Insurance institutions pay close attention to review and design
the terms and conditions of business when they conduct overseas
invest transaction, however, the terms and conditions of governing
law and dispute resolution should not be underestimated.
In recent years, it is more important for contracting parties to
draft clauses of governing law and dispute resolution deliberately,
rather than routinely, with customization for each contract with an
increasing investment of insurance funds, especially after Ping An
Life Insurance Company of China, Limited and Ping An Insurance
(Group) Company of China, Limited filed a request for arbitration
against Belgium with ICSID (For more details, please check (https://icsid.worldbank.org/apps/ICSIDWEB/cases/Pages/casedetail.aspx?CaseNo=ARB/12/29&tab=PRO).
Insurance institutions should pay more attention on choosing the
governing law and the method of dispute resolution. So far, the
common clauses of governing law and dispute resolution provided in
the overseas investment documentation made by insurance
institutions are as follows,
The subscription file signed by insurance institutions generally
stipulates the governing law is the place where investment
funds' is registered if the investment object of Insurance
funds' is investment funds, eg. the U.S.A., the British Virgin
Islands or the Cayman Islands. Therefore, both parties choose the
court where the investment funds registered as the place of
jurisdiction if litigation is used to resolve the conflicts between
them. In the majority of cases, there is little room for insurance
institutions to negotiate an alternative option on governing law
and dispute resolution with the fund manager for the ratio of
insurance funds to investment funds is relatively small or as a
co-investment. Insurance institutions could identify the clauses of
governing law and dispute resolution in the investment
documentation with relevant transaction parties under the condition
that the transaction is involved in the case that insurance funds
directly into overseas stock or real estate investments. Pursuant
to Law of the People's Republic of China on Application of
Laws to Foreign-Related Civil Relations, Article 3 and Article
41 provided that Parties concerned may, in accordance with the law,
expressly choose laws applicable to foreign-related civil
relations. Parties concerned may choose the laws applicable to a
contract by agreement. Where the parties have made no such choice,
laws of the habitual residence of the party whose performance of
obligations best reflects the characteristics of the contract or
other laws having the most significant relationship with the
contract shall apply. Thus, it is advisable for CIRC to concern and
supervise insurance institutions to pay more attention on the
choice of governing law in external investment.
A majority of insurance disputes are resolved by either
litigation or arbitration (within or outside China) in the
investment process of insurance funds. In this context, insurance
institutions should take all factors into account, such as the
country where parties reside, the law system of the country where
parties reside and the parties' respective bargaining power
etc. Insurance institution should fully consider the efficiency and
fairness of the foreign court system, recognition and
enforceability of the foreign judgment if one party suggests a
foreign judicial system would be used to resolve the dispute
between the parties. By contrast, as most investment destination
countries and China are member states of the Convention on
Recognition and Enforcement of Arbitration Award of Foreign
Arbitration Institution, considering the convenience and
recognition regarding disputes resolution to both parties, we
recommend that China International Economic and Trade Arbitration
Commission or China International Economic and Trade Arbitration
Commission Hong Kong Arbitration Center should be the two principal
arbitration bodies that handle foreign-related arbitrations.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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