“Arbitration laws are the backbone of international arbitration, providing the legal infrastructure that ensures the process is both effective and fair, allowing parties to resolve disputes with confidence in the enforceability of their awards.”
~ Gary Born
Introduction
Coming into force on 1 January 2024, the re-envisioned and refreshed China International Economic and Trade Arbitration Commission (“CIETAC”) Arbitration Rules intend to cater to the evolving needs of international ventures by equipping parties and arbitral tribunals with more transparency, efficiency, and flexibility. The China Council for the Promotion of International Trade, also known as the China Chamber of International Commerce revised and adopted it on September 2, 2023. Taking cognisance of the dynamic nature of cross-border trade and investment, the significance of a robust and trustworthy arbitration mechanism cannot be overstated. As enterprises navigate the tangled mesh of the international commercial arena, they require assurance that conflicts can be resolved smoothly and to the mutual satisfaction of all involved parties.
This article embarks on an exploration of the recently revised CIETAC Rules 2024 (“Rules”). It sheds light on the pioneering changes and their key implications for international arbitration, simultaneously pointing out the shortcomings in the arbitration rules with plausible solutions for the same. As to the standardization of arbitration procedures, the new measures taking into account the concerns of the epoch of digitalization, the Rules mark a significant leap forward.
Comprehending the CIETAC Rules: Pioneering Justice since 1956
Post World War II, there was a paucity of reliable and compatible mechanisms for resolving trade disputes wherein China urged and created a conducive environment for international business in 1950s. Established in 1956, CIETAC formulated its first set of rules and now stands as one of the top five most distinguished international permanent arbitration institutions in the world. The rules have been redesigned and revised numerous times to take into account the evolving nature of the arbitral process, with the latest revision having been made in 2023. CIETAC objectively resolves commercial and investment disputes through the mechanism of arbitration. Its current structure consists of its headquarters in Beijing and the centres or sub-commissions form a single institution [Article 2(3)]. The Articles of Association of CIETAC delineate that the arbitration centres are its branches that accept the arbitration applications and that CIETAC delegates the power to them to arbitrate cases. CIETAC has impartially resolved over 30,000 arbitration cases involving parties from over 100 countries and its awards have been enforced in more than 150 countries around the globe. Thus, studying the redesigned Rules becomes a task called for as they have such a vast ambit and aim to assist people in resolving their disputes.
Redefining Arbitral Frontiers: Analysing Key Changes and Their Implications
The Rules have revamped the CIETAC Arbitration Rules of 2015 (“2015 Rules”). This has been done to ensure compliance with the dynamic world of international arbitration. The institution, through these Rules, seeks to provide a cost-effective, better-driven, and proficient institutional service. The Rules demonstrate CIETAC’s commitment to complying with basic fairness and party autonomy maintaining the neutrality of arbitral tribunals, and trying its best to maximize the efficiency of the arbitral proceedings. In light of the aims and objectives envisioned by the CIETAC, it becomes imperative to analyse the key changes brought by the 2024 Rules vis-à-vis previous CIETAC Rules.
Firstly, the 2024 Rules bring in the novel concept of early dismissal, enshrined under Article 50. Under this provision, at the request of the party, the tribunal is authorised to “grant an early dismissal of a claim or counterclaim in whole or in part”. This is aimed to sidestep unreasonable delays in the arbitral proceedings. It is suggested that the early dismissal of arbitral proceedings can serve to be fruitful as parties can evade the often-tedious clutches of arbitration. It is important as it reduces unreasonably long pendency which repletes the parties with a feeling of injustice. A similar incident occurred in the Indian case of General Manager of the Raj Durbhunga v. Coomar Ramaput Singh, where the arbitral proceedings continued for a period of 30 years. Thus, such provisions can have a profound impact all over the world.
Secondly, Article 48 lays down novel provisions on third-party funding wherein, the funded party is supposed to inform the Arbitration Court about the funding agreement without any delay. Simultaneously, the presence of third-party funding is taken into consideration by the tribunal when calculating the cost of the arbitration proceedings. This undertakes three ventures, namely, the cost-effectiveness of the arbitral proceedings, timely resolution of disputes, and fostering of accountability and transparency in arbitral proceedings. In recent years, there has been a significant rise in instances of third-party funding, such as that in Akhmedova v. Akhmedov, where the English Court acknowledged the role played by professional funders as “highly desirable” to make justice more accessible to the people. Similarly, in the case of Difederico v. Amazon.com, Inc., the Federal Court of Canada gave a green signal to third-party funding agreements. Thus, in light of the spike noticed in the practice of third-party fundings, the decision of the CIETAC to include this provision can serve to be fruitful globally and meet the needs of today’s times.
Thirdly, the choice of determining the jurisdiction of a dispute has been altered. Under the 2015 Rules, the CIETAC institution held the power to determine the jurisdiction that could be delegated to the arbitral tribunals in matters considered necessary, which complied with the Arbitration Law of the People’s Republic of China (“PRC”), under which the question of the legality of an arbitration agreement shall be resolved by the arbitration institution or the Courts of the People’s Republic of China. However, the 2024 Rules, under Article 6.1., recognise the globally acknowledged principle of kompetenz-kompetenz, that gives the power of determination of jurisdiction to arbitral tribunals. If the arbitral tribunal has already been constituted, the power to determine jurisdiction rests with the arbitrators. This is done by the CIETAC to ensure harmony with the Arbitration Law of the PRC, whose revision draft has been on the table since 2021, which inter alia includedthe introduction of the principle of kompetenz-kompetenz. This principle grants the tribunals the jurisdiction to determine if there was an arbitration clause between the parties, if the arbitration is legitimate, and if authority belongs to the tribunal. The implementation of the amended law remains uncertain and is still subject to ongoing deliberation. Therefore, this change is a welcome step and a stepping stone to narrowing down the chasm between the Chinese Arbitration Rules. In accordance with the changes that have taken place in the Arbitration Law of the PRC, these rules put CIETAC in a vanguard of international arbitration institutions, meeting today’s challenges.
Unpacking the Shortcomings in the Revised CIETAC Arbitration Rules
The revised CIETAC Rules carry with them impeccable advantages, but with great benefits come great barriers that need to be tumbled down. Some of the shortcomings of the Rules are dealt with below.
Firstly,the revised CIETAC Rules failed to expand the jurisdiction of the Rules to cases beyond international investments and commercial contracts such as tax, technology, and media disputes. Secondly, the CIETAC Rules do not offer an appeal mechanism, leaving the parties with no recourse if they are unsatisfied with the arbitral award. Thirdly,even though CIETAC is a well-known institution in the realm of international arbitration, its Rules are still not accepted globally. To resolve this roadblock, the CIETAC should focus on educating and building the capacity of individuals by regularly conducting seminars and workshops. It can also work with organisations and governments to ensure that legislative reforms conform to international standards. The CIETAC should adopt a decentralised approach by establishing regional offices around the world, permitting a more focused presence while keeping an eye on the bigger picture. Fourthly, the maintenance of a database acting as a ledger of disputes posits a significant barrier. However, the roadblock can be resolved by resorting to artificial intelligence (“AI”) technologies to carry out its business since AI can prove handy in maintaining a register of cases. For instance, the number of disputes filed, undergoing or resolved can be maintained easily by using AI. In addition, AI-powered natural powered language tools can assist in identifying redundant, obsolete, and inconstant. With AI-oversight platforms, CIETAC can communicate efficiently with the users resulting in constant modification of the rules with reference to users’ feedback. Further, using AI can generate workable translations of the CIETAC Rules in different languages of the different parties involved enhancing their understanding. Lastly, the Rules still provide a major chunk of power to the CIETAC institution, compromising party autonomy [Article 26]. The Rules ensure a higher level of institutional control, restricting the opportunities for the parties to tailor the arbitration proceedings to their specific demands.
The following are the potential shortcomings that may cause criticism based on the framework laid out in the CIETAC Rules. As for the particularities of the flaws of the 2024 CIETAC Rules, the precise changes or amendments to the rules, and the real experience of the parties concerned will shape those defects.
Concluding Remarks and Way Forward
With the increasing complexity of cross-border transactions, the progressive attitude of CIETAC might act as a catalyst to further enhance the harmonization of international arbitration. In an attempt to maximize the expeditiousness of the arbitral process and enhance the protection of information, CIETAC should keep up with the level of digitalisation. As stated, it may consider resorting to AI for assisting in procedural and mechanical aspects of arbitration. Since CIETAC endeavours to be acknowledged globally, AI can thus prove to be extremely handy for the purpose. Additionally, the CIETAC Rules can eliminate unpleasant occurrences and encourage worldwide commerce, establishing a linked economy, owing to its more transparent and accountable nature. More cooperation with other arbitration organizations of the world is required.
Ultimately, the CIETAC Arbitration Rules 2024 herald a new era in international commercial international arbitration, blending innovation with pragmatism. With the evolvement of the international arena of arbitration each day, these Rules mark a shift in paradigm treading the path of a more transparent, accountable, and streamlined arbitration process. The 2024 Rules puts forth myriad provisions showcasing CIETAC’s commitment to honour Chinese legal practices whilst aligning them with international standards.
In the times to come, whether and to what extent these standards will be effectively applied and interpreted in the practice by arbitrators, legal practitioners, and the members of the companies will decide the destiny of these standards. Furthering a step in adaptive and cultivating cooperation, the CIETAC Rules are avant-garde in arbitration, prepared for the high-profile change in the conditions of the constantly developing and globalizing business environment.
This blog is written by Yash Sharan and Suryansh Jaiswal, Students of B.A. LL.B.(Hons.) at HNLU, Raipur