A Critical Period Has Come for the ICSID Rules Amendment

At present, the revision of the ICSID Rules of the International Center for Investment Dispute Settlement enter a critical period, and the Working Group Report on Amendments to the Arbitration Rules of the ICSID (III) issued by the Secretariat of the ICSID in late August 2019 marks the latest development in the procedural reform of the ICSID.

The investment arbitration community continues to have deep concerns about the legality of the "disqualification of arbitrators" procedure for the following two reasons: first, the ICSID panel of arbitrators is a single body composed mainly of white men, and second, the ICSID tribunal always inherently supports the investor side based on the ICSID ruling. 

In addition to the incredibly high standard of certification for disqualifying arbitrators, the decision-making mechanism under the ICSID rules has also been challenged in terms of guaranteeing procedural fairness.

Suspected of accepting bribes, Peruvian arbitrators go into detention

On November 5, 2019, Peruvian judge Jorge Chavez has ordered the detention of 18 months for 14 of the 19 arbitrators currently under investigation in the Odebrecht corruption case. On the grounds that they were suspected of accepting bribes from the Odebrecht company in favour of their ruling.

The main legal arbitration issue related to the incident is, taking Peru as an example, many Latin American countries implemented loose economic policies in the 1990s, and national infrastructure projects disputes are often left to arbitration. However, such disputes involve a large amount of money, and have a wide-ranging effect on public interests. Arbitration being relatively distant from the control of the national judiciary, it has resulted in judicial and arbitration corruption.

At present, Peru is considering amending the Government Contract Act in relation to arbitration provisions in order to protect the public interest.

SAA’s inaugural ceremony launches at the Shanghai Summit Forum of International Arbitration

On November 8, 2019, the Shanghai Summit Forum of International Arbitration, which is a supporting activity of the Second China International Import Expo, was successfully held at the National Convention and Exhibition Center. The launch ceremony of the Shanghai Arbitration Association (SAA) took place at the start of the Forum. The first general meeting of SAA members has seen the election of 21 directors, 3 supervisors, 1 president, 6 deputy presidents, 1 supervisor, and 1 secretary general and one deputy secretary general. 

The SAA is the first local arbitration association established by a provincial judicial administrative authority in China. It is a professional non-profit organization that has obtained a registration certificate for social organization as a legal person issued by the Shanghai Municipal Bureau of Civil Affairs in October this year. The association will conduct industrial self-disciplinary management and its members include arbitration institutions, arbitrators, mediators, as well as a number of other organizations and personnel engaged in arbitration practice, theoretical research and professional services.

The Intermediate People’s Court of Huaihua:

Arbitral Awards Based on Evidence which is Falsified, Shall be Revoked

Relevant Provision:

Article 58(1) and (2) of the Arbitration Law of the People's Republic of China provides, “A party may apply for setting aside an arbitration award to the intermediate people's court in the place where the arbitration commission is located if he can produce evidence which proves that the arbitration award involves one of the following circumstances: … (4) The evidence on which the award is based was forged;… The people's court shall rule to set aside the arbitration award if a collegiate panel formed by the people's court verifies upon examination that the award involves one of the circumstances set forth in the preceding paragraph.”

Furthermore, Article 70 of the Civil Procedure Law of the People's Republic of China provides, “The originals as documentary evidence shall be submitted.”

In the case of Jiang Fan v Huaihua Jinding Real Estate Development Co., Ltd. over the application for revocation of the arbitral award [(2019) Xiang 12 Min Te No.1],the core issue was whether the arbitration award made by the Huaihua Arbitration Commission [(2018) No. 23] was based on false evidence and whether such arbitration should be revoked.

Court’s View:

The court revoked the arbitration award made by the Huaihua Arbitration Commission [(2018) No. 23] for the following reasons:

a)Given that the Respondent did not provide the original contract, the Claimant explicitly refused to accept the authenticity, legality and relevance of the copied contract. Under these circumstances, the arbitral tribunal had failed to exclude the copied evidence according to the correct legal procedure; 

b)The arbitral tribunal relied upon by the Commercial Housing Sales Contract was authenticated by the judicial authentication center entrusted by the court, however the signature of the Buyer "Jiangfan" was forged; 

c)Therefore the arbitration award made by the Huaihua Arbitration Commission [(2018) No. 23] was based on false evidence.

The Supreme People’s Court:

A Dispute Over Shareholder Capital Shall not be Settled Through Arbitration

Relevant Provision:

Article 70 of the Civil Procedure Law of the People's Republic of China provides, “An action instituted for a dispute arising from formation, shareholder eligibility confirmation, profit distribution, dissolution or any other matter of a company shall be under the jurisdiction of the people's court at the place of domicile of the company.” 

Article 14(3) of the Provisions of the Supreme People's Court on Several Issues concerning the Handling of Cases regarding Enforcement of Arbitral Awards by the People's Courts provides, “Where, upon special reminder on the applicable arbitration procedures or arbitration rules, a party knows or should have known that the statutory arbitration procedures or selected arbitration rules are not observed, but he or it still participates in or continues to participate in the arbitration procedures and raises no objection and after an arbitral award is rendered, the party files an application for non-enforcement of the arbitral award on the ground that it violates the statutory procedures, the people's court shall not support such application.” 

In the case of Beijing Zhengquan Holding Co., Ltd. v Fangzheng Securities Co., Ltd. [(2019) Supreme Court Min Xia Zhong No. 121], the core issue was whether Fangzheng Securities were correct to apply for arbitration under the arbitration clause in the Purchase Agreement with Beijing Zhengquan Holding Co.

Court’s View:

The court rejected the appeal and upheld the original ruling for the following reasons:

a)Instead of holding Beijing Zhengquan Holding Co liable for tort pursuant to the Contract Law, Fangzheng Securities Company requires Beijing Zhengquan Company to assume shareholder liability in accordance with Company Law; 

b)The disputes relating to a company’s operation shall, in accordance with the provisions of Article 26 of the Civil Procedure Law on the jurisdiction over company disputes, be subject to the jurisdiction of the people's court at the domicile of the company, and this case was put on record and accepted by the Hunan Higher People’s Court, which is appropriate;

As the Appellant, Beijing Zhengquan Holding Co, had applied for arbitration in accordance with the arbitration clause of the Purchase Agreement, the fact that Fangzheng Securities did not raise any objection to jurisdiction in the case has no direct legal relationship with this Case, so a conclusion that this Case should be reviewed by an arbitration institution cannot be made.