PROCEDURE OF ARBITRAL HEARING

I .Defense and counterclaim

The secretariat of CIETAC-Shanghai shall send the Notice of Arbitration to the claimant and the respondent respectively after the case is accepted.Meanwhile,one copy each of the claimant's application for arbitration and its attachments as well as the Arbitration Rules,the Panel of Arbitrators shall be enclosed to the respondent.The respondent shall lodge his defense and/or counterclaim within the time limit specified in the Arbitration Rules:

The counterclaim must meet the following three requirements:

(I)Arising from the same contract relation or legal relation as that of the claims raised by the claimant;

(II)The counterclaim is directed against the claimant;

(III)The disputes involved in the counterclaim shall not be the same as the disputes involved in the arbitration claims.

The respondent may request to amend his defense and/or counterclaim.

II .Composition of the Tribunal

Sole-arbitrator tribunal is composed of one arbitrator and collegiate tribund with three arbitrators,The parties may agree upon the ways to form the tribunal.Pursuant to the Arbitration Rules,Summary Procedure shall,unless otherwise agreed by the parties,automatically be applied to any case in dispute where the amount of claim totals not more than RMB 500,000 Yuan.Summary Procedure may also be applied to any case in dispute where the amount of claim totals more than RMB 500,000 Yuan provided that both parties agree in writing.The cases which the Summary Procedure applied to shall be examined and heard by a sole-arbitrator tribunal.

III .Hearing

Generally,oral hearings are conducted in the course of arbitration.However,the arbitration tribunal may examine the case and make an award on the basis of documents only with the consent of the parties,or in case of Summary Procedure. The arbitration tribunal shall not hear cases in open session.If both parties request a hearing to be held in open session,the arbitration tribunal has the power to decide to do it or not.All participants shall not disclose my substantial or procedural matters to outsiders when the case is not heard in open session.

The parties shall send their representative(s) or authorized agent(s) to attend the hearing.Should one of the parties fail to appear at the hearing,the arbitration tribunal may proceed with the hearing and make an award by default.

IV .Settlement

In the process of arbitration,the parties may reach an amicable settlement agreement by themselves,or they may either request,or after consulted by the tribunal,agree that the arbitration tribunal to conciliate the case.If the conciliation is successful,the arbitration tribunal shall make an award in accordance with the consents of the parties'settlement agreement.Should conciliation fail,any statement,opinion,view or proposal which has been made,raised,put forward,acknowledged,accepted or rejected by either party or by the arbitration tribunal in the process of conciliation shall not be invoked as grounds for any claim,defense and/or counterclaim in the subsequent arbitration proceedings,judicial proceedings,or any other proceedings.

V .Award

The arbitral award shall be decided by the majority of the tribunal.When the arbitration tribunal cannot attain a majority opinion,the arbitral award shall be decided in accordance with the presiding arbitrator's opinion.The date on which the arbitral award is made is the date on which the arbitral award comes into legal effect.The arbitral award is final and binding upon both parties.Neither party may bring a suit before a law court or make a request to any other organization for revising the arbitral award.