Since Shenzhen Court of International Arbitration (SCIA) published its rules, which allow it to administer investor-state arbitration under the UNCITRAL Rules for the first time, another Chinese arbitration centre has also published its independent investment arbitration rules. CIETAC proposes its rules as a promotion of China’s legal construction on arbitration, a requirement for China’s double-direction investment, a necessity for China’s One Belt One Road initiative and a benefit for the system of international investment arbitration.
1. New Content
The Rules are independent rules that only regulate investment disputes. The Rules consist of six chapters with 58 articles and two annexes. The chapters include the general principle (Chapter 1, Article 1-7), the start of arbitration ( Chapter 2, Article 8-9), the Constitution of the Arbitral Tribunal ( Chapter 3, Article 10-19), the Arbitral Proceeding ( Chapter 4, Article 20-44), the Award ( Chapter 5, Article 45-53) and other rules ( Chapter 6, Article 54-58). The chapters intend to show a clear picture, thus allowing parties to be more involved inthe entire investment proceeding.
The Rules also follow current developments in investment arbitration. For example, Article 27 regulates “Third Party Funding” (TFP) including the definition of TFP and the disclosure duty of the party obtaining a TFP. Article 27 also allows the arbitral tribunal to take TFP into consideration with regard to the cost of the arbitral proceeding. Article 46 specifically stresses that applicable law only refers to substantial matters. Article 55 discusses the transparency of the arbitral proceeding which regulates which kind of proceeding documents should be published. Moreover, the Annex of the new Rules also regulates the Emergency Arbitral Procedure.
2 Chinese Characteristics
The Rules have Chinese characteristics, or more broadly, Asian characteristics. Article 6, Good Faith (CHENG SHI XIN YONG in Chinese), regulates that arbitration participants should join the arbitral proceeding by the principle of good faith. Arbitration participants may include the parties, arbitral tribunals, third parties, or, more broadly, the secretaries. This principle is well recognized in national legalisation and international law. For example, this principle has been frequently included recorded in Chinese, for example, the 2017 general rules of China’s Civil Code. However, it is rare that there is a separate article in arbitration rules stressing this principle.
Furthermore, in the author’s opinion, compared with parties from western countries (especially western European countries or US), parties from Asia (and China in particular) would not prefer to settle disputes in front of a court or an arbitral tribunal. Parties would generally prefer to sit down and talk, in order to settle the dispute peacefully. This situation is common in commercial disputes, because the parties may be eager for further cooperation. That is one of the reasons why, under CIETAC commercial arbitration practice, mediation is always prior to arbitration. In China’s civil law practice, judges are normally required to first mediate the disputes. Article 6 of the Rules continues this characteristic in asking for a combination of mediation and arbitration. Article 6 expends the principle of good faith to investment arbitration. Although mediation is not mandatory under this article and party autonomy should still be respected in the first place, this article is still very new among investment arbitration rules.
3. Two Concerns
The Rules fill the gaps in China’s investment arbitration rules. But the first thing that strikes the author is the ambition of China’s arbitral institutions. After we looking at the wording of the Rules, there are some concerns.
Firstly, China still lacks investment arbitration practice and experience. Although there are several cases published related to China, it can not be said that China has gained much experience. According to the ICSID database, there are no arbitrators from China (mainland) who have solved the cases and only one from China (HK). But it should be pointed out that the Rules are applicable to CIETAC (HK centre), which could benefit from the application of these Rules.
Secondly, although the Rules take into account experience gained from other arbitral rules, including the ICSID Convention and the Stockholm Chamber of Commerce (SCC) rules, as well as current developments. The development of investment arbitration is fast-moving and it will take time before a case arises in which the parties agree to apply these Rules.
Although in Asia, both the Singapore International Arbitration Centre (SIAC) and CIETAC currently have their own investment rules, and SCIA can also administrate investment arbitration, western scholars or lawyers still lead investor-state arbitration. Given their ambition, Asian arbitral institutions should also build up trust and convince the parties. The next step should be when parties ask “why choose your rules?” -the institutions should have their answers ready.
Note: The draft text of the new Rules was published on 25 September 2017. At the time of writing this blog, only a Chinese version was available. Any translations related to the Rules contained within this article were made by the author. If there are any differences when compared to the forthcoming official English version of the Rules, the official English version should be applied.