Shanghai ranked among the world's top 10

 most popular international arbitration venues for the first time

Recently, the Queen Mary University of the United Kingdom, an authoritative research institution for international arbitration, released the International Arbitration Survey 2021, which shows that for the first time, Shanghai has become the eighth among the top ten most popular places for international arbitration. With four legally registered arbitration institutions in Shanghai and another four foreign arbitration institutions setting up representative offices in the Shanghai Pilot Free Trade Zone, Shanghai has become the city with the highest concentration and wealth of international arbitration resources in China. The latest data shows that since the implementation of China's first arbitration law in 1995, Shanghai arbitration institutions have handled more than 60,000 cases with a total amount of subject matter for more than CNY 400 billion, and the parties involved in the above cases were from more than 80 countries and regions around the world by the end of last year.

In the next step, the Shanghai arbitration industry will fully speed up the revision of the relevant arbitration rules, fully absorb the concepts and practices of international advanced arbitration rules, provide more professional arbitration services so as to meet the demand for diversified and internationalized dispute resolution services. At the same time, the industry will further improve the big data application system, enhance the efficiency of arbitration, promote the development of the industry, optimize the cooperation ecology, empower domestic and foreign market players, and promote the city's deep integration into the global governance network.

Hong Kong released Report on

 Reform of Outcome Related Fee Structures for Arbitration

Currently, The Law Reform Commission of Hong Kong released its Report on Reform of Outcome Related Fee Structures(ORFS) for Arbitration, recommending changes to relevant laws and regulations to permit lawyers to adopt ORFS for arbitrations in the Hong Kong Special Administrative Region ("Hong Kong") and outside Hong Kong.

ORFS shall mean three types of agreements that lawyers may enter into with their clients, i.e., conditional fee agreements, damage-based agreements, and hybrid damages-based agreements.

Except for Hong Kong and Singapore, all major arbitration venues permit certain form of ORFS for the time being. The Law Reform Commission of Hong Kong identified the need for reforms to maintain and improve the competitiveness of Hong Kong as a major arbitration centre, to expand the avenues for seeking justice, and to provide flexible forms of pricing and charge to respond to the increasing demand from the parties involved in the arbitrations. The Department of Justice is reviewing the above-mentioned report and has indicated that it will arrange for legislative amendments as soon as it decides to adopt the report.

The International Court of Arbitration for Sports 

holds a video hearing to hear the appeal against the revocation of the suspension on Russian figure skater

The International Testing Agency (ITA) released a statement confirming that Russian figure skater Kamila Valieva(the “Athlete”) provided an anti- doping test sample in December 2021 and the results were positive. The Athlete has since been provisionally suspended by the RUSADA. At the hearing , RUSADA's disciplinary board decided to lift the provisional suspension on Valieva and allow her to continue participating in the Beijing Winter Olympic Games. Subsequently, the International Olympic Committee (“IOC”), the World Anti-Doping Agency (“WADA”) and the International Skating Union (“ISU”) all appealed to the International Court of Arbitration for Sport(“CAS”), challenging RUSADA's decision on revoking the provisional suspension.

CAS held a video hearing at its temporary office in Beijing on the evening of February 13 and announced on the afternoon of February 14 that it would not impose a provisional suspension on Valieva for the following reasons: (1) the Athlete is a “protected person” under the World Anti-Doping Code; (2) the RUSADA Code and the World Anti-Doping Code do not explicitly regulate the provisional suspensions for "protected persons". At the same time, these above said regulations have specific provisions on different standards of evidence and lenient penalties for “protected persons”; (3) the Athlete tested positive based on the text sample sent on December 2021 rather than during the Beijing Winter Olympics Games, therefore, the decision on the Athlete will be dealt with according to the case. To prevent the Athlete from continuing to participate in the Winter Olympics Games in the current situation will cause irreparable harm; and (4) there exists a serious problem of untimely notification of the doping test results on December 2021, which affects the Athlete's relevant legal rights.

Beijing No.4 People's IntermediateCourt: Preconditions do not affect the jurisdiction of arbitral institutions, nor the conduct of arbitration proceedings

Legal basis：

Arbitration Law of the People's Republic of China

Article 58

Where the parties concerned can provide evidence disproving the arbitration award in any of the following circumstances, they may request a cancellation of the arbitration award by an intermediate People's Court at the place where the arbitration commission is located:

(1) there was no arbitration agreement;

(2) items for arbitration were not within the scope of the arbitration agreement or were those upon which the arbitration commission had no right to arbitrate;

(3) the establishment of the arbitration tribunal or arbitration procedures are in contravention of legal proceedings;

(4) the evidence upon which the arbitration award is made was counterfeit;

(5) the other party has concealed evidence to the degree that fairness has been affected;

(6) arbitrators have accepted bribes, resorted to deception for personal gain or perverted the course of justice by the award.

Where the People's Court has formed a collegiate bench and has examined and verified that the award was made under one of the aforesaid situations, it shall order the cancellation of the award.

Where the People's Court decides that it should make a ruling to the effect that there has been a violation of the public interest, it shall order the cancellation of the award.

Case Description:

On September 21, 2017, Tianjin Cat Eyes Microfilm Culture and Media Co., Ltd. (hereinafter referred to as “Tianjin Cat Eyes Company”), Beijing Weiying Times Technology Co., Ltd. (hereinafter referred to as “Beijing Times Company”) and third parties, Shanghai Sankuai Technology Co. Ltd. Entered into the Capital Increase Subscription Agreement, which stipulates in Article 13.07(1) that any dispute, controversy or claim arising out of or relating to this Agreement or its breach, termination or invalidity shall first be settled by the parties through amicable negotiation. The party making the claim shall promptly notify the other parties by a notice containing the date that a dispute has arisen and describing the nature of the dispute. If the dispute cannot be resolved through negotiation within thirty (30) days after the date of the notice, any party involved in the dispute may submit such dispute to arbitration at CIETAC, which shall be conducted in accordance with the arbitration rules in effect at the time the dispute is submitted, with arbitration place being Beijing. Article 13.01 of the Agreement sets out Beijing Times Company's address for notification as “···· of Huitong Times Square in Beijing”, the addressee Chen and the telephone number. CIETAC accepted the arbitration case of Beijing Times Company and Tianjin Cat Eyes Company in accordance with the agreement of the arbitration clause in the above Capital Increase Subscription Agreement and the written arbitration application submitted by Tianjin Cat Eyes Company. The arbitration award in respect of the case was rendered in September 2021. Later, Beijing Times Company applied to the court to revoke the arbitral award on the grounds that Tianjin Cat Eyes Company had failed to meet the preconditions for initiating arbitration, failed to make reasonable inquiries during the arbitration hearing to provide the tribunal with correct address, and concealed evidence sufficient to affect a fair award.

The court retrieved the records of services made by CIETAC. In March 2021, the court served the arbitration notice on Beijing Times Company at the address provided by Tianjin Cat Eyes Company naming "Beijing Huitong Times Square", with "Legal Representative/Lin" as the addressee, and the letter was returned with the reason of “Rejected”. Tianjin Cat Eyes Company provided Beijing Times Company's contact person “Chen”, relevant contact information and the registered business address to the CIETAC. On April 20 and April 29, Tianjin Cat Eyes Company served letters to the registered address of Beijing Times Company with the addressee Lin, Chen and the additional contact information, but all the letters were returned. Tianjin Cat Eyes Company confirmed in writing to CIETAC that the business registration address of Beijing Times Company was the last known address and the contact person Chen and the relevant contact information. CIETAC made notarized service on the business registration address of Beijing Times Company.

During the court's review, Beijing Times Company acknowledged the contact number of Chen(secretary of Beijing Times Company’s director) and itself, its business registration address had not been changed, and that the new office address had not been notified to other contractual parties.

Court’s View:

The arbitral tribunal did not examine or request clarification on Beijing Times Company’s claim that Tianjin Cat Eyes Company did not met the pre-conditions for initiating arbitration. The Court held that the "violation of statutory procedures" as stipulated in Article 58 of the Arbitration Law refers to the violation of the arbitration procedures stipulated in the Arbitration Law and the arbitration rules chosen by the parties that may affect the proper award of the case, and the standard shall be that the violation of statutory procedures has seriously affected the procedural rights of the parties and substantially affected the proper award of the case. The agreement on the preconditions for arbitration in the Capital Increase Subscription Agreement did not affect the jurisdiction of CIETAC, nor did it affect the conduct of the arbitration proceedings, and the hearing held by the arbitral tribunal was in compliance with the Arbitration Law and the Arbitration Rules.

With regard to Beijing Times Company’s claim on the service procedure violated the lagal procedure, the Court held that Article 8 of the Arbitration Rules clearly stipulated on the service of arbitration proceedings, including the content of service, the manner of service and the address of service. During the arbitration procedure, Tianjin Cat Eyes Company provided CIETAC with the notice address and registered address of Beijing Times Company set out in the Capital Increase Subscription Agreement, as well as the contact person and contact information set out in the agreement, etc. CIETAC served the arbitration documents by mail to the above addresses, which were returned and then served by notarization. The service was considered valid. In conclusion, the arbitration procedure was in accordance with the provisions of the Arbitration Law and the Arbitration Rules. The failure of Beijing Times Company to receive the materials and attend the hearing could not be attributed to the arbitral tribunal's procedural faults.

Regarding Beijing Times Company’s claim that Tianjin Cat Eyes Company had concealed evidence sufficient to influence the fair award. The Court held that the circumstances in which the People's Court found that “the opposing party has concealed evidence sufficient to affect the impartial award from the arbitration institution” including: the evidence is the main evidence to determine the basic facts of the case, the evidence is only in the possession of the opposing party, but has not been submitted to the arbitral tribunal; the existence of the evidence is known during the arbitration process, and the opposing party is requested to submit the evidence, but fails to show or submit the evidence without justifiable reasons.

In accordance with Article 58 and Article 60 of the Arbitration Law of the People's Republic of China, the Court rejected the application of Beijing Weiying Times Technology Co., Ltd.

U.S. District Court for the District of Columbia:

Chinese SOEs do not constitute a branch of the People's Republic of China, and partially denied the petitioner's “Motion for investigation on jurisdiction”

Case Description:

SIPC entered an Agency Agreement with UNI-TOP Asia Investment Limited(hereinafter referred to as “UNI-TOP”), whereby the parties agreed that UNI-TOP acts as the agent of SIPC to assist SIPC in acquiring the shares of PK Company. In 2012, UNI-TOP filed an application for arbitration arsing from the Agency Agreement to an arbitration commission, subsequently, the claims were all rejected. In 2015, UNI-TOP applied for arbitration again, and the arbitration commission supported part of UNI-TOP's claims.

In 2020, SIPC filed a lawsuit in Beijing No. 4 Intermediate People's Court, requesting the court to revoke the arbitral award. The court ruled to revoke the arbitral award on the ground that the aforesaid award violated the “once the arbitral award is made, it was the final decision which can not be reviewed again” as provided for in the Arbitration Law. Under such circumstances, UNI-TOP filed a lawsuit in the United States District Court for the District of Columbia (the “U.S. Court”) against SIPC to apply for executing the arbitral award. The U.S. Court placed the case on file.

UNI-TOP alleged that (i) the U.S. Court has jurisdiction ratione personae over the case. 28 U.S.C. § 1330 provides jurisdiction ratione personae over a “foreign state” which, under § 1603 (a) includes a “political subdivision” and an “institution or instrumentality” of a foreign state. Pursuant to the disclosure of SIPC, SIPC is jointly owned by (but not majority owned by) three companies affiliated with China's State Council. UNI-Top offered four analyses of SIPC as a “foreign state”:(1)UNI-TOP argued that SIPC is an institution or instrumentality of “PRC”, because “it is majority owned by the state or its political subdivisions”; (2)SIPC is an “institution or instrumentality” of PRC for it is a governmental body of PRC or Chinese political branches; (3)SIPC is an “institution or instrumentality” of PRC because it is an embodiment of one of the shareholders, on the basis that its shareholder is also an institution or instrument of the PRC; and (4)SIPC is a political branch of PRC for it being an embodiment of its shareholders and the shareholders being a political branch of PRC. (ii)the U.S. Court has territorial jurisdiction over this case.

Court’s View:

With regard to the theory of “political branch”: The D.C. Circuit adopted a “triage approach”. If the entity's core functions was governmental, it shall be deemed to be the foreign state itself; if commercial, the entity shall be deemed as an agency or instrument of the foreign state. In determining whether a function is a governmental function, the Court assessed whether the function is “intertwined with the sovereign duties of the state or is a necessary accompaniment of sovereignty”. UNI-Top failed to show that SIPC was the embodiment of its shareholders. Although UNI-Top adduced evidence that shareholders of SIPC influenced its operations and provided financial support for it, it was not uncommon for a parent company to play these roles. The evidence in this case showed that multiple shareholders had an influence on SIPC, which was detrimental to the proof that SIPC was the incarnation of any shareholder. Therefore, UNI-Top was far from achieving the required level of “equivalent to complete domination”.

UNI-TOP failed to prove one of(or many of ) SIPC’s shareholders is a political branch of PRC. Pursuant to the above-mentioned triage approach, the core function of petrol and gas company is commerce, as is that of an asset management company that is "outside the hierarchy" of a government, even if it is "owned by that government" and has close ties to the national interest. Therefore, UNI-Top's claim was legally untenable.

As for the theory of “institution or instrumentality”: UNI-Top's other theories concerning jurisdiction ratione personae all attempted to classify SIPC as an “institution or instrumentality” of the PRC, which contradicted its claim of territorial jurisdiction. The U.S. Court held that § 1391 (f) (4) permits enforcement in its region when the defendant is a “foreign state or political branch thereof”. With respect to “a foreign state or its political branches”, a foreign state is defined under the relevant law as a foreign state itself, its political branches, or its institutions or instrumentality. Under this definition, foreign state or political branch was to exclude institutions or instrumentality from § 1391(f)(4), and therefore § 1391(f)(4) could not be used to govern an action against an institution or instrumentality. If SIPC was an institution or instrumentality of PRC, rather than a political branch, then § 1391(f)(4) was not a basis for suit in U.S. Court. Because UNI-Top has found no other legal basis for allowing suit in U.S. Court for the time being, it appears that this case should be dismissed as improperly litigated.

In conclusion, the U.S. Court held that Chinese SOE do not constitute a political branch of the PRC and partially denied the Motion for Investigation on Jurisdiction.

This Newsletter is produced by ZLWD International Business Committee and for your reference only.

Editorial Board: Wei LIN  Philip DUAN  Ellen WANG  

Lingling GUO Yuming Li  Ning Ning  Yu Zhuan

All Information published in this Newsletter is from open source.

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