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Rules of the Supreme People's Court on Related Issues concerning the Application of Law in Hearing Foreign-Related Contractual Dispute Cases Related to Civil and Commercial Matters
Promulgation Date:2007-07-23  Promulgation Number:  Promulgation Department:The Supreme People's Court
Announcement of the Supreme People's Court The Rules of the Supreme People's Court on Related Issues concerning the Application of Law in Hearing Foreign-Related Contractual Dispute Cases Related to Civil and Commercial Matters, which were adopted at the 1,429th Meeting of the Judicial Committee of the Supreme People's Court on June 11, 2007, are hereby promulgated, and shall come into force as of August 8, 2007. The Supreme People's Court July 23, 2007 Rules of the Supreme People's Court on Related Issues concerning the Application of Law in Hearing Foreign-Related Contractual Dispute Cases Related to Civil and Commercial Matters Fa Shi [2007] No.14 (Adopted at the 1,429th Meeting of the Judicial Committee of the Supreme People's Court on June 11, 2007) For the purpose of correctly hearing foreign-related contractual dispute cases related to civil and commercial matters and accurately applying the law, the present Rules have been formulated according to the General Principles of the Civil Law of the People's Republic of China, the Contract Law of the People's Republic of China and other related provisions. Article 1 The law applicable to foreign-related contracts related to civil and commercial matters refers to the substantive law in related countries or regions, excluding the conflict of law and procedural law. Article 2 The contractual disputes as mentioned in the present Rules include the disputes over the conclusion, validity, performance, alteration, transfer and termination of a contract as well as the liability for breach of contract, etc. Article 3 To choose a law or alter a choice of law applicable to contractual disputes shall be done by the parties in an explicit manner. Article 4 The people's court shall permit the parties concerned to choose a law or alter a choice of law applicable to contractual disputes by agreement prior to the end of court debate of the first instance. In case the parties concerned fail to choose a law applicable to contractual disputes but both invoke the law of a same country or region and neither has raised any objection to the choice of law, the parties concerned shall be deemed as having made the choice of a law applicable to contractual disputes. Article 5 In case the parties concerned fail to choose a law applicable to contractual disputes, the law of the country or region with the closest connection thereto shall be the applicable law. When determining the law applicable to contractual disputes in accordance with the principle of using that with the closest connection, the people's court shall determine the law of the country or region having the closest connection with the contract as the applicable law of a contract in light of the particularities of the contract and that the performance of contractual obligations by one party concerned can best embody the essential characteristic of the contract, etc.. (1) As for contracts of sale, the applicable law shall be the law of domicile of the seller at the time of contract conclusion. In case a contract is concluded after negotiation at the domicile of the buyer, or the contract clearly prescribes that the seller shall fulfill the consignment obligation at the domicile of the buyer, the law of domicile of the buyer shall be the applicable law. (2) As for contracts on processing with supplied materials, assembling with supplied parts and other processing work, the law of domicile of the processor shall be the applicable law. (3) As for contracts on supplying plant equipments, the law of the place of installation shall be the applicable law. (4) As for contracts on the sale, lease or mortgage of real estate, the law of the place of the real estate shall be the applicable law. (5) As for contracts on the lease of movables, the law of domicile of the lessor shall be the applicable law. (6) As for contracts on pledge of movables, the law of domicile of the pledgee shall be the applicable law. (7) As for contracts on borrowing, the law of domicile of the lender shall be the applicable law. (8) As for insurance contracts, the law of domicile of the insurer shall be the applicable law. (9) As for financial leasing contracts, the law of domicile of the lessee shall be the applicable law. (10) As for contracts on construction projects, the law of the place of construction project shall be the applicable law. (11) As for warehousing or safekeeping contracts, the law of domicile of the warehouseman or keeper shall be the applicable law. (12) As for contracts on guaranty, the law of domicile of the guarantor shall be the applicable law. (13) As for entrustment contracts, the law of domicile of the mandatary shall be the applicable law. (14) As for contracts on issuance, sale and transfer of bonds, the law of the place of issuance of bonds, the law of the place of sale of bonds and the law of the place of transfer of bonds shall respectively be the applicable law. (15) As for contracts on auction, the law of the place where the auction is held shall be the applicable law. (16) As for contracts on brokerage, the law of domicile of the broker shall be the applicable law. (17) As for contracts on intermediation, the law of domicile of the intermediary shall be the applicable law. In case any contract above is of obvious and closest connection to another country or region, the law of the country or region shall prevail. Article 6 Any elusion of any compulsory provision of the law or administrative regulation of the People's Republic of China by a party shall give no effect to the application of a foreign law, and the contractual dispute shall be subject to the law of the People's Republic of China. Article 7 In case the application of a foreign law violates any public interests of the People's Republic of China, the foreign law may not apply, and the law of the People's Republic of China shall apply. Article 8 The performance of any of the following contracts within the territory of the People's Republic of China shall be subject to the law of the People's Republic of China: (1) Contract on a Chinese-foreign equity joint ventures; (2) Contract on a Chinese-foreign contractual joint ventures; (3) Contract on Chinese-foreign cooperation in the exploration or exploitation of natural resources; (4) Contract on the transfer of shares in a Chinese-foreign equity joint venture, Chinese-foreign contractual joint venture or wholly foreign-funded enterprise; (5) Contract on the operation by a foreign natural person, foreign legal person or any other foreign organization of a Chinese-foreign equity joint venture or a Chinese-foreign contractual joint venture established within the territory of the People's Republic of China; (6) Contract on the purchase by a foreign natural person, foreign legal person or any other foreign organization of share equity held by a shareholder in a non-foreign-funded enterprise within the territory of the People's Republic of China; (7) Contract on the subscription by a foreign natural person, foreign legal person or any other foreign organization to the increased registered capital of a non-foreign-funded limited liability or company limited by shares within the territory of the People's Republic of China; (8) Contract on the purchase by a foreign natural person, foreign legal person or any other foreign organization of assets of a non-foreign-funded enterprise within the territory of the People's Republic of China; and (9) Other contracts subject to the law of the People's Republic of China as prescribed by a law or administrative regulation of the People's Republic of China. Article 9 In case the parties choosing a foreign law applicable to related contractual disputes or altering the choice of law applicable to contractual disputes to a foreign law, it shall provide or prove the related content of the foreign law. When determining a law applicable to contractual disputes in accordance with the principle of using that with the closest connection, the people's court may ascertain the foreign law upon its authority, or require the parties concerned to provide or prove the content of the foreign law. In case neither the parties concerned nor the people's court can ascertain the content of the foreign law through proper channels, the people's court may apply the law of the People's Republic of China. Article 10 In case the parties concerned raise no objection to the ascertained content of a foreign law after cross-questioning, the people's court shall affirm the foreign law. In case the parties concerned raise any objection, the people's court shall conduct examination and determination. Article 11 The present Rules shall apply by analogy to the law applicable to the contracts related to civil and commercial matters involving the Hong Kong Special Administrative Region or the Macao Special Administrative Region. Article 12 In the case of any discrepancy between the rules issued previously by this Court and the present Rules, the present Rules shall prevail.
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