Dancing with the Dragon: What U.S. Parties Should Know about Chinese Law When Drafting a Contractual Dispute Resolution Clause

Wang, Marcus | January 1, 2009

This paper is intended as a guide for U.S. parties doing business with Chinese parties who wish to inoculate themselves to the greatest extent possible against foreseeable difficulties arising from disputes. One such protective measure is the inclusion of a dispute resolution clause in the contract between the parties. Dispute resolution clauses, for the purposes of this paper, refer to clauses in the contract between the parties that specify the location and means of dispute resolution. That location may be a forum in China or outside of China, and the means may be either litigation or arbitration. U.S. parties must draft their Dispute Resolution Clauses with an eye towards two main factors: legal validity of the clause under Chinese law, and the practicality of enforcing the clause and/or any judgments or awards that may ensue. This paper will discuss the options available to U.S. parties with regard to both concerns, as well as looking to forecast likely future trends.