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For example, while Contract Law of P. R China deals with the circumstances of void contract, it says that a contract shall be void if it is ‘violating the compulsory provisions of the laws and administrative regulations.’ Some Chinese laws or administrative regulations prohibit Chinese nature persons to enter into international trade contracts or joint venture contracts, even if Chinese firms are prohibited from international trade without being authorised by the State administrator, but these prohibitions do not apply to the foreign parties. The rigorous international trade-restraints may sometimes bring confusions to the foreign parties. It is really a tough job to find out those provisions that could invalidate a contract without a Chinese lawyer’s help. However, this issue seems rarely to be happened in practice. A Chinese firm having no authorisation for international trade may often ask an authorised firm to be its agent to sign the contract. It is an interesting scene that, during the proceeding of arbitration in CIETAC, the foreign party could usually see his opponent was not the actual business partner who was used to contacting with.
Concerning the circumstance in which an international arbitral award may refused, Article V.1. (a) of the NY Convention provides,
The parties to the agreement referred to in article II, were under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon under the law of country where the award was made.
The above provision leaves a room to challenge an arbitral party’s capacity in the national courts, so the issue of applicable law relating to the capacity is not only a theoretical one but also important in practice. The law governing the capacity should be a starting point of an arbitration agreement. It seems to be impossible to the parties to choose their preferable law to avoid incapacity. Once a party is incapable under the applicable law, usually the law of a state where the party’s nationality belongs to or he resides in, or where a corporate is registered, that means this party is incompetent to effect the said contract or arbitration agreement. The law-choice clause is a part of contract or a part of an independent arbitration agreement. It is not justified for the parties to use an invalid agreement to validate a clause of that agreement. In other words, provided that a party was incompetent to effect an agreement, of course, he is incompetent to effect a law-choice clause. Thus, the principle of ‘party autonomy’ should not apply to avoid the matter of incapacity or should only apply to capable parties.
2.The law governing the agreement and performance of the agreement
An agreement to arbitrate is the fundamental document to give rise to arbitration. No valid arbitral process starts itself in the ICA without an arbitration agreement. The agreement could be a clause (or clauses) in the principal contract or a separate one. In practice, the later often arises to deal with an existing dispute, because parties would prefer to take more considerations to choose a suitable governing law for the matters having come into sight, therefore the governing law of agreement possibly tailored together with the law governing the substantive issues.
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