SIAC procedure gets cold shoulder in China

The First Intermediate People’s Court of Shanghai Municipality, on 11 August 2017, refused to recognize and enforce an arbitral award rendered by the Singapore International Arbitration Centre (SIAC) on the grounds that it violated article 5(1)(d) of the New York Convention and, “the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties”. This ruling by the Chinese court triggered a hubbub in international arbitration circles for a time.

The applicant in this case was Noble Resources International, and the respondent Shanghai Good Credit International Trade. The arbitral award in question is award No. 005 of 2015, rendered by the SIAC. The core of the case lies in the parties originally having specified in their arbitration agreement that the tribunal was to be composed of three arbitrators, whereas SIAC, pursuant to its rules for an expedited arbitration procedure, had its president designate a sole arbitrator to form the tribunal to hear the case and render the award.

With respect to this, the Shanghai court held that party autonomy is the cornerstone of operation of the arbitration system and the method of constitution of the tribunal is a fundamental procedural rule of arbitration. The phrase “unless the president determines otherwise”, in article 5.2(b) of the 2013 version of the SIAC arbitration rules, should not be construed as granting the SIAC president discretion on the method of constitution of the tribunal. On the contrary, in exercising his or her decision authority, he or she should fully respect the parties’ agreement on the method of constitution of the tribunal so as to ensure party autonomy. In other words, the arbitration rules formulated by an arbitration institution should not be too loose, and the decision of its chairman should not take precedence over the express provisions of the arbitration agreement between the parties.

Jia Hongwei is a senior partner at Longan Law Firm and head of the firm’s Shenzhen office. He can be contacted on +86 136 0256 7671 or +86 755 8828 6044, or by email at jiahongwei@longanlaw.com