The agreement on ‘all disputes in connection with the contract’

To shorten the time for resolving a dispute, the parties tend to choose arbitration to resolve disputes arising during the performance of their contract or agreement in the future. The parties must agree on an arbitration clause in writing when executing the contract or agreement. Article 4 of the Arbitration Law provides that an arbitration agreement reached by the parties on a voluntary basis is the premise for resolving disputes through arbitration. In entering into the arbitration clause, the parties usually state that “all disputes in connection with the contract” must be resolved through arbitration. This stipulation provides the parties with reassurance and a guarantee that all disputes in connection with the contract will be under the jurisdiction of arbitration as agreed upon in the arbitration clause, but it is not necessarily the case in judicial practice. The following cases are presented for illustration.

Case One. Is the arbitration clause involved in a series of contracts or agreements generally applicable in corporate merger and acquisition (M&A)?

Company A intends to acquire the mineral resource project of company B and the parties chose the method of the acquisition by way of stock exchange. Relevant parties first entered into a Framework Agreement on Share Transfer, which determines stock exchange as the method for the acquisition and specifies the parties to the stock exchange, and states that an agreement must be entered into separately for specific matters.

In the following years, relevant parties entered into a series of agreements including the Agreement on Increase in Capital and Shares, the Share Transfer Agreement and the Shareholder Agreement. Specifically, none of the agreements contains the arbitration clause that provides for arbitration as the method of dispute resolution, except for the Agreement on Increase in Capital and Shares, which includes an arbitration clause.

In the above-mentioned case, only the Agreement on Increase in Capital and Shares is accepted by the arbitration institution. Therefore, even though it is stipulated in the Agreement on Increase in Capital and Shares that “all disputes in connection with the contract” must be submitted to arbitration for resolution, such arbitration clause cannot be applicable to other agreements because the agreements involve different subjects and subject matters, and have respectively formed independent contractual systems.

Lian Yan is a senior partner at Beijing Kangda Law Firm. She can be contacted on +86 10 5086 7666 or by email at yan.lian@kangdalawyers.com