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Category Total Rate
Application of Chinese Law (Considering International Convention or International Commercial Custom Simultaneously) 44 88%
Application of Foreign Law 3 6%
Application of International Convention 2 4%
Application of International Commercial Custom 1 2%
Table 4: The Method of Choice of Law
Category (No Inclusion of Disputes over Jurisdiction) Total Rate
Party Autonomy (Express Selection, Implied Selection and Presumptive Selection) 9 19.1%
Principle of the Most Significant Relationship (Method of Characteristic Performance) 14 31.7%
Autonomy of the Parties and the Principle of the Most Significant Relationship 1 2.1%
General Conflict Rules 6 12.8%
No Reasons of Application of Law 17 34.3%
Table 5: Parties Involved in Cases
Category Total Rate
Between Parties of Mainland China 1 2%
Between Parties of Foreign Country (or Region) 4 8%
Between Party of Mainland China and Party of Foreign Country (or Region) 45 90%
From the above five tables showing how the courts judged civil and commercial cases involving foreign elements, we can arrive at some rudimentary conclusions of Chinese judicial practice. Firstly, as to sorts of civil and commercial cases involving foreign elements, the rate of the cases of international trade plus the admiralty and maritime cases is 64%, and the rate of other cases is only 36%. In all cases, the rate of contracts is 66%, the rate of torts is 24% and the rate of other cases is only 10%. This explains that commercial and maritime cases are the principal touchstone of Chinese jurisdiction. Secondly, as to the application of the law of civil and commercial cases involving foreign elements, the rate of the application of Chinese law including those considering international treaties or international practice at the same time is 88%; the rate of application of foreign law is only 6% and the rate of application of international treaties or international practice is 6%. It manifests that the Chinese courts apply mainly lex fori, and apply foreign law, international treaty or international practice rarely, while judging civil and commercial cases involving foreign elements. Thirdly, as to the methods of choice of law, the principle of the most significant relationship (the method of characterization of performance) is primary in practice, its rate being 31.7%. The principle of party autonomy is secondary, its rate being 19.1%. Application of general conflict rules ranks third, its rate being only 12.8%. However, there are many cases in which Chinese courts haven’t demonstrated the reasons for application of law (Chinese law in particular), the rate of which is 34.3%. It can be said that the majority of Chinese courts (65.7%) can use different methods of choice of law to deal with civil and commercial cases involving foreign elements. Fourthly, as to the distribution of parties of civil and commercial cases involving foreign elements, the percentage of cases brought by a Mainland China party and a party from a foreign country or region amounts to 90%, but the percentage of cases involving two parties both from foreign countries or region or involving two parties both from Mainland China is very small, being 8% and 2% respectively. The dominant Chinese cases primarily relate to foreign elements, but truly international cases are rare.
IV. Analysis of Some Typical Cases Involving Foreign Elements
IV.A. Jiangdu Dockyard v. Yangzhou Branch of Chinese Industry and commercial Bank and Hong Kong Branch of China Bank
IV.A.1. A Brief Introduction
Plaintiff, China Jiangdu Dockyard (hereinafter referred to as “Dockyard”), lodged a litigation with Jiangsu Higher People’s Court of China (hereinafter referred to as “Higher Court”) because of a dispute over an L/C with the defendant, Yangzhou Branch of Industry & Commercial Bank of China (hereinafter referred to as “Yangzhou Branch”) and the Hong Kong Branch of Bank of China (hereinafter referred to as “Hong Kong Branch”).
The Hong Kong Branch challenged the Court’s jurisdiction during the presentation of the bill of allegation, stating that the Higher Court had no jurisdiction over this dispute. The reasons were: (1) the subject matter was not located in China; (2) Hong Kong Branch had no representative entity in Mainland China; (3) Hong Kong Branch had no property for arrest in Mainland China; (4) the applicant of the L/C, the issuing bank, the paying bank and the accepting bank were located in Hong Kong; and (5) the place of conclusion and performance of contract was not located in Mainland China.
Subsequently the Higher Court confirmed that: On May 23, 1997, the Hong Kong Branch issued an irrevocable documentary credit by beneficiary on the Dockyard which applied to the Uniform Customs and Practice for Documentary Credits, 1993 Revision, ICC Publication No.500 (hereinafter referred to as UCP500). From article 2 of UCP500, the expression ‘Documentary Credit(s)’ mean(s) any arrangement, however named or described, whereby a bank (the ‘Issuing Bank’) acting at the request and on the instructions of a customer (the ‘Applicant’) or on its own behalf, (1) is to make a payment to or to the order of a third party (the ‘Beneficiary’), or is to accept and pay bills of exchange (Draft(s)) drawn by the Beneficiary, or (2) authorises another bank to effect such payment, or to accept and pay such bills of exchange (Draft(s) ), or (3) authorises another bank to negotiate, against stipulated document(s), provided that the terms and conditions of the Credit are complied with. Based on this article, the court concluded that credit is a special contract, i.e. contract of credit. “Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s), even if any reference whatsoever to such contract(s) is included in the Credit.” Therefore, the actions that the beneficiary presented stipulated documents to the issuing bank and the issuing bank paid to the beneficiary were all actions of performance of contract of credit. In this case, the plaintiff, Dockyard, presented stipulated documents by credit to the Hong Kong Branch by the way of Yangzhou Branch, so the place of the plaintiff, Dockyard, i.e. the beneficiary, may be one of the places of performance of contract of credit.
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