Doing Business in China For Dummies®

Governing Language

The governing language clause determines which language version of an agreement is the official version in the event of an inconsistency in the two language versions. This clause is important because translation errors happen much more often than most people know.

In the case of joint venture (JV) contracts, many authorities are reluctant to approve an agreement that reads Chinese isn’t the governing language. If the other party won’t agree to English or another foreign governing language, you should specify that both language versions are equally authentic and controlling. This idea seems paradoxical, but that way you don’t automatically lose the dispute because of the inconsistency. You can also try to augment this clause with a reference that the agreement was concluded based on discussions in a foreign language. That way, arbitrators may give more weight to the foreign language version in case of a conflict.

Telling the other party that you want English (or another foreign language) to govern the contract often leads to their insisting on Chinese being the governing language. The subtle approach — writing that both language versions are equally authentic and controlling but based on English discussions — is more likely to work when the parties haven’t argued the governing language point yet.