When you enter into a contract to do business in China or with a partner from China, a dispute resolution clause suitable to you is critical, says Xu Chen, chief counsel, Greater China, Cargill Law.
In selecting a forum to resolve a China-related dispute, you may want to consider factors such as neutrality, efficiency, competency and professionalism. With such factors under consideration, for commercial contracts it is generally advisable at this stage to choose arbitration rather than litigation to resolve disputes related to China.
As for selection of an arbitration forum, you may want to refer to the counterparty’s financial strength first.
For financially reliable counterparties, neutrality of the forum, rather than an immediate court preservative relief, may be your priority in such a case. You may look at those well-established arbitration institutes first, especially those in third countries. Of course to choose arbitration in a third country you had better ensure validity of the arbitration agreement by, for example, using an entity from an offshore jurisdiction to sign the contract at issue.
For those counterparties in China, whose financial strength may not be so strong, you may want to select an arbitration institute in the country to ensure an immediate access to judicial relief in case you need to prevent the counterparty from losing the capacity to perform an award in your favour. Pre-arbitration court preservation is available for arbitration by domestic institutions. Emergency arbitration relief is also available under the most recent arbitration rules of China International Economic and Trade Arbitration Commission (CIETAC) in Beijing.
Note that for arbitration institutes such as CIETAC you may have a chance to further strengthen the neutrality of the forum by, for example, agreeing in the contract on a presiding arbitrator from a third country.
A forum, selected and designed in a right way, will save you from more troubles when you are already bothered by a commercial dispute.