Foreign-related contract disputes are resolved primarily through two channels: arbitration and litigation. Both are lawful means recognised by law. The choice depends on the terms of the contract and the intention of the parties: where the contract contains a valid and enforceable arbitration clause, the dispute should in principle be submitted to arbitration; where there is no arbitration agreement, the dispute may be brought before a people’s court in accordance with the law. The operational procedures for arbitration and for litigation are set out separately in Parts 2 and 3 of this article respectively.
1. Arbitration is based on a valid arbitration agreement reached by the parties. The dispute is heard by an arbitral tribunal composed of arbitrators chosen by the parties.
2. Arbitration adopts a final-award system: once an award is rendered, it becomes legally binding immediately, and the parties may not bring an action before a people’s court on the same dispute again.
3. Arbitration is conducted through non-public (in camera) hearings as a matter of principle, which offers strong confidentiality.
4. An arbitral award may be recognised and enforced in more than 170 countries and regions in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).
To apply for arbitration, the parties must have a valid and enforceable arbitration clause in the contract, or must have reached a written arbitration agreement afterwards, and must clearly agree to submit the dispute to a particular arbitral institution. If the arbitration clause or agreement is unclear in its terms, it may give rise to jurisdictional disputes and may even make it impossible to resolve the dispute through arbitration.
1. China International Economic and Trade Arbitration Commission (CIETAC): China’s first and most representative arbitration institution for foreign-related matters. It accepts international and domestic economic and trade disputes as well as international investment disputes, and maintains sub-commissions or arbitration centres in Shanghai, Shenzhen, Hong Kong and elsewhere.
2. Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Centre, SHIAC): a well-known arbitration institution established against the backdrop of Shanghai’s status as an international financial centre, with strong capability in handling foreign-related disputes.
3. Beijing Arbitration Commission (Beijing International Arbitration Centre, BAC/BIAC): highly internationalised; its awards have been recognised and enforced in a number of countries and regions abroad.
4. Others: the Shenzhen Court of International Arbitration (SCIA), the arbitration commissions of the municipalities directly under the central government and of provincial capitals, as well as maritime arbitration institutions, may all accept foreign-related disputes in accordance with the law.
The newly amended Arbitration Law of the People’s Republic of China was adopted on 12 September 2025 and will take effect on 1 March 2026. The amendment introduces the concept of the “seat of arbitration”, partially opens up ad hoc arbitration in foreign-related matters (applicable to foreign-related maritime disputes and in specific areas such as the pilot free trade zones and the Hainan Free Trade Port), and broadens the scope of foreign-related arbitration cases, providing parties to foreign-related disputes with more flexible and more internationalised arrangements for dispute resolution.
The timeframe for arbitration depends on the arbitration rules applicable. Taking major institutions such as CIETAC as an example, it usually takes from six months to one year from the constitution of the arbitral tribunal to the rendering of an award. As arbitration is final and there is no second-instance procedure, the timeframe is generally relatively controllable.
1. Litigation is the exercise of judicial power by a people’s court in accordance with the provisions of law. Where the parties have not agreed on an arbitration clause, or where the agreed arbitration clause is invalid, they need to bring an action before a people’s court in accordance with the law to resolve the dispute; where the contract contains a valid and enforceable arbitration clause, the dispute should be submitted to arbitration in accordance with that clause.
2. Litigation is conducted through public hearings as a matter of principle and generally follows a two-instance final system (a case is concluded after two instances).
3. After a judgment takes effect, if one party fails to perform it, the other party may apply to a people’s court for compulsory enforcement in accordance with the law.
To bring a civil action in a people’s court, the plaintiff must satisfy the conditions for filing prescribed by the Civil Procedure Law: the plaintiff must be a citizen, legal person or other organisation having a direct interest in the case; there must be a clearly identified defendant; there must be specific claims, facts and grounds; and the case must fall within the scope of civil actions accepted by the people’s courts and within the jurisdiction of the court in which the action is brought. Where, upon examination, the people’s court finds that the conditions for filing are met, it will docket and accept the case.
Level (hierarchical) jurisdiction: First-instance foreign-related civil and commercial cases are in principle under the jurisdiction of basic people’s courts. Intermediate people’s courts have jurisdiction over foreign-related cases involving relatively large amounts in dispute — the intermediate courts in the Beijing, Tianjin, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong and Chongqing districts have jurisdiction over foreign-related cases where the amount in dispute is RMB 40 million or more (including the figure itself), and the intermediate courts in other districts over those where the amount is RMB 20 million or more (including the figure itself); high people’s courts have jurisdiction over first-instance foreign-related cases where the amount in dispute is RMB 5 billion or more (including the figure itself), or other cases with significant impact within their respective districts. Foreign-related maritime, intellectual property, and ecological and environmental damage disputes are handled in accordance with the rules on special jurisdiction.
Territorial jurisdiction and connecting factors: An action against a citizen is under the jurisdiction of the people’s court of the place where the defendant is domiciled (where the domicile and habitual residence differ, of the place of habitual residence); an action against a legal person or other organisation is under the jurisdiction of the people’s court of the place where the defendant is domiciled; an action arising from a contract dispute may also be brought in the people’s court of the place of performance of the contract. Where an action other than one relating to personal status is brought against a defendant who has no domicile within the territory of China, if the place where the contract was signed, the place of performance of the contract, the location of the subject matter of the action, the location of the property available for attachment, the place where the tort was committed or the domicile of the representative office is within the territory of China, the case may be under the jurisdiction of the people’s court of the corresponding place; where a foreign-related civil dispute has any other appropriate connection with China, it may also be under the jurisdiction of a Chinese court (Article 276 of the Civil Procedure Law).
Agreement on jurisdiction: Under the domestic rules, the parties to a dispute arising from a contract or other property rights may, by written agreement, choose the court of a place that has an actual connection with the dispute to have jurisdiction (Article 35 of the Civil Procedure Law). Under the foreign-related rules, where the parties to a foreign-related civil dispute agree in writing that a Chinese court shall have jurisdiction, the dispute may be under the jurisdiction of a Chinese court; following the 2023 amendment, no actual connection with the dispute is required, provided that the provisions on exclusive jurisdiction are not contravened (Article 277).
Jurisdiction by appearance: Where a party does not raise an objection to jurisdiction and files a defence on the merits or brings a counterclaim, the people’s court is deemed to have jurisdiction over the foreign-related dispute, except where the provisions on level jurisdiction and exclusive jurisdiction are contravened (Article 278 of the Civil Procedure Law).
Exclusive jurisdiction: The following disputes must be under the jurisdiction of a people’s court and may not be excluded by an agreement choosing another court or by arbitration (Article 279 of the Civil Procedure Law): (1) actions arising from disputes concerning the incorporation, dissolution and liquidation of a legal person or other organisation established within the territory of China, and the validity of resolutions adopted by such a legal person or other organisation; (2) actions arising from disputes concerning the validity of intellectual property rights granted upon examination within the territory of China; and (3) actions arising from disputes concerning the performance within the territory of China of contracts for Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, and Chinese-foreign cooperative exploration and development of natural resources.
1. Statutory trial periods: A case under the ordinary procedure of first instance should generally be concluded within six months from the date of docketing, which may be extended with approval under special circumstances; an appeal against a judgment should be concluded within three months from the date of docketing of the second instance.
2. Important special rule: The time limits for the people’s courts to try foreign-related civil cases are not subject to the above first-instance and second-instance trial periods (Article 287 of the Civil Procedure Law), because service of process abroad and the taking of evidence overseas often require more time.
3. The particularities of service abroad: Service on a party outside the territory of China may be effected through international treaties, diplomatic channels, Chinese embassies or consulates, postal service, public announcement and other means; steps such as service by public announcement may significantly extend the trial period.
4. Practical reference: A foreign-related lawsuit usually takes from one to two years from docketing to a judgment of first instance; if it proceeds to a second instance, the period may be longer.
Under Article 41 of the Law of the People’s Republic of China on the Application of Laws to Foreign-Related Civil Relations, the parties may agree on the law applicable to the contract. Accordingly, in a foreign-related contract the parties should preferably specify the governing law in the contract, so as to stabilise their expectations and avoid disputes.
Where the parties have not chosen the law applicable to the contract, the law of the place of habitual residence of the party whose performance of obligations best characterises the contract shall apply, or the law of the place that has the closest connection with the contract.
The foreign law chosen by the parties must not contravene the mandatory provisions of Chinese law, nor prejudice the social and public interests of China. For specific types of contracts performed within the territory of China, such as contracts for Chinese-foreign equity joint ventures and Chinese-foreign contractual joint ventures, the relevant disputes often have to be governed by Chinese law.
For a foreign-related contract, it is advisable to specify both the governing law and the language of the contract at the same time, for example agreeing that the laws of the People’s Republic of China apply and that the Chinese version prevails, so as to avoid disputes over the governing law and the interpretation of the text after a dispute has arisen.
When a foreign party (including a foreign natural person or a foreign enterprise) brings an action or defends in a Chinese court, it usually needs to retain a Chinese practising lawyer as its litigation representative, because foreign lawyers may not appear in Chinese courts as practising lawyers of China. In arbitration proceedings, the parties may appoint representatives, and in practice it is likewise advisable to retain a Chinese lawyer who is familiar with Chinese law and arbitration rules.
1. Select a lawyer and sign an engagement agreement, specifying the scope of authority, the scope of representation and the legal fees.
2. Execute a power of attorney setting out the matters entrusted and the scope of authority; where the litigation representative is to admit, waive or modify the claims, reach a settlement, or file a counterclaim or an appeal on behalf of the client, the client’s special authorisation is required.
3. Complete the evidentiary formalities for the power of attorney (a key step): a power of attorney executed within the territory of China may be signed in the presence of a judge of the people’s court, without the need for notarisation and authentication; a power of attorney executed outside the territory of China, or dispatched or delivered from abroad, should be notarised by a notary public in the country where it is executed and authenticated by the Chinese embassy or consulate in that country, or comply with the evidentiary formalities provided for in the treaty concluded between China and that country. Where the country concerned is a contracting party to the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents (the Hague Convention), an “apostille” may be used in lieu of consular authentication.
4. Provide identity documents: a foreign natural person submits identity documents such as a passport; a foreign enterprise submits documents evidencing its registration or legal personality that have been notarised by a notary public in the country concerned and authenticated by the Chinese embassy or consulate (or bearing an apostille), together with documents evidencing the authority of the person authorised to represent the enterprise in the proceedings.
5. The lawyer submits the power of attorney formalities, the statement of claim (or statement of defence) and the evidence materials together to the people’s court or the arbitral institution.
A power of attorney in a foreign language and evidence in a foreign language should generally be accompanied by a Chinese translation when submitted.
Legal fees are agreed between the parties in the engagement agreement. Contingency fee arrangements are subject to relatively strict restrictions, or are generally not available, in foreign-related commercial cases, and the specifics are governed by the terms of the engagement agreement.
1. Limitation of actions: The limitation period for general civil rights is three years (Article 188 of the Civil Code), commencing from the date on which the right holder knows or should have known of the infringement of its rights and of the obligor. For disputes arising from contracts for the international sale of goods and contracts for technology import and export, the limitation period for bringing an action or applying for arbitration is four years (Article 594 of the Civil Code). Rights should be asserted in a timely manner to avoid the expiry of the limitation period.
2. Property preservation: To prevent the other party from transferring its assets, a party may apply for property preservation before or during the action in accordance with the law (where the dispute is submitted to arbitration, the arbitral institution may refer the preservation application to the intermediate people’s court of the place of the respondent’s domicile or the location of its property for a ruling), but security is usually required.
3. Evidence and translation: Evidence formed outside the territory of China usually needs to go through notarisation and authentication (or apostille) formalities and be accompanied by a Chinese translation.
4. Recognition and enforcement of judgments and awards: Where a judgment of a Chinese court or a foreign-related arbitral award needs to be enforced abroad, a party may apply to a competent foreign court for recognition and enforcement, or proceed in accordance with international treaties or the principle of reciprocity. A foreign arbitral award may, in accordance with the New York Convention, be recognised and enforced by the intermediate people’s court of the place of the domicile of the party against whom enforcement is sought or the location of its property. A foreign court judgment must, in accordance with international treaties or the principle of reciprocity, be recognised and enforced by a competent Chinese intermediate people’s court.
In handling foreign-related contract disputes, agreeing in advance is far more important than remedying afterwards. Clearly specifying in the contract at the time of signing the arbitral institution (or the competent court), the applicable law, the language of the contract and the method of service can save considerable time and cost in any future dispute resolution. If a dispute has already arisen, it is advisable to consult a
For the official statutory texts, consult the Supreme People’s Court. Read more in our legal insights.
This article is provided for general reference only and does not constitute legal advice. The handling of an individual case involves the specific terms of the contract and judgments on jurisdiction and governing law; please consult a professional lawyer in light of your own circumstances.
1. Civil Procedure Law of the People’s Republic of China (amended in 2023)
2. Arbitration Law of the People’s Republic of China (revised in 2025, effective from 1 March 2026)
3. Law of the People’s Republic of China on the Application of Laws to Foreign-Related Civil Relations
4. Civil Code of the People’s Republic of China
5. Provisions of the Supreme People’s Court on Several Issues Concerning Jurisdiction over Foreign-Related Civil and Commercial Cases (Fa Shi [2022] No. 18)
6. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention)
Published: October 17, 2026
By Siqi Ma , Attorney at Law