Draft an Arbitration Clause as per China laws

When parties to a contract intend to select an arbitration commission to settle the dispute whenever it rises, they should formatted a clause in the agreement stating which arbitration institue a dispute is supposed to submit to, as well as where the arbitration is supposed to take place. However, if this forum selection clause is not properly set up, it may make this arbitration agreement to be null and void, or to go where the parites don’t expect at the beginnig of making the agreement. Lawyer Jingzhan.Wang from China raises a case as an expample to illustrate that how an arbitration clause works.

Case Review
On the 29th of April,2014, the claimant,a Canadian company, entered into a contract with the respondent, a Tianjin company.
It’s agreed that the claimant would 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.

Call a lawyer of China to help you in a arbitration clause
a lawyer of China help you in an arbitration clause

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 that negotiation fails for any dispute arising thereof. Actually 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 of the three Abitration Commissions should the case be submitted to. According to the clause 6, the Supreme Court’s interpretation about several issues for applying PRC Arbitration Law, one arbitration establishment shall be deemed to be the contractual arbitration establishment in a place if there is only one Arbitration Commission in this place. In case that there are two or more Arbitration Establishment in that areas, parties are allowed to choose which one shall be the right one by mutual agreement, but if the parties can’t reach an agreement on this point, the Arbitration Clauses would be decided to be null and void. In this case, there isn’t a definite choice on which arbitration establishment should the case submitted to , and also they can’t reach an agreement when one party tried to submit it to Arbitration. Therefore it’s concluded that the arbitration agreement shall be null and void as per the stipulation stated above.

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