Authored by Arthur Dong (dongxiao@anjielaw.com)

Beijing Arbitration Commission (‘BAC’) was founded in 1995 by Beijing Municipal government and later became a financially independent institution. Since its founding, BAC has received great reputation among the business and legal community and growing very fast in recently years. [1] Many foreign companies choose CIETAC and BAC as the top two choices for their arbitration forum in Mainland China.

The last amendment of the Beijing Arbitration Commission’s (‘BAC’) Arbitration Rules (‘Rules’) was made in 2007 and went into effect in 2008. On October 31, 2013, BAC announced its latest amended Rules seeking for public comments. BAC claims that the new revision of the Rules reflects the valuable experience BAC has gained in application and enforcement of its 2008 Rules in the last 5 years. The discussion below will address numerous amendments to the 2008 Rules and the reasoning behind those revisions. 

Increase the Discretion of BAC and Arbitration Tribunal

If both parties fail to stipulate the arbitration procedures in their agreement, the BAC or the arbitration tribunal has the discretion to determine what procedure is proper for the case to ensure an effective and fair resolution of the dispute. 

Obligation of Honesty and Dealing in Good Faith

The new Rules state that the parties, party representatives, and the arbitration tribunal have the obligation to be honest and dealing in good faith.

Increase the Flexibility in Producing Evidence in the Pre-Hearing and Hearing

BAC stated that due to the rigid language in the 2008 Rules, the requirement to produce evidence at the pre-hearing stage and at the hearing has caused confusion for parties and conflicted with the effective and flexible nature of the arbitration proceeding. Therefore, unlike in the 2008 Rules, [2] the new revision gives authority to the arbitration panel to determine dates and procedures for producing evidence.  The chairperson of the arbitration panel may also determine the aforesaid procedures as assigned by the arbitration commission.

Independent Evidence Authentication Procedure

The new Rules have deleted the section which copied the China Civil Procedure Law. The arbitration panel is allowed to review the trade customs and industry practice, in addition to relevant laws, administrative regulations, and court interpretations for evidence authentication. BAC claims that this change is to accommodate the commercial nature of arbitration.

Continuance of Arbitration Proceeding with a Majority of the Arbitrators in the Arbitration Panel

After the last hearing for the case is over, if one of the three arbitrators in the arbitration panel dies, is discharged, or cannot participate in the conference and issue the arbitral award due to any reason, the director of the BAC may assign another arbitrator to resume the role of the arbitrator on leave or continue the arbitration proceeding with the remaining two arbitrators.

Increase the Enforceability of the Arbitral Award

The new Rules affirm that the arbitral award shall be enforceable on the same day that it is issued.  Under the new Rules, after issuance of the arbitral award, the parties should perform their obligation(s) accordingly.  If one party fails to perform its obligation under the award, then the other party may request that the court apply the mandatory enforcement actions.

A Party’s Objection to BAC’s Jurisdiction Cannot Effect the Continuance of the Arbitration Proceeding

Under the 2008 Rules, there was no rule on whether the arbitration proceeding should be put on hold if a party objects to BAC’s jurisdiction.  In practice, sometimes a party misses their date to appoint an arbitrator under the mistaken belief that the arbitration proceeding will stop after they have submitted their jurisdiction objection to the BAC.  Therefore, the new Rules have clarified this point to avoid any misunderstandings.

The Amount Involved in the Dispute can be Determined by BAC

If the parties fail to pay the arbitration fee, the BAC, in accordance with the relevant BAC Rules, shall determine the amount involved in the dispute when considering the arbitration fee.

Establish the Factors to Consider Whether to Accept Counter-Claim or Amendment of the Claim after Expiration of the Due Date

The 2008 Rules only provided that the arbitration panel, or if the arbitration panel has not been formed, the BAC, shall determine whether to accept the counter-claim after the expiration date. However, it did not list the factors to consider for such a request.  In the new Rules, the factors include: 1) the necessity to hear the Respondent’s counter-claim and Appellant’s claim in the same case; 2) the length of time until the expiration date was due; 3) whether acceptance of the counter-claim will cause undue delays to the cases; and 4) other factors that have been deemed appropriate by the arbitration panel.  The Rules further established that if a party’s petition for filing an amendment to the claim or counter-claim after the expiration date would cause undue burden to the ongoing arbitration proceeding, the arbitration panel or BAC may refuse to accept such petition.

Allow the Parties to Request a Reporter in the Arbitral Hearing

The new Rules allow the parties in the arbitration to apply for BAC appointed reporters in the arbitration proceeding to meet their specific needs.  The cost for such shall be borne by both parties or by the parties that requested the service.

Offer a List of Items on Expenses and Reasonable Costs in the Arbitration Cost Provision

The purpose is to manage parties’ expectations on the cost of arbitration.  Expenses include but are not limited to: assignment fee, inspection fee, and auditing cost.  Reasonable costs shall include but are not limited to: attorney fee, traveling cost, cost of injunction, and notarization fee.

Create an Exception for Arbitration Cost to Punish a Party’s Intentional Delay in Arbitration Proceeding

In practice, parties in the arbitration may intentionally delay the arbitration proceeding, and this therefore resulted in additional costs for arbitrating the case.  Under the new Rules, if such circumstance occurs, the exception on sharing arbitration cost shall apply, which states that the party caused the delay shall pay for all the additional expenses.

Revision in Challenging the Validity of Arbitration Clause

Instead of challenging the arbitration agreement, the new Rules clarify that the challenge is to BAC’s jurisdiction.  This is because challenging an arbitration agreement is one of the causes that can be used to object to BAC’s jurisdiction.  Under the revised Rules, if a party objects to the existence or validity of the arbitration agreement or the BAC’s jurisdiction of the case, the party may submit their objection to the commission. 

Revision in Joinder of Claims Provision to Make it More Practical

The joinders of claims provision in the new Rules make it easier to join two related claims from different parties.  Under the new Rules, the arbitration panel may join two or more claims if the applicant can satisfy two of the following three conditions: first, the subject of the disputes are related or of the same kind; second, one party has applied for joinder of the claims and the other party has agreed to this; and third, the arbitration panels for the different claims are composed of the same arbitrators.  For a case with joined claims, the panel shall determine the appropriate arbitration procedure.

Circumstances in which a Party May File a Petition to Withdraw the Case from BAC

In the 2008 Rules, there were no circumstances under which a party may withdraw the case at the conclusion of the arbitration proceeding.  The new Rules provide that the arbitration panel or BAC may dismiss the case if the arbitration proceeding cannot make any progress or if there is no need for a continuation of the arbitration.  The dismissal of the case shall be decided by the arbitration panel or the BAC in case the arbitration panel has not formed yet.

The Suspension and Reconvention of the Arbitration Proceeding

Whereas the 2008 Rules only stipulated the situations for when the arbitration proceeding shall be suspended, the new Rules provide the conditions on which the arbitration can be reconvened.  The arbitral proceeding shall be reconvened from its suspension after the elimination of the special circumstances.  The arbitral proceeding may also be suspended if both parties request suspension or if one party requests the suspension and the other party fails to object.  The arbitral proceeding shall be reconvened upon reception of a party’s petition or when arbitration panel deems the reconvention of the arbitral proceeding to be necessary.  The decision to suspend and reconvene the arbitral proceeding shall be made by the arbitration panel or the BAC if the arbitration panel has not been formed yet.

Establish Procedure for Amending the Mediation Agreement

Under the new Rules, to correct the spelling and calculation errors in the mediation agreement, the parties have the right to request the commission amend the mediation agreement within 30 days of its issuance.

Address Issue of Arbitration Fee in Transition from Summary Proceeding to Standard Proceeding

The new Rules give a much clearer guideline on how the parties should be obliged to pay for the related arbitration cost if the case has been transferred from a solo arbitrator in the summary proceeding to the arbitration panel in the standard proceeding.  The additional cost caused by the transfer from summary proceeding to standard proceeding shall be borne by the parties under mutual agreement.  If the parties cannot agree, the BAC will make a decision on the additional arbitration fee.  After the arbitration panel is formed due to the transition from summary arbitration to standard arbitration, the parties shall then appoint their arbitrator within 5 days after receiving notice of such amendment. 

Increase Recognition of the Arbitration Agreement in Writing

In reference to the UNCITRAL rules and the customs of international arbitration, the new Rules establish that: “During the exchange of the appellant complaint and the respondent’s response, if one party claims that the arbitration agreement has existed while the other party fails to assert any objections, then, the BAC will deem that the written form of the arbitration agreement existed.’

New Provision on Joinder of Arbitration Cases

Although the joinder clause remains controversial among international arbitration practitioners, many well-established international arbitration forums have adopted the joinder of arbitration clause in their rules.  Therefore, BAC’s new Rules has clarified the procedures for joinder of arbitration cases to make it more practical.  Specifically, the new Rules allow different cases to merge into a single arbitration proceeding if one party has petitioned for the joinder of the cases and the other party(s) has consented or if BAC, under its discretion, deems it necessary to join the cases and has received consent from all involved parties.  Unless otherwise agreed upon by the parties, all other cases shall be merged into the first case filed for arbitration. 

Under the joinder clause, after joining the different cases, the parties that were not in the first arbitration case can be the appellant or the respondent of the merged arbitration case upon agreement with the parties of the first arbitration proceeding.   If an agreement cannot be reached, the joining parties shall be considered as an independent party that can participate in the case with the same rights and obligations of the appellant or the respondent under the new Rules.  Additionally, if the arbitration panel has not yet formed in the initial arbitration case, the independent joining parties and the parties in the arbitration cases shall reach a consensus on selecting the arbitrators to form the panel.  If any independent parties cannot agree on the arbitrator candidate for the panel after 15 days since the arbitration selection procedure has started, then, the director of the BAC has the discretion to designate arbitrators for the case.

Create Claim Request among Multiple Parties

In reference to Article 8 of the ICC Arbitration Rule, in the arbitration with multiple parties, BAC’s new Rules authorize claims that may be made by any party against any other party in the arbitration.

Additional Amendments to Accommodate International Commercial Arbitration

The other amendments include: 1) what procedure should apply if the parties disagree on whether the arbitrated case contains any foreign element after the arbitration award has been rendered; 2) give discretion to the commission to determine the appropriate arbitration location in accordance with the circumstances of the case; 3) create provisions to issue pre-arbitration injunctive relief orders under the relevant applicable law;  and 4) if both parties fail to stipulate the applicable law for arbitration, the arbitration panel has the authority to choose the applicable law according to the facts of the case.

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[1] See Dr. Chen Fuyong, Sun Wei, Looking Beyond Rules – Analyzing Competitive Attractions of BAC , LexisNexis Dispute Resolution Law Guide, 2014

[2] Under Art. 33 of the 2008 Rules, if the Arbitral Tribunal considers it necessary, it may, prior to the hearing, authorize the presiding arbitrator to summon the parties to exchange their evidence and jointly draw up a list of the disputed issues and define the scope of the hearing. Prior to the hearing or at any stage during the hearing , the Arbitral Tribunal also may, if necessary, require the parties to produce evidence and to respond to questions.