Publish time: Fri Dec 24 10:12:56 CST 2021
The Beijing Arbitration Commission/Beijing International Arbitration Center (“BAC”) will implement new arbitration rules (“the new rules”) on February 1, 2022. In summary, the main revisions in the new rules are as follows: (1) they make clear that the mode of hearing includes virtual hearing and the Arbitral Tribunal has the right to determine the mode of hearing according to the circumstances of the case; (2) A new mode for nominating presiding arbitrators is introduced: that is, if the two parties fail to nominate the presiding arbitrator jointly, the Chairperson of the BAC may decide that the presiding arbitrator shall be jointly nominated by the two party-appointed arbitrators in accordance with the circumstances of the case; (3) the effectiveness of electronic service is promoted and it is stipulated that the BAC or the Arbitral Tribunal has the right to adopt an appropriate mode of service according to the circumstances of the case; and (4) the capped administration fee is lowered.
The new rules will come into effect on February 1, 2022.
In detail, the main revisions in the new rules are described below.
I.It is made clear that the mode of hearing includes both an oral hearing and a virtual hearing. The Arbitral Tribunal has the right to determine the mode of hearing in accordance with the circumstances of the case.
The COVID-19 pandemic has had a great impact on how arbitration cases normally proceed, the hearing process having been the most affected aspect. In order to address the problem of impossibility or inconvenience in arranging in-person hearings, the BAC issued its Working Guidelines on Virtual Hearings (For Trial Implementation) on May 8, 2020. After more than a year of practice, virtual hearings have achieved a high degree of acceptance with parties and their authorized representatives, while arbitrators and institutional staff have also accumulated significant relevant experience of them. So far, a number of virtual hearing cases handled by the BAC have been successfully concluded, while others are in progress. The virtual hearing has not adversely affected efficiency of case procedures or the rights of the parties. In recent years, many international and domestic arbitral institutions have revised their arbitration rules to implement virtual hearing, indicating that institutions, arbitrators and arbitration practitioners have reached a consensus that this form of hearing has a realistic basis for meeting parties’ needs in dispute resolution.
The number of international cases accepted annually by the BAC in recent years has been more than 150. The number of domestic cases in which one party was resident or had its place of business outside Beijing has accounted for more than 60% of references, while the number of cases in which both parties came from places outside Beijing has accounted for about 25%. Virtual hearings can save parties and authorized representatives from tiredness related to travel, reduce travel costs and other expenses, and help save the costs of dispute resolution.
In view of the rapid development of technology and in order to improve the applicability of the new rules, Article 25(2) adopts a broader definition of “virtual hearing”: “virtual hearing means that one, multiple or all parties to an arbitration participate in the arbitration hearing by using teleconference, videoconference or other communication technology (or a combination thereof)”.
As to which specific cases may be heard virtually, Article 25(3) of the new rules gives the Arbitral Tribunal the right to determine the mode of hearing in accordance with the specific circumstances of the case. The factors that it may consider in doing so include the willingness of both parties to accept a virtual hearing, the applicable technical conditions, the ability of both parties to participate in a virtual hearing and whether there are circumstances in which it would be particularly inappropriate to hold one. Further, Article 41 of the new rules stipulates that the written record of a virtual hearing shall be confirmed in the manner determined by the Arbitral Tribunal. In the case of a regular in-person oral hearing, the written record of the hearing is basically confirmed by signing it in person. In the case of a virtual hearing, the Arbitral Tribunal may adopt a more flexible way of confirming the written record of the hearing in accordance with the circumstances of the case.
A virtual hearing and an in-person hearing in fact differ only as to the specific form or mode of the hearing, while virtual hearings are also in line with the procedural principle of direct and verbal trial on the part of arbitrators, that is to say, their obligation (like judges) to hear all participants directly in order to find facts and reach a decision. Article 25(5) of the new rules also reiterates that “regardless of the mode of proceeding adopted, the Arbitral Tribunal shall treat the parties fairly and impartially and give each party a reasonable opportunity to make submissions and arguments”. Thus, applying the principle of due process, both virtual hearings and in-person hearings can sufficiently protect the procedural rights of the parties.
Following implementation of the new rules, the BAC will update the Working Guidelines on Virtual Hearings 2020 contemporaneously and will constantly improve them in the light of practice, so as to facilitate the further and better use of the virtual hearing process by arbitrators and parties.
II.The effectiveness of electronic service is promoted, Article 71(1) of the new rules stipulating that the BAC or the Arbitral Tribunal has the right to adopt an appropriate mode of service in accordance with the circumstances of the case.
Service is an important element in the arbitration process. As a result of developments in science and technology, the use of more convenient and effective electronic service to improve efficiency and save time has become an important trend in arbitration. Email was included as a mode of service in Article 71 of the BAC Arbitration Rules 2019. In practice, the BAC has adopted electronic service in a number of cases on the basis of the willingness of the parties, achieving good results. Article 71 of the new rules therefore further clarifies and confirms the mode and scope of electronic service, stipulating that “[a]rbitral documents, notices and other materials may be served on the parties or their authorized representatives in person or by mail, courier, facsimile, email, or other electronic means”, and “if service is carried out by electronic means and the electronic transmission record can show the completion of sending, … [documents] shall be deemed to have been served”. Moreover, Article 71(1) of the new rules clearly stipulates that “the BAC or the Arbitral Tribunal has the right to decide the appropriate mode of service in accordance with the particular circumstances of the case”. It therefore enables the BAC and the Arbitral Tribunal to decide the mode of service required in accordance with the parties’ actual situation, enhancing the flexibility of the rules.
The new rules also make it clear that in cases where service is deemed to have been properly effected if the document is delivered to the addressee’s last known place in accordance with Article 71(3), the BAC or the Arbitral Tribunal shall have the right to determine the specific time of service if there is a dispute over this matter. Where direct service has been agreed by the parties, the time of service shall also be determined by the BAC or the Arbitral Tribunal if there is a dispute over this matter. The purpose of these amendments is to cope with relevant issues that may be controversial in practice, so as to remove the doubts or concerns of the parties with regard to service.
Ⅲ. A new mode for nominating presiding arbitrators is introduced.
Article 20 of the new rules stipulates that the Chairperson of the BAC may decide that the presiding arbitrator shall be jointly nominated by the two party-appointed arbitrators in accordance with the circumstances of the case.
The nomination of arbitrators is both an important procedural right of the parties and an important embodiment of party autonomy. Generally, the parties can each nominate an arbitrator, while the presiding arbitrator shall be jointly nominated by both parties. Where there is a lack of trust between the two parties or an absence of knowledge or understanding about the presiding arbitrator, it is rare in practice for both parties to nominate that arbitrator jointly. To facilitate joint nominations of presiding arbitrators by parties, the BAC has introduced the “list system”, the “recommendation system” and other nomination systems since promulgating its Arbitration Rules 2004, with an aim to increase the possibility of joint nominations of presiding arbitrators by parties. Article 20(5) of the new rules further stipulate that the Chairperson of the BAC may, in the light of the circumstances of the case, decide that the presiding arbitrator shall be jointly nominated by two arbitrators either nominated by the parties or appointed by the Chairperson. Generally speaking, the parties tend to trust arbitrators chosen by themselves, so that the nomination of a presiding arbitrator by those appointees may be regarded as an extension of the right of the parties to nominate arbitrators. Besides, arbitrators often have a better understanding of standards of professional competence and conduct among themselves, so it is more realistic for party nominated arbitrators or BAC appointed arbitrators, to nominate presiding arbitrators, since in reality the parties do not possess such information or knowledge and, as a result. there will be a higher probability of nominating suitable presiding arbitrators. Moreover, the members of an Arbitral Tribunal constituted in this way would have more trust in each other, which is conducive to the mutual co-operation required to conduct the hearing of the case and to make an award.
In order to avoid any potential adverse impact of the nomination process on the procedural efficiency of the case, Article 20(5) of the new rules further stipulates that “the two arbitrators shall jointly nominate the presiding arbitrator within 10 days from the date of receipt of the notice from the BAC” (in the international commercial arbitration procedure under the 2022 Rules, the time limit is 15 days). If the presiding arbitrator is not jointly nominated by the two arbitrators within the time limit, it indicates those arbitrators may not be able to nominate a suitable presiding arbitrator for a number of reasons. At this point, the nomination procedure ends and the presiding arbitrator shall, by virtue of Article 20(6), be appointed by the Chairperson of the BAC.
The new rules stipulate that the mode of nomination may be decided by the Chairperson of the BAC in accordance with the particular circumstances of the case. The factors that the Chairperson may consider generally include the sum in dispute, the complexity of the case and the arbitrators who have been nominated by each party.
Ⅳ. Further lowering the capped administration fee
The Arbitration Rules 2019 clearly divide arbitration fees into administration fees and arbitrators’ fees, and stipulate a capped amount of administration fees: that is to say, where the sum in dispute is over RMB 5,000,000,000, the administration fee will not be increased further and the upper limit of the administration fee will be RMB 8,761,000. In order to reduce further the arbitration fees payable by the parties and to help them to control reasonably the cost of dispute resolution under the BAC process, the new rules further lower the capped administration fee, so that, in cases where the sum in dispute exceeds RMB 3,964,000,000, the upper limit of the administration fee will be RMB 7,000,000.
Ⅴ. Other significant revisions in the new rules
These include the following:
1. In Article 7: “Application for Arbitration”, it is made clear that the parties shall provide the “arbitration agreement on which the Application for Arbitration is based” in the application for arbitration. This is the so-called “arbitration basis”, which relates to the Arbitral Tribunal’s jurisdiction. The “arbitration basis” is both the basis on which (1) the parties may apply for arbitration and (2) the Arbitral Tribunal may determine the scope of hearing, and is particularly relevant where the dispute between the parties involves multiple contracts.
2. In Article 8: “Single Arbitration under Multiple Contracts”, in relation to the conditions whereby a party may apply to commence a single arbitration concerning disputes arising out of or in connection with multiple contracts, the Chinese wording that “the parties to multiple contracts are the same” in 2019 Arbitration Rules is revised to read “such [multiple] contracts involve the same parties”. In practice, there may be different understandings of “the parties to multiple contracts are the same”, for example, that the parties to multiple contracts must be exactly the same. To avoid ambiguity, the adjustment of the wording by the new rules to “such [multiple] contracts involve the same parties” means that the parties to multiple contracts are not required to be exactly the same, so that it is acceptable for some of the parties (but not all) to be the same. Article 8(2) of the new rules also makes clear that if any other party raises an objection to single arbitration under multiple contracts after the BAC has accepted the application, the Arbitral Tribunal shall decide the matter.
3. In Article 9: “Acceptance”, it is made clear that if the Claimant’s Application for Arbitration under Article 7 does not meet the requirements of the new rules and the Claimant fails to rectify this within a specified time, the Application for Arbitration shall be deemed not to have been submitted, in which case the Application for Arbitration and its attachments will not be retained by the BAC. This provision is intended mainly to clarify to parties the consequences of failure to rectify the Application for Arbitration in accordance with the new rules and to urge them to exercise their rights in a timely manner.
4. In Article 16: “Submission of Documents and Number of Copies”, in addition to allowing the parties to submit arbitration documents directly to the Arbitral Tribunal upon the consent of the parties, it is further clarified that the parties may agree on “direct service”, so as to respect any special arrangements for the submission and service of documents between the parties.
5. In Article 65: “Defense and Counterclaim of the Chapter 8: Special Provisions on International Commercial Arbitration”, a paragraph is added by Article 65(2): “If the parties amend Claim or Counterclaim, the time limit for the defense shall be determined in accordance with Article 65(1) before the composition of the Arbitral Tribunal; the Arbitral Tribunal shall determine the time limit for the defense in accordance with the specific circumstances of the case after its composition” The time limit for submitting a defense in international arbitration cases is 45 days [Article 65(1)], which is relatively long. The specific circumstances in which the parties may change an arbitration claim or counterclaim are different, and some changes may not involve significant adjustments to a claim or changes in the basic legal relationship. In such a case, the Arbitral Tribunal shall determine the time limit for submitting a defense in accordance with the specific circumstances of the case, which will help to improve the efficiency of the proceedings. Thus, the new rules stipulate that in international arbitration cases, the Arbitral Tribunal has the right to determine the period for submitting a defense in order to achieve a balance between the protection of the Respondent’s defense rights and the efficient conduct of the arbitration process.
The commentary above is a brief description of the revisions made by the new rules. Their text and a Comparison Table of the Revisions in the New Rules can be found in the Annexes to the 2022 Rules.
We sincerely thank the arbitrators, parties, authorized representatives and others who made valuable suggestions in the process of amending the arbitration rules. We will always strive to improve the rules, protect the procedural rights of parties and facilitate parties to resolve disputes professionally and efficiently through arbitration.
Beijing Arbitration Commission/Beijing International Arbitration Center
December 24, 2021