Public Consultation on Draft BAC Investment Arbitration Rules

Publish time: Tue Feb 12 12:17:45 CST 2019   Contributor:zhangxi

The Beijing Arbitration Commission/Beijing International Arbitration Center (BAC) is pleased to announce that the “Beijing Arbitration Commission/Beijing International Arbitration Center International Investment Arbitration Rules (Draft for Comment)” (hereafter the Rules) is now available for public comment.

With the expansion of international investment activities, the global need for investment arbitration is growing. Against such a background, BAC senses it necessary to promulgate a set of specialized arbitration rules for the settlement of international investment disputes. The Rules not only aim to meet the growing need of Chinese and foreign investors in settling investment disputes, but also try to respond to the major concerns over the current investment arbitration system.

BAC sincerely invites all interested users and practitioners to submit their comments. BAC welcomes all suggestions on the contents of the Rules, as well as any other related issues.

The Introductory Note on the Making of “Beijing Arbitration Commission/Beijing International Arbitration Center International Investment Arbitration Rules(Draft for Comment)” is also attached herein for those who are interested.

Comments shall be sent to the following email address by 20 March 2019:

zhangxi@bjac.org.cn

We appreciate your attention to the BAC International Investment Arbitration Rules.

Beijing Arbitration Commission/
Beijing International Arbitration Center
12 February 2019


Introductory Note on the Making of “Beijing Arbitration Commission/Beijing International Arbitration Center International Investment Arbitration Rules(Draft for Comment)”

Background statement

With the expansion of international investment activities, the global need for investment arbitration is growing. While the International Center for the Settlement of Investment Disputes (ICSID) remains the most frequently selected arbitration institution, an increasing number of investment disputes are submitted to other institutions and ad hoc arbitration under the United Nations Commission of International Trade Law Arbitration Rules (UNCITRAL Arbitration Rules). In recent years, a number of arbitration institutions have promulgated investment arbitration rules.

Despite the growing need for investment arbitration, the existing investment arbitration system has generated grave concerns over the long time and high costs of arbitration, lack of independence and impartiality of arbitrators, inconsistency of arbitral decisions, and lack of transparency of arbitration proceedings, to list a few. In response, the international community is taking steps to reform the investment arbitration system. For instance, UNCITRAL Working Group III is charged to explore the reform of the investor-state dispute settlement (ISDS) regime, the European Union has raised a proposal of multilateral investment court, and the ICSID has initiated a new round of arbitration rules amendments.

Against such a background, Beijing Arbitration Commission/Beijing International Arbitration Center (BAC/BIAC) senses it necessary to promulgate a set of specialized arbitration rules for the settlement of international investment disputes. The BAC Investment Arbitration Rules (“the Rules”) have broad applicability and strong practicality. The Rules are applicable to both institutional arbitrations submitted to the BAC and ad hoc arbitrations under the UNCITRAL Arbitration Rules administered by the BAC. The arbitrations can be based on either treaties or contracts. The Rules also highlight several innovations, such as the inclusion of an appeal procedure and an expedited arbitration procedure, the enhancement of procedural transparency, and the default requirement of service of arbitration documents through electronic means. The Rules not only aim to meet the growing need of Chinese and foreign investors in settling investment disputes, but also try to respond to the major concerns over the current investment arbitration system.

In the making of the Rules, necessary reference was paid to the existing international investment arbitration rules, and to the major criticisms and suggestions of the reform of the investment arbitration system.

Summary of the Rules

The Rules are composed of a main body and six appendixes. The main body is composed of six chapters, 54 Articles.

Chapter I is “General Provisions”. This Chapter contains four articles (Articles 1 through 4), covering arbitration institution, application scope of the Rules, waiver of immunity and right to object, and general conduct of the participants to the arbitration. Especially, Article 2 contains detailed provisions on the application scope of the Rules, the formal requirements of arbitration agreement, and the relationship between the Rules and other procedural rules that may be agreed to by the Parties. It also provides that the BAC may administer ad hoc arbitrations under the UNCITRAL Arbitration Rules, following the procedural guidelines set forth in Appendix F to the Rules.

Chapter II is “Commencement of Arbitration”. This Chapter contains three articles (Articles 5 through 7), covering notice of arbitration, response to the notice of arbitration, and consolidation of arbitrations. To initiate an arbitration under the Rules, the applicant shall submit a valid notice of arbitration as required by Article 5 (a), send the notice to the respondent state and pay a registration fee. The respondent state shall provide a response to the notice of arbitration. To allow the respondent state sufficient time to determine how to respond to an arbitration claim, such as filing objections to jurisdiction, raising a counterclaim, or nominating an arbitrator, the state may simply provide a concise response that only contains the compulsory items.

Chapter III is “Arbitral Tribunal”. This Chapter contains ten articles (Articles 8 through 17). It first lays down the qualification requirements of arbitrators (Article 8). In addition to high moral character and recognized competence of law and language skills, arbitrators under the Rules are required to possess sufficient public international law knowledge. The BAC shall maintain a Panel of Arbitrators for International Investment Disputes, from which the arbitrators can be nominated or appointed. The Parties, however, may nominate arbitrator(s) outside this Panel. This Chapter addresses several different scenarios of composition of arbitral tribunal, including three-member tribunal, sole arbitrator, and nomination of arbitrators by multi-parties (Articles 10 through 12). This Chapter also deals with the disclosure requirement, challenge and replacement of arbitrator(s) (Articles 14 through 16), and further provides that an arbitral tribunal may appoint an assistant subject to the consent of the Parties (Article 17).

Chapter IV is “Arbitral Proceedings”. This Chapter contains 22 articles (Articles 18 through 39), which is comprehensively drafted to deal with a broad range of procedural issues of arbitration proceedings. It covers certain general provisions on the conduct of an arbitration under the Rules (Article 18), “common procedures” (Articles 19 through 32) and “special procedures” (Articles 33 through 39). The articles of “common procedures” deal with various typical arbitral procedural issues, including the organizing meeting, working procedures and timetable of arbitral tribunal, the seat and language of arbitration, party representatives, submissions of the Parties, hearings, default, evidence, witness, tribunal-appointed expert, suspension, withdrawal, dismissal, discontinuance and closure of the arbitral proceedings. In relation to the “common procedures”, Appendix B to the Rules provides an indicative timetable for a typical arbitral proceeding under the Rules. The articles of “special procedures” may be invoked as per the special needs in individual cases. They cover jurisdictional objections, early dismissal, provisional measures and emergency arbitrators, third-party submission, expedited procedures and third-party funding. In relation to the “special procedures”, Appendix C to the Rules provides detailed rules for expedited procedures, and Appendix D to the Rules lays down further rules for emergency arbitrator procedures.

Chapter V is “Arbitral Award”. This Chapter contains nine articles (Articles 40 through 48). It covers the applicable rules of law, the settlement of the dispute, the making, correction, interpretation and appeal of the award (Articles 40 through 46). It also deals with costs of the arbitration and deposit of such costs (Articles 47 through 48). Under the Rules, not only the Parties have an opportunity to read and comment on the draft of an arbitral award, but the arbitral award may also be appealed against in accordance with the procedures in Appendix E to the Rules.

Chapter VI is “Final Provisions”. This Chapter contains six articles (Articles 49 through 54). It not only covers service of arbitration documents and the time limits, transparency of arbitration, but also includes miscellaneous provisions, such as exclusion of liability, and interpretation, official versions and coming into force of the Rules. Especially, this Chapter provides the possibility of applying the relevant rules of the UNCITRAL Rules on Transparency in Treaty-Based Investor-State Arbitration (UNCITRAL Transparency Rules) to the arbitration, as far as and to the extent the Parties so agree.

Summary of the Appendixes

The Rules contain six Appendixes. They are Fees Schedule (Appendix A); Indicative Timetable for Arbitration Proceedings (Appendix B), Expedited Procedures (Appendix C), Emergency Arbitrator Procedures (Appendix D), Rules for Appeal Proceedings (Appendix E), and Procedural Guidelines for Arbitration under the UNCITRAL Arbitration Rules (Appendix F).

Appendix A is fees schedule. It provides the standard registration fee and arbitration administration fee of the BAC. It also allows the fees of arbitrators to be determined either on an hourly basis or depending on the amount in dispute.

Appendix B is an indicative timetable for a typical investment arbitration case submitted to the BAC under the Rules. By clearly stating the proposed duration of each stage of the arbitration, the timetable not only serves as a helpful reference for the arbitral tribunals, but also helps enhance the procedural predictability of the arbitration.

Appendix C sets forth expedited procedure rules. It covers the application of an expedited procedure, composition of an arbitral tribunal, rules of the proceedings and reference to other provisions of the Rules. Essentially, this Appendix, through appropriately simplifying an arbitral procedure, provides the Parties a possibility to resolve the dispute in an expedited manner. Under this Appendix, an expedited procedure may be initiated upon the consent of both Parties.

Appendix D provides procedural rules for emergency arbitrator. It deals with the application for emergency interim relief, and the appointment, procedure, seat, decision and costs of emergency arbitrator.

Appendix E are rules of appeal proceedings. These rules deal with the initiation and cause of appeal, the composition and jurisdiction of appellate tribunal, the conduct and termination of appeal proceedings, and the appeal award. It also deals with costs of the appeal and the deposit of the costs. Under this Appendix, the members of the appellate tribunal shall be nominated or appointed from the Panel of Arbitrators, and shall be different from the arbitrators of the original arbitration. Importantly, once an appeal has been initiated, no Party may seek performance of the arbitral award or apply to any judicial authorities to enforce or set aside the arbitral award, unless the appeal proceedings are terminated. The appeal award shall be the final award.

Appendix F is Procedural Guidelines for Arbitration under the UNCITRAL Arbitration Rules. In practice, UNCITRAL Arbitration Rules are frequently applied in ad hoc investment arbitrations, and the Guidelines can facilitate the BAC in administering such arbitrations. This Appendix includes general provisions, the seat of arbitration, notice of arbitration and administration services which the BAC may provide. It also includes costs of the arbitration, and payment and deposit of such costs.

Major Highlights

The Rules not only aim to provide a set of practical rules for investment arbitration, but also aim to bring in certain innovative aspects to the existing investment arbitration rules and practices.

First, the Rules combine a set of institutional arbitration rules with a set of procedural guidelines for ad hoc arbitrations under the UNCITRAL Arbitration Rules. The major purpose of integrating the Guidelines in the Rules is to enable the BAC to serve both institutional and ad hoc arbitrations.

Second, the Rules allow appeal against arbitral awards. The inconsistency of arbitral decisions in investment arbitration is frequently criticized. Such inconsistency is caused by many reasons, and an appeal procedure is often thought as a helpful way of improving the consistency and predictability of investment arbitration. The arbitral appeal issue has been extensively discussed in various contexts, notably in the amendment of the ICSID Arbitration Rules, the discussions of UNCITRAL Working Group III, and the treaty-making of the European Union. Up to the present, no existing institutional investment arbitration rules have incorporated a set of specialized rules for appeal proceedings. The BAC takes a first step. As stipulated in Article 51 and Appendix E to the Rules, an appeal against the arbitral award is possible and available, subject to certain requirements. The appeal shall be based on the consent of the Parties, and the Parties shall bear the necessary time and costs of the appeal.

Under the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the annulment procedure and judicial review of arbitral awards allow scrutiny of the procedural aspects of an arbitral award. Substantive errors of the arbitration can hardly be corrected. For such reason, the Rules and Appendix E allow the Parties to appeal against an arbitral award if the award contains an error of the interpretation and/or application of rules of law or a manifest and material error in the appreciation of the facts, or the arbitral tribunal/BAC lacks jurisdiction or exceeds its power, without prejudice to the applicable judicial review procedures.

Third, the Rules feature further improvement of arbitral efficiency and reduction of arbitral costs. Recognizing that excessive duration and high costs are among major concerns over the existing investment arbitration system, the Rules incorporate several innovative aspects to address these concerns. The Rules require arbitral tribunals to render arbitral awards within 24 months since the constitution of the tribunals (Article 19). Besides, an indicative timetable is also attached in Appendix B, suggesting a time limit on each major stage of an arbitration under the Rules. The Rules also include a set of rules of expedited procedures (Article 38 and Appendix C). This provides an opportunity for the dispute to be resolved in an expedited way, which could substantively improve arbitral efficiency and save costs of the arbitration. Similar rules are seldom found in institutional investment arbitration rules. Further, the Rules provide that arbitration documents shall be delivered through electronic means, unless the Parties have agreed otherwise, which is both time-saving and environment-friendly. Finally, compared with major institutional investment arbitration rules, the registration fee and administration fee charged by the BAC are also kept at a low level.

It deserves noting that, while the Rules try to impose clear time limits on arbitration proceedings after the constitution of the arbitral tribunal, they provide flexibility to the Parties in taking necessary steps before the constitution of the tribunal. This is especially to allow the respondent state more time to respond to the arbitration claim. For instance, a respondent state is only obliged to provide a limited amount of information in the response to the notice of arbitration, mainly relating to the contact information of the respondent, while more information could be sufficed at a later stage of arbitration (Article 6). The respondent state also has 60 days for nomination of arbitrator (Article 10). Further, even if one Party fails to nominate an arbitrator within the designated time limit, the BAC will not automatically and immediately step in to appoint arbitrator, but will do so upon the request of the other Party.

Fourth, the Rules enhance the transparency of arbitration. Lack of transparency is a major criticism of the investment arbitration system. The international community has formed a certain level of consensus on the improvement of arbitral transparency. Such consensus can be sensed from the adoption of the UNCITRAL Transparency Rules and the United Nations Convention on Transparency in Treaty-Based Investor-State Arbitration (Mauritius Convention). Recognizing such “transparency trend”, the Rules include clear provisions on the opening of hearings (Article 24), third party participation (Article 36) and compulsory publication of certain types of arbitration documents, such as the award, jurisdictional decision and notice of arbitration (Article 50). More importantly, the Rules allow the Parties to determine whether and to what extent the UNCITRAL Transparency Rules are to be applied in the arbitration through mutual agreement.

Fifth, the Rules set forth high qualification and ethical requirements on arbitrators. This is a timely and practical response to the growing concerns over the impartiality and independence of arbitrators in investment arbitration. The Rules not only expressly require arbitrators to have sufficient availability in handling the dispute, but also require them to possess knowledge of public international law (Article 8). Further, the BAC shall maintain a Panel of Arbitrators (Article 9). This is helpful in maintaining a high qualification and ethical requirements for arbitrators.

Last but not the least, the Rules also incorporate a number of provisions to respond to some other concerns over the existing investment arbitration system, such as the provisions dealing with third party funding.

Appendixes:

Beijing Arbitration Commission Rules for International Investment Arbitration

Appendix A. Schedule of Fees for International Investment Arbitration

Appendix B. Indicative Timetable for International Investment Arbitration

Appendix C. Expedited Procedure Rules for International Investment Arbitration

Appendix D. Emergency Arbitrator Rules for International Investment Arbitration

Appendix E. Rules of Appeal Proceedings for International Investment Arbitration

Appendix F. Procedural Guidelines for Arbitration under the UNCITRAL Arbitration Rules

Model Arbitration Clause Arbitration Clause
All disputes arising from or in connection with this contract shall be submitted to Beijing Arbitration Commission / Beijing International Arbitration Center for arbitration in accordance with its rules of arbitration. The arbitral award is final and binding upon both parties.
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