More clarification on validity of foreign-related arbitration clauses

During the past year, for those who run international commercial activities, it is noteworthy that the Supreme People’s Court has, through a series of official replies to cases before lower-level courts, further clarified the criteria for determining the validity of foreign-related commercial arbitration clauses. Taking into consideration relevant cases, this column will explore how to distinguish the effectiveness of foreign-related commercial arbitration clauses in China.

Q: Is it possible to provide for arbitration by a foreign arbitration institution in a commercial dispute without any foreign-related elements?

A: The Supreme Court says no. In its Reply to the Request for Instructions in the Dispute Between Jiangsu Energine Wind Turbine Manufacture Co Ltd and LM Wind Power (Tianjin) Co Ltd Involving an Application to Confirm the Validity of an Arbitration Agreement, the Supreme Court arrived at the following answer by a two-step method.

Step 1. Pursuant to article 178 of the Opinions of the Supreme People’s Court on Several Issues Concerning the Thorough Implementation of the General Provisions of the Civil Code of the People’s Republic of China (for trial implementation) and article 1 of the Interpretations of the Supreme People’s Court of Several Issues Concerning the Application of the Law of the People’s Republic of China on the Application of Laws to Foreign-Related Civil Relationships it can generally be determined whether a dispute has foreign-related elements from the following three aspects: (1) the nationalities of the parties; (2) the location of the subject matter; and (3) the place of the occurrence of the legal facts that gave rise to, modified or extinguished the civil relationship.

Arthur Dong is a partner at AnJie Law Firm in Beijing