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CIETAC 2024: What’s New in the Arbitration Rules?
Introduction
The China International Economic and Trade Arbitration Commission (CIETAC) is one of the oldest and most prominent arbitration institutions in the world with the CIETAC arbitration rules as its procedural framework that governs the arbitration proceedings administered by CIETAC. On 1 January 2024, the new version of the CIETAC Arbitration Rules (2024 Rules) came into force, replacing the previous 2015 Rules. The 2024 Rules apply to CIETAC arbitrations commenced on or after this date.
The 2024 Rules reflect CIETAC's efforts to keep pace with the latest developments in international arbitration, such as third-party funding, early dismissal, and emergency arbitration. They also aim to provide parties and arbitral tribunals with more flexibility, efficiency, and transparency throughout arbitration proceedings.
This article highlights some of the key features and innovations of the 2024 CIETAC Arbitration Rules.
Evolution of CIETAC's Arbitration Landscape
In comparison to its predecessor, the 2015 Rules, the 2024 Rules exemplify CIETAC's evolution, assimilating insights from its extensive handling of over 60,000 cases since its establishment in 1956. With more than 30 improved provisions, constituting a comprehensive revision, CIETAC aims to enhance the flexibility, efficiency, and transparency of arbitration proceedings.
Third-Party Funding
Third-party funding is a phenomenon that has been gaining popularity and acceptance in international arbitration in recent years. It refers to the situation where a third party, who is not a party to the dispute, provides financial support to one of the parties in exchange for a share of the proceeds or other benefits if the case is successful.
The 2024 Rules introduce a new provision on third-party funding in Article 48, which requires that any funded party disclose to the CIETAC Arbitration Court, without delay, the existence of the third-party funding arrangement, the financial interest therein, the name and address of the third-party funder, and other relevant information. The disclosure obligation continues throughout the arbitration proceedings until the final award is rendered or the case is terminated.
The purpose of this disclosure requirement is to ensure that the arbitral tribunal is aware of any potential conflicts of interest that may arise from the involvement of third-party funders and to safeguard the integrity and impartiality of the arbitration process. The disclosure may also have implications for the allocation of arbitration costs or any other fees, as Article 48.2 of the 2024 Rules empowers the tribunal to consider the existence of third-party funding and the parties' compliance with the disclosure requirement when deciding on such matters.
The 2024 Rules are not the first attempt by CIETAC to regulate third-party funding. In September 2017, CIETAC issued the Guidelines for Third-Party Funding and incorporated relevant rules into the CIETAC International Investment Arbitration Rules. In 2022, CIETAC's practice of third-party funding was recognized in judicial review by PRC courts for the first time (see prior post). The courts held that the involvement of third-party funding did not necessarily violate the principle of confidentiality in arbitration and did not affect the impartiality of the tribunal, as long as the third-party funding was disclosed to the tribunal.
The 2024 Rules mark CIETAC's further step in regulating third-party funding in CIETAC arbitration cases, which is expected to become more common in the future.
Early Dismissal
Another notable feature of the 2024 Rules is the introduction of rules on early dismissal in Article 50. This mechanism allows a party to request the early dismissal of a claim or counterclaim where the claim or counterclaim is manifestly without legal merits or beyond the jurisdiction of the tribunal.
The early dismissal procedure is intended to provide a fair and efficient process and avoid any unnecessary delay or expense caused by frivolous or unmeritorious claims or counterclaims. It is also consistent with the international trend of adopting early dismissal or preliminary determination mechanisms in arbitration rules, such as the guidance text adopted by the United Nations Commission on International Trade Law in July 2023.
According to Article 50 of the 2024 Rules, a party may apply for early dismissal within 30 days after the constitution of the tribunal, unless otherwise agreed by the parties or decided by the tribunal. The application must state the grounds and reasons for early dismissal and be accompanied by relevant evidence. The tribunal must decide whether to accept the application within 15 days after receiving it. If the application is accepted, the tribunal must render its decision on early dismissal within 60 days after accepting it, unless otherwise agreed by the parties or decided by the tribunal.
The early dismissal mechanism under the 2024 Rules is subject to the discretion of the tribunal and the due process rights of the parties. The tribunal may reject an application for early dismissal if it considers that it is premature, inappropriate, or unnecessary. The tribunal must also allow both parties to present their views before making any decision on early dismissal.
The early dismissal mechanism under the 2024 Rules is a welcome addition to the arsenal of the tribunal and the parties to deal with manifestly unfounded or out-of-scope claims or counterclaims. It may enhance the efficiency and cost-effectiveness of the arbitration proceedings and discourage abusive or dilatory tactics by the parties.
Limitation on Liability
Under Article 86, CIETAC explicitly excludes civil liability for acts and omissions related to arbitration, emphasizing a deviation from any obligation to testify. This provision, subject to applicable law, shields CIETAC, staff members, arbitrators, and relevant persons engaged by the tribunal from unwarranted liabilities.
Other Updates
Besides the above-mentioned features, the 2024 Rules also introduce or improve several other provisions that may be relevant to the parties and the tribunal, such as:
Justice and Efficiency
Article 26.4 empowers CIETAC to override agreements on tribunal formation when manifestly unfair or unjust, preventing undue delays. Article 22.2 vests the president with the authority to exclude new counsel, preventing conflicts that may compromise tribunal independence.
Jurisdiction
CIETAC further strengthens the Kompetenz-Kompetenz principle by vesting the newly constituted tribunal with the power to determine its jurisdiction in case of challenges after its constitution. This empowers the tribunal, promotes procedural efficiency, and avoids unnecessary delays while adhering to due process principles. Additionally, addressing the increasingly common phenomenon of multi-tiered dispute resolution clauses, the new rules clarify that failure to comply with pre-arbitration procedures will not necessarily prevent CIETAC from accepting the case unless explicitly mandated by the applicable law or arbitration agreement. This provision promotes flexibility, prevents unnecessary hurdles, and encourages the timely resolution of disputes.
Consolidation of Arbitrations and Multiple Contracts
Article 14 establishes the grounds on which a single arbitration may be commenced in disputes arising from related contracts. The clarification of the rules on consolidation of arbitrations in Article 19, which provides that the CIETAC Arbitration Court may consolidate two or more arbitrations into a single arbitration if the claims in the arbitrations are made under the same arbitration agreement, or under multiple arbitration agreements that are identical or compatible, and if the arbitrations involve the same parties or the same legal relationship.
Conservatory and Interim Measures
Retaining the power to grant interim measures (Article 23.3), the 2024 Rules expand CIETAC's scope to forward applications for interim measures to domestic courts outside Mainland China. Article 23.1 grants the Claimant the option to request CIETAC to apply interim measures to the competent court before the notice of arbitration is served.
Digital Tools
Embracing technological acceleration, the 2024 Rules prioritize electronic communication in Article 8 which provides that any written communication may be delivered by courier, registered mail, fax, email, or any other means that can provide a record of delivery. Building upon its successful virtual hearing initiative during the COVID-19 pandemic, the 2024 rules explicitly empower tribunals to conduct hearings remotely with Article 37.5 granting tribunals discretion on hearing format.
Conclusion
The 2024 Rules are a testament to CIETAC's continuous efforts to improve its arbitration services and to keep pace with the evolving needs and expectations of its users. The 2024 Rules incorporate some of the latest developments and best practices in international arbitration and aim to provide a more flexible, efficient, and transparent arbitration process for the parties and the tribunal. The 2024 Rules also reflect CIETAC's confidence and competence in handling complex and high-value disputes involving Chinese and foreign parties.
- The 2024 Rules introduce new rules on third-party funding and early dismissal, and provide more flexibility, efficiency and transparency for parties and tribunals.
- The 2024 Rules have 88 provisions, four more than the 2015 Rules, and reflect recent developments in international arbitration.
- The new version of the CIETAC Arbitration Rules (2024 Rules) took effect on the first day of 2024 and apply to any CIETAC arbitration initiated from then on.
