New Rules on the Choice of Law for Foreign-related Contracts

September 01, 2007 | BY

clpstaff

Parties to foreign-related contracts have been free to choose which country's law govern their contracts - except where PRC law is mandatory. The new Provisions provide better guidance on deciding the governing law of the contract.

By John Shi and Richard Feller of Mallesons Stephen Jaques

The Supreme People's Court (SPC) recently issued new Provisions which deal with the applicable law in foreign-related commercial or civil contracts.1 These new Provisions also apply to civil or commercial contracts involving parties from Hong Kong and Macao.

Prior to the new Provisions, contracting parties had to rely on vague articles contained in the Civil Law and the Contract Law.2 These articles simply stipulate that parties to a foreign-related contract are free to choose the governing law – save for those contracts where PRC3 law is mandatory. Further, the articles provide that where the parties failed to elect a governing law, the law of the jurisdiction which has the closest connection with the contract applies.

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