8.01  This chapter discusses in detail the conduct of arbitral proceedings under the CIETAC Rules, including important procedural matters regarding the conduct of oral hearings, such as: principles on conduct of hearing; place of oral hearing; notice of oral hearing; confidentiality; default from arbitral proceedings, and record of oral hearing (Articles 35 to 40); some rules in regard to evidentiary issues (Articles 41 to 44); suspension of the arbitral proceedings (Article 45); a party’s withdrawal of its claim and the associated consequences (Article 46); as well as the unique practice of combining conciliation and arbitration (Article 47).

8.02  This provision sets forth the general principles for the arbitral tribunal to conduct a case under the CIETAC Rules. In the first sentence, it reaffirms the parties’ autonomy to determine the procedure of arbitration by way of agreement, which is expressly provided in Article 4.3 of the CIETAC Rules.¹ In the meantime, it confirms the arbitral tribunal’s power to decide on the procedure in the absence of the parties’ explicit agreement.

8.03  In the second sentence, the mandatory duties of arbitrators, i.e. ‘to act impartially and fairly’, which has been mentioned in Articles 24 and 32 of these Rules,² are reaffirmed. Since the emphasis here is on the conduct of a hearing, a specific requirement is added, i.e. the arbitral tribunal is required to ‘afford a reasonable opportunity to both parties to present their case’. The arbitrators are required to carry out such mandatory duties ‘under all circumstances’. It follows that, where parties’ agreement on procedure of hearing is deemed as violating fundamental fairness or depriving a party of the reasonable opportunity to present their case, the arbitrators are authorized to override such agreement so as to carry out their mandatory duties. This provision is in line with the rules of other international arbitration institutions³ and the provision of the New York Convention.⁴

8.04  As a principle, the arbitral tribunal is required to hold an oral hearing under the CIETAC Rules. There are two exceptional situations where the arbitral tribunal may examine the case on the basis of documents only, namely: (i) where all the parties agree and the arbitral tribunal consents; and (ii) where the arbitral tribunal deems that oral hearings are unnecessary and the parties so agree.

8.05  In either circumstance, ‘document only’ examination of a case can be achieved only where all the parties and the arbitral tribunal considers it appropriate. The distinction between the two is merely how the idea of ‘document only’ examination is originated.

8.06  Even when the parties agree on ‘document only’ examination of a case, the arbitral tribunal may in its discretion order a hearing against parties’ agreement. The purpose of this provision is to empower the arbitral tribunal to safeguard the fundamental fairness of the arbitral proceedings and carry out the mandatory duties provided in Article 35.1.

8.07  This provision should be understood in the context of ordinary procedure. For a summary procedure, the requirement is set forth in Article 60 of these Rules. For a discussion on that provision, see paragraphs 13.28 to 13.30.

8.08  Notwithstanding this provision, in practice, cases of ordinary procedure are rarely conducted on document-only basis.

8.09  The inquisitorial approach is commonly adopted in court and arbitration proceedings in civil law jurisdictions. Since China is a civil law jurisdiction, hearings in China are generally conducted under the inquisitorial approach, whereby the arbitral tribunal guides the parties through the hearing, including presiding over the parties’ oral submissions, arguments, and the examination of evidence, and conducting investigations and fact-finding on themselves. This approach can be very efficient and hearings usually last for no more than one day.

(p. 183) 8.10  While the inquisitorial approach is widely adopted in CIETAC arbitrations, parties and counsel involved in foreign-related arbitrations administered by the CIETAC are often from common law jurisdictions and they normally prefer the adversarial approach. Also, the CIETAC maintains a large panel of experts and arbitrators who are familiar with conducting hearings under the adversarial approach. As such, there is a need for arbitration to be conducted under the adversarial approach.

8.11  In recognition of this fact, the CIETAC has, since the adoption of the 2005 CIETAC Rules, granted parties an option to adopt the adversarial approach in CIETAC arbitrations.⁵ Parties may provide in their arbitration agreement as to whether the inquisitorial or adversarial approach shall be adopted in any hearings. According to Article 35.3 of the CIETAC Rules, even in the absence of the parties’ choice of either approach, the arbitral tribunal may in its own discretion ‘adopt an inquisitorial or adversarial approach in hearing the case having regard to the circumstances of the case’. In practice, the adversarial approach has been adopted in a growing number of CIETAC arbitrations, particularly where the presiding arbitrator or the sole arbitrator is from a common law background. In such procedure, substantial time is allocated for the examination and cross-examination of witnesses, and the hearing may go on for days.

8.12  Timing of deliberations—The CIETAC Rules impose no restriction on the way how the arbitral tribunal deliberates on a case. In practice, members of an arbitral tribunal meet immediately before the oral hearing, which provides a good opportunity for them to meet each other, to confirm with the CIETAC case manager certain procedural issues, such as ensuring that all communications received from the parties have been duly delivered to the parties, and to conduct a preliminary review of the case so as to identify the issues to be dealt with at the hearing. Such a preparation meeting is usually considered as part of the ‘deliberations’ of the arbitral tribunal.

8.13  The arbitral tribunal usually deliberates on the case right after the hearing. Such deliberations may yield a unanimous opinion on the merits of the case. Where there are outstanding factual issues to be further substantiated by way of supplementary evidence (which is allowed in many cases), or there are outstanding legal issues to be further elaborated on by the parties, the deliberations right after the hearing may not yield (p. 184) any outcome, in which case there will be further deliberations by the arbitral tribunal through the appropriate means.

8.14  ‘In any manner’—Where the arbitrators have reached a unanimous opinion or a majority opinion through deliberations, the presiding arbitrator should draft an arbitral award accordingly. Following circulation of the draft award, one other round of deliberation usually takes place. By this time, all the outstanding issues need to be sorted out. In other instances, the presiding arbitrator will draft an arbitral award as per his or her own opinion, i.e. before a unanimous opinion or a majority opinion is reached, then all three arbitrators will further deliberate on the case on the basis of the draft award.

8.15  In the old time, deliberations always mean in-person meetings. However, with advancement of technology, arbitrators now may deliberate through telephone conferencing, video conferencing, exchange of emails, or even communications via social network (such as a mini-Wechat group). In practice, in-person meetings and telephone conferencing are most commonly used.

8.16  Recommended procedural tools—This provision recommends some procedural tools that are commonly adopted in international arbitration. In the past, these tools are rarely adopted in CIETAC arbitration, probably because most arbitrators of the CIETAC are not familiar with those tools and the arbitrators rely on the Secretariat of the CIETAC to handle procedural matters. However, this situation has been changed in the recent years. Nowadays, more and more CIETAC arbitrators begin to make use of those tools, particularly procedural orders and question lists, in order to manage the procedure in a time-saving and cost-effective manner. To date, use of terms of reference and pre-hearing conferences is still not popular.

8.17  The CIETAC has organized a taskforce to focus on reforming its arbitral procedure. Emphasis is placed on enhancing the arbitral tribunal’s role and encouraging more arbitral tribunals to run a case in a way similar to international arbitration in other major arbitration jurisdictions. Templates of procedural orders and timetables are to be recommended to arbitrators who have limited experience in this field. No doubt such reform will lead to increasing use of the procedural tools.

(p. 185) 8.18  Presiding arbitrator’s power to decide the procedural arrangements—The second sentence of this provision is newly added to the CIETAC Rules. In practice, important procedural matters, such as decision on jurisdiction, holding of oral hearings, and stay of proceedings, etc., need to be decided by the entire arbitral tribunal; however, less important matters, such as whether to grant a party’s request for extending the time for submission, may be decided by the presiding arbitrator alone (in consultation with the Arbitration Court in most situations), so as to save time and improve efficiency. This new provision is indeed a crystallization of the previously existing practice.

8.19  How a CIETAC hearing is conducted depends on the approach of the arbitral tribunal, the agreement of the parties, the nature and complexity of the case, etc. Below is a summary of what usually happens in a CIETAC hearing.

8.20  Time—In a CIETAC arbitration, a hearing normally commences at 9:30 am and concludes at either 12:00 pm or at 5:00 pm.

8.21  Sitting of attendees—The hearing is usually attended by the parties, their counsel, witnesses, experts, the arbitral tribunal, and the CIETAC case manager who will take a record of the hearing. The parties and their respective counsel will normally sit at opposite sides of the hearing table and the arbitral tribunal will sit at the head of the table. The case manager will sit at a separate table next to where the members of the arbitral tribunal are seated.

8.22  Pre-hearing formalities—Prior to the commencement of the hearing, the parties would be requested by the case manager to fill in a form stating the name, profession, and capacity of each participant. Parties’ counsel and employees who appear at the hearing are required to submit a power of attorney from a party authorizing his or her attendance at the hearing, while there is no such requirement for a party’s legal representative⁶ nor witnesses. The power of attorney shall be submitted to the Arbitration Court for examination by the arbitral tribunal (with the assistance of the case manager) before the hearing starts.

8.23  Pre-hearing discussions—Arbitrators usually will have a short meeting to discuss the case right before the hearing. The meeting would usually take about half an hour. Arbitrators will exchange their preliminary views face to face on the procedural or substantive matters of the case.

(p. 186) 8.24  Opening remarks of the arbitral tribunal—A hearing is commenced by the sole or presiding arbitrator, who would normally begin by announcing the name of the case and the case number and then introducing the arbitral tribunal. After this, the sole or presiding arbitrator would go through the forms submitted by the parties so as to know the name and capacity of each participant at the hearing, and inquire the parties if there is any objection to any of the arbitrators or participants at the hearing. Sometimes, the sole or presiding arbitrator will also confirm the terms of the applicable arbitration agreement(s), the arbitration rules, and other procedural aspects of the case.

8.25  Opening submissions—In the absence of any objection, the arbitration will proceed further. In most cases, the arbitral tribunal will request the Claimant to make opening submissions first. Although normally no time limit is imposed on such oral submissions, the arbitral tribunal would generally encourage the Claimant not to repeat the detailed contents of the Request for Arbitration and ask the Claimant to limit its submissions to the key points. Once the Claimant has completed its submissions, the Respondent would then be directed to make its opening submissions.

8.26  Examination of witness or evidence—Following the parties’ opening submissions, the arbitral tribunal will normally pose questions to each party. Then it is the time for examination of evidence. As to the documentary or physical evidence, the arbitral tribunal will direct a party to comment on the authenticity, relevancy, legitimacy and evidential value of the evidence produced by the other party. Where a party disputes the authenticity of the evidence, the other party needs to present the original of the evidence to substantiate its authenticity.⁷ As for the procedure for witnesses to give evidence, a direct or cross examination of factual witnesses and expert witnesses is permitted, although the time and extent of the examination are usually limited. In practice, examination of witness usually takes place after examination of documentary evidence, but this sequence may be adjusted by the arbitrators if they consider it necessary to hear from the witnesses first.

8.27  Debate—Once testimonial evidence and any other evidence have been presented, the arbitral tribunal may pose further questions to the parties. These questions usually focus on legal issues. With the permission of the arbitral tribunal, a party may pose factual and legal questions to the other party. On some occasions, the arbitral tribunal may summarize the key legal issues and direct parties to each present its view on these issues. This stage is usually called the ‘debate’ following the approach of civil litigation in mainland China, although it is much less formal compared with civil litigation.

8.28  Adjournment—After the key issues have been summarized and discussed through ‘debate’ or otherwise, it is customary for a three-member tribunal to adjourn the hearing for approximately fifteen minutes. The main purpose is to allow the three arbitrators to have a preliminary assessment on the merits, an assessment on the feasibility of (p. 187) mediation, or to determine whether to allow further submissions of evidence and to conduct additional hearings.

8.29  Conciliation—After reconvening the hearing, the arbitral tribunal will normally seek views from the parties with respect to the further conduct of the proceedings. In particular, the parties will usually be asked as to whether they see any chance for settlement, or whether the parties would like the arbitral tribunal to conciliate their dispute. If the parties agree to conciliate, the arbitration may be immediately suspended. If any party disagrees, the arbitration will continue to run its course.⁸

8.30  Arrangements of future proceedings—At the end of the hearing, the arbitral tribunal will consult with the parties and give oral directions regarding the subsequent proceedings. If any party wishes to have further hearings, it may raise a request to the arbitral tribunal. According to the circumstances of the case, the arbitral tribunal will fix a timetable for submission of any further documents, such as post-hearing statement, supplementary evidence (if any), and written comments on the evidence already submitted and on the supplementary evidence.

8.31  Since the 2005 CIETAC Rules, the ‘place of oral hearing’ is clearly distinguished from the ‘place of arbitration’.⁹ The former simply refers to the place for holding the oral hearing; while the latter refers to the seat of arbitration and carries multiple important implications. For a discussion of the place of arbitration, see paragraphs 3.18 to 3.49.

8.32  Parties are at will to agree on the place of oral hearing either in or outside mainland China. Under Article 82.3 of the CIETAC Rules, where the parties have agreed to hold a hearing at a place other than the domicile of the CIETAC or its relevant sub-commission/arbitration centre, the parties are required to pay a deposit for any travel and accommodation expenses to be incurred for the arbitral tribunal and case manager to attend the hearing. Since the incurrence of expenses is a consequence of the parties’ (p. 188) agreement, the deposit is usually equally split between the parties. If the parties failed to do so within the time period (usually one or two weeks) specified by the CIETAC, the hearing should be held at the domicile of the CIETAC or its relevant sub-commission/arbitration centre.

8.33  Where parties have not reached any agreement on place of hearing, which is usually the case, the place of hearing shall be the domicile of the CIETAC headquarters or its sub-commission/arbitration centre which administers the case, unless a different location is approved by the President of the Arbitration Court.

8.34  This provision also permits the arbitral tribunal to, if it considers necessary, conduct a hearing at a place other than the domicile of the CIETAC or its sub-commission/arbitration centre with the approval of the Arbitration Court of the CIETAC. In practice, such a decision is usually made for convenience of the parties and/or arbitrators. For example, where the two parties are from Qingdao, and one of the parties nominated an arbitrator who is also from Qingdao, the arbitral tribunal may decide to hold the hearing in Qingdao with the approval of the Arbitration Court. In the circumstances, the parties will be directed to pay a deposit for the travel and accommodation expenses of the other two arbitrators and the case manager, and possible expenses for renting hearing facilities, if necessary.

8.35  Having said the above, the authors’ observation is that, in practice, the hearing would normally be conducted on the premises of the CIETAC or its sub-commission/arbitration centre.

8.36  The date of a hearing is fixed by the arbitral tribunal in consultation with the Arbitration Court. In the past, arbitral tribunals did not consult with parties when fixing the date of a hearing with a view to expediting the arbitral proceedings. If the date of the hearing did not suit a party’s schedule, the party can apply for postponing the hearing. (p. 189) Under the current practice, arbitral tribunals and case managers are generally encouraged to consult with the parties before determining the date of a hearing for the sake of good services and to avoid re-scheduling at any party’s request. However, in practice, some arbitral tribunals in CIETAC arbitrations, particularly those hearing small-value cases, still fix the date of a hearing without consulting with the parties in advance. It is always advisable for the counsel to consult the case manager after the composition of the arbitral tribunal as to the possible dates of the hearing, and inform the case manager the dates that he or she, or the party he or she is representing, is unavailable, so as to avoid, to the possible extent, postponement of oral hearing due to unavailability of a party or counsel.

8.37  This provision requires that the arbitral tribunal notify the parties, usually through the case manager of the Arbitration Court, the date of the first oral hearing at least twenty days in advance.¹⁰ The Notice of Oral Hearing may include the following information:¹¹

1. (i)  case number and names of parties, parties’ representative and arbitrators;

2. (ii)  time and place for the oral hearing;

3. (iii)  a reminder that parties should attend the hearing on times, and should bring originals of their documentary and physical evidence for examination by the arbitral tribunal and the other party;

4. (p. 190) (iv)  a reminder that parties should notify the Arbitration Court in advance the names and the capacities of the participants who shall attend the oral hearing; and

5. (v)  in some cases, a deadline for submitting pleadings or evidence or other procedural issues.

8.38  Normally, the case manager will send the Notice of Oral Hearing via courier to parties as discussed in paragraph 8.37. But if the case manager considers that the Notice of Oral Hearing may not be received by parties at least twenty days in advance of the oral hearing, the case manager may use fax, email or other instant means of communication to ensure that the parties are duly notified pursuant to this provision.

8.39  Format and content—The request for postponement should be made in writing and signed and/or sealed by a party or its counsel. In the written request, a party should expressly state its specific request, i.e. how long it expects the hearing to be postponed; in the written request, the applying party should also provide the justified reasons for the postponement sought.

8.40  Justified reasons—The ‘justified reasons’ for a party’s request for postponement of hearing may include the following:

1. (i)  the date of the oral hearing is in conflict of the requesting party’s agenda for other important matters;

2. (ii)  the other party submitted a large volume of new evidence shortly before the scheduled hearing, and the requesting party does not have time to digest the new evidence of the other party and prepare its rebutting evidence; and

3. (iii)  the requesting party, its counsel or witness may not attend the hearing due to physical conditions, and roles of such a person cannot be substituted by others, etc.

8.41  Recipient—This provision requires a requesting party to communicate its request for postponement to the arbitral tribunal; in practice, the request is usually communicated to the arbitral tribunal through the case manager of the Arbitration Court.

8.42  Time limit—Under the 2005 CIETAC Rules, such request must be communicated to the arbitral tribunal (through the Secretariat of the CIETAC) at least ten days prior to the hearing.¹² Under the 2012 and current CIETAC Rules, the time period for a party to postpone a hearing has been changed to ‘within 5 days of the receipt of the notice of the oral hearing’.¹³ This change was introduced in light of the perception that a party should know within a reasonable time period whether the date of a hearing informed by the (p. 191) Arbitration Court fits its schedule upon receipt of the notice of the hearing. Pursuant to this provision, parties should ensure that the request for postponement be received by CIETAC within the 5-day period. To increase the chance of success in regard to its request for postponement, parties are encouraged to submit its request as soon as possible.

8.43  Decision on request for postponement—In accordance with the last sentence of Article 37.1, where a party has submitted its request for postponement, the arbitral tribunal will decide whether to grant the request and postpone the hearing. The arbitral tribunal may consider the following factors for the decision:

1. (i)  whether the reason for postponement is justified;¹⁴

2. (ii)  whether the oral hearing may be rescheduled without causing undue delay of the proceedings; and

3. (iii)  whether the other party is fairly treated if the postponement is granted, etc.

8.44  Late submission—Article 37.2 of the CIETAC Rules expressly authorizes the arbitral tribunal to decide whether to accept a late submission of the request for postponement.¹⁵ Pursuant to this provision, the arbitral tribunal may still accept a party’s request for postponement as long as the requesting party gives a justified reason for its late submission, e.g. where the key witness cannot participate the oral hearing due to his or her physical condition and such physical condition occurs after the expiration of the 5-day period stipulated in Article 37.1. The arbitral tribunal may decide how to handle the late submitted request for postponement and is not obligated to review or respond to such late submitted request.¹⁶

8.45  The provision clarifies that the 20-day and 5-day time periods provided in Article 37.1 apply only to the notice of the first hearing and a request for postponement of the first hearing, and do not apply to notices of any subsequent hearing or requests to postpone these hearings; the 20-day and 5-day time periods also do not apply to notice of a postponed oral hearing, even if it is the first oral hearing, and party’s request for further (p. 192) postponement of the postponed oral hearing. This provision is apparently introduced for the purpose of ensuring efficiency.

8.46  Confidentiality is a ‘contentious and unsettled subject’ in the arena of international commercial arbitration.¹⁷ The CIETAC Rules only address limited aspects of this subject, i.e. the privacy of hearing (Article 38.1), which is basically universally adopted by national legislation and institutional rules, and the general obligation of confidentiality (Article 38.2), which is regarded as an inherent requirement of the privacy of hearing. The CIETAC Rules are silent on other important issues of confidentiality. The arbitral tribunal and parties may resort to other applicable legal sources to determine the other issues in relation to confidentiality.

8.47  This provision expressly stipulates that a hearing shall be held privately unless the arbitral tribunal decides otherwise in the face of a joint request by parties.

8.48  Privately held hearing means that any person is not allowed to participate in the hearing unless his or her participation is permitted under the CIETAC Rules, or consented by parties and approved by the arbitral tribunal. In addition to parties, parties’ representatives, arbitrators and CIETAC case managers, the following are permitted to participate an arbitration hearing: witnesses (Article 40.1), experts (Article 44.3), interpreters (Article 81.2), and stenographer (Article 40.3), etc.

8.49  Participants to the hearing may include arbitrators, case manager, parties, parties’ representatives, witnesses, interpreters, stenographers, experts, and appraisers etc. In practice, the case manager will assist the arbitral tribunal to verify the capacity of each participant ahead of the hearing. Any person who does not possess the due capacity, e.g. a company employee or a legal assistant who fails to present a power of attorney to verify his or her capacity as party representative or agent, may participate in the hearing only upon the consent of all the parties and the approval by the arbitral tribunal.¹⁸

(p. 193) 8.50  Where both parties request for an open hearing, the arbitral tribunal should grant such joint request in principle. However, there are exceptions. Article 40 of the PRC Arbitration Law provides that an arbitration involving state secrets shall be held privately. This means that the arbitral tribunal may, despite the parties’ agreement to the contrary, hold a hearing privately if the arbitral tribunal is of the view that state secrets are involved in the dispute. In practice, parties’ agreement for an open hearing is very rarely seen.

8.51  This provision imposed a general obligation of confidentiality upon all the participants to the arbitral proceedings. The requirement in regard to the arbitrators is consistent with the Article XIII of the Code of Conduct, which provides that ‘[a]n arbitrator shall keep the confidentiality of an arbitration and shall not disclose any information related to its substance or procedure, including facts of the case, arbitral proceedings and deliberations of the tribunal’.¹⁹

8.52  However, the CIETAC Rules are silent on other important issues concerning confidentiality, such as the scope of the obligation of confidentiality, exceptions to the obligation of confidentiality, and the remedies for violation of the obligation; the arbitral tribunal and parties have to rely on the applicable national law or other legal sources to resolve these issues.

8.53  The obligation of confidentiality is not expressly recognized under PRC Arbitration Law, and scope of obligation of confidentiality is far from settled. However, based on court decisions or practical experiences, the following situations may be regarded as not violating the obligations of confidentiality:

1. (i)  Expert witness—In a 2015 case, where the applicant moved to set aside a SCIA award on the ground that the other party had violated the principle of confidentiality by retaining expert to support its defense, the court held that the principle of confidentiality has not been violated because retaining expert is part of (p. 194) the other party’s right to defense and no evidence shows that confidential information has been leaked to non-party, therefore, the court denied the applicant’s request.²⁰

2. (ii)  Notary service—In a 2016 case, where the applicant moved to set aside a BAC award on the ground that the BAC had violated the principle of confidentiality by entrusting public notary to witness the service of arbitration documents, the court held that the BAC’s use of notary services is consistent with its arbitration rules, and such practice does not violate the principle of confidentiality, therefore the court denied the applicant’s request.²¹

3. (iii)  Use of arbitral award as evidence—Pursuant to Article 9.5 of the Supreme People’s Court Several Provisions on Evidence in Civil Procedures (‘SPC Provisions on Evidence’),²² a party are not required to prove any fact confirmed in an arbitral award, which effectively allows parties to submit the arbitral award as evidence.²³ In a 2014 case, an arbitral award was submitted as evidence by a party who is not even the party to that arbitration; the opposing party in that case challenged this evidence on the ground that the submitting party had violated the principle of confidentiality; however, the court based its decision on the arbitral award without touching the issue of confidentiality.²⁴

4. (iv)  Listed company—The PRC law expressly requires that the listed company shall immediately disclose the material event that may affect stock price of the listed company, including the major litigation or arbitration. Article 30(10) of the Administrative Measures for the Information Disclosure of Listed Companies provides that ‘[i]f there is a material event that may have a relatively great impact on the trading prices of the securities and their derivatives of a listed company, and investors have no knowledge, the listed company shall immediately disclose and give explanations on the cause, the current status and the possible impact of the material event’. This provision further provides that ‘[f]or the purposes of the preceding paragraph, material events include: . . . 10 major litigation or arbitration of the company’.²⁵

(p. 195) As to the threshold of materiality, the Listing Rules of Shanghai Stock Exchange provides that the amount of dispute shall exceed RMB 10 million and account for at least 10 per cent of the absolute net assets.²⁶

Section 11.1.3 of the Listing Rules requires a listed company to submit the following documents concerning the material litigation/arbitration event to the Stock Exchange: (1) draft announcement; (2) complaint/request of arbitration and notice of acceptance of case; (3) judgment or arbitral award; and (4) other materials required by the stock exchange, etc.

Section 11.1.4 of the Listing Rules requires a listed company to disclose the following information concerning the material litigation/arbitration event to the public: (1) information concerning court/arbitration institution’s acceptance of the case and background information of the case; (2) impact of the case on company’s current and future profits; (3) whether there is other undisclosed litigation or arbitration; and (4) other information required by the stock exchange, etc.

8.54  Under Article 39, ‘default’ refers to two scenarios, namely: (1) where a party fails to appear at a hearing without providing sufficient reasons; or (2) where a party withdraws from an on-going hearing without the permission of the arbitral tribunal.

(p. 196) 8.55  Failure to appear at an oral hearing without showing sufficient cause—A party’s failure to appear at a hearing is very serious defaulting act, as it may substantially affect the arbitral tribunal’s efforts to resolve the disputes. Therefore, parties need to provide solid reasons to justify such defaults. In practice, ‘sufficient cause’ for any default to attend a hearing may include occurrence of a sudden physical condition on the part of a party’s key representative or key agent, or other unforeseeable situations that may amount to force majeure, such as cancellation of flight due to bad weather. Even under such extreme circumstances, parties or its representatives should to the possible extent give the case manager a prior notice and request for postponement of the oral hearing. In practice, the Claimant rarely fails to appear at a hearing; in some cases, the Respondent may fail to attend the proceedings, in particular the oral hearing.

8.56  Withdrawal from an on-going oral hearing without the permission of the arbitral tribunal—Where a party withdraws from an on-going oral hearing without the arbitral tribunal’s permission, it probably intends to show its strong dissatisfaction to arbitral tribunal’s conduct of the proceedings. In practice, this happens very rarely. Obviously, the CIETAC strongly discourages parties to express their objection in such manner.

8.57  Default in multi-party arbitration—In the context of joinder or consolidation, Article 39 should be applicable to any party with regard to its own claims or counterclaims.

8.58  If a party defaults in an arbitration, the defaulting party may be deemed to have withdrawn its claims or counterclaims, while the non-defaulting party’s counterclaims or claims are not affected, and the arbitral tribunal shall proceed with the hearing in respect of the non-defaulting party’s counterclaims or claims and make a default award.

8.59  Deemed withdrawal—In case of a party’s default, the arbitral tribunal may decide whether to further consider the defaulting party’s claims or counterclaims. The provision in Article 39.1 that ‘the Claimant may be deemed to have withdrawn its application for arbitration’ indicates that the arbitral tribunal has discretionary power to decide whether to deem the Claimant’s default as withdrawal of its case. The last sentence of Article 39.2 indicates that the same principle applies to the Respondent’s counterclaims in case of the Respondent’s default.; it may well be the case that the defaulting party’s claims or counterclaims would be deemed by the arbitral tribunal as being withdrawn. However, as a matter of practice, arbitral tribunals are reluctant to exercise this power where the defaulting party has no intention to withdraw the case, for instance, the default occurs due to the fee dispute between the defaulting party and its attorney, but may give the defaulting another opportunity to be heard^.

(p. 197) 8.60  Article 39 should be read in conjunction with Articles 46.2 and 46.3 of the CIETAC Rules. Article 46.2 provides that ‘[a] party may be deemed to have withdrawn its claim or counterclaim if the arbitral proceedings cannot proceed for reasons attributable to that party’. Article 46.3 requires a case to be dismissed if all the claims, and all the counterclaims, if any, have been withdrawn (or deemed to have been withdrawn). If the actual withdrawal or deemed withdrawal happens after the composition of the arbitral tribunal, the arbitral tribunal shall make a decision on dismissing the case; if it happens prior to the composition of the arbitral tribunal, the President of Arbitration Court of the CIETAC shall make the decision on dismissing the case.

8.61  Default award—In case of a party’s default, the arbitral tribunal shall, once deciding that the defaulting party’s claims or counterclaims are deemed as being withdrawn, proceed to hear the non-defaulting party’s counterclaims or claims and make a default award. Unlike court litigation in China, a party’s default in a CIETAC arbitration does not always lead to a ruling in favour of the non-defaulting party. The arbitral tribunal still needs to hear the non-defaulting party’s submissions, examine the evidence, and decide whether the non-defaulting party has made out its claim or counterclaim. A default award is equally enforceable as an ordinary award, but it may be more likely to be challenged in subsequent set-aside or enforcement proceedings. As long as the defaulting party (typically a defaulting Respondent) has been properly served the notice of the arbitral process, and has been afforded the opportunity to nominate arbitrator(s) and to present its case, challenge by way of set-aside or non-enforcement application should not be sustained. However, from the perspectives of the CIETAC and the arbitral tribunal, it is always advisable to take reasonable efforts to make sure the non-defaulting party’s procedural rights are afforded in the arbitration process.

8.62  Article 40 sets forth the provisions regarding producing, maintaining and referencing record of oral hearings. Compared with the corresponding provisions under the 2012 CIETAC Rules,²⁷ the CIETAC adopted a new provision (Article 40.3) in the current Rules which explicitly allows parties to request for professional stenographic services. It should be noted that, in line with the new provision, the CIETAC now uses the term of ‘written record’ in Articles 40.1 and 40.2 (while under previous versions of the CIETAC Rules the term ‘stenographic record’ has been used to refer to the ordinary record taken by the CIETAC²⁸), so as to differentiate the term from ‘stenographic record’, which has (p. 198) been reserved for use in Article 40.3 to specifically refer to the written records produced by professional stenographer.

8.63  Statutory requirements—This provision reflects the statutory requirements of Article 69 of the PRC Arbitration Law, which provides that, for foreign-related arbitrations, the arbitral tribunal ‘may’ make written record of a hearing or prepare a summary of the written record²⁹ of the key points arising out of the hearing. The written record or summary may be signed or sealed by the parties and any other participants of the arbitration. By contrast, Article 48 of the PRC Arbitration Law, which deals with record of hearings in domestic arbitrations, requires that the arbitral tribunal shall make a written record of a hearing, and such record shall be signed or sealed by the arbitral tribunal, the recorder, the parties and all the other participants of the arbitration.³⁰ The statutory requirements for recording hearings in foreign-related arbitrations are less stringent than those for domestic arbitrations. This is probably because the participants of a hearing in a foreign-related arbitration may not speak the language of arbitration, and thus may not be in a position to confirm the contents of the record.

8.64  Written and/or an audio-visual record—In addition to written record, the case manager of a case will also arrange audio-visual record of the hearing no matter whether the case is a domestic one or a foreign-related one. The written record is usually taken by the case manager or his or her assistant unless a professional stenographer is retained pursuant to Article 40.3 of the CIETAC Rules.

8.65  Minutes—Under Article 69 of the PRC Arbitration Law and Article 40.1 of the CIETAC Rules, the arbitral tribunal may, if it considers appropriate, summarize the key points of hearing in the form of ‘minutes’ of the oral hearing rather than arranging a written record of the same. In the practice of CIETAC arbitration, however, minutes of an oral hearing are rarely used as a substitute for a written record.

8.66  Signing and/or affixing seal on the written record—This provision authorizes the arbitral tribunal to decide whether to request participants of the oral hearing to sign the written (p. 199) record or affix his or her seal to the written record. In practice, the arbitral tribunal generally would require parties to do so, which has in fact become a standard procedure. After the oral hearing is concluded, the case manager will print one copy of the written record, and then ask participants to review and sign on the written record. If any participant finds that any part of the written record does not accurately reflect what he or she said at the hearing, he or she may make corrections at the relevant part of the written record and then sign his or her name there. A party’s counsel and other representative is required to sign his or her name at the bottom of each page of the written record, and a factual witness or expert is required to sign at the pertinent part of the record only, i.e. the pages that record what he or she said at the oral hearing.

8.67  The written record, the minutes and the audio-visual record will become part of the confidential records of the arbitration, which are maintained by the Arbitration Court and are available for use and reference by the arbitral tribunal. In the old time, as a general principle, neither the written record nor the audio-visual record will be made available to the parties. Nowadays, however, the CIETAC provides written record to both parties upon written application by one or both parties. It should be noted, however, that the written record, the minutes and the audio-visual record would be made available for the PRC court that is dealing with arbitration-related cases such as setting aside or enforcement of an arbitral award.³¹

8.68  This is a newly adopted provision which explicitly allows the parties to request for professional stenographic service.

(p. 200) 8.69  In the past, the case manager is responsible for keeping written record. However, since most case managers have not received any stenographic training, they are usually not capable of making a complete written record the hearing. To respond for parties’ need for professional stenographic services, the newly adopted Article 40.3 allows parties to request for a professional stenographer at their own cost. The Arbitration Court normally would accommodate such request, provided that the costs are duly advanced by the requesting party or parties.

8.70  Unlike written record, the stenographic record is made available to the parties. Usually the service provider will, according to the arrangement reached with the party/parties or the Arbitration Court of the CIETAC, send the stenographic record to the parties, their counsel, the arbitrators and the case manager in the evening of each hearing day. The parties may ask for amendment of the stenographic record if there is any error.

8.71  Articles 41 to 44 of the CIETAC Rules are provisions governing evidentiary issues in CIETAC arbitration: Article 41 sets forth the general principle regarding evidence; Article 42 is the provision on examination of evidence; Article 43 explicitly allows the arbitral tribunal to conduct investigation and collect evidence for the purpose of fact-finding, which is in line with the civil law tradition; and Article 44 deals specifically with experts’ reports, including appraisers’ reports.

8.72  As can be seen from the text, Article 41 sets forth the principle of burden of proof, i.e. each party should provide evidence in support of its own case. It also sets forth further provisions with respect to the arbitral tribunal’s power to fix a time period for the parties to produce evidence, and the consequences of a party’s failure to produce sufficient evidence within the specified time period. The CIETAC Rules are silent on other important aspects of evidence, such as standard of proof and admissibility of evidence; these issues are left for the parties to agree and for the arbitral tribunal to decide. Before dealing with the provisions of Article 41, and indeed all the provisions on evidence, it is necessary to have an overview of evidentiary issues in regard to CIETAC arbitration.

8.73  The guiding principle of deciding disputes in arbitrations in mainland China is ‘taking facts as the basis and the law as the criterion’. In practice, this principle is implemented in the first instance by the examination of all facts surrounding the dispute. Only after the examination of the factual issues will the arbitral tribunal proceed to analyse the legal issues of the case.

(p. 201) 8.74  In CIETAC arbitration proceedings, the process of fact-finding is conducted as follows:

1. (i)  examining the written submissions and evidence produced by the parties;

2. (ii)  direct- and cross-examining parties’ witnesses at an oral hearing; and

3. (iii)  independent fact-finding by the arbitral tribunal, either by appointing independent experts or conducting on-site visits.

8.75  It is well established that rules of evidence in arbitration are subject to the parties’ agreement and the arbitral tribunal’s determination, in so far as such agreement and determination do not violate the mandatory provisions of the lex arbitri.

8.76  Articles 43 to 46 of the PRC Arbitration Law provide only general guidance regarding evidence. These statutory provisions touch on a party’s duty to prove its case and the arbitral tribunal’s power to collect evidence on its own motion (Article 43); expert evidence obtained by way of appraisal or inspection (Article 44); presentation of evidence at a hearing and a party’s right to examine the evidence (Article 45); and a party’s application for the preservation of evidence (Article 46). Articles 41 to 44 of the CIETAC Rules deal with similar issues, namely general issues of evidence, examination of evidence, investigation by the arbitral tribunal, and experts’ reports (including appraisers’ reports).³²

8.77  In practice, these provisions contained in the law and the institutional rules are too general to provide specific guidelines for arbitrators and parties to deal with evidentiary issues. Since parties rarely specify rules of evidence in their arbitration agreement, the rules are usually to be determined by the arbitral tribunal.

8.78  In some cases, particularly where the presiding arbitrator is experienced with international arbitration seated outside mainland China, the arbitral tribunal may recommend to the parties that the evidentiary issues be governed by the 2010 IBA Rules on Evidence and may give such directions in a procedural order. However, in most CIETAC arbitrations, the 2010 IBA Rules on Evidence are not adopted.

8.79  It is generally accepted that the rules of evidence applicable in civil litigation in mainland China are not binding on parties and arbitral tribunals in arbitrations seated in mainland China.³³ However, in practice, many Chinese arbitrators follow the PRC court’s rules of evidence, particularly the SPC Provisions on Evidence, since they are a complete set of evidentiary rules, which are compatible with the Chinese legal culture and tradition.

(p. 202) 8.80  The SPC Provisions on Evidence (2001 version) contain six chapters and 83 articles, covering issues on production of evidence by the parties, investigation, collection and preservation of evidence, time limit for production and exchange of evidence, examination of evidence, verification and admissibility of evidence, and miscellaneous matters. A new version of SPC Provisions on Evidence, containing 100 articles, has been promulgated on 25 December 2019 and will officially become effective on 1 May 2020. The SPC Provisions on Evidence provide a useful framework for evidential issues in legal proceedings.

8.81  The SPC Provisions on Evidence do not address the issue of whether it is applicable to the arbitration proceedings, but it should be noted that there is relevancy between the SPC Provisions on Evidence and commercial arbitrations in China. For example, in Clinton Engineering Ltd v. Guangzhou Dongjun Real Estate Co. Ltd, the arbitral tribunal of Foshan Arbitration Commission employed an appraisal agency that had no qualification on appraising construction project quality and project costs, the Guangzhou Intermediate People’s Court ruled, after having obtained approval from the SPC through the ‘reporting mechanism’, that since the arbitral tribunal did not employ a qualified appraisal agency in accordance with the law and the arbitration rules, the arbitral procedure was not in accordance with the arbitration rules and the arbitral award made by the arbitral tribunal should not be enforced. In reaching the conclusion, the Guangzhou court stated that ‘the requirement on the qualification of a qualified appraisal agency was an inherent requirement of the relevant laws and arbitration rules on the legality of the process of collecting the evidence’.³⁴

8.82  It is observed that in the said case, the SPC does not explicitly refer to the SPC Provisions on Evidence, nevertheless it uses the principle set forth in Article 27(1) of the SPC Provisions on Evidence (2001 version), which provides that, ‘the People’s Court shall grant the party’s request for re-appraisal made by the appraisal agency or appraiser entrusted by the People’s Court if the party can present evidence regarding one of the following circumstance: (1) the appraisal agency or appraiser does not possess the required qualifications’. (The corresponding provision in the SPC Provisions on Evidence (2019 version) is Article 40(1).) As such, this interesting case has demonstrated the interplay between the rules of evidence of the arbitral tribunal and the rules of evidence of the national court. Although the arbitral tribunal in an arbitration case may have large discretion in considering the rules of evidence, it cannot overlook the impact of the SPC Provisions on Evidence. In the authors’ observation, the arbitral tribunal in the context of arbitrations seated in the PRC should look up to the SPC Provisions on Evidence when dealing with evidentiary matters and distinguish between provisions that are universally applicable to legal proceedings including arbitration and the provisions that should not be applicable in light of the nature of arbitration (or the distinction between arbitration and litigation).

(p. 203) 8.83  For some years, there had been suggestions that the CIETAC should promulgate its own rules on evidence, which seeks to reconcile international arbitration with the Chinese legal tradition. In 2015, the CIETAC issued the Guidelines on Evidence, which became effective from 1 March 2015. The CIETAC Guidelines on Evidence contain twenty-five articles, covering not only issues on taking of evidence, but also issues on the burden of proof (including facts not requiring proof), standard of proof and preservation of evidence. As such, the scope of the CIETAC Guidelines on Evidence is broader than that of the 2010 IBA Rules on Evidence. The provisions on taking of evidence in the CIETAC Guidelines on Evidence are very similar to the 2010 IBA Rules on Evidence. For example, Article 7.3 of the CIETAC Guidelines on Evidence provides that the arbitral tribunal can decline a party’s request to produce, which is very similar to Article 9.2 of the 2010 IBA Rules on Evidence.

8.84  The CIETAC Guidelines on Evidence are intended to apply to arbitrations seated in mainland China where the PRC Arbitration Law applies. It is not part of the CIETAC Rules and its application is not automatic but is rather subject to parties’ agreement. Parties may agree on the application of the Guidelines on Evidence by themselves or through the inquiry of the arbitral tribunal. Once parties agreed to apply the Guidelines on Evidence to their arbitration case, provisions of the Guidelines on Evidence shall prevail in case of conflict between them and the CIETAC Rules. Such a practice is similar to the international practice in regard to application of the 2010 IBA Rules on Evidence, the application of which depends on parties’ agreement or the determination of the arbitral tribunal.³⁵

8.85  As discussed in paragraphs 8.9 to 8.11, the inquisitorial approach is generally adopted in hearings in civil litigation and arbitrations in mainland China. Under this approach, there is an emphasis on documentary evidence, while much less importance is attached to testimonial evidence. Hearings are usually very brief, normally taking no more than one day. Documentary and physical evidence shall be presented at a hearing and examined by the parties, whereby the authenticity, relevancy, legality, admissibility, and weight of the evidence will be examined.

8.86  The original of a document or a piece of physical evidence is no doubt the best proof of a fact. Where a copy has been previously submitted by a party (for example, as an attachment to the parties’ written submissions), the original shall in principle be presented by that party at the oral hearing, to be examined by the arbitral tribunal and the other party. In practice, where the other party does not challenge the authenticity of a copy of evidence, itis at liberty not to examine the original at a hearing. Where no original is (p. 204) available, the copy submitted is not necessarily inadmissible. However, it cannot be relied upon as the only piece of evidence for finding a fact.³⁶ This means it has to be used in conjunction with other evidence to prove an alleged fact.

8.87  The CIETAC Rules contain no requirement regarding the formality for the submission of documentary evidence. There is also no requirement in the PRC Arbitration Law or the CIETAC Rules that documents such as statements, affidavits, expert reports must be notarized or legalized if they came into being outside the mainland China. Such requirement can be found in the SPC Provisions on Evidence,³⁷ however, PRC court has found that such provision is not binding in arbitral proceedings as there was no such requirement in the applicable arbitration rules. In Shandong Machinery Import and Export Group Co. v. Modern Jordanian Co. and Weifang Chengcheng Chemical Ltd (discussed in paragraph 3.87), Shandong Machinery applied to set aside a CIETAC award by alleging, in addition to its argument that there was no Chinese translation of evidence, that some documentary evidence submitted by Modern Jordanian Company should have been notarized and certified under Article 11 of the SPC Provisions on Evidence (2001 version), since these documents came into being in a foreign country. The Beijing Second Intermediate People’s Court in its decision dated 15 December 2005³⁸ rejected this argument and held that the applicable CIETAC Rules did not require such documentary evidence to be notarized and certified.

8.88  On a separate note, it is worth noting that, under the SPC Provisions on Evidence (2001 version), all evidence coming into being outside the territory of China shall be notarized by a notary office and authenticated by the Chinese embassy or consulate of that place;³⁹ such requirement is loosened in the SPC Provisions on Evidence (2019 version), which provides that, in general, evidence originating from outside China needs (p. 205) to be notarized, and only evidence concerning identification relationship requires extra authentication by the Chinese embassy or consulate.⁴⁰

8.89  As discussed in paragraph 8.85, under the inquisitorial approach, emphasis is traditionally on documentary evidence, not testimonial evidence. Under this approach, the function of witnesses, if any, is merely to emphasize and explore major issues in dispute that are already placed before arbitrators by written submissions and documentary evidence. Arbitrators play an active role by, among other things, examining or interrogating witnesses at an oral hearing. Counsel can generally examine and cross-examine witnesses, but such examination is much less extensive and much less important than that in common law jurisdictions.

8.90  The reasons why Chinese arbitrators in CIETAC arbitration give less value to testimonial evidence are summarized below.

8.91  Firstly, the practice of oath-taking is not recognized in China. The traditional society in China is essentially non-religious, which results in the lack of oath-taking in any legal proceedings in China. Affirmation does exist; when a witness is called to the stand, the arbitral tribunal will usually emphasize to him or her the importance of telling the truth. It is generally observed that, without religious belief, a witness may feel less guilty when stating false facts.

8.92  Secondly, under the PRC Criminal Law,⁴¹ a witness giving false testimony in criminal proceedings commits perjury, which is subject to imprisonment of up to seven years. However, giving a false testimony in civil or arbitral proceedings does not constitute a crime punishable under the PRC Criminal Law. Further, the PRC courts and the Chinese arbitrators tend to believe that a witness always shares some common interests with the party calling him to give evidence, and the truthfulness of his or her testimony is doubtful. As a result, the PRC courts and arbitrators do not attach much importance to a witness testimony and rarely consider that such testimony alone would be adequate for proving a fact.⁴²

8.93  According to the authors’ observations, due to influence from arbitration systems in common law jurisdictions (such as Hong Kong and Singapore), the weight attached to testimonial evidence in CIETAC arbitration is now gradually growing, and it will be much more enhanced if perjury can be extended to civil litigation and arbitration through future amendments of the PRC Criminal Law.

8.94  A staff member of a legal person, corporate entities or otherwise, may appear as a party representative along with external legal counsel. Arbitral tribunals in arbitrations seated in mainland China generally allow such a staff member to present the facts (p. 206) regarding the underlying transaction and often give credit to what they say. This is because, under Article 63 of the PRC Civil Procedure Law, party statement is a category of evidence recognized in the context of civil or commercial disputes.

8.95  Moreover, in mainland China, submission of a witness statement is not a prerequisite for a witness to testify, although the Arbitration Court and the arbitral tribunal do encourage, and sometimes require, submission of witness statements in advance of the hearing. The statement may be drafted by the witness himself or herself, and may also be drafted by the counsel as per the recount of facts by the witness.

8.96  As a matter of principle, a witness should appear at an oral hearing to be examined by the opposing party and the arbitral tribunal. If, for reasons such as physical incapability, inconvenience, or natural disaster, etc., a witness cannot be present at a hearing, he or she may testify by way of submitting a written testimony or by means of audio-visual transmission technology.⁴³ Where a witness has not appeared at a hearing without providing any of the specified reasons, his or her witness statement would not be completely disregarded by the arbitral tribunal. However, such witness statement cannot be relied upon as the only basis for finding a fact in dispute.

8.97  Expert evidence may also be employed in the context of CIETAC arbitration. See paragraphs 8.125 to 8.133 for a detailed discussion of Article 44 of the CIETAC Rules.

8.98  Neither the PRC Arbitration Law nor the CIETAC Rules contain any specific provision regarding discovery or disclosure. Practices such as preparation of a list of documents to be disclosed by a party and the Redfern Schedule are not commonly followed in arbitrations in mainland China. Also, requests for production of documents are not frequently granted by Chinese arbitrators, as the general expectation of Chinese arbitrators and legal professionals is for parties in dispute to submit evidence in support of their own cases.

8.99  In practice, a party may submit to the arbitral tribunal a request that the arbitral tribunal directs the other party to produce certain documents. The other party typically will not produce the requested documents directly and will only wait for the arbitral tribunal to give orders. Where the arbitral tribunal finds that the requested documents are relevant to the outcome of the case and are reasonably in the possession or control of the other party, it may order the other party to produce such documents. In that case, if the other party fails to produce the requested documents, the arbitral tribunal might draw an adverse inference towards the non-producing party.⁴⁴

(p. 207) 8.100  A party may also request the arbitral tribunal to collect documents from a non-party, for example, the records or files maintained by a government agency that is not a party to the arbitration. Where the arbitral tribunal finds the requested documents to be relevant, it may seek to obtain the documents from the non-party through the assistance of the CIETAC or its Arbitration Court. It should be noted that there is no law or regulation in mainland China which requires a non-party to produce evidence in the context of arbitral proceedings.⁴⁵ In light of this, arbitral tribunals are generally reluctant to collect evidence from non-parties. Having said that, in practice, it is not rare for CIETAC arbitral tribunals to collect evidence from government agencies or public institutions for the files or records that they hold, and such agencies and institutions generally see the CIETAC as part of the legal system and are willing to co-operate. For further discussions, see paragraphs 8.117 to 8.120.

8.101  A party may request the other party to call a witness only through the arbitral tribunal. If the arbitral tribunal considers necessary, it may order the party to call the witness to give evidence. Failure of the party to comply with such an order will generally lead to an adverse inference drawn by the arbitral tribunal. However, the practice in regard to calling of witnesses is far less than developed.

8.102  This provision reflects the fundamental principle of burden of proof under the CIETAC Rules. The saying in the Chinese legal circle on this is ‘who alleges, who proves’. Under this provision, any party to an arbitration is to assume the burden to prove facts that it alleges and to supply to the arbitral tribunal the factual basis in support of its submissions.

8.103  However, this principle does not affect the arbitral tribunal’s power to investigate facts of the case or allocate the burden of proof to the party adverse to the alleging party under certain circumstances. According to Articles 43 and 44 of the CIETAC Rules, an arbitral tribunal may retain experts and order parties to disclose documents and materials to assist the fact-finding process. However, where the arbitral tribunal (p. 208) is not satisfactory with the outcome of fact-finding and no reasonable method could be adopted to further advance fact-finding process, the arbitral tribunal may resort to the rules on allocation of burden of proof to determine which party shall assume the consequences for not proving the facts which is relied to support a claim or a defense point.

8.104  As regards allocation of burden of proof, although the overall principle is ‘who alleges, who proves’, under certain circumstances, the arbitral tribunal may allocate the burden to the party adverse to the alleging party, in which situation the adverse party is to assume the legal consequences for not proving the fact in support of its defense to an alleged fact. See paragraphs 8.109 to 8.111 for a discussion of allocation of burden of proof.

8.105  The deadline for submission of evidence—The arbitral tribunal is empowered to set a deadline for parties to submit evidence, and may refuse to admit any evidence submitted after the deadline. Where the arbitral tribunal holds a preliminary meeting for determining procedural matters (which is not frequently seen in the context of CIETAC arbitration, but is likely when a common law background presiding arbitrator is involved), it will usually fix a timetable for the conduct of the arbitration, including the timelines for the production of documentary evidence and the filing of witness statements and expert report, etc. In such a scenario, an oral hearing is arranged after the submission and exchange of evidence.

8.106  In many cases, the arbitral tribunal may not hold a preliminary meeting, in those cases, the arbitral tribunal may simply fix a time period for submission of evidence. The arbitral tribunal may designate a deadline ahead of the oral hearing, where the parties are expected to submit all of their evidence; in case a party intends to introduce any supplementary evidence after the deadline, the party should apply to the arbitral tribunal for re-opening the door for evidence submission. Such application is typically made at the oral hearing, whereby the party and the arbitral tribunal is in a good position to evaluate the necessity of submitting and allowing supplementary evidence. If the application is granted by the arbitral tribunal, the applying party or both parties will be given a fixed time period for submission of supplementary evidence. In case (p. 209) the supplementary evidence is voluminous or very critical, a second hearing may to be scheduled if the arbitral tribunal considers it to be necessary.

8.107  In other cases, the arbitral tribunal may not set a time period for submission of evidence ahead of the first hearing. In such situation, submission of supplementary evidence after the first hearing is generally allowed, as the arbitral tribunal will set the deadline only at the oral hearing. Again, where supplementary evidence is voluminous or very critical, a second hearing may to be scheduled if the arbitral tribunal considers it to be necessary.

8.108  Extension—If a party cannot submit evidence before a deadline fixed by the arbitral tribunal, the party should submit a written request for extension before the deadline, in which the party should explain reasons for extension sought and propose an estimated period of extension. The arbitral tribunal is empowered to decide whether or not to grant the requested extension and set a new deadline it deems appropriate if the request is granted. To make such decision, the arbitral tribunal may consider whether reasons for extension are justified, and whether the extension will cause undue delay for the arbitral proceedings.

8.109  Under this provision, a party bearing the burden of proof shall produce sufficient evidence within the time period specified by the arbitral tribunal; otherwise the arbitral tribunal may draw an adverse conclusion against that party.

8.110  A party bearing the burden of proof is usually the party who raises the affirmative claims (or counterclaims); a party who raises defense shall bear the burden of proof in relation to the facts that it relies upon in the defense. Pursuant to this provision, where a party fails to produce sufficient evidence within the time period to support its claim, counterclaim or defense, it shall also bear the consequences thereof. Even if the party bearing the burden of proof does furnish evidence in relation to the alleged fact, but the evidence is not sufficient to prove the alleged fact, the party shall still bear the consequences of not proving the alleged fact. It should be noted that, although the English version of the second half of the sentence reads as ‘not sufficient to support its claim or counterclaim’, the Chinese version, if directly translated into English, would read as ‘not sufficient to support its allegation’. As such, this provision should not be understood to only refer to evidence in support of claim or counterclaim; evidence in support of defense should also be covered.

(p. 210) 8.111  Under PRC law, allocation of burden of proof is generally not regarded as a matter of substantive law which is not subject to judicial review; an arbitral tribunal may exercise its discretion to decide this issue. In the SPC Reply to the Tianjin High People’s Court dated 9 December 2015, the SPC reviewed an application for non-enforcement of a foreign-related CIETAC award on the grounds, inter alia, that the arbitral tribunal erroneously confirmed the other parties’ case when that party’s burden of proof was not duly discharged, and thus violated the Article 2 of the SPC Provisions on Evidence (2001 version).⁴⁶ The SPC held that the legal grounds invoked by the applicant in the non-enforcement application involves admissibility of evidence, finding of fact and determination on parties’ liabilities, which do not fall within the scope of judicial review of the PRC court. Therefore, the SPC directed the Tianjin High People’s Court and its lower court to reject the application of non-enforcement of arbitral award.⁴⁷ The SPC’s position in the said case was followed by the Zhuhai Intermediate People’s Court of Guangdong Province in a recent decision rendered in 2018. In that case, the Zhuhai court expressly held that the arbitral tribunal’s decision on burden of proof is a question of application of law, and it is not one of the legal grounds for setting aside an arbitral award under Article 58 of the PRC Arbitration Law.⁴⁸

8.112  This provision reflects the requirements under Article 45 of the PRC Arbitration Law, which provides that evidence should be presented at an oral hearing and the parties may examine the evidence. In most CIETAC arbitrations, evidence is examined by way of oral hearings.

8.113  The methods for examination may be varied depending on the type of evidence:

1. (i)  For documentary evidence, parties are generally required to bring the original of the documents for examination, but in some cases, some parties may bring a notary certificate, with photocopy of the original document attached, to prove the existence of the original document.

2. (p. 211) (ii)  For physical evidence, parties may bring the physical object to the oral hearing; but if the physical object is cumbersome, hazardous or otherwise unsuitable to be present at the hearing, the arbitral tribunal may inspect the object on site, or instruct the producing party to provide a notary certificate or a written report instead.

3. (iii)  For testimonial evidence, such as witness statement, or report issued by party-appointed expert or appraiser, the arbitral tribunal usually would summon the witness, expert or appraiser to the oral hearing to answer the questions from the arbitral tribunal and other party; where the expert or the appraiser is retained by the arbitral tribunal, the examination procedure is to be conducted in accordance with Article 44 of the CIETAC Rules.⁴⁹

8.114  Where the arbitral tribunal allows submissions of supplementary evidence after the first oral hearing, it may, upon a party’s request, hold a second oral hearing if the supplementary evidence is in a large volume or gives rise to new issues.

8.115  If, however, the supplementary evidence is not in a large volume or does not give rise to new issues, the arbitral tribunal may decide not to hold any further oral hearing. In the circumstance, the arbitral tribunal will consult with the parties and obtain their consents to examine the evidence by way of submitting written opinions. This approach has been widely adopted in practice. Where a party has any doubt as to the authenticity of the supplementary evidence produced by the opposing party, the arbitral tribunal may instruct the case manager of the Arbitration Court to organize a meeting between the parties and/or their counsel to check the originals of the supplementary evidence. The parties may submit written comments on such evidence after having checked the originals.

8.116  Likewise, the arbitral tribunal may adopt the same approach, i.e. allowing parties to examine documentary evidence in writing, where a case is heard on a document-only basis under Article 35.2 or Article 60 of the CIETAC Rules.

8.117  Investigation and evidence collection ex officio—It is widely accepted that an arbitral tribunal has the authority to conduct fact-finding and evidence taking process in order to properly decide the dispute. In China, such authority is expressly confirmed by Article 43 of the PRC Arbitration Law⁵⁰ and Article 43.1 of the CIETAC Rules. The arbitral tribunal may conduct investigation or evidence collection on its own initiative or at the request of a party. The arbitral tribunal may order such investigation or evidence collection over a party or both parties’ objection if it deems necessary.

8.118  Investigation and evidence collection at the request of a party—In a CIETAC arbitration, a party may request the arbitral tribunal to investigate certain facts and collect certain evidence. The arbitral tribunal has the power to decide whether such investigation and collection of evidence are necessary.

8.119  Where a party requests the arbitral tribunal to conduct an investigation or to collect evidence, it shall file a written request to specify the name and content of the evidence, the location of the evidence, the facts to be proved by the evidence and the reason why such evidence cannot be obtained by the requesting party itself.⁵¹

8.120  Site inspection—Although site inspection is not expressly referred in both the PRC Arbitration law and CIETAC Rules, it is sometimes used by Chinese arbitrators as a method of fact-finding. For example, many cases arbitrated at the CIETAC involve claims over the quality of goods and machineries; in such cases, site inspection may effectively facilitate the fact-finding process. Site inspection can be conducted by the arbitral tribunal itself (with the parties being invited to attend), it can also be conducted by the arbitral tribunal with experts appointed by the arbitral tribunal.

8.121  When the arbitral tribunal investigates and collects evidence, it may notify the parties the time and place and invite the party to observe the whole process. The word ‘may’ used in the first sentence indicates that whether parties should be notified of the arbitral tribunal’s efforts on investigation and evidence collection is entirely a matter up to the arbitral tribunal’s discretion.

8.122  In Shaanxi Changsheng Industrial Group Co. Ltd v. MAFAGROBOTIC ([2013] Yi Zhong Min Te Zi No. 6539), a case decided by the Beijing First Intermediate Peoples’ Court in 2013, an applicant attempted to set aside a CIETAC award on the ground that the arbitral tribunal’s investigation was not legally conducted; specifically, the applicant alleged that the arbitral tribunal failed to retain any expert, the co-arbitrators failed to participate in the investigation, and no plan was made to specify the objective and scope of the investigation, etc. The Beijing First Intermediate People’s Court rejected the application and held that the investigation did not violate Article 37 of the 2005 CIETAC Rules (which is substantially the same as the Article 43 of the 2015 CIETAC Rules).⁵²

8.123  In practice, arbitral tribunal almost always notifies the parties of the said process and invite the parties to be present during the process. In the event that any party fails to be present after being notified, the investigation and collection of evidence shall proceed.

8.124  Under Article 43.3 of the CIETAC Rules, the arbitral tribunal shall, through the Arbitration Court, transmit the evidence collected to the parties for their comments. The evidence collected by the arbitral tribunal is also subject to examination at an oral hearing if an oral hearing is to be conducted. In practice, the arbitral tribunal’s collection of evidence may take place before the first oral hearing, but mostly after the first (p. 214) oral hearing because, by that time, the arbitral tribunal may have a good chance to evaluate the necessity of collecting evidence on its own after hearing the parties’ submissions. In case the collection takes place after the first oral hearing, the arbitral tribunal will usually organize a second oral hearing so that the parties can have a chance to comment on the evidence collected by the arbitral tribunal.

8.125  This Article sets forth the rules concerning appointment and examination of experts and appraisers.

8.126  Arbitral tribunal’s right to retain expert and appraiser—Many CIETAC arbitration proceedings involve complicated technical matters which generally cannot be easily dealt with by an arbitral tribunal consisting of lawyers or law professors. Therefore, this first sentence of Article 44.1 expressly allows the arbitral tribunal to retain third party experts or appraisers for assistance on sorting out specific issues (typically complicated technical issues) of the case. The second sentence of Article 44.1 expressly provides that the expert and the appraiser may be either an institution or a natural person; and there is no restriction on nationality of expert or appraiser. There is also no requirement on qualification, probably because that, given the nature of international arbitration, it would be difficult to identify a qualification that is acceptable worldwide.

8.127  Experts and appraisers—There is no definition under the CIETAC Rules on ‘expert’ or ‘appraiser’. The corresponding term is Chinese is ‘鉴定人’‎ (jian ding ren). In the context of arbitration and litigation in the PRC, appraiser is a narrower concept which generally refers to persons with particular expertise or qualifications for appraising certain facts. Expert is a broader and more general concept and should be deemed to include appraiser. Experts engaged by the arbitral tribunal to assist with fact-finding may include accountants, assessor, engineers of various types, and scholars of various backgrounds, etc. In theory, use of expert on foreign law is also covered by Article 44 of the CIETAC Rules. However, in practice, foreign law experts are rarely seen in the context of CIETAC arbitration.

(p. 215) 8.128  Approach for selecting expert or appraiser—Selection of expert or appraiser is subject to parties’ agreement and arbitral tribunal’s discretion. Where the parties have reached an agreement on who shall be the expert or appraiser, the arbitral tribunal will not object to the expert or appraiser so selected by the parties. However, in practice, it is rare for parties to reach such an agreement; the arbitral tribunal may either appoint the expert or appraiser directly, or in some cases, ask the parties to submit a shortlist of recommended candidates in order to identify an expert or appraiser that is acceptable to both sides. In the latter situation, where there is no common candidate recommended by both sides, the arbitral will still need to make an appointment.

8.129  Costs of expert or appraiser—Article 82.1 of the CIETAC Rules expressly empower the CIETAC to charge costs (including the remuneration of the expert or appraiser, and the expenses to be incurred for undertaking the relevant work) for retaining an expert or appraiser from the parties. In practice, this matter is usually determined by the arbitral tribunal in conjunction with the Arbitration Court. In most situations, the arbitral tribunal is to direct the two sides to prepay the costs in equal shares, although in some cases, the arbitral tribunal may direct the party who requests for assistance by an expert or an appraiser to prepay the costs in total. Eventually the arbitral tribunal will determine which party is to bear the costs in the arbitral award.

8.130  Party’s right to retain expert and appraiser—Although not expressly provided under the CIETAC Rules, a party may appoint its own appraiser or expert, and submit relevant reports as part of its evidence. In general, where both parties have engaged their respective experts or appraisers, there is no need for the arbitral tribunal to appoint another expert or appraiser. Party-appointed experts shall be cross-examined in the same manner as factual witnesses. In some cases, party-appointed experts may sit together in front of the arbitral tribunal at an oral hearing and discuss the issues together, in a way similar to ‘hottubing’ in overseas arbitration. No matter what approach is taken, in the end, the arbitral tribunal needs to reach a conclusion from the conflicting views expressed by those experts. If, however, the arbitrators are unable to reach a conclusion by themselves, they then need to appoint a neutral expert.

8.131  For the purpose of an appraisal, the arbitral tribunal has the power to direct the parties to deliver or produce to the expert or appraiser any relevant materials, documents or (p. 216) goods. If a party refuses to comply with the arbitral tribunal’s direction, the arbitral tribunal may draw an adverse inference against the non-complying party.

8.132  In practice, in order for the arbitral tribunal and the expert or the appraiser to identify the scope of the technical issues to be dealt with, and the materials and documents, etc., to be provided, the arbitral tribunal may organize a meeting, attended by both parties, the expert or the appraiser, and the parties, to have a detailed discussion. After hearing the views of the parties and of the expert or appraiser, the arbitral tribunal is able to give further directions to the parties.

8.133  This provision is to ensure the parties’ procedural right to examine the report produced by the tribunal-appointed expert or appraiser. As a matter of procedure, the arbitral tribunal will always ask the case manager to forward the expert’s or appraiser’s report to the parties, and give the parties a certain time period to submit their written comments on the report. At the request of a party and with the approval of the arbitral tribunal, the expert and appraiser shall appear at the next oral hearing, whereby the parties have a chance to pose questions to the expert or appraiser in regard to the report, and the expert or appraiser will, to the extent that the arbitral tribunal considers necessary, answer the questions and explain the report to the parties and the arbitral tribunal.

(p. 217) 8.134  Parties’ joint or separate request—Article 45.1 expressly provides that parties may jointly or separately request for suspension.⁵³ Where the parties jointly request for a suspension, or one party requests for a suspension and the other party consents to the requested suspension, the arbitral tribunal should generally grant the request. By contrast, the arbitral tribunal may need to consider carefully about a party’s unilateral request to which the counterparty does not consent. In general, the Claimant’s request is more likely to be granted (particularly where the Respondent has not filed a counterclaim against the Claimant), as the Claimant is perceived as the party which shall actively push forward to proceedings; the Respondent’s request for suspension may have a lower chance to be granted.

8.135  Decision on suspension or resumption of the arbitral proceedings—Under Article 45.3, the arbitral tribunal is empowered to decide whether to suspend or resume the arbitral proceedings. Where a decision needs to be made at a time when the arbitral tribunal has not been formed, the decision shall be made by the President of the Arbitration Court. The arbitral tribunal/the President of the Arbitration Court may decide to suspend the arbitral proceedings either upon any party’s request (or parties’ joint request) or based on the circumstances of the case. The arbitral tribunal/the President of the Arbitration Court shall decide to resume the arbitral proceedings when the reason for the suspension has disappeared or the suspension period has ended. The decision to resume the arbitral proceedings shall be made in time so as to avoid undue delay.

1. (i)  ‘Circumstances where such suspension is necessary’—In practice, the arbitral tribunal/the President of the Arbitration Court may suspend the arbitral proceedings under several typical situations, as follows:

2. (ii)  Where there is a good prospect for the parties to settle their dispute, in which circumstance the parties may jointly apply for suspension of the arbitration so as to allow themselves to have time for negotiations, to avoid further costs and to maintain the status quo of the arbitral proceedings. In the circumstance, the arbitral tribunal’s mandate for arbitrating the case will arguably be suspended. Although, in theory, the arbitral tribunal may in its discretion decide not to suspend the arbitral proceedings, in practice, the arbitral tribunal always recognizes such circumstance as a valid reason for suspension and thus grants the parties’ joint application.

3. (iii)  Where the Respondent in an arbitration seated in mainland China disputes the validity of the arbitration agreement, it may, in accordance with Article 20 of the PRC Arbitration Law, request the arbitration commission or the PRC court to make a decision on the validity of the arbitration agreement. In accordance with Article 3 of the SPC Reply on Several Issues concerning Ascertaining the (p. 218) Validity of Arbitration Agreement,⁵⁴ the PRC court will notify the arbitration commission to suspend the arbitration pending its determination on the validity of the arbitration agreement. In the circumstances, the arbitral tribunal would have to suspend the arbitration in light of the court order.

4. (iv)  Where one party to the on-going arbitration asserts that the outcome of a parallel proceeding may have a significant impact on the on-going arbitration, thus it requests for a suspension of the arbitration pending the outcome of the parallel proceeding. In the circumstance, the counterparty will normally object to the requested suspension, and the arbitral tribunal will decide in its discretion whether to suspend the arbitration or not.

8.136  Resumption—According to Article 45.2, the arbitral proceedings shall be resumed as soon as the circumstance for the suspension disappears or the time period of suspension expires. For example, if the parties have reached a settlement during the suspension, the arbitral proceedings should be resumed so that the arbitral tribunal may render a consent award or a conciliation statement,⁵⁵ or a decision on dismissal (termination) of the case.

8.137  Parties’ right to withdraw—The CIETAC Rules allow a party to withdraw its claims or counterclaims in entirety at any stage of the arbitral proceedings before the arbitral award is made; a party’s right to withdraw its claims or counterclaims is automatic, in that it is not subject to approval of the Arbitration Court, the arbitral tribunal or any other party. The withdrawal becomes effective immediately when the party’s request for withdrawal is communicated to the Arbitration Court. Unlike the rules of other (p. 219) PRC arbitration commissions,⁵⁶ the CIETAC imposes no restriction on parties’ right to withdraw its claims or counterclaims. This liberal approach is based on consensual nature of commercial arbitration.

8.138  Effect of withdrawal—After a party withdraws its claims or counterclaims, the arbitral tribunal shall no longer consider such claims or counterclaims. However, the withdrawal shall not prevent the arbitral tribunal from examining the other party’s counterclaims or claims and rendering arbitral award thereon. Where the other party has not raised any counterclaim or claim, or withdraws its counterclaims or claims at the same time, the case will be dismissed pursuant to Articles 46.3 and 46.4.

8.139  Parties’ right to re-arbitrate—It is generally understood that a party’s withdrawal of its claims or counterclaims is made without prejudice to its right to request for arbitration in regard to the same dispute and the same claims. Under PRC law, there is no provision that prohibits a party from re-applying for arbitration if the previous arbitration was dismissed without rendering an award. However, in practice, the opposing party may, in the second arbitration, claim for the legal fees and other costs incurred for the first arbitration.

8.140  Deemed withdrawal—The provision contained in Article 46.2 of the current CIETAC Rules was first introduced in the 2012 CIETAC Rules,⁵⁷ which gives the arbitral tribunal and the CIETAC a discretionary power to deal with situations where an arbitration cannot possibly proceed further for reasons attributable to a party. For example, where a natural person party dies with no heir or a corporate party is dissolved without any successor in rights and obligations, it would be considered impossible for the arbitral proceedings to be carried on. Under Article 46.2 of the CIETAC Rules, the party may be deemed to have withdrawn its claims and the case would be dismissed.

8.141  As another example, where a party fails to appear at a hearing without sufficient cause or withdraws from an on-going hearing without the permission of the arbitral tribunal, its claims or counterclaims may also be deemed as having been withdrawn. This circumstance is also covered by Article 39 of the CIETAC Rules, and has been discussed in paragraphs 8.54 to 8.61.

8.142  If the parties have withdrawn or be deemed to have withdrawn all of their claims or counterclaims, the arbitral tribunal or the President of the Arbitration Court will render a decision to dismiss (i.e. to terminate) the case in accordance with Article 46.3 of the CIETAC Rules.

8.143  Withdrawal of claims or counterclaims in entirety is a ground for dismissal (termination) of the case. However, it is not the only ground. For example, a case may also be dismissed if the arbitral tribunal decides that the CIETAC has no jurisdiction over the case under the CIETAC Rules. This circumstance is expressly provided for in Article 6.7 of the CIETAC Rules.

8.144  According to Articles 6.7, 46.3, and 46.4, where a decision on dismissal of the case is to be made by the arbitral tribunal or by the President of the Arbitration Court, the CIETAC’s seal should be affixed to the dismissal decision in addition to the signature of the arbitral tribunal or the President of the Arbitration Court.

8.145  China is probably the first country to start conciliation. There are cultural and historical reasons for this.⁵⁸ Nowadays conciliation is still popular in China. Aside from conciliation conducted by conciliation institutions of various types, conciliation also exists in civil litigations and commercial arbitrations in China.

8.146  A feature of arbitration in China is that a dispute may be resolved through a process whereby arbitration and conciliation are combined.⁵⁹ This approach is expressly permitted in Articles 51 and 52 of the PRC Arbitration Law and Article 47 of the CIETAC Rules.

8.147  Article 51 of the PRC Arbitration Law provides that:

8.148  Under Article 47 of the CIETAC Rules, combination of conciliation with arbitration can take two forms, i.e. conciliation before commencement of arbitration (‘med-arb’), or conciliation during the course of arbitration proceedings (‘arb-med’).

8.149  In some jurisdictions, a distinction is drawn between conciliation and mediation over the role of the third party neutral. In China, no such distinction is made. The Chinese term for both conciliation and mediation is ‘调解‎’ (tiao jie). The popular translation for ‘tiao jie’ is ‘conciliation’; in recent years, however, use of ‘mediation’ is becoming popular.⁶⁰ ‘Mediation’, rather than ‘conciliation’, is also used by UNCITRAL in the Convention on the Enforcement of International Settlement Agreements Resulting from Mediation (i.e. the Singapore Mediation Convention). Moreover, UNCITRAL also amended its 2002 UNCITRAL Model Law on International Commercial Conciliation and renamed it as the 2018 UNCITRAL Model Law on International Commercial Arbitration and International Settlement Agreements Resulting from Mediation. In this book, the authors will use the term ‘conciliation’ as this is the term used in the CIETAC Rules. However, whenever the term ‘mediation’ or ‘med’ is used, it refers to the same concept as ‘conciliation’.

8.150  Med-arb as a mechanism is provided in Article 47.10 of the CIETAC Rules, according to which a settlement agreement reached before the commencement of arbitration, through conciliation or otherwise through direct negotiations, may be converted into an arbitral award following the CIETAC’s appointment of an arbitrator for this purpose.

8.151  Arb-med as a mechanism for conciliation to be conducted in the course of arbitration is provided in Articles 47.1 to 47.9 of the CIETAC Rules. Articles 47.1 and 47.8 provides the several optional approaches for Arb-med. Articles 47.2, 47.3, and 47.7 set forth detailed provisions on conciliation by arbitral tribunal. Articles 47.4, 47.5, and 47.6 are provisions in relation to making of consent award and conciliation statement. Article 47.9 provides for the effect of conducting conciliation, i.e. parties are not allowed to rely on the view, opinion, statement or any other forms of expressions of the other party in any subsequent arbitral, judicial, or other proceedings after the failure of conciliation.

8.152  Med-arb and arb-med are commonly accepted practices in mainland China. However, in some other jurisdictions, conciliation and arbitration are viewed as two different processes, and the combination of these two processes in the form of arb-med, particularly where arbitrators are to play the role of conciliators, is believed to be inappropriate. There are plenty of criticisms that an arbitrator can no longer decide a case fairly and independently after failing to conciliate the case.

8.153  Despite these criticisms, combination of conciliation with arbitration, particularly arb-med, has proved to be successful in resolving disputes in China. According to the statistics released by the CIETAC, during the period from 1983 to 1988, approximately 50 per cent of the CIETAC’s cases were settled through conciliation by arbitrators. Since 1989, the success rate has remained between 20 per cent and 30 per cent of the CIETAC’s caseload.⁶¹

8.154  Combination of conciliation with arbitration is also gaining increased recognition in other jurisdictions, particularly in the Asia-Pacific region. For example, the Hong Kong Arbitration Ordinance (Cap. 609) and the Singapore International Arbitration Act (Cap. 143A) expressly permit an arbitrator to act as mediator or conciliator in the same proceedings.⁶²

8.155  The practice of arb-med has a number of benefits. Firstly, the benefits of both conciliation and arbitration are available to the parties in the same legal proceedings. There is no need for the parties to commence separate conciliation proceedings and pay separate fees. Thus arb-med can result in a substantial saving of time and costs for the parties.

8.156  Secondly, there is a higher possibility of achieving a settlement through a combined process. The experience of the CIETAC suggests that conciliation conducted in the course of an arbitration will more likely resolve a dispute than a separate conciliation.

8.157  Thirdly, a settlement reached through a combined process can be converted into an award that is enforceable under national laws and international conventions. By comparison, a settlement agreement reached by the parties in a separate conciliation process is enforceable only as a private contract.

8.158  However, there are also potential downsides with the practice of arb-med. On the one hand, arbitrator may be unduly influenced by the information received in conciliation, thus parties advised by experienced counsel may be reluctant to fully disclose their true positions. On the other hand, in the conciliation conducted by arbitrators, parties may be able to sense from arbitrator-conciliator’s comments the strength and weakness of their submissions and hence may have the chance that otherwise would not be available to them to evaluate and improve their arguments. Although an experienced arbitrator-conciliator would be very careful so as not to indicate their views concerning the dispute, it is difficult for the arbitrator-conciliator to achieve that. Therefore, it is somewhat challenging for an arbitrator-conciliator to lead the conciliation into meaningful discussions.⁶³

8.159  The flexible nature of the conciliation during the arbitration proceedings may lead to issues that will be subject to judicial scrutiny in the set-aside or enforceability proceedings. In the famous case of Gao Haiyan v. Keeneye, the enforceability of an arbitral award made by Xi’an Arbitration Commission was scrutinized by the High Court of Hong Kong (first by the Court of First Instance,⁶⁴ then by the Court of Appeal⁶⁵). The underlying arbitration was commenced by Keeneye Holdings Ltd and New Purple Golden Resources Development Ltd (the Respondents of the Hong Kong enforcement proceedings) against Gao Haiyan and Xie Heping (the Applicants of the Hong Kong enforcement proceedings) over disputes arising out of share transfer agreements.

8.160  During the course of the arbitration, a conciliation was conducted over a dinner in a hotel, hosted by the Secretary General of the Xi’an Arbitration Commission who is not a member of the arbitral tribunal. After the conciliation failed, the arbitral tribunal rendered the arbitral Award on 17 June 2010 in favour of the Applicants (who are the Claimants in the arbitration). The Applicants later applied to the HK court to have the award enforced in Hong Kong. On 2 August 2010, Judge Saunders made an ex parte Order for the enforcement of the arbitral award. The Respondents applied to set aside Judge Saunders’ Order on public policy grounds by suggesting that the arbitral award is tainted by bias or apparent bias. Judge Reyes of the Court of First Instance, after hearing the application, made the judgment on 12 April 2011, deciding to set aside the arbitral award. Judge Reyes held that, inter alia, the arb-med process was not conducted by Xi’an Arbitration Commission ‘in a way which avoided the problem of apparent bias’, and he concluded that the arbitral award shall be set aside on the ground of public policy.⁶⁶

(p. 224) 8.161  The Gao Haiyan case seems to have caused significant misunderstandings towards the practice of arb-med in mainland China. However, it is observed that the decision is about how arb-med should be properly conducted, not whether arb-med should be allowed. Indeed, at least in the context of CIETAC arbitration, conciliation is only conducted during the course of oral hearing or an official setting (such as a separate conciliation session organized by the arbitral tribunal after the oral hearing) and in a manner agreed by both parties. It is designed to be a flexible but controlled process which would not affect the integrity and fairness of the arbitration proceedings.

8.162  When conducting conciliation in the course of a CIETAC arbitration, arbitrators are required to follow a number of principles to ensure that the process is fair and adequate.⁶⁷ These principles are summarized below.

8.163  Conciliation is not a required procedure in CIETAC arbitrations. Neither the parties nor the arbitral tribunal are under any obligation to conciliate the dispute. The arbitral tribunal usually proposes conciliation when they see a reasonable prospect of settlement between the parties through conciliation. The arbitral tribunal may conciliate a case only where all parties have agreed to conciliation; if any party says no to the arbitral tribunal’s proposal for conciliation, no conciliation shall be conducted. Even if all parties have agreed to conciliation, the arbitral tribunal must discontinue the on-going conciliation proceedings if any party so requests during the process.

8.164  Once parties have agreed to conciliation, the conciliation must be clearly separated from the arbitration. The presiding arbitrator will announce that the arbitration hearing is suspended, and will direct the CIETAC case manager to stop recording the oral hearing by any form.

8.165  Where conciliation is successful, the parties are likely to enter into an agreement, either called a ‘settlement agreement’ or a ‘conciliation agreement’, to set out the terms of their settlement. The agreement must be unequivocally agreed to by the parties and be entered into of their free wills. There is no fixed format for the ‘settlement agreement’ or ‘conciliation agreement’; as a matter of practice, such an agreement usually indicates that the settlement has been achieved during the course of arbitration at the CIETAC and thanks to the efforts of the arbitrator-mediators.

8.166  Information disclosed by the parties during a conciliation are on ‘without prejudice’ status. It means to say that, where the conciliation fails, and the arbitration is resumed, the parties should not rely on or refer to any proposals, recommendations, statements or admission which came to light or was communicated during the conciliation in the subsequent arbitration. The proposals, recommendations, or statements here generally refer to those made by the parties, but they may also include those made by the arbitral tribunal during the conciliation. The arbitral tribunal must disregard any admission of facts which they became aware of during the conciliation once the arbitration has resumed. This principle has now been formally recognized in Article 47.9 of the CIETAC Rules.

8.167  It is conceivable that settlement agreements reached through conciliation or negotiation are only enforceable as private contracts. In practice, the CIETAC from time to time receives parties’ request to convert their settlement agreements into consent awards, so as to make them judicially enforceable under national law and the New York Convention. For this purpose, the CIETAC introduced a provision into its 2005 CIETAC Rules (i.e. Article 40.1) to allow the CIETAC to appoint an arbitrator merely to turn a settlement agreement into an arbitral award. The 2012 CIETAC Rules maintain such provision in Article 45.10 and the current CIETAC Rules maintain such provision in Article 47.10.

8.168  It is worth noting that the 2012 CCPIT/CCOIC Mediation Rules⁶⁸ contain a provision that is compatible with Article 47.10 of the CIETAC Rules. Article 28 of the CCPIT/CCOIC Mediation Rules provides:

8.169  The procedure referred to in Article 47.10 is a special fast-track procedure. Unless otherwise agreed by the parties, the Chairman of the CIETAC shall appoint a sole arbitrator regardless of the amount in dispute. The sole arbitrator shall examine the case in a procedure that it considers appropriate, and is not required to follow the procedure and time limit for rendering an award under other provisions of the CIETAC Rules. In practice, the Respondent is not required to submit a Statement of Defense, and the arbitral tribunal in a procedure conducted under Article 47.10 usually renders the award in no more than two weeks from the date of its composition.

8.170  In such med-arb practice, after the ‘mediation’ part is successfully concluded with a settlement agreement, the sole purpose of the ‘arbitration’ part is to convert such settlement agreement into an enforceable award. The task of the arbitral tribunal is not to deal with the disputes between both parties, but to make an award to record the settlement agreement. However, under Articles 1 and 2 of the PRC Arbitration Law, arbitration is to resolve dispute. Thus some commentators argue that in med-arb process, there is no dispute to be arbitrated, which is in violation of the said provisions of the PRC Arbitration Law. Other commentators express the opposing view that ‘med-arb’ should be seen as an integral process and real dispute does exist at the outset of the process; with the CIETAC Rules expressly endorsing such a mechanism and parties willingly choosing the mechanism, there should be no issue with legitimacy of the process.

8.171  To address the concern that the process may be used for illegal purposes, the arbitral tribunal should have detailed examination of the case through meetings with the parties or oral hearings, and submissions of the parties, so as to make sure that there is a real transaction between the parties which gives rise to dispute. For example, in a typical sales of good case, the arbitral tribunal may want to see the contract, the invoice, the bill of lading (if any), the letter of credit (if any), the packing list, the customs papers, etc., in order to make sure that the transaction is a real one, rather than a forged one for the purpose of money-laundering.

(p. 227) 8.172  Indeed, in recent years, there have been voices in the legal circle in China calling for legislation to curb the so-called ‘fake arbitration’. Fake arbitration may take the form of either an ordinary arbitration or a ‘med-arb’. In particular, ‘fake arbitration’ can be used by two or more parties who conspire to harm the interests of a third-party. An example was Guo Mingyan v. Jiangsu Mahui Real Estate Co. Ltd.⁶⁹ Guo Mingyan applied for enforcement of a people’s court judgment against Jiang Yulan and, as a result, the Yangzhong People’s Court sealed up a commodity house under the name of Jiang Yulan. Jiangsu Mahui Real Estate Co. Ltd (‘Mahui Company’) initiated an arbitration against Jiang Yulan before the Nanjing Arbitration Commission to rescind the commodity house sales contract entered into by Mahui Company and Jiang Yulan despite that Jiang Yulan had paid the full contract price. The arbitral tribunal rendered an arbitral award to rescind the commodity house sales contract. The arbitral award, if enforced, would have rendered the sealing ineffective. Thus, the Jiangsu High People’s Court denied Mahui Company’s application for terminating the sealing in light of the arbitral award. Although the Jiangsu High People’s Court did not find the arbitration between Mahui Company and Jiang Yulan to be a ‘fake arbitration’, it noted that there was no legal basis at the time for a non-party to challenge an arbitral award where the non-party’s interests have been prejudiced by the arbitral award.

8.173  On 22 February 2018, the SPC promulgated the SPC Provisions on Several Issues concerning the Enforcement of Arbitral Awards by the People’s Court (‘the SPC Provisions on Enforcement of Arbitral Awards’), which provided a resolution for non-parties. Article 9 of the SPC Provisions on Enforcement of Arbitral Awards gives a non-party to an arbitration the right to apply to the competent court for non-enforcement of an arbitral award or a conciliation statement in case the said non-party can furnish evidence that the arbitration was commenced ‘for malicious or false purpose’.⁷⁰

8.174  Since the promulgation of the SPC Provisions on Enforcement of Arbitral Awards, several non-parties have successfully applied for non-enforcement of arbitral awards and conciliation statements. For example, in an arbitration administered by Jining Arbitration Commission, Shandong Xintangyuan Construction and Engineering Co. Ltd (‘Xintangyuan’) and Zaozhuang Tongji Real Estate Co. Ltd (‘Tongji Real Estate’) reached a settlement agreement and a conciliation statement was made. Shandong Tongji M&E Co. Ltd (‘Tongji M&E’), as a non-party to the said arbitration, applied for non-enforcement of the conciliation statement before the Zaozhuang Intermediate People’s Court. The Zaozhuang court found that Xintangyaun and Tongji Real Estate tried to create a priority right in sequence of compensation by way of conciliation statement in arbitration, and that enforcement of such a conciliation statement are likely (p. 228) to harm the interests of other creditors including Tongji M&E. The Zaozhuang court finally ruled in favor of Tongji M&E and granted the non-enforcement of the conciliation statement.⁷¹

8.175  In the background of this new SPC judicial interpretation, arbitrators should be even more careful when handling ‘med-arb’ proceedings.

8.176  Articles 47.1 and 47.8 set forth the basic provisions for arb-med, in regard to party autonomy on commencement of arb-med and who shall conciliate the dispute in arb-med.

8.177  Commencement of arb-med—As mentioned in paragraph 8.163, conciliation in the course of arbitration is by nature a consensual process. It follows that conciliation is to be conducted only with parties’ explicit consent. According to Article 47.1, the arbitral tribunal may conciliate the disputes during the arbitration proceedings after having obtained consent from all parties to the proceedings. The consent may either be an agreement reached directly between the parties to the arbitration or one party’s consent collected by the arbitral tribunal in relation to the proposal of the other party.

8.178  Arbitrator-conciliators vs separate conciliators—The PRC Arbitration Law and the CIETAC Rules do not prohibit parties from resolving their disputes through other available means after commencement of arbitration. There are three optional approaches for arb-med provided under Articles 47.1 and 47.8 of the CIETAC Rules, i.e.: (1) the conciliation conducted by arbitral tribunal; (2) conciliation assisted (but not conducted) by the CIETAC; and (3) settlement reached by parties themselves.