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《Rules Issued by the Supreme People's Court of the PRC Concerning Several Issues of Law Application in Civil and Commercial Contract Disputes Cases with Foreign Interests》Taken Effect on 8 August 2007

2007-09-10

(hereinafter referred as ), issued by the Supreme People’s Court on 23 July 2007, took effect on 8 August 2007.
 
  

Accompanying with the increasing external trade of the PRC, civil & commercial disputes with foreign interests raised accordingly. Whereas the issue of law application in civil & commercial contract with foreign interests always is the difficulty and emphases of the civil & commercial cases with foreign elements. It is too academic and practice situation are diversified. Therefore, the provided explicit proposals for those issues, which were normally encountered in legal practice of civil or commercial trials with foreign interests and still unsolved. The concrete content is as follows:
 
 

1. Ascertain the parties’ method of selecting the law of application. The Article No.3 of the regulated that if the parties select or alter the law of application, which is supposed to resolve the contract disputes, they shall act expressly.
 
 

2. Regulate the time the parties could select or alter the law of application. According to the , the parties selecting or altering the law of application shall not be later than the time that the court debate of the first instance is ended. Meanwhile, it is indicated that in the circumstance that the parties did not select the law of application, which is supposed to solve the contract disputes, but both quoted the law of the same country or district and did not submit dissent concerning the law of application, it should be deemed that the parties have already select the law of application.
 
 

3. Regulate the exercise of the most closely connected principal. The emphasized that when the court ascertain the law of application pursuant to the most closely connected principal, it shall select the law of the country or district, which have the closest connection with the contract, as the governing law by considering the special nature of the contract, the obligation performed by which party could mostly reflecting the nature of the contract and other elements. The also listed out the most closely connection law of 17 type contracts.
 
 

4. Limitation of the foreign law’s application. The , based upon the China>, added several kinds of contractual disputes which should decline the application of foreign law and directly apply the Chinese law. Such added contractual disputes include the agreement on share transfer of three types of foreign-funded enterprises, the agreement on contracted management of three types of foreign-funded enterprises by the foreign entity, the agreement on the foreign entity’s contribution to additional share of Chinese-funded enterprise, and the agreement on purchasing the stock rights or properties of Chinese-funded enterprise by foreign entity.
 
 

The have been put in force for one month only. What the implementing situation is and whether it occurring new issues or disputes, we would continuously paying attention.
 

  

(By GL & CO. Law Firm on 10 September 2007)
 

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