In recent decades, with the fast growth of China’s economy, more and more foreign enterprises have chosen to invest in China mainland (“China”), either establishing representative offices/branches/subsidiaries/joint-ventures or by just setting up their trade line with Chinese enterprises. As a natural consequence thereof, disputes having “Chinese elements” had an enormous increase in number in recent years.
Arbitration, because of its convenience and efficiency, and even more importantly, the more stringent cross-boarder enforceability of its awards, has now become one of the most popular dispute resolution mechanism adopted in cross-boarder contracts. However, in certain circumstances, even the parties who have agreed to submit their potential disputes to arbitration are forced to go to court as a consequence of disputes relating to the arbitration clause. Also considering that different countries/regions may have different legal requirements with respect to the validity/enforceability of arbitration agreement/ clauses, I strongly advise commercial operators to pay more attention to this issue.
This article will mainly deal with the validity of arbitration agreement/clauses under Chinese law, and has been written with the intent and hope to be helpful to enterprises doing or wishing to do business in or with China.
International, Foreign-related and Domestic Arbitrations
Chinese law provides for three different types of arbitrations: International Arbitration, Foreign Related Arbitration and Domestic Arbitration.1