Beijing Arbitration Commission

A brief Introduction to the BAC Arbitration Rules 2019 and Annexes concerning Schedules of Fees

Publish time: 2019-8-29   Contributor:Jiang Qiuju

At its Fourth Meeting on July 4, 2019, the Seventh Session of the Beijing Arbitration Commission/Beijing International Arbitration Center (the “BAC”) deliberated and adopted the revised Beijing Arbitration Commission Arbitration Rules and the annexes thereto concerning the Fee Schedules (hereinafter referred to as the "New Rules and Fee Schedules").

The New Rules and Fee Schedules will be implemented and effective from September 1, 2019. The following is an introduction to the main revisions.

(1) Increasing the amount in dispute applicable under the Ordinary Procedure to RMB 5,000,000 and above

Article 53 of the current BAC Arbitration Rules (hereinafter referred to as the "current Rules") on “Scope of the Application of Expedited Procedure” stipulates that unless otherwise agreed by the parties, the Expedited Procedure shall apply if the amount in dispute does not exceed RMB 1,000,000. In other words, the Ordinary Procedure shall apply if the amount in dispute exceeds RMB 1,000,000. Based on the BAC’s current caseload and trends, for cases where the amount in dispute is between RMB 1,000,000 and RMB 5,000,000, the application of the Ordinary Procedure may result in certain contradictions between the parties’ expectations of efficient case management and a lengthy time period in procedural matters such as the composition of arbitral tribunals and arranging hearings. To meet better the needs of the parties to resolve their disputes efficiently and expeditiously, it is practically necessary to increase the amount in dispute applicable under the Ordinary Procedure. In addition, after more than 20 years of development of the BAC, Chinese lawyers’ and arbitrators’ professional competence and dispute resolution experience have significantly improved.  As such, it is now feasible for a sole arbitrator to hear cases in which the amount in dispute does not exceed RMB 5,000,000 under the Expedited Procedure.

(2) Implementing a new Schedule of Fees and clearly dividing arbitration fees into arbitrator’s fees and administration fees

The schedules of fees under the current Rules comprise three parts, namely, (1) Annex 1 - Case Acceptance Fees Schedule of the Beijing Arbitration Commission (the “Case Acceptance Fees Schedule”) and Case Handling Fees Schedule of the Beijing Arbitration Commission (the “Case Handling Fees Schedule”); (2) Annex 2 - Arbitration Fees Schedule for International Commercial Arbitration; and (3) Annex 3 - Schedule of Fees for Appointing Emergency Arbitrators and Applications to Emergency Arbitrators for Interim Measures. Among them, the main constituents of the BAC’s schedules of fees are the Case Acceptance Fees Schedule and the Case Handling Fees Schedule.

The division between the Case Acceptance Fee and the Case Handling Fee results from specific historical conditions. With the development of Chinese arbitration practice, there has been increasing criticism of these separate categories of fee. From the parties’ perspective, it is unclear what these fees are paid for, while the correlation between the arbitrators' fee and administration fees is not clear and lacks transparency, and also deviates from international practice. In order partially to solve this issue, the BAC has adopted a separate fees schedule in Annex 2 to the current Rules which distinguishes between arbitrator’s fees and administration fees and is available to parties in international commercial arbitration.

Parties in domestic cases also in fact wish to know the specific composition of the applicable fees. In order to resolve this issue entirely, therefore, the new Rules combine Annex 1 and Annex 2 to the current Rules into the new Annex I of the BAC Schedule of Arbitration Fees (hereinafter referred to as the "New Fees Schedule"), and clearly categorize arbitration fees into arbitrator’s fees and administration fees. Such a reclassification is conducive to (1) clarifying arbitration fees for parties, (2) elevating arbitrators’ performance by allowing an appropriate level of remuneration for their professional contribution to a specific arbitration case, and (3) improving the level of institutional service and management. In the meantime, the BAC has further raised the fees of arbitrators to align with current levels of economic development and to reflect reasonably respect for the value and expertise of arbitrators.

(3) The New Fees Schedule raises minimum fees and imposes a cap on maximum fees

Under the current Rules, the minimum arbitration fee charged by the BAC is RMB 5,100, while the minimum fee payable to a sole arbitrator is RMB 7,000; thus, minimum arbitration fees are not sufficient to cover the arbitrator’s remuneration and the cost of handling a case. Under the BAC’s previous practice, the arbitration fees charged for cases with a large amount in dispute have been used to make up for deficits resulting from those with a small amount in dispute, a practice which has increasingly been questioned over time.

In order to make the arbitration fees for cases with a small amount in dispute able to cover actual costs and become ‘self-sufficient’, as well as to ensure the quality of arbitration services and maintain sustainable development of the BAC, the New Rules raise the minimum fee for cases in which the amount in dispute is less than RMB 250,000(inclusive), the arbitrator's fee shall be RMB 12,000 and the administration fee shall be RMB 5,000 (under the current Rules, the arbitration fee for cases where the amount in dispute is RMB 250,000 is RMB 14,550). If calculated at an hourly rate of RMB 3,000 (which is the current general hourly rate for domestic lawyers), the minimum arbitrator’s fee of RMB 12,000 equates approximately to four working hours, while on average an arbitrator would in fact spend more than four hours working on a case. At the same time, due to the high level of individual income tax in China and the fact that there is no preferential tax policy for arbitrators’ fees at present, the minimum fee of an arbitrator will equate to RMB 10,080 after taxes and other dues are deducted. The minimum level of administration fees, meanwhile, has not been raised and remains at RMB 5,000, the same as the previous Case Handling Fee. However, under the current tax system, the arbitration institution must also pay the value-added tax and surcharge based on the total amount of arbitration fees it has charged, so the minimum fee that the institution will actually receive is only RMB 3,922.

While the minimum fee has been raised, in order to reduce the arbitration costs of the parties in cases with large amounts in dispute, the New Fees Schedule imposes a cap on the maximum fees payable: the maximum fee for arbitrators shall be RMB 18,000,000 (for three arbitrators), and the corresponding amount in dispute shall be RMB 8,682,000,000; the maximum administration fee shall be RMB 8,761,000, and the corresponding amount in dispute shall be RMB 5,000,000,000. That is to say, where the amount in dispute is more than RMB 5,000,000,000, the maximum administration fee to be borne by the parties shall be RMB 8,761,000; where the amount in dispute is more than RMB 8,682,000,000, the maximum arbitrator’s fee to be borne by the parties shall be RMB 18,000,000.

As the BAC administers a number of cases with large amounts in dispute, the adoption of fee cap can effectively help the parties to control reasonably the cost of dispute resolution. Taking a case with an amount in dispute of RMB 5,000,000,000 as an example, according to the current fee schedule, the administration fee is approximately RMB 11,030,000; after adoption of the fee cap, this fee will be reduced by RMB 2,260,000. For a case with an amount in dispute of RMB 10,000,000,000, under the current fee schedule, the administration fee is approximately RMB 22,000,000; after adoption of the fee cap, this fee will be reduced by RMB 13,240,000.

(4) Arbitrators may now charge on an hourly basis by agreement of the parties

The hourly billing method is a common practice in international arbitration for calculating arbitrators’ fees and can reflect the time and effort devoted by arbitrators in specific cases with greater accuracy. For cases with a large amount in dispute but with simple facts, adoption of hourly rates by agreement of the parties can effectively control the cost of dispute resolution. In order to provide more options for the parties and to respect party autonomy fully, the New Fees Schedule introduces hourly rates in the calculation of arbitrator’s fees. Once agreed upon by the parties, arbitrators’ remuneration may be calculated in accordance with an hourly rate.  At the same time, in order to control reasonably the costs of arbitration, the New Fees Schedule also imposes a cap on the arbitrator’s hourly rate, which shall not exceed RMB 5,000 in principle. The adoption of hourly rates will help to advance further the integration of domestic arbitration practice with international practice and provide the parties with more options and a greater say in determining and controlling fees.

(5) Single arbitration under multiple contracts

In practice, the BAC usually allows a party to apply for a single arbitration to resolve disputes under several related contracts or contracts of the same type, in order to reduce the cost of dispute resolution. However, as the current Rules do not explicitly make such provision, it is uncertain whether the parties to multiple contracts may apply for a single arbitration based on such contracts, and this may also trigger disputes between the parties as to the legal basis for a single arbitration under multiple contracts. Thus, under the New Rules, the right to apply for a single arbitration under multiple contracts is specifically provided for, in accordance with the actual needs of the parties (see Article 8 of the New Rules).

(6) Perfecting the emergency arbitrator procedure and adopting a new fee schedule for appointing emergency arbitrators and applying for interim measures

At the end of 2017, the BAC accepted the first case in Mainland China to which an emergency arbitrator procedure was applied, and the decision on interim measures made by the emergency arbitrator was successfully enforced in Hong Kong. The administration of that case has provided valuable practical experience by reference to which to perfect the emergency arbitrator procedure in the current Rules. The New Rules specify what should be included in applications for interim measures submitted by the parties and prioritize the use of an electronic service method in the emergency arbitrator procedure. At the same time, the New Rules adopt a new fee schedule for the appointment of emergency arbitrators and applications for interim measures (Annex II to the New Rules), replacing the fee schedule in Annex 3 to the current Rules. The New Fees Schedule first distinguishes between administration fees and emergency arbitrator’s fees. The administration fee is fixed at RMB 10,000. Since the emergency arbitrator procedure is adopted in international arbitration, and by contrast with other institutions, the BAC does not charge a fixed amount (usually around RMB10,000) as the registration fee, therefore the administration fee of RMB10,000 charged in the emergency arbitrator procedure does not increase the costs burden of parties to international arbitration.

With regard to cases involving challenge to, replacement of and other matters related to emergency arbitrators, an additional administration fee of RMB 2,000 may be charged on each occasion.

With regard to the emergency arbitrator’s fees, the minimum fee shall be RMB 20,000, and an additional fee shall be charged accordingly based on the specific circumstances of the case - for example, if the parties apply for several interim measures, to modify interim measures previously ordered or to amend decisions on interim measures. The parties may also agree to pay the emergency arbitrator by hourly rates. In general, the New Fees Schedule emphasizes the actual workload of an emergency arbitrator under the procedure, in order to strike a reasonable balance between remuneration and actual workload.

(7) Other revisions under the New Rules

Other revisions made by the New Rules include the following.

(1) The time limit for accepting a case shall be extended from 5 days upon payment to 10 days. Based on actual requirements, the BAC now undertakes more work when accepting cases, such as (among other things) forwarding applications for preservation measures to courts, confirming addresses for service, electronic scanning of case materials, so that  there is an objective need to extend the case acceptance timeframe appropriately. While it may appear that the time for case acceptance has been slightly extended, the necessary work involved is conducive to the effective conduct of the arbitration in the subsequent proceedings.  From the perspective of overall case management, therefore, this will not affect the efficiency of case handling.

(2) Time limits specified in the New Rules may be extended as in accordance with the specific circumstances of the case.  Under the current Rules, there are certain time limits that fall within the BAC’s function of case management and reflect the BAC’s pursuit of efficiency. In some cases, parties may apply for an extension of these time limits, though the current Rules do not specify whether these time limits can be extended. For example, in practice, there are cases in which a party may apply to the court for preservation measures. In order to prevent the respondent from disposing of property after receiving the notice of arbitration, the claimant may often wish to extend the period for the BAC to send out the request for submission of defense, in order to increase the possibility of successful preservation. As such, the New Rules add an exception in the “Calculation of Time Limits” provisions whereby such time limits may be extended appropriately in accordance with the actual circumstances of the case and upon approval by the Secretary General of the BAC. On one hand, this can maintain the principle of efficiency that has always been emphasized by the BAC while, on the other hand, responding at the same time to the practical needs of the parties to protect their interests in special circumstances parties.

The foregoing is a brief introduction of the New Rules and the Fee Schedules. Please refer to the attachments for more details. The BAC hereby would like to extend thanks to arbitrators, parties, lawyers and others who have provided valuable suggestions during the revision of the New Rules and the Fee Schedules. The BAC will continue to provide professional and efficient dispute resolution services to the parties and thereby contribute to the development of arbitration in China. 
                                 

Beijing Arbitration Commission/Beijing International Arbitration Center
July 19, 2019

2019/7/19

Attachment: Beijing Arbitration Commission Arbitration Rules (effective as of September 1, 2019 )(Download)


Model Arbitration Clause Arbitration Clause
All disputes arising from or in connection with this contract shall be submitted to Beijing Arbitration Commission / Beijing International Arbitration Center for arbitration in accordance with its rules of arbitration. The arbitral award is final and binding upon both parties.
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