Did you agree on dispute jurisdiction correctly?

In order to obtain the convenience regarding litigations, many companies would agree on a specific dispute jurisdiction court in the contract, such as “under the jurisdiction of the court where the plaintiff is located”, “under the jurisdiction of the court where the contract is signed”, and so on. However, in judicial practice, such agreement might be deemed as invalid.

Article 35 of the “Civil Procedure Law” stipulates: “The litigants of a contract dispute or other property rights dispute may agree in writing on selection of the court at the location of the defendant’s domicile, place of performance of contract, place of execution of contract, address of the plaintiff, location of the subject matter, etc. or a venue which has actual connection with the dispute to be the court which has jurisdiction, but shall not violate the provisions hereof on grade jurisdiction and exclusive jurisdiction.” Therefore, the agreed jurisdiction shall meet two preconditions. Firstly, the agreed jurisdiction court shall be located in the place with actual connection to the dispute. Secondly, the agreement on jurisdiction shall not violate the provisions of hierarchical jurisdiction and exclusive jurisdiction. Since the rules regarding hierarchical jurisdiction and exclusive jurisdiction are clear, this article would only focus on how to determine the “location with actual connection to the dispute”.

Article 35 of the “Civil Procedure Law” stipulates five types of locations regarding to the determination of the “locations with actual connection to disputes”. If the agreed court does not belong to one of these 5 types and the plaintiff failed to prove there is any actual connection with the dispute, such agreement will be deemed invalid. In the case (2019) Zui Gao Fa Min Xia No. 76, the Supreme Court held that, “Although the Performance Service Contract stipulates that any party can file a lawsuit to the Chaoyang district court of Beijing in case of disputes, there is no actual connection between Chaoyang district of Beijing and the dispute involved in the case, and the jurisdictional clause is invalid. In this case, the jurisdictional court should be determined according to statutory jurisdiction.”

If both parties have chosen one of the five types of locations as the jurisdictional court, there are several issues shall be highlighted.

Firstly, regarding the defendant’s domicile and the plaintiff’s domicile, in practice, there are two special circumstances, which are the domicile of a party stated in the contract is different from its registered address, or its registered address has been changed at the time of filing a lawsuit.

Article 3 of the “Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law” stipulates that “… the domicile of a legal person or any other organization refers to the place where the main office of the legal person or any other organization is located. Where the place of main office of a legal person or any other organization cannot be determined, the registration place of the legal person or any other organization is the domicile thereof.” Therefore, in judicial practice, if the main office of a party is the address specified in the contract, there will be no dispute, but if there is no evidence to prove that the main office of a party is the address specified in the contract, such agreed jurisdiction will be doubted. In the case (2023) Zui Gao Min Fa Xia No. 46, the Supreme Court held that although the contract stated that the defendant’s address was located in Binjiang district, Hangzhou, there was no evidence to prove that the address was the defendant’s main office during the prosecution and acceptance stages of this case, so this case should be transferred to the court of Minhang district, Shanghai, where the defendant’s registered address is located. In the case (2023) Jing 03 Min Xia Zhong No. 375, the Beijing Third Intermediate court held that, “Both parties had no objection to the defendant’s address stated in the contract, and it could be inferred that the address was the defendant’s main office. Therefore, it should be under the jurisdiction of the court of the place where the address stated in the contract is located.” In view of the above two typical cases, it can be seen that there are disputes regarding such agreed jurisdiction in judicial practice. If the agreed jurisdiction is the court located in the defendant’s domicile or the plaintiff’s domicile, it is recommended to prescribe in the contract that the domicile shall be the registered address. In addition, if the address of any party prescribed in the contract is not its registered address, it is recommended to state as the “mailing address” or “contract address.”

In judicial practice, there is no dispute regarding the second situation. Article 32 of the “Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law” prescribes that, ” Where a jurisdiction agreement stipulates the jurisdiction of the  court in the domicile of one party, but the domicile of the said party changes after the conclusion of the agreement, the lawsuit shall come under the jurisdiction of the court in the place where the said party has his/her domicile at the time of conclusion of the agreement, unless otherwise agreed by the parties.”

Secondly, regarding the place of contract signing, according to Article 493 of the “Civil Code”, the parties may agree on the place of contract signing. The problem is that if both parties have agreed on a specific place of contract signing which has no actual connection with the dispute, whether such agreement is valid? There are disputes in judicial practice. In the case (2023) Zui Gao Min Fa Xia No. 70, the Supreme court held that the agreed jurisdiction was effective, stating that “Generally speaking, if the parties enter into a contract in writing and the place of signing or stamping as agreed in the contract does not match the actual place of signing or stamping, the court shall recognize the agreed place of signing as the place of signing of the contract. The jurisdictional agreement of the agreement involved in the case is specific and clear. Since both the plaintiff and the defendant had not brought any objection to the jurisdictional agreement, the court of Hongkou district, Shanghai, ruled to transfer the case to the court of Banan district, Chongqing for handling on the grounds that ‘Hongkou district is not the location of the domicile of plaintiff, defendant, or any third party in this case, so it has no relevance to the contract in this case’. Such ruling is inappropriate.” However, in the case (2023) Zui Gao Min Fa Xia No. 36, the Supreme court held that, “In the absence of evidence to prove the existence of an actual connection, if the agreed jurisdiction is valid, it may lead a large number of cases to run to the agreed court, which may disrupt the normal order of civil litigation jurisdiction. Therefore, the agreement jurisdiction clause is invalid.” In view of the above two typical cases, it can be seen that there are disputes regarding such agreed jurisdiction in judicial practice. It is recommended to choose a place of contract signing which has actual connection with the performance of the contract.

Thirdly, regarding the place of contract performance, as Article 18 and Article 20 of the “Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law” provide many provisions on how to determine the place of contract performance for different contractual relationships, there are still many different opinions in judicial practice, so this article will not elaborate on them one by one.

To sum up, it is recommended not to stipulate that “the jurisdictional court is the place of performance of the contract” only, but to add the reason on why the place is the place of performance of the contract.