17 July 2013
Recently, the Suzhou Intermediate People's Court in Jiangsu province (the "Suzhou Court"), China, refused to enforce an arbitral award rendered by China International Economic and Trade Arbitration Commission Shanghai Sub-commission ("CIETAC Shanghai") (renamed Shanghai International Economic and Trade Arbitration Commission on 16 April 2013 and also known as Shanghai International Arbitration Centre ("SHIAC")).
In this article we briefly examine the background of this case and the uncertainties the above ruling adds to the unresolved disputes between CIETAC's Headquarters in Beijing ("CIETAC Beijing"), SHIAC, and CIETAC's South China Sub-commission in Shenzhen (now renamed South China International Economic and Trade Arbitration Commission and also known as Shenzhen Court of International Arbitration ("SCIA")).
The arbitration agreement between Suzhou Canadian Solar Inc ("Suzhou CSI") and LDK Solar Co., Ltd ("LDK") provides, inter alia, that any dispute between the parties shall be submitted to "China International Economic and Trade Arbitration Commission (place of arbitration: Shanghai, China) for arbitration which shall be conducted in accordance with Commission's arbitration rules in effect at the time of applying for arbitration".
Dispute arose between the parties and in July 2010, CIETAC Shanghai accepted the case for arbitration in accordance with the CIETAC Arbitration Rules 2005. In December 2012, CIETAC Shanghai rendered an award in favour of LDK. In February 2013, LDK applied to the Suzhou Court for enforcement of the CIETAC Shanghai award. Suzhou CSI opposed the application and challenged the jurisdiction of CIETAC Shanghai over the case.
The Suzhou Court found that the jurisdiction of the arbitration commission came from the consensus of the parties, which had chosen CIETAC as the arbitration commission to resolve their disputes. Before its declaration of independence, CIETAC Shanghai was an integral part of CIETAC. However, since its declaration and in particular, since CIETAC Shanghai obtained from the Shanghai Justice Bureau a registration certificate of arbitration commission on 7 December 2011, CIETAC Shanghai is no longer part of CIETAC and is therefore not the arbitration commission originally selected by the parties. Since CIETAC Shanghai did not inform the parties of its independence and seek the confirmation of the parties as to whether they would like to continue with the arbitration or select another arbitration commission, the Suzhou Court found that CIETAC Shanghai had contravened the true will of the parties. Relying on Article 237 (2) of Civil Procedure Law of the People's Republic of China ("CPL"), the Suzhou Court refused to enforce the award.
Under Article 154 of CPL, the ruling of the Suzhou Court is not subject to appeal to the superior courts. Further, as the award rendered by CIETAC Shanghai is a domestic award, the ruling of the Suzhou Court will not trigger the internal review mechanism laid down by the Supreme People's Court in its Notice issued in 1995. Hence, on the face of it, the ruling of the Suzhou Court only reflects its own view and does not represent or reflect the views of the Higher Court of Jiangsu Province or the Supreme People's Court.
It is also worth noting that, strictly speaking, the ruling of the Suzhou Court is not binding on the other courts outside the jurisdiction of Suzhou. Accordingly, it remains to be seen whether the courts outside Shanghai and Shenzhen will adopt the same approach as the Suzhou Court did in determining the enforceability of arbitral award(s) rendered by SHIAC and SCIA after their declarations of independence.
In our Legal Update "Latest Development in CIETAC Arbitration", 10 May 2013, we have already provided a comprehensive analysis of the background to and the uncertainties created by the ongoing disputes between CIETAC Beijing, SHIAC and SCIA. The ruling of the Suzhou Court, which adds further uncertainties to the above dispute, is in line with our earlier prediction.
At present, the Supreme People's Court is drafting a Judicial Interpretation with a view to resolving the uncertainties and it is envisaged that such will be promulgated in the near future.