3.20 Are there any terms which, if included in a construction contract, would be unenforceable?
According to the PRC Civil Code, the grounds for invalidating a contract are applicable to invalidate a contract term. A contract or a contract term is invalid and unenforceable:
(1) when such contract or contract term is based on false expression of intent (Article 146);
(2) when it violates the mandatory provisions of laws and administrative regulations, except where such provisions do not lead to invalidity of such contract or contract term; and when it violates public order or good morals (Article 153); and
(3) when the parties maliciously collude in impairing another’s legitimate rights (Article 154).
Article 506 of the PRC Civil Code further provides that a clause is invalid when it exempts a party’s liability from causing: (1) personal injury to the other party; or (2) property damage to the other party as a result of deliberate intent or gross negligence.

3.21 Where the construction contract involves an element of design and/or the contract is one for design only, are the designer’s obligations absolute or are there limits on the extent of his liability? In particular, does the designer have to give an absolute guarantee in respect of his work?
Article 56 of the PRC Construction Law imposes the absolute responsibility of the design quality on the designing party, where the designing party shall comply with the provisions of relevant laws and regulations, the standards for construction quality and safety, the technical standards for design and the agreements in the contract.
It is possible for the limitation of liability clause to limit the contractual liability of the designing party. However, the designing party may still be facing administrative penalties or criminal charges if quality problems are found in a construction project.
The designing party can have its absolute liability (except criminal liability) covered under a suitable insurance policy.

3.22 Does the concept of decennial liability apply in your jurisdiction? If so, what is the nature of such liability and what is the scope of its application?
Unlike in some civil law countries, decennial liability is not codified in the PRC Civil Code. However, Article 40 of the Regulations on the Quality Administration of Construction Projects provides the following warranty requirements of a construction project:
(a) with regard to infrastructure projects, ground foundation projects and main structural projects for housing, the quality warranty period shall be reasonable for use as specified in the design documents;
(b) for roofing and waterproofing works, the quality warranty period shall be five years;
(c) for heating and air-conditioning systems, the quality warranty period shall be two cycles of the heating or air-conditioning period; and
(d) for works regarding electric wiring, gas, water supply, drainage pipes, equipment installation and renovation works, the quality warranty period shall be two years.
In addition to above, Article 1252 of the PRC Civil Code imposes joint and several liability on the employer and the contractor if a building, structure or other facility falls/collapses and causes damages to others, unless the employer and the contractor can prove that there is no quality defect therein. Such liability is strict and without time limitation.

4 Dispute Resolution
4.1 How are construction disputes generally resolved?
Most construction disputes are resolved through settlement by parties. For disputes that cannot be resolved among the parties, litigation or arbitration are the applicable methods of resolution. In the process of litigation or arbitration, a dispute may also be resolved through mediation presided over by the judge or the arbitrator.

4.2 Do you have adjudication processes in your jurisdiction (whether statutory or otherwise) or any other forms of interim dispute resolution (e.g. a dispute review board)? If so, please describe the general procedures.
There is no concept of statutory adjudication under PRC law. For timely resolution of a civil dispute, there is People’s Mediation, rarely used in construction disputes, provided by the PRC People’s Mediation Law, which is the mediation presided over by a People’s Meditation Committee (organised by rural villager committees and residents’ committees).
A construction contract may contain terms of a dispute review board, but it is not commonly used by parties in practice. For example, the Model Contract for EPC Project (GF-2020-0216) provides the Dispute Review mechanism, which parties have the option to use. In general, a Dispute Review Panel (“DRP”) consisting of one or three reviewers will be appointed by the parties within 28 days after the conclusion of the contract or within 14 days after the dispute arises. Either party may submit a dispute relating to the contract to the DRP at any time, and the DRP will make a written decision with reasons on such dispute within 14 days or within the time, subject to the parties’ consent, otherwise proposed by the DRP. Such decision will be binding once the parties confirm the decision by signature. If either party does not accept the decision or does not perform in accordance with the decision, the parties may resort to other methods of dispute resolution as agreed. A party’s refusal to accept the decision will not influence the interim enforcement of the decision, until changes of the DRP’s decision are made later in other methods of dispute resolution.

4.3 Do the construction contracts in your jurisdiction commonly have arbitration clauses? If so, please explain how, in general terms, arbitration works in your jurisdiction.
A standard construction contract commonly provides clauses of litigation or arbitration for parties’ choice. Although trends show arbitration to be popular in construction practice, parties tend to refer disputes to litigation when a project does not contain any international elements.
According to the PRC Arbitration Law, a valid arbitration agreement must include: (1) an expression of intention to apply for arbitration; (2) matters for arbitration; and (3) a designated arbitration commission (i.e., institutional arbitration). Therefore, the PRC Arbitration Law precludes ad hoc arbitration from being recognised and enforced. In 2017, the PRC Supreme People’s Court issued the Opinions of the Supreme People’s Court on Providing Judicial Guarantee for the Development of Free Trade Zones, conservatively recognising the ad hoc arbitration agreement concluded by parties registered in Free Trade Zones.
The PRC courts have shown their supportive attitude toward arbitration, and the grounds for invalidating an arbitration agreement and for setting aside an arbitration award are very limited.

4.4 Where the contract provides for international arbitration, do your jurisdiction’s courts recognise and enforce international arbitration awards? Please advise of any obstacles (legal or practical) to enforcement.
China is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the “New York Convention”) with the reciprocity reservation and commercial reservation. Accordingly, the PRC courts will recognise and enforce awards made in territories of other signatory countries.
In general, the PRC courts are supportive of the recognition and enforcement of a foreign award and only in a few cases is enforcement denied after courts’ internal review procedures, up to the PRC Supreme People’s Court. In accordance with Article 274 of the PRC Civil Procedure Law, the following circumstances will lead to denial of enforcement of a foreign arbitral award:
(1) the parties have neither included an arbitration clause in their contract nor subsequently reached a written arbitration agreement;
(2) the respondent did not receive the notices of appointing the arbitrator or the notice of arbitration proceedings, or the respondent was unable to state his/her opinions due to reasons for which he/she is not responsible;
(3) the constitution of the arbitration tribunal or the arbitration procedure was not in conformity with the rules of arbitration; or
(4) matters decided in the award exceed the scope of the arbitration agreement or are beyond the authority of the arbitration.
In addition, if the People’s Court determines that the enforcement of the award would be against public interest, it shall make a ruling to deny the enforcement.

4.5 Where a contract provides for court proceedings in your jurisdiction, please outline the process adopted, any rights of appeal and a general assessment of how long proceedings are likely to take to arrive at: (a) a decision by the court of first jurisdiction; and (b) a decision by the final court of appeal.
A construction-related dispute takes the same court proceedings as general civil disputes. The courts in mainland China adopt a two-trial system, by which the judgment made at the second instance shall be the final ruling on a dispute (though the limited grounds for “retrial/review” may lead to a case being tried more than twice). Broadly speaking, the following processes at first instance are adopted:
 a claimant files a complaint (online filing is encouraged) to initiate the litigation and the court, having accepted the case, will deliver a copy of the complaint to the defendant. The defendant may file any counterclaims after the court’s acceptance of the case and before the end of the court debates;
 the defendant shall submit a statement of defence after receiving the complaint and may submit a challenge to the jurisdiction within the time limit for filing the statement of defence;
 the parties shall submit any evidence within time limit determined by parties’ agreement or the court’s decision;
 then a court hearing will be held. The hearing mainly includes two sections, i.e., the investigation of the facts and the court debates; and
 the written judgment should be made within six months (this may be extended) from the date of case acceptance.
Either party may appeal the judgment made in the first instance to the higher level of court. The court of second instance may decide not to have a hearing if no new facts, evidence or reasons are submitted (in practice, generally, a hearing is held in the second instance) and the judgment should be made within three months from the date of accepting the appeal (this may be extended).
In practice, a construction dispute often takes a longer time compared with other civil disputes, because it is common for complication of facts, judicial appraisal and expert opinions to be involved.

4.6 Where the contract provides for court proceedings in a foreign country, will the judgment of that foreign court be upheld and enforced in your jurisdiction? If the answer depends on the foreign country in question, are there any foreign countries in respect of which enforcement is more straightforward (whether as a result of international treaties or otherwise)?
According to the PRC Civil Procedure Law, an effective judgement made by a foreign court can be recognised and enforced in accordance with the international treaties concluded or acceded to by China, or in accordance with the principle of reciprocity.
China has concluded bilateral treaties containing the matter of recognition and enforcement of court judgments with more than 30 countries, such as Argentina, Brazil, Cuba, France and Italy. Among those countries, more than 20 countries are along the route of One Belt, One Road.
In practice, the number of cases of recognition and enforcement of a foreign judgment is very small; in over half of the cases, such recognition and enforcement is denied for a variety of reasons.