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.

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