Governing Law and Jurisdiction in China-Related Contracts
How to choose the rules, forum and enforcement path before a dispute arises
How to choose the rules, forum and enforcement path before a dispute arises
Key takeaways
- Governing law and dispute forum are separate choices; both should be drafted clearly and tested against mandatory and exclusive-jurisdiction rules.
- The CISG may apply automatically to an international sale of goods unless it is validly excluded or displaced.
- The best forum is the one that can grant the required relief and produce an award or judgment that can be enforced against the counterparty’s assets.
1. What governing law controls
The governing-law clause identifies the substantive law used to interpret the contract and decide rights and remedies. In a genuinely foreign-related relationship, the parties may often choose the applicable law, subject to Chinese mandatory rules, public policy and matters governed by law regardless of the parties’ choice.
Choosing foreign law can add evidence, translation and expert-law costs in Chinese proceedings. Choosing Chinese law may be efficient where performance, assets and enforcement are in China. A neutral law may be appropriate for some transactions, but neutrality alone does not guarantee a faster or cheaper outcome.
2. Do not overlook the CISG
For qualifying international sales of goods between parties in contracting states, the United Nations Convention on Contracts for the International Sale of Goods may apply without being named in the contract. The parties should decide whether to adopt, modify where permitted, or exclude it expressly. A clause stating only ‘Chinese law’ may not by itself answer every CISG question.
3. Litigation or arbitration?
Litigation may offer compulsory procedures, appellate review and direct access to court measures, but cross-border service, evidence and judgment enforcement can be complex. Arbitration offers party choice over institution, seat, language and arbitrators, confidentiality in many settings, and broad international enforcement under the New York Convention. It also requires a valid and workable arbitration agreement.
4. Drafting a jurisdiction clause
A court clause should state whether jurisdiction is exclusive, identify the chosen court or jurisdiction with sufficient certainty, and respect Chinese rules on level and exclusive jurisdiction. Article 279 of the Civil Procedure Law reserves specified disputes to Chinese courts, including certain disputes concerning Chinese entities, Chinese-granted IP validity and specified contracts performed in China.
5. Drafting an arbitration clause
State the arbitration institution, seat, rules, number of arbitrators and language. Consider interim measures, consolidation, multi-contract transactions and the law governing the arbitration agreement. The revised Arbitration Law took effect on 1 March 2026, so clauses and commentary should be checked against the current law rather than pre-2026 templates.
6. Start with enforcement
Before selecting a forum, identify the likely respondent, assets, evidence and urgent remedies. A clause that looks neutral may be commercially weak if the resulting judgment cannot be recognised where the assets are located. Contract language and service details should also be coordinated with the forum choice.
Before you act
- Choose governing law and forum separately and expressly.
- Assess whether the CISG applies and state the intended treatment.
- Check Chinese mandatory and exclusive-jurisdiction rules.
- For arbitration, specify institution, seat, rules and language.
- Test recognition, interim relief and enforcement where assets are located.
How we can help
BizLawyerChina can conduct counterparty due diligence and prepare or review bilingual China-related contracts, including payment security, inspection, IP, governing-law and dispute-resolution provisions.
Principal official sources
- Civil Procedure Law of the People's Republic of China (2023 Amendment)
- Arbitration Law of the People's Republic of China, effective 1 March 2026
- United Nations Convention on Contracts for the International Sale of Goods