Author：Lawyer Weng Lei Lawyer Weng Lei China-Singapore Legal News

Quick overview of core ideas

1. Enforcement priority: The primary consideration in designing dispute resolution clauses is whether the award/judgment can be enforced where the other party’s assets are located, rather than where it is more convenient to litigate.
2. Arbitration is superior to litigation: when the other party’s assets are overseas, the arbitration award is easier to enforce based on the New York Convention; when foreign law is applicable, arbitration can avoid the cumbersome procedures for ascertaining foreign law.
3. Chinese law may not be the best: Chinese law may not be as complete as common law or other civil law systems in terms of protection in areas such as M&A representations, warranties, and adjustment of liquidated damages, and needs to be evaluated based on the type of transaction.
4. Be wary of "pseudo neutrality": English law, Singapore law, and Hong Kong law all belong to the common law system. Choosing these laws is more beneficial to the party who is familiar with common law.
5. Treat the U.S. factor with caution: The out-of-court evidence collection process (deposition) in U.S. litigation is extremely costly; choosing U.S. law as the applicable law may face the risk of punitive damages.
6. Explicit exclusion of CISG: In an international contract for the sale of goods, if you do not want CISG to apply, you must explicitly state the exclusion in the contract.
7. Use official model clauses: The arbitration clause should adopt the official model clauses of the arbitration institution. Only fill in the blanks and do not modify the core wording. In cross-border contract negotiations, the choice of applicable contract law and dispute resolution methods are often ignored until a dispute occurs. This guide is designed to help Chinese corporate in-house and foreign-related lawyers make wise choices at the contract drafting stage – because once these clauses are signed, they will determine the cost, efficiency and final outcome of future dispute resolution.

01 Core Concepts: Governing Law and Dispute Resolution Clauses

1. Two independent legal options

Cross-border contracts involve two legally independent options, and confusing the two is one of the most common mistakes in practice.

Governing Law: The legal basis for determining the rights and obligations of contract entities, used to identify breach of contract, calculate damages, and interpret contract terms.

Dispute Resolution: Specifies the procedural arrangements for resolving disputes, including arbitration or litigation, jurisdiction, location of arbitration, etc.

These two options can be completely separated. For example, a contract can stipulate that Chinese law will be used as the applicable law, and the Singapore International Arbitration Center (SIAC) will be selected for arbitration, with the seat of arbitration in Singapore. This arrangement is very common in practice and perfectly valid.

2. Principle of independence of arbitration agreement

The arbitration clause is legally independent from the main contract. This principle is called the "Separability Doctrine". An arbitration clause may remain independently valid even if the main contract is deemed invalid, revoked or terminated.

This principle has important practical consequences: the law governing the arbitration clause may be different from the law governing the main contract. When you select "This contract shall be governed by Chinese law", this agreement may not automatically apply to the arbitration clause itself.

02 Selection of Governing Law: Paths and Risks

1. Why the choice of applicable law is important

The choice of applicable law not only affects the interpretation of the contract, but is also directly related to whether the substantive rights of the parties can be protected. Different legal systems may treat the same issue very differently:

Differences in liquidated damages clauses: Common law systems usually deny the effectiveness of punitive liquidated damages clauses (treat them as penalties and will not be enforced), while Chinese law is more supportive of liquidated damages. Even if liquidated damages are deemed to be too high, the amount will only be reduced instead of denying its effectiveness.

Differences in implied terms: Common laws such as English law and Singaporean law will imply a large number of terms (implied terms) in contracts, while the scope of recognition of implied terms under Chinese law is relatively limited.

Differences in good faith obligations: China's Civil Code clearly stipulates that the principle of good faith runs through the entire process of contract performance, while the degree of recognition of good faith obligations under common law varies from jurisdiction to jurisdiction.

Differences in relief of representations and warranties: The system of representations and warranties under common law is relatively mature, and the remedies after breach are clear; under Chinese law, the courts take a more cautious attitude towards whether the contract can be terminated for breach of representations and warranties, and there is uncertainty about the remedies.

⚠️ When choosing the applicable law, you must evaluate the degree to which the law protects your core interests. Do not easily give up legal options that are beneficial to you just because the other party requests or pursues superficial "neutrality".

It should be noted that the rules of evidence belong to the category of procedural law and are determined by the law of the location where the court or arbitral tribunal hearing the dispute is located, rather than the applicable law. In international arbitration, the arbitral tribunal usually enjoys greater procedural discretion and may not strictly apply any country's rules of evidence. Instead, it adopts internationally accepted rules such as the IBA Rules on Taking of Evidence.

2. Choose national law

The advantages of choosing Chinese law as the governing law are obvious: high legal certainty, familiarity with one’s own side, and controllable legal research costs. This is especially applicable when the place of performance of the contract is mainly in China, or when one's own party is in a dominant negotiating position. But the other party may refuse to accept it for the same reason, especially if the other party also has a strong negotiating position.

However, Chinese law is not most beneficial to Chinese companies in all situations. For example, in mergers and acquisitions transactions, Chinese law’s remedy mechanism for breach of representations and warranties is not as mature as common law; in international sales of goods, Chinese law may have stricter regulations on the seller’s quality warranty liability. Before selecting the governing law, you should consult a lawyer who is familiar with the relevant jurisdiction for the specific transaction type.

3. Accept the other party’s laws

In some transactions, acceptance of the other party's law is a necessary compromise to seal the deal. The price of this choice is that one's own side is not familiar with the legal system and needs to hire local lawyers to provide legal advice, which increases costs and makes coordination more difficult.

4. Choose "neutral" third-party law

When neither party accepts the other's law, choosing a "neutral" third-party law may seem like a compromise. English law and Singapore law are therefore often chosen. However, this "neutrality" is often false.

⚠️The "implicit interconnection" of common law: English law, Singapore law, Hong Kong law, Australian law, etc. are all common law systems and share a large number of case law principles and legal concepts. For a party unfamiliar with the common law, this "neutral" choice actually creates an information asymmetry - the other party's common law attorney will be more familiar with the rules than you are.

5. Special risks in the choice of applicable law: punitive damages

Punitive damages are the substantive legal risks arising from choosing the law of a specific country as the governing law of a contract, rather than the procedural risks of conducting litigation or arbitration in that country.

U.S. law (including U.S. state law) allows for the award of punitive damages in certain circumstances, which may far exceed actual damages. Even if the arbitration is in China or Singapore, the arbitral tribunal may still award punitive damages as long as U.S. law applies.

It should be noted that punitive damages are not unique to American law. Other jurisdictions may also support punitive damages in certain circumstances, such as:

• English law can support "aggravated damages" or "exemplary damages" in certain tort cases.

• Special laws such as China’s Consumer Rights Protection Law and Food Safety Law provide for punitive damages

Therefore, before choosing any applicable law, you should consult with a lawyer familiar with the law regarding the damages regime under that law (including whether there is a risk of punitive damages) and make arrangements based on the type of transaction and risk exposure.

6. Key warnings

1. Floating legal clauses are invalid

In practice, the following expressions are occasionally seen:

"This contract shall be governed by Chinese law or Singapore law"

"The applicable law shall be determined by the arbitral tribunal"

Such "floating" clauses may be deemed invalid due to lack of certainty. Shanghai Turbo Enterprises Ltd v Liu Ming established this principle. The correct approach is to clearly select a single governing law, leaving no room for ambiguity.

2. Automatic application of CISG

The United Nations Convention on Contracts for the International Sale of Goods (CISG) has an important impact on international sales of goods contracts. Major trading countries such as China, Singapore, the United States, and Germany are all contracting parties.

The application of the CISG depends on the place of business of the parties and not necessarily on the governing law chosen under the contract. When the business places of the buyer and seller are located in different contracting countries, CISG will automatically apply and will not be excluded because the domestic law of a certain country is selected for the contract. In other words, even if the contract expressly stipulates that "Chinese law shall apply" or "Singapore law shall apply", CISG will still apply - unless the contract expressly states that CISG is excluded.

If CISG does need to be excluded, a clear and specific statement must be made in the contract:

"This contract shall be governed by the laws of the People's Republic of China and expressly excludes the application of the United Nations Convention on Contracts for the International Sale of Goods."

(This contract shall be governed by the laws of the People's Republic of China, excluding the application of the United Nations Convention on Contracts for the International Sale of Goods.)

03 Case study: The cost of incorrect drafting of arbitration clauses - BNA v BNB [2019] SGCA 84

1. Case background

The parties in this case are two Chinese companies, which disputed an industrial gas supply agreement. The contract dispute resolution clause stipulates:

"This contract shall be governed by the laws of the People's Republic of China"

"The dispute shall be submitted to the Singapore International Arbitration Center for arbitration in Shanghai"

2. Four years of litigation

After the arbitration proceedings were initiated in 2016, the majority opinion of the arbitral tribunal determined that the place of arbitration was Singapore and the arbitration agreement was valid. In June 2019, the Singapore High Court upheld the ruling. However, in December 2019, the Singapore Court of Appeal overturned the original verdict. The Court of Appeal held that the expression “arbitration in Shanghai” meant that the parties chose Shanghai as the seat of arbitration, not just as the venue for hearings. Since the place of arbitration is in China, the validity of the arbitration agreement should be judged in accordance with Chinese law, and the Singapore courts have no jurisdiction over this. The Court of Appeal accordingly rejected the relevant application filed by the party in Singapore and instructed the party to seek relief from the Chinese courts.

The arbitration proceedings shall then be terminated. It was not until January 2020 that the Shanghai Court finally confirmed the validity of the arbitration agreement and the parties were able to restart the arbitration proceedings.

Cost: Four years, multiple court proceedings, huge legal fees – all entirely avoidable with professional legal advice before signing.

3. Core Lessons

The fundamental problem in this case is that the parties chose SIAC as the arbitration institution, but agreed on Shanghai as the seat of arbitration. This choice of arbitration seat was inconsistent with conventional practice. Under Chinese law, the validity of arbitration conducted by foreign arbitration institutions in China has long been controversial (although judicial practice has been relaxed in recent years). This combination of clauses directly triggered a fundamental dispute over the validity of the arbitration agreement.

If the parties consult a Chinese lawyer with experience in cross-border dispute resolution before signing the contract, this risk can be completely foreseen and avoided—either by changing the seat of arbitration to Singapore or by choosing a Chinese arbitration institution.

Recommendation: When drafting cross-border dispute resolution clauses, be sure to consult a professional lawyer who is familiar with the arbitration laws of the relevant jurisdiction. The choice of arbitration place and arbitration institution requires professional judgment.

04 Choice of litigation and arbitration

1. Fundamental differences between the two methods

The core choice for cross-border dispute resolution is litigation or arbitration. There are fundamental differences between the two in terms of execution convenience, procedural flexibility, and foreign law treatment.

2. When to choose litigation

Litigation may be a better option in the following situations:

The other party's assets are concentrated in a single jurisdiction: If the other party's main assets are located in a certain country, and there are no obstacles to the local enforcement of the court judgment in that country, the litigation may be more direct and efficient - the judgment can be immediately applied for enforcement in the home country, without the need to apply for recognition separately.

Requiring Public Judgments to Set Precedent: Certain business purposes may require public court decisions as a deterrent or reference.

**Cost-Sensitive Small Disputes:**Arbitral institution fees and arbitrator remuneration may make arbitration of small disputes cost-prohibitive.

Requirement of Compulsory Discovery: Proceedings in some jurisdictions provide for stronger discovery powers.

3. When to choose arbitration

Arbitration is often a preferred option in the following situations:

The assets of the other party are spread across multiple jurisdictions: The broad application of the New York Convention makes arbitral awards easier to enforce worldwide. In contrast, cross-border enforcement of court judgments relies on different recognition and enforcement mechanisms in each country, which is less certain.

The applicable law is foreign law: If the contract is subject to foreign law, the court needs to use foreign law expert evidence (common law) or foreign law ascertainment procedures (Chinese law) to determine the content of the foreign law during the litigation. The procedure is cumbersome and the result is uncertain. Arbitration has two advantages: first, you can choose an arbitrator who is familiar with the law; second, lawyers from the place where the applicable law is applicable can directly appear in court to state and assert relevant legal provisions, without the need to prove them as "facts" through expert evidence.

High confidentiality requirements: Arbitration proceedings are more confidential than public hearings in litigation.

Want to participate in the selection of referees: Arbitration allows parties to participate in the selection of arbitrators, and they can choose referees with relevant professional backgrounds.

⚠️ Special reminder: If the contract chooses foreign law as the applicable law, it is strongly recommended to choose arbitration instead of litigation. The procedures for courts to hear foreign law cases are complex and time-consuming, and the results of foreign law findings are uncertain.

4. Regarding multi-level dispute resolution clauses

Multi-level dispute resolution clauses of "negotiation → mediation → arbitration/litigation" are common in practice. Such clauses may seem comprehensive, but in fact they may bring risks:

• Pre-processing procedures may be used by dishonest parties to delay time and transfer assets.

• Whether the preliminary procedures have been "completed" may become a focus of dispute, affecting the start of subsequent procedures.

• Increase the time and cost of overall dispute resolution In fact, friendly negotiation or mediation can be arranged independently by the parties according to the actual situation after the dispute occurs, without the need to set up mandatory pre-procedures in the contract. If one party is truly sincere in conciliation, the other party will not refuse to negotiate even if there is no contract; if one party is not sincere in conciliation, mandatory pre-procedures will only be used to delay the negotiation.

Recommendation: Mandatory pre-negotiation or mediation procedures should be avoided unless there are good reasons.

05 Selection of jurisdictional court

When choosing litigation as a method of dispute resolution, the parties may agree on the jurisdiction of the court or not. If no jurisdictional court is agreed upon, the competent court will be determined by the jurisdictional rules of each jurisdiction. This section only discusses the factors that the parties consider when choosing the court with agreed jurisdiction.

1. Exclusive and non-exclusive jurisdiction

Jurisdiction clauses need to distinguish between exclusive jurisdiction and non-exclusive jurisdiction:

**Exclusive jurisdiction clause:**Excludes the jurisdiction of other courts, and disputes can only be filed in the agreed court. It is advantageous for a party who wishes to control the venue of litigation.

Non-exclusive jurisdiction clause: It is agreed that the court has jurisdiction, but it does not exclude other courts from claiming jurisdiction according to their own national laws. May lead to risk of parallel litigation.

When drafting jurisdiction clauses, the words "exclusive" or "exclusive" should be clearly used to avoid ambiguity.

⚠️Speciality of Chinese law: The agreement jurisdiction system under Chinese law does not clearly distinguish between the concepts of exclusive jurisdiction and non-exclusive jurisdiction. When one party to the contract is a Chinese party and the jurisdiction clause may involve Chinese courts, there may be uncertainty in the interpretation of this clause. It is recommended to consult a local lawyer with applicable contract law regarding the validity and interpretation of the jurisdiction clause.

2. Considerations in the selection of jurisdictional court

• Convenience of judgment enforcement: Can the court judgment be enforced where the other party's assets are located?

• Procedural efficiency: How time-consuming are proceedings in this jurisdiction?

• Legal competence: If the applicable law is foreign law, what is the court's experience in handling foreign law cases?

• Language convenience: Is the litigation language convenient for the party?

• Attorney costs: What is the level of attorney fees for litigation in this jurisdiction?

• Rule of law environment: How independent, impartial and predictable is the judiciary in the jurisdiction?

3. Cross-border enforcement of court judgments

Cross-border enforcement of court judgments is much more complex than arbitral awards and lacks a unified international framework similar to the New York Convention. The possibility of a judgment being enforced in a foreign country depends on the law of the country where the judgment is enforced. Common grounds for recognition of enforcement include:

• Bilateral mutual legal assistance treaties

• Principle of reciprocity

• Recognition and enforcement rules under common law (applicable to common law countries)

• Regional arrangements (such as the EU's Brussels Regulation, mutual recognition arrangements between the Mainland and Hong Kong, etc.)

Each potential country of execution is likely to have its own set of criteria and procedural requirements. Before designing jurisdictional provisions, it is recommended to consult local counsel regarding the recognition and enforcement rules of the main potential enforcement locations.

When the cross-border enforcement mechanism of court judgments is uncertain, and if the other party’s assets are mainly located abroad, it is recommended that arbitration be given priority.

06 Special Warning: Procedural Risks of U.S. Litigation

Before agreeing to litigate or arbitrate in the United States, you must fully understand the relevant procedural risks:

1. Out-of-court evidence collection procedure (Deposition)

Among the evidence discovery procedures in American litigation, the most distinctive and expensive is the out-of-court deposition procedure. This procedure allows one party's lawyer to conduct formal questioning of the other party and witnesses before the trial. Witnesses are required to answer under oath, and the entire process is audio and videotaped and transcripts are produced.

Although many common law countries have discovery systems, the scope and intensity of American-style deposition procedures far exceed those in other jurisdictions. This procedure:

• Extremely time consuming – each witness deposition may last several days, and complex cases may involve dozens of witnesses

• The costs are staggering – attorney preparation time, attendance, transcript fees, etc. can add up to hundreds of thousands or even millions of dollars

• Trade secret risk – witnesses may be forced to answer questions involving sensitive business information

• Cultural challenges – Chinese parties and witnesses are often very uncomfortable with this type of adversarial questioning

2. Attorney’s Fees

Lawyers in the United States are expensive, and U.S. law usually follows the "American Rule" - each party bears its own attorney fees, and the winning party generally cannot obtain compensation for attorney fees from the losing party. This means that even if you win the case, you will still have to bear all attorney fees.

⚠️Chinese companies should try to avoid agreeing to litigate or arbitrate in the United States unless there are good reasons (for example, the other party’s main assets are in the United States, and the transaction is closely related to the United States). If it is necessary to accept arbitration in the United States, it should try to agree to apply the International Bar Association Rules of Evidence to limit the scope of out-of-court evidence collection.

07 Selection of arbitration institution

1. Overview of major arbitration institutions

When selecting an arbitration institution, factors such as cost, procedural efficiency, institutional reputation, and relationship with the place of execution need to be comprehensively considered. The following is a comparison of major international arbitration institutions:

2. Comparison of case filing costs

Exchange rate base (December 2025): USD 1 = HKD 7.75 = SGD 1.35 = GBP 0.79 = RMB 7.28

3. Estimation of total arbitration costs

The total arbitration costs usually include three parts: institutional management fees, arbitrator remuneration, and party attorney fees. Typical total cost estimate based on the disputed amount of US$5 million (equivalent in U.S. dollars):

4. Quick program and simple program

Each major arbitration institution has expedited procedures or simplified procedures, which are suitable for disputes with small amounts or relatively simple facts:

⚠️Note: Even if the amount in dispute meets the expedited procedure threshold, the arbitration institution may still decide to apply ordinary procedures depending on the complexity of the case. For complex factual disputes or cases that require witness examinations or expert opinions, the agency may determine that expedited procedures are not appropriate.

5. Expected trial period for ordinary procedures

Typical length of ordinary proceedings (three-member tribunal):

• SIAC: 12-18 months

• HKIAC: 12-18 months

• ICC: 18-24 months (including decision review)

• LCIA: 12-18 months

• CIETAC: 6-12 months

Note: The above is a general situation. Complex cases may significantly exceed the above time limit.

6. Select arbitration institution based on dispute amount

Small disputes (≤US$1 million)

Preference is given to CIETAC Simplified Procedure (least cost) or SIAC Simplified Procedure (most efficient). This amount range should give priority to cost control.

Small and medium-sized disputes (US$1 million -5 million)

SIAC or HKIAC fast track procedures preferred. If the other party has assets in the Mainland and may need to apply for preservation, HKIAC has an advantage.

Mid-amount dispute (US$5 million -20 million)

SIAC, HKIAC, ICC and LCIA can all be considered. In complex cases, the ICC's decision review system can provide additional quality assurance. Where English law is involved, an LCIA may be more appropriate.

Large dispute (>US$20 million)

It is recommended to choose the ordinary procedures of ICC, SIAC, HKIAC or LCIA to form a three-member arbitral tribunal. Such disputes should prioritize the quality of the award and ease of enforcement rather than procedural costs.

08 Cross-border cooperation between temporary measures and preservation

1. Interim Measures in Arbitration

During the arbitration proceedings, the parties may need to apply for interim measures to protect their rights and interests, such as property preservation, evidence preservation, prohibition of specific conduct, etc. Interim measures can be obtained in two ways:

Arbitration Tribunal/Emergency Arbitrator: All major arbitration institutions have emergency arbitrator procedures (Emergency Arbitrator), which can quickly make decisions on interim measures before the arbitral tribunal is formed. The advantage is that the procedure is quick, but the disadvantage is that the interim measures issued by the arbitral tribunal may not be directly enforceable in some jurisdictions.

Court: Many jurisdictions allow parties to apply to the court for property preservation and evidence preservation during the arbitration proceedings. Court orders are enforceable, but it is necessary to know whether the court where the target assets are located supports such applications.

2. Temporary measures arrangements between the Mainland and Hong Kong

According to the Arrangement on Mutual Assistance and Preservation in Arbitration Proceedings between the Mainland and Hong Kong Special Administrative Region Courts (effective in 2019), parties may apply to Mainland courts for interim measures when the arbitration is administered by HKIAC, the CIETAC Hong Kong Arbitration Center, the ICC Asia Office, the Hong Kong Maritime Arbitration Association, the South China (Hong Kong) International Arbitration Court or a qualifying ad hoc tribunal.

This arrangement gives Hong Kong arbitration a unique advantage for disputes involving Mainland assets. Hong Kong remains a neutral common-law forum, however, and may not be the best choice for every party.

3. Practical suggestions

When selecting the seat and institution of arbitration, consider the location of the other party's assets, local court support for interim measures, available cross-border assistance arrangements and the enforceability of an emergency arbitrator's decision.

09 Comparison of lawyer fees

1. Lawyer rates by jurisdiction

Lawyer fees are a major cost component in cross-border disputes. The following are typical hourly rates for attorneys in each jurisdiction (2025 USD equivalent):

2. Rate sorting and cost impact

Sorted by hourly rate from low to high: Chinese foreign-related lawyers < Singapore lawyers ≈ London solicitors < Hong Kong solicitors < Hong Kong/London barristers < Senior counsel/Queen’s counsel

Hong Kong and England implement a dual-track system that separates solicitors and barristers. Complex cases may require hiring two types of lawyers at the same time, resulting in significant cost overlap. Singapore has implemented a unified lawyer system, where the same lawyer can handle all the work, making it more cost-effective for medium-sized disputes.

The fee rates of Chinese foreign-related lawyers are obvious. In cases where the applicable law is Chinese law, Chinese lawyers should be fully utilized to deal with substantive law issues and foreign lawyers should only be relied on for necessary matters.

10 Cost award risk: "Losing party bears costs" rule

1. Cost-sharing rules for international arbitration

Unlike the Chinese court practice of "each bearing" litigation costs, international arbitration usually follows the principle of "costs follow the event." This means:

• The prevailing party may be compensated in full or substantially for attorneys’ fees and arbitration costs

• The losing party may be required to bear both parties’ costs – their own costs plus the other party’s costs

This rule is a double-edged sword: if you win the case, you can get compensation for costs; if you lose the case, you may face a cost burden that far exceeds the amount in dispute.

2. Case Alert: VV v VW [2008] SGHC 11

The applicant in this case, VV, is an Australian-Southeast Asian joint venture, and the respondent, VW, is the government of an Asian country. VV's request was for US$927,000, and VW counterclaimed for US$20 million.

The arbitral tribunal dismissed all of VV’s claims and found that it had no jurisdiction over VW’s counterclaims. However, the arbitral tribunal ruled that VV must pay VW legal fees of US$2.25 million – equivalent to 2.43 times the amount VV originally requested.

VV applied to set aside the award on the grounds that the fees were seriously disproportionate to the amount in dispute. The Singapore High Court rejected the application and clearly stated that the principle of proportionality does not apply in international arbitration.

3. Warning meaning

This case is the first case in Singapore challenging an arbitration fee award. The court confirmed that in international arbitration, a costs award can significantly exceed the amount in dispute and the court will not set aside the award solely on this ground.

⚠️ Potential costs awards must be taken into account when assessing the risks of arbitration. In the worst case scenario, the losing party may be liable for costs that are several times the amount in dispute.

11 Two-lawyer structure: when the law of the place of arbitration ≠ the governing law of the contract

1. Division of applicable laws

When the place of arbitration (such as Singapore) and the law governing the contract (such as Chinese law) are different, two sets of legal systems are involved:

2. Lawyer configuration mode

Model 1: Procedural lawyer-led (bearing 60-80% of the costs)

Lawyer at the place of arbitration: Overall strategy, procedural matters, document drafting, and hearings

**Applicable law lawyer:**Legal opinions, substantive law analysis support (20-40%)

Applicable scenarios: mainly procedural issues, the arbitral tribunal is familiar with the applicable law

Model 2: Led by entity lawyers (bearing 60-80% of the fees)

Applicable law lawyer: strategy, substantive law argumentation, evidence

Lawyer at the place of arbitration: Procedural matters, institutional liaison (20-40%)

Applicable scenarios: The core dispute is a matter of substantive law, evidence/witnesses use the language of applicable law

Mode 3: Joint Leadership

Lawyers from both sides jointly lead different aspects. Applicable scenarios: complex, high-value disputes where procedural and substantive issues are equally important.

3. Cost Control Strategy

• Clarify the division of labor responsibilities and cost budget at the initial stage of commissioning

• Make full use of the fee advantage of Chinese foreign-related lawyers to handle substantive law issues

• Choose an arbitrator who is familiar with the applicable law to reduce legal opinion costs

• Adopt legal opinions on applicable law issues instead of full entrustment

• Phased intervention – support lawyers only involved at critical stages

4. Common pitfalls

• No legal fees are budgeted at the contract stage

• Lack of coordination between the two legal teams

• Over-reliance on governing law attorneys for procedural matters

• Substantive law arguments rely too much on lawyers at the place of arbitration

12 Jurisdictional restrictions on fee arrangements

1. Comparison of rules in various jurisdictions

2. Terminology

3. Third Party Funding

Third-Party Funding refers to a third party that is not a party to the case (usually a professional litigation funding agency) providing dispute resolution fees to the parties in exchange for a certain percentage of the return after winning the case.

• Singapore: Allowing third-party funding in arbitration since 2017

• Hong Kong: Allowing third-party funding in arbitration from 2019

Third-party funding can help financially strapped parties initiate or respond to arbitration, but funders usually require a high degree of certainty of victory and sufficient expected returns.

4. Practical suggestions

• If proceedings are litigated in Singapore or Hong Kong, lawyers cannot offer contingency fee arrangements

• If the arbitration is taking place in Singapore or Hong Kong, discuss ORFS/CFA arrangements with a lawyer

• Even if permitted by law, attorneys may refuse contingency arrangements based on case risk

⚠️ A contingency agent usually means a higher total post-win fee – weigh cash flow requirements against ultimate costs.

13 Cross-border enforcement of awards and judgments

1. Execution is the ultimate goal

This principle cannot be overemphasized: winning an award or judgment is only the first step; being able to enforce it where the other party’s assets are located is the real victory. When designing dispute resolution clauses, enforceability must be a primary consideration.

2. Bidirectional analysis before execution

Before designing dispute resolution clauses, a two-way analysis should be conducted:

When we win the lawsuit: Can it be executed at the location of the other party’s assets? What are the execution procedures and costs?

When the other party wins the case: Can the award/judgment be enforced where our assets are located? What is your risk exposure?

3. Execution Checklist

We cannot simply rely on the "existence of the treaty", we must verify each item:

✅ The specific scope of application of the treaty (what types of judgments/awards are covered?)

✅Procedural requirements (documentation, certification, translation)

✅ Exceptions based on public policy of the place of execution

✅ Actual execution difficulty and time limit

✅ Execution program cost

✅ Defense grounds available to the person subject to execution

14 Key points in drafting arbitration clauses

1. Required elements

A valid arbitration clause must contain the following elements:

Expression of intention to arbitrate: Clearly express the intention to submit the dispute to arbitration for resolution.

**Arbitration Institution:**The institution designated to administer the arbitration proceedings.

**Arbitration Rules:**Specify the applicable procedural rules.

Seat: The legal place that determines the procedural law of the arbitration and the supervisory court.

2. Recommended elements

In addition to the necessary elements, it is recommended to clearly agree on: the number of arbitrators, the arbitration language, and the governing law of the arbitration agreement.

3. Not recommended practices

Disrecommendation 1 Arbitration and court jurisdiction clauses appear at the same time

In the same contract, if there are clauses "Disputes arising from this contract shall be submitted to the jurisdiction of XX court" and "Disputes arising from this contract shall be submitted to arbitration" at the same time, conflicts will arise, which may lead to the invalidation of the arbitration agreement or jurisdictional disputes.

Disrecommendation 2 Floating/fuzzy expression

"Arbitration in Singapore or Hong Kong"

"The place of arbitration shall be determined by negotiation between the parties."

Such statements may be controversial due to a lack of certainty.

Disrecommendation 3 The choice of the place of arbitration is inconsistent with convention

Lessons from the BNA v BNB case: The parties chose SIAC as the arbitration institution, but agreed on the seat of arbitration in Shanghai. This choice of arbitration seat was inconsistent with conventional practice. Such arrangements may trigger fundamental disputes over the validity of the arbitration agreement. It should be ensured that the choice of the seat of arbitration is consistent with common practice, or at least that there are no legal impediments to the arrangement.

Suggestion 4 Changing the name of the organization without authorization

The full official name of the arbitration institution must be used. Any modification (such as abbreviation, wrong name) may provide room for defense by the other party, claiming that "the arbitration institution does not exist" and challenge jurisdiction.

Not recommended five designated agency but other rules apply

In practice, we occasionally see clauses that designate an arbitration institution but require the application of the arbitration rules of another institution, for example:

"The dispute shall be submitted to SIAC for arbitration and the ICC Arbitration Rules shall apply" Such clauses may be interpreted as ad hoc arbitration rather than institutional arbitration, resulting in the agreement not being accepted by the agreed institution. The relevant principle was established in Insigma Technology Co Ltd v Alstom Technology Ltd [2009] SGCA 24. It is recommended to use the arbitration rules provided by the arbitration institution and not to mix and match them.

4. Golden Rule

⚠️ Use the official model clauses of the arbitration institution, fill in only the blanks (place of arbitration, language, number of arbitrators) and do not modify any core wording.

15 Drafting a summary of best practices

1. Things to do

✅ Use the organization’s official model clauses – don’t modify the core wording

✅ Fill in all blank fields (place of arbitration, language, number of arbitrators)

✅ Separately specify the governing law of the arbitration agreement

✅ The contract for the sale of goods expressly excludes CISG

✅ The exclusive jurisdiction clause uses the word "exclusive"

✅Consult a professional arbitration lawyer before signing a contract

2. Things to avoid

❌ Avoid multi-level clauses (negotiation → mediation → arbitration)

❌ Avoid pathological clauses (wrong organization name, conflicting clauses)

❌ Do not have both arbitration and litigation clauses in the same contract

❌ Don’t use “and/or” to float legal terms

❌ Don’t just copy the template without filling in the fields

❌ Do not choose ad hoc arbitration without experience

16 Practical case analysis

The following uses hypothetical cases to illustrate the selection strategy of applicable law and dispute resolution method:

Case 1: Chinese manufacturers export equipment to Southeast Asian buyers

Background: Company A in China exported industrial equipment to Company B in Singapore. The contract amount was US$3 million. The equipment was produced in China and delivered to Singapore.

Suggested solution:

(1) Applicable law: Chinese law (excluding CISG) - the equipment is produced in China, and Chinese law is more familiar and controllable in protecting manufacturers

(2) Dispute resolution: CIETAC arbitration is preferred - the lowest cost, familiar procedures, and the award can be enforced in Singapore in accordance with the New York Convention

(3) Arbitration language: Chinese

Analysis: Choosing CIETAC for arbitration has the lowest fees and the procedures are most familiar to the Chinese side. Enforcement of awards in Singapore does not become more complicated by choosing a Chinese arbitration institution – the New York Convention provides a clear legal framework for the enforcement of CIETAC awards in Singapore.

Case 2: Equity acquisition between Chinese investors and European target companies

Background: Chinese Company C acquired 100% equity of German Company D, with a transaction amount of EUR 50 million, involving complex terms such as representation guarantees and price adjustments.

Suggested solution:

(1) Governing law: German law or English law - the representation and warranty system for mergers and acquisitions transactions is relatively mature under both common law and German law.

(2) Dispute resolution: ICC arbitration, seat of arbitration in Paris or Singapore - high-value complex transactions are suitable for the ICC's award review mechanism

(3) Number of arbitrators: three - complex disputes are not suitable for sole arbitration

Analysis: Under Chinese law, the court takes a more cautious attitude towards whether the contract can be terminated due to breach of representation and warranty. It is actually more difficult for the buyer to claim to terminate the contract. The common law remedies for breach of representations and warranties are clearer and the rules for calculating damages are clearer. As a buyer, Company C may not obtain optimal protection if it chooses Chinese law.

Case Three: Technology Licensing between Chinese Enterprises and American Companies

Background: Chinese Company E obtained a technology license from American Company F, with an annual license fee of US$500,000 and a license period of 5 years.

Suggested solution:

(1) Governing law: Singapore law - to avoid possible punitive damages risks under U.S. law

(2) Dispute resolution: SIAC arbitration, seat of arbitration in Singapore - avoid out-of-court deposition procedures in US litigation

(3) It is clearly agreed that the arbitration procedure shall be governed by the IBA Evidence Collection Rules

Analysis: The cost of out-of-court deposition procedures in U.S. litigation is extremely high, and Chinese parties and witnesses are usually very uncomfortable with this kind of adversarial questioning. Even if the other party insists on arbitration in the United States, it should agree to apply the IBA discovery rules to limit the scope of out-of-court discovery. In addition, choosing U.S. law as the applicable law may face the risk of punitive damages, which should be avoided as much as possible.

Case 4: In cross-border transactions, the counterparty has assets in multiple jurisdictions

Background: Chinese Company G signed a long-term supply contract with Singaporean Company H, with a contract amount of RMB 50 million. Company H has assets in Singapore, Hong Kong and the Mainland.

Suggested solution:

(1) Governing law: Chinese law - the place of performance of the supply contract is in China

(2) Dispute resolution: HKIAC arbitration, place of arbitration in Hong Kong Analysis: The advantage of choosing HKIAC arbitration is that the award can be enforced in the Mainland in accordance with the Arrangement Concerning the Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region, and can be directly enforced in Hong Kong, and can also be enforced in Singapore in accordance with the New York Convention. In addition, HKIAC arbitration can use the Mainland's provisional measures arrangement to apply for protective measures from the Mainland courts, which has a unique advantage in preserving the other party's assets in the Mainland.

17 Detailed explanation of common misunderstandings

Myth 1: "Chinese law + Chinese arbitration is always most beneficial to Chinese companies"

This is the most common misconception. Chinese law does not provide optimal protection to Chinese companies in all types of transactions:

Representation and warranty in mergers and acquisitions: Under Chinese law, the courts take a more cautious attitude towards whether the contract can be terminated for breach of representation and warranty. It is actually more difficult for the buyer to claim to terminate the contract. Under common law, the buyer can choose different remedies depending on whether the breach is a "representation" or a "warranty", and the rules for calculating damages are also clearer.

Adjustment of liquidated damages: Chinese law has a high degree of support for liquidated damages. Even if it is determined to be too high, it will only be reduced rather than denied the effect. However, Article 585 of the Civil Code allows the court to adjust the liquidated damages if they are "excessively higher than the losses caused." In contrast, common law such as Singaporean law will directly deny its effectiveness after determining that a clause constitutes a penalty clause (penalty), rather than adjusting the amount; however, "liquidated damages" (liquidated damages) agreed upon by both parties are usually respected.

Recommendation: Before selecting the applicable law, you should consult a lawyer who is familiar with the relevant jurisdiction on the core rights protection issues of the specific transaction type.

Misunderstanding 2: "Hong Kong law and Singapore law are neutral choices"

This ignores the "implicit interconnections" between common law laws:

Shared case law: Hong Kong law, Singapore law, English law, Australian law, etc. are all common law systems, and a large number of legal principles originate from the common case law tradition. A lawyer practicing in Hong Kong will be familiar with the contract interpretation principles of Singapore law, but Chinese lawyers may need to learn them from scratch.

Information asymmetry: For a party that is familiar with common law, these "neutral" laws are actually its home court; for Chinese companies that are not familiar with common law, it is an away game.

Recommendation: If you really need to choose third-party law, you should evaluate the familiarity of both parties with the legal system and set aside a cost budget for hiring local lawyers.

Myth 3: “Arbitration must be more expensive than litigation”

This simple comparison ignores the special cost structure of cross-border disputes:

Foreign law discovery cost: If the litigation is in a Chinese court but foreign law applies, the foreign law discovery process may take several months and cost hundreds of thousands. Choosing an arbitrator who is familiar with the applicable law in arbitration can significantly reduce this cost.

Enforcement Costs: Uncertainty in cross-border enforcement of court judgments may result in the need for repeated litigation in multiple jurisdictions. Enforcement of arbitral awards is generally smoother under the New York Convention.

Appeal costs: Litigation may go through multiple levels of appeals, while arbitration is final.

Recommendation: When evaluating the cost of dispute resolution, the cost of the entire process should be considered comprehensively, rather than just comparing the filing fees.

Myth 4: “If you choose to apply the laws of a specific country, you don’t have to worry about CISG application.”

The application of CISG depends on the place of business of the parties and not necessarily on the choice of governing law:

Automatic application: When the business places of the buyer and seller are located in different CISG contracting countries, CISG may automatically apply and will not be excluded by choosing the domestic law of a certain contracting country.

Must be expressly excluded: If you do not want CISG to apply, you must clearly state in the contract: "This contract expressly excludes the application of the United Nations Convention on Contracts for the International Sale of Goods."

Recommendation: In the international contract for the sale of goods, it is important to clarify whether CISG applies and make corresponding exclusions or applicable statements.

Misunderstanding 5: “The fee award will not be too outrageous”

The lessons of VV v VW show that this is a dangerous assumption:

The principle of proportionality does not apply: In international arbitration, there is no proportionality limit between the cost award and the amount in dispute. The arbitral tribunal may award the losing party several times the amount in dispute.

Irreversible: A court will not set aside an arbitration award solely on the basis that the fee award is "excessive."

Recommendation: When assessing arbitration risks, worst-case cost awards should be taken into consideration rather than just calculating one's own expected costs.

Misunderstanding 6: "Multi-level dispute resolution is more comprehensive"

Setting up mandatory pre-negotiation or mediation procedures often does more harm than good:

Delay Tools: Dishonest parties can use pre-processing procedures to delay time and transfer assets.

**Focus of Dispute:**Whether the pre-processing procedures have been "completed" itself may become a focus of controversy.

It can be arranged independently: Friendly negotiation or mediation can be arranged independently by the parties after the dispute occurs, without the need for contract enforcement.

Recommendation: Mandatory multi-level dispute resolution clauses should be avoided unless there are special business reasons.

18 Core principles

Execution is the ultimate goal. Consider implementation feasibility first, and then design dispute resolution terms.

The choice of governing law relates to substantive rights. Different laws have significantly different provisions on remedies for breach of contract, implied terms, and representations and warranties, which directly affect the possibility of winning the lawsuit. Be wary of the "pseudo-neutral" option. There are implicit interconnections between common law laws.

Certainty is better than flexibility. Floating clauses and vague statements are the enemies of dispute resolution clauses.

Treat the U.S. factor with caution. The cost of out-of-court evidence collection procedures in U.S. litigation is staggering, and you may face punitive damages under U.S. law.

Expense risk is the core variable. The "losing party bears costs" rule may result in cost compensation far exceeding the amount in dispute.

Use official model terms. Do not modify the core wording of the arbitral institution model clause.

Interprofessional collaboration is essential. Non-litigation lawyers and corporate legal counsel should take the initiative to consult colleagues or peers with arbitration and litigation experience when drafting dispute resolution clauses.

About the author: Shaun Wong is a Singaporean barrister, international arbitrator and international mediator. He is good at handling various cross-border complex commercial dispute cases involving China.

Copyright Statement: Free reprinting is allowed provided that the original text is complete and the source and author are indicated

Appendix 1: Model Clauses of Major Arbitration Institutions

SIAC (Singapore International Arbitration Center)

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Center ("SIAC") in accordance with the SIAC Rules for the time being in force.

The seat of the arbitration shall be Singapore.

The Tribunal shall consist of [one/three] arbitrator(s).

The language of the arbitration shall be [ ].

HKIAC (Hong Kong International Arbitration Center)

Any dispute arising out of or relating to this contract shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Center (HKIAC) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted.

The seat of arbitration shall be Hong Kong.

The number of arbitrators shall be [one/three].

The arbitration proceedings shall be conducted in [ ].

ICC (International Court of Arbitration of the International Chamber of Commerce)

All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

The seat of the arbitration shall be [ ].

The number of arbitrators shall be [one/three].

The language of the arbitration shall be [ ].

LCIA (London Court of International Arbitration)

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause. The seat of arbitration shall be London. The number of arbitrators shall be [one/three].The language of the arbitration shall be [ ].

CIETAC (China International Economic and Trade Arbitration Commission)

Any dispute arising out of or related to this contract shall be submitted to the China International Economic and Trade Arbitration Commission for arbitration in accordance with the arbitration rules currently in effect at the time of application for arbitration. The arbitration award is final and binding on both parties.

The place of arbitration is [Beijing/Shanghai/Shenzhen/Hong Kong].

The arbitral tribunal shall consist of [one/three] arbitrators.

The arbitration language is [ ].

Appendix 2: Core terminology comparison table

This article is general information and not legal advice. Specific matters require assessment by appropriately qualified professionals.