Arbitration clauses are often described as the root of international contracts, however their effectiveness depends heavily on precise drafting. Even minor errors, such as the misnaming of an arbitral institution can raise questions about enforceability and, in some jurisdictions, may completely undermine the parties’ agreement to arbitrate.
In such a case, courts across different jurisdictions have been tasked with balancing two competing principles:
1. the respect for statutory requirements; and
2. giving effect to the parties’ clear intention to arbitrate.
This tension came into focus in Grand Ocean & v Huaxicun Offshore, where the Hong Kong CFI had to decide whether an arbitration clause governed by PRC law, but referring to a non-existent arbitral institution, could survive.
The clause named “江蘇仲裁委員會,” translated as the “Jiangsu Arbitration Tribunal.” However, no such body exists. In Jiangsu province, only institutions such as the CIETAC Jiangsu Arbitration Center & the Nanjing Arbitration Commission are recognised. Because Article 16 & 18 of PRC law requires arbitration agreements to expressly designate a valid arbitral commission, and renders any agreement failing to do so void, the Court held that the clause was invalid.
This was not the first time PRC law had led to such an outcome. In Klöckner Pentaplast v Advance Technology, a clause governed by PRC law was found void for failing to name an arbitral institution, even though it specified the ICC Rules, the seat in Shanghai, and German governing law. PRC courts have consistently treated the designation of an arbitral commission as a mandatory element, with little room for judicial flexibility.
The strict PRC approach stands in contrast to Singapore law. In Re Shanghai Xinan Screenwall, the Singapore Court was confronted with an arbitration clause that named a non-existent “China International Arbitration Center.” Rather than invalidate the agreement, the Court reasoned that rational commercial parties would not deliberately choose a fictitious institution. By matching the name to an existing institution, the Court identified CIETAC as the intended body, thus saving the clause. Interestingly, by the time the matter reached court, CIETAC had already administered the arbitration & issued an award, further reinforcing the enforceability of the clause.
The divergence between Grand Ocean & Re Xinan raise the broader question of whether courts should infer the institution intended when faced with misnomers. In Jiangsu province, multiple arbitral institutions exist, and it may be possible to match the name “Jiangsu Arbitration Tribunal” to one of them. However, courts must avoid speculation beyond what the words and context support. Singapore’s reasoning suggests that, so long as the parties’ intention can objectively be discerned, courts should strive to give effect to arbitration clauses rather than nullify them (a typical use of the effective interpretation doctrine).
