Originally from Arbitration Clauses for International Contracts - Second Edition

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Chapter 12 - Preview Page
CHINA CONTRACTS

This Chapter addresses the special considerations that arise when either mainland China is to be the place of arbitration, or enforcement in mainland China is foreseeable. In either of these scenarios, Chinese arbitration law will apply.

(1) Overview of Chinese Arbitration Law
Under Chinese arbitration law (effective as of 2006), the scope of the parties’ rights to choose where and under what rules to arbitrate depends upon whether the contract is characterized as being “foreign related” or “domestic.”

“Foreign related” agreements are those where either (i) one or both parties is a foreign national (in the case of a company, determined by the place of incorporation), or (ii) the “facts” that affect the parties’ legal relationship occurred in a foreign country (a standard that has not been clarified), or (iii) the subject matter of the dispute is outside China.

Three critical consequences flow if the contract is considered to be “domestic” rather than “foreign related:” (i) the arbitration must be institutional; (ii) the arbitral institution must be Chinese (e.g., CIETAC); and (iii) the governing substantive law must be Chinese law. Arbitrations under domestic contracts may be conducted in a foreign country in certain circumstances.