China’s International Economic and Trade Arbitration Commission

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An introduction to the CIETC and the importance of arbitration clauses in China contracts

Mar. 9 – Arbitration: a tool used to mediate disputes that avoid the costly procedures (both in time and in money) involved in settling a dispute through litigation.

The Vienna International Arbitral Center is one of the world’s leading centers for arbitration and, with an average dispute resolution time of 12 months, is also one of the fastest centers for arbitration in the world. China’s counterpart is known as the International Economic and Trade Arbitration Commission. There are, however, some key differences.

For example, when the VIAC is helping arbitrate a dispute, all evidence must be presented during a predetermined period of time before the arbitration procedures take place. CIETAC, on the other hand, accepts evidence during any part of the conflict, as long as it is relevant to the case.

A resolution arising from either of the arbitration centers is binding to every firm from any nation subjected to agreement under the New York Convention. In the event that the conflict is between firms from different countries, the decision can be applied in any signatory country of the New York Convention, even if the country in which the conflict was generated does not wish to enforce the resolution. That means the arbitrating committee retains the right to confiscate merchandise or even stop the departure of a plane in any country.

If you are considering signing a contract, adding an arbitration clause is one important thing to consider.

Dezan Shira & Associates is boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, Vietnam and India. For assistance or advice regarding the drafting of contracts please email info@dezshira.com or download the firm’s brochure here.

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6 thoughts on “China’s International Economic and Trade Arbitration Commission

    Mike says:

    Great article Chris.

    I thought arbitration panels did not have the authority to be able to issue an order for injunctive relief (confiscate merchandize or stop a plane). Does CIETAC have this authority? In what language does CIETAC conduct its arbitrations if the contract is silent on that? How many arbitrators does it use if the contract is silent on that? Will it ever allow for foreign arbitrators?

    Chris Devonshire-Ellis says:

    @Mike – great questions, much of which the answers to are – grey. However China has other “means” to enact what it wants to achieve, bypassing arbitration altogether if an issue is politicised. They prefer to work it out on a G2G basis and negotiate. Foreign arbitrators have been allowed in China before, including that of the International Chamber of Commerce. However I gather that ‘pressure’ meant they withdrew that service from Beijing. China doesn’t like having its sovereignty over domestic laws questioned, although eventually they’ll have to come into line.

    Alexander Kleyman says:

    I was involved in international Trade business with my partners from Ukraine with one Chinese company Yungta Titanium Industry Co.,Ltd. We decide to buy copy paper from this company and after negotiating open LC through Bank of America to this company.

    This company did ship 20′ container by NYK Logistics global transportation company, who issued Bill of lading NYKS 2341125580, in which was declared that gross weight of paper in container 17920kg.

    When on May9, 2012 cargo with container arrives to destination port Odessa, Ukraine,

    the Ukrainiann customs in Odessa makes control weighting of this container and they found that instead of declared in BL 17920kg there only 9180kg ( see attached akt from custom in Odessa), while JCC rules allows only +_ 5% discrepencis in total weight.

    After this container was delivered to recipient company MVL-K in Lugansk, Ukraine,

    where Ukrainian Customs Representatives together with experts from bereau”Veritas” did open this container and found that instead of declared 1000 carton boxes paper with 8 reams, 500 sheets in each, there were only 973 boxes with 6 reams inside of this boxes and most of all reams contains not 500 sheets of paper but 100, 250 and so on.

    This is a real fraud and now we can name this company cheater.

    We send few letters to this company, but got only one reply where they agree that this is fraud and we suffered big loss and promice to give us right offer which will cover our loss, but than they disappeared and no one contact us any more.

    We would like to report this cheat behaviour from this company and ask your advice how we can return our loss. We do have all signed and sealed documents from Chinese company which clear show what and how many shoud be in this container and all signed and sealed official documents from Ukrainian customs and bereau “Veritas” that show what actual was in this container.

    Also we would like to report wrong deal from NYK Logistics, which issued false Bill of Lading what allow the cheater – Chinese company receive payment from Bank of America, if they issued right BL, Bank of America did not make any payments to this company, but rely on This false Bill of Lading they did make payment.

    Please let us know, what we have to do right now to cover our loss and punish them to prevent them cheating in the future.

    Please contact us by email: abkleyman@hotmail.com and/or phones in USA:(408)281-1583 or (650)861-0545.
    Thanks and best regards,
    Alexander Kleyman.

    Alexander Kleyman says:

    We received, instead of declared in all issued by Yungta Titanium Industry Co., Ltd 17920kg of paper in container, only 9180kg and also inside container instead of declared 500sheets of paper in each ream experts from beraeu “VeritaS’ FOUND REAMS WITH 100, 200, 250 SHEETS OF PAPER, in other worlds this is not products, but garbage.
    We try to solve this case in peacfull manner, but they did not reply to our emails, why we decide to go to your organization for help and advice how we can recover our loss and what we should do now.
    Thank you very much for your cooperations,

    Best regards,
    Alexander Kleyman.
    abkleyman@hotmail.com
    (408)281-1583 or (650)861-0545 in USA.

    Alex my colleague Chet Scheltema will be in touch. – Chris

    My colleague Chet’s response has been illuminating, so for our readers I reproduce the email here concerning Alexander’s issues, which he seems to have no problem being in the public domain. The advice below is sound – over to Chet:

    Dear Alexander;
    Thank you for your post in response to the article “China’s International Economic and Trade Arbitration Commission.” (https://www.china-briefing.com/news/2011/03/09/a-brief-introduction-to-chinas-international-economic-and-trade-arbitration-commission.html)

    Although a licensed law firm attorney would need to be sought for authoritative legal advice and counsel, we can offer a few thoughts and ideas for consideration.

    Based on your summary, the parties at fault appear to be NYK Logistics and/or Yungta Titanium Industry Co., Ltd, and/or the actual shipping company (if not NYK Logistics) and perhaps even the bank. The legal issues would be seem to be failure to fulfill the contract terms and potentially fraud and other issues (eg, Improperly handling or interpreting the LOC and BOL).

    One of the first issues you may want to consider is whether you feel it’s worth pursuing this matter by considering (i) whether the companies at fault have the financial resources to return your money, and (ii) whether the complaint against them is strong, and (iii) whether the expense involved in pursuing a recovery is too great (For instance, will the attorney fees, other expenses, and business resources required to pursue this exceed the anticipated recovery). You may need to chat with an experienced attorney to help you make this assessment.

    As you move forward in assessing your odds of recovering your money, it’s important to also review the governing contracts to see how and where a dispute would be resolved. Although an authoritative interpretation of the contracts would require legal review, you can probably identify the basic provisions about what law will govern the transactions and what courts (or arbitrator) will resolve any dispute. The contracts may have conflicting terms which will complicate the matter.

    To use an example, if the contracts identify Hong Kong law and courts as the means for resolving the dispute, then your next step might be to communicate with a Hong Kong law firm (or law firm in your hometown with connections to a Hong Kong law firm) about the matter and see what help they can offer, whether they feel it’s worth pursuing the matter, and what expense and effort would be involved.

    Once you have reviewed the contracts and gained a sense of where the matter will need to be resolved, we may be able to help think about how to identify Chinese law firm to help. As noted in the Dezan Shira post, it would be very helpful if the contracts identify international arbitration in a neutral location as the means of resolving the dispute.
    I hope this information is helpful.

    The issues Chet describes are pertinent – establsihing where the blame actually lies – with the supplier and/or the shipper or bank, then establishing the abode for the arbitration clause. Taking it forward then depends upon these issues – which shows the important of having an arbitration clause in there. In this instance, Hong Kong seems to have a far better reputation for impartiality than most Chinese arbitration centers. The rest of this correspondence will remain private, but this exchange serves as a useful indicator as to how arbitration can be a varied issue and the wrong doing target identified before the case even goes to dispute resolution. – Chris

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