Lacking knowledge of and exposure to China’s judicial and arbitrational system, foreign companies usually worry about dispute resolution clauses more than any other clause in a contract. Deciding which arbitration tribunal and what arbitration rules to specify becomes a sensitive and important aspect of contract negotiations for wholly foreign owned entities (“WFOE”) and cooperative joint ventures (“CJV”).
I． Choice of Arbitration Tribunal
Contracts in which one party is a foreign entity will contain foreign elements, allowing the parties to choose their jurisdiction without restriction under PRC law. The parties to such a contract may decide at their discretion whether to choose an arbitration tribunal within China or in another country, or resort to ad hoc arbitration to resolve disputes.