Can a contract with a Chinese company be governed by English law?

A contract between a foreign and a Chinese company may choose English or any other foreign law, and that law need not be connected to the deal. Chinese mandatory rules apply regardless. Two companies registered in China, your own subsidiary included, cannot choose foreign law. In a Chinese court, the party that chose foreign law must prove it.

The draft from your Chinese customer says Chinese law governs. Your own template says English law. Before either side spends goodwill on that clause, it helps to know what the English-law choice buys in China: it decides how the contract is read and what a breach is worth. It does not switch off China’s foreign exchange or competition rules. In a Chinese courtroom it also comes at a cost, because every English judgment you rely on must be produced in full.

For a sale of goods, the clause may not even decide which rules apply. China is one of 97 states party to the UN Convention on Contracts for the International Sale of Goods (CISG), which governs sales between businesses in different member states.^⁠[1,2] The United Kingdom has never joined it. So “English law” in a sale to China can sit on top of a treaty the UK never joined.

When can a contract with a Chinese company choose a foreign law?

Yes, when the contract is foreign-related (涉外). The parties to a foreign-related contract may choose the law that governs it (Choice of Law Act, Article 41), but the choice must be made expressly.^⁠[3] The Supreme People’s Court treats a relationship as foreign-related when a party is foreign or habitually resident abroad, or when the subject matter, or the facts that create the contract, are outside China. Its list ends with “other circumstances”, so it is not closed.^⁠[4]

The chosen law does not have to be connected to the deal. A German company and a Chinese one may choose Singapore law, and a Chinese court will not set the choice aside because neither of them is in Singapore.^⁠[4]

Contract	Foreign law?	Why
Your company abroad sells to a Chinese company	Yes	One party is foreign
Your Chinese subsidiary and its foreign parent	Yes	One party is foreign
Your Chinese subsidiary and a Chinese customer, performed in China	No	Both are registered in China and nothing on the list is abroad
An equity or cooperative joint venture contract performed in China	No	Chinese law is imposed by Civil Code Article 467
Exploring and developing natural resources in China with a Chinese partner	No	Civil Code Article 467

Our Shanghai subsidiary signs with Chinese customers. Can it use English law?

Not where nothing else in the deal is abroad. A wholly foreign-owned enterprise (WFOE, 外商独资企业) is an enterprise registered in China under Chinese law, whoever owns it.^⁠[5] Its sale to a Chinese customer, delivered and paid for in China, meets none of the Supreme People’s Court’s tests. A choice of law that Chinese law does not authorise is void. A foreign link created on purpose to escape China’s mandatory rules has no effect either.^⁠[4]

So the group’s contract with its own subsidiary can choose English law, and the subsidiary’s sales contracts cannot. English law has a milder version of the same idea. Where everything else in a contract sits in one country, choosing another country’s law does not displace the first country’s mandatory rules (Rome I, Article 3(3)).^⁠[7]

Which Chinese rules apply whatever the contract says?

China’s mandatory rules (强制性规定) apply to a foreign-related contract directly, whichever law it chose.^⁠[3] The Supreme People’s Court names the areas: protection of workers, food and public health safety, the environment, foreign exchange control and financial security, and anti-monopoly and anti-dumping rules. The list leaves room for others.^⁠[4]

Two of those areas reach an ordinary sale. The checks a Chinese bank runs before paying a foreign seller fall under foreign exchange control, set out in how Chinese customers pay foreign companies. A clause fixing a Chinese distributor’s resale price is tested under the Anti-Monopoly Law, as appointing a Chinese distributor explains. An English-law clause changes neither.

Separately, a foreign law is not applied where applying it would harm China’s public interest, and Chinese law is applied instead.^⁠[3]

What happens when a Chinese court has to apply English law?

The party that chose English law must prove it. A court, an arbitral body or an authority establishes foreign law, and parties who chose it must provide it (Choice of Law Act, Article 10).^⁠[3] Since 1 January 2024 the Supreme People’s Court has said what that takes. For a case-law system such as England’s, the full text of every judgment relied on must be filed. A party that misses the court’s deadline without good reason may find the foreign law treated as unascertainable, and Chinese law then decides the case.^⁠[3,8]

The court cannot give up on foreign law only because a party did not help, and it has other routes, including treaty channels and its own expert committee. The cost of proving the law follows what the parties agreed. Otherwise the court divides it in its judgment.^⁠[8] Chinese courts work in Chinese, and a foreign-language document filed as evidence needs a Chinese translation.^⁠[9]

Say an Adelaide wine exporter sells to a Shanghai importer under a contract choosing English law and a Shanghai court. On 1 March, with AUD 180,000 still unpaid, the exporter sues. The importer says the wine arrived late. Now the exporter has to put the English rules on late delivery before the court, judgment by judgment, with a Chinese translation of each. If the exporter misses the deadline without good reason, the court may decide the claim under Chinese law, the law the clause was chosen to avoid.

An arbitral tribunal starts from the same place. CIETAC applies the law the parties agreed, and decides the law itself only where they agreed none or their choice conflicts with mandatory provisions.^⁠[10] What the court and the arbitral routes cost, and where each can be enforced, is in arbitration or a Chinese court.

We sell goods. Does an English-law clause keep the UN sales convention out?

Not clearly. The CISG governs a sale of goods between parties whose places of business are in different member states.^⁠[1] Where it applies, a Chinese court gives it priority over Chinese law, except for provisions China has reserved.^⁠[11] It covers how the contract is formed and the seller’s and buyer’s rights and duties: delivery, conformity of the goods, payment and remedies.^⁠[1]

Seller’s place of business	CISG member?	Sale to a Chinese buyer
Australia, Germany, Japan, Singapore, the United States, New Zealand	Yes	Governed by the CISG unless the parties exclude it
United Kingdom	No	Outside it before a Chinese court: China declared it is not bound by Article 1(1)(b), the route that would bring the convention in through choice-of-law rules

The parties may exclude the convention, and a Chinese court upholds an exclusion the convention allows.^⁠[1,11] Neither the convention nor the Supreme People’s Court’s interpretation on applying treaties says whether naming English law, the law of a state outside the convention, is enough to do that. The Adelaide exporter’s clause therefore leaves open whether its sale runs on the CISG or on English sale of goods law. An express exclusion, or an express choice to keep the convention, does not depend on how that question is answered.

Our contract says nothing about governing law. Which law applies?

The court chooses. Without a choice, the contract is governed by the law of the place where the party whose performance best characterises it habitually resides, or by another law more closely connected to the contract.^⁠[3] The parties can still agree a law, or change the one they chose, until argument ends at first instance. If both sides simply argue under the same country’s law without objecting, the court may treat that as their choice.^⁠[4]

What is still open about English-law clauses in China?

As at 8 October 2026, three points remain open:

• Whether choosing the law of a state outside the CISG, England included, excludes the convention from a sale between two member states.
• How Civil Code Article 467 applies to a joint venture formed as an ordinary company. The article still names equity and cooperative joint venture contracts, but the laws that created those forms were repealed on 1 January 2020, with five years for existing ventures to convert.^⁠[5,6]
• What else counts as “other circumstances” on the court’s foreign-related list. The item exists so that a court can find a foreign element the list does not name.^⁠[4]

The governing law is one of the seven points in what to check in a China contract before signing. A contract commercial review reads the governing-law clause beside the forum and the language clause, and sets out what each means for the price, payment and remedies the contract is meant to secure.

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