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I’m in Australia, you’re in China, but what is the governing law of our contract?

31.01.2008

Contracts have an absolutely fundamental role in commercial transactions, especially with overseas parties. Australian businessmen are now finding that the level of sophistication of their Chinese counterparts is increasing, and that they pay much closer attention to Western-style “terms and conditions”.

The governing law of the contract is one such condition.On 7 August 2007, China’s Supreme People’s Court issued a new judicial interpretation dealing with the governing law to be used in deciding contract disputes with a connection to China. The new rules, called the Provisions on Several Issues concerning Applicable Law in Resolving Foreign-related Civil or Commercial Contract Disputes of the Supreme People’s Court, are aimed at instructing Chinese courts how to go about deciding which law should be applied to contractual disputes between Chinese and foreign parties.

In this China Messenger we provide an overview of the new interpretive rules, which are of great importance to companies operating in the Australia-China business circle.