Beijing Arbitration Commission

Explanations on 2008 Amendment to Beijing Arbitration Commission Arbitration Rules

Wang Hongsong, Secretary-General of Beijing Arbitration Commission

Beijing Arbitration Commission (the “BAC”) discussed and adopted the new Beijing Arbitration Commission Arbitration Rules (the “2008 Rules”) at the First Meeting of the Fifth Session of the BAC on September 20, 2007, which are to be implemented on April 1, 2008. This is the seventh amendment to the Arbitration Rules of the BAC since the inception of the organization. On one hand, the 2008 amendment further improves the system and specific contents of the Arbitration Rules and provides a more reasonable and efficient procedural guarantee for the participants of arbitration; and on the other hand, it also makes the Arbitration Rules more in line with international practice and lays a foundation for the civil and commercial arbitration activities in China to meet the international standards and thus attract international parties.

The 2008 Rules are an amendment to the Arbitration Rules implemented since March 1, 2004 (the 2004 Rules), which symbolizes that the BAC has “been gradually converted from passively making up for procedural defects to actively serving the realization of advanced arbitration concepts”. The 2004 Rules contained major adjustments, modifications and supplements in both structure and content, and the provisions on many systems and measures, such as the disclosure and withdrawal of arbitrators, the ways of selection and appointment of arbitrators and the provision of dissenting opinions by the arbitrators who refuse to sign on an award, were the first of their kind in the arbitration institutions in China. But although the 2004 Rules received high recognition from both arbitration circles both in and outside China, some problems have been exposed in practice. The modifications in the 2008 Rules show further efforts and explorations of the BAC in serving the realization of advanced arbitration concepts on the basis of the 2004 Rules. All the modifications in the 2008 Rules are institutional ones, demonstrating the tireless efforts of the BAC in internationalizing its Arbitration Rules.

I. The 2008 Rules Delete the Provisions on the Service by Public Notice or by Leaving the Documents at the Place of Service in the Presence of a Notary

The deletion of those two ways of service is an important change in the Arbitration Rules concerning service.

Given that it was quite controversial at the time on whether the international practice of the “attempt of delivery” in commercial arbitration is applicable in the domestic cases in China, the 2004 Rules adopted this temporary expedient to deal with the service-related issues in domestic cases with reference to the ways of service by public notice and by leaving the documents at the place of service in civil litigation. These ways of service have been challenged in practice that they might violate the principle of confidentiality of arbitration, and waste human and material resources, leading to delays in the arbitration proceedings and violating the principle of cost-effectiveness of arbitration. The BAC recommended to adopt the provision on the “attempt of delivery” as early as in the amendment of the 1999 Rules, but this recommendation was not implemented due to various reasons. The 2004 Rules for the first time adopted the provision on the “attempt of delivery” for international commercial cases, i.e. “if despite reasonable inquiries, the addressee’s place of business, place of habitual residence or other mailing address cannot be found, service shall be deemed to have been effected if the document, notice or material is delivered to the addressees last known place of business, place of habitual residence or other mailing address by mail, courier or by any other means of delivery with proof of attempt to deliver”. The 2008 Rules further extend the application of this way of service to all cases. It is also conducive to promoting the cooperation in good faith between the parties and reminds the parties that they may have to bear adverse consequences if they fail to provide prompt and accurate contact information.

II. The Parties of International Commercial Cases Are Allowed to Select Arbitrators outside the Panel of Arbitrators

The BAC adopts the system of panel of arbitrators, that is, the parties are to select arbitrators from a list provided by the BAC. But the candidates in the list of arbitrators are sometimes unsatisfactory and are particularly not attractive to the parties of international commercial cases. International practice shows that generally arbitration institutions have the lists of arbitrators just for the purpose of recommendation, and some of them even do not have such list and the parties may freely choose arbitrators.

The 2008 Rules provide that the parties of international commercial cases may choose arbitrators outside the list, allowing the parties to freely choose the arbitrators that meet the conditions specified in the Arbitration Law. This on the one hand enhances the autonomy of the parties in choosing arbitrators and highlights the principle of respect for the will of the parties; and on the other hand makes the Arbitration Rules of the BAC more in line with the international practice and increases the attractiveness to the parties of international cases.

The added contents in the 2008 Rules concerning the selection of arbitrators are as follows (see Article 55):
“(1) Arbitrators could be chosen by the parties from or outside the panel of arbitrators maintained by the BAC.
(2) If the parties want to select arbitrators outside the panel of arbitrators maintained by the BAC, they shall submit the resume and means of contact of the candidate to the BAC. The candidate selected outside the panel may act as an arbitrator with the confirmation of the BAC, and with a term to expire at the closing of the case, unless the BAC decides on listing the arbitrator on the panel of arbitrators. ”

III. The 2008 Rules no Longer Distinguish between the Panel of Arbitrators for Domestic Cases and That for International Commercial Cases

Previously the BAC has separate panels of arbitrators respectively for the domestic and international commercial case for the parties to choose from the corresponding panel according to the nature of their cases. As the BAC has seen an increase in its accepted international commercial cases in recent years, its demand for the arbitrators for international commercial cases is growing. In addition, with the increasingly stricter criteria for the engagement of arbitrators and the strengthening system of trainings, the overall quality of its arbitrators is being improved. In this context, integrating the panels of the arbitrators for the domestic and international commercial cases can expand the scope of independent selection for the parties and provide the arbitrators with an opportunity to constantly improve their abilities to adapt to the needs of international arbitration.

IV. The 2008 Rules Provide That an Agreement to Apply the BAC Rules Shall be Deemed as Agreement to Provide Disputes to the BAC for Arbitration

A paragraph is added to Article 2 of the 2008 Rules:

“Where the parties agree to apply the BAC rules, but do not choose a specific arbitration institution, they shall be deemed to agree to provide their disputes to the BAC”
In international practice, few countries require that an arbitration institution must be fixed in the arbitration clause. Therefore, the parties of international commercial cases are generally accustomed to agree on the applicable arbitration rules instead of an arbitration institution. According to general practice, in the case of institutional arbitration, an agreement on the application of the arbitration rules of an arbitration institution means the agreement on the jurisdiction on that institution. But in the Arbitration Law of China it is required that an arbitration agreement should explicitly state the selected arbitration institution.

The added paragraph is mainly based on Article 4 of the Interpretation of the Supreme People's Court concerning Some Issues on Application of the Arbitration Law of the People’s Republic of China, which reads “Where an agreement for arbitration only stipulates the arbitration rules applicable to the dispute, it shall be deemed that the arbitration institution is not stipulated, unless the parties concerned reach a supplementary agreement or may determine the arbitration institution according to the arbitration rules agreed upon between them.”Under this provision, an arbitration agreement that only stipulates the applicable arbitration rules is invalid unless the parties may determine the arbitration institution according to the arbitration rules agreed. This provision of the Supreme Court also draws on international practice, but requires a statement in the arbitration rules themselves. If the arbitration rules of an arbitration institution do not provide that an agreement on applying its arbitration rules shall be deemed as an agreement to submit the dispute to the institution for arbitration, the arbitration agreement on the applicable arbitration rules is invalid. Therefore, this added paragraph can make up for the deficiency in the original Arbitration Rules to comply with the provisions of the judicial interpretation, avoid troubles to the parties in terms of the arbitration jurisdiction, and especially protect the interests of the parties of international commercial cases.

V. Modifications in other Aspects

1. A paragraph is added to Article 18, which reads,
“6. The party shall re-nominate another arbitrator within 5 days of its receipt of the notice of re-nomination, if the arbitrator refuses to accept the party’s nomination or cannot attend to hear the case, due to the illness or other factors that may affect performing an arbitrator’s duty.”

This is mainly out of the consideration on the re-nomination of an arbitrator before the constitution of an arbitral tribunal. The 2004 Rules only provided for the re-nomination after the constitution of arbitral tribunal in Article 22, which was also applied to the cases before the constitution as a reference. Therefore the 2008 Rules make a clear provision for the re-nomination before the constitution of arbitral tribunal.

2. A provision on private conciliation is added

This is to match the implementation of the Conciliation Rules. The practice of conciliation in other countries shows an annual increase of cases where the parties suspend the arbitral proceedings and resort to conciliation first in the arbitration process. This added provision offers more flexible, convenient and cost-effective ways of resolving disputes to those parties fearing that the impartiality of the award of the arbitration after the failure of conciliation may be affected when an arbitrator acts as the conciliator at the same time.
The content of the added provision is:

“Article 40 Private Conciliation by the Parties
During the arbitral proceedings, the parties may enter into private conciliation or apply to the BAC for conciliation in accordance with the Conciliation Rules of the BAC. ”

3. Provisions on the suspension of arbitral proceedings are added

The occurrence of some circumstances may lead to suspension of arbitral proceedings and there are actually such suspensions in practice. Arbitration Rules make general provisions based on which the arbitral tribunal may make a decision to suspend the arbitration proceedings. The time of suspension is not counted in the time limit on case hearing, making the suspension more acceptable to the parties.

The content of the added provision is:
“Article 41: Suspension of Arbitral Proceedings

1. The arbitral proceeding may be suspended upon the joint request of the parties or if special circumstances occur during the proceeding that makes suspension of proceeding necessary;

2. The suspension shall be decided by the arbitral tribunal, or if the arbitral tribunal has not been constituted, by the BAC. ”

4. The provision “other documents issued by the BAC do not constitute part of these rules, unless the BAC has otherwise statement” is added in Article 65.

This explicitly states that other internal documents issued by the BAC other than the Arbitration Rules, including the ethical standards guiding the arbitrators, secretaries and appraisal institutions, are not a part of the Rules and shall not be taken as a standard to judge whether there is a breach of the arbitral procedures.

5. Provisions on the arbitration fees are added

This is mainly to increase the transparency of the fees charged by the BAC by explicitly providing that in addition to the case acceptance fees and the case handling fees that occur in each case, some other fees may also incur to the parties in specific cases and the parties need to pay them according to the actual situations.

The added provisions are as follows: 

“Article 18

5. The party shall bear the burden of the arbitrator’s increased travel expense incurred necessarily by hearing the cases, if the party nominates the arbitrator living outside Beijing. If a party has not deposited the advance on expenses within the period stipulated by the BAC, it shall be deemed not to select the arbitrator. The Chairman could appoint the arbitrator for the party in accordance with these Rules.

Article 32
2. The parties shall deposit an advance in appraisal costs according to the agreement by the parties or the proportion confirmed by the tribunal. The tribunal has the power to decide not to carry out the appraisal, if the parties do not deposit an advance in costs.

Article 55
4. As a party agrees to increase the compensation for international arbitrators, the party shall deposit an advance on the resulting additional costs within the period stipulated by the BAC. If a party has not deposited the advance on costs, it shall be deemed not to select the arbitrator. The Chairman could appoint the arbitrator for the party in accordance with these Rules. ”

The evolvement and improvement of Arbitration Rules is the epitome of the continuous development and progress of an arbitration institution. The modifications in the 2008 Rules fully reflect the pragmatic and innovative spirit that the BAC has always been advocating. With the implementation of the new Rules, BAC will further standardize its work of arbitration, provide more professional, efficient, economical and suitable arbitration services for the parties of commercial cases and make tireless efforts in building itself into a world leading arbitration institution!

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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