13 May Update on the China International Commercial Court
[Matthew S. Erie is an Associate Professor of Modern Chinese Studies and a Fellow at St. Cross College at the University of Oxford.]
In 2018, China began setting up the China International Commercial Court (CICC), the first judicial institution in the People’s Republic of China (PRC) specifically designed to adjudicate cross-border commercial disputes touching on matters of foreign law. The CICC is also regarded as the first legal institution designed to support the “Belt and Road Initiative,” China’s multi-trillion dollar project to promote economic integration across Eurasia, and beyond, through infrastructure and energy projects as well as digital connectivity. The BRI has generated a global debate about whether China provides an “alternative Asian model” of development or whether it is a “neo-colonial power,” and the CICC has become one focus of this debate. Some academic commentators view the CICC as one means by which China is expanding its judicial influence with implications for global governance via “BRI jurisprudence.”
In an earlier essay, I have written about the basic structure of the CICC, its jurisdiction, enforcement concerns, and specific issues such as procedural language, foreign expertise, and intake. In this post, I want to update that earlier essay and to briefly discuss the most recent regulations that further define the structure and operations of the CICC and the first batch of cases accepted by the courts.
By way of background, the CICC, a product of regulations issued by the Supreme People’s Court (SPC), is billed as a “one-stop shop” (yizhanshi) for resolving “international commercial disputes” of amounts of over 300 million yuan, between Chinese parties and their counterparts, through litigation, arbitration, and mediation. There are two observations about its jurisdictions: one, the CICC is intended for cases not limited to those stemming from the BRI. Two, the CICC is not mandatory for BRI deals; rather it is one option amongst an increasingly competitive field of dispute resolution forums in Asia. As such, the CICC is part of a new generation of hybrid dispute resolution mechanisms, part of what I the “new legal hubs.” The CICC seeks to draw on the strengths of different channels of dispute settlement, yet in doing so, there is some lack of clarity. Confusion is apparent in the name of the institution. Whereas the SPC has translated the institution’s English name as “courts,” in reality, they are “tribunals” (fating) as the SPC has authority only to establish tribunals and not courts. The difference is that a decision of a tribunal is effectively a decision of the SPC, and there is no appeal, although parties can apply for a retrial in the SPC’s No. 4 Civil Division.
In terms of venue, the CICC is comprised of two courts, one in Shenzhen and the other in Xi’an. These two municipalities correspond to the maritime “road” and the overland “belt,” respectively. In terms of dispute settlement, on the litigation side, the courts feature fifteen judges, all from the SPC. To internationalize the institution, the CICC also features an International Commercial Expert Committee of twelve PRC and twenty non-PRC legal professionals, experts mainly in mediation and arbitration.
In the latter half of 2018, the SPC issued a number of regulations that provide further details about the workings of the CICC. The most notable features are the following:
- According to the “Notice Regarding the First Batch of “One-Stop Shop” International Commercial Disputes [to be Settled] by an International Commercial Arbitration and Mediation Organ under the Plural Resolution Mechanism,” the CICC coordinates with other arbitral and mediation institutions, including the China International Economic and Trade Commission, the Shanghai International Arbitration Center (SHIAC), the Shenzhen Court of International Arbitration, the Beijing International Arbitration Centre, the China Maritime Arbitration Commission, the China Council for the Promotion of International Trade (CCPIT) Mediation Center, and the Shanghai Commercial Mediation Centre.
- Pursuant to the “(Trial) Notice of the General Office of the SPC’s Working Rules for the International Commercial Expert Committee,” the members of the International Commercial Expert Committee serve a four-year term, are appointed by the SPC, and are serving mainly a mediation function.
- The “(Trial) Notice of the SPC on the Rules of Procedure of the International Commercial Court” specifies pre-trial mediation as an initial procedure, which parties may opt out of.
- There is a “case management office” to coordinate dispute resolution between the different channels of dispute resolution.
There are a number of implications of and questions raised by the regulations. First, as each of the arbitration and mediation institutions is a domestic PRC organ, it is clear that the CICC operates as a platform to further internationalize these institutions. Second, procedurally and institutionally, there is an emphasis on mediation. This emphasis accords with the creation of the International Commercial Dispute Prevention and Settlement Organization, under the CCPIT, announced at the Second Belt and Road Forum for International Cooperation in Beijing on April 25-27, 2019. While details about this most recent institution are forthcoming, it is known that it will prioritize mediation.
However, the relationship between the CICC and the existing institutions is still nascent. Specifically, it is unclear why parties would opt for arbitration under, for example, SHIAC via the CICC when they could go directly to SHIAC. It is further unclear if an award given by a body like SHIAC would be converted to or recognized as a judgment by the SPC and, second, what this recognition would give the parties provided that arbitral awards given by arbitration institutions have greater likelihood of enforcement abroad under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards than do SPC judgments. This matters when drafting the dispute resolution clause in the relevant commercial contracts. To date, CICC has not issued language for a model clause, as is customary among arbitration institutions. Additionally, it is uncertain, given that the CICC has privileged party autonomy, what the role of the “case management office” is.
On December 29, 2018, the CICC announced it has received its first batch of cases. The Shenzhen court has received approximately five cases and the one in Xi’an approximately four. All of these were cases that had been received by the SPC and were subsequently handed down to the CICC, as no case yet is the result of specification for the CICC in the parties’ contracts. This pattern is not surprising for international commercial courts. For instance, it took the Singapore International Commercial Court (SICC) some three years before it heard its first case that was the result of the parties choosing the SICC as their forum for dispute resolution. Prior to that, the SICC received all its cases by transferral by the Singapore High Court.
In terms of nature of disputes, three of the Shenzhen cases concern applications concerning the validity of arbitration agreements, one is a dispute over product liability and another concerns unjust enrichment. For the Xi’an cases, two concern disputes over liability for damage of a company’s interests and the others concern equity determination and profit distribution disputes. Interestingly, none of the cases is necessarily a “BRI dispute;” for example, a Xi’an case is a continuation of a drawn-out legal battle between Thailand-based T.C. Pharmaceutical Industries Co. Ltd. (which makes the energy drink Red Bull) and its Chinese counterpart.
All of the cases are still on the proceedings. In an exercise of transparency, there have been a couple of announcements about court actions, including one, dated April 4, 2019, concerning the consolidation of three related requests to the court to confirm the validity of an arbitration agreement and the second, dated May 6, 2019, regarding a pre-trial meeting for a product liability case. In that latter announcement, the CICC reports that the parties agreed on pre-trial mediation by the International Commercial Expert Committee.
Looking ahead, it is likely that the CICC will grow slowly. Among seasoned lawyers in China, there is scepticism towards the CICC as to whether it can gain international legitimacy and also provide dispute resolution services that are otherwise unmet by existing options for international commercial arbitration. This is somewhat striking given that in the U.S. and its allies, among some experts, there is a kind of fascination with the institution (see e.g., “BRI jurisprudence” above). Nonetheless, beyond the symbolism of establishing an international commercial court, the CICC will potentially serve as a learning device writ large, a means of two-way socialization to both increase foreign parties’ awareness of and appreciation for Chinese legal institutions and Chinese legal and judicial experts’ exposure to best practices in international commercial law.
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