YU,Jianlong , Vice-Chairman of China International Economic and Trade Arbitration Commission(CIETAC), Vice-Chairman of China Maritime Arbitration Commission(CMAC), Secretary-General of China Maritime Law Association(CMLA).

New Developments of China’s Maritime Arbitration

Since the year 2007, China’s maritime arbitration has made significant developments in many aspects. As the great majority of maritime-related cases in China are handled by the China Maritime Arbitration Commission(CMAC), CMAC cases are representative of the developing trends in maritime arbitration in the country. Over the past two years, not only has CMAC’s caseload increased rapidly but the amount of claim has also grown dramatically. The types of cases have diversified. In addition to conventional cases such as charter party disputes, disputes over ship collision, fishery, logistics, vessel insurance, ship building, ship repair, salvage, and cargo agency as well as bill of lading have also appeared and grown in number. These achievements are attributable to both the efforts made by people in the arbitration circle and the efforts by the judiciary in support of arbitration. In September 2006, the Interpretation of the Supreme People’s Court concerning Some Issues on Application of the Arbitration Law of the People’s Republic of China was issued, thus greatly enhancing the Chinese court’s judicial support to and supervision over arbitration. On 4 August 2009, the Supreme People’s Court issued some opinions on the construction of contravention and dispute settlement mechanism regarding the connection of suit and non-suit, which embodies the endeavor of the Chinese courts to broaden the scope of alternative dispute resolution mechanism and give it a more important role.

My presentation covers three things, namely a brief introduction of the cases CMAC handles, the latest development of judicial support for arbitration and the development of maritime conciliation in China.

1. The acceptance and hearing of the CMAC cases
In 2007, the CMAC accepted 49 cases in total with the amount of claim reaching RMB 144 million.(The Beijing headquarters accepted 16 cases, and the disputed value was RMB 54 million; the Shanghai Sub-commission accepted 33 cases with a total claim of RMB 89 million). The types of the cases included ship sales contract, ship collision, fishery ship collision, bareboat charter, time charter, voyage charter, bill of lading, ship insurance contract, carriage of goods contract, storage contract, logistics contract, cargo agency contract and so forth. In total, 41 cases were closed in 2007(14 cases in Beijing headquarters, 27 cases in Shanghai Sub-Commission).
In 2008, the CMAC accepted 60 cases with a disputed value of RMB 112 million. In total, 41 cases were closed. Among the above cases, the Beijing headquarters accepted 26 cases and the amount of claim was RMB 42 million. The Shanghai sub-commission took cognizance of 34 cases with a disputed value of RMB 70 million. The types of cases involved carriage contracts, voyage charter, container renting disputes, seaman’s labor contract, insurance contract, dock charge, ship repair contract, logistics contract, fishery, ship collision, cargo agency and charter party.
In the first half of 2009, the CMAC Beijing headquarters accepted 14 cases with an overall amount of claim of nearly RMB 200 million and the Shanghai sub-commission accepted 41 cases representing a total disputed   value of RMB 700 million.
The above data shows: firstly, the number of CMAC’s cases has been increasing on a yearly basis and so has the amount of claim. Secondly, judging from the types of disputes, the impacts of the financial crisis on the shipping market have loomed, highlighted by the significant increase of charter party disputes and ship building disputes. Thirdly, the Shanghai Maritime Conciliation Center, which was established in 2006 has begun to attract cases and the combination of arbitration with conciliation has been well enhanced. Fourthly, awards based on settlement agreements are increasing in number, which further shows the advantage of the combination of arbitration with conciliation.
Now let me touch on the latest development of judicial support to arbitration. In a word, the Chinese court’s judicial support for and supervision over arbitration has become more standardized over the past two years.
For your information, according to the Chinese Arbitration Law, a valid arbitration clause shall contain three elements, namely the intention to arbitrate, the matters for arbitration and the selected arbitration commission. A party may challenge the validity of an arbitral clause if it does not conform to the requirement as set out in the Arbitration Law.
In recent years, In CMAC arbitration, the number of jurisdictional objection has been increasing, with less than standard arbitral clause being a commonplace. In 2007, 4 jurisdiction disputes were raised in total. In one case the parties stipulated only the place of arbitration without reference to the institution. In 2008, there were 3 jurisdictional objections. One case concerned a non-standard arbitral clause in which the parties only agreed that the CMAC Rules should apply but did not mention the name of the institution. In 2009, up to September, there have been 4 jurisdictional objections, among which one case involves a non-standard clause stipulating “the dispute shall be submitted to the Shanghai Maritime Arbitration Commission or prosecuted at the Shanghai Maritime Court”. This is a case that involves the ambiguity of the parties’ will as to whether to arbitrate or litigate their case if a dispute arises. This is very important since the disputes over the validity of an arbitral clause are mostly about the parties’ subject’s qualification to participate in an arbitration case, or in other words, whether the arbitration clause binds the parties.
The Interpretation of the Supreme People’s Court concerning Some Issues on Application of the Arbitration Law of the People’s Republic of China came into force on 7 September 2006. It contains specific and concrete prescriptions on the effectiveness of non-standard arbitral clauses. For instance, Article 4 of the Interpretation stipulates that: “Where an agreement for arbitration only stipulates the arbitration rules applicable to the dispute, it shall be deemed that the arbitration institution is not chosen, unless the parties concerned reach a supplementary agreement or may determine the arbitration institution according to the arbitration rules agreed upon between them.” Article 6 provides that: “ Where an agreement for arbitration stipulates that the disputes shall be arbitrated by the arbitration institution at a certain locality and there is only one arbitration institution in this locality, the arbitration institution shall be deemed as the stipulated arbitration institution. If there are two or more arbitration institutions, the parties concerned may choose one arbitration institution for arbitration upon agreement; if the parties concerned fail to agree upon the choice of the arbitration institution, the agreement for arbitration shall be ineffective.” Article 7 provides that “Where the parties concerned agree that they may either apply to the arbitration institution for arbitration or bring a lawsuit with people’s court for settlement of dispute, the agreement for arbitration shall be ineffective, unless after one party applies to the arbitration institution for arbitration, the other party fails to submit any objection within the period prescribed in Paragraph 2 of Article 20 of the Arbitration Law.” Article 9 provides that: “Where the credits or debts are entirely or partially assigned, the agreement for arbitration shall be binding upon the assignee, unless the parties concerned have otherwise agreed, or the assignee explicitly objects to the assignment of the arbitral clause or does not know there is a separate agreement for arbitration.” The judicial interpretation provides a definite legal basis when the arbitration institution cognizes the effectiveness of less than standard clauses. The parties can also avoid the unnecessary jurisdiction disputes.
In a carriage contract dispute accepted by the CMAC, questions were raised as to whether an insurance company was bound by the arbitration clause contained in the carriage contract after it indemnified and obtained the Right of Subrogation. The circumstances of the case are as follows: on 8 November 2005, a transportation company entered into a carriage contract with an international construction company, clause 12 on law application and arbitration provisions stipulated that “Anything not stipulated in this contract shall be negotiated by the parties. If the negotiation is unsuccessful, all disputes arising out of or in connection with this Agreement shall be submitted to China Maritime Arbitration Commission in Beijing.” The international construction company submitted an application to the CMAC on 14 September 2007. The CMAC accepted the application and sent the Arbitration notice to the international construction company and the transportation company on March 5, 2008. On 30 May 2008, the respondent submitted a written defense against the application. On 27 May 2008, the insurance company indemnified the international construction company a total RMB 370,000 for damaged cargo based on the cargo insurance policy issued on August 12, 2006 and obtained the right of subrogation. Then the insurance company submitted the application to subrogate the international construction company to attend the arbitration. The transportation company submitted “the objection to a ‘third party’s participation in arbitration”. On 1 September 2008, the CMAC issued a decision on a party’s subject’s qualification to participate in the arbitration, ruling the insurance company is entitled to subrogate the international company to exert the right of compensation. Then the parties to the disputes became the insurance company and the transportation company. The basis of the CMAC’s decision is: 1. The arbitration clause was legitimate and effective based on the relevant provision in the Chinese Arbitration Law;

2. The insurance company obtained the right of subrogation by indemnification. Consequently, it meant the insurer totally replaced the legal position of the insured; 3. Based on Article 9 of the Interpretation, the arbitration clause can be assigned when the credit is assigned unless the insurance company explicitly objects to the assignment. Therefore the arbitration clause bound the insurance company and the transportation company.
The transportation company disagreed with the above decision and brought a lawsuit before the Tianjin Maritime Court on 19 September 2008. It pleaded that there was no effective arbitration agreement between it and the insurance company.
On 26 June 2009, the Tianjin Maritime Court made a Confirmation Ruling, which recognizes the arbitration clause between the transportation company and the construction company abide by Chinese laws and shall be affirmed to be effective. Because the construction company submitted the application to the CMAC and the CMAC accepted its application, and also because the insurance company applied to participate in the arbitration after its indemnification to the construction company and obtained the right of subrogation. Although the insurance company was not the signatory to the carriage contract, the above behavior clearly expressed its acceptance of the arbitration clause. So the arbitration clause bound the insurance company. The CMAC’s acceptance of the dispute was not improper. Therefore, the Tianjin Maritime Court overruled the application on ascertaining that there was no effective arbitration agreement between the insurance company and transportation company.
Moreover, the judicial interpretation contains further provisions on the setting-aside and non-enforcement of the arbitral awards.  After all, since 2000 there has been only one award made by the CMAC that was set aside by the Chinese court, which deemed that the relevant documents were not effectively served on the respondent.

3. The new development of maritime conciliation
To enhance the role of conciliation in resolving disputes and enable the combination of conciliation with arbitration to play a bigger role, the Maritime Conciliation Centers were established under the CMAC. The Conciliation Rules and Code of Conduct of Conciliators have also been enacted. In August 2006 and March 2009, the CMAC Shanghai Maritime  Conciliation Center and CMAC Jiangsu Maritime Conciliation Center were set up in Shanghai and Jiangsu province respectively. The conciliators are made up of lawyers, professors and employees of maritime departments.
Since its inception two years ago, the Shanghai Maritime Conciliation Center has dealt with 8 cases including the collision incident between the vessels “Feiyue” and “Fuxing 8”, and the collision incident between vessels “Yu Mei Sheng 3698” and “Star Mariner”. The total amount of claim has reached RMB 63 million. Due to the hard work of the conciliators, most of the cases were settled within a short period of two or three months. The center has gained a good reputation both from the parties and foreign P&I clubs. It has become increasingly popular in the shipping circle in Shanghai.
The procedure of the Maritime Conciliation Center is that the parties voluntarily submit the disputes to the conciliation center based on the Conciliation Rules and choose the conciliators. If the conciliation is successful, the parties may sign a conciliation agreement, which is also signed by the conciliators and sealed by the conciliation center. The parties may also stipulate in the agreement to submit the dispute to the CMAC for arbitration, and a sole arbitrator shall render an award based on the settlement agreement. For unsuccessful conciliation cases, the conciliators may suggest that the parties submit their case to CMAC for arbitration.
As a result of the absence of laws on commercial conciliation, the legal effects of conciliation are not prescribed by law, and therefore, conciliation has not been given a prominent role in dispute resolution as an alternative to arbitration and litigation. Consequently, there has not been much enthusiasm for conciliation as people would have expected. The Supreme People’s Court’s recent document entitled some opinions on the construction of contravention and dispute settlement mechanism regarding the connection of suit and non-suit, will produce a far–reaching effect in promoting the use of conciliation in dispute resolution.
The CMAC will increase input into the conciliation centers and try to establish conciliation centers in other major port cities in China so as to build up a network of the maritime conciliation. Efforts are also needed to further improve the Conciliation Rules, to further improve the working mechanism and management mechanism, and to further improve the mechanism of combination of conciliation with arbitration.