Publish time: 2019-9-13 Contributor:Zhang Xi
At the fourth meeting of its seventh Committee held on 4 July 2019, the Beijing Arbitration Commission/Beijing International Arbitration Center (the “BAC/BIAC”) discussed and adopted the Beijing Arbitration Commission/Beijing International Arbitration Center Rules for International Investment Arbitration 2019 (the “Investment Arbitration Rules” or the “Rules”). The Rules will take effect on 1 October, 2019. The BAC/BIAC is now pleased to release the Rules officially to the public. The following is a statement on the making of the Rules.
With the expansion of international investment activities, the global need for investment arbitration is growing. While the International Center for the Settlement of Investment Disputes (ICSID) remains the most frequently selected arbitration institution, an increasing number of investor-State disputes are submitted to other institutions and to ad hoc arbitration under the United Nations Commission on International Trade Law Arbitration Rules (UNCITRAL Arbitration Rules). In recent years, a number of arbitration institutions have promulgated investment arbitration rules.
Notwithstanding the growing need for investment arbitration, the existing investment arbitration system has generated grave concerns over the long duration and high costs of arbitration, the lack of independence and impartiality of arbitrators, inconsistency of arbitral decisions and the lack of transparency of arbitration proceedings, to list but a few criticisms. In response, the international community has been taking steps to reform the investor-State dispute settlement (ISDS) system. For example, UNCITRAL Working Group III is currently charged with studying reform of the ISDS regime, while the European Union has proposed the establishment of a multilateral investment court and ICSID has initiated a new round of amendment of its Arbitration Rules.
Against such a background, the BAC/BIAC considers it necessary to promulgate a set of specialized arbitration rules for the settlement of international investment disputes. The BAC/BIAC Investment Arbitration Rules 2019 have broad applicability and strong practicality. The Rules are applicable both to institutional arbitrations administered by BAC and ad hoc arbitrations under the UNCITRAL Arbitration Rules, for which the BAC provides administration services to parties. Such arbitrations can be based either on treaties or on contracts. The Rules also highlight several innovations, such as the inclusion of an expedited arbitration procedure and an appeal procedure, the enhancement of procedural transparency and a default requirement for service of arbitration documents through electronic means. The Rules aim not only to meet the growing need of Chinese and foreign investors in settling investment disputes, but also to respond to major concerns over the current investment arbitration system.
In formulating the Rules, necessary reference was made to existing international investment arbitration rules and attention paid to major criticisms of and suggestions for the reform of the ISDS system.
2. The rule-making process
In July 2018, the BAC/BIAC officially established the Investment Arbitration Rules Task Force to conduct research and draft the Rules. It took more than a year from initiation of the drafting work to the final adoption of the Rules. During this period, the BAC/BIAC held expert discussions, launched public consultations and extensively solicited opinions from nearly 70 professionals and organizations among the legal communities both at home and abroad. The Rules were finalized after nine rounds of discussions and revisions.
3. Summary of the Rules
The Rules comprise a main body of provisions and six appendices. The main body has six chapters, consisting of 54 articles. The appendices comprise a Fees Schedule (Appendix A), an Indicative Timetable for Arbitration Proceedings (Appendix B), a set of Expedited Procedures (Appendix C), Emergency Arbitrator Procedures (Appendix D), Rules for Appeal Proceedings (Appendix E) and Procedural Guidelines for Arbitration under the UNCITRAL Arbitration Rules (Appendix F).
Chapter I, ’General Provisions’, contains four articles (1-4), covering the arbitration institution, scope of application of the Rules, waiver of immunity and rights to object, and general conduct of participants to arbitrations.
Chapter II, ’Commencement of Arbitration’, contains three articles (5-7), covering the notice of arbitration, response to the notice of arbitration, and consolidation of arbitrations.
Chapter III, ‘Arbitral Tribunal’, contains ten articles (8-17). It deals with the qualification requirements, nomination and designation, disclosure obligations, challenge to and replacement of arbitrators, constitution of the tribunal and secretary of the tribunal. It also provides that the BAC shall maintain a panel list to facilitate the nomination of arbitrators by parties.
Chapter IV, ’Arbitral Proceedings’, contains 22 articles (18-39). It is comprehensively drafted to deal with a broad range of procedural issues arising in arbitration proceedings, including general provisions (Article 18), ‘common procedures’ (Articles 19-32) and ‘special procedures’ (Articles 33-39). Common procedures concern working procedures and timetable, seat and language of the arbitration, party representatives, written submissions, hearings, evidence and experts, and the suspension, termination and closure of arbitral proceedings. Special procedures concern issues of objection to jurisdiction, early dismissal, interim measures and emergency arbitrators, third-party submissions, mediation and third-party funding.
Chapter V, ’Arbitral Award’, contains nine articles (40-48). It covers the applicable law and rules of law, settlement of the dispute, and the making, correction, interpretation and appeals against awards (Articles 40-46). It also deals with the costs of the arbitration and the deposit of such costs (Articles 47 and 48).
Chapter VI, ‘Final Provisions’, contains six articles (49-54). It covers the service of arbitration documents and time limits, transparency of arbitration, exclusion of liability, and interpretation, official versions and effective date of the Rules.
Appendix A sets out the Schedule of Fees for arbitrations under the Rules. This provides for the BAC’s standard registration fee and arbitration administration fee. It also allows the fees of arbitrators to be determined either on an hourly basis or depending on the amount in dispute.
Appendix B sets out an Indicative Timetable for a typical investment arbitration case submitted to the BAC under the Rules. By clearly stating the proposed duration of each stage of the arbitration, the timetable not only serves as a helpful reference for arbitral tribunals, but also helps enhance the procedural predictability of the arbitration.
Appendix C sets out Rules of Expedited Procedures. It covers the application of an expedited procedure, the composition of an arbitral tribunal, rules of expedited proceedings and reference to other applicable provisions in the main body of the Rules. Essentially, this Appendix, while appropriately simplifying an arbitral procedure, provides the parties with the possibility of resolving the dispute in an expedited manner. Under this Appendix, an expedited procedure may be initiated by agreement of both Parties.
Appendix D sets out procedural Rules for Emergency Arbitrator. It deals with the application for emergency interim relief and the appointment of emergency arbitrators, the procedure and seat of emergency arbitrations, and the decision and costs of emergency arbitrators.
Appendix E sets out Procedural Rules of Appeal Proceedings. These rules deal with the initiation and grounds of appeals, the composition and jurisdiction of the appellate tribunal, the conduct and termination of the appeal proceedings, and the appeal award. They also deal with the costs of the appeal and the deposit of costs.
Appendix F sets out Procedural Guidelines for Arbitration under the UNCITRAL Arbitration Rules. In practice, the UNCITRAL Arbitration Rules are frequently applied in both institutional and ad hoc investment arbitrations. The Guidelines aim to facilitate the BAC in administering arbitrations or providing administration services in ad hoc arbitrations. This Appendix includes general provisions, provisions on the seat and notice of arbitration, and administration services which the BAC may provide. It also covers costs of the arbitration and the payment and deposit of such costs.
4. Major highlights of the Rules
The Rules aim not only to provide a set of practical rules for investment arbitration, but also to introduce a number of innovative aspects to existing investment arbitration rules and practices.
Firstly, the Rules apply both to institutional arbitrations submitted to the BAC and ad hoc arbitrations under the UNCITRAL Arbitration Rules where the BAC provides various arbitration administration services.
Secondly, the Rules allow appeals against arbitral awards. The inconsistency of arbitral decisions in investment arbitration is frequently criticized. There are many reasons for such inconsistency and an appeal procedure is often considered to be a helpful way of improving the consistency and predictability of awards. The issue of arbitral appeals has been extensively discussed in a number of different contexts, notably in the discussions of UNCITRAL Working Group III, and the investment treaty-making of the European Union. Up to the present, no existing institutional investment arbitration rules have incorporated a set of specialized rules for arbitral appeal proceedings. The BAC Rules constitute a first step. As stipulated in Article 51 of and Appendix E to the Rules, an appeal against an arbitral award is possible subject to certain requirements. The appeal shall be based on the agreement of the parties, who shall bear the necessary time involved and the costs of appeals.
Under both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (the ICSID Convention) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), the annulment procedure and judicial review of arbitral awards respectively allow scrutiny only of the procedural aspects of an arbitral award. Substantive errors arising in the award are incapable of correction. For this reason, the Rules and Appendix E thereto allow the parties to appeal against an award where it contains an alleged error in the interpretation and/or application of rules of law or a manifest and material error in the appreciation of the facts, or the arbitral tribunal or the BAC lacks jurisdiction or exceeds its power, without prejudice to the applicable judicial review procedures.
Thirdly, the Rules feature further improvements in arbitral efficiency and reduction of arbitral costs. Recognizing that excessive duration and high costs are major concerns about the existing investment arbitration system, the Rules incorporate several innovative aspects to address these concerns.
They require arbitral tribunals to render awards within 24 months (or 30 months in cases where an arbitral tribunal has decided to bifurcate the proceedings) from their constitution (Article 19).
Additionally the Indicative Timetable in Appendix B suggests a time limit for each major stage of an arbitration under the Rules.
The Rules of Expedited Procedures (Article 38 and Appendix C) provide an opportunity for the resolution of a dispute in an expedited manner, which could substantially improve arbitral efficiency and save costs in arbitrations. Similar rules are seldom found in institutional investment arbitration rules.
The Rules provide that arbitration documents shall be delivered through electronic means, unless the Parties agree otherwise, which is both time-saving and environment-friendly (Article 49).
Finally, compared with other major institutional investment arbitration rules, the registration fee and administration fee charged by the BAC are also kept at a low level (Appendix A).
It deserves noting that, while the Rules try to impose clear time limits on arbitration proceedings after the constitution of the arbitral tribunal, they provide flexibility to the parties in taking necessary steps before the constitution of the tribunal. For example, a respondent State is only obliged to provide a limited amount of information in its response to the notice of arbitration, mainly relating to the contact information of the respondent, while more information may suffice at a later stage of arbitration (Article 6). The respondent State also has 60 days in which to nominate an arbitrator (Article 10). Further, even if one Party fails to nominate an arbitrator within the designated time limit, the BAC will not automatically and immediately step in to designate the arbitrator, but will do so upon the request of the other party.
Fourthly, the Rules enhance the transparency of arbitration. Lack of transparency is a major criticism of the investment arbitration system. The international community has reached a certain level of consensus on the improvement of arbitral transparency. This can be sensed from the adoption of the UNCITRAL Transparency Rules 2014 and the United Nations Convention on Transparency in Treaty-Based Investor-State Arbitration 2014 (the Mauritius Convention). Recognizing such a trend in transparency, the BAC Rules include clear provisions on the opening of hearings (Article 24), third party participation (Article 36) and compulsory publication of certain types of arbitration document, such as awards, jurisdictional decisions and notices of arbitration (Article 50). More importantly, the Rules allow the parties themselves to determine by mutual agreement whether and to what extent the UNCITRAL Transparency Rules are to be applied in their arbitration.
Fifthly, the Rules impose high qualification and ethical requirements on arbitrators. This is a timely and practical response to growing concerns over the impartiality and independence of arbitrators in investment arbitration. The Rules not only expressly require arbitrators to have sufficient availability in handling the dispute, but also require them to have recognized competence in law (particularly knowledge of public international law) (Article 8). Further, the BAC shall maintain a Panel of Arbitrators (Article 9). These provisions are helpful in maintaining high qualification and ethical requirements for arbitrators.
Last but not least, the Rules also incorporate a number of provisions to respond to some other recent concerns over the existing investment arbitration system, such as third-party funding.
On the occasion of the release of the Investment Arbitration Rules, the BAC/BIAC is particularly grateful to Mr. Ren Qing, Partner of Global Law Firm, and Mr. Chi Manjiao, Professor of Law, University of International Business and Economics, members of the Investment Arbitration Rules Task Force, for their extensive research efforts and hard work during the rule-making process.
In addition, the BAC/BIAC would like to express heartfelt thanks to the following organizations and individuals who have participated in the review, research, discussions and feedback on the Rules. They are (the following are ranked in no particular order):
Beijing Arbitration Commission/Beijing International Arbitration Center
13 September, 2019