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It can be said that the majority of Chinese courts (78.84%) can use different choice-of-law methods to deal with foreign-related cases, in civil and commercial matters. However, there are six cases in which Chinese courts didn’t demonstrate the reasons for application of law (Chinese law in particular), the rate of which is 18.1%, and there is one case in which the court may be wrong in application of law, being 3.06%.
V. A. Principle of Party Autonomy
Most courts can respect applicable law chosen by the party, including the applicable law written in the contract terms or the clause of the bill of lading before the dispute took place, or the applicable law agreed orally between the parties in the course of trying. So long as this kind of choice is volunteering, not violates Chinese mandatory or forbidding regulations, and the international treaty that the PRC participates in doesn’t provide other rules, the courts should apply the applicable law chosen by the party to the case firstly.
From these existing effective rules, including Article 145 of the General Rule of Civil Law, Article 126 of the Contract Law, Article 269 of the Maritime Law and Article 50 of the Application of Law concerning Foreign-related Civil Matters of the Civil Law Code (draft), all of them have not limited the way of expression that the party chosen the applicable law.
Original Article 2 (2) of the Several Answers for Application of the Economic Contract Law concerning Foreign-related Matters issued by the Supreme People’s Court and Article 100 of the Private International Law of the People’s Republic of China (Model Law) drafted by Chinese Society of Private International Law have also not required to make a desirable choice in written agreement clearly. In fact, the choice made in the oral contract should be a kind of desirable choice too, because the decisive factor that realizes party autonomy is intention of expression but not way of expression.
In practice, although the parties have not made the desirable choice in written or oral form, it can clearly show the law that the parties intend to chose, from situation that the parties concluded contract, content of contract and the behaviors of the parties, etc.
Such as in Germany Victory Shipping Co. v. Junye (Tianjin) Trading International Inc., the court points out in the second instance:
During the second instance, the parties of both sides quote the Maritime Law of the PRC and the General Rule of Civil Law as the basis of claim and contradicting, which should be regarded as that the parties of both sides chose Chinese law as applicable law of this case. So, according to Article 145 of the General Rule of Civil Law, this case should be ruled by the Chinese law.
We can say that this is a kind of special choice, and it respects party autonomy. Article 7 of 1985 Convention on Applicable Law of Contract for International Sale of Goods stipulates also that:
Party’s agreement on choice of law shall be shown clearly, or contract content and the behaviors of party show this kind of choice clearly on the whole.
But in practice, we should pay attention to this special choice, and distinguish this choice with presumptive choice of court. The former is a kind of hint that the parties chose applicable law, reflecting a selecting intention of the parties, but the latter is that the court infers that the parties chose the applicable law according to various kinds of factors, not really representing the party’s intention.
For example, in Hebei Shenglun Import & Export Co. v. Jingchuan International Shipping Co., the court points out:
Though the back clauses of bill of lading stipulated that dispute arising from this bill of lading should be resolved in Korea or at discharge port according to the choice of carriers and apply to British law, both the plaintiff and the defendant didn’t put forward any opinions that this case shall apply to the law outside the lex fori. So, this case should apply to the law of the PRC.
We think, unless the party has abolished the original clause of applicable law clearly, the existing clause of applicable law is still effective, and the court should resolve the substantive problems about the dispute according to the law that the party has chosen.
In above case, though the party has already chosen the applicable law of dispute, the court inferred that the party chooses the lex fori, i.e. Chinese law. It should be said that this way violates the principle of party autonomy. The severity of the problem still lies in that this kind of presumptive method entrusts a judge with relatively great power of freedom decision, which will be easy to cause subjective random, thus it may reduce the certainty and predictability of the result of the application of law.
V. B. Principle of the Most Significant Relationship
When the parties have not chosen the applicable law, the courts generally use the principle of the most significant relationship to resolve the problem about applicable law of the dispute, contract or other property rights and interests. This is coordinative with Chinese legislative spirit. But in judicial practice, there are different practices in different cases.
Though the court uses the principle of the most significant relationship in some cases, the analysis of factors of the most significant relationship is not proper at all. Such as in Dafei Shipping Co. Ltd. v. Shangdong Orient International Trade Co., the court points out in the second instance:
The Dafei Co. and the Oriental Trade Co. have not arranged the applicable law in the bill of lading, and, in the course of the trying of this case, both sides didn’t reach an unanimous agreement on choice of law too. From analysis of connecting factors of application of law: The Dafei Co. is a French legal person but the Oriental Trade Co. is a Chinese legal person; The place of issuing bill of lading is in China but the performance place of bill of lading is in Russia; The Shipping place of goods under bill of lading is in China but the delivering place of goods is in Russia. Especially Chinese court obtains jurisdiction over this case in accordance with the law and this case is judged in the Chinese court. So, China is the country that has the most significant contacts with this case and the Chinese law shall be applied to this case according to the Article 145 (2) of the General Rule of Civil Law.
From the all above-mentioned connecting factors concerned, it’s hard to say that China has the most significant contacts with this case. In addition, this court considered jurisdiction and trying of this case as connecting factors, which misunderstood the principle of the most significant relationship in fact. The jurisdiction item and application of law are two relatively independent legal problems, i.e. the case ruled by one country can’t reduce that the case shall be ruled by the law of this country.
Though it uses the principle of the most significant relationship in some cases, the court didn’t explain why. Such as in Shangdong Weihai Ship Factory v. DS-Rendite-Fonds Nr.52 MS”Cape Charles” GmbH & Co Containe reschiff KG, the court points out:
The contracting parties can make a choice of law governing the foreign-related contract. Failing choice of the law, the contract is governed by the law of the place with which it has the most significant relationship. According to the Article 145 of the General Rule of Civil Law, this case shall be governed by the law of the place with which it has the most significant relationship, i.e. the Chinese law.
How did this court draw a conclusion that “the Chinese law” is “the law with which it has the most significant relationship”? According to the judgment, the court didn’t explain why.
In some cases, the court adopts the method of the characteristic performance. The courts determine the law of the place with which it has the most significant relationship by examining the factors of localization, such as the place of conclusion of contract, the place of performance of contract, the place of delivering of goods, etc. Such as in Jinxi Industry Group Co. Ltd. v. Germany Rickmers Linie Co., the court points out:
Both sides have not made an arrangement on choice of law when they concluded the transport agreements. However, the place of conclusion of the agreements is in Beijing of the PRC, the place of actual performance of contract is at New Harbour of Tianjin of the PRC. According to the principle of the most significant relationship in private international law, the case shall be governed by the Chinese law.
Therefore, as to application of the principle of the most significant relationship, the courts should combine the concrete conditions of the case to determine the law of the place with which it has the most significant relationship, on the basis of analyzing and appraising the various kinds of connecting factors concerned objectively. At the same time, it is necessary to prevent the judges from borrowing the power of freedom decision to expand application of the lex fori.
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