CIETAC Arbitration Clause Revisited

Abstract

CHINA INTERNATIONAL ECONOMIC AND TRADE ARBITRATION COMMISSION (CIETAC), the world’s largest arbitration centre in terms of the number of cases received,1 adopted new arbitration rules (‘New Rules’) in May 2005. The Chinese Supreme Court issued Certain Interpretations of Chinese Arbitration Law Application (‘New Interpretation’) to be effective in September 2006. In addition, Chinese courts have made a series of judicial decisions in the past few years in the area of arbitration law. The New Rules, New Interpretation and new decisions have brought changes to CIETAC arbitration. This article revisits the issue of CIETAC arbitration clause drafting in light of these changes. Judicial decisions in recent years have shown Chinese courts’ formalistic approach to determining the validity of an arbitration clause. An otherwise valid arbitration clause can be held null and void on purely minor technical grounds, such as inaccuracy of the name of the arbitration institution, even though all the parties involved clearly knew which institution the clause referred to. In one case,2 the court held an arbitration clause invalid because it described CIETAC in Beijing as ‘CIETAC Beijing branch’, which is technically wrong, as it is the headquarters, instead of a ‘branch’. In another case,3 an arbitration clause to submit a dispute to ‘Qingdao economic and trade arbitration commission’ was held invalid because the institution’s name should have been ‘Qingdao arbitration commission’, even though this is the only arbitration commission in the city of Qingdao and the parties clearly had it in mind when the clause was drafted. This formality-over-substance attitude is not only in conflict with the general practice of international arbitration, but also in violation of the Chinese Contract Law, which requires a court to seek the parties’ true intention in interpreting a contract. The New Interpretation, with 31 articles in total, includes four …