A potential blind spot on the validity of arbitration agreements

In international commercial agreements, parties to a contract will usually specify the scope of jurisdiction of the arbitration agreement as being disputes “arising from, or in connection with, this contract”. On the surface, it would seem that this clause expands the scope of application to the greatest extent, covering all disputes that could arise in connection with the contract in the arbitration agreement. Foreign parties to a contract often ignore the question of whether this clause is achievable per Chinese law. This column will consider the issue.

American Superconductor vs Sinovel

In the software copyright infringement case Suzhou American Superconductor vs Sinovel Wind Group and Dalian Guotong Electric, American Superconductor took legal action in the Hainan Provincial No. 1 Intermediate People’s Court, demanding that the two companies bear liability for infringement. American Superconductor claimed that Sinovel and Guotong had illegally obtained and modified software code in which it had exclusive right of use. Further, it claimed that Sinovel and Guotong had reproduced, installed and used the modified software on turbines, infringing American Superconductor’s software copyright.

The contract between Sinovel and American Superconductor provided that, “any dispute arising from, or in connection with, the performance of this contract shall be resolved by the parties through amicable consultations. If a consensus cannot be achieved through consultation, formal arbitration of the dispute shall be carried out, with the dispute referred to the Beijing Arbitration Commission for resolution by arbitration pursuant to its arbitration rules”. On this basis, Sinovel filed an objection to the court’s jurisdiction, arguing that the case should be referred to arbitration.

Michael Wang is an associate of Martin Hu & Partners