CISG 8; 25; 74; 77; 78 PRC: China International Economic & Trade Arbitration Commission [CIETAC] 31 December 1999..
  9. Savić, M. and Ugale, A. (2023) Seat of Arbitration, Jus Mundi. Available at: https://jusmundi.com/en/document/publication/en-seat-of-arbitration (Accessed: 17 September 2024).; Anand, G. (2023) Determining the seat of Arbitration, Determining the Seat of Arbitration | International Bar Association. Available at: https://www.ibanet.org/determining-seat-of-arbitration (Accessed: 17 September 2024).
  10. UNILEX on UNIDROIT Principles & CISG International Case Law & Bibliography. https://www.unilex.info/principles/case/2232
  11. Xi’an Lijun Pharmaceutical Co. Ltd., V. New Chemic (US) Inc. CIETAC Case No. G20160758. Arbitral Award. 30 December 2016.
  12. Yu, M. (2022) Application of CISG in Arbitration in China: A Case Study with CIETAC, China Justice Observer. Available at: https://www.chinajusticeobserver.com/a/application-of-cisg-in-arbitration-in-china-a-case-study-with-cietac (Accessed: 25 September 2024).

* Monitora del Departamento de Derecho Comercial y estudiante de quinto año de derecho.

[1] China International Economic and Trade Arbitration Commission (no date) Statistics, CIETAC. Available at: https://www.cietac-eu.org/statistics/ (Accessed: 17 September 2024).

[2] Savić, M. and Ugale, A. (2023) Seat of Arbitration, Jus Mundi. Available at: https://jusmundi.com/en/document/publication/en-seat-of-arbitration (Accessed: 17 September 2024).; Anand, G. (2023) Determining the seat of Arbitration, Determining the Seat of Arbitration | International Bar Association. Available at: https://www.ibanet.org/determining-seat-of-arbitration (Accessed: 17 September 2024).

[3] China International Economic and Trade Arbitration Commission (no date) Arbitration Rules, CIETAC. Available at: https://www.cietac-eu.org/rules/ (Accessed: 17 September 2024).

[4] China International Economic and Trade Arbitration Commission (no date) Fee Calculator, CIETAC. Available at: https://www.cietac-eu.org/schedules-of-fees/ (Accessed: 17 September 2024).; International Chamber of Commerce (2023) Costs Calculator, International Chamber of Commerce. Available at: https://iccwbo.org/dispute-resolution/dispute-resolution-services/arbitration/costs-and-payment/costs-calculator/ (Accessed: 17 September 2024).

[5] China International Economic and Trade Arbitration Commission (no date) Statistics, CIETAC. Available at: https://www.cietac-eu.org/statistics/ (Accessed: 17 September 2024).

[6] Manjiao, Chi. “Application of the UNIDROIT Principles in China: Successes, Shortcomings and Implications.” Uniform Law Review, vol. 15, no. 1, 2010, pp. 5-36. HeinOnline, https://heinonline.org/HOL/P?h=hein.journals/droit2010&i=35.

[7] People’s Republic of China: China International Economic & Trade Arbitration Commission [CIETAC] (31 December 1999). Case 805: CISG 8; 25; 74; 77; 78 PRC: China International Economic & Trade Arbitration Commission [CIETAC] 31 December 1999.; Freezing units case. CISG/2005/17. 2nd September 2005. Available at: https://cisg-online.org/files/cases/7631/translationFile/1712_20918633.pdf.

[8] Xi’an Lijun Pharmaceutical Co. Ltd., V. New Chemic (US) Inc, CIETAC Case No. G20160758, Arbitral Award, 30 December 2016; UNILEX on UNIDROIT Principles & CISG International Case Law & Bibliography. https://www.unilex.info/principles/case/2232

[9] Ibidem.

[10] Yu, M. (2022) Application of CISG in Arbitration in China: A Case Study with CIETAC, China Justice Observer. Available at: https://www.chinajusticeobserver.com/a/application-of-cisg-in-arbitration-in-china-a-case-study-with-cietac (Accessed: 25 September 2024).

 [MOU1]Cuidado con esto. Puedo tener un arbitraje que tenga sede en Colombia, administrado por el CIETAC, con derecho aplicable inglés. La elección del centro no implica indefectiblemente la elección de la sede.