Laws of the People's Republic of China

Reply of the Supreme People's Court to the Request for Letters on Affirming the Force of an Arbitral Agreement

Min Si Ta Zi [2005] No. 52

Beijing Higher People's Court:

We have received your Request for Letters on the Case Involving the Application of Hangzhou Top Leader Textile Co., Ltd. for Invalidity of an Arbitral Agreement and hereby make a reply upon deliberation as follows:

We agree to your opinions on treatment. Article 17 of the Sales Contract as signed between Hangzhou Top Leader Textile Co., Ltd. and Forward Machinery Industrial Corporation prescribes: In the event of any dispute occuring in the operation of this Contract, both parties concerned shall settle it through a friendly negotiation. If any negotiation cannot succeed, the dispute shall be presented to Beijing Economy & Trade Arbitration Commission for final ruling." This is a case in relation to Hong Kong, wherein both parties concerned cannot decide the law applicable to the force of the arbitration clause or to specify a place of arbitration, so the lex fori, namely, the law of the Mainland China, shall be applied to determine the effectiveness of the arbitration clause. There is no such arbitration institution as demanded as condition by the parties concerned in Beijing. Although there are 3 arbitration institutions in Beijing, namely, Beijing Arbitration Commission, China International Economy & Trade Arbitration Commission as well as China Marine time Arbitration Commission, still the true intent of the parties concerned fail to speculated therefrom. In case one party concerned has applied with the people's court to for making sure the invalidity of the arbitration clause, it could be thought that both parities cannot conclude any supplement agreement concerning the arbitration institution. In accordance with the provisions of Articles 16 and 18 of the Arbitration Law of the People's Republic of China, the arbitration clause shall be regarded as invalid.

Request for Instructions of the Higher People's Court of Beijing Municipality on the Case Involving the Application of Hangzhou Top Leader Textile Co., Ltd. for Invalidity of an Arbitral Agreement

Jing Gao Fa Fa [2005] No. 309 November 23, 2005

The Supreme People's Court:

This Court has got from the No. 2 Intermediate People's Court of Beijing Municipality a Request for letters on the Invalidity of an Arbitral Agreement in an Arbitration Case No. M20050287 as Accepted by China International Economy & Trade Arbitration Commission. After check and examination, the demands of Hangzhou Top Leader Textile Co., Ltd. for making sure the Invalidity of the arbitration clause in a the contract it has concluded with Forward Machinery Industrial Corporation abide by the provisions of paragraph 2, Article 16 and Article 18 of the Arbitration Law of China and therefore the said arbitration clause shall be regarded as invalid. In accordance with the Circular of the Supreme People's Court on the Relevant Issues Concerning the Dealing with of Foreign-related Arbitration and Arbitration of a Foreign Country by the People's Court (Fa Fa [1995] No. 18), we hereby present the following questions to you:

1.

Basic Information of the Parties

Applicant (Respondent in the arbitration): Hangzhou Top Leader Textile Co., Ltd.

Respondent Respondent (Applicant in the arbitration): Forward Machinery Industrial Corporation (Hong Kong)

2.

Basic Case

On November 24, 2003, Hangzhou Top Leader Textile Co., Ltd. signed with Forward Machinery Industrial Corporation a sales contract No. ET-0321A, of which, Article 17 stipulates "In the event of any disagreement in the performance of this Contract, both parties concerned shall settle it through a friendly negotiation. It shall be submitted to Beijing International Economic and Trade Arbitration Commission for final ruling if any negotiation cannot solve.

3.

Opinions on Treatment

In accordance with the Provisions of paragraph 2, Article 16 and Article 18 of the Arbitration Law of the People's Republic of China, the "Beijing Economy & Trade Arbitration Commission" as selected by both parties concerned does not exist, and so the regulation in this aspect is not specified. Both relative parties cannot present any evidence proving that they have reached any agreement on the arbitration institution. Thus, this court accords with the treatment opinions which are worked out by the No. 2 Intermediate People's Court of Beijing Municipality that this arbitration clause shall be invalid.

Please reply to us whether or not the aforesaid opinions are right.