Arbitration Clause in China

Case Review
On the 29th of April,2014, the claimant,a Canadian company, entered into a contract with the respondent, a Tianjin company.
It provided that the claimant would engaged to be responsible for the structural design of wooden villas, supplying for Canadian imported structural frames, onsite technical instruction, technical service and after-sales service and etc. The provisional lump sum price is 13.15 million CNY. It’s provided in Clause 10 of the contract that “in case any disputes arise during the execution of this contract, it shall be resolved by negotiation in spirit of amicable collaboration. An arbitration shall be applied to Beijing arbitration establishment if it can’t be resolved by negotiation. In performance of the contract, a dispute arose and can’t be resolved by negotiation. The claimant complained to the court and pleaded that the arbitration clause shall be null and void, whereas the respondent was applying to the Beijing Arbitration Commission

Court’s decision

It’s affirmed that the contract, signed on April 29th of 2014 between claimant and respondent is null and void

Lawyer’s view

It’s provided, in the contract signed between the claimant and respondent, that parties shall apply to Beijing arbitration establishment in case negotiation can’t be concluded for any dispute arising thereof. Because there are three arbitration establishments: Beijing Arbitration Commission, China Maritime Arbitration Commission, and China International Economic & Trade Arbitration Commission. The parties didn’t define, in the arbitration clause, which commission shall be applied. According to the clause 6, the Supreme Court’s interpretation about several issues for applying PRC Arbitration Law, one arbitration establishment shall be deemed as the contracted arbitration establishment if the arbitration agreement provides that the disputes shall be arbitrated by the arbitration establishment in one place and that’s the only one in such place. If there is two and above arbitration establishment in a place, parties can choose which one shall be applied by agreement, whereas the arbitration agreement may be null and void if the parties can’t reach an agreement. In this case, the arbitration agreement didn’t provide a definite arbitration establishment, moreover, they didn’t reach an agreement afterwards. Therefore the arbitration agreement shall be null and void as per the stipulation stated above.

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