Drawing the fuzzy line: arbitrability of dissolution-related disputes in China

Abstract The dissolution of a Sino-foreign joint venture can lead to high-stakes disputes between the company’s shareholders, who often have pre-agreed arbitration clauses in their joint venture contract or the constitutional documents of the joint venture company. However, as the dissolution and liquidation of a company involves the termination of the company’s legal capacity and will thus have an effect in rem, whether or not (and to what extent) such a dispute is capable of being settled by a private tribunal invites controversy. This article examines the various reply letters, meeting minutes and judgements handed down by the Chinese courts in an attempt to draw the line between the power of arbitral tribunals and the power of the courts when it comes to dissolution-related disputes under Chinese law. Three sets of dichotomies are set out to provide an analytical framework on this issue: first, disputes arising during the liquidation process (arbitrable) vs disputes leading to the dissolution of a company (probably non-arbitrable); second, disputes under the corporate organizational law, particularly judicial dissolution due to company deadlock (non-arbitrable) vs disputes arising from contractual grounds for dissolution (arbitrable); and finally, disputes where the parties seek an outright order for the dissolution (non-arbitrable) vs disputes where the parties merely seek a declaration confirming their rights or an order for the performance of contractual obligations on the other party’s side (arbitrable).