Ningbo court handles int’l arbitration requests

    Updated : 2015-08-03

1. Brief

The Zhejiang Yisheng Petrochemical Co signed two technology licensing agreements with the Jinweida Co of Luxembourg on April 28 and June 15, 2003, which had an arbitration clause in English that stated, “The arbitration shall take place at the China International Economic Trade Arbitration Centre, Beijing, China and shall be settled according to the UNCITRAL Arbitration Rules presently in force”. On July 11, 2012, the Jinweida filed an appeal for arbitration at the Beijing Centre and, on Oct 29, 2012, Yisheng filed an appeal to the Ningbo Intermediate People’s Court for a voidance of the arbitration clause on the grounds that the arbitration agreed upon by both sides was a temporary one that was not supported by the Arbitration Law of China.

2. Results

After appealing to the Supreme People’s Court for a review of the case and having it approved, the Ningbo Intermediate People's Court, in Zhejiang province announced a final ruling on March 17, 2014, where it noted that, although the parties used the expression “take place at”, which is usually followed by a distinct location, the phrase after the expression in the arbitration clause could refer to either the location of the arbitration or the arbitration agency for purposes of achieving the goal in arbitration. The court stated that the arbitrator mentioned in the clause should be Beijing’s China International Economic Trade Arbitration Centre as indicated by its abbreviation, CIETAC, but the Chinese name of the agency in the clause is not accurate, so the arbitration clause in this case is not in violation of the Arbitration Law of China, so Yisheng’s request is denied.

3. Significance

This case was the first to recognize the force of a clause that the parties agree to and handled by a permanent arbitration agency in China according to UNCITRAL Arbitration Rules. It also clarified the idea that the clause involves the organization of arbitration rather than temporary arbitration. The case used an explanation method that could help the parties achieve their desire for arbitration concerning ambiguous words in the contract. Since the clause did not define the arbitration agency’s specific function, the court decided that the parties’ agreeing that an agency could apply another arbitration rule should be understood as follows: the agency can take charge of the whole arbitration process in accordance with relevant rules. This case is of a typical example of the need to promote a method for resolving disputes and for encouraging international arbitration and greater credibility in the arbitration process.