Shanghai International Commercial Court Established

On December 30, the Shanghai International Commercial Court (SHICC) was officially inaugurated under the Shanghai First Intermediate People's Court, centrally exercising jurisdiction over first-instance and second-instance foreign-related commercial cases, judicial review of arbitration, and other matters that were originally under the jurisdiction of the Shanghai First and Second Intermediate People's Courts.

The functional positioning of the Shanghai International Commercial Court primarily includes, in terms of performing judicial duties, exercising centralized jurisdiction over foreign-related commercial cases in accordance with the law; in terms of reform and innovation, exploring and improving an international commercial adjudication mechanism that is more adaptable to a high-level institutional opening-up; and in terms of enhancing dispute resolution efficiency, actively building a more professional and efficient international commercial dispute resolution system.

It is reported that the Shanghai International Commercial Court will implement a series of strong measures to ensure its high-quality operation. In terms of talent allocation, it will be talent-driven, building a hub for foreign-related adjudication talent and striving to establish a high-level foreign-related adjudication talent training system; in terms of technological support, it will closely rely on the achievements of the Shanghai Digital Court, introducing cutting-edge technologies such as artificial intelligence, big data, and blockchain to construct an intelligent adjudication management system; and in terms of institutional safeguards, it will meticulously formulate foreign-related adjudication procedures covering the entire process, including case filing, trial proceedings, service of documents, and mediation.

Shanghai International Arbitration Center Releases 2024 Annual Arbitration Report

On January 11, the Shanghai International Arbitration Center (SHIAC) released its 2024 annual arbitration report. The report highlights that SHIAC handled 4,028 cases throughout the year, with a total disputed amount of RMB 75.431 billion, representing a 6.53% year-on-year increase. The average disputed amount per case reached RMB 18.72 million, marking a 29.01% growth from the previous year. Notably, there were 128 cases with disputed amounts exceeding RMB 100 million, 19 cases exceeding RMB 500 million, and 7 cases surpassing RMB 1 billion. The disputes involved 67 countries and regions worldwide, reflecting a 39.58% increase compared to the previous year. In 2024, parties from 37 countries and regions participated in SHIAC’s arbitration proceedings.

Apart from China, the top five jurisdictions of parties involved were Hong Kong (China), the United States, the United Kingdom, Singapore, and Taiwan (China). The international conventions and foreign laws chosen by parties included the United Nations Convention on Contracts for the International Sale of Goods (CISG), Singapore law, and Hong Kong law, among others. Additionally, a total of 102 foreign arbitrators participated in case hearings in 2024.

In 2024, SHIAC continued its high-quality development, steadily improving case-handling efficiency and effectiveness, while enhancing its reputation both domestically and internationally. The center has been strengthening its legal service capabilities, with the goal of becoming a world-class arbitration institution. It has also made significant progress in supporting Shanghai’s development as a global arbitration hub in the Asia-Pacific region and advancing China’s foreign-related legal framework.

Seventh Edition of the SIAC Arbitration Rules Comes into Effect

On January 1, 2025, the Seventh Edition of the Singapore International Arbitration Centre (SIAC) Arbitration Rules (2025 Rules) officially came into effect. SIAC began soliciting public feedback in August 2023 before finalizing these rules, which aim to enhance arbitration efficiency and introduce innovative procedures. Key changes include:

A. Expedited Procedure (Article 13): For disputes of low value and low complexity, if the disputed amount does not exceed SGD 1 million and the parties agree, the tribunal will render an award within three months, with a cost cap set at 50% of the prescribed fees under the Schedule of Fees. This is designed to efficiently resolve smaller-value disputes.

B. Increased Monetary Cap for Expedited Procedure (Article 14.2): The monetary threshold for cases eligible for the expedited procedure has been raised to SGD 10 million, expanding its applicability.

C. Preliminary Determinations (Article 46): The tribunal is now empowered to issue preliminary determinations in specific circumstances, saving time and costs while improving case management efficiency.

D. Consolidation Mechanism (Article 17): For disputes involving multiple contracts or multiple parties, the new rules introduce a coordination procedure, allowing a single tribunal to hear multiple cases under a harmonized process, reducing the risk of parallel proceedings.

E. Appointment of Emergency Arbitrators (Article 12.1): The new rules permit parties to apply for an emergency arbitrator even before filing a Notice of Arbitration, enabling faster interim relief.

F. Disclosure of Third-Party Funding (Article 38): Parties are now required to disclose the identity of any third-party funders, helping to identify potential conflicts of interest.

Beijing Fourth Intermediate People's Court:

The Arbitration Clause in the "Agreement" Has Lost Legal Effect Due to a Change in Dispute Resolution Method in the "Supplementary Agreement"; Arbitration Clause Declared Invalid

Legal Basis:

"Arbitration Law of the People’s Republic of China"

Article 16

An arbitration agreement shall include arbitral clauses stipulated in the contract and other written agreements which request arbitration to be made prior to or following the occurrence of a dispute.

An arbitration agreement shall include the following:

(1) the expression of an application for arbitration;

(2) items for arbitration;

(3) the chosen arbitration commission.

Article 20

Where the parties concerned have a differing opinion upon the validity of an arbitration agreement, a request may be made for an award to be made by the arbitration commission or a judgment made by the People's Court. Where one party requests an award to be made by the arbitration commission and the other party requests a judgment from the People's Court, it shall be judged by the People's Court.

Where the parties concerned have a differing opinion upon the validity of an arbitration agreement, this shall be raised before the arbitration tribunal commences the first hearing.

Case Description：

On August 19, 2024, a company based in Inner Mongolia (the respondent) submitted an arbitration application to the Beijing Arbitration Commission, requesting that a municipal government (the applicant) pay various fees, including land primary development costs, liquidated damages, compensation for land revenue below 60% of the project area, attorney fees, and arbitration fees, amounting to RMB 1,413,235,818.19.

The municipal government argued that the arbitration clause in the "Agreement" signed on June 3, 2010, had been superseded by a subsequent agreement. Specifically, on September 29, 2014, both parties signed a "Supplementary Agreement" and a new "Agreement", which explicitly stipulated that disputes should be resolved through litigation rather than arbitration. Consequently, the municipal government petitioned the court to confirm the invalidity of the arbitration clause in the 2010 Agreement and sought to have the Inner Mongolia company bear the litigation costs. The municipal government contended that the originally agreed arbitration clause had been replaced by the litigation clause in the later agreements, rendering the arbitration clause invalid.

The Inner Mongolia company, however, argued that the arbitration clause remained valid, was not overridden by the subsequent agreements, and asserted that the municipal government’s litigation request was an attempt to delay the arbitration process.

Court's View:

The court first examined the contractual agreements between the parties and determined that the arbitration clause in the June 3, 2010 Agreement was valid at the time of signing and complied with relevant legal provisions. Thus, the arbitration clause itself was not inherently invalid.

However, the court found that the 2014 Supplementary Agreement and the new Agreement explicitly stipulated that disputes should be resolved through litigation instead of arbitration. This demonstrated that the parties had expressly modified the dispute resolution mechanism, and the litigation clause had effectively replaced the original arbitration clause.

Although the arbitration clause in the original 2010 Agreement was not formally revoked, the court held that the later agreements reflected the parties' true intent to change the dispute resolution method. Given the explicit provisions in the subsequent agreements, the court ruled that the arbitration clause had been superseded and was no longer applicable.

Final Ruling, The Beijing Fourth Intermediate People's Court ruled that the arbitration clause in the June 3, 2010 Agreement was invalid, upheld the municipal government’s litigation request, and ordered the Inner Mongolia company to bear the litigation costs.

Singapore High Court:

The Arbitrator Upheld Natural Justice in the Arbitration Proceedings and Dismissed the Application to Set Aside the Arbitral Award

DHZ, as the main contractor for a project, engaged DHY to provide specific goods and services. The parties signed four contracts:

Contract 9: Design, supply, and delivery of goods.

Contract 24: Supervision of design, manufacturing, factory testing, delivery, installation, testing, and commissioning during the defect liability period.

Contract 27: Supply and delivery of isolators.

Contract 18: Supervision of design, manufacturing, factory testing, delivery, installation, testing, and commissioning during the defect liability period.

Payments for Contracts 9, 18, and 24 were divided into four stages, while Contract 27 had three payment stages. Each payment stage was tied to progress completion, with the third and fourth stages of Contracts 9, 18, and 24 constituting 5% of the contract price. The contracts stipulated that disputes should be resolved through arbitration under the Singapore International Arbitration Centre (SIAC) rules, with a sole arbitrator appointed.

As the project progressed, disputes arose over unpaid amounts, delayed deliveries, and defect rectifications under these contracts. In July 2021, DHY initiated arbitration under the contracts, seeking payment of outstanding amounts and additional work costs. DHZ counterclaimed, alleging DHY’s failure to fulfill its contractual obligations, which resulted in additional costs for DHZ.

On October 31, 2023, the arbitrator issued an award in favor of DHY, dismissing DHZ’s counterclaims. DHZ, dissatisfied with the decision, sought to set aside the award, arguing that the arbitrator had violated the principles of natural justice and relevant provisions of the arbitration agreement. DHZ’s challenge was based on Sections 48(1)(a)(vii) and 48(1)(a)(iv) of the Arbitration Act 2001 (2020 Revised Edition):

Section 48(1)(a)(iv): A court may set aside an award if the dispute decided was not submitted to arbitration or if the award exceeded the scope of the arbitration agreement. If separable, only the part of the award exceeding the submission may be set aside.

Section 48(1)(a)(vii): A court may set aside an award if there was a breach of the rules of natural justice during the arbitration that prejudiced the rights of a party.

The court emphasized that the threshold for setting aside an arbitral award is very high and would only be considered if there was actual prejudice. Under the precedent set in Soh Beng Tee, the challenger must establish: (1) which rule of natural justice was breached; (2) how the breach occurred; (3) how the breach affected the decision; and (4) how it prejudiced the challenger’s rights.

Court's View：

The court found that DHZ’s challenge regarding Contract 9 was unfounded. DHZ alleged that the arbitrator had failed to notify the parties and hear their arguments, particularly concerning the allocation of a USD 1,400 payment. However, the court ruled that unless the breach of natural justice resulted in actual prejudice, the award would not be set aside. Since DHZ failed to prove such prejudice, the court dismissed the setting-aside application.

Regarding Contract 18, the court upheld the arbitrator’s ruling. In DHZ’s C18 LD counterclaim, the arbitrator determined that the “designated delivery date” referred to the agreed actual delivery date, not the date specified in Annex 4, leading to the rejection of the liquidated damages claim. For the C18 DLP counterclaim, the arbitrator found that DHZ failed to provide sufficient evidence to support its claim for additional costs, leading to its dismissal. As for the C18 Declaration counterclaim, the arbitrator held that it did not seek monetary relief and thus was not subject to an arbitral award. The court found that the arbitrator had thoroughly considered and assessed DHZ’s evidence and arguments, rendering a decision in line with legal requirements, and thus dismissed the setting-aside application.

For Contract 24, the court found that the arbitrator had reasonably ruled that DHY was entitled to payment for Stage 3 of Contract 24 and had rightly upheld DHY’s additional claims for extra work. Although DHZ argued that no formal written instruction had been issued, the arbitrator applied the doctrine of estoppel to hold DHZ accountable for the costs. The court found that the arbitrator’s analysis of the evidence and legal principles was appropriate. Additionally, the court held that DHZ’s objections to the evidence were merely disagreements with the arbitrator’s conclusions rather than new evidence, leading to the rejection of the setting-aside application.

Finally, for Contract 27, DHZ contended that the air freight cost should be borne by DHY. However, the arbitrator ruled that DHY was entitled to USD 105 in air freight costs. The court held that this decision did not breach the principles of natural justice and that the arbitrator did not exceed his jurisdiction, thereby dismissing DHZ’s application to set aside the award.

In Conclusion, The court found that, despite DHZ’s numerous objections to the arbitral award, the arbitrator had made his decision based on sufficient evidence and sound legal reasoning, without violating the principles of natural justice. Consequently, the Singapore High Court dismissed DHZ’s application to set aside the arbitral award and upheld the arbitration decision.