Steve Dickinson’s Monday post summarizes a spate of recent Shanghai Number 2 Intermediate People’s Court decisions and makes clear that in Shanghai, if a contract calls for arbitration by the CIETAC Shanghai subcommission, the one and only proper arbitral body is the Shanghai International Arbitration Center (SHIAC).China arbitration

I agree with Steve’s conclusion that the matter is now settled for Shanghai. It is similarly settled for Shenzhen. On January 6, 2015, the Shenzhen Intermediate People’s Court issued a decision upholding the primacy of the Shenzhen Court of International Arbitration (SCIA) for contracts that call for arbitration by the CIETAC Shenzhen subcommission.

But let’s just step back a moment and consider: did anyone seriously think that Shanghai and Shenzhen would not rule in favor of their own respective arbitration centers? Others are far keener followers of the Supreme People’s Court, but I would be chary of proclaiming that these decisions obviously signify the court’s invisible hand and the matter is therefore settled for the entire country. On some level, the decisions are nothing but local protectionism. For more on how local protectionism can impact an arbitral body’s decision to keep a case filed before it, check out Forum Selection Clauses: Do NOT Try These At Home

A few international law firms (see here and here) have issued well-written commentaries on these decisions, but do not even raise the specter of home-town favoritism, instead assuming that the decisions must have the imprimatur of China’s Supreme Court because otherwise they could not have been issued. But because the Supreme Court has not actually acted, the commentaries are couched with phrases like “it would appear that” and “it has yet to be seen.”

 

One thing is clear: these decisions all but sound the death knell for CIETAC’s newly reconstituted Shanghai and Shenzhen subcommissions. Given that CIETAC announced the reorganization of these subcommissions mere days before, the Shanghai and Shenzhen decisions must have come as a shock. Will CIETAC and its allies in Beijing really go away so quietly? If not, this story may get messy again.

 

The takeaway from all of this, as Steve stresses, is that if you are doing business in China and plan to resolve your disputes via arbitration, be very careful when designating the arbitral body

  • sfinder

    The Supreme People’s Court has acted in both cases, although it is not evident from the face of the rules. The Shanghai ruling was also approved by the Supreme People’s Court before it was issued. These decisions should not have come as a shock to CIETAC because they were consistent with the September, 2013 notice mentioned below.