Ad Hoc Arbitration Rules of China Maritime Law Association and 

Rules As Appointing Authority In Ad Hoc Arbitration of China Maritime Arbitration Commission released in Beijing

On March 18, China Maritime Law Association (CMLA) and China Maritime Arbitration Commission (CMAC) jointly held a press conference in Beijing to simultaneously release the CMLA Ad Hoc Arbitration Rules(“CMLA Rules”) and the CMAC Rules As Appointing Authority In Ad Hoc Arbitration(“CMAC Rules”). The two rules will come into force simultaneously on March 18, 2022.

CMLA Rules are model rules for ad hoc arbitration, covering all stages of ad hoc arbitration proceedings, reflecting the advantages of full respect for party autonomy, flexibility and efficiency of ad hoc arbitration, and providing systematic guidance on the whole process of ad hoc arbitration, including, without limitation, the scope of application of the rules, service and deadline, place of arbitration, language of arbitration, composition of the arbitral tribunal, addition of parties, joinder of hearings, provisional measures, preparatory meetings, proof and examination of evidence, award and arbitration fees. The CMAC Rules are the operational rules for ad hoc arbitration services, which are designed to fulfill the responsibilities of the “appointing authority” as provided in the CMLA Rules and as agreed by the parties. The services of the “appointing authority” are limited to the provision of administration, assistant and support services for ad hoc arbitrations, but not the full management.

Belgian Court of Cassation ruled in a case that the arbitrator committed serious errors and was civilly liable

Recently, the Belgian Court of Cassation ruled in Case C-19.0153.N-C.19.0174.N/1 that the sole arbitrator had committed a serious error sufficient to give rise to civil liability and required him to return the fees collected from the parties.

In that case, the arbitrator was appointed as sole arbitrator in an IT technology dispute. With the consent of both parties, the sole arbitrator appointed a technical expert to assist with the specific technical issues of the case. The expert prepared notes, but did not share his notes with the parties. After the tribunal hearing, the sole arbitrator sent the draft award to the technical expert for his comments.

The Brussels Court of Appeal, the court of first instance, issued a decision on the case, which was upheld by the Belgian Court of Cassation, the court of second instance. Both the court of first instance and the court of second instance held that the foregoing facts constituted special situations and were justifiable to require the arbitrator to bear the liability. The decision held that the sole arbitrator committed the following serious errors: (1) violated the parties' due process rights by not sharing the technical expert's report with the parties; (2) unlawfully delegated decision-making powers in the case to the technical expert; and (3) violated the confidentiality of award by sharing the draft award with the expert. Based on the above errors, the contract between the arbitrator and the parties should be terminated and the arbitrator should refund the fees received and compensate the injured party in principle for the damages.

ICSID Administrative Council approved the Proposed Amendments to the Regulations and Rules for ICSID Convention Proceedings

On March 21, 2022, the member states of the International Centre for Settlement of Investment Disputes (ICSID) adopted a set of amendments to the Regulations and Rules for ICSID Convention Proceedings(“ICSID Rules”) for the Settlement of Disputes between Foreign Investors and Host States.The ICSID arbitration and mediation rules have been updated to reduce costs by further reducing the time taken to process cases, including mandatory time limits for issuing decisions and awards. Parties can now also opt for the new Expedited Arbitration Rules, which will cut the time required to process a case by half. In addition, the ICSID Rules establish entirely new procedural rules for mediation and fact-finding. The mediation rules support a negotiated settlement of disputes between the parties, while the fact-finding rules support an impartial and tailored assessment of the facts relating to the investment. Both can be used as stand-alone procedures or in combination with arbitration proceedings. At the same time, the revised ICSID Rules regulate for the first time the issue of third-party funding. Parties are obliged to disclose third party funding (including the name and address of the funder) on an ongoing basis to avoid potential conflicts of interest arising from such funding.

The 2022 version of the ICSID Rules will take effect on July 1, 2022. Over the next few months, ICSID will issue guidance notes and provide briefings and courses as needed to help the parties in dispute use the ICSID Rules.

United States District Court for the Central District of California:

recognition and enforcement of arbitration award rendered by Xiamen arbitration commission

Case Description:

On November 21, 2013, the Respondent Mr. Fang, Mrs. Wang and seven companies (four of which have Fang as their legal representative) jointly borrowed RMB 50 million in principal from the Applicant for business purposes and issued the IOU to the Applicant, agreeing that the monthly interest on the loan would be calculated at 2.8% and that the dispute would be arbitrated by Xiamen Arbitration Commission(the “Commission”). The Applicant delivered the loan of RMB 50 million to the account designated by the Respondents on the same day, fulfilling the obligation to deliver the loan, and each Respondent also issued a receipt to confirm receipt of the loan of RMB 50 million. Subsequently, the Respondent failed to return the amount to the Applicant, therefore the Applicant filed an arbitration to the Commission.

On November 23, 2020, an arbitral tribunal composed of three arbitrators of the Commission issued Arbitration Award No. 2020855, awarding the Respondent to pay to the Applicant the principal amount of the loan of RMB 50 million and interests calculated at a rate of 1.5% per month.

In March 2021, as Fang and Wang moved to Los Angeles, the Applicant applied to United States District Court for the Central District of California(The Court) for recognition and enforcement of the above arbitral award, with Fang and Wang as the respondents. The respondents applied to set aside the arbitral award (actually, not to recognize and enforce the arbitral award) on the grounds that they had not received proper notice of the arbitration proceedings and that the applicant had failed to submit sufficient evidence.

The Court found that: the Commission served the respondents at their last known place of residence. Respondent Wang's last place of residence was at Siming District, Xiamen. However, the household registration data showed that he moved to Los Angeles in 2011 and cancelled his domestic residence. Respondent Fang's last place of residence was at Huli District, Xiamen, and Fang defended that he had stayed in the United States since 2018 and sold the Xiamen property considered to be his last known residence in 2016. The Commission also served the Respondents at their last known place of business. Wang worked as the deputy general manager of one of the Respondents, Fengrun Financial Holdings Group Limited (the "Company"), therefore the Commission also served Wang with a notice of arbitration at the business place of the Company. Fang did not dispute the fact that he was the legal representative of the Company, but argued that no representative or individual of the Company notified him. The Company, also a party to the loan agreement, received notice of the arbitration proceedings and submitted defense materials, but ultimately did not attend the hearing.

Court’s View:

The Court held that: based on the above facts, the Commission's service on Fang was reasonable. Although the Commission did not succeed in serving Fang at his last known place of residence, it continued to serve Fang at his working place, and Fang and the other three companies of which Fang was the legal representative received actual notice of the arbitration proceedings and submitted their defenses. Given the fact that Fang's prominent leadership position in these companies and the absence of any evidence that he was no longer at the helm of these companies, it was sufficient to prove that the Commission's service on Fang at his last known place of business was "reasonably ascertainable as actual notice" and therefore complied with due process.

With respect to Wang's service, the Court held that service on Wang did not meet due process requirements because Wang had been living abroad for nearly a decade. Moreover, the household registration information indicated that she left China to move to the United States in 2011 and cancelled her domestic residence with the Chinese government prior to moving abroad. Therefore, the fact that she had worked as a deputy general manager at the Company before her departure to the United States did not mean that service on her at the Company's business place consistent with the arbitration procedure of "reasonably ascertainable as actual notice". Although the Commission’s rules allow for service at the last place of business, such service was not sufficient to actually inform her of the arbitration proceedings, given that she left China almost ten years ago and cancelled her domicile prior to her departure.

Above all, the Commission's service on Fang met the requirements of due process and therefore complied with the notice requirements of the New York Convention, but service on Wang did not meet the requirements of due process and therefore should be enforced against Fang and not against Wang.

The High Court of the Republic of Singapore:

Unclear agreement on arbitration institution does not necessarily render arbitration agreement invalid

Case Description:

A curtain wall construction company in Shanghai(the “Shanghai Company”) entered into two contracts(the “Contracts”) with a great wall technology company in Singapore(the “Singapore Company”). The arbitration agreement in the Contracts was as follows: "Any dispute arising from or in relation to the contract shall be settled through negotiation. If negotiation fails, the dispute shall be submitted to China International Arbitration Centre for arbitration in accordance with its arbitration rules in force at the time of submission". On 27 November 2020, CIETAC ordered the Singapore Company to pay the Shanghai Company outstanding sums under the Contracts, together with the interest and costs. on 3 August 2021, the Shanghai Company has obtained leave to enforce the foreign arbitral award against the Singapore company. The Singapore company then sued the High Court of the Republic of Singapore to set aside the court order.

The issues to be determined in the case mainly were: whether the Singapore Company had proper notice of the arbitration; whether the foreign arbitral award has become binding and whether the arbitration agreement is valid under Chinese law.

Court’s View:

I. The service on the Singapore Company was adequate and effective. The reasons are as follows: (1)Service on the Singapore Company at its registered address was in accordance with the Singapore Companies Act. The Singapore Company argued that it had not used the office at its registered address since July 15, 2020 and that it changed its registered address on November 2, 2020, but the court found that the service of notice of arbitration on the Singapore Company occurred before the Singapore Company changed its registered address, so its claim was not upheld. (2)The address of service was the address stated in the Contracts, and unless the respondent informs the appllicant of the change of address, service of the address in the Contracts shall be considered as valid service. In view of Singapore Company's failure to explain its system put in place for the receipt of documents or how that system might have failed in this case. The judge had reasonable grounds to believe that Singapore Company's officers saw the notice of arbitration but chose to ignore it.

II. The arbitral award had become binding. Although the service of the arbitral award was made after the Singapore Company changed its registered address, the Singapore Company did not inform the Shanghai Company of the above-mentioned fact. Therefore, the service of the arbitral award by Shanghai Company on Singapore Company according to the correspondence address provided by Singapore Company in the Contracts was considered as good service. At the same time, the arbitral award only become binding once made.

III. The arbitration agreements were valid. The respondent argued because the arbitration agreements in the Contracts named an arbitral institution that technically did not exist, therefore it constituted an invalid arbitration agreement under Article 18 of the Chinese Arbitration Law. The court held that whether the Contracts did indeed select an arbitral institution and whether the arbitration institution was CIETAC, is a matter of construction. Rational commercial parties would not deliberately choose a non-existent arbitration institution. The question is thus whether the arbitration agreements evince a common intention that CIETAC would be that arbitration institution. The English names of the four arbitration institutions proposed by the Respondent (Shenzhen Court of International Arbitration , Beijing International Arbitration Center, Shanghai International Arbitration Center and China Maritime Arbitration Commission) are not compatible with the term "China International Arbitration Center". Since the English version of the original contract prevailed, the parties used the first two words of CIETAC, namely "China" and "International", as well as another word included in CIETAC, "Arbitration", omitting the other two words "Economic" and "Trade" from CIETAC, and finally replacing the word “Commission” with “Center”. The court therefore held that when the parties agreed on "China International Arbitration Center", they in fact agreed on CIETAC. Therefore, according to Articles 16 and 18 of the Chinese Arbitration Law, the parties were deemed to have chosen the arbitration institution, and the arbitration agreements were not invalidated by the unclear agreements on the arbitration institution.

In summary, the High Court of the Republic of Singapore rejected the Singapore Company’s application to set aside the Order.

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  jingya MAO

All Information published in this Newsletter is from open source.

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