\\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 1 23-SEP-13 8:20 Enforceability of Ad Hoc Arbitration Agreements in China: China’s Incomplete Ad Hoc Arbitration System Tietie Zhang† Today arbitration is the dominant method for resolving international commercial disputes. The international commercial arbitration system based on the New York Convention effectively facilitates resolution of cross-border disputes and contributes to the world’s continuing economic development. Ad hoc arbitration has many advantages over institutional arbitration that make it a preferred way to resolve commercial disputes in many contexts. China, an emerging economic superpower, is also an active player in the field of arbitration. The People’s Republic of China Arbitra- tion Law (Law), however, requires that parties appoint an arbitration insti- tution in their arbitration agreement. Otherwise, their ad hoc arbitration agreement is invalid. Interestingly, this strict requirement does not mean Chinese courts will never enforce an ad hoc arbitration agreement. Given arbitration’s “international” nature, parties can freely agree to arbitrate outside China where ad hoc arbitration is accepted and/or choose a differ- ent law to govern their arbitration agreement’s validity when arbitrating inside China. The Supreme People’s Court of China respects such contrac- tual freedom and adopts a choice-of-law rule that enables Chinese courts to enforce many ad hoc arbitration agreements. A comparative study of arbi- tration’s history in China as well as China’s social and economic structures at the time of the Law’s promulgation reveals the true reasons behind the Law’s hostility towards ad hoc arbitration. As China participates more fully in globalization, this bizarre requirement will need to change. A sys- tematic analysis shows this change would require a whole-scale rewriting of the Law and revision to many other relevant Chinese laws. Introduction ..................................................... 363 R I. Rejection and Enforcement of Ad Hoc Arbitration Agreements in China ..................................... 366 R A. Rejection of Ad Hoc Arbitration Agreements Under Chinese Law.......................................... 367 R † The author would like to extend his heartfelt gratitude to his supervisor, Professor John J. Barcelo´ III, William Nelson Cromwell Professor of International and Comparative Law at Cornell Law School, for his invaluable guidance and support. 46 CORNELL INT’L L.J. 361 (2013) \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 2 23-SEP-13 8:20 362 Cornell International Law Journal Vol.46 1. The PRC Arbitration Law’s Requirement that Arbitration Be Institutional ......................... 367 R 2. Consequences of the PRC Arbitration Law’s Rejection of Ad Hoc Arbitration Agreements................... 367 R B. Enforcement of Ad Hoc Arbitration Agreements in China Under Non-Chinese Law........................ 368 R 1. Choice-of-Law Rules in International Commercial Arbitration Practice in General ..................... 369 R 2. Choice-of-Law Rule Adopted By the SPC When Determining an Arbitration Agreement’s Validity..... 370 R 3. The SPC’s Historically Consistent Attitude Towards Enforcement of Ad Hoc Arbitration Agreements ...... 371 R II. Analysis and Critique of the SPC’s Approaches to the PRC Arbitration Law’s Requirement that Arbitration Be Institutional.............................................. 373 R A. Analysis of the SPC’s Choice-of-Law Rule .............. 373 R 1. A Generally Validity-Preferring and Pro-Arbitration Rule .............................................. 373 R 2. Complicated Issues Potentially Arising From the Choice-of-Law Rule ................................ 375 R a. Choosing a Non-Chinese Lex Arbitri Instead of Specifying a Non-Chinese Law to Govern the Validity of the Arbitration Agreement .......... 375 R b. Specifying a Non-Chinese Law to Govern the Validity of the Arbitration Agreement While Placing the Seat of Arbitration in China........ 377 R B. The SPC’s Overly Strict Interpretation of the PRC Arbitration Law’s Requirement that Arbitration be Institutional .......................................... 377 R 1. When Parties Choose Institutional Rules Instead of Institutions Themselves in Their Arbitration Agreement......................................... 377 R 2. When Parties Choose Two Institutions in Their Arbitration Agreement ............................. 381 R III. Reasons Behind Chinese Law’s Apparent Hostility Towards Ad Hoc Arbitration.............................. 383 R A. Reasons Given By the Chinese Legislature ............. 383 R B. A Historical Analysis .................................. 384 R 1. The History of Arbitration in the Western World ..... 384 R 2. The History of Arbitration in China................. 385 R 3. What the Comparison Tells Us...................... 389 R 4. Particular Social Background to the Current PRC Arbitration Law at Its Time of Enactment ........... 390 R IV. Reflections on and Suggestions for Chinese Arbitration Law...................................................... 392 R \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 3 23-SEP-13 8:20 2013 China’s Incomplete Ad Hoc Arbitration System 363 A. Chinese Law Should Not Use the Distinction Between Ad Hoc and Institutional Arbitration as a Standard to Determine Arbitration Agreements’ Validity ............ 392 R 1. The Distinction Between Ad Hoc and Institutional Arbitration May Be Vague in Some Cases ............ 392 R 2. This Vagueness Will Likely Lead to Uncertain Results Under Chinese Law................................ 393 R B. Historical Reasons for the Preclusion of Ad Hoc Arbitration in China No Longer Exist.................. 394 R C. China Needs Ad Hoc Arbitration ...................... 395 R D. How Should China Construct a Complete Ad Hoc Arbitration System? ................................... 397 R Conclusion ...................................................... 398 R Introduction Instead of being merely an alternative dispute resolution mechanism, today arbitration has become the dominant method to resolve international commercial disputes.1 The international commercial arbitration system based on the United Nations Convention on the Recognition and Enforce- ment of Foreign Arbitral Awards (New York Convention) has evolved into a highly efficient and effective legal framework that greatly facilitates resolu- tion of cross-border disputes and, therefore, contributes to the world’s con- tinuing economic development.2 There are multiple ways to categorize commercial arbitration. Depend- ing on whether or not the arbitration proceeding is administered by an established organization, arbitration could be classified as either institu- tional, where “the proceedings are administered by an organization, usually in accordance with its own rules of arbitration,”3 or ad hoc, meaning that “there is no formal administration by any established arbitral agency; instead the parties have opted to create their own procedures for a given arbitration.”4 1. See, e.g., CHRISTIAN BU¨HRING-UHLE, LARS KIRCHHOFF & GABRIELE SCHERER, ARBITRA- TIONAND MEDIATIONIN INTERNATIONAL BUSINESS 27 (2d ed. 2006); Gerald Aksen, Arbitra- tion and Other Means of Dispute Settlement, in INTERNATIONAL JOINT VENTURES: A PRACTICAL APPROACHTO WORKINGWITH FOREIGN INVESTORSINTHE U.S. AND ABROAD 287, 287–88 (David N. Goldsweig & Roger H. Cummings eds., 1990) [hereinafter Aksen, Arbitration]. 2. SeeBU¨HRING-UHLE, KIRCHHOFF, & SCHERER, supra note 1, at 57–60; Kofi Annan, Sec’y Gen. of the U.N., Opening Address Commemorating the Successful Conclusion of the 1958 United Nations Conference on International Commercial Arbitration, in ENFORCING ARBITRATION AWARDS UNDER THE NEW YORK CONVENTION: EXPERIENCE AND PROSPECTS, at 1–3, U.N. Sales No. E.99.V.2 (1999), available at http://www.uncitral.org/ pdf/english/texts/arbitration/NY-conv/NYCDay-e.pdf; Gloria Miccoli, International Commercial Arbitration, AM. SOC’Y INT’L L., http://www.asil.org/erg/?page=arb#id.8000y f4mkmkr (last updated Jan. 20, 2013). 3. Gerald Aksen, Ad Hoc Versus Institutional Arbitration, ICC INT’L CT. ARB. BULL., June 1991, at 8, 8 [hereinafter Aksen, Ad Hoc]. 4. Id. \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 4 23-SEP-13 8:20 364 Cornell International Law Journal Vol.46 Ad hoc arbitration undoubtedly preceded institutional arbitration. Long before the emergence of permanent organizations providing profes- sional services that facilitate arbitration proceedings, ad hoc arbitration had been in existence for hundreds or even thousands of years.5 However, institutional arbitration remains popular among business entities.6 Due to the intrinsically decentralized nature of arbitration, as well as parties’ con- cerns about confidentiality, it is hard to accurately compare the numbers of cases resolved by ad hoc or institutional arbitration respectively. In gen- eral, however, these two forms of arbitration today operate side by side in most of the world. Although sharing most of the common characteristics and benefits of arbitration in general, each form has certain unique advantages. Generally speaking, ad hoc arbitration is more flexible, more efficient, and usually more cost-effective.7 More importantly, the promulgation of the UNCITRAL Arbitration Rules in 1976 greatly facilitated ad hoc arbitra- tion in practice.8 Instead of having to draft detailed rules either in advance or after a dispute arises, parties can now easily incorporate this set of com- prehensive and well-prepared rules by reference in their arbitration agree- ment.9 By doing so, parties gain the benefit of ad hoc arbitration, while at the same time avoiding risks caused by poor drafting or a failure to foresee possible pitfalls. Institutional arbitration, on the other hand, also has several advan- tages. Arbitration institutions provide professional services in connection with the arbitration and usually have a lot of experience.10 The institu- tions’ arbitration rules are usually well drafted and are constantly amended to meet changes in practice.11 Parties can also easily adopt institutions’ standard arbitration clauses as their arbitration agreement, and courts will typically defer to such clauses. In cases where one party is absent, courts are usually more comfortable with enforcing a default institutional arbitra- tion award, rather than an ad hoc award, because the institution, as a neu- tral third party, usually supervises the process and has specific rules that better preserve due process.12 5. See discussion infra Part III.B. 6. In 2009, CIETAC decided 1,329 cases, and the ICC approved 415 awards. 2009 Statistical Report, 21 ICC INT’L CT. ARB. BULL., 5, 15 (2010); Zhang Wei, Maozhong Shouan Shuliang Chixu Zengzhang ( ) [Number of Cases Accepted by CIETAC Continues to Increase]; FAZHI RIBAO ( ) [LEGAL DAILY], Feb. 5, 2010 (China). 7. For more on the advantages of ad hoc arbitration, see Asken, Ad Hoc, supra note 3, at 8. 8. The most recent version of the UNCITRAL Arbitration Rules was revised in 2010. UNCITRAL Arbitration Rules as Revised in 2010, G.A. Res. 65/22, U.N. Doc. A/ 65/465 (Dec. 6, 2010), available at http://www.uncitral.org/pdf/english/texts/arbitra- tion/arb-rules-revised/arb-rules-revised-2010-e.pdf. 9. See Asken, Ad Hoc, supra note 3, at 9. 10. See id. at 10–11; see also OFFICEOFTHE CHIEF COUNSELFOR INT’L COMMERCE, U.S. DEP’T OF COMMERCE, INTERNATIONAL ARBITRATION §I.E (last revised Mar., 2005), http:// www.osec.doc.gov/ogc/occic/arb-98.html. 11. Asken, Ad Hoc, supra note 3, at 9. 12. Id. at 12. \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 5 23-SEP-13 8:20 2013 China’s Incomplete Ad Hoc Arbitration System 365 The People’s Republic of China (PRC), as an emerging economic superpower, is an active player in the field of international commercial arbitration. Yet, despite ad hoc arbitration’s many advantages over institu- tional arbitration, which makes it a preferred way for parties to resolve their disputes in many circumstances, the Arbitration Law of the People’s Republic of China (PRC Arbitration Law) requires that parties appoint an arbitration institution in their arbitration agreement.13 Accordingly, ad hoc arbitration agreements are invalid per se under the PRC Arbitration Law. This requirement clearly has profound legal significance in practice, since arbitration’s consensual nature presupposes that the arbitration agreement is its foundation. A valid arbitration agreement is a necessary condition for a successful arbitration, as the agreement grants jurisdiction to the appointed arbitrator(s) and at the same time divests jurisdiction from the courts. The validity of an arbitration agreement will also affect the status of the ensuing arbitration award. If an award is based on an invalid arbitration agreement, the award may be set aside by the court at the seat of arbitration, or refused recognition and enforcement under the New York Convention by courts in other countries.14 As a result, for the purposes of successfully obtaining and enforcing an arbitration award, the importance of the arbitration agreement cannot be overstated. Interestingly, the strict requirement that arbitration must be institu- tional under the PRC Arbitration Law does not mean Chinese courts will not enforce an ad hoc arbitration agreement. In practice, parties are free to place the seat of their arbitration outside China where ad hoc arbitration is accepted and/or to choose a law other than the PRC Arbitration Law to govern the validity of their arbitration agreement when arbitrating inside China.15 Such contractual freedom is respected by Chinese courts.16 Con- sequently, many ad hoc arbitration agreements have indeed been enforced 13. Zhongcai Fa ( ) [Arbitration Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 31, 1994, effective Sept. 1, 1995), art. 16 (China) (English translation provided by the National People’s Congress, available at http://www.npc.gov. cn/englishnpc/Law/2007-12/12/content_1383756.htm). 14. See United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards art. V(1)(a), June 10, 1958, 330 U.N.T.S. 38 [hereinafter New York Con- vention]; Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law, G.A. Res. 61/33, U.N. Doc. A/61/453 (revising G.A. Res. 40/72), art. 34(2)(a)(i) (Dec. 4, 2006), available at http://www.uncitral.org/ pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf; Zhongcai Fa ( ) [Arbi- tration Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 31, 1994, effective Sept. 1, 1995), art. 58(1) (China) (English translation provided by the National People’s Congress, available at http://www.npc.gov.cn/englishnpc/Law/2007-12/12/ content_1383756.htm). 15. See infra Part I.B.2. 16. See, e.g., Zuigao Renmin Fayuan Guanyu Shiyong “Zhonghua Renmin Gongheguo Zhongcai Fa” Ruogan Wenti de Jieshi ( ) [Interpretation on Certain Issues Concerning the Application of the “Arbitration Law of the People’s Republic of China”] (promulgated by the Sup. People’s Ct., Aug. 23, 2006, effective Sept. 8, 2006), art. 16 (China). \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 6 23-SEP-13 8:20 366 Cornell International Law Journal Vol.46 by Chinese courts.17 It is nonetheless true that the rejection of ad hoc arbitration agreements under the PRC Arbitration Law has caused a great many complicated issues in arbitration practice in China. Part I of this Article will discuss in more detail when a Chinese court will, and when it will not, enforce an ad hoc arbitration agreement. Part II will analyze Chinese court practice in enforcing or rejecting ad hoc arbitra- tion agreements and put forward a critique of that practice. Part III will, starting from a historical perspective, explore the reasons behind China’s hostility towards ad hoc arbitration. Part IV will argue that China should incorporate a complete ad hoc arbitration system into its arbitration law and will suggest that making this change in Chinese law will not be easy because it calls for a whole-scale rewriting of the current PRC Arbitration Law, as well as for revisions of a broad range of related Chinese laws. The Article ends with a brief conclusion. I. Rejection and Enforcement of Ad Hoc Arbitration Agreements in China The distinction between ad hoc and institutional arbitration has little legal significance in most jurisdictions in the world. Whether an arbitra- tion agreement calls for submission of the dispute to an ad hoc tribunal or to a tribunal working with an arbitration institution usually makes no dif- ference as long as the agreement clearly demonstrates the parties’ intent to arbitrate. Awards rendered by ad hoc tribunals and by tribunals working with arbitration institutions are equally binding upon the parties and equally enforceable by courts. In any case, ad hoc arbitration awards cer- tainly fall under, and are supported by, Article I(2) of the New York Con- vention, which reads, “the term ‘arbitral awards’ shall include . . . awards made by arbitrators appointed for each case . . . .”18 In China, however, this distinction does make a difference. To be valid under the PRC Arbitration Law, an arbitration agreement must specify an arbitration institution to administer the arbitration.19 Accordingly, ad hoc arbitration agreements are invalid under PRC law. However, not all arbitra- tion agreements enforced in China are subject to PRC law. The Supreme People’s Court of China (SPC) has adopted a choice-of-law rule that allows ad hoc arbitration agreements to be enforced in China in a great many 17. See, e.g., Zuigao Renmin Fayuan Guanyu Fujian Sheng Shengchan Ziliao Zong Gongsi yu Jinge Hangyun Youxian Gongsi Guoji Haiyun Jiufen Yi’an Zhong Tidan Zhongcai Tiaokuan Xiaoli Wenti de Fuhan ( ) [Reply Letter Concerning the Validity of the Bill of Lading’s Arbitration Clause in the International Shipping Dispute Case Between Fujian Province Production Material Corporation and Jinge Shipping Co., Ltd.] (promulgated by the Sup. People’s Ct., Oct. 20, 1995, effective Oct. 20, 1995) (China). 18. New York Convention, supra note 14, art. I. 19. Zhongcai Fa ( ) [Arbitration Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 31, 1994, effective Sept. 1, 1995), art. 16 (China) (English translation provided by the National People’s Congress, available at http://www.npc. gov.cn/englishnpc/Law/2007-12/12/content_1383756.htm). \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 7 23-SEP-13 8:20 2013 China’s Incomplete Ad Hoc Arbitration System 367 instances.20 To achieve this result, however, the parties must draft their agreement carefully, particularly the provisions concerning the arbitration seat or the law applicable to their arbitration agreement, as will be dis- cussed below. A. Rejection of Ad Hoc Arbitration Agreements Under Chinese Law 1. The PRC Arbitration Law’s Requirement that Arbitration Be Institutional Relevant parts of Article 16 and Article 18 of the PRC Arbitration Law read as follows: Article 16 . . . . An arbitration agreement shall contain the following particulars: . . . . (3) a designated arbitration commission.21 . . . . Article 18 If an arbitration agreement contains no or unclear provisions concern- ing . . . the arbitration commission, the parties may reach a supplementary agreement. If no such supplementary agreement can be reached, the arbitra- tion agreement shall be null and void.22 As these provisions make clear, ad hoc arbitration agreements are invalid under the PRC Arbitration Law. Moreover, the SPC strictly inter- prets the institutional arbitration requirement. If, in an arbitration agree- ment, the parties only choose an institution’s rules rather than the institution itself, the agreement may be held invalid.23 Similarly, if the par- ties agree on two possible arbitration institutions in an arbitration agree- ment, that agreement is invalid unless they reach a valid supplementary agreement choosing one of the two institutions and eliminating the other.24 2. Consequences of the PRC Arbitration Law’s Rejection of Ad Hoc Arbitration Agreements As mentioned before, the PRC Arbitration Law’s rejection of ad hoc arbitration agreements has grave consequences. Not only will no ad hoc arbitration agreement be enforced under the PRC Arbitration Law, but 20. See infra Part I.B.2. 21. Zhongcai Fa ( ) [Arbitration Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 31, 1994, effective Sept. 1, 1995), art. 16 (China) (English translation provided by the National People’s Congress, available at http://www.npc.gov. cn/englishnpc/Law/2007-12/12/content_1383756.htm) (emphasis added). 22. Id. art. 18 (emphasis added). Here, however, “invalid” may be a better transla- tion than “null and void.” 23. See infra Part II.B for a more detailed discussion. 24. Id. \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 8 23-SEP-13 8:20 368 Cornell International Law Journal Vol.46 awards based upon ad hoc arbitration agreements may also be annulled under the PRC Arbitration Law for that reason alone. This, however, is not a conclusion without qualifications. Because China is a contracting state to the New York Convention, under which ad hoc arbitration is undoubtedly supported, Chinese courts are obliged to enforce ad hoc awards made outside China.25 Of course, if the arbitration seat is in China, meaning the New York Convention does not apply, the prospect of having an ad hoc arbitration award enforced by Chinese courts, although not entirely absent, is slight. Moreover, because international commercial arbitration is a highly sophisticated system under which all contracting states to the New York Convention may potentially be involved and no single country can control the whole process, this extremely rare preclusion of ad hoc arbitration under the PRC Arbitration Law may also cause complicated consequences on the international level.26 For example, if the parties place the seat in China and still choose ad hoc arbitration, will other contracting states to the New York Convention enforce the award?27 With respect to enforcement of ad hoc arbitration agreements by Chi- nese courts, the picture is still rather complicated. When concluding an arbitration agreement in an international commercial transaction, parties are, of course, free to agree on the seat of arbitration as well as the law that will govern the validity of the arbitration agreement. The PRC Arbitration Law does not, therefore, apply to all the arbitration agreements presented before Chinese courts or entered into by Chinese parties. Therefore, it is important to know in what situations a Chinese court will apply the PRC Arbitration Law to strike down an ad hoc arbitration agreement. B. Enforcement of Ad Hoc Arbitration Agreements in China Under Non-Chinese Law Although under the PRC Arbitration Law an ad hoc arbitration agree- ment is invalid, in practice many ad hoc arbitration agreements are never- theless enforced by Chinese courts. This outcome is achieved via a choice- of-law rule adopted by the SPC.28 25. See New York Convention, supra note 14, art. I(2); Tietie Zhang, Enforcing Ad Hoc Arbitration Awards Under Chinese Law (unpublished manuscript) (on file with author). 26. As far as the author has been able to determine, China is one of the only coun- tries requiring institutional arbitration. 27. For a full analysis of the enforcement of ad hoc arbitration awards made in China, see Zhang, supra note 25. 28. See, e.g., Zuigao Renmin Fayuan Guanyu Shiyong “Zhonghua Renmin Gongheguo Zhongcai Fa” Ruogan Wenti de Jieshi ( ) [Interpretation on Certain Issues Concerning the Application of the “Arbitration Law of the People’s Republic of China”] (promulgated by the Sup. People’s Ct., Aug. 23, 2006, effective Sept. 8, 2006), art. 16 (China). \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 9 23-SEP-13 8:20 2013 China’s Incomplete Ad Hoc Arbitration System 369 1. Choice-of-Law Rules in International Commercial Arbitration Practice in General Choice-of-law issues play a very important role in international com- mercial arbitration. They are, however, also very complicated because there could be multiple applicable laws governing different legal issues within one arbitration case. Generally speaking, there are three fundamen- tal issues calling for decisions on what law applies: (i) what law governs the substance or merits of the dispute; (ii) what law governs the validity of the arbitration agreement (treated as a separate agreement even when occurring in a clause of a larger agreement); and (iii) what law governs the arbitration proceeding (this law is also commonly known as the “curial law” or the “lex arbitri”).29 As a result of such complication, it is necessary to carefully distinguish between different applicable laws within the same arbitration case, even if one law may be chosen by the parties or deter- mined by the facts in the case, to govern all of these issues. When it comes to determining the law governing the validity of an arbitration agreement, in international practice courts and arbitrators adopt different approaches. Some use traditional conflict-of-laws approaches, while others apply validity-preferring rules or adopt a special body of transnational rules on international arbitration agreements.30 Usually, unless parties explicitly agree on the law governing the validity of their arbitration agreement, which is a rather rare occasion, a tribunal or a national court will choose a law from several alternatives; theoretically, these could include the following: (i) the law governing the merits of the dispute; (ii) the law at the seat of arbitration; or (iii) the law at the forum where judicial enforcement of the arbitration agreement is sought.31 How- ever, “[t]here is little uniformity among either arbitral tribunals or national courts in choosing between these alternatives.”32 Tribunals and courts may choose the law governing the merits of the dispute by reasoning that the arbitration agreement, usually in the form of a clause within the larger contract (the container contract), should also be governed by the law that the parties chose to govern the whole contract.33 Tribunals and courts also frequently choose the law at the seat of arbitration as the governing law, because they consider the seat of arbitration as the strongest connecting 29. See, e.g., TIBOR VA´RADYETAL., INTERNATIONAL COMMERCIAL ARBITRATION: A TRANS- NATIONAL PERSPECTIVE 681–84 (5th ed. 2012); Luke Zadkovich, Determining the Law of an Arbitration Agreement, INT’L ARB. Q., (June 2012), http://www.hfw.com/International- Arbitration-Quarterly-June-2012. 30. SeeFOUCHARD, GAILLARD, GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION 218–40 (Emmanuel Gaillard & John Savage eds., 1999); JULIAN D. M. LEWETAL., COM- PARATIVE INTERNATIONAL COMMERCIAL ARBITRATION118–27 (2003). 31. SeeFOUCHARD, GAILLARD, GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION, supra note 30, at 218–40; LEWETAL., supra note 30, at 118–27. 32. GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION: COMMENTARYAND MATER- IALS 95 (2d ed. 2001). 33. SeeFOUCHARD, GAILLARD, GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION, supra note 30, at 222–23; LEWETAL., supra note 30, at 120. \\jciprod01\productn\C\CIN\46-2\CIN204.txt unknown Seq: 10 23-SEP-13 8:20 370 Cornell International Law Journal Vol.46 factor to this choice-of-law issue.34 Some courts may even validate the arbi- tration agreement by relying on forum law or by declaring that the exis- tence and validity of an arbitration agreement depends solely on the parties’ intent and not on any national law.35 2. Choice-of-Law Rule Adopted By the SPC When Determining an Arbitration Agreement’s Validity The choice-of-law rule adopted by the SPC to determine the law gov- erning the validity of an arbitration agreement is clear and straightforward. The SPC has explicitly stated, in both cases and judicial interpretations, that if the parties have specifically agreed on a governing law for the valid- ity of the arbitration agreement itself, as distinguished from the substantive law that the parties have chosen to govern the merits of the container con- tract,36 then that chosen law shall apply.37 If they fail to agree on any such law, but have agreed on the seat of arbitration, the law at the seat of arbitra- tion shall apply.38 If they fail to agree on both the governing law of the arbitration agreement’s validity and the seat of arbitration, then the forum law, i.e. Chinese law, shall apply.39 In 2010, Chinese legislators adopted the SPC’s choice-of-law rule in the Law on Application of Law in Foreign-related Civil Relations. The new statute allows parties to choose the law governing the validity of their arbi- 34. SeeFOUCHARD, GAILLARD, GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION, supra note 30, at 225–27; LEWETAL., supra note 30, at 122–25. 35. These two approaches are the ones that the Swiss and French courts adopted, respectively. See FOUCHARD, GAILLARD, GOLDMAN ON INTERNATIONAL COMMERCIAL ARBI- TRATION, supra note 30, at 228–30, 237–38; LEWETAL., supra note 30, at 122–23. 36. Di’erci Quanguo Shewai Shangshi Haishi Shenpan Gongzuo Huiyi Jiyao ( ) [Minutes of the Second National Working Conference on Adjudication of Foreign-related Commercial and Maritime Cases] (promulgated by the Sup. People’s Ct., Dec. 26, 2005, effective Dec. 26, 2005), art. 58 (China) (providing that the substantive law chosen by parties to govern the merits of the container contract cannot be used to determine the validity of the arbitration clause within the container contract). 37. Zuigao Renmin Fayuan Guanyu Shiyong “Zhonghua Renmin Gongheguo Zhong- cai Fa” Ruogan Wenti de Jieshi ( ) [Interpretation on Certain Issues Concerning the Application of the “Arbitration Law of the People’s Republic of China”] (promulgated by the Sup. People’s Ct., Aug. 23, 2006, effective Sept. 8, 2006), art. 16 (China); Di’erci Quanguo Shewai Shangshi Haishi Shenpan Gongzuo Huiyi Jiyao ( ) [Minutes of the Second National Working Conference on Adjudication of Foreign-related Commercial and Mari- time Cases]; art. 58; Zuigao Renmin Fayuan Guanyu Sichuan Huahong Guoji Jingji Jishu Touzi Youxian Gongsi Su Hanguo Hanhua Zhushihuishe Maimai Hetong Jiufen Yi’an Zhongcai Tiaokuan Xiaoli Wenti de Qingshi de Fuhan ( ) [Reply Letter to the Request for Instructions Concerning the Validity of the Arbitration Clause in the Sales Contract Dispute Case Between Sichuan Huahong International Economic and Technical Investment Co., Ltd and Hanwha Corporation (Korea)] (promulgated by the Sup. People’s Ct., Aug. 24, 2007, effective Aug. 24, 2007) (China). 38. See sources cited supra note 37. 39. See id.