Chinese companies are more often refusing to sign contracts that do not provide for disputes to be resolved in China. In some cases, you will be better off in a Chinese court and in other cases you will be better off arbitrating in China.
We typically look at the following factors, among others, in deciding whether to go with arbitration or litigation:
- The nature of the likely disputes.
- The importance of being able to preserve evidence.
- The likelihood of needing injunctive relief.
- The quality of the court being sought by the Chinese party or of the court most likely to hear the case.
- The power/influence of the Chinese party.
In those instances in which our China contract lawyers write arbitration in China clauses for our clients, we typically push for the following terms regarding that arbitration:
1. A CIETAC (China International and Economic Trade Arbitration Commission) or BAC (Beijing Arbitration Commission) arbitration. These are the two most highly regarded and internationalized of China’s arbitration commissions. The Chinese companies virtually never fight us on this point.
2. That the arbitration take place in Beijing or Shanghai. These two cities generally have the most experienced arbitration commissions and arbitrators. The Chinese companies often fight us on this point, but usually not very hard.
3. That the arbitration be conducted in English. Note that if you do not specify a language other than Chinese, it will be in Chinese. The Chinese companies often fight us on this point and sometimes they fight very hard on this point. Sometimes it is a deal breaker, but most of the time it isn’t.
4. That at least one of the arbitrators not be a Chinese national. Surprisingly, we usually do not get all that much resistance to this from the Chinese counter-party. We often manage to get two, and sometimes even all three, of the arbitrators not to be a Chinese national. We always push hard to have the chair of the arbitration be a foreigner and we also often push for the chair to be a specific foreigner, and we often succeed with both of these.
There are all sorts of other issues that can come into play when writing a China arbitration clause, but if you are at least sure to cover the above four properly, you likely will be giving yourself at least a fighting chance.
What do you think?
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