Recovery of Overseas Construction Payments: Should One Sue in a Foreign Court? — A Discussion of Jurisdictional Disputes Arising from a Foreign-Related Construction Contract Dispute
2026/10/14
Introduction: A project located
overseas, a contract between two Chinese citizens, and a construction payment
that has long gone unpaid. When the contractor brings suit against the employer
before a domestic court, the other side argues: the project is abroad, so the
case should be governed by a foreign court. Does the domestic court have
jurisdiction at all? This jurisdictional dispute reflects a key issue in
foreign-related construction project disputes.
I. Adapted Facts
In 2021, Chinese citizen A, as
employer, entered into a Construction Subcontract with B,
agreeing to subcontract to B the water and electricity portion of a
construction project located in a certain foreign country. After the contract
was signed, B organized personnel to go abroad and completed the construction.
However, after the project was completed, A delayed in paying the corresponding
construction payment. After repeated unsuccessful demands, B filed suit before
a basic-level domestic court in the place of B's own domicile, seeking payment
of the construction price and interest.
After the case was accepted, A raised a
jurisdictional objection. A's core argument was: the project involved is
located overseas, and a dispute over a construction project contract is subject
to exclusive jurisdiction, which should be exercised by the court of the place
where the project is located; the domestic court therefore has no power to hear
the case. This objection plunged the case into a dispute over "whether the
domestic court should hear it."
II. Issue in Dispute: Can a Domestic
Court Exercise Jurisdiction over an Overseas Project?
A's position appears plausible: a
dispute over a construction project contract is governed by the rules on real
property disputes, and real property disputes are subject to the exclusive
jurisdiction of the court of the place where the real property is located.
Since the project is overseas, it seems that it should fall to a foreign court.
Upon review, however, the court held
that this understanding confuses the boundary between "domestic exclusive
jurisdiction" and "jurisdiction over foreign-related cases." The
Civil Procedure Law provision treating construction project contract disputes
as real property disputes for purposes of exclusive jurisdiction applies to
situations where the subject matter is within the territory of our country.
Where the project is located overseas, that provision cannot be relied upon to
exclude the jurisdiction of our courts.
At the same time, both the plaintiff
and the defendant in this case are Chinese citizens. Although the subject
matter is overseas, the interests of our citizens are involved. Under the
"doctrine of forum non conveniens" as provided in the Judicial
Interpretation on the Civil Procedure Law, only where six conditions are
simultaneously satisfied may a court rule to dismiss the suit and advise the
parties to sue in a foreign court. Because this case involves the interests of
Chinese citizens, it does not satisfy the condition that "the case does
not involve the interests of the People's Republic of China, its citizens,
legal persons, or other organizations," and therefore cannot be
transferred to a foreign court.
Ultimately, the court held that this
case should be treated as an ordinary contract dispute for purposes of
determining jurisdiction, to be heard by the court of the defendant's domicile
or the place of contract performance. Since both the defendant's registered
residence and the plaintiff's habitual residence are within the jurisdiction of
that court, the court had jurisdiction over the case and ruled to dismiss A's
jurisdictional objection.
III. Counsel's Views
1. In foreign-related construction
disputes, exclusive jurisdiction does not necessarily mean jurisdiction must
lie with a foreign court. Construction project contract disputes are governed by
the rules on real property disputes for jurisdictional purposes, but that rule
primarily allocates authority among domestic courts. Where the project is
located overseas, it cannot automatically be concluded that our courts lack
jurisdiction.
2. Jurisdiction of our courts is the
principle, and jurisdiction of foreign courts is the exception. For foreign-related
civil cases brought before our courts, our courts should exercise jurisdiction
in accordance with law unless all six conditions of the "doctrine of forum
non conveniens" are simultaneously satisfied. Here, both parties are
Chinese citizens and the interests of our citizens are involved, so the
conditions for transferring jurisdiction to a foreign court are plainly not
met.
3. The general rules on contractual
jurisdiction remain applicable. Where exclusive jurisdiction does not apply to an
overseas project, jurisdiction should be determined as in an ordinary contract
dispute, that is, by the court of the defendant's domicile or the place of
contract performance. This provides a clear basis for parties to choose a
domestic court to vindicate their rights.
IV. Counsel's Recommendations
First, expressly agree on the court
with jurisdiction at the time of contracting. In foreign-related construction
contracts, the parties should, so far as possible, agree that our courts shall
have jurisdiction and specify the precise connecting factors, so as to avoid
consuming time on jurisdictional issues later.
Second, consult a professional lawyer
promptly once a dispute arises. The jurisdictional rules for foreign-related cases
are complex, involving exclusive jurisdiction, the doctrine of forum non
conveniens, judicial sovereignty, and multiple other factors. A professional
lawyer can help determine the optimal litigation strategy.
Third, pay attention to preserving
evidence and to the identity of the parties. If both parties are Chinese
citizens or have domiciles within the territory, this can strengthen the
connecting factors supporting the exercise of jurisdiction by our courts. A
lawyer can assist in sorting out key facts such as party capacity and the place
of contract performance.
Fourth, do not be easily deterred by
the fact that "the project is overseas." An overseas project does not mean
that suit must be brought in a foreign court. So long as the conditions are
met, a domestic court may likewise exercise jurisdiction. The involvement of a
professional lawyer often enables a party to seize the initiative at the
jurisdictional stage.
Conclusion: Jurisdiction over foreign-related
construction project contract disputes concerns both judicial sovereignty and
the litigation convenience of the parties. When the other side raises a
jurisdictional objection, one should not lightly abandon the domestic
litigation route. Only by promptly seeking the assistance of a professional
lawyer can one find the most favorable path for vindicating one's rights within
the complex rules governing foreign-related jurisdiction.