Chinese Judicial Practice on Asymmetric Choice of Court Agreements in International Civil & Commercial Disputes – Conflict of Laws

By Yuchen Li, a PhD pupil at Wuhan College.

A. Introduction

An uneven alternative of court docket settlement is usually utilized in worldwide industrial transactions, particularly in monetary agreements, which often permits one get together (possibility holder) an elective alternative concerning the discussion board by which proceedings could also be introduced however the different (non-option holder) an unique option to sue in a delegated court docket.[1] A typical instance is as follows:

 ‘(A) The courts of England have unique jurisdiction to settle any disputes ….

(B) The Events agree that the courts of England are essentially the most acceptable and handy courts … to settle Disputes and accordingly no Get together will argue on the contrary.

(C) This Clause is for the good thing about the Finance Events solely. In consequence, no Finance Get together shall be prevented from taking proceedings referring to a Dispute in another courts with jurisdiction. To the extent allowed by regulation, the Finance Events might take concurrent proceedings in any variety of jurisdictions.’ [2]

In recent times, points regarding uneven alternative of court docket agreements have been controversial in instances inside some jurisdictions.[3] Regardless of the numerous quantity of analysis on uneven alternative of court docket agreements, little consideration has been paid to Chinese language stance on this subject. With Chinese language non-public events actively partaking in worldwide transactions, Chinese language angle in the direction of such clauses is essential for industrial events and educational researchers. This text provides a glimpse of how Chinese language courts deal with uneven alternative of court docket agreements in worldwide and industrial civil litigations.[4]

B. Characterization

Chinese language courts have demonstrated primarily 4 completely different views in characterizing uneven alternative of court docket agreements.

Firstly, some courts classify this type of settlement as uneven jurisdiction agreements.[5] In Grasp Seng Financial institution Ltd. v. Shanghai Tiancheng Storage Co., Ltd. & Lin Jianhua, Shanghai Monetary Court docket reasoned {that a} jurisdiction clause which permits one get together to sue in a number of jurisdictions and requires the opposite to solely carry the dispute to a particular jurisdiction must be characterised as an uneven jurisdiction clause.[6]

Second, a number of courts characterize the settlement as non-exclusive jurisdiction clause.[7] In Hwabao Belief Co., Ltd. v. Xiao Zhiyong, Shanghai Excessive Folks’s Court docket noticed that, in line with the jurisdiction clause in problem, the choice holder may both select to provoke proceedings within the designated court docket or different competent courts, therefore the clause is non-exclusive.[8]

Thirdly, it’s notable that in GOOD VANTAGE SHIPPING LIMITED v. Chen Fuxiang et al, Xiamen Maritime Court docket categorized the disputed clause as an ‘uneven unique jurisdiction clause’. The court docket held that, underneath the disputed clause, solely when the choice holder chooses to take the proceedings within the designated court docket will that court docket have unique jurisdiction, however this doesn’t exclude the suitable of the choice holder to sue in different competent courts.[9]

Final, various instances overlook the particularity of uneven alternative of courts agreements and broadly classify them as jurisdiction agreements.[10]

C. Alternative of Regulation

Most Chinese language courts have a tendency to use lex fori on the effectiveness of uneven alternative of court docket agreements. Counting on Article 270 of Chinese language Civil Process Regulation (hereinafter known as ‘CPL’) which supplies that this Regulation applies to foreign-related civil actions inside PRC,[11] Chinese language courts usually take the view that the ascertainment of jurisdiction is a procedural matter and apply lex fori.[12]

D. Effectiveness

a. Validity

By far, the validity of uneven alternative of court docket agreements has not been addressed by Chinese language laws. Nevertheless, in 2022, the Supreme Folks’s Court docket of PRC (hereinafter known as ‘SPC’) issued Abstract of Nationwide Symposium on Overseas-Associated Business and Maritime Trials of Courts (hereinafter known as ‘the Abstract’). The Abstract regulates that except an uneven alternative of court docket settlement includes the rights and pursuits of shoppers and staff or violates CPL’s provisions on unique jurisdiction, the folks’s court docket ought to reject the events’ declare that the settlement is invalid on the bottom of unconscionability. Though the Abstract just isn’t an official supply of regulation, it serves as an essential reference and guideline for courts within the absence of laws.

Chinese language courts typically assist the view that an uneven alternative of court docket settlement won’t be deemed invalid for its asymmetry. The validity of such an settlement is usually upheld for 3 causes. First, such an settlement itself just isn’t opposite to Chinese language regulation.[13] In Winwin Worldwide Strategic Funding Funds Spc v. Chen Fanglin, Fujian Excessive Folks’s court docket held that such a clause doesn’t violate CPL and acknowledged its validity. [14] Second, get together autonomy in civil and industrial litigations must be protected.[15] In Solar Jichuan v. Chen Jianbao, Beijing Fourth Intermediate Folks’s Court docket identified that CPL permits events to a contract the suitable to pick out the court docket by settlement, which displays get together autonomy in civil process regulation. The goal of defending this proper is to safeguard that each events are handled equally by the court docket, however this doesn’t imply they’ve to decide on the very same court docket. In consequence, a alternative of court docket settlement is legitimate as long as it doesn’t violate necessary guidelines and expresses the true intention of the events.[16] Third, it’s obligatory to say that in a home case the place the validity of an uneven alternative of court docket clause in a mortgage contract is in dispute, Pudong New Space Folks’s Court docket of Shanghai analyzed the positions of each the borrower (non-option holder) and the financial institution (possibility holder) and concluded that the borrower’s place underneath an uneven jurisdiction clause is not any weaker than underneath an unique one.[17]

In a small variety of instances, Chinese language courts refuse to acknowledge the validity of normal uneven alternative of court docket agreements for violating particular guidelines of normal clause underneath Chinese language regulation.[18] In Picc Xiamen Department v. A.P. Moller – Maersk A/S, Zhejiang Excessive Folks’s Court docket dominated that the disputed normal jurisdiction clause within the Invoice of Lading lacks specific, apparent varieties to differentiate from different clauses, and the provider (possibility holder) failed to determine that the jurisdiction clause had been negotiated with or given full discover and rationalization to the shipper (non-option holder).[19] Subsequently, if the drafting get together fails to immediate or clarify the usual uneven alternative of court docket settlement to the opposite get together, Chinese language court docket might contemplate that this clause fails to symbolize the true intention of the events and decide that the clause doesn’t represent part of the contract.[20]

b. Results

An uneven alternative of court docket settlement has completely different results upon possibility holder and non-option holder. For the non-option holder, the jurisdiction clause has an unique impact, proscribing the get together to taking the proceedings to the designated court docket solely.[21]

As for the choice holder, Chinese language courts have two completely different explanations. On the one hand, an uneven alternative of court docket settlement has each unique and non-exclusive results on the choice holder. Whereas the designated court docket has unique jurisdiction when the choice holder brings the case to the designated court docket, the choice holder may additionally select to sue the non-option holder in different competent courts.[22] Alternatively, some courts analyze that, other than the designated court docket, the choice holder may additionally sue in different competent courts, therefore the clause is non-exclusive for the choice holder. [23]

E. Development

In Financial institution of Communications Trustee Ltd. v. China Vitality Reserve and Chemical substances Group Firm Ltd., whether or not the jurisdiction clause in a assure settlement is an uneven one is in dispute. The clause supplies:

The guarantor agrees (i) for the good thing about the trustee and bondholder, the courts of Hong Kong have unique jurisdiction to settle any disputes arising out of or referring to this Assure Settlement; (ii) the courts of Hong Kong are essentially the most acceptable and handy courts; and (iii) consequently, the guarantor won’t argue that different courts are extra acceptable or extra handy to simply accept service of course of on its behalf.[24]

The SPC established that, when figuring out whether or not the events’ settlement constitutes an uneven jurisdiction clause, the folks’s court docket ought to construe the events’ intention in a strict method. The wording of the uneven alternative of court docket clause must be clear and exact. The court docket reasoned as follows:

Generally, contractual events share equal rights and obligations, and due to this fact their rights concerning jurisdiction of litigation must also be equal. Because of this, their proper to pick out a court docket must be the identical except the events particularly agree in any other case. Beneath the precept of disposition of procedural rights, events are allowed to agree on an uneven jurisdiction clause whereby one get together’s proper to decide on the court docket is restricted whereas the opposite get together just isn’t. An uneven jurisdiction clause constitutes a major, distinctive restriction on one get together’s procedural rights, which must be decided via the events’ clear and specific intention. In any other case, unequal or unfair rights and obligations shall not be presumed.[25]

Subsequently, the SPC determined that the disputed jurisdiction clause just isn’t an uneven one as a result of it solely highlights the unique jurisdiction of Hong Kong courts and doesn’t specify that the assure has the suitable to carry the proceedings to different competent courts.

F. Conclusion

Plainly Chinese language courts take a liberal stance on uneven alternative of court docket agreements, exhibiting their respect to get together autonomy and freedom to contract in worldwide civil and industrial jurisdiction. In 2024, reviewed and accepted by the SPC, two instances[26] recognizing the validity of uneven alternative of court docket agreements are included into the Folks’s Court docket Case Database as reference instances.[27] What’s extra, as has been talked about earlier than, the Abstract acknowledges the validity of uneven alternative of court docket agreements based mostly on the idea that these agreements are appropriate with CPL’s provisions on unique jurisdiction or don’t infringe sure weaker events’ pursuits. Uneven alternative of court docket agreements are ubiquitous in worldwide civil and industrial contracts, particularly in worldwide monetary contracts. Chinese language courts are adapting to the event tendencies of worldwide industrial follow and are getting ready to cope with sophisticated civil and industrial disputes.

Nonetheless, there’s nonetheless an extended journey to go for Chinese language courts to determine a classy mechanism to deal with such agreements. As for now, Chinese language judicial follow concerning uneven alternative of court docket agreements stays inconsistent. Moreover, most instances solely contain easy disputes regarding whether or not Chinese language courts have jurisdiction underneath such agreements. Issues might get actually sophisticated when different mechanisms in worldwide civil process like lis pendens rule apply to such agreements. A correct answer to these points depends on a unified and nuanced normal for courts to use. Whether or not there will probably be a judicial interpretation or laws concerning uneven alternative of court docket agreements, and the way Chinese language courts will deal with advanced disputes associated to such agreements stay to be noticed sooner or later.

For practitioners, it’s noteworthy that Chinese language courts have a tendency to use lex fori on uneven alternative of court docket agreements. The uneven nature of the jurisdiction clause must be exactly and clearly expressed. Moreover, if the uneven alternative of court docket settlement is a regular one, underneath the Civil Code of PRC, it’s advised that the drafting get together, when concluding a contract, ought to immediate the jurisdiction clause via conspicuous indicators resembling distinctive phrases, symbols, or fonts which are ample to carry the clause to the opposite get together’s consideration. Upon the opposite get together’s request, the drafting get together must also totally clarify the jurisdiction clause to the opposite get together.

[1] See Mary Keyes and Brooke Adele Marshall, ‘Jurisdiction agreements: Unique, Optionally available and Asymmetrical’ (2015) 11 Journal of Personal Worldwide Regulation 345, 349.

[2] See Louise Merrett, ‘The Future Enforcement of Uneven Jurisdiction Agreements’ (2018) 67 Worldwide and Comparative Regulation Quarterly 37, 40-41.

[3] See e.g., Ms X v. Banque Privee Edmond de Rothschild Europe (Societe), French Cour de cassation (Supreme Court docket) (First Civil Chamber) September 2012, Case 11-26.022, Commerzbank Aktiengesellschaft v Pauline Delivery Restricted and Liquimar Tankers Administration Inc [2017] EWHC 161 (Comm).

[4] Though uneven alternative of court docket agreements might take numerous varieties, the everyday instance abovementioned in notice 2 is the commonest sort in follow. Subsequently, uneven alternative of court docket agreements on this article solely confer with agreements underneath which one get together might carry proceedings solely within the chosen court docket however the different get together might carry proceedings in different courts as properly. See Brooke Marshall, Uneven Jurisdiction Clauses, (Oxford College Press 2023) 17; Trevor Hartley & Masato Dogauchi, Explanatory Report on the Conference of 30 June 2005 on Alternative of Court docket Agreements (HCCH Publications 2013) 85.

[5] See Grasp Seng Financial institution Ltd. v. Shanghai Tiancheng Storage Co., Ltd. & Lin Jianhua, (2019) Hu 74 Min Chu 127 Hao [(2019)?74??127?]; Solar Jichuan v. Chen Jianbao, (2021) Jing Min Xia Zhong 76 Hao [(2021)????76?]; XYZ Co. v. Chen & Su, (2022) Lu Min Zhong 567 Hao [(2022)???567?].

[6] See Grasp Seng Financial institution Ltd. v. Shanghai Tiancheng Storage Co. Ltd. & Lin Jianhua, (2019) Hu 74 Min Chu 127 Hao [(2019)?74??127?], paras. 94.

[7] See DBS Financial institution (Hong Kong) Restricted v. Ahead (Zhaoqing) Semiconductor Co., Ltd. et al, (2011) Yue Gao Fa Li Min Zhong Zi Di 82 Hao [(2011)????????82?]; Suen Kawi Kam v China Dragon Choose Progress Fund, (2019) Jing Min Xia Zhong 279 Hao [(2019)????279?]; Hwabao Belief Co., Ltd. v. Xiao Zhiyong, (2021) Hu Min Xia Zhong 60 Hao [(2021)????60?].

[8] See Hwabao Belief Co., Ltd. v. Xiao Zhiyong, (2021) Hu Min Xia Zhong 60 Hao [(2021)????60?], para. 10.

[9] See GOOD VANTAGE SHIPPING LIMITED v. Chen Fuxiang et al, (2020) Min 72 Min Chu 239 Hao [(2020)?72??239?], paras. 13, 15.

[10] See Beijing Huahai Equipment Co., Ltd. v. KAMAT GmbH & Co. KG, (2017) Jing 02 Min Zhong 4019 Hao [(2017)?02??4019?]; Winwin Worldwide Strategic Funding Funds Spc v. Chen Fanglin, (2019) Min Min Xia Zhong 151 Hao [(2019)????151?]; Antwerp Diamond Financial institution v. Weinstock Michel, (2013) Yue Gao Fa Li Min Zhong Zi Di 467 Hao [(2013)????????467?]; Guosen Securities (Hong Kong) Monetary Holdings Co., Ltd v. Yunnan Zhongyuan Industrial Group Co., Ltd. et al, (2017) Zui Gao Fa Min Xia Zhong 423 Hao [(2017)??????423?]; Picc Xiamen Department v. A.P. Moller – Maersk A/S, (2017) Zhe Min Xia Zhong 119 Hao [(2017)????119?]; Zhu Yuquan v. AxiCorp Monetary Providers Pty Ltd, (2021) Jing Min Zhong 893 Hao [(2021)???893?].

[11] Article 270 of CPL supplies: ‘This Half (Half 4 of CPL, Particular Provisions on Overseas-Associated Civil Procedures) shall apply to foreign-related civil actions throughout the Folks’s Republic of China. For points not addressed on this Half, different provisions of this Regulation shall apply.’

[12] See Antwerp Diamond Financial institution v. Weinstock Michel, (2013) Yue Gao Fa Li Min Zhong Zi Di 467 Hao [(2013)????????467?]; Suen Kawi Kam v. China Dragon Choose Progress Fund, (2019) Jing Min Xia Zhong 279 Hao [(2019)????279?]; GOOD VANTAGE SHIPPING LIMITED v. Chen Fuxiang et al, (2020) Min 72 Min Chu 239 Hao [(2020)?72??239?]; Hwabao Belief Co., Ltd. v. Xiao Zhiyong, (2021) Hu Min Xia Zhong 60 Hao [(2021)????60?]; Guosen Securities (Hong Kong) Monetary Holdings Co., Ltd v. Yunnan Zhongyuan Industrial Group Co., Ltd. et al, (2017) Zui Gao Fa Min Xia Zhong 423 Hao [(2017)??????423?]; Picc Xiamen Department v. A.P. Moller – Maersk A/S, (2017) Zhe Min Xia Zhong 119 Hao [(2017)????119?]; Zhu Yuquan v. AxiCorp Monetary Providers Pty Ltd, (2021) Jing Min Zhong 893 Hao [(2021)???893?].

[13] See e.g. Solar Jichuan v. Chen Jianbao, (2021) Jing Min Xia Zhong 76 Hao [(2021)????76?]; XYZ Co. v. Chen & Su, (2022) Lu Min Zhong 567 Hao [(2022)???567?]; GOOD VANTAGE SHIPPING LIMITED v. Chen Fuxiang et al, (2020) Min 72 Min Chu 239 Hao [(2020)?72??239?]; Zhu Yuquan v. AxiCorp Monetary Providers Pty Ltd, (2021) Jing Min Zhong 893 Hao [(2021)???893?].

[14] See Winwin Worldwide Strategic Funding Funds Spc v. Chen Fanglin, (2019) Min Min Xia Zhong 151 Hao [(2019)????151?], para. 2.

[15] See Antwerp Diamond Financial institution v. Weinstock Michel, (2013) Yue Gao Fa Li Min Zhong Zi Di 467 Hao [(2013)????????467?]; Solar Jichuan v. Chen Jianbao, (2021) Jing Min Xia Zhong 76 Hao [(2021)????76?].

[16] See Solar Jichuan v. Chen Jianbao, (2021) Jing Min Xia Zhong 76 Hao [(2021)????76?], para. 15.

[17] ‘On the one hand, the borrower’s unique alternative may facilitate the enforcement of judgements. Alternatively, the financial institution’s proper to decide on the competent court docket may scale back industrial prices, which is able to ultimately profit peculiar purchasers (together with the borrower). On this sense, the borrower’s place is not any weaker than underneath an unique jurisdiction clause.’ See Financial institution of Tianjin CO., LTD. Shanghai Department v. Gong Chongfang et al, (2022) Hu 0115 Min Chu 87551 Hao [(2022)?0115??87551?], para. 7.

[18] See Shaoxing Haoyi Buying and selling Co., Ltd. v. GMA-CDMS et al, (2016) Zhe Min Xia Zhong [(2016)????294?]; Picc Xiamen Department v. A.P. Moller – Maersk A/S, (2017) Zhe Min Xia Zhong 119 Hao [(2017)????119?].

[19] See Picc Xiamen Department v. A.P. Moller – Maersk A/S, (2017) Zhe Min Xia Zhong 119 Hao [(2017)????119?], para. 10.

[20] Article 496, paragraph 2 of the Civil Code of PRC supplies: ‘Upon concluding a contract, the place a regular clause is used, the get together offering the usual clause shall decide the events’ rights and obligations in compliance with the precept of equity, and shall, in an affordable method, name the opposite get together’s consideration to the clause regarding the different get together’s main pursuits and considerations, resembling a clause that exempts or alleviates the legal responsibility of the get together offering the usual clause, and provides explanations of such clause upon request of the opposite get together. The place the get together offering the usual clause fails to carry out the aforementioned obligation of calling consideration or giving explanations, thus ensuing within the different get together’s failure to concentrate to or perceive the clause regarding its main pursuits and considerations, the opposite get together might declare that such clause doesn’t grow to be a part of the contract.’ See Civil Code of the Folks’s Republic of China, The State Council of the Folks’s Republic of China, https://english.www.gov.cn/archive/lawsregulations/202012/31/content_WS5fedad98c6d0f72576943005.html, visited on tenth March, 2025.

[21] See Solar Jichuan v. Chen Jianbao, (2021) Jing Min Xia Zhong 76 Hao [(2021)????76?].

[22] See Winwin Worldwide Strategic Funding Funds Spc v. Chen Fanglin, (2019) Min Min Xia Zhong 151 Hao [(2019)????151?]; GOOD VANTAGE SHIPPING LIMITED v. Chen Fuxiang et al, (2020) Min 72 Min Chu 239 Hao [(2020)?72??239?].

[23] See Suen Kawi Kam v. China Dragon Choose Progress Fund, (2019) Jing Min Xia Zhong 279 Hao [(2019)????279?]; Hwabao Belief Co., Ltd. v. Xiao Zhiyong, (2021) Hu Min Xia Zhong 60 Hao [(2021)????60?].

[24] See Financial institution of Communications Trustee Ltd. v. China Vitality Reserve and Chemical substances Group Firm Ltd., (2021) Zui Gao Fa Min Zai 277 Hao [(2021)?????277?], para. 25.

[25] See Financial institution of Communications Trustee Ltd. v. China Vitality Reserve and Chemical substances Group Firm Ltd., (2021) Zui Gao Fa Min Zai 277 Hao [(2021)?????277?], para. 26.

[26] See Financial institution of Communications Trustee Ltd. v. China Vitality Reserve and Chemical substances Group Firm Ltd., (2021) Zui Gao Fa Min Zai 277 Hao [(2021)?????277?]; XYZ Co. v. Chen & Su, (2022) Lu Min Zhong 567 Hao [(2022)???567?].

[27] In keeping with Article 19 of Procedures for the Development and Operation of the Folks’s Court docket Case Database, the folks’s courts ought to confer with comparable instances of the Database when listening to instances. Nevertheless, this reference might not be used as a foundation of the adjudication. See Susan Finder, Replace on the Folks’s Court docket Case Database, Supreme Folks’s Court docket Monitor, https://supremepeoplescourtmonitor.com/2024/12/, visited on twenty sixth February 2025.