Handling multiple laws and jurisdictions chosen by arbitration parties

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China foreign-related commercial arbitration cases
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In recent years, Chinese arbitration institutions have experienced a rise in the number of foreign-related commercial arbitration cases. These often involve parties explicitly agreeing in the contract on the sole law to be applied in the event of a dispute.

Taking Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BAIC) as an example, an increasing number of cases administered by the BAC since 2018 have seen the application of laws from various regions and foreign countries, including Hong Kong, Macau, South Korea, the US state of New York, Kyrgyzstan, Thailand and Sri Lanka, among others.

China’s Application of Laws for Foreign-related Civil Relations holds that, as long as the agreed-upon laws do not violate public order and there is no malicious evasion of Chinese laws, the unanimously chosen laws by the parties shall apply.

However, the author has also observed during case management that some parties may stipulate the simultaneous application of laws from multiple countries or regions.

When this occurs, the rules of overlapping application of conflicting laws in the sense of private international law norms require the arbitration tribunal to analyse any legal issues that arise from the chosen laws.

While this increases the tribunal’s workload, it is the proper way to handle foreign-related commercial arbitration cases, which will not only ensure the principle of party autonomy, but also uphold the professionalism of the arbitration.

Challenges may then arise when different laws lead to conflicting conclusions on the same issue. How should a tribunal deal with that situation?

Assuming that the parties have agreed to apply the laws of both countries A and B, without violating public order or maliciously evading Chinese laws, the tribunal may consider both sets of laws and ideally arrive at the same conclusion. In this case, the tribunal may simplify its argument: After applying the law of country A to the issue, the tribunal could clarify that “this conclusion does not violate the law of country B”.

However, in cases where the laws of countries A and B lead to conflict, the tribunal must consider specific circumstances based on the types of legal norms in each country when making its final decision. For example:

  • If country A’s regulations are discretionary, while country B’s regulations are mandatory, the final conclusion must not violate the mandatory regulations of country B.
  • When both countries’ laws have mandatory provisions governing the issue, the tribunal must exercise due care and attention in reaching a conclusion that does not violate these provisions.

However, in cases where the provisions of both countries’ laws contradict each other, making it impossible to reach a conclusion, the author suggests that the two parties should be considered as having failed to reach an agreement on the applicable laws, based on the principle of contract interpretation. In such instances, article 69 (2) of the BAC Arbitration Rules grants the tribunal the authority to determine the applicable law in accordance with the legal provisions of the principle with the closest connection, or to determine the applicable law in the light of actual circumstances.

  • In cases where both countries’ laws provide interpretative rules, the tribunal shall thoroughly investigate the issue, utilising its professional knowledge and experience at the hearing. The tribunal may guide the parties towards consensus or narrow down the points of the dispute to the greatest extent possible, subject to their consent.

If the parties cannot reach an agreement and persist in their respective interpretations of the relevant laws, the tribunal shall proceed as follows: Based on the investigation conducted during the hearing and after thoroughly considering the opinions of both parties, as well as taking into account the background, customs and customary practice of the tribunal, the tribunal will make a ruling and interpret the disputed issues.

This will be done by relying on the evidence collected at the hearing, applying the principles of contract interpretation, and considering the contents of the contract in dispute. Alternatively, the parties can be deemed to have failed to reach an agreement on the applicable law, as previously analysed, and the tribunal shall determine the applicable law.

The issue of ascertaining foreign laws plays a crucial role in foreign-related commercial arbitration cases. Practical situations may arise where the parties involved face challenges in ascertaining foreign laws due to factors such as time constraints, cost considerations, differing approaches, or delays and prolonged arbitration proceedings while the parties seek to ascertain foreign laws.

In the author’s opinion, the Interpretations II of Law of the People’s Republic of China on the Application of Laws for Foreign-related Civil Relations, issued by the Supreme People’s Court (SPC) and effective from 1 January 2024, offer a valuable solution to ascertainment challenges.

The interpretations provide an expanded range of methods for ascertainment of foreign laws, including: the establishment or participation of the SPC in co-operation mechanisms for legal ascertainment; the involvement of experts from the International Commercial Expert Committee of the SPC; and utilisation of services from legal ascertainment agencies or Chinese and foreign legal experts.

By referring to the interpretations, the parties may also ascertain foreign laws in a more convenient and efficient manner in the arbitral proceedings. This enables them to express their opinions on the relevant issues and safeguard their rights and interests. It also enhances the tribunal’s ability to comprehensively apply the jointly selected laws and conduct a thorough analysis of the case at hand.


Fu Xiangyu is a senior counsel at BAC/BIAC

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