Chinese companies (especially SOEs) often refuse 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 in deciding whether to go with China arbitration or China 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 counterparty.
In those instances in which our China contract lawyers write China arbitration clauses, we typically push for the following:
1. A CIETAC (China International and Economic Trade Arbitration Commission) or BAC (Beijing Arbitration Commission) arbitration. These are the two most highly regarded and international of China’s arbitration commissions. The Chinese companies virtually never fight on this.
2. 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 on this point, but usually not very hard.
3. The arbitration be in English. If your contract does not specify a language other than Chinese, the arbitration 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. 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 company.
There are other issues that come into play when writing a China arbitration clause, but if you are cover the above four, you likely will be giving yourself a fighting chance.
