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As indicated at the beginning of this book, the international contracts or foreign contracts were governed by a separate contract law named “Foreign Economic Contract Law” before the Contract Law was adopted in 1999. At that time, making foreign contracts was viewed as the business activities that required special rules. For example, in the Foreign Economic Contract Law, Chinese citizen was not eligible to be a party to a foreign contract.3 The promulgation of the Contract Law unifies the laws that regulate all contracts regardless of foreign elements or nature. Thus, the international contracts and domestic contracts now are all under the same umbrella of the Contract Law
But the international contracts possess some distinctions that the domestic contracts do not have. A notable distinction is that in international contracts, both jurisdiction and choice of law are the issues that must be considered because of involvement of the foreign elements. To be accurate, for an international contract, the Chinese law may not apply to the disputes over the contract or the contract may be beyond the reach of the judicial power of the Chinese courts even though the contract is concluded or performed in China. In some contract cases, however, due to the concern about the state interests, the application of Chinese law is mandatory, which leaves no choice to the parties to select a foreign law as the governing law.
1. Choice of Law in International Contracts
The choice of law problem occurs wherever the parties have been subject to the authority of more than one sovereign state or nation. In the international business transactions, the most distinctive feature is that the transactions invoke the jurisdictions of multiple sovereigns, which makes the choice of law the matter mostly confronted by the lawyers engaged in international practice. Thus when drafting an international contract, the lawyer must think through the issues as to which law the contract will be subject, according to which rules the rights and obligations of the parties to the contract will be determined, and under which mechanism the disputes over the contact will be resolved. With a well-worded choice of law clause in the contract, the certainty and predictability about the transactions involved will be greatly enhanced.
3The Foreign Economic Contract Law applied to “economic contracts, concluded between enterprises or other economic organizations of the People’s Republic of China and foreign enterprises, other foreign economic organizations or individuals”. Clearly, the Chinese individuals were excluded from making a foreign contract. See Foreign Economic Contract Law (1985), art. 2. An English translation is available at http://www.qis.net/chinalaw/preclaw20.htm.
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To draft a contract for the transactions that involve China may cause more concerns to foreign businessmen and their lawyers. The unfamiliarity with Chinese legal system aside, a very common view is that China is a country where the rule of law is lack. Although the last two decades have witnessed the fastest growth of Chinese economy in world, which indeed provided incredible business opportunities for foreign investors and companies, the concerns about the legal climates of the country seem to still remain high. The factors that cause the concerns may be many, but the lack of respect to the authority of law and the want of independent judiciary are perhaps the most striking ones.
Generally, in an international contract, the lawyer would carefully draft a choice of law clause to the extent that the contract could be possibly protected by the law of the client’s own country, by the law that is similar to the client’s national law, or at least by the law of a neutral country. In several other cases, however, the lawyer may choose to leave the choice of law issue open due to the difficulty encountered in reaching an agreement on the governing or applicable law for the purpose not to jeopardize the deal that the client really wants, with a hope that the choice of law matter may be negotiated and resolved at a later time. As an alternative, the lawyer would also try to make the contract under the governance of the existing trade usages / customs or internationally unified rules.
1.1. Choice of Law by the Parties
As far as the choice of law in international contracts is concerned, a wellestablished rule is to allow the parties to choose governing law. This rule is originated from the long-standing principle of freedom of contract, and is termed as “party autonomy”. Classically, the freedom of contract was viewed as granting to the parties the power to regulate their own contracts. In other words, as Professor Kessler pointed out, as to the parties, the law of contracts is of their own making.4 Under the party autonomy doctrine, if the parties have expressly chosen the law to apply to their contract, the law so chosen shall be the governing law of the contract.5
But when the choice is not made expressly, the issue is dealt with differently from country to country. In England, for example, if no choice of law is expressly made by the parties, the governing law may be inferred from the terms of the contract by the court through “applying sound ideas of business,
4See Friedrich Kessler, Contracts of Adhesion – Some Thoughts about Freedom of Contract, 43 Colum. L. Rev. 629 (1943)
5 See Jeffrey Ferriell & Michael Navin, Understanding Contracts, 7–8 (LexisNexis, 2004).
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convenience, and sense to the language of the contract itself, with a view to discovering from it the true intention of the parties.”6 However, in many other countries, the parties’ intent in terms of applicable law may not be inferred.
In common with the general practice elsewhere in the world, China now also recognizes the doctrine of party autonomy in the choice of law in foreign contracts, and the doctrine has been incorporated into the Contract Law to give the parties the right to choose the law that they see fit to govern the contract. Under Article 126 of the Contract Law, the parties to a foreign contract may choose the law applicable to the settlement of their contractual disputes except otherwise provided by the law. The choice may be made either in the form of a contract clause, namely the choice of law clause, or in a separate agreement, called choice of law agreement. The implication of Article 126 is that the law intended by the parties as a result of fair bargain between them will govern their contract.
However, there are several questions that are not clearly addressed in Article 126. The first question is whether the choice of law must be made expressly by the parties or may be inferred from the provisions of the contract by looking into the “presumed intent” of the parties. In practice, the Supreme People’s Court of China takes restrictive stance by limiting the choice of law to the one expressly made by the parties. In its Answers to the Questions Concerning Application of Foreign Economic Contracts Law in 1987, the Supreme Court explicitly ruled out the implied choice of law by stating that the applicable law of contract by the parties must be the product of negotiation and must be made expressly.7 Although the Foreign Economic Contracts Law was repealed after the adoption of the Contract Law, the Supreme People’s Court’s opinion is regarded to remain effective.8
The Supreme People’s Court’s position against implied choice of law is also endorsed by the Chinese Society of Private International Law (CSPIL). In 2000, the CSPIL published a Model Law of the Private International Law of the People’s Republic of China (Model Law), aiming at providing a legislative reference to Chinese legislator for the future legislation. Article 100 of the Model Law, headlined as Party Autonomy, provides that a contract is to be governed by the law that is agreed upon and expressly chosen by the par-
6 See Morris, supra note 1 at p. 323.
7Supreme People’s Court, 1987 Answers to the Questions Concerning Application of Foreign Economic Contracts Law, art. 2, See Gazette of the Supreme People’s Court of the People’s Republic of China, Vol. 12 (1987) ( hereinafter referred to as Answers).
8See Li Guoguang, Explanation and Application of the Contract Law, 528 (Xinhua Press, 1999).
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ties except as otherwise provided by the law or by the treaties concluded by China or to which China is a member.9 It then could conclude that in China the choice of law by the parties may not be implied by inference to the intent of the parties.
The second question is when the parties may make a choice of law that governs contract or the time for the parties to make the choice. Again, Article 126 of the Contract Law contains no indication of it, but the Supreme People’s Court took a flexible approach allowing the parties to decide at anytime before the trial. According to the Supreme People’s Court, the parties may choose the governing law at the time of contract, after the occurrence of disputes, or even before the court hearing starts. In addition, under the Supreme People’s Court opinion, the contract disputes for which the parties may choose the governing law include those concerning conclusion of the contract, time for the conclusion, interpretation of the contract terms, performance of the contract, and modification, suspension, assignment, dissolution as well as termination of the contract.10 But the capacity of the parties to the contract is not within the reach of the choice by the parties, nor is the formality of the contract.11
The third question concerns whether the law of country chosen by the parties must have a relation to the contract, the parties or the controversy. The relation requirement is used in some countries as a means to impose limitation on the choice of law by the parties. In the U.S for example, under the UCC, the parties to a contract involving international transaction may choose “the law of this State or of another State or country”, “whether or not the transaction bears a relation to the State or country designated”.12 If, however, one of the parties to the transaction is a consumer, the choice of law by the parties will not be effective unless the transaction bears a reasonable relation to the State or country designated.13 In China, at least from the Supreme People’s
9See the Chinese Society of Private International Law, Model Law of the Private International Law of the People’s Republic of China, art. 100, published in 2000 by Law Publishing House (hereinafter referred to as Model Law); See also Han Depei, Private International Law, 198–199 (Beijing Higher Education Press and Beijing University Press, 2000).
10See id.
11As a general principle, the civil capacity, including the capacity to a contract, is determined by the “personal law”, that is the law of the country of which the party is a citizen or a resident. Also, because the Contract Law has special requirements for the contract formality (writing, oral or other forms), the compliance with the formality requirements is critical to the validity of the contract that is concluded in China and such requirements may not be bypassed by the parties’ choice of governing law.
12UCC Section 1-301 (c).
13UCC Section 1-301 (e).
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Court viewpoint, such a relation is not required. Therefore, the parties may by agreement choose as governing law the Chinese Law, or the law of other country or region that is in force.14 Under the Model Law, the parties may also choose international customs and international civil and commercial treaties.15
The forth question relates to whether the parties may choose different law to govern different parts of the contract. This is the issue concerning the splitting of the contract between different legal systems, which means that a contract may be governed by more than one law with reference to the different duties of performance or different matters of the contract. For example, the parties may agree that the validity of contract is to be governed by the law of country A, while the performance will be subject to the law of country B. In choice of law theory, this doctrine is called dépeçage or splitting. In China, there has been some voice advocating for the adoption of the dépeçage doctrine, and a notable representative of which is the Model Law. Under Article 100 of the Model Law, the parties may decide to apply the law they choose to the whole contract or only to one or several parts of the contract. But, the official recognition of this doctrine is not clear yet.16
The connotation of the law chosen by the parties also presents questionable issue. The issue is what the law so chosen actually means, or to be more specific, whether the chosen law is the whole law or specific law of a particular country. The issue is relevant because it may affect the meaningfulness of the choice of law by the parties. To illustrate, if the law chosen by the parties refers to the whole law of a country, it would include the conflict of law rules contained in the law of the country. In this situation, the law chosen by the parties may be displaced via a choice of law escape device so-called renvoi (also known as transmission or remission) with the law of the country that the parties have never designated. Realizing the potential problem of renvoi in the choice of law by parties, the people’s courts in China are directed by the Supreme People’s Court to regard the foreign law chosen by the parties as the substantive law of that country, excluding its conflict of law rules in order to avoid the renvoi problem.17
Indeed, the choice of law by the parties is premised on the notion of freedom of contract. But keep in mind that the contractual parties’ freedom on
14See Supreme People’s Court, Answers, supra note 7, art. 4.
15See Model Law, supra note 9, art. 110.
16The problem that the dépeçage may cause is the case where “the two chosen laws cannot logically be reconciled in their application to a particular situation. See Morris, supra note 1 at p. 329.
17Under Supreme People’s Court opinion, the foreign law the parties may choose is the substantive law of that country that is in effect. See Supreme People’s Court, Answers, supra note 7, art. 4.
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choice of law is limited and the exercise of the freedom to determine the applicable law is restrained in the situation where the freedom of choice confronts with the public policy, or a clash occurs between the freedom of choice and the mandatory rules. The public policy is the safeguard device by which the country in question, in order to protect the state or public interests, denies the application of a foreign law that is deemed to be in contradiction with the fundamental principles or policy of the nation. The mandatory rules are the rules that must be applied and should not be derogated through the contract. Like the public policy, the mandatory rules are also the common mechanism employed by a country to preserve its national interests. The distinct nature of the mandatory rules is the requirement for the application of the law of the forum country only.
In China, the choice of law by the parties is restricted in several aspects. First, the foreign law that the parties have chosen shall be excluded if its application would harm the social public interests of China. Pursuant to Article 150 of the Civil Code, the application of foreign laws or international customs shall not violate the public interests of China. Also under Article 142 of the Civil Code, in application of provisions of the international treaty, the provisions to which China has made reservation must be excluded. Second, the choice of law must be made by the parties with a mutual consent, and the choice of law clause that is concluded by fraud, duress, or any other means that violates the fairness principle will be null and void. And third, the choice of law shall not be made in violation of the rules that mandate the application of Chinese laws.
The exclusion of application of foreign law on the ground of public interests is known as public policy reservation and its purpose is to ensure that the application of foreign law will not offend the public policy of the forum state. According to the Supreme People’s Court of China, when the applicable is a foreign law, but the application of which would violate the basic principles of the Chinese law and the social public interests, the application of foreign law shall be rejected and the Chinese law shall be applied instead.18
In certain cases, it is required that Chinese law be applied. At present, the mandatory application of Chinese laws mainly deals with the contracts involving foreign investment enterprises. It is clearly provided in Article 126 of the Contract Law that the laws of China shall apply to the contracts for Chinese-foreign equity joint ventures, for Chinese – foreign cooperative joint venture, or for Chinese – foreign cooperative exploration and development of natural resources to be performed within the territory of China. In short, the law governing these JV contracts may only be the Chinese laws. Also, under the Detailed Rules (as amended 2001) for Implementation of the Law of China on Wholly Foreign-Owned Enterprises (WFOE), for the contracts between a
18 See id.
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WFOE and other company, enterprise, other economic organization, or individual, the Contract Law of China shall be exclusively applied.19
The basic notion underlying the exclusive application of Chinese laws to the JV contracts is that foreign investment has great impacts on the national economy and the retaining of application of the domestic laws will effectively put the foreign investment under the reasonable control in light of the nation’s interest. On the other hand, because of their business operation in China, the JVs all have the most substantial connection with China, which provides the reasonable ground for the exclusive application of Chinese laws. Moreover, a JV, once established in China, will become a Chinese legal person whom Chinese laws shall necessarily govern. It should be pointed out, however, that because of the Chinese legal person status of a JV, a contract between a JV and a foreigner (foreign company or individual) will be a foreign contract in which a foreign law may be chosen as the governing law.
The public policy reservation is also used to exclude application of foreign law when the parties try to evade the application of compulsory or prohibitive provisions of Chinese law. As noted, a contract that is foreign in China includes the one involving Hong Kong or Macao. Thus, for a contract concluded in the mainland and Hong Kong or vice versa, the choice of law would become an issue. Although within one country, due to the fact that the legal and social systems of the mainland differ from those of Hong Kong or Macao in many aspects, the application of the law of Hong Kong or Macao may be denied in the mainland because of public policy concerns. The case below would serve as a good example in this regard.
Bank of China (Hong Kong), Ltd. v.
The Bureau of Foreign Trade and Economic Cooperation of Qinghai Province
The High People’s Court of Qinghai (2003)
Qing Min San Zhong Zhi No. 3 20
Plaintiff (Appellant), Bank of China (Hong Kong), Ltd. has its major business office in the Bank of China Tower at No. 1 Garden Road, Hong Kong. Defendant (Respondent), the Bureau of Foreign Trade and Economic Cooperation of Qinghai Province, is located at No. 25 Xishulin Lane, Xining City, Qinghai Province.
19See Art. 181 of the Detailed Rules on Implementation of the Law of China on Wholly Foreign-owned Enterprises, amended on April 21, 2001. A similar provision is also contained in the newly amended Law of China-Foreign Equity Joint Ventures and its Implementation Rules.
20See the National Judicial College & People’s University Law School, An Overview of the Trial Cases of China (Volume of Commercial Cases 2004), 83 (People’s Court Press and People’s University Press, 2005).
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In July 1988, plaintiff and Haihu Trade Inc. Ltd. (Haihu Trade), a company incorporated in Hong Kong as a show-window of the province, established a credit relation under which plaintiff granted Haihu Trade a credit line of HK$17.5 million. On July 6 of the same year, Defendant issued an irrevocable Letter of Guaranty for Haihu Trade to guarantee the repayment of the loan. Haihu Trade defaulted in repayment of the loan. On February 23, 1998, defendant wrote to plaintiff confirming that the Letter of Guaranty remains effective and the confirming letter also indicated that the guaranteed loan amount should not exceed HK$19.5 million. On March 6, 1998, in its “Letter of Commitment to Loan Repayment” sent to plaintiff, Haihu Trade admitted that the total amount of the loan owed to plaintiff was HK$19,021,625.04 and Haihu Trade promised to repay the loan in 18 installments.
Haihu Trade repaid a portion of the loan and then defaulted again. In November 2000, plaintiff filed lawsuit against defendant at Xi Ning City Intermediate People’s Court, alleging that as of November 11, 200, defendant owed to plaintiff a total amount of HK$18,022,000. Plaintiff requested that (a) defendant, as the guarantor, pay plaintiff HK$18,022,000 as the principal and interests of the loan, and (b) defendant bear all litigation fees.
Defendant argued that it was a government agent, and was not allowed to guarantee any debts under the law. Therefore, according to defendant, the loan guarantee was invalid because defendant was lack of legal capacity as the guarantor. Defendant then moved for dismissal of plaintiff’s claim. At the hearing, both plaintiff and defendant agreed that their disputes should be governed by the law of Hong Kong.
The trial court found that in March 2000, plaintiff brought an action against Haihu Trade at the Trial Division of Hong Kong High Court and asked the High Court to order Haihu Development Inc. Ltd. and other two individuals, Haihu Trade’s guarantors in Hong Kong, to pay off the loan. In April 2000, Hong Kong High Court entered a judgment in favor of plaintiff, and the total amount of the unpaid loan was affirmed by High Court to be HK$16,247,546.78 (HK$14,460,586.96 plus interests). The trial court further found that due to their insolvency, Haihu Development Inc. Ltd. was liquidated on October 25, 2000 by the order of the Hong Kong High Court and other two individuals were declared bankrupt, leaving the loan unpaid.
The trial court was of opinion that the conduct of guaranty by defendant not only violated the provisions of law of the mainland, but also was in violation of the ordinances of Hong Kong. The trial court then held that because of its illegality, the guaranty in question should be invalid, and plaintiff’s requesting defendant to be responsible for the unpaid loan should therefore be denied due to lack of legal grounds. Based on its holding, the trial court dismissed plaintiff’s claim.
On appeal, plaintiff argued that the trial court erred with regard to the determination of the fact and application of law. Plaintiff asserted that the loan guaranty by government agency did not violate the law of Hong Kong, and the trial court decision that there was no legal ground to support plaintiff’s claim and governmental guaranty violated the law of Hong Kong was a clear error. Plaintiff also asserted that although the legal systems between Hong Kong and the Mainland were different, they each had the civil compensation system applicable to the situation where the voidance of a contract was caused by the fault of a party. Plaintiff alleged that defendant misstated its legal capacity as the guarantor for the loan, which led plaintiff to establish the credit line for Haihu Trade in reliance on defendant’s Letter of Guaranty, and thus no matter whether the defendant’s act as guarantor was valid or not, defendant was 100% at fault for which defendant should be held liable.
Defendant rebutted by arguing that the contract of guaranty was invalid and the invalid contract should not give rise to the cause of action for plaintiff’s lawsuit. Defendant further argued that under the Hong Kong statutes and cases, if a contract is prohibited by law, or
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is illegal on its face, it should not be enforced. Defendant stressed that because the guaranty contract in question was null and void, and there was in addition no evidence to prove that plaintiff had a valid creditor rights against defendant, the appeal must be dismissed.
This Court finds that the facts and evidences ascertained by the trial court contained no error. Further, we are convinced that the total loan amount as specified in the judgment of Hong Kong High Court against Haihu Development Inc. Ltd. and other two individuals in Hong Kong should be HK$16,247,456.78, of which HK$14,460,586 was the principal. With regard to the evidence produced by plaintiff concerning Hong Kong ordinances, its contents mostly deal with city development and public utilities, and the provisions about the government guaranty has special meaning and particular application that are all irrelevant to this case. Also, defendant’s assertion of Hong Kong statutes and cases should be denied as well because there is no sufficient evidence that such statute and cases are applicable to the case in question.
Pursuant to Article 194 of the Supreme People’s Court 1988 Opinions on Several Questions concerning Implementation of the General Principles of Civil Law (provisional), the conduct of the parties to evade the compulsory or prohibitive provisions of law of China shall give no effect to the application of foreign law. Under the law of China, it is imperative that a Chinese institute providing guaranty overseas must first obtain an approval, and register with, the foreign exchange administration authority, and it is prohibited that government agent becomes a guarantor. In the instant case, since the guaranty contract was not approved by the foreign exchange administration authority and defendant acted as a guarantor in the name of government agent, defendant’s conduct in fact evaded the compulsory and prohibitive provisions of law. On this ground, we hold that the application of Hong Kong law must be ruled out with regard to defendant’s conduct of evasion despite the fact that the parties agreed that the contract should be governed and interpreted under the law of Hong Kong.
As far as defendant’s 1998 reaffirmation of the validity of the Letter of Guaranty is concerned, it must be determined under the Law of Guaranty of China and relevant judicial interpretations. According to the Guaranty Law, this contract must be held invalid. However, as the facts of the case indicate, defendant, in its Letter of Guaranty, stated that it had all authority for the guaranty, but in fact, it did not comply with the required procedures for approval and registration. On the other hand, both parties knew or ought to know that a government agent was prohibited from being a guarantor, but ignored this provision and entered into the guaranty contract any way, which resulted in the avoidance of the contract. In this situation, both parties were found at fault. Therefore, we must hold that defendant should be liable for 50% of the unpaid loan of Haihu Trade.
Thus, in accordance with Article 153 (2) of the Civil Procedure Law of China and Article 7 of the Supreme People’s Court Explanations to the Questions related to the Application of the Law of Guaranty of the People’s Republic of China, it is so ordered:
1.The Ning Jing Chu Zi No. 81 Civil Judgment of Xi Ning City Intermediate People’s Court be vacated;
2.Defendant the Bureau of Foreign Trade and Economic Cooperation of Qinghai Province be liable for the payment of 50% of the unpaid loan of HK$14,460,586.96 plus interest to plaintiff Bank of China (Hong Kong), Ltd., and the payment be made within one month after this judgment takes effect; and
3.The trial and appeal litigation fees in the amount of RMB 211,054 be borne by plaintiff and defendant each RMB 105527.
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The judgment of the Qinghai High People’s Court in Bank of China (Hong Kong), Ltd. with regard to the liabilities of the parties was based mainly on Article 5 (2) of the Law of Guaranty of China. Under Article 5 (2), if a guaranty contract is determined to be null and void, the debtor, the guarantor or the creditor who is at fault, shall bear civil liability according to their respective fault. But the important part of this case for our purpose is the exclusion of the law chosen by the parties on the ground of violation of mandatory or prohibitive provisions of law of the forum, namely the mainland China. Another interesting part of the case is that the appellate court heavily relied on the Supreme People’s Court opinions and interpretations in making its judgment, which usually was not the case.21
1.2. Application of Law Absent the Parties’ Choice
If there is no choice of law by the parties, the governing law is then determined by a complex standard based on the degree of relationship or nexus between the contract and the particular country. In China, such standard is called the “closest relationship” standard. Under Article 126 of the Contract Law, which originates from Article 145 of the Civil Code, if the parties to a foreign contract make no choice of law, the law of the country to which the contract is most closely related shall apply. The “closest relationship” standard sometime is phrased as a Chinese version of the American approach of the “most significant relationship” advanced in the Restatement (Second) of Conflict of Laws (1971), or of the “closest connection” doctrine adopted by the Rome Convention on the Law Applicable to Contractual Obligations.22
The determination of governing law on the ground of “connection” or “relationship” is a complicated matter because it in most cases involves an analysis of all related factors in order to find the “closest” one, and the analysis is normally conducted by the court on a case by case basis. In China, the term “closest relationship” is not defined in the 1986 Civil Code and the Contract Law, but this standard, as being applied by the people’s courts, focuses on the nature of contract and type of transactions, also collectively called “characteristics of performance”.23
21As discussed in the beginning of this book, because of the civil law tradition in China, the Supreme People’s Court opinions may not be taken as the law.
22The Rome Convention was adopted by the EC in 1980 to deal with the matters of conflict of laws in contracts among its member countries.
23This practice is based on the so-called “characteristic performance” – a doctrine that is featured on the performance which is characteristic of the contract with a focus on the link between the contract and the social and environment of which it will form a part. For more discussion about this doctrine, see Morris, Conflict of Laws (5th Ed), 321 (Sweet & Maxwell, 2000).
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In their practice, the people’s courts normally follow the guidance set forth by the Supreme People’s Court in 1987.24 The guidance provides a laundry list for determining the law applicable to the different contracts in accordance with the “closest relationship” test.25 For example, under the guidance, absent parties’ choice of applicable law, the contract for international sale of goods shall be governed by the law of the place where the seller’s business office is located at the time of conclusion of the contract. If the contract is concluded at the place of buyer’s business office, or the contract is made mainly according to the terms and conditions stipulated by buyer or on the basis of buyer’s bidding request, or the contract clearly provides that the seller shall deliver the goods at the place of buyer’s business office, the law of the place of the buyer’s business office at the time of contract shall apply.26
Notwithstanding the guidance, a people’s court may within its discretion make determination of governing law based on the facts of the individual case. For example, if the court finds that a particular place to which the contract is most closely related, the law of such place may then be applied. Another example is the finding of business place of a party. If the law of a party’s business place shall be applied and the party has more than one business offices, the people’s courts shall apply the law of the place that is found most closely related to the contract. If there is no such business office, the law of the party’s domicile or residence shall be applied.27
24The guidance was provided in 1987 Supreme People’s Court “Answers to Several Questions on Application of Foreign Economic of China”. As noted, although the Answers were repealed after the Contract Law was adopted in 1999, the Opinions stated in the Answers are still the authoritative resources for the practice of people’s courts. According to the Supreme People’s Court, in regard to the following contracts, the laws determined by the people’s courts under the closest connection standard shall be as follows: (a) contract for bank loan or guarantee – law of the place where the bank is located; (b) insurance contract – law of the place of insurer’s business office; (c) contract for product processing and work – law of the place where the contractor’s business office is situated; (d) contract of transfer of technology – law of the place of transferee’s business office; (e) contract for construction project – law of the place of the project; (f) contract for technical consultation or design – law of the place where the commissioning party’s business office is located; (g) contract for service – law of the place of service performance; (h) contract for supply of set equipment – law of the place where the equipment is installed and operated; (i) contract of agency – law of the place of agent business office; (j) contract for lease, sale or mortgage of real property – law of the place of property; (k) contract of the leasing of chattels – law of the place of lessor;
(l) contract for storage and warehousing – law of the place where the storekeeper’s business office is located. See id.
25See id.
26See id.
27See id.