PRC litigation shows promising signs

The importance of carefully-crafted contracts when conducting business with Chinese companies cannot be stressed enough. Foreign parties are usually advised to opt for offshore arbitration while negotiating the dispute resolution forum and governing law. And while this is often the safest choice, PRC litigation is better suited to certain cases, especially as the Chinese legal system continues to develop and modernize.

PRC laws on dispute resolution

Under the PRC Civil Procedure Law (CPL) and PRC Arbitration Law, parties to transactions are generally free to select a preferred dispute resolution mechanism (such as litigation or arbitration) and governing law in their contract. They may agree to submit their disputes to a Chinese court as long as it has an actual connection to the deal (e.g., the court is located where the defendant is domiciled or where the contract was signed or performed). Parties may therefore choose a preferable court in a more developed region with an actual connection, such as Beijing, Shanghai, Guangdong, Zhejiang and Jiangsu.