Editor’s Note: The Fourth Seminar of the International Commercial Expert Committee of the Supreme People’s Court and Reappointment (New appointment) Ceremony of Expert Members was held successfully on September 25, 2024. Over 40 experts from more than 20 countries and regions focused on the theme of the “Collaborative Dialogue, Diverse Integration, Peaceful Development” during the seminar. Extensive and in-depth discussions were held within the framework of four specific issues. The texts of speeches delivered by the members of expert committee and distinguished guests during the discussion session on Topic Two International commercial transactions from a comparative law perspective: navigating legal intersections of international and domestic law would be posted on the CICC’s website.

The Illegal Theories In The International Commercial Game Rules

Philip Yang

Hon. Chairman of the Hong Kong International Arbitration Centre

Former Chairman of the Asia Pacific Regional Arbitration Group

In cross-border commercial transactions, one typically faces a multitude of complex legal issues stemming from different legal systems, encompassing public and private law. For instance, investing in overseas companies involves not only contractual and private law issues but also inevitably entails public law issues such as: company law, tax law, labor law, antitrust law, and anti-corruption law etc. China is the world’s most important trading nation, and international trade of goods necessarily involves laws and regulations on the import and export of goods from different legal jurisdictions. In today’s international environment, different legal systems under their public policies, impose restrictive provisions such as, predatory tariffs, etc. This results in cross-border commercial transactions have greater potential in crossing path with “illegality” or violations of public policies.

Internationally, what is legal or illegal is ever-evolving and changing, primarily involving public law but also private law matters. Under common law, courts represent the justice and moral integrity of the state and society. Hence, traditionally once illegality is involved, regardless of its severity, courts will refuse to provide assistance. However, in today’s international and business reality, it is necessary to adapt to numerous laws from different legal systems, thus undergoing reforms and “finding the way across the river.” For example, the UK Supreme Court established guidelines and introduced “proportionality” in dealing with common law illegality in the case of Patel v. Mirza (2016) UKSC 42. There is also the case of Ryder Industries Limited v. Chan Wui Woo (2015) 18 HKCFAR 544 in the Hong Kong Special Administrative Region of China, which considers the severity of illegality under law of another jurisdiction or “proportionality” in affecting the enforcement of contracts. There is a consistent principle, that a contract should be construed in such way to ensure its legal and effective performance.

Under Chinese law, the Supreme People’s Court (SPC) has laid down some principle and guidelines. For example, on how to recognize the mandatory legal provisions that render a contract invalid, how to recognize the consequences of violating rules and regulations, etc., and has addressed the consequences of the non-establishment of a contract, how to return property between the parties, and how to establish damages. Adopting explicit guidelines would be the correct direction and approach. Though there is a room for further strengthening and developing in further details. 

Under the Belt and Road Initiative and the policy of maintaining openness, Chinese law and judicial practices should expand their international influence. It may be worthwhile to consider drawing lessons from and adopting internationally accepted practices in international business, which would indirectly guide Chinese enterprises venturing abroad to understand the best practices in international business.

*The original text is Chinese and has been translated into English for reference only. If there is any inconsistency or ambiguity between the Chinese version and the English version, the Chinese version shall prevail.