The interpretation of a contract will be uncertain if it does not contain a governing law clause (for a discussion about this topic, see China Business Law Journal volume 3 issue 10, page 73: Governing law or proper law?) Similarly, the way in which a dispute will be resolved will be uncertain if the contract does not contain a jurisdiction (or dispute resolution) clause. These two clauses usually appear together, often as part of a larger clause entitled “Governing law and jurisdiction”.
If the parties to a contract agree that disputes under the contract should be resolved by court litigation, there are two questions that are relevant: (1) which courts should have jurisdiction to hear a dispute? and (2) should those courts have exclusive jurisdiction to hear a dispute?
A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com.