Interim measures in arbitration proceedings in China

In summary

There is a general conception that arbitral tribunals sitting in China do not have the power and authority to grant interim measures. This might be a misunderstanding of the arbitration law and practice in China; arbitral tribunals sitting in China have been consistently issuing orders for measures that are equivalent to ‘interim measures’, though they might not have been described as such. In this article, we present a historical review of the ‘interim measures’ adopted and granted by arbitral tribunals in arbitration proceedings taking place in China.

Discussion points

• Interim measures under the 1956 CIETAC Arbitration Rules and the 1959 CMAC Arbitration Rules
• Court-ordered preservatory measures under the 1982 Civil Procedural Law and its subsequent amendments
• Court-ordered preservatory measures under the 1995 Arbitration Law
• Measures equivalent to ‘interim measures’ granted in arbitral proceedings in China

Referenced in this article

• 1956 CIETAC Arbitration Rules
• 1959 CMAC Arbitration Rules
• Article 194 of the 1982 Civil Procedural Law
• 1988 CIETAC Arbitration Rules
• 1995 Arbitration Law
• 2012 and 2015 CIETAC Arbitration Rules
• 2018 and 2021 CMAC Arbitration Rules

Interim measures are important procedural tools to safeguard the parties’ rights in the pendency of arbitration proceedings before a final award is issued by the arbitral tribunal. At the request of a party, interim measures may be granted by the arbitral tribunal or national courts. Interim measures may be granted for different purposes, and may be described by different names in different jurisdictions:

During the course of an arbitration, it may become necessary for the arbitral tribunal or a national court to issue orders intended to preserve evidence, to protect assets, to respect procedural rights, and otherwise to maintain the status quo pending the outcome of the arbitration proceedings. Such orders take different forms and are known by different names. In the Model Law and the UNCITRAL Rules, they are known as “interim measures”; in the English version of the ICC Rules, they are known as “conservative and interim measures”.^[1]

There is a general conception both within and outside China that arbitral tribunals sitting in China do not have the power and authority to grant interim measures. This might be a reflection of different terminology, and a misunderstanding of the arbitration law and practice in China. Based on our professional experience, arbitral tribunals sitting in China, at least since the 1990s, have been consistently issuing orders for measures that are equivalent to ‘interim measures’, as they are now known, in arbitral proceedings under the China International Economic and Trade Arbitration Commission’s (CIETAC) rules of arbitration, though such measures might not have been described as interim measures.

1956 CIETAC Arbitration Rules

In 1956, CIETAC, then known as the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade (CCPIT), published its first arbitration rules: the Provisional Rules of Procedure of the Foreign Trade Arbitration Commission of the CCPIT (the 1956 CIETAC Rules), article 15 of which provided for the power of the chairman of the Arbitration Commission to stipulate interim measures during the course of arbitration proceedings:

The Chairman of the Arbitration Commission may, at the request of a party, stipulate interim measures against materials and properties, etc. related to the parties, in order to safeguard the rights of the parties.

Due to the fact that CIETAC’s caseload before the 1980s was low, and the limited number of awards given are not publicly available, we are unable to identify a case where such ‘interim measures’ were actually ordered by the chairman of the Arbitration Commission or an arbitral tribunal appointed under the 1956 CIETAC Rules. According to information published by CIETAC, until the 1980s, CIETAC maintained a small panel of 17 arbitrators, who were known as members of the Arbitration Commission, which was composed of outstanding figures in China’s economic sectors and the legal profession, such as the governor of the Peoples’ Bank of China (the Chinese central bank) and well-known law professors. Under the 1956 CIETAC Rules, which were revised and replaced by a new set of rules in 1988, the chairman of the Arbitration Commission had the power and authority to order interim measures in support of arbitration proceedings conducted under the 1956 CIETAC Rules.

1959 CMAC Arbitration Rules

In 1959, the other well-known arbitration institution in China and CIETAC’s sister organisation, the China Maritime Arbitration Commission (CMAC), then known as the Maritime Arbitration Commission of the China Council for the Promotion of International Trade, published China’s first maritime arbitration rules: the Provisional Rules of Procedure of the Maritime Arbitration Commission of the CCPIT (the 1959 CMAC Rules). Similar to the 1956 CIETAC Rules, article 15 of the 1959 CMAC Rules provided for the power of the chairman of the Maritime Arbitration Commission to grant interim measures, but used a different term – ‘measures of security’:

In cases within the cognizance of the Maritime Arbitration Commission, the Chairman of the Maritime Arbitration Commission may, upon the request of one of the parties, make decisions in respect of measures of security and determine the amount and form of the security for the claim. If the amount and form of the required security have already been agreed upon between the parties, such amount and form shall prevail.

Article 16 of the 1959 CMAC Rules went further and provided for the possibility of enforcement by national courts of such ‘measures of security’:

Upon the request of one of the parties, the People’s Court of the People’s Republic of China shall enforce the decision of the Chairman of the Maritime Arbitration Commission in respect of measures of security in accordance with law.

1982 Civil Procedural Law (for Trial Implementation)

In 1982, the National People’s Congress of China passed and promulgated China’s first code of civil procedure, the Civil Procedural Law of the People’s Republic of China (for Trial Implementation) (the 1982 Civil Procedural Law). This law provided for judicial assistance to support international arbitration proceedings conducted by China’s ‘foreign related arbitration institutions’, including court-ordered ‘preservatory measures’ in support of international arbitration proceedings. Article 194 of the 1982 Civil Procedural Law provided:

Where, upon the request of a party, a foreign related arbitration institution of the People’s Republic of China deems it necessary to take preservation measures, it shall refer the matter to the Intermediate People’s Court of the place where the respondent’s property is located or where the arbitration institution is located for a decision.

The term ‘foreign related arbitration institution’ was a reference to CIETAC or CMAC, which were the only two arbitration institutions in China constituted to handle arbitration proceedings involving foreign parties at that time and until 1995. This was obviously a very important and useful development of the arbitration law. Since an arbitral tribunal’s jurisdiction is limited to matters in relation to the relationship between the parties to the arbitration proceedings, an arbitral tribunal’s power to grant interim measures is also limited, only to the extent that they are binding on the parties to the arbitration proceedings. An arbitral tribunal has no power and authority to grant interim measures that are addressed to a third party of whom assistance may be required for the implementation of the interim measures ordered. For arbitral proceedings in China, the most commonly used measures of preservation are freezing of bank accounts or attachment of movable (eg, vehicles) or immovable (eg, real estate) assets, both of which would require the assistance of third parties, such as the bank with which the relevant bank account is maintained or the registration authorities for vehicles and movable or immovable assets. Only national courts have the power to order preservation measures that are addressed to third parties for the protection of the rights of the arbitrating parties. Such court-ordered preservatory measures available under the 1982 Civil Procedural Law were intended to provide judicial assistance and support to international arbitration proceedings conducted by China’s ‘foreign related arbitration institutions’. The availability of such judicial assistance by way of court-ordered preservatory measures was not a denial of the foreign-related arbitration institutions’ power and authority to grant interim measures under the 1956 CIETAC Rules and the 1959 CMAC Rules. The legislative history of the 1982 Civil Procedural Law and its subsequent revisions reveals that provisions for court-ordered measures of preservation were not intended to deprive the foreign-related arbitration institutions’ power and authority to grant interim measures, which are addressed to and only binding upon the parties to the arbitration proceedings. This has been evident from the fact that even after the promulgation of the 1982 Civil Procedural Law and its subsequent revisions, the foreign-related arbitration institutions and arbitral tribunals sitting in China have continued to exercise their power and authority to grant interim measures or measures having the equivalent effect all the time, as discussed further below.

1988 CIETAC Arbitration Rules

In 1988, CIETAC revised and replaced its 1956 Provisional Rules of Procedure with its 1988 Arbitration Rules (the 1988 CIETAC Rules). The 1988 CIETAC Rules provided for court-ordered preservatory measures in line with the 1982 Civil Procedural Law in article 13, which stated:

The Arbitration Commission may, according to the application of a party, request the Chinese court at the place where the respondent’s property is located or where the arbitration institution is located to make a decision on preservative measures in accordance with Chinese law.

While the ‘interim measures’ mentioned in article 15 of the 1956 CIETAC Rules were missing, the 1988 CIETAC Rules introduced the notion of an ‘interim award’ in article 35:

The Arbitral Tribunal may, at any time during the arbitration proceedings, render an interim award or a partial award in respect of any matter of the case, where the Arbitral Tribunal deems it necessary or at the request of a party with the consent of the Arbitral Tribunal.

An interim award is understood to be a decision by the arbitral tribunal that temporarily resolves an issue or issues between the parties, that is necessary or desirable for the protection of the rights of the parties and that is binding upon the parties pending further directions of the tribunal or until a final award is rendered. Given that the arbitral tribunal has the power and authority to render an interim award ‘in respect of any matter of the case’, there is no reason to doubt that the arbitral tribunal has the power and authority to grant interim measures, either in the form of an interim award or in the form of procedural directions.

1995 Arbitration Law

In 1994, the National People’s Congress of China passed and promulgated the Arbitration Law of the People’s Republic of China, which came into force on 1 September 1995 (the 1995 Arbitration Law). The 1995 Arbitration Law provides for court-ordered preservative measures in support of arbitration proceedings in line with the 1982 Civil Procedural Law, as amended by the 1991 Civil Procedural law, but extends the applicability of preservatory measures, which were originally applicable only to international arbitration proceedings conducted by China’s foreign-related arbitration institutions, to domestic arbitration proceedings^[2] and preservation of evidence.^[3]

CIETAC arbitrations

In practice, arbitration institutions or arbitral tribunals sitting in China have consistently made decisions to grant measures equivalent to interim measures at least since the 1990s, though such measures were not called ‘interim measures’ at that time. Measures ordered by arbitration institutions or arbitral tribunals in support of ongoing arbitral proceedings covered various aspects of the arbitral proceedings, such as inspection of goods, audit of accounts, site visit and preservation of status quo. They might take the form of procedural directions or interim or partial awards. Sometimes, procedural directions might be given orally at the conclusion of a hearing. In most cases, these measures were implemented voluntarily by the parties with or without participation of members of the arbitral tribunal or third parties appointed or approved by the arbitral tribunal. Such measures might fail to be implemented when cooperation from both parties was required but one of the parties failed or refused to cooperate. Under such circumstances, the arbitral tribunal would draw the necessary inference and conclusion it deems fit, taking into account all the relevant circumstances and factors. Below are a few examples of such measures that we have encountered in the capacity of counsel or arbitrator.

In a 1993 arbitration under the 1988 CIETAC Arbitration Rules between a Hong Kong claimant and a mainland China respondent for disputes under a joint venture hotel project, the claimant claimed for termination of the joint venture and payment of damages for breach of contract. The joint venture hotel was under the management and control of the respondent. One aspect of the disputes was that the claimant claimed that the respondent paid itself with money from the joint venture’s bank account for transactions not approved by the board of directors of the joint venture. The claimant requested the tribunal to issue an interim award to order the respondent to stop paying itself from the joint venture’s bank account. At the conclusion of the first hearing, the tribunal informed the parties that it did not intend to grant the claimant’s request for an interim award but recommended the parties to preserve the status quo and directed the respondent to stop paying itself from the joint venture’s bank account pending a final resolution of the disputes in a final award. This order was made orally at the conclusion of the first hearing, and was accepted and complied with by the parties. As a joint venture partner, the claimant regularly received financial statements of the joint venture hotel, and had not complained of unilateral payment by the respondent thereafter.

In a 1995 arbitration under the 1994 CIETAC Arbitration Rules between a mainland China claimant and a Hong Kong respondent for disputes under a sales contract for the import of cotton from the United States, the claimant claimed for termination of the sales contract and payment of damages due to poor quality of the cotton supplied by the respondent. The respondent challenged the quality inspection certificate issued by the commodity inspection authority at the port of destination, and requested the arbitral tribunal to appoint experts to carry out a second sampling and inspection. The tribunal granted the request and appointed experts from the China National Quarantine and Inspection Administration to carry out a second sampling and quality inspection. Sampling of the cotton was implemented at the presence of representatives of both parties and the presiding arbitrator, issues regarding the method of sampling were resolved at the site, and a second quality inspection certificate was issued by the tribunal appointed experts. After hearing the parties’ submissions based on the second inspection certificate, the tribunal rendered its final award on the claimant’s claims for termination of contract and payment of damages.

In a 1999 arbitration under the 1998 CIETAC Arbitration Rules between a Chinese claimant and a US respondent for disputes regarding the quality of a printing machine for printing cigarette packages supplied by the respondent, the claimant claimed for termination of contract and the return of the printing machine. The respondent challenged the evidence produced by the claimant and asserted that the malfunction of the printing machine was caused by improper operation and maintenance. The claimant requested the tribunal to pay a site visit to inspect the condition and operation of the printing machine, which the tribunal granted. At the site, the printing machine was operated by employees of the claimant under the supervision and direction of representatives of the respondent. With the first-hand information obtained from the site inspection, the tribunal found that the malfunction of the printing machine was not caused by improper operation but due to a design or manufacturing defect, and also that the printing machine was not properly stored by the claimant and could not be returned to the respondent in a reasonably intact condition as asserted by the respondent. Thus, the tribunal rejected the claimant’s claim for termination of contract but ordered the respondent to pay damages to the claimant as compensation for the inconformity of the printing machine.

In a 2001 arbitration under the 2000 CIETAC Arbitration Rules between joint venture partners from Hong Kong and mainland China, the disputes focused on the conditions of the land contributed to the joint venture by the mainland Chinese party. The parties jointly requested the tribunal to pay a site visit to the joint venture to inspect conditions of the land and determine whether the land was actually used by the joint venture and whether conditions of the land were consistent with the joint venture agreement. The site visit was carried out smoothly with cooperation from both parties.

There have also been several other arbitrations where arbitral tribunals granted a party’s request to appoint an auditor to audit the books of a joint venture or the opposing party. Such interim measures turned out to be less successful where the opposing party refused to cooperate or was less cooperative. The arbitral tribunal would make the necessary inference and conclusion it deemed fit from the conduct of the parties.

In the arbitration proceedings mentioned above, there might have been arguments regarding the necessity and feasibility of the measures requested by a party, but the power and authority of the arbitral tribunal to grant such measures were seldom challenged. The arbitral tribunal was chosen by the parties as the final decision maker for their disputes. As the ultimate fact finder, the tribunal’s order for investigatory measures must be respected by the parties, otherwise negative inferences will be made against the party violating the measures.

Enforcement of interim measures ordered by the arbitral tribunal

On the one hand, as the arbitral tribunal has full control of the arbitral proceedings, and parties to arbitration proceedings are conscious that any violation of interim measures ordered by the tribunal will have consequences, interim measures are usually complied with voluntarily by the parties without the need for enforcement by national courts. On the other hand, interim measures are, by definition, interim in nature for the safeguard of rights, often procedural rather than substantive, in the course of arbitral proceedings, as opposed to final disposition of substantive rights. As a result, the enforcement of such interim measures by national courts may entail practical problems and difficulties, as discussed in International Chamber of Commerce Arbitration (2000):

The possibility of taking interim measures by way of award is obviously intended to increase the chances of securing compliance with the arbitral tribunal’s decision either voluntarily or, if need be, with the assistance of national courts. . . . There are conceptual difficulties, however, for the tribunal to take its decision in the form of an award: while the tribunal no doubt intends to bind the parties with its decision, it is hard to conceive of the decision as finally disposing of a dispute between the parties. It was for this reason, as well as the practical problem of submitting the essentially summary proceedings for interlocutory orders to a regime appropriate to a final disposition of a matter (reasoned award, scrutiny of the award by the Court), that a Working Party of the ICC Commission some years ago recommended that, in general, tribunal decisions concerning interim measures should not take the form of an award. . . . A further question arises whether the award format of interim measures entitles them to recognition and enforcement within the terms of the New York Convention. . . . Recognition and enforcement under the New York Convention of what is essentially an interlocutory order, modifiable by the arbitral tribunal in accordance with changes of circumstances but rendered in the form of awards must remain doubtful. There is a certain flaw in attempting to use the New York Convention, which was designed to insure enforcement of decision which put an end to a dispute between arbitrating parties, or at least part of a dispute, to secure enforcement of a decision which might, for instance, seek to preserve the status quo until a final arbitration award can be rendered.^[4]

This conclusion is still true today. Nevertheless, there are circumstances where it is necessary for interim measures to be recognised and enforced by national courts. In this regard, and in practice, Chinese courts have recognised and enforced interim measures granted in the form of an award, either an interim award or a partial award, by arbitral tribunals in arbitral proceedings taking place in and outside China. For example, in 2012, the Yixing City Intermediate People’s Court of Jiangsu Province recognised and enforced a partial award issued by an arbitral tribunal composed under the Singapore International Arbitration Centre in relation to a joint venture party’s right to audit the financial records and books of the joint venture company located in China.

2012 and 2015 CIETAC Arbitration Rules

In the summer of 2011, when CIETAC was discussing revisions to its arbitration rules, one of the authors of this article made the proposal that CIETAC should reintroduce provisions for interim measures to its new rules. That proposal was followed by a debate on the power of arbitral tribunals sitting in China to grant interim measures and discussions on the distinction between court-ordered preservatory measures and tribunal-ordered interim measures. The proposal was eventually accepted by CIETAC in its 2012 Arbitration Rules (the 2012 CIETAC Rules). Article 21 of the 2012 CIETAC Rules, under the heading ‘Conservatory and Interim Measures’, made a distinction between conservatory measures ordered by national courts and interim measures ordered by arbitral tribunals:

1. Where a party applies for conservatory measures pursuant to the laws of the People’s Republic of China, CIETAC shall forward the party’s application to the competent court designated by that party in accordance with the law.
2. At the request of a party, the arbitral tribunal may decide to order or award any interim measure it deems necessary or proper in accordance with the applicable law or the agreement of the parties and may require the requesting party to provide appropriate security in connection with the measure.

The inclusion of the phrase ‘in accordance with the applicable law or the agreement of the parties’ reflected a different opinion and a concern that arbitral tribunals sitting in China may not have the power to grant interim measures. This concern may not be necessary on the premise that the 1995 Arbitration Law does not prohibit arbitral tribunals from granting interim measures as long as the applicable arbitration rules, which are deemed part of the agreement of the parties, authorise the arbitral tribunal to have such power. Anyway, in all circumstances an arbitral tribunal has to take into account mandatory provisions of the arbitration law applicable to the arbitration proceedings. The current 2015 CIETAC Rules have further expanded the applicability of interim measures by introducing the emergency arbitrator procedures.^[5]

2018 and 2021 CMAC Arbitration Rules

In its previous arbitration rules, CMAC adopted the same approach as reflected in the 2012 CIETAC Rules regarding interim measures ordered by arbitral tribunals, providing that:

At the request of a party, the arbitral tribunal may decide to order or award any interim measure it deems necessary or proper in accordance with the applicable law or the agreement of the parties and may require the requesting party to provide appropriate security in connection with the measure.^[6]

In October 2021, CMAC published its new rules of arbitration (the 2021 CMAC Rules). Noticeably, in article 27 of the 2021 CMAC Rules, the phrase ‘in accordance with the applicable law or the agreement of the parties’ has been excluded. Article 27 now reads:

At the request of a party, the arbitral tribunal may decide to take interim measures it deems necessary or appropriate and has power to decide that the party applying for the interim measure should provide appropriate security.

Conclusion

In essence, interim measures are not foreign to arbitration proceedings in China. To some extent, it is a matter of terminology. Arbitral tribunals sitting in China have consistently granted measures that are equivalent to interim measures, though such measures might not have been described as such. ‘Interim measures’ were expressly available under the 1956 CIETAC Rules and the 1959 CMAC Rules. After the introduction of court-ordered preservatory measures in support of arbitration proceedings in the 1982 Civil Procedural Law, the term ‘interim measures’ was excluded from the arbitration rules of CIETAC and CMAC. In practice, interim measures have been consistently granted by arbitral tribunals sitting in China, though under a different terminology. The term ‘interim measures’ was reintroduced in the 2012 CIETAC Rules, and has continued to develop in subsequent years. The 1995 Arbitration Law is currently under review. According to a draft amendment of this law published by the Ministry of Justice for public consultation, provisions will be introduced to authorise arbitral tribunals to grant interim measures in support of arbitration proceedings and to facilitate enforcement of such measures by the national courts. We hope that the new law will bring arbitration proceedings in China more in line with international best practice.

Footnotes