China signs Convention on Choice of Court Agreements
On 12 September 2017, China's Ambassador to the Netherlands signed the Convention on Choice of Court Agreements (选择法院协议公约) on behalf of the Chinese government.
Once ratified by China's president in accordance with a decision by the National People's Congress (NPC) Standing Committee, the convention will help promote certainty in relation to some commercial disputes between Chinese and foreign contracting parties.
Under the convention, a judgment on a civil or commercial dispute issued by a court in a contracting state designated in an exclusive choice of court agreement will be recognised and enforceable in the courts of another contracting state, provided the parties to the dispute reside in different contracting states. A contracting state refers to any country or region party to the convention.
The convention will not apply to, among others, the following subject matters:
Employment and consumer contracts.
Family law and inheritance matters.
Insolvency and related matters.
Competition or anti-monopoly issues.
The validity and infringement of intellectual property rights.
The validity and dissolution of legal persons.
Personal injury claims.
The exclusive choice of court agreement must be concluded after the convention has taken effect in both contracting states.
An exclusive choice of court agreement refers to an agreement which designates, for the purpose of resolving disputes, the jurisdiction of the courts of a contracting state (or one or more specific courts of a contracting state) to the exclusion of the jurisdiction of any other courts.
Courts other than the chosen court are required to stay or dismiss related proceedings, unless the chosen court refuses to assert jurisdiction.
Timothy Blakely, Partner, Morrison & Foerster, Hong Kong
"China's decision to sign the convention is consistent with other recent measures supportive of international enforcement of court judgments. These include decisions to enforce court judgments from Singapore and California based on the principle of reciprocity and statements by the Supreme People's Court highlighting judicial cooperation in mutual recognition and enforcement of commercial court judgments involving China's "Belt and Road" initiative. Once the convention is ratified, however, its effectiveness in practice may depend on implementation. For example, how broadly will China's courts apply the convention's public policy exception to the obligation to enforce foreign judgments, and will China adopt supportive procedures such as the need for higher court approval if a lower court denies enforcement of a foreign judgment under the convention?"
There is no need for immediate action in relation to this development, but GC should be aware of the relevant issues and may wish to seek specialist advice in relation to the use of exclusive choice of court agreements once China ratifies the convention.