Wording in arbitration agreements deserves greater care

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Wording in arbitration agreements deserves greater care
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A written arbitration agreement is not only the reflection of the parties’ consent of resorting to a commercial arbitration as a dispute resolution, but also the statutory requirement for an arbitral institution to gain its jurisdiction over contract disputes or other property rights disputes in mainland China. The accurate, lawful and careful wording of an arbitral institution in a contract is the key to a valid arbitration agreement. It ensures an efficient arbitration proceeding and minimizes the risk of unnecessary delays caused by jurisdictional challenges.

In practice, inaccurate, illicit and careless wording in agreements is not rare. When parties stipulate a Chinese arbitration commission in their arbitration agreement, a common mistake is the misuse of a redundant word “city” (市). For example, Beijing Arbitration Commission (北京仲裁委员会, or BAC) is often mistaken as Beijing “City” Arbitration Commission (北京 “市” 仲裁委员会).

In terms of determining such errors, the BAC, courts in Beijing and some courts in other regions of mainland China have reached a consensus that the validity of such an arbitration agreement should always be confirmed. On 13 March 2016, by overruling the improper holding made by Henan Anyang Intermediate People’s Court on an invalidity issue, the Supreme People’s Court (SPC) issued a ruling [(2016) SPC Civil Supervision No. 106] and ordered a retrial in Zhongse Twelve Metallurgy Construction Company v Anyang Yingde Gas Company. The contested arbitration agreement under the “Bilateral Settlement and Payment Agreement” mistakenly used the word “city” (市) when stipulating BAC as the arbitral institution. The SPC’s ruling is deemed as affirmation of the consensus that holds this miswording does not invalidate the arbitration agreement.

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Wang Xiaoxi is a case manager at Beijing Arbitration Commission/Beijing International Arbitration Centre

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