Party autonomy in contractual conflict of laws : a Chinese perspective on the adjudication of the enforceability of choice of law clauses

Abstract

The principle of party autonomy in contractual choice of law gives parties to an international contract the freedom to choose the law to govern their contract. The principle is widely recognised in the law of most jurisdictions. It has been nearly 30years since party autonomy was first accepted in Chinese private international law. The first statute on China’s private international law entitled “Law on the Application of Laws to Foreign-related Civil Relationships of the People’s Republic of China”(2010 Statute) became effective on 1 April 2011, and the principle is positioned as one of its “General Provisions”. Before the 2010 Statute, the legal rules provided in legislation and judicial interpretations concerning the application of the party autonomy principle were abstract and open-ended. Several important issues relating to the adjudication of the enforceability of choice of law clauses were ambiguous. The ambiguities were left to be addressed by people’s courts in specific cases. But without a critical understanding of the party autonomy principle and appropriate interpretations of the relevant legal rules, judges did not exercise their discretionary power convincingly. As a result, the party autonomy principle was applied in a way that undermined the very purpose underlying the principle, that is, to protect the legitimate expectations of the parties and promote the predictability of outcomes in transnational commercial litigation. The 2010 Statute fails to address these ambiguities so that unresolved issues are bound to arise after the Statute became effective. This thesis addresses the question of how, when, and with what limitations, parties’ choice of law clauses in an international commercial contract should be enforced by people’s courts. It argues that in China, a choice of law clause in contract should only be interfered with or overridden by the lex fori when it is necessary to secure a broader public interest, the justification of which should be formed in legislation rather than in administrative rules. In the interests of the predictability and certainty of transnational litigation in China, it is important for the legislature to establish a comprehensive system of legal rules concerning the enforceability of choice of law clauses. It is far more important for the judiciary to interpret and apply those rules in specific cases consistently, respecting the intent of the parties. In doing so, people’s courts should consider the theories and principles of private international law, and exercise their discretionary power with caution, demonstrating that they have done so by providing logical and detailed reasoning in their judgments.