Uncertainties with jurisdiction agreements

Pursuant to article 4 of the Civil Procedure Law (CPL), “All those who are engaged in civil actions within the territory of the People’s Republic of China must abide by this Law.” Additionally, the law applicable to a foreign-related civil or commercial contract refers to the substantive law of the relevant country or region, without consideration of its conflict of laws or laws of procedure. Taking into consideration common international practice, the first thing that we need to clarify is that the laws of China govern procedural issues such as jurisdiction, etc., in civil (including foreign-related civil) disputes within the territory of China.

The CPL, implemented from 1 January 2013, deletes the provisions on agreement on jurisdiction of domestic and foreign courts in foreign-related civil disputes, instead providing in article 34 that parties to a contract or other property interest dispute may agree to the jurisdiction of a domestic court. The interpretations of the Supreme People’s Court (SPC) on the application of the CPL, implemented on 4 February 2015, further specify that parties to a foreign-related contract or other property interest dispute may agree in writing that a foreign court “in a place with an actual connection with the dispute” has jurisdiction.

EXCLUSIVE JURISDICTION

Based on the principle of the autonomy of will in contracts, the provisions agreed upon by the parties prevail in respect of contract jurisdiction (except in cases of exclusive jurisdiction), with the statutorily provided circumstance applying only where jurisdiction has not been provided for. However, the existence of the provision on special territorial jurisdiction over foreign-related civil dispute cases in the CPL can still expose parties to a foreign-related contract that have agreed upon jurisdiction of a foreign court to the risk of parallel proceedings in separate countries.

Craig Zhou is an associate with Martin Hu & Partners