Retrial Ruling of the Supreme People's Court Settles the Disputes on the Jurisdiction over Joint Tort Cases - Litigation or Arbitration

Abstract

A factual pattern forming the basis for a referral to arbitration arising from an appropriately worded arbitration clause may also give rise to tortious claim(s) brought jointly against parties and non-parties to the relevant agreement. In such cases, a recent judgment of the People's Republic of China's Supreme Court, known as the Retrial Decision, suggests that it is possible to circumvent referring the dispute to arbitration by showing prima facie evidence of the existence of the joint tort claim against signatories and non-signatories. The stark implication of the decision is that it raises the risk of disputes being referred to the courts, irrespective of an arbitration clause existing between certain parties to the proceedings. This article considers the background to the decision and its implications, and then undertakes a comparative analysis of the materially different approach to such cases adopted in other jurisdictions; namely, England, Hong Kong, Singapore and Canada. The article concludes by considering the implications of the Retrial Decision, the concerns which it raises, and sets out the authors' thoughts on how parties can address the risks which the judgment raises. It is often the case that commercial parties chose arbitration, as an alternative to litigation, as the preferred dispute resolution mechanism. However, when disputes arise between the parties, one or more of them may pursue litigation in a bid to avoid giving up a ‘home advantage’ in a local court system. This has led to cases where a signatory to an arbitration clause has brought a joint tort claim in the courts against another party to the arbitration clause, in addition to non-signatories. In the People's Republic of China (the ‘PRC’), there has been some uncertainty as to whether the courts have jurisdiction over such composite tort disputes, notwithstanding the arbitration clause. This is partly due to the divergent views presented in the Supreme People's Court judgments considering the issue. Nonetheless, a decision recently handed down by the Supreme People's Court (‘the Retrial Decision’) has given a clear answer to the question. This Article considers the decision, which will undoubtedly impact upon the future judicial practice of the PRC courts, and compares the approach to that adopted in other common law systems; namely, England, Hong Kong, Singapore and Canada.1 The Article concludes by considering the implications of the Retrial Decision and the concerns which it raises.