Development and reform of CIETAC

What was the genesis of CIETAC Hong Kong and its establishment in 2012?

While it has always been acceptable to handle cases in which parties have specifically chosen a non-Chinese mainland seat (e.g. Stockholm), CIETAC had a long-term goal to set up subcommissions in jurisdictions that parties from China and the rest of the world considered neutral, pro-arbitration and convenient.

Among various invitations and choices, Hong Kong stood out from the rest.

Hong Kong related cases rank second in number among CIETAC administered cases. Also, CIETAC valued the support of the Hong Kong legal system, the geographical convenience of Hong Kong, and the wide pool of legal service providers in the jurisdiction. These factors were key to CIETAC accepting the invitation of the Department of Justice of Hong Kong to open its first branch out of Chinese mainland.

How does CIETAC Hong Kong differentiate itself from other regional arbitral institutions, including the other CIETAC sub‑commissions?

CIETAC Hong Kong has several features which make it unique among the many newly established local arbitration centers. Its headquarters – CIETAC in Beijing – is one of the world’s oldest and busiest international arbitration centres. In 2018 CIETAC administered 2,962 new cases from more than 60 countries with a dispute amount total of more than CNY100 billion. With such case administration experience and user pool, CIETAC Hong Kong was born a capable and popular institution.

CIETAC Hong Kong has a default choice of Hong Kong as the seat for its administered arbitration cases. This differentiates it from its mainland counterparts. The CIETAC mainland subcommissions administer cases primarily under the PRC Arbitration Law, which is quite different from the Hong Kong Arbitration Ordinance, which is based on the UNCITRAL Model Law.

Party pattern is another unique feature. Being a Chinese arbitration institution’s off-shore branch and situated in a neutral seat, CIETAC Hong Kong administers cases between Chinese mainland parties and non-Chinese parties.

Regarding appointment of arbitrators, CIETAC Hong Kong is fortunate to have a pool of arbitrators who are capable of handling cases which are cross-border and/or China-related in nature and are based in or connected with Hong Kong. Out of all the nominations CIETAC Hong Kong has made for a sole arbitrator or presiding arbitrator, more than 95 per cent are arbitrators from outside mainland China, including Mr James Rogers of Norton Rose Fulbright.

What have been the main challenges and successes for CIETAC Hong Kong since it was established?

Three milestone events stand out.

The first is the introduction of Chapter VI of CIETAC Arbitration Rules 2015.

CIETAC adopts arbitration rules which, from version to version, consistently feature what CIETAC considers to be the best practices of international arbitration (to the extent they are acceptable under the PRC Arbitration Law). Accordingly, the establishment of CIETAC Hong Kong called for special rules compatible with the procedural laws and arbitration practices in Hong Kong, a common law jurisdiction.

Chapter VI was introduced in the CIETAC Arbitration Rules 2015 (the “Rules”), which is exclusively applicable to arbitration cases accepted and administered by CIETAC Hong Kong. The Chapter provides that (unless parties agree otherwise) cases under CIETAC Hong Kong shall comply with the doctrine of kompetenz-kompetenz (enabling an arbitral tribunal to rule on the question of whether it has jurisdiction before intervention by national courts); and acknowledges the power of the arbitral tribunal to make interim measures. A transparentlystructured fee schedule was also introduced and implemented.

The second is the “last-mile challenge” – the off-shore enforcement of a CIETAC Hong Kong award.

In late 2016, the Nanjing Intermediate People’s Court of Jiangsu Province of China (the Intermediate People’s Court) handed down its ruling ((2016) Su Ren Gang 1) to enforce an Arbitral Award issued by CIETAC Hong Kong. Relying on the Supreme People’s Court’s Arrangement Concerning Mutual Enforcement of Arbitral Awards between Chinese Mainland and Hong Kong 1999 (which mirrors the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards), the Intermediate People’s Court found that the CIETAC Hong Kong award was in accordance with the procedural laws of Hong Kong, and enforcement would not contradict the public interest of mainland China.

The third is related to an off-shore court’s ruling in aid of an ongoing CIETAC Hong Kong administered case.

In June 2017, a local court in Guangzhou, China accepted a party’s asset preservation application forwarded by CIETAC Hong Kong to prevent the respondents from disposing of their assets. Primarily relying on Article 28 of PRC Arbitration Law and upon a financial undertaking provided by a third party, the Court held that the tests for approving such application were satisfied.

The above-mentioned case ((2017) Yue 0113 Cai Bao 237) illustrates the “brunch” feature of CIETAC Hong Kong; it carries both the characteristics of a Hong Kong seat and a sub-commission of a Chinese arbitration commission. It might also be argued that it has provided a new option of seeking interim relief in similar arbitrations, albeit (potentially limited by) the implied restriction in Article 10 of the PRC Arbitration Law.

The law was changed in 2017 to allow the funding of arbitration in Hong Kong. What impact has this had on the local arbitration landscape?

Hong Kong recently published the highly-anticipated Code of Practice for third party funders and announced that the amendments to the Hong Kong Arbitration Ordinance (which permit funding of Hong Kong arbitrations) would come fully into force on February 1, 2019. Such amendments cater to those companies with potential cash flow and legal finance issues that are engaged in (or anticipate being engaged in) an arbitration. The amendments are widely welcomed by the legal community in Hong Kong.

It is worth noting that Hong Kong’s definition of a “third party funder” is much wider than that of Singapore’s since the latter is limited to professional funders only. In Hong Kong a “third party funder” means any “person who is a party to a funding agreement … and who does not have an interest recognized by law in the arbitration other than under the funding agreement”. In principle, this includes lawyers and law firms.

Contemporaneously, CIETAC Hong Kong published its own Guidelines for Third Party Funding in Arbitration. The Guidelines provide practical checklists for arbitrators, funded parties and parties seeking funding, in cases administered by CIETAC Hong Kong where there is (or it is anticipated that there will be) third party funding. Lawyers from Norton Rose Fulbright were invited and joined the working group which was primarily responsible for drafting the same.

CIETAC opened a North America Arbitration Center in Vancouver last year, which is its second branch outside mainland China. What is the intended role of the North American Arbitration Center and how does it differ from the CIETAC sub-commissions, such as CIETAC Hong Kong?

CIETAC opened up its North America Arbitration Center in Vancouver and Europe Arbitration Center in Vienna in 2018. The establishment of the two Centers made CIETAC the only Asian arbitral institution that has establishments in Asia, North America and Europe.

Currently CIETAC Hong Kong is the only CIETAC sub-commission outside mainland China which administers cases. It may serve as a good example for the two newly established arbitration centres to provide more options for CIETAC users outside mainland China.

What impact do you see the Belt and Road initiative having on arbitration in the region?

The Belt and Road Initiative refers to the Silk Road Economic Belt and 21st Century Maritime Silk Road, a significant development strategy launched by the Chinese government with the intention of promoting economic co-operation among countries along the proposed Belt and Road routes. It creates unprecedented opportunities and platforms in history for financial integration, trade and investment, facilities connectivity, policy coordination and cultural exchange.

To facilitate this initiative in terms of providing dispute resolution services, several arbitration institutions came up with inspiring programmes and schemes. CIETAC’s unique user pool both request and facilitate CIETAC being readily available for and capable of handling Chinese foreign investment and project disputes. Last year, financial disputes were the most common in CIETAC’s 2018 newly administered cases, among which, a large portion were Belt and Road related. CIETAC Hong Kong has, in the meantime, been reaching out to a number of Belt and Road countries in Asia for capacity building and we will only do more in the coming years.

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