China’s Civil Code to have a Contract Part Judicial Interpretation

photo of workshop

Because the Supreme People’s Court (SPC) has not released its judicial interpretation agenda for 2021 (as previously mentioned), the observer seeking to determine what is on that drafting priority list must rely on occasional reports in the professional and academic press.  Last month, several academic Wechat accounts reported on discussions of a draft of a judicial interpretation of the Contract Part of the Civil Code  民法典合同编司法解释(草案). The one I’m relying upon contains the more detailed report on the discussion, including the names of those discussing the draft on behalf of the SPC.  I’ll flag from this article why this discussion was held, what can be learned from the report on the discussion, and a quick preview of the interpretation itself.  But first, a few words about why this interpretation is needed and what it is intended to do.

Background on judicial interpretations

Through judicial interpretations, the SPC is seeking to “unify court judgments,”  to ensure that court decisions throughout the country and at various levels of courts are more consistent.  This principle is set out in the current and previous judicial reform plans. Establishing a Chinese case law system assists in this, but is insufficient.  As seen from the SPC, judicial interpretations are intended to address issues in which statutory law is either ambiguous or contains a gap, causing judges to misunderstand (the law) and issue decisions inconsistent with legislative intent (see more below).  The SPC  identifies those issues through the multiple stages in the judicial interpretation drafting process.

.Judges, particularly at the basic level, need to issue judgments efficiently in commercial cases. They face a combination of a large number of cases and relatively short deadlines in domestic civil procedure.  Recent reforms to the jurisdiction of the courts will require basic level courts to deal with even more cases.   They cannot assume that most cases will settle, as shown by my own research (concerning certain courts) and those of some others  (in certain courts) . The Contract Part of the Civil Code is not detailed enough for judges to rely upon to decide contract cases efficiently and consistently.  A more active National People’s Congress (NPC)  (and its Standing Committee) is not able to fill in the gap.  Therefore the SPC must be the one to do so.

As I have written before in this blog and in my recent book chapter, the SPC and the NPC, and NPC Standing Committee (NPCSC), most often the NPCSC Legislative Affairs Commission (LAC), communicate during the course of judicial interpretation drafting.  SPC rules require that a judicial interpretation draft be submitted to the relevant committees of the NPC or relevant department of the NPCSC to solicit their views before the final draft is submitted to the SPC judicial (adjudication) committee. Additional relevant guidance cited in my chapter reminds drafters that “liaison with the NPCSC LAC must be timely, and after major revisions to the judicial interpretation draft after consulting with the NPC LAC, the view of the NPCSC LAC  should be solicited again.”  Therefore the views of the two institutions are harmonized before the judicial interpretation is finalized by judicial committee approval.

Broad Consultation of Opinions

As I wrote in my recent book chapter, discussions of draft judicial interpretations by specialists are a regular part of the SPC’s judicial interpretation drafting process.  I described this as “broad consultation outside the gated community.”  The reason workshops are organized is to solicit the views of experts on specialized or technical subject matter. Those invited for these meetings tend to be senior academics, either from the country’s major universities or CASS, as was the case here.

The workshop was held at Renmin University, while a second similar workshop was held at CASS.  Participants included experts from the NPC LAC,  Renmin, Peking and Tsinghua Universities, China University of Political Science and Law,  China Academy of Social Sciences, Jilin University, Beijing Institute of Technology, Central University of Finance and Economics, University of International Business and Economics among others.

The normal practice is for SPC drafters to assess the views given by those experts at the workshops and consider whether they should be adopted or further taken into consideration. Professor Wang Liming, who is a member of the China International Commercial Court expert committee, was one of the leaders who spoke.

It can be determined from the workshop report which personnel at the SPC were involved in drafting and what the issues are.  As to personnel, Justice Liu Guixiang spoke at the beginning of the workshop, which means he is the most senior SPC judge responsible for the draft interpretation. Justice Liu is a full-time member of the judicial committee with vice-ministerial rank. Others from the SPC who spoke included Judge Guo Feng, deputy head of the Research Office,  Chen Longye, head of the civil section of the Research Office, Jiang Jiadi, a staff member of the same section, Judge Lin Wenxue, head of the #2 Civil Division (responsible for domestic commercial issues) and Judge Zeng Hongwei, a judge in the #2 Civil Division.  The #2 Civil Division hears appeals and retrials (再审) (and applications for retrial), unlike the Research Office, and therefore sees first hand some of the issues arising in the lower courts.  I surmise that Chen, Jiang and Zeng are the ones who are shouldering the bulk of the drafting work.  Judges Guo and Lin would have many other responsibilities.  The persons primarily involved in drafting discussed their parts of the interpretation.

Preview of the Interpretation

The first chapter of the draft interpretation is “General Provisions,” in which Chen Longye of the Research Office took the lead.  Judge Zeng Hongwei took the lead in discussing the second chapter on contract establishment. Issues included:

  •  contract interpretation;
  • trade practices;
  • application of non-contractual obligations;
  •  contract formation;
  • contract terms;
  • form of the contract; and
  • agency contracts,

Chapters 3 and 4 of the draft relate to the validity of and the performance of contract. Also, the #2 Civil Division took the lead in drafting because Judges Lin Wenxue and  Zeng Hongwei spoke.  From the discussion, it appears that the controversial questions were the oldies but goodies, the ones that occur in practice:

  • contract validity and  the obligation to report for approval;
  • defective contracts;
  • contracts in violation of mandatory provisions;
  • consequences of validity;
  • signing related issues, involving corporate seals and individual fingerprints;
  •  debtor’s right of defense in the transfer of creditor’s rights;
  • repayment of debts, debts by shares, joint debts, indivisible debts;
  • contract performance by a third party or to a third party or repayment by a third party;
  • Repayment by third parties; and
  • changes in circumstances.

Chapters 5 and 6 concern preservation of contract (保全), contract modification and transfer.  Judge Guo Feng and Jiang Jiadi of the  Research Office took the lead.  Issues included:

  • scope of rights,
  • scope of rights exclusive to the debtor
  •  right of subrogation
  • right of cancellation in “contract preservation;”
  • Contract modification and transfer;
  • role of a third party in the litigation of the creditor’s rights and debt transfer disputes,

Chapters 7 and 8 relate to  “Termination of Contract Rights and Obligations, Liability for Breach of Contract”.   Chen Longye took the lead in discussing the following issues, among others:

  • liability for compensation for contractual obligations after the breach;
  •  termination and its consequences;
  • the timing of termination;
  • determination of losses due to breach of contract;
  • liquidated damages, deposits, delay in receipt; and
  • force majeure.

When will the Interpretation be Issued?

As to whether this judicial interpretation will be issued by the end of this year, I personally have my doubts.  I have not found any reports of discussion of this draft in the lower courts or with the NPCSC LAC.  These steps are a usual part of judicial interpretation drafting.  Contract law is fundamental to business.  Those in SPC leadership are unlikely to approve this interpretation unless they think it meets the target of dealing with the unclear issues that lower courts and practitioners frequently encounter in practice.  The scope of consultation is unknown, such as whether some lawyers or companies will be consulted, or whether the entire draft will be issued for public comment. It is also unknown whether selected foreign contract law specialists have or will be approached for their comments.  We have to wait for further developments.

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Many thanks to certain anonymous readers for their insightful comments on earlier versions of this blogpost. They are not responsible for any errors or “erroneous views.”

Why I Research China’s Supreme People’s Court

I was honored to be invited by the New York University School of Law’s U.S. Asia Law Institute to contribute a short essay to their Perspectives blog, entitled Why I Research China’s Supreme People’s Court

 Many thanks to those involved in the entire process, including those who commented on earlier drafts!

What’s on the Supreme People’s Court’s financial law agenda?

Justice Liu Guixiang Speaking

This year, the Supreme People’s Court (SPC) has not released its judicial interpretation agenda to the general public, so observers concerned about what the SPC is doing in specific areas of law must be attentive to what SPC leaders mention in either speeches in major conferences or articles in the media.  Justice Liu Guixiang, a member of the judicial committee with deputy ministerial status, spoke in early September at the 4th Annual  Conference on Serving Small and Medium Sized Investors .  His speech was one of many leader’s speeches  (visible in the link领导人讲话) delivered at this conference sponsored by the China Association for Public Companies, Securities Association of China and other securities industry associations. (For the careful listener (or reader) his speech provides insights on what can be expected from the SPC in the near future in the area of financial law.  It is linked to  China’s development of its securities market and dealing with the increasing number of financial fraud cases and civil disputes. Some of what he told the audience illustrate, in the area of financial and securities law,  how the SPC operates in the New Era.  Those include:

  1. the SPC plans to issue a new conference summary on financial trials (金融审判座谈会纪要) before the end of the year, to unify trial standards. This is linked to government policies on the prevention and resolution of financial risks;
  2. the SPC plans to amend the 2003 interpretation
    Some Provisions of the Supreme People’s Court on Trying Cases of Civil Compensation Arising from False Statement in Securities Market, as it is outdated, particularly the requirement of an administrative penalty before investors can file suit. The interpretation is inconsistent with the amended Securities Law;
  3. the SPC will guide the lower courts on the hearing of securities group cases  (证券集体诉讼制度), particularly focusing on financial fraud, providing better relief to investors, and assisting to stabilize the market in its transition to a registration based listing system.  He stressed that the SPC would require lower courts to apply the principle of harmonizing standards for fault and administrative penalties in financial fraud cases, distinguishing different types of fault, and “striking hard” in cases of intentional financial fraud (要求人民法院在处理财务造假等案件中,基于“过错与处罚相一致”原则,区分过错类型,依法严厉打击故意造假行为过错与处罚相一致);
  4.  The SPC will provide guidance to the local courts on strictly applying new rules (in the Civil Code and the SPC’s judicial interpretation) on guarantees provided by listed companies and will also provide further guidance on the bankruptcy (and reorganization ) of listed companies.  
  5. The SPC will cooperate further with relevant government organs and other institutions to further develop non-litigation solutions to securities disputes. One example Justice Liu likely had in mind was the recently promulgated notice jointly issued by the General Office of the SPC and the China Securities Regulatory Commission (CSRC) on establishing an online system for linking the CSRC’s electronic platform with the SPC’s mediation electronic platform, to enable mediated settlements within the securities and future mediation systems to become enforceable through judicial confirmation online (在线申请司法确认或出具调解书等诉调对接工作) This August 2021 document is entitled Notice on Establishing a Linkage Between Mediation and Litigation “General to General” Online Securities and Futures Disputes Mechanism  最高人民法院办公厅 中国证券监督管理委员会办公厅关于建立“总对总”证券期货纠纷在线诉调对接机制的通知.  That document, which implements the Party Center’s concept — social governance pattern of co-construction, co-governance and sharing (建立共建共治共享社会治理格局)includes a joint meeting system between the two institutions and affiliated organizations, with the CSRC’s Investor Protection Bureau and the China Securities Small and Medium Investor Service Center Co., Ltd. taking an important part. The linkage between mediation and litigation is part of diversified dispute resolution. It calls for analogous linkage at the local level between offices of the CSRC and the courts. The SPC has issued other documents previously,  particularly the Supreme People’s Court and the China Securities Regulatory Commission of Issuing Opinions on Comprehensively Advancing Establishment of Diversified Resolution Mechanism of Securities and Futures Disputes. The SPC’s 2021  bilingual report on its diversified dispute resolution reforms (2015-2020) provides more details on this and other reforms.
  6. Finally, Justice Liu called for promoting the securities representative litigation mechanism (mentioned in Article 95 of the Securities Law and further developed in a 2020 judicial interpretation, Provisions of the Supreme People’s Court on Several Issues Concerning Representative Actions Arising from Securities Disputes). The Shanghai Financial Court has taken the lead in these cases. What Justice Liu means is using the results in representative litigation to resolve outside of the courts other similar securities & futures disputes, particularly group disputes. This is an example of implementing the SPC’s diversified dispute resolution policies. This mechanism is can also be characterized as linking to the Party Center’s current policy of mediating first and resolving disputes at their source to reduce the quantity of litigation  (党中央关于“将非诉讼纠纷解决机制挺在前面,从源头上减少诉讼增量), as discussed in greater detail in the bilingual report.

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Those with more specialized knowledge in Chinese securities law should provide corrections or comments by using the blog’s comment function.

The 996 typical cases

Document heading for the 996 typical cases

On 26 August 2021, the Ministry of Human Resources and Social Security (MHRSS) along with the Supreme People’s Court (SPC) issued a second set of typical (典型 model/exemplary cases). As I have explained before, these are summaries or edited versions of cases, not original labor arbitration or court decisions. These are on overtime labor and personnel disputes (人力资源社会保障部、最高人民法院联合发布超时加班劳动人事争议典型案例) that I’ll call the “996 typical cases,” a central level institutional response to the widespread use of 996 overtime work in the technology sector and elsewhere. The cases themselves are entitled “the second set of typical personnel and labor disputes cases (劳动人事争议典型案例(第二批). The version that the SPC published on its two websites (court.gov.cn and chinacourt.org) lacks the document headers that accompanied the release of the cases. That version had the mutually agreed statement about the cases (joint statement) and the cases themselves. Thankfully for this analysis, the Inner Mongolian Higher People’s Court released a version that includes the headers. The comments below focus not on the rules embedded in the typical cases, but on the SPC’s use of typical (model or exemplary) cases.  These cases are:

  • a product of institutional joint cooperation, as memorialized in a 2017 document mentioned in the joint statement;
  • a typical use of typical cases in the New Era; and
  • Used by the labor arbitration tribunals under the MHRSS system and the courts to unify legal standards.

Institutional joint cooperation

The 996 typical cases are a product of cooperation between the MHRSS and the SPC, as memorialized in the policy documentOpinions of the MHRSS and the SPC on Strengthening the Building of a Mechanism of Connection between Arbitration and Litigation of Labor and Personnel Disputes,  (No. 70, MHRSS)(《关于加强劳动人事争议仲裁与诉讼衔接机制建设的意见》(人社部发〔2017〕70号).  Two quick comments on the cooperation are as follows.

  1. More such cooperation can be predicted in general.  Greater cooperation between the SPC and other government and Party departments is a feature of the New Era, as I mentioned earlier this year. Coordination with other central Party and state organs is a customary function of the SPC that is being repurposed, in part, in the New Era. Coordination with other central organs appears to be an increasingly important part of New Era governance.  Therefore, the statement accompanying the cases stated the following:

In recent years, the MHRSS and the SPC have actively guided the implementation of the “Opinions on Strengthening the Construction of a Cohesive Mechanism for Labor and Personnel Dispute Arbitration and Litigation” , and the cohesion mechanism for adjudication and adjudication has been realized… In the next step, the two departments will continue to jointly develop guidelines, publish cases, and strengthen information comparison, and continue to promote the convergence of adjudication procedures and the unification of the application of law, so as to better achieve an efficient and orderly connection between arbitration and justice, and realize labor disputes. The dispute resolution is an organic unity of political, legal and social effects.

2.  As can be seen from the statement above, we can expect further cooperation between the MHRSS and the SPC in the form of joint guidelines, more typical cases, and information sharing.  All of these are flagged in the 2017 Opinion mentioned above.

What we can see from the document numbers of the 2017 Opinion, the first set of joint typical labor cases and the 996 typical cases is that they all have an MHRSS document number.  (See analysis of the first set of cases here.)That means both the Opinion and the typical cases are an initiative of the MHRSS that required concurrence by the SPC. The Opinion  sets out the agreement between the two institutions:

The departments of HRSS shall positively and voluntarily strengthen communication and coordination with the people’s courts. The people’s courts shall specify that a tribunal [division] or office [庭室] is uniformly responsible.

So we can see from this language that at each level of court, a division (tribunal) or office (likely to be the Research Office) is responsible for liaising with the HRSS authorities.  At the level of the SPC, it is understood to be the Civil Division #1, which is responsible for labor-related issues among many other civil law issues, and within that division, a group of people (likely judges with special competence in labor issues) was involved with liaising with the MHRSS to agree upon a draft version of the statement and the typical cases.  Given the administrative nature of the SPC and previous practice, it seems likely that what was agreed upon at the staff level was reviewed by the head or deputy head of the Civil Division #1 and approved by the SPC vice president in charge of the Civil Division #1. It is likely the cases were cleared at an analogous senior level at MHRSS as well.

As to why these particular cases, it is likely that they are scenarios that regularly occur in the labor arbitration tribunals and the courts, but where decisions are inconsistent because the law is unclear.

Use of Typical Cases in the New Era

The release of the 996 typical cases is a typical use of typical cases in the New Era.  As discussed in further detail last year,  this is part of popularization of law (普法教育), an old development repurposed in the post 4th Plenum of the 19th Party Congress New Era. I first wrote about typical cases in 1993:

 

 

The release of these 996 typical cases is linked to the popularization of law responsibility system set out in this document: General Offices of the Party Central Committee and State Council Opinions on a Popularization of Law Responsibility System of State Organs Regarding “whoever enforces that law, explains the law.” (中共中央办厅 国务院办公厅印发《关于实行国家机关“谁执法谁普法”普法责任制的意见》Section 6 calls for judge, procurators, administrative enforcement personnel, and lawyers to establish a “using cases to explain the law” system.

Therefore MHRSS personnel are encouraged to use cases to explain the law, and the 2017 Opinion encourages MHRSS personnel to cooperate with the SPC in doing so. The message to the general public as set out in the joint statement is:

On the one hand, it reminds employers of the risks of illegal activities and promotes the regulation of labor according to law; on the other hand, it clarifies the expectations of workers’ rights protection and guides workers to protect their rights in a rational way.

Releasing these cases also hits another target for those involved: fulfilling their obligations under the current Party history study and education campaign: “I do real things for the masses”(“我为群众办实事,” therefore in the first sentence of the joint statement).

 996 Typical Cases Used to Unify Legal Standards

What the SPC’s version of the 996 typical cases omitted (likely unintentionally) is guidance from the two institutions on how the 996 typical cases are to be used:  “local [labor] arbitration agencies and people’s courts,  shall refer to it in handling cases.”

Last year’s guidance on case searches clarifies that the lower courts must search  SPC typical cases when doing a similar case search and that these cases are not binding, but for reference, or quite persuasive. These cases will provide guidance to both labor institutions and courts, providing a more unified standard on these overtime issues.  It will also indirectly pressure employers to amend their labor handbooks and change other labor practices to be consistent with these cases.

Concluding thoughts

These cases are not expected to completely resolve the overwork culture in Chinese companies. They are intended to set a clearer standard for the labor arbitration commissions and courts to apply (and lawyers or other advocates to meet), as well as to reduce the number of cases in which courts overturn labor arbitration commission determinations related to overtime and overwork. They also provide societal guidance (社会导向)by providing a timely signal to companies and Chinese society on these issues. They also evidence that the SPC is “strengthening judicial safeguards of people’s livelihood” (加强民生司法保障). Most importantly it shows that the MHRSS and the SPC are doing “real things for the masses.”

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Many thanks to those who commented on an earlier version of this blogpost.

Training foreign-related legal personnel for the Chinese courts

President Zhou Qiang visiting the University of International Business & Economics

Since the Fourth Plenum of the 19th Party Congress, and especially since President Xi Jinping spoke about the need for China to train foreign-related legal personnel  (涉外法治人才), the Supreme People’s Court (SPC) press, SPC leadership, and others important to the SPC leadership, such as Shen Deyong, former executive vice president of the SPC and current leaders of the CPPCC have reiterated the importance of “foreign-related legal personnel” to China and the people’s courts.  Training “foreign-related legal personnel” is incorporated into the Party’s Plan for Building the Rule of Law (2020-2025), an indication of its importance.  Shen Deyong  criticized the way that “foreign-related legal personnel” is used within government institutions– “team is too small, their numbers are too few, they are scattered and the market is chaotic.””涉外法律服务人才队伍建设还存在一些问题和不足,主要呈现队伍“小”、人才“少”、分布“散”、市场“乱”的特点.  I would add to the issues that he flagged that policies directed towards attracting  “foreign-related legal personnel” to the courts inevitably encounter the special characteristics of the courts’ personnel system as it has evolved since the quota judge reform was implemented, both the training system and especially career advancement from judges assistant to quota judge.

Foreign-related legal personnel policy

The language about increasing “foreign-related legal personnel” in the courts is not new but dates back to at least 2015 and the  Opinion of the Supreme People’s Court on Providing Judicial Services and Safeguards for the Construction of the “Belt and Road” by People’s Courts (BRI Opinion #1). It was reiterated in the 2019  Opinions of the Supreme People’s Court on Further Providing Judicial Services and Guarantees by the People’s Courts for the “Belt and Road” Initiative (BRI Opinion #2) and the 2020 Guiding Opinions of the Supreme People’s Court on the People’s Courts Serving and Guaranteeing the Further Opening Up to the Outside World (Open Economy Guiding Opinion). Article 15 of BRI Opinion #1 calls for improving training for Chinese judges on their professional capacity (业务能力) and improving overall judicial quality. Article 38 of BRI Opinion #2 and Article 16 of the Open Economy Guiding Opinion both have language about cooperating with universities to develop training and teaching plans so as to train and prepare a pool of international legal practitioners….”  A knowledgeable person has reminded me that repetition in consecutive documents is an indication of importance (and I would add the difficulty of resolving the problem).

As readers of this blog know, the Chinese courts need “foreign-related legal personnel” in many areas. Those include working on cross-border cases across a broad range of procedural and substantive areas,  undertaking research related to cross-border judicial policy and cross-border legal issues that have an impact on the judiciary, as well as working on a range of issues related to the SPC’s and lower courts’ interactions with the outside world.

Court cooperation with universities

The SPC has designated a number of China’s leading law schools and legal research institutions as Belt & Road research bases, including: the International Law Institute of the China Academy of Social Sciences; Tsinghua University School of Law; Wuhan University School of Law, Southwest University of Political Science and Law; China University of Political Science and Law, Shanghai University of Political Science and Law; Dalian Maritime University, and East China University of Political Science and Law. The SPC is thus able to draw on the research capacities of China’s law schools and involve law students in the legal issues facing the Chinese courts. Participating in this research can also motivate students to enter the courts after graduation.

Law students apply to become judges assistants after graduation for a variety of reasons. Some become further interested after internships (see this blogpost on SPC interns–a version with more data may appear later).  Other law school graduates are motivated by presentations by outstanding judges at their law school (SPC Judge Gao Xiaoli’s 2015 talk at the Peking University School of Transnational Law earned her many new fans), while still others recognized that a job “in the system” would resolve their hukou problems and enable them to live in Beijing, Shanghai, or other major cities. Yet others are motivated to use their education in the service of the public. I can say with authority that law graduates with knowledge of transnational law, fluency in English (and other foreign languages) are working as legal assistants in courts all over China.  Recruitment of legal assistants is a local matter, so the #4 Civil Division of the SPC (in charge of foreign commercial matters) and likely the Political Department of the SPC (in charge of personnel) lacks statistics on the number of “foreign-related legal personnel” working in the local courts.

Special characteristics of the courts’ personnel system

I write about the judiciary’s personnel system with some trepidation as I am well aware that my knowledge of the regulatory system is incomplete. (Some of the relevant regulations cited in analyses of the personnel reforms are not accessible to those outside the court system.)   On the issue of placement of junior “foreign-related legal personnel,”  I have not heard from either knowledgeable persons, former students, or other junior personnel in the Chinese court system that specific policies have been implemented within the court system (the Political Department of the SPC is responsible at the national level, and locally, political departments of local courts are responsible) to channel judges assistants recruited from China’s law schools with transnational training and experience into roles in which their academic background can be used and their “foreign-related” legal skills can be developed. In the absence of specific policy, too many local court leaders appear to see the young people with a transnational legal background and experience merely as workers that can be put to work in the national judicial machine (司法民工). Judges assistants from higher courts are sometimes sent down to the local level to work for two years, in line with young cadre development policy.

Training

If the three documents cited above have language about training, it seems likely that a training plan is somewhere in the approval pipeline.  My guess is that this is yet another matter that requires coordination among multiple institutions within the SPC, including the #4 Civil Division–the ones asking for the training to be done, with the Political Division and the National Judges College.  As I wrote last year, a new national court training plan (2019—2023年全国法院教育培训规划)) is underway.  As senior leadership has called for cultivating  “foreign-related legal personnel,” it seems likely that the SPC will eventually issue (perhaps not publicly) a training plan for judges handling all sorts of foreign-related issues, both civil-commercial and criminal.

Career advancement

Another issue for foreign-related legal personnel in the courts is career advancement for judges assistants.  As I mentioned in passing in an earlier blogpost, career advancement from judges assistant to quota judge has slowed. Specific promotion criteria are set locally.   Local studies have been done on the role of the judges assistant but have not surmounted the language barrier (see this one from one of the Chongqing Intermediate People’s Courts)  that provide specific data and specific analysis deriving from local conditions.  From my observations, fixed quotas on the number of judges in a court can mean a talented, educated judges assistant in one court may wait significantly longer than a similarly qualified person in another court to become a judge.

Concluding thoughts

Unless the SPC can evolve better national policy directed towards a career for “foreign-related legal personnel,”  some of them will leave, disappointed with the failure of the judicial system to use their talents, despite the official publicity. There will be many companies and law firms, some dealing with the issues I described previously, that will value them.

 

 

Brief comments on the China International Commercial Court

On 29 July, I spoke briefly at an American Society of International Law  webinar entitled “Charting the New Frontiers of International Dispute Resolution in the Asia-Pacific.” The post below is the (slightly edited) text of my comments on the China International Commercial Court (CICC). I have made some of the same points in earlier blogposts and this version includes those links.

Thank you for this opportunity to provide my thoughts on the CICC.  As some people know, I am on the CICC’s international expert committee, but nothing I have to say should be attributed to the Supreme People’s Court (SPC) or the China International Commercial Court (CICC). I’m not going to comment on the numerous articles I have seen either in both English and Chinese but instead focus my remarks on what I understand the focus of the work of the CICC to be now, suggest some reasons, and identify some trends.

The CICC has thus far accepted 18 cases in the three years since it was established.  Although I have never seen official confirmation of this, it appears that when the CICC was approved, it was approved as a part-time court.  It can be seen from the biographical description of each judge that each of them has at least one other full-time responsibility additional to being a CICC judge.  Some of the judges have two other full-time responsibilities.  The Intellectual Property Court of the SPC, is instead is a full-time court—it is unclear whether they have additional headcount. I have not seen a discussion of why one was approved as a part-time court and the other a full-time court—perhaps the leadership decided that the Intellectual Property Court was the one that would make a more important national and international impact, given the critical importance of intellectual property at this stage at China’s development and the range of intellectual property law issues in contention between China and certain of its trading partners.

In my view, the fact that the CICC is not a full-time court—means that the SPC’s #4 Civil Division, which provides leadership for the  CICC, must be strategic about what the CICC does.  Based on the language in some of the recent SPC documents,  particularly the September 2020 policy document on the Open Economy, I surmise that the #4 Civil Division is considering the best way forward with the CICC, as there is this language–“promote the construction of the CICC” (推进最高人民法院国际商事法庭建设). Additionally, the SPC has designated two senior Chinese academics (Shan Wenhua of Xian Jiaotong University and Liu Xiaohong of the Shanghai University of Political Science and Law), who are expert committee members to provide research on this topic.

Based on the type of cases that the CICC has accepted and the language in the end 2019 2nd Belt & Road Opinion and the 2020 Open Economy document, my understanding that the short-medium focus of the CICC is to be a model or guide for China’s lower courts in unifying “foreign-related” substantive and procedural law —it is currently domestically focused, rather than focusing on hearing large numbers of foreign-related cases.

So far, most of the cases that the CICC has accepted have been referred from the lower courts. The CICC will take the cases if it meets its criteria and it can see that the case involves issues regarding which existing law and judicial interpretations are unclear and that involve issues that frequently arise in practice. This can be seen in Articles 22 and 25 of BRI Opinion #2 “and the role of the CICC in providing models and guidance shall be developed… the role of cases in determining rules and guiding behavior shall be leveraged  (发挥国际商事法庭示范引领作用_…,发挥好案例的规则确定和行为指引作用).  Therefore the CICC has accepted and decided at least 5 cases related to arbitration—filling in gaps in Chinese arbitration law and judicial interpretations—and has accepted two more related to demand guarantees/standby letter of credit fraud disputes.  It has also issued a judgment on an issue related to product liability.

A second and it seems underappreciated aspect (outside of China) of the role of the CICC is in providing “models and guidance”– 示范引领作用– to guide the lower courts and to pilot reforms that are replicable (a Chinese judicial reform concept), as stated in Article 22 and 25 of BRI Opinion #2. That can be seen from reports on certain local courts:

  1. The Beijing #4 Intermediate Court—promoting one-stop diversified dispute resolution (多元化解纷纠纷中心), with links to local arbitration (CIETAC & the Beijing Arbitration Commission) & mediation organizations, the goal being for this court to come up with new ideas in international commercial dispute resolution to focus on Beijing’s advantages;
  2. The Suzhou International Commercial Court (approved by the SPC, and involving cooperation with the Singapore government through the China-Suzhou Suzhou Industrial Park );
  3. Haikou/Hainan also—the SPC’s policy document supporting the Hainan Free Trade Port mentions an international commercial court, although it seems to be less developed.

I would like to mention also that it is possible that whatever guidance is developed may also draw on the memoranda concluded and other best practices discussed at the Standing Forum of International Commercial Courts, of which the SPC is a member.

From what I can see from these local initiatives, the themes may include:

  1. promoting mediation (also in line with SPC policy on mediation taking priority);
  2. Centralizing case acceptance;
  3. Addressing additional arbitration-related issues;
  4. Possibly considering rules regarding more complex commercial disputes.

From my own research and discussions with some local judges, it appears to be early days to see any further guidance coming out of these local courts.

I wouldn’t be surprised to see the CICC eventually developing further rules, for example, related to mediation, drawing on the work of the lower courts, as this is a pattern I have seen before in other areas of law with the SPC because it appears CICC regulatory infrastructure is less fully developed in comparison with other commercial courts in other jurisdictions.  Experience from the lower courts could accelerate matters in part.

I surmise that either the CICC or local “international commercial courts” will eventually provide greater legal infrastructure related to what I call “invisible BRI disputes”–the increasing number of cases between two Chinese companies involving projects overseas, particularly in the area of construction engineering, often heard in the Chinese courts—that involve issues such as how to:

  1. find and apply foreign law;
  2. provide information and expertise about foreign technical standards; and
  3. improve the role of expert witnesses (with the necessary expertise) in construction engineering disputes.

These types of disputes raise several of many areas of law that need further work as Chinese companies operate internationally but want to have related disputes heard at home, and China seeks to progress domestic and foreign-related legislation.  I surmise that the Beijing #4 Intermediate Court will eventually come up with some guidance through its collaboration with the Beijing Arbitration Commission and other institutions.

Turning to the expert committee…the expert committee is an institution different from a user committee in jurisdictions such as US, Canada, the UK, Australia, New Zealand, Kenya etc. where they are often required by law and are primarily focused on incorporating input from users, including those practicing lawyers in evolving court rules.  I note that Taiwan involved a user committee in working on its new commercial & intellectual property court. Court rules in China are entirely within the authority of the SPC, and lower courts in practice issue them as well, and there is no compulsory requirement in Chinese legislation for incorporating public input in the course of drafting court rules. The CICC expert committee and other Chinese court expert committees (such as that established by the Beijing Financial Court appear to be established to enable courts to access expertise among the experts on a flexible basis, and it appears intentionally not involving lawyers practicing in China.  The link between the role of the expert committee members and the subject matter competence is weaker than with user committees, and thus far the few formal meetings of the entire expert committee have included speeches making general statements about international commercial dispute resolution in contrast to the more technically focused user committees in the jurisdictions I have mentioned.

From the BRI documents mentioned above that the SPC has issued, it appears that the SPC is still trying to determine a proper role for the expert committee (at least on the foreign side) as I don’t believe the roles mentioned in CICC regulations have turned out to fit with the SPC’s actual needs and the varied backgrounds of the experts. I’ve been in touch with several foreign members of the expert committee, none of whom has been approached by the CICC individually to provide expertise. One of many issues (as I’ve written about before) is that mediation outside China is considered to be its own type of expertise, different from arbitration (an area in which a number of experts are well known). Another question is whether the expert committee is made known internally within the SPC as a platform through which others in the SPC can access foreign expertise.

For all these reasons—the limited time that CICC judges have to devote to specific CICC matters, the focus on progressing Chinese substantive & procedural law through CICC decisions, the possible use of the lower courts to assist the CICC to evolve international commercial rules appropriate for China, and the flexible use of the expert committees–in the short to medium term I see the work of the CICC as more domestically focused, as the SPC does its part to progress Chinese domestic and foreign-related legislation, or as the current slogan has it “统筹推进国内法治和涉外法治.”

 

Update on judicial interpretations

One of the most important functions (职能) of the Supreme People’s Court (SPC) is issuing judicial interpretations (司法解释), which it issues for the most part unconnected with a specific “case or controversy” but rather drawing on many cases that have previously arisen in the lower courts. They are a critically important way that the SPC unifies the application of law. The extent to which SPC judicial interpretations are binding is one of several fundamental uncertainties attaching to this function, as the National People’s Congress (NPC) Standing Committee is authorized to review them and may require amendments to them or more, and it is unclear how much they bind institutions outside the court system.  But what can be said is that they are critically important to the operation of the Chinese legal system, The SPC, particularly its headquarters in Beijing,  focuses on judicial interpretation work for reasons connected with the slow pace and abstract language of Chinese legislation, although Chinese (and foreign) scholars, lawyers and other commentators sometimes criticize the SPC’s expansive reading of laws. 

About one month ago (in June 2021), the SPC updated its 2007 Judicial Interpretation Work Provisions (JI Work Provisions) in this decision  关于修改《最高人民法院关于司法解释工作的规定》的决定).  [See a refresher on the legislative basis of judicial interpretations, if needed.] The JI Work Provisions describe the types of judicial interpretations the SPC can issue, which institutions can propose drafting judicial interpretations, the drafting process, the promulgation process, the filing process, etc. The update was a minimally invasive one, adding to Article 6  a new category of documents, now classified as judicial interpretations–rules (规则). Rules are defined in a new paragraph of Article 6, as follows: “The judicial interpretations regulating the trial practices of people’s courts shall adopt the format of “Rules”–the intention being that when the SPC issues court rules, they should be in the form of 规则. That means that from now on there are five types of judicial interpretations:

The amendments underwhelm this observer, who had read many SPC documents signaling that many changes were needed. Two of those are Article 26 of the 2019 Fifth Five-Year Judicial Reform Plan Outline and Article 2 (3) of the  2020 Opinions of the Supreme People’s Court on Improving the Work Mechanism for Unifying the Standards for Application of Law (Opinion on Improving the Work Mechanism) :

#26 Improve mechanisms for the uniform application of law. Strengthen and regulate work on judicial interpretations, complete mechanisms for researching, initiating, drafting, debating, reviewing, publishing, cleaning up, and canceling judicial interpretations, to improve centralized management and report review mechanisms….

Article 2 (3) of the Opinion on Improving the Work Mechanism:

Judicial interpretation is an important part of the socialist judicial system with the Chinese characteristics and an important duty of the Supreme People’s Court. For special issues of application of laws in judicial work, especially the unspecific and unclear provisions of the laws which result in difficulty in understanding and enforcement, changes in circumstances which result in different understanding of the basis for handling cases, different standards used for rulings of specific cases in same type and other relevant issues, the Supreme People ’s Court shall strengthen investigation and study and formulate judicial interpretations in a timely manner strictly in accordance with the law. In respect of the judicial interpretations involving the interests of the people or major and complicated issues, public comments shall be solicited openly. It is imperative to further standardize the procedures for formulation of judicial interpretations, improve the mechanism for research, project initiation, draft, argumentation, review, promulgation, clearing and repeal and improve centralized management and record-filing review mechanism.

The question is, why after all this language about providing more details about judicial interpretation procedures, did the SPC leave the rules unchanged, except for adding one new category of judicial interpretations? The SPC’s press conference announcing the 2020 Opinion on Improving the Work Mechanism does not shed any light on this question.   

I surmise that the SPC leadership decided that it was most prudent to leave the regulations unchanged because it is best to leave maximum flexibility in the drafting process. The language in the documents above on improving judicial interpretation procedures remains significant as reminders to the SPC Research Office and others involved in the judicial interpretation drafting process. The Research Office is the gatekeeper for reviewing proposals, examining and coordinating the drafting of judicial interpretations. It also acts as the liaison when other central institutions forward their draft legislation and judicial interpretations to the SPC for comments, coordinating the SPC’s response with other divisions and offices, with a knowledgeable person noting that “the view of the Research Office prevails.”

The SPC liaises with the NPC Legislative Affairs Commission during the judicial interpretation drafting process to harmonize the views of the institutions. In an article published on 21 July by China University of Political Science and Law Professor Luo Xiang on appraisals by administrative institutions in criminal cases, he compared an article in the Criminal Procedure Law judicial interpretation issued for comment with the final version, noting that “the Office for Criminal Law of the Legislative Affairs Commission of the National People’s Congress clearly held a negative attitude [to the language of the article in the original draft] “(全国人大法工委刑法室则明确持否定态度).

As I understand the language in the two documents quoted above, they serve as further reminders that the Research Office staff should review the package of documents that come before them before the documents are forwarded to the SPC Judicial Committee (Adjudication Committee) for consideration with these factors in mind (among others):

  • does it clear that the divisions (tribunals) involved have done sufficient research and investigation about the issues that arise in practice;
  • is it sufficiently comprehensive, with the right amount of discretion given to the lower courts and accommodate varying judicial competence, economic and social development; and
  • does it incorporate the views of relevant internal and external stakeholders?

On the topic of flexibility in procedures, take the example of public consultation. As I mentioned in January,  the Regulations on JI Work Provisons do not specify a minimum (or maximum) time period for soliciting opinions from the public. 

Reviewing the comment periods for some of the other judicial interpretations and other judicial documents for which comments were solicited in 2020, the deadlines appear to vary significantly.  I surmise that the deadline is set by the team in charge of drafting the judicial interpretation. In November 2020, the SPC solicited public comments on proposed amendments to its judicial interpretations related to the taking of security for 18 days, while comment periods for other judicial interpretations and judicial documents seem to be often one month and sometimes two months

It appears many judicial interpretations do not involve public consultation. Consulting the public is optional, unlike consulting internal and other official stakeholders. Article 17 of the JI Work Provisions requires approval by two SPC leaders–the vice president in charge of that type of issue, plus either the court president or the executive vice president (currently Justice He Rong). As I wrote in my recently published book chapter, a review of SPC judicial interpretation public consultations reveals that few, if any, have been in the area of criminal law or criminal procedure law. One experienced SPC judge gave his view of why that was so:

It’s the SPC’s bureaucratic nature! It thinks that the power to draft interpretations is with it and it is completely within its ability to draft good judicial interpretations. So therefore no democratic procedure has been formed to broadly consult different parts of society during the drafting process. The practice always has been internal consultation, generally consulting gongjianfasi [公检法司] [public security, procuratorate, courts, and administration of justice], and experts, the various divisions and offices of the SPC, and then it is submitted and approved. If timing is rushed, one or two experts will be consulted.

My book chapter, describing what I called “gated community” procedures,  explores other reasons as well.

Another topic mentioned by the documents cited above is project approval or initiation, also discussed in further detail in my book chapter. Since 2018, the SPC has provided the domestic and international professional world with more transparency about its judicial interpretation agenda by making public the document by which the SPC leadership gave project approval (立项) to proposals for drafting judicial interpretations. The SPC has a yearly plan for drafting judicial interpretations, as set out in the JI Work Provisions, analogous to the National People’s Congress (NPC)’s legislative plans. It should be noted that the JI Work Provisions do not require the project approval document to be made public. This year, the judicial interpretation agenda has not [yet] been released. It is unclear whether it is a matter that was overlooked in the flood of other documents issued or for some other reason.

 

Invisible Belt & Road Disputes

slide from my presentation

In academic and many professional discussions of Belt & Road Initiative (BRI) disputes, the focus is on disputes between the Chinese and foreign parties.  Few mention disputes between two or more Chinese parties but linked with a BRI project.   (Professor Vivienne Bath of the University of Sydney Law School is one of the few exceptions.)   These are what I call “invisible  BRI disputes,” because few in the academic world and a small group in the professional world have noticed them.

I mentioned these type of disputes during my keynote speech at the University of Pittsburgh School of Law and Asian Studies Center’s “Deals and Disputes: China, Hong Kong, and Commercial Law” webinar when I spoke about the role of the Supreme People’s Court (SPC) in developing “Chinese international commercial law” (as I defined the term).–as can be seen in the slide above.

Although I made inquiries with some authoritative persons in the world of Chinese arbitration and the judiciary,  they were unable to give even a vague estimate of the number of these invisible BRI disputes, but all had the sense that they have been increasing and will continue to increase, both in arbitration and in the courts, as more projects undertaken by Chinese contractors overseas encounter unanticipated problems and enter into dispute settlement proceedings with one or more foreign counterparties and thereafter seek to claim their losses from their Chinese subcontractors (or sub-subcontractors) or suppliers or prevent their banker from paying out under a demand guarantee (or counter-guarantee).

The Belt and Road Initiative: Legal Risks and Opportunities Facing Chinese Engineering Contractors Operating Overseas (Engineering Contractors Book), written by a group of highly experienced Chinese legal advisers to major Chinese contractors, identified some of the risks to Chinese companies when doing contracting projects overseas.  As this and other sources have written, Chinese contractors are often engineering, procurement, construction (EPC) contractors in BRI jurisdictions.

This blogpost looks at three types of business risks leading to invisible disputes, as identified by the authors of the Engineering Contractors Book and others advising Chinese engineering contractors.  I look forward to others taking this topic forward.

Invisible Dispute #1

The Engineering Contractors Book said of the risks of subcontracting to other Chinese companies: “illegal subcontracting and multilevel subcontracting has become one of the biggest risks to Chinese contractors nowadays…[T]he choice of subcontractor is very important, which will result in one honors all; one damns all.” The book gives this example of invisible dispute #1.

 Company A is a large [Chinese] international contractor… Company A undertakes the general contracting, and completes sets of equipment, engineering consultation and engineering design, project management and engineering supervision, installation and debugging and technical services of various domestic industrial projects. A project in Country F in Southeast Asia was developed and executed by two subsidiaries of Company A: Company B and Company C. Company B is a trading company. This was the first time that it carried out foreign projects. Previously, Company B had no overseas project experience and personnel with relevant experience. Company C is an enterprise whose main business is project design, debugging and tests. In the selection of equipment suppliers, materials suppliers and other suppliers, Company B chose enterprises that had cooperated with Company A in other projects. Problems concerning these enterprises occurred during the installation, debugging and operation process, resulting in project delay, repeated procurement and increased costs. In the stage of commissioning and trial, Company C subcontracted the work to Company K, and Company K subcontracted to Company P, which was also a subcontractor of the employer. This subcontracting mode caused many problems, which led to project delay and triggered the employer’s claim.

According to a recent article in the Chinese press, about 70% of these disputes are heard in Chinese domestic arbitration.  A legal adviser to a provincial-level state-owned engineering contractor wrote recently about several of such cases heard in the courts.

In correspondence, an arbitrator who has heard these cases commented:

subcontracting and multilevel subcontracting are common phenomena, especially overseas. When the contractor cannot finish on time, the employer looks to the local construction team….

these cases are troublesome.  The problem is obtaining the crucial evidence, not because of any local restrictions, but because after projects go into operation, there are major changes to the site [of the construction project], so loss is difficult to determine. [In one case[ there were several boxes of peripheral and circumstantial evidence, in English, Arabic, and Chinese, but they did not form a chain of evidence.

Invisible Dispute #2

The authors of the Engineering Contractors Book wrote about demand guarantee risk.  In their view, fraudulent claims by the employer (and beneficiary of a demand guarantee) in a construction project are a significant risk because some employers may make claims in bad faith; international legal harmonization on the issue of fraud in demand guarantees is insufficient.  Invisible dispute #2 arises when an employer seeks to draw on the demand guarantee and the Chinese contractor files a claim against its bank, requesting the court to issue an injunction to stop payment under the demand guarantee on the basis of fraud.  Sometimes the project owner’s overseas bank is added, involving demand guarantees given by a Chinese contractor operating overseas and its bank. One example was mentioned in an earlier blogpost and another example is found in the deal list of a leading Chinese disputes lawyer:

Represented Beijing xxxx International Engineering Technology Co., Ltd. in an overseas construction letter of guarantee dispute before the ….. High People’s Court (first instance) and the Supreme People’s Court (second instance)–

The hearing of cases involving demand guarantees (standby letters of credit) appears to be an important area in which Chinese style case law will supplement the principles in the Civil Code, its relevant judicial interpretation, and the SPC’s 2016  judicial interpretation on independent (demand) guarantees.  At the end of last year (2020), the Shanghai Higher People’s Court issued a policy document on improving the hearing of foreign-related financial cases  (上海法院服务保障进一步扩大金融业对外开放若干意见), one point of which calls for the courts to improve the hearing of demand guarantees. The policy document was accompanied by typical cases (典型案例), one of which was a demand guarantee case heard by the Shanghai Financial Court.

I expect two further authoritative decisions will harmonize how legal and finance professionals understand Chinese law related to demand guarantees.  Those decisions will be made in two cases that the China International Commercial Court (CICC) has heard but has not yet decided. The cases involve demand guarantee (standby letter of credit) issues and the question of the standard for fraud and the issuance of an injunction.  If the SPC takes a case as a CICC case, it means that the legal issue is considered important enough to require a panel of five Supreme People’s Court (SPC) judges to hear the case.  The decisions will be soft precedents, ones that fill in a gap in statutory law and judicial interpretations.

Invisible Dispute #3

The authors of the Engineering Contractors Book wrote about supplier (often Chinese supplier) risk:  “if contractors fail to enhance the selection and management of suppliers, they are likely to face difficulties during the project execution. In practice, there are many cases in which contractors suffer losses due to improper selection or poor management of suppliers…Some suppliers use various unreasonable means to guarantee their profits in the bidding and follow-up process, which will inevitably bring greater risks to contractors.” My comments here are limited to Chinese supplier risk.

One example that can be identified most easily is related to the construction of Justice House in Tbilisi, Georgia.  Disputes over the quality of equipment and related issues ended up in litigation in the Sichuan Higher People’s Court.

Concluding thoughts

It is understood that first and third type of disputes may be heard by Chinese arbitral tribunals or courts, depending on whether the contracts have arbitration clauses, while the demand guarantee cases are generally heard in the courts.  Chinese legal professionals have commented that these cases are challenging for both arbitral tribunals and the courts to hear, particularly if much of the evidence is outside of China and especially if technical expertise is needed. Another issue raised by one of the authors cited is the choice (application) of law, as some jurisdictions may require that local law apply to any subcontracting, but Chinese courts tend to apply Chinese law.

Two recent articles in the Chinese professional legal press by a senior Chinese construction lawyer focused on a recent initiative to establish a qualification system for expert witnesses in construction engineering disputes.  It is even more challenging for Chinese courts to hear disputes that may involve foreign technical expertise.  Yet another issue relates to evidence formed abroad.   A third issue, not mentioned in this blogpost, relates to the greater need for dispute adjudication boards in construction disputes heard in the Chinese courts. Both the China International and Economic and Trade Arbitration Commission (CIETAC) and the Beijing Arbitration Commission have such rules in place, although with different titles.

These invisible BRI disputes raise several of many areas of law that need further work  as Chinese companies operate internationally but want to have related disputes heard at home, and China seeks to progress domestic and foreign-related legislation, or as the current slogan has it “筹推进国内法治和涉外法治.”

____________________________

Many thanks to Sun Wei, partner with the Zhong Lun Law Firm, and some authoritative persons for sharing their insights. The author alone is responsible for the above views.

SPC WHITE PAPERS & ANNUAL REPORTS WITH ENGLISH TRANSLATIONS

I’ve just created a page with links to SPC white papers and annual reports with English translations. As I commented there, these reports are useful for the professional and academic public outside of China. It would be a service to the professional and academic publics inside and outside of China if these reports could be accessed in one place on the SPC’s official website in their Chinese and English versions (to the extent there are English versions). For the English versions, making them more accessible could also be understood (for some) as telling the story of the Chinese courts better to the English-reading international public. Please use the comment function to suggest additional links and additional reports and make corrections.

The Supreme People’s Court & the Development of Chinese International Commercial Law

I am very honored to have been the first keynote speaker of the webinar “Deals and Disputes: China, Hong Kong, and Commercial Law” held on May 18-21 (2021).   The webinar was organized by the University of Pittsburgh, with its School of Law’s Center for International Legal Education working together with its Asian Studies Center. Many thanks to Professors Ronald Brand and James Cook for the kind invitation.   For those who missed it, the recording of my presentation is now available on the Youtube channel of the Center for International Legal Education.

I spoke on the Supreme People’s Court (SPC) and the Development of Chinese International Commercial Law (as I defined it).  My presentation synthesizes many points that I have made separately on this blog and should be useful to students or others seeking to understand several aspects of the work of the SPC.   Many thanks to Professor Pamela Bookman and Mary Buck Young for taking the time to make insightful comments on earlier drafts of my Powerpoint slides. Special thanks to (one of) my research assistants, Yuan Ye, for his work in transforming SPC statistics into a more understandable form and translating them into English.

Mainland-Hong Kong Insolvency “Arrangement” Forthcoming

For those for whom the timing is right, tomorrow’s (14 May afternoon) event gives the interested person an opportunity to watch a discussion in real-time concerning a new hard-law legal “Arrangement”  (it is now clear that the document is not so entitled) between the Mainland (presumably the Supreme People’s Court (SPC) and the Hong Kong Special Administrative Region (Hong Kong SAR) on bankruptcy (insolvency) law and learn about relevant recent updates. The document is the Conference Summary [Meeting Minutes] on Procedures for the Mutual Recognition of and Assistance in Insolvency Procedures by the Courts of the Mainland and the Hong Kong SAR (内地与香港特别行政区法院相互认可和协助破产程序的会谈纪要).  At the same time, the SPC is releasing an Opinion approving pilot projects to implement the Conference Summary  最高人民法院关于开展认可和协助香港特别行政区破产程序试点工作的意见.  A pilot project approach is usual when the SPC wants to test whether procedures are workable before implementing them nationwide.

social media posting by one of Hong Kong’s leading barristers chambers describes it as the “most momentous cross-border insolvency development in a generation. ”  Although it is not so stated, I surmise (by reviewing the press conference announcing the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region” (the Supplemental Arrangement (关于内地与香港特别行政区相互执行仲裁裁决的补充安排), that the official signing of the new insolvency Arrangement will be held in the morning, after which a press conference will be held. My guess, based on that press conference, is that  SPC Vice President Yang Wanming (杨万明副院长) will sign on behalf of the SPC and that Hong Kong SAR Secretary for Justice Teresa Cheng will sign on behalf of the Hong Kong SAR Government.  The link to the SPC’s press conference indicates that Vice President Yang Wanming will in fact sign and that Judge Si Yanli will participate in the signing ceremony and the press conference.

According to the social media posting above, Mr. Justice Jonathan Harris, current Companies and Insolvency Judge of Hong Kong’s High Court, will be delivering a keynote speech during the afternoon Forum announced above.   My guess (without any factual basis) is that Judge Si Yanli will give a keynote as well.  The Arrangement is likely to have involved a great deal of hard work on the part of all involved in the drafting.

Justice Harris’s judgments contain valuable insights into some of Hong Kong’s cross-border insolvency-related issues, such as the intersection between stock exchange listings and insolvency.  His decision in the Winding-Up Proceedings of China Huiyuan Juice Group is a good example:

As I explained at the outset of this decision the court is hearing many petitions to wind-up listed companies whose businesses are in the Mainland.  Since the court resumed hearings in May more than half the petitions I have heard have involved listed companies. Remarkably petitions to wind-up Hong Kong incorporated companies operating domestic businesses are currently a minority…  What is now quite clear is that the use of the group structures I have described present difficulties.  It will be useful if I describe these and what I anticipate will be their impact for creditors and shareholders in Hong Kong and other jurisdictions….

As will be apparent from this decision the practice has developed of Mainland businesses listing in Hong Kong using corporate vehicles which have no connection with the Mainland, which is commonly the COMI [Center of Main Interest], , or Hong Kong where the business is to be listed.  The structure is made more complicated by group architecture which involves inserting between the listed company and the mainland companies at least one, and my impression is commonly more than one, intermediate subsidiary incorporated in a different offshore jurisdiction.  As this decision demonstrates this structure creates a significant barrier to steps being taken by creditors and shareholders to enforce rights using the courts of Hong Kong, which is the legal system that they have probably assumed they will be able to access if they need to take steps to enforce their legal rights against a company listed here.

As I have previously written,  cross-border bankruptcy (insolvency) law is an area of particular focus of the SPC.  Phrases in two 2020 SPC Opinions signal this Arrangement. Article 16 of the November 2020 SPC Opinion  on Providing Support and Guarantees for Shenzhen to Build Itself into a Pilot Demonstration Zone for Socialism with Chinese Characteristics (最高人民法院关于支持和保障深圳建设中国特色社会主义先行示范区的意见) states:

Promote the establishment of a cross-border bankruptcy recognition and assistance mechanism推动建立跨境破产认可与协助机制.

Additionally, Article 12 of the September 2020 SPC  Guiding Opinions on Further Expanding People’s Court Service Safeguards for Expanding the Opening Up to the World (Open Policy Guiding Opinions)) (最高人民法院关于人民法院服务保障进一步扩大对外开放的指导意见) contains the following (translation thanks to Chinalawtranslate):

12. Properly handle cross-border bankruptcy [insolvency], financial, and enforcement cases. Adhere to the principle of equal protection for similar claims, actively participate in and promote the formulation of international treaties on cross-border bankruptcy [insolvency], improve the coordination mechanisms for cross-border bankruptcy [insolvency] and protect the rights and interests of creditors and investors in accordance with the law…12.妥善处理跨境破产、金融、执行案件。 坚持同类债权平等保护原则,积极参与和推动跨境破产国际条约的制定,完善跨境破产协调机制,依法保护债权人和投资人权益。

This single issue illustrates the close reading skills needed to understand SPC Opinions.

Further analysis of the implications of the Arrangement will need to follow its release.

Soft and Hard Law Arrangements & Other Agreements Between the Mainland Authorities and the SAR Governments

1st Joint conference meeting on the Hong Kong BRI Arrangement

If you have never heard of hard and soft law  Arrangements (安排) and other agreements between Mainland authorities and the Hong Kong and Macau Special Administrative Region (SAR) governments, do not be surprised.  The classification is my own and I see it as useful to capture the types of Arrangements and other soft law agreements that have been signed between certain Mainland authorities and the Hong Kong SAR and the Macau SAR, as well as Arrangements between the two SARs. This blogpost highlights several of the more important soft law Arrangements and other agreements between the mainland authorities and the SAR governments.  

This classification harmonizes with the analysis of Professor Wang Heng of the University of New South Wales concerning Belt & Road Initiative Agreements.  

Definition of Arrangements

Although I have written previously about Arrangements between the Supreme People’s Court (SPC) and the Hong Kong Special Administrative Region (SAR) Government, I have not seen an official definition of “Arrangement.”     It appears to be used as a form of agreement between certain Mainland authorities  (intended to include institutions such as the Supreme People’s Court and the Standing Committee of the National People’s Congress as well as ministries and commissions under the State Council ( and it seems some counterparts at the provincial level) and the government of the Hong Kong or Macau SAR.  Some are between the two SARs. I have not seen an equivalent to the Law on the Procedure for the Conclusion of Treaties.  Perhaps guidance exists internally. I surmise (from my blogpost on the recent SPC Arrangement) that the Hong Kong and Macau Affairs Office supervises Arrangements.

What I had not realized until recently that Arrangements are far more numerous and cover a broader range of areas than most legal professionals outside of China (including me) are generally aware of.   Both types of Arrangements can include affiliated measures, such as joint [steering] conferences 联席会议 (related to one of my recent posts ) and yearly implementation measures, such as agreed areas for cooperation.   

Hard and Soft Law Arrangements

 The “Hard Law Arrangements” often have content that is somewhat analogous to a treaty between sovereigns-that is, they have normative content, while the “Soft Law Arrangements” have more soft law content, some more analogous to the ones Professor Wang Heng discussed in the BRI content, while others have language found in domestic Chinese government documents.  I will borrow the definition that Professor Wang Heng uses in his article: soft law refers to quasi-legal obligations or law-like promises that are not legally binding but may affect state behavior.  His definition draws on earlier work, such as that of my colleague Professor Francis Snyder.  (My colleague has a forthcoming book chapter on soft law.)

Professor Wang Heng describes Belt & Road Initiative (BRI) primary agreements (soft law agreements) as largely emphasizing project development rather than rule development. This is also seen to some extent with “soft law Arrangements.” 

“Hard Law” Arrangements

“Hard Law Arrangements” and other “hard law” agreements between mainland authorities and the Hong Kong and Macau SARS are well-known, so this section only mentions a few of the most prominent: 

Professor Henry Gao noted in an article that during the negotiations leading to the conclusion of the CEPAs, it had been suggested that they should be called free trade agreements (FTAs) but they were named  “Closer Economic Partnership Arrangements” instead. He commented that in substance, the two CEPAs are no different from the other FTAs around the world.

For those interested, the Ministry of Commerce (MOFCOM) has a webpage that consolidates the related Macau supplemental agreements.

  •  Dispute Resolution Arrangements

Hong Kong’s Ministry of Justice has a webpage (available in multiple languages) with links to arbitration-related Arrangements as well as recognition and enforcement of civil and commercial judgments Arrangements.  The webpage also links to Arrangements involving other Hong Kong SAR government departments. It appears that some agreements mentioned on that webpage may be soft law documents, but I have not seen the full text of some of these documents and so cannot confirm.

An Arrangement on the Mutual Recognition and Enforcement of Arbitral Awards between the Supreme People’s Court and the Macau SAR Government also exists.

Many other hard law Arrangements have been signed, but I have not seen a single repository of these documents. It is my hope that the Hong Kong Government can do so.

Soft Law Arrangements and Other Soft Law Agreements

It appears that less attention has been paid to soft law Arrangements and other soft law agreements.  There are also memoranda of understanding (MOU), with analogous usage to those in BRI projects. A number of the important ones are highlighted below.

  • July, 2017 National Development and Reform Commission, People’s Government of Guangdong Province, Government of the Hong Kong Special Administrative Region, Government of the Macao Special Administrative Region Framework Agreement  on Deepening Guangdong-Hong Kong-Macao Cooperation in the
    Development of the Greater Bay Area Greater Bay Area (GBA Framework Agreement)

This Framework Agreement is a soft law agreement that links hard and soft law content. In discussing BRI soft law agreements, Professor Wang Heng mentions Project-Linked Agreements and Mechanism-Creating Agreements and mentions that some combine both. The GBA Framework Agreement mentions some of the above hard law Arrangements, with a great deal of new soft law content aimed at promoting the development of the GBA.  It flags what was then forthcoming BRI Arrangements. Among the goals cited:

deepen co-operation between the Bay Area and related countries and regions in… legal and dispute resolution services… and to build an important support area for pursuing the Belt and Road Initiative.for Hong Kong…

establish a centre for international legal and dispute resolution services in the Asia-Pacific Region…

This is the document that attracted my interest in “soft law Arrangements.”  Several articles relate to developing Hong Kong’s role in dispute resolution, such as:

2.To support Hong Kong in developing high value-added maritime services, including…maritime law and dispute resolution,

26. To support Hong Kong in establishing itself as a centre for international legal and dispute resolution services in the Asia-Pacific region to provide relevant services for the Belt and Road Initiative.

The Hong Kong BRI  Arrangement links to Article 34 of the SPC’s 2019  Opinion On Further Providing Judicial Services and Guarantees by the People’s Courts for the “Belt and Road” Initiative (BRI Opinion #2). That article contains language about supporting the Hong Kong SAR to develop as a regional legal service and dispute resolution center and Hong Kong playing a more important role in jointly developing the BRI:

The development of the regional legal service and dispute resolution center of the Hong Kong Special Administrative Region (“Hong Kong SAR”) shall be further supported, the cooperation between arbitration institutions in Hong Kong such as Hong Kong International Arbitration Centre and arbitration institutions in the Mainland, the arbitration institutions in the Hong Kong SAR shall be introduced to the construction of the “one-stop” dispute resolution platform of international commercial courts… and the Hong Kong SAR shall play a more important role in the joint development of the “Belt and Road” Initiative. 进一步支持香港特别行政区区域法 律服务和纠纷解决中心的建设,支持 香港国际仲裁中心等仲裁机构与内地 仲裁机构的合作,在国际商事法庭 “一站式”纠纷解决平台建设中适当 引入香港特别行政区仲裁机构…不断发挥 香港特别行政区在共建“一带一路” 中的重要作用。

The Arrangement establishes a joint conference mechanism (that features in a number of Arrangements) comprising responsible officials from the National Development and Reform Commission (NDRC), the Hong Kong and Macao Affairs Office of the State Council and other relevant departments as well as senior representatives of the HKSAR.  The SPC has participated in at least two of these meetings, but from the reports on the meetings, does not appear to be a joint conference member institution.

The  Hong Kong BRI Arrangement could be linked to the 2019 Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region and the 2020 Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong SAR. Although  BRI Opinion #2 explicitly restates the Chinese government’s desire that more international commercial disputes (including BRI ones) be resolved in China, this clause is also a recognition that the Hong Kong International Arbitration Centre is often selected in contracts between Chinese companies and foreign companies, including in BRI disputes, as evidenced in Professor Matthew Erie‘s recently published article.

Under the Arrangement, the two sides have agreed, in related documents, upon major areas of work and in 2020, allocation of responsibilities and have established an annual joint conference. It is unclear whether a similar set of documents exist for the Hong Kong BRI Arrangement.

The Macau and Hong Kong BRI Arrangements are quite different from one another and deserve further analysis. Under the Macau BRI Arrangement, for example, the Macau SAR Government undertakes to be a platform for liaison with Lusophone countries.

It is unclear why there is no courtesy English translation of this Arrangement (as there is for the Hong Kong BRI Arrangement). The content of this Arrangement provides insights into plans for Hong Kong and the Mainland to cooperate in the area of science and technology, but time does not permit further analysis.

A final comment is that it appears to be difficult to locate the full text of some of the soft law Arrangements reported.

More to Come?

I surmise that the Hong Kong and Macau SARs’ futures will involve more hard and soft law Arrangements and other agreements with the Mainland.  The topic of these agreements deserves closer attention. I hope that someone with an interest, the time, and the language skills can take this research forward. 

 

RECORDING & REVIEW PT. 8: “SAME LIFE, DIFFERENT VALUES,” OR HOW THE NPC LEGISLATIVE AFFAIRS COMMISSION REVIEWS JUDICIAL INTERPRETATIONS

Written by Dongyu Sun.  Edited by Susan Finder and Changhao Wei.

This post also appears on the NPC Observer.

On December 15, 2005, a loaded truck rolled over on a mountain road in Chongqing, crushing a trishaw carrying He Yuan and her two friends to school. All three perished in the accident. What thrust this tragedy into the national spotlight, however, was the drastically different amounts of compensation their families received. The trucker’s employer settled with the families of Yuan’s friends for over 200,000 RMB each, but was willing to pay hers only 80,000 RMB—because she, unlike her classmates, had a rural hukou (or household registration).[1] The company cited a 2003 Supreme People’s Court (SPC) interpretation on the application of law in personal injury cases (2003 Interpretation), which created two separate standards for compensating the deaths of urban and rural residents.

As a result of this effectively hukou-based rule, countless victims’ families have found themselves in the same position as Yuan’s. The Chinese public has dubbed this phenomenon “same life, different values” [同命不同价] and has persistently criticized the 2003 Interpretation. Some citizens have requested that the NPC Standing Committee (NPCSC) conduct a constitutional review of the Interpretation.

It was not until 2020 that the NPCSC’s Legislative Affairs Commission publicly addressed these requests in its annual report on “recording and review” (R&R) [备案审查]. This report’s timing and content are significant. Below, we will first take a closer look at the 2003 Interpretation and the controversy surrounding hukou-based compensation standards, before returning to the Commission’s report.

The SPC’s 2003 Interpretation

Under article 15 of the 2003 Interpretation, in a civil case where the deceased victim was an urban resident, the defendant must generally pay twenty times the previous year’s per capita disposable income of urban residents of the relevant province for the victim’s death. For a victim who was a rural resident, the previous year’s per capita disposable income of rural residents[2] is used as the base instead. The urban per capita disposable income is consistently several times higher than its rural counterpart across China. In practice, courts mainly used the victim’s hukou to determine the applicable standard. Article 12 of the 2003 Interpretation contains similar residence- (hence hukou-) based compensation standards when the victim has been permanently disabled. At the time, the standards in the 2003 Interpretation were considered appropriate for China and in line with official policy that made distinctions based on hukou.

Within a few years, the SPC publicly acknowledged that the dual standards created inequities between urban and rural victims. Then-SPC President Xiao Yang told media in 2007 that the SPC had already formed “a preliminary view” on “same life, different values,” and would issue new rules after that year’s NPC session. But in 2008, an SPC vice president disclosed that it was not possible for the SPC to reach a consensus on a replacement standard.[3] Instead, the SPC issued measures in 2006 and 2011 directing the lower courts to consider factors in addition to hukou (such as a victim’s “habitual residence”) in applying the 2003 compensation standards. Basic level courts encountered many difficulties in implementing this guidance, however, so hukou largely remained the determining factor.

The issue of the dual compensation standards arose during the drafting of China’s Tort Liability Law [侵权责任法].[4] One draft would have set a uniform national standard for death compensations, based on the average annual salaries of urban employees nationwide, while another would have provided an individual-based rule.[5] The NPCSC in the end did not adopt either provision and left the rules in the 2003 Interpretation intact. The Tort Liability Law did make one limited change in response to cases like He Yuan’s: under article 17 (now codified as article 1180 of the Civil Code [民法典]), if multiple people died because of the same tort, a court could award their families the same amount of death compensation without regard to their individual circumstances.

From these developments, it is clear that the authorities considered that the hukou-based rules fit the reality of unequal development of China’s urban and rural regions.[6] They thought that an individual-based rule would give judges too much discretion, but that uniform rules would either create too much burden for rural tortfeasors (if based on urban income level), or be unfair to urban victims (if tied to rural income level). So the 2003 Interpretation, plus the SPC’s flexible measures, were considered the least worst.

Fang Shimin’s Request for Review

Over the years, Chinese citizens have requested the NPCSC to review the validity of the 2003 Interpretation through its R&R process, explained here in more detail. In sum, that process is an oversight tool that empowers the NPCSC Legislative Affairs Commission (LAC) to reject a sub-statutory legal document if it deems the document unconstitutional, unlawful, contrary to the Communist Party’s major policies, or otherwise “clearly inappropriate.”

The Southern Metropolis in January 2021 reported on such a citizen request and the LAC’s reply. Mr. Fang Shimin, a retired manager of an Anhui mine company with an interest in the law, wrote to the LAC in mid-2018, arguing that the 2003 Interpretation’s hukou-based rules violated the guarantee in Article 33 of the Constitution that all citizens are “equal before the law.”

The LAC (specifically, its Office for Recording and Reviewing Regulations) disagreed with Mr. Fang. It responded to him in December 2018, after having consulted with the SPC and its own Office for Civil Law. The LAC explained that the differential compensations were constitutional because they did not in fact make up for the victims’ disabilities or lost lives, but were instead economic relief to the victims or their families. The LAC’s reply did also acknowledge that there were some issues with the 2003 Interpretation that need to be “studied and resolved,” including how to define the compensation more reasonably so that “most citizens would accept them.”

Recent Policy Change & Reform Pilots

The turning point for the hukou-based compensation rules came in late 2013, when the Communist Party decided to “accelerate” hukou reform. A few months later, the State Council issued a major policy document that called for abolishing the distinction between urban and rural hukou and replacing both with “resident hukou” [居民户口]. By February 2017, all mainland provinces had implemented this reform. The State Council also ordered companion reforms to other institutions (e.g., social welfare programs) consistent with the uniform “resident hukou” system, but one government researcher said at the time that there would be “a long way to go” before the urban-rural disparity in social benefits disappears.

After a few years of development, in April 2019, the Party Central Committee and the State Council issued a joint policy document to further hukou reform and to promote integrated development of urban and rural areas. The document specifically requires “reforming the personal injury compensation system and equalizing compensation standards for urban and rural residents.”

To implement this directive, the SPC soon required provincial-level courts to initiate pilot programs to equalize compensation standards. According to our research, almost all courts have decided to conduct the pilots within the whole province, while a few limited their scope to a few designated cities. The majority of provinces are experimenting with uniform compensation standards in all civil cases involving personal injury, but a few are testing them in only a subset of tort cases, for instance, those arising from traffic accidents. As for the new compensation standards, most provinces are now applying the urban standards under the 2003 Interpretation to all victims, whereas some are trying out new formulae, such as the per capita disposable income of all residents of a province.

The pilots are still underway as of this writing. The SPC has not indicated when they would end.

The LAC’s Report

It was against this backdrop that the LAC again responded to citizens’ requests to review the SPC’s 2003 Interpretation. According to its 2020 R&R report, some citizens (like Mr. Fang before them) argued that “the inequalities in judicial trial practices that have resulted from the [2003 Interpretation’s] different calculation standards were inconsistent with the relevant constitutional spirit”—namely, the equality principle.

The LAC responded:

After review, we think that as the society develops and makes progress, the State has proposed the integrated development of urban and rural areas, and the gaps between urban and rural development and the residents’ living standards will gradually narrow, so the differences between standards for calculating compensations for personal injury to urban and rural residents should accordingly be abolished.

我们审查认为,随着社会发展进步,国家提出城乡融合发展,城乡发展差距和居民生活水平差距将逐步缩小,城乡居民人身损害赔偿计算标准的差异也应当随之取消。

The LAC then mentioned the ongoing pilot programs to equalize the compensation standards as authorized by the SPC and reported that it had “advised” the SPC to “timely” amend its 2003 Interpretation after “summarizing lessons learned from the pilots.”

It thus appears that the LAC dodged the constitutional question raised by the citizens’ requests. Instead, it relied on two other grounds under the R&R’s governing rules—new state policies and changed realities—to disapprove the hukou-based rules in the 2003 Interpretation. Yet, curiously, Liang Ying, head of the LAC’s Office for Recording and Reviewing Regulations, affirmed the constitutional nature of the LAC’s review of the 2003 Interpretation in an interview with the Legal Daily. If so, then why did the LAC was not more forthcoming about its true reasoning in its official report?

It might have concerns for the ramifications of using the Constitution to invalidate the SPC’s hukou-based standards. Although the post-2014 hukou reforms have removed the urban-rural classification, they have neither ended the hukou system nor instantly improved the urban-rural inequality created by the prior classification. Most citizens continue to obtain critical social services and benefits—compulsory education, healthcare, affordable housing, unemployment benefits, pension, veterans’ benefits, among many others—from the local government at the place of their hukou. (Rural migrants may access urban benefits, but only if they meet the often-stringent residency requirements, especially in megacities.[7]) Except under a few now-integrated welfare programs, rural residents in general still receive social entitlements of inferior quality. For instance, the State Council maintains separate rules for the urban and rural subsistence allowance programs. And by end of 2020, only 7 of 31 mainland provinces had achieved (rough) parity of subsistence allowances between urban and rural residents; in all other provinces, eligible urban residents received at least 20 percent (and up to 130 percent) more allowances than rural residents.

Were the LAC to reject officially the 2003 Interpretation’s dual compensation standards on constitutional grounds, it would render other hukou-based rules—rules that disfavor rural residents—susceptible to the same constitutional challenge. By contrast, relying on policy and societal changes that are specific to personal injury compensation would give the LAC more leeway to turn away constitutional attacks on other hukou-based rules. By framing the controversy over the 2003 Interpretation as one of policy, therefore, the LAC can signal that other hukou-based rules are open to change, but also make clear that the changes will come only at the authorities’ discretion.

_____________________________________________

SUN Dongyu graduated from the School of Transnational Law of Peking University in 2018, with a Juris Doctor degree in American law and a Juris Master degree in Chinese law. He was recently awarded a German Chancellor Fellowship by the Alexander von Humboldt Foundation in Germany for the year 2021–22. He currently works as a research assistant to Professor Susan Finder. 

Changhao Wei is a Postdoctoral Fellow at Yale Law School’s Paul Tsai China Center, where he focuses on China’s legislative process and constitutional enforcement mechanisms. He is the founder, manager, and editor of NPC Observer, a website that covers China’s national legislature, the National People’s Congress.

_    _    ___-

[1] Rural hukou was officially “agricultural hukou” [农业户口], and urban hukou “non-agricultural hukou” [非农业户口].

[2] The Interpretation uses the term “per capita net income of rural residents” [农村居民人均纯收入], but the National Bureau of Statistics has stopped using that metric since 2016 and has replaced it with the “per capita disposable income of rural residents” [农村居民人均可支配收入].

[3] See Zhang Xudong [张旭东], The Theoretical Paths to Solving the Conundrum of “Same Life, Different Values” [破解“同命不同价” 难题的理论路径], Mod. L. Sci. [现代法学], no. 6, 2008, at 97, 98.

[4] See Zhang Xinbao [张新宝], An Interpretation of the Death Compensation System in the Tort Liability Law [《侵权责任法》死亡赔偿制度解读], China Legal Sci. [中国法学], no. 3, 2010, at 22, 23.

[5] Id.

[6] Zhang, supra note 4, at 98.

[7] See, e.g., Kam Wing Chan, China’s Hukou System at 60: Continuity and Reform, in Handbook on Urban Development in China 59, 73–74 (Ray Yep et al. eds., 2019).

Integrating socialist core values into court judgments

On 18 February 2021,  the Supreme People’s Court (SPC) issued the Guiding Opinions on Deeply Promoting the Integration of  Socialist Core Values into the Analysis and Reasoning of Adjudicative Instruments (关于深入推进社会主义核心价值观融入裁判文书释法说理的指导意见 the SCV Guiding Opinion).  This Guiding Opinion is intended to guide the way SPC  and lower court judges write their court judgments and rulings (and any other judicial document issued to the public) to better incorporate the use of socialist core values and for those judgments to be better understood by the general public. 

For close observers of the SPC and the Chinese court system, the SCV Guiding Opinion came as no surprise.  That this Opinion would be issued was clear from phrases in several Party and SPC documents issued in recent years.  The SCV Guiding Opinion is important not only for what it says about the use of socialist core values in judgments and also for its guidance to judges on the analysis and reasoning in court judgments, rulings, and other documents.  

This blogpost is not intended as an extended academic analysis of socialist core values and the law, of which there are several excellent ones by Sue Trevaskes and Delia Lin.  It will address some more modest questions, such as:

  • what it says, including what it requires of SPC and lower court judges;
  • the documents linked to the SCV Guiding Opinion
  • how the SCV Guiding Opinion should be classified & whether it is binding or persuasive;
  • what a quick sampling of judgments containing socialist core values uncovers,
  • the vision of the court system portrayed by the SCV Guiding Opinion.

I have italicized my comments.

Summary of the SCV Guiding Opinion

The background for the SCV Guiding Opinion is that it is part of what is required by the Party Center to integrate socialist core values into the legal system and to promote their use in national governance.  This has been a theme in writings of Xi Jinping about the law, the Party  Plan on Building the Rule of Law in China (2020–2025), previous Party documents, and related SPC documents.  Some of those background documents are listed in a later section of this blogpost.

Article 1 provides that the underlying principles of the SCV Guiding Opinion are:

  1. a fusion of law and morality, which is linked to their fusion in traditional legal thought ( 法治与德治相结合); 
  2. people-oriented (以人民为中心), meaning that judgments should be clear to ordinary people and serve the purpose of educating them; and
  3. the organic unity of political, legal, and social effectiveness (政治效果、法律效果和社会效果有机统一 ), because by strengthening the guiding role of socialist core values it will enhance the legal, social, and rational recognition of judicial judgment.

The summary below highlights some of the principal points for Chinese judges.

Article 4 specified the types of judgments in which the use of socialist core values should be increased:

  1.  Cases involving national interests, major public interest, and widespread public concern;
  2. Cases involving epidemic prevention and control, emergency rescue and disaster relief, protection of heroes, brave actions for righteousness, legitimate defense,  and other such cases may trigger social moral evaluation;
  3. Cases involving the protection of vulnerable groups such as the elderly, women, children, and the disabled, as well as groups that have major disputes and may cause widespread concern in the society;
  4.  Cases involving public order and good customs, customs, equality of rights, ethnic religions, etc., where the parties to the litigation have major disputes and may cause widespread concern in the society;
  5. Cases involving new situations and new issues that require in-depth interpretation of legal provisions, judicial policies, etc., to guide social trends and establish value orientation;
  6. Other analogous cases.

What this means is that in cases where there is a great deal of public concern, judges should seek to use socialist core values.  Some of these, especially with national interest, major public interest, types of cases that attract Party leadership attention, or wide public concern are likely to be those in which the higher levels of the courts, or local political-legal commissions provide their views.

A significant part of the SCV Guiding Opinion contains guidance to lower court judges. I surmise that the guidance is directed towards less experienced and educated judges. My understanding is that more sophisticated judges, who are highly knowledgeable about political matters in addition to being technically highly competent, would consider the guidance unnecessary.

Articles 5-6 address judgment drafting.  These provisions relate to the  2018 SPC Guiding Opinions on Strengthening and Standardizing the Analysis and Reasoning in Adjudicative Instruments. Article 5 gives Chinese judges rules of interpretation generally in cases involving socialist core values., directing them to first look to a normative legal document (law or judicial interpretation) as the basis for judgment, the legislative intent, and supplement it with socialist core values.  Article 6 gives directions to judges in civil and commercial cases where there is no normative legal document as the direct basis for the judgment. Judges should use socialist core values ​​as the guide and custom and the most similar legal provisions as the basis for the judgment; if there is no most similar legal provision, judges should make judicial decisions in accordance with the spirit of the legislation, legislative purposes, and legal principles, and make full use of the core socialist values ​​in the judgment documents to explain the basis and reasons for the judgment.  It is this principle that has attracted dry comments from some of the legal professionals with whom I am acquainted.

Article 7 gives guidance to judges in cases involving multiple socialist core values, directing them to consider the spirit of the legislation, legal principles, provisions, and law and legal provisions to balance and select the relevant principles and values.   Article 8 directs judges to respond, if possible, orally in court, to the use of socialist core values by parties in court.

Article 13 directs judges handling cases that fall into one of the Article 4 categories, to emphasize socialist core values, in situations in which cases are discussed in professional judges committees or judicial (adjudication) committees.

Article 14 encourages socialist core values to be included in judicial training, particularly that related to the Civil Code, and Article 16 encourages competitions to find the best judgments that cite socialist core values.

Flagging the SCV Guiding Opinion

Several recent Party and SPC documents flagged the SCV Guiding Opinion.  Among them are:

  • the April 2020 Opinions of the Supreme People’s Court on Thoroughly Implementing the Spirit of the Fourth Plenum of the 19th Party Congress to Advance the Modernization of the Judicial System and Judicial Capacity– (最高人民法院关于人民法院贯彻落实党的十九届四中全会精神推进审判体系和审判能力现代化的意见)–improve and promote the in-depth integration of socialist core values ​​into the supporting mechanisms for trial and enforcement (完善推动社会主义核心价值观深度融入审判执行工作配套机制). My blogpost on that document briefly mentioned socialist core values;
  • the 2020 Plan on Building the Rule of Law in China (2020–2025), mentioned above
  • the 2019 5th Five Year Judicial Reform Plan Outline; and
  • the 4th Plenum of the 19th Party Congress.

This Guiding Opinion can be considered the progeny of the SPC’s 2015 Opinions on Cultivating and Practising Socialist Core Values at People’s Courts. 最高人民法院关于在人民法院工作中培育和践行社会主义核心价值观的若干意见, after which the SPC issued typical cases, both discussed in Sue Trevaskes’ and Delia Lin’s academic articles linked above. Their articles also discuss other related documents. As I wrote in 2018, the SPC issued a five-year plan, never made public, to incorporate socialist core values into judicial interpretations.

How to Classify the SCV Guiding Opinion

As to which basket of SPC documents the SCV Guiding Opinion should be placed, that relates to the catalog that I set out in a November 2020 blogpost on the SPC’s soft law. I classified a number of the SPC’s documents into different categories.  According to my classification, the SCV Guiding Opinion should be classified as Opinion Type 1, although the criteria I mentioned don’t fit perfectly.

As I defined it, that type of Opinion is one issued solely by the SPC, which create and transmit to the lower courts new judicial policy, update previous judicial policy, and establish new legal guidance that may be eventually crystallized in judicial interpretations and direct the lower courts, but cannot be cited in judicial judgments or rulings. They are generally linked to an important Party or state strategy or initiative. 

The SCV Guiding  Opinion is linked to an important Party and state strategy or initiative, that of promoting socialist core values. As a “guiding opinion,” it is intended to push policy forward. Article 17 of this document directs the SPC itself and lower courts to issue occasionally socialist core value-related model cases. From a quick search of recent lower court model cases, local courts have taken account of this.

Socialist Core Values in Chinese court judgments 

Chen Liang, one of my current students, sampled cases from basic level courts in various parts of China as set out in this spreadsheet. He originally found over 6000 cases that used “socialist core values.”In his research, he found three ways that courts invoke socialist core values:

  1.  elaborating a legal standard (such as Case No. 1), a trend that I had found in my own research);

In this case, the defendant (a government branch) rejected the plaintiff’s application to recognize his father, a KMT military officer, as a martyr who died in the Anti-Japanese War, and the plaintiff sued to correct this decision. The Court invoked the SCV to emphasize the importance of the recognition of someone as a martyr, and then affirmed the defendant’s strict scrutiny of the application.

2.invoking socialist core values as a way to allocate liability (such as Case No. 9); 

The plaintiff was hit by the defendant, and was in hospital. After 15 days in hospital, the doctor recommended him to leave, but he refused by claiming he had headache. Then, the plaintiff stayed in hospital for 110 days, and sued the defendant for compensation of medical fees of 110 days. When considering the exact duration to be compensated, the Court noted that the plaintiff’s action was wasting public medical resources, which was a violation of the SCV, and then confirmed that the defendant only had to compensate for the medical fees of 15 days in hospital.

3. invoking socialist core values as a way to educate people (or to promote total social welfare) (such as Case 10).

The plaintiff and defendant agreed to jointly operate a restaurant, and they had disputes during the operation. The plaintiff sued for damage. During the trial, the parties insulted with dirty words against each other. Given that, the Court asked the parties to contemplate on their behaviors considering the whole society was promoting SCV.

This use of cases to educate the public, noted in the academic articles mentioned above, also links to a more recent line of documents about which I wrote in July 2020, relating to using cases to explain the law and the popularization of law responsibility system (普法责任制). As mentioned in that blogpost, Sue Trevaskes has also written about the history of the popularization of law (pufa).

In my view, following this document, we are likely to see many more cases mentioning socialist core values, likely falling in all three categories mentioned above.

Vision of the Chinese Court System

This Guiding Opinion can be seen as a part of the “socialist core valueization” of Chinese law and the legal system, and in particular, the judiciary. It is one important piece of how the judiciary is being further transformed in the Xi Jinping era.

Article 1 is part of official legal ideology so that the drafters of this Guiding Opinion (the  SPC’s Judicial Reform Office) must incorporate those principles. The Party Center requires this to be done.   As  Sue Trevaskes and Delia Lin mentioned in their writings, as in the traditional legal state, “morality here is treated in a particular normative sense whereby claims are made about the unified nature of socialist values held by China’s rulers and the ruled.”  This long-time observer of Chinese society would question whether the moral values across Chinese society are as unified as this ideal has it. 

An aspect the drafters of this document may not have considered is  whether this approach to law and court judgments is consistent with China’s desire to promote the use of Chinese law overseas, which the SPC has promoted in its Opinion on Further Providing Judicial Services and Guarantees by the People’s Courts for the Belt and Road Initiative (BRI Opinion #2, discussed in this blogpost).  The fusion of law and morality in cases involving multinational commercial parties seems problematic. 

These principles see the public as a body to be educated, and that judgments need to further incorporate socialist core values to be better accepted by the public.  Writing judgments in language the public can understand–plain language judgments–is a worldwide concern of domestic courts, but incorporating socialist core values may or not be the way to achieve that.

As I mentioned above, a significant part of the SCV Guiding Opinion contains guidance to lower court judges. I surmise that the Judicial Reform Office decided that this guidance was needed for less experienced and educated judges in less developed parts of China. The more experienced judges, with many years of experience and training, both substantive and ideological, are unlikely to need such guidance set out in an SPC document.

The reality of Chinese society that Chinese judges face, particularly at the local level, is not the one that matches the socialist core values ideal. That can be seen from cases discussed in the Chinese professional media (and some cases that have caught Chinese media attention) about some of the difficult issues that they face when needing to incorporate socialist core values. A few of those cases could include:

cases involving the status of children whose parents are not married under the Chinese legal definition of marriage to one another. That may be gay or lesbian couples or one in which a married man fathers a child with a woman with whom he is not married;

Cases involving disputes between a gay or lesbian couple that has split over mutually-owned property; 

Cases involving the rights of single women who wish to have children without being married.

The SCV Guiding Opinion can be seen a signal of the direction towards which the Chinese courts are being guided.  The more sophisticated judges will know how to balance the above requirements with the need to issue a judgment that parties in cases that involve fundamental personal rights find acceptable.

 

 

How the Supreme People’s Court Coordinates With Other Party & State Organs

3rd meeting of the Inter-Ministerial Conference Combatting Illegal Trade in Wild Plants and Animals

A little-discussed aspect of the work of the Supreme People’s Court (SPC) is coordinating with other Party and state organs to better serve the greater situation and resolve specific policy issues.   At some point, I will set out a fuller description of this distinctive function of the SPC and its background history, but that will need to wait until I have plumbed the SPC’s past regulatory documents and conducted a more complete survey of practices in SPC divisions.   I examined one aspect of the way that the SPC coordinates with other departments in a book chapter to be published in the fall of 2021. That chapter focuses on the drafting of criminal procedure judicial interpretations. The  “never-ending” academic article that I am writing touches upon one aspect, briefly. This blogpost highlights some formal frameworks for coordination and at least some of what is involved. 

 Coordination with other central Party and state organs regarding specific legal issues is one of the unrecognized functions of the SPC. It  is hard to assess how much coordination work is done in comparison to other functions of the SPC, such as hearing cases or drafting judicial interpretations.  Because the Collection of the Supreme People’s Court’s Judicial Rules, a handbook for judges, places the principle “establish coordination mechanisms, properly resolve administrative disputes” in the section of general principles of administrative law, I surmise that coordination is a very important function of the administrative division. From my research below and discussions with knowledgeable persons,  some judges in the civil and commercial divisions are involved in work under these frameworks, and likely also the Research Office. Some issues involve multiple divisions of the SPC.

My understanding is that coordination with other central Party and state organs is a customary function of the SPC that is being repurposed, in part, in the New Era. For that reason, I surmise that more of this will take place in SPC headquarters in the future. This is based on two factors. The first is that SPC hears most commercial and administrative cases in the circuit courts. Second, coordination with other central organs appears to be an increasingly important part of New Era governance.  That was flagged in several statements of Liu Zheng, deputy head of the SPC’s Judicial Reform Office, in a February, 2021 press conference, where the SPC released its report on online mediation. Liu Zheng stated:

promote the improvement of the social governance pattern of joint construction, co-governance and sharing…(促进完善共建共治共享的社会治理格局)

In describing the accomplishments of the SPC in promoting diversified dispute resolution, he stated:

We strengthened our communication and coordination with Central departments (ministries) and commissions, we held three coordination meetings at the ministry level, and established a joint action mechanism (加强与中央部委的沟通协调,3次召开部委层面协调交流会,建立联动机制 ).

  At the central Party level, clearly coordination occurs at the level of broad policy through the Central Political Legal Commission and the Building Ping’an (peace and safe)-China Coordination Small-Group about which Li Ling wrote last year.  Other coordination occurs through leading small group offices (工作领导小组办公室).  I describe one below.  This blogpost will focus on State Council Inter-Ministerial Joint Conferences because it is through those that much of the more specific coordination occurs.  Thankfully for the researcher, State Council transparency is quite good and I found many approval documents for Inter-Ministerial Joint Conferences. From my research thus far, the SPC participates in many Inter-Ministerial Joint Conferences established by the State Council. I note that some other jurisdictions have Inter-Ministerial Council Conferences as well, not involving the judiciary. In some instances, ministries or commissions of the State Council create coordination mechanisms with the SPC, while the SPC initiates some.  Some coordination is done more formally on an as-needed basis, as Liu Zheng mentioned and that requires separate research. It is understood that within the framework of the formal structures, interaction and coordination occur at the staff level.

Leading Small Group Coordination Offices

As mentioned above, the Party Center has established some leading small group coordination offices to coordinate specific central Party and state organs policies and measures. Because of the nature of the matter, the SPC is a member. One example is the following office.

The Pursuit of Fugitive [Officials] Pursuit of Stolen Assets Working Office of the Central Anti-Corruption Coordination Leading Small Group (中央反腐败协调小组国际追逃追赃工作办公室), established in 2015, of which the SPC is a member.  The 2017 judicial interpretation on asset recovery is likely related to the SPC’s work in this group.  The SPC is involved in the yearly Skynet operation. Through this office,  the SPC  participates in related campaigns under this mechanism, such as a 2015 one against offshore companies and underground banks.

Inter-Ministerial Joint Conferences

The State Council has established many Inter-Ministerial Joint Conferences (部际联席会议), in which other Central-level ministries take the lead (牵头) and the SPC is one of many other Party and state organs involved. For those unfamiliar with Inter-Ministerial Conferences in China, the Office of the Central Staffing Commission has an authoritative explanation (amended Google translate):

The inter-ministerial joint conference  is established to negotiate and handle matters involving the responsibilities of multiple departments of the State Council. It is established with the approval of the State Council. The member units communicate in a timely manner and coordinate differing opinions. It is a work mechanism for enabling the smooth implementation of a task (responsibility). It is the highest-level joint meeting system of administrative agencies. The establishment of inter-ministerial joint conferences should be strictly controlled. For matters that can be resolved through coordination between the sponsoring department and other departments, inter-ministerial joint conferences are generally not established. The establishment of inter-ministerial joint conferences must be submitted to the State Council for approval. The lead department shall ask for instructions, clarify the name, convener, lead unit, member unit, work tasks and rules, etc., and submit it to the State Council for approval after approval by relevant departments. After the task of the inter-ministerial joint conference is completed, the lead department shall submit an application for cancellation, stating the establishment time of the inter-ministerial joint conference and the reasons for its cancellation, etc., and submit it to the State Council for approval after the approval of the member units. The newly established inter-ministerial joint conference which is led by the leading comrades of the State Council, may be entitled ” State Council… ” , and the other joint conferences are collectively referred to as ” inter-ministerial joint conferences . ” The inter-ministerial joint conference does not engrave a seal or formally issue documents. If documents must be formally issued, the name of the leading department and the seal of the leading department may be used, or the relevant member units may jointly issue a document.

SPC and Inter-Ministerial Joint Conferences

Sometimes the SPC is a founding member of an Inter-Ministerial Joint Conference. In other situations, it is recognized that the expertise of the SPC is needed and the SPC is invited to join after the Inter-Ministerial Joint Conference has been in operation for several years. Some examples are:

  1. The Inter-Ministerial Joint Conference on the Implementation of the Intellectual Property Strategy of the State Council,  headquartered at the China National Intellectual Property Administration, of which the SPC is one of many members. It is directed towards achieving the National Intellectual Property Strategy and unusually, has its own website.  A previous version was established in 2008, but that was superseded in 2016 when the State Council revamped the Inter-Ministerial Joint Conference, likely to better achieve China’s Intellectual Property Strategy.  Justice Tao Kaiyuan is designated as a member of the Joint Conference on behalf of the SPC.  The Joint Conference meets from time to time and issues an annual plan, allocating responsibilities to members according to their authority.  Among the matters allocated to the SPC in the 2020 plan is promoting three-in-one hearing of intellectual property cases and drafting a Guiding Opinion for Three-in-one Work ( 深入推进知识产权审判“三合一”工作,制定“三合一”工作指导意见。(最高人民法院). ” (For those unfamiliar with Three-in-one hearings,” they refer to integrating jurisdiction over civil, administrative and criminal intellectual property cases. It is understood that discussions occur at staff level to coordinate and promote policies. 
  2.  The Inter-Ministerial Joint Conference on Combating Illegal Plant and Wildlife Trade (打击野生动植物非法贸易部际联席会议), established in 2016. The SPC (and the Supreme People’s Procuratorate (SPP)) was invited to join the conference in  2020., which likely means that the organizer, the State Forestry Administration, did not realize that the expertise of the SPC and SPP were necessary. The SPC is one of 27 Central-level organs. It is likely that the 2020 Guiding Opinions on Punishing the Illegal Trade of Wild Animals issued by the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Ministry of Justice is a product of this Inter-Ministerial Mechanism.
  3. The Inter-Ministerial Conference on Money Laundering (反洗钱工作部际联席会议制度).  The State Council established it in 2004.  The People’s Bank of China takes the lead. National Money Laundering Strategies are drafted under its auspices. The role of the SPC is to supervise and guide the trial of money laundering crimes and formulate judicial interpretations in a timely manner in response to relevant legal issues encountered (督办、指导洗钱犯罪案件的审判,针对审理中遇到的有关适用法律问题,适时制定司法解释)It is understood that at a staff level, discussions take place regularly, and the SPC has issued several judicial interpretations as a result.
  4. As mentioned in a blogpost in 2020, in 2017 the State Council approved an Inter Ministerial Joint Conference on the Popularization of Law, with Zhang Jun, then head of the Ministry of Justice, as head and the SPC as one of the parties.

SPC established coordination mechanisms

The SPC establishes coordination mechanisms with other government and Party departments such as:

  1. The family trial method and work joint conference mechanism (家事审判方式和工作机制改革联席会议), established in 2017 with Central Political-Legal Commission consent; and
  2. Under the framework of Inter-Ministerial Joint Conferences, specific coordination mechanisms may be established. One likely product of ongoing policy discussions under the framework of the Intellectual Property Inter-Ministerial Joint Conference discussed above was the January 2021 establishment of a mediation coordination mechanism between the SPC  and the China National Intellectual Property Administration.

Legal basis

The legal basis of coordination appears to be Article 2 of the Organic Law of the People’s Courts in which the courts are called upon to “guarantee the smooth progress of the building of socialism with Chinese characteristics.”

Comments

In the New Era, we can expect to see more and more coordination by the SPC, much of it invisible to those of us outside the system.  It appears to be a recognition of the technical competence of the SPC in resolving a broad range of technical issues required to be resolved in furtherance of the governance of the country.  The State Council and its ministries and commission need the SPC’s expertise to deal with a large variety of legal issues–criminal, civil, administrative, enforcement.  The SPC coordinates with other central Party and state organs because it needs them to resolve specific issues. Given China’s state-run governance model, establishing mechanisms to better coordinate and promote national strategies and targets, and better draft policies and measures are considered an efficient way to accomplish governance targets and serve the needs of the Party and country.

 

 

Happy Niu 🐂Year!

 

 

 

 

 

 

 

Happy Niu 🐂Year to all blog followers and readers! Best wishes to all for good health, success in work and study, and all else!

In recent weeks I have been focusing on several longer pieces of writing and am still in “focus mode.”

While most of the Supreme People’s Court  (SPC) has been taking a break, based on previous year’s reports, it is likely that the team of people working on drafting President Zhou Qiang’s speech to the National People’s Congress (NPC) are hard at work.  I surmise that they will draw on January’s Central Political-Legal annual work conference, where responsibilities for implementing this year’s major tasks were allocated, and guidance from President Xi was transmitted. At that time, the Party leadership heard work reports from the SPC’s (and Supreme People’s Procuratorate’s) Party Group, so it seems likely that the report to the NPC will draw on that report as well.

Among the content that I expect to be included in the report is:

  • successful transition to the Civil Code, including review  of old judicial interpretations (and other judicial normative documents), canceling and amending old ones;
  • successes in meeting the challenges that Covid-19 meant for the courts, including the increased use of online proceedings;
  • smart courts and informatization;
  • accomplishments of the Supreme People’s Court’s Intellectual Property Court, including its first anti-suit injunction;
  • the issuance, for the first time, of reports on the judicial review of arbitration in 2019 and judicial assistance in civil and commercial matters between the Mainland and Hong Kong.  The full text of the two reports has not yet been released to the public, so I surmise that they will be released during the NPC meeting;
  • In the area of criminal law, likely the effective use of criminal proceedings in the battle against Covid-19;
  • successes in the saohei (organized crime) campaign;
  • successes in the area of environmental law, such as the recent signing of a framework agreement between the SPC and the leading small group on the protection of the Yellow River and the June, 2020 policy document on providing judicial services and guarantees to the protection and high quality development of the Yellow River;
  • furthering of socialist core values, such as the guiding opinion issued on 18 February on integrating those values into judgments (最高人民法院印发《关于深入推进社会主义核心价值观融入裁判文书释法说理的指导意见) and
  • judicial reforms such as the recently approved establishment of the Beijing Financial Court (the Shanghai Financial Court has been very busy since it was established) and the piloting of reforms to separate simple and complicated cases (the SPC recently submitted a midterm report to the NPC Standing Committee on the pilots).

We’ll see next month how accurate the above guesses are. In the meantime, additions or corrections are welcome.

______________________________________

The SPC New Year’s greetings are ©the SPC, found in this short video 

Supreme People’s Court Solicits Comments on Court Online Procedures

On 21 January, the Supreme People’s Court (SPC) issued  for public comment regulations on online hearings, applicable to civil (commercial), administrative and enforcement cases, and certain criminal cases, entitled Regulations on Some Issues Related to People’s Courts Handling Cases Online (English translation available at Chinatranslate.com) 关于人民法院在线办理案件若干问题的规定(征求意见稿). This topic is likely to be of interest to foreign and foreign-invested users of the Chinese court system (although they are a tiny minority of users). Judging by the number of articles in the English-language professional media on China’s internet and online courts, the draft may also attract comments from interested professionals outside of China. One issue I would hope is clarified is whether they apply to cross-border cases (cases involving jurisdictions outside of (mainland) China, as my quick reading is that the draft is unclear.  (Corrections welcome!) .

It is likely that the SPC’s Judicial Reform Office took primary responsibility for drafting the regulations because the email and physical mail address for comments is directed to that office.  The deadline for comments is 5 February.  I surmise the 16 day comment period  is linked to the upcoming Chinese new year’s (spring festival) holiday, rather than disinterest in receiving comments from foreign, foreign-invested, or foreign-related institutions or individuals.  In the experience I have had personally or been aware of through other foreign institutions involved in commenting on draft interpretations, SPC judges have taken comments from foreign Chambers of Commerce in China, foreign-invested companies, and foreign professional bodies seriously. Some of the foreign Chambers of Commerce, for example, have legal committees, but it would take some time for them to organize a translation of the draft and assemble comments from committee members.

The SPC regulations on judicial interpretation work do not specify a minimum (or maximum) time period for soliciting opinions from the public.  Reviewing the comment periods for some of the other judicial interpretations and other judicial documents for which comments were solicited in 2020, the deadlines appear to vary significantly.  I surmise that the deadline is set by the team in charge of drafting the judicial interpretation (or other judicial document). In November, the SPC solicited public comments on proposed amendments to its judicial interpretations related to the taking of security for 18 days, while comment periods for other judicial interpretations and judicial documents seem to be often one month and sometimes two months

Where comments were solicited on judicial interpretations and other judicial documents in the area of intellectual property law, the general public, including the foreign public, seems to be given more time to make comments.  That may reflect the international nature of intellectual property law and long-term interactions between intellectual property specialists at the SPC and foreign intellectual property judges and other foreign experts knowledgeable about China’s intellectual property system. As Mark Cohen commented when the SPC’s Intellectual Property Court was established: [a specialist intellectual property appellate court] “has been a focus of much discussion between US and Chinese experts over 20 or more years, notably between the SPC and former CAFC [Court of Appeals for the Federal Circuit] Chief Judge Rader, former USPTO [United States Patent and Trademark Office] Director Kappos and others (including the author/owner of this blog {Mark Cohen]).”

I surmise that the persons soliciting comments would accept comments submitted after the formal deadline. That has been my own experience, but  in relation to another area of law.  To be safe, those planning to submit comments after the deadline are advised to contact the persons whose emails are listed in the notice, to ensure that their comments will in fact be read and considered. 

New Supreme People’s Court guidance on how Chinese judges consider cases

photo of professional judges’ meeting in a Qingdao area court

Among the many reforms set out in mentioned in the February, 2019  Supreme People’s Court ‘s (SPC’s) fifth judicial reform plan outline is improving the mechanism of the Professional Judges Meeting, about which I have previously written.   Earlier this month (January, 2021), the SPC issued guidance on professional/specialized judges meetings (I have also translated it previously as specialized judges meetings) , entitled Guiding Opinion on Improving the Work System of Professional Judges Meetings (Professional Judges Meetings Guiding Opinion or Guiding Opinion),  (关于完善人民法院专业法官会议工作机制的指导意见), superseding 2018 guidance on the same topic. The earlier guidance had the title of Guiding Opinions on Improving the Working Mechanism for Presiding Judges’ Meetings of People’s Court (For Trial Implementation).  The meetings are intended to give single judges or a collegial panel considering a case additional thoughts from colleagues, when a case is “complicated,” “difficult,”, or the collegial panel cannot agree among themselves.  

This blogpost will provide some background to the Guiding Opinion, a summary of the Guiding Opinions, a summary of a non-scientific survey of judges, and some initial thoughts. 

Background to the Guiding Opinion

The Guiding Opinion is a type of soft law that enables the SPC to say that it has achieved on of the targets set out in the current judicial reform plan. According to a recent article by the drafters, they researched and consulted widely among courts, but that does not mean that a survey went out to all judges.  It is further evidence that the SPC is operating as Justice He Xiaorong stated five years ago–” after the circuit courts  are established, the center of the work of SPC headquarters will shift to supervision and guidance…” 

Judicial reform and the Guiding Opinion

The Professional Judges Meeting Guiding Opinion is linked to #26 of the current judicial reform plan outline, discussed in part in this June, 2019 blogpost.  I have bold-italicked the relevant phrases:

#26 Improve mechanisms for the uniform application of law. Strengthen and regulate work on judicial interpretations, complete mechanisms for researching, initiating, drafting, debating, reviewing, publishing, cleaning up, and canceling judicial interpretations, to improve centralized management and report review mechanisms. Improve the guiding cases system, complete mechanisms for reporting, selecting, publishing, assessing, and applying cases. Establish mechanisms for high people’s courts filing for the record trial guidance documents and reference cases. Complete mechanisms for connecting the work of case discussion by presiding judges and collegial panel deliberations, the compensation commission, and the judicial committee. Improve working mechanisms for mandatory searches and reporting of analogous cases and new types of case. (完善统一法律适用机制。 加强和规范司法解释工作,健全司法解释的调研、立项、起草、论证、审核、发布、清理和废止机制,完善归口管理和报备审查机制。完善指导性案例制度,健全案例报送、筛选、发布、评估和应用机制。建立高级人民法院审判指导文件和参考性案例的备案机制。健全主审法官会议与合议庭评议、赔偿委员会、审判委员会讨论案件的工作衔接机制。完善类案和新类型案件强制检索报告工作机制)

Uniform Application of Law

As for why the uniform application of law is an issue, a quick explanation is the drafting of Chinese legislation often leaves important issues unresolved and  leaves broad discretion to those authorities issuing more specific rules.  To the casual observer, it appear that the Chinese legislature (NPC) “outsources” to the SPC (and Supreme People’s Procuratorate (SPP) for some issues) the hard job of drafting more detailed provisions. (see Chinalawtranslate.com for many examples and NPC_observer.com for insights about the legislative drafting process).  Although the Communist Party’s plan for building rule of law in China calls for legislatures to be more active in legislating (see NPC Observer’s comments), in my view the SPC (and SPP) will continue to issue judicial interpretations, as the NPC and its standing committee are unlikely to be able to supply the detailed rules needed by the judiciary, procuratorate and legal community.  Although the general impression both inside and outside of China is that the SPC often “legislates,” exceeding its authority as a court, as I have mentioned several times in recent blogposts, the SPC issues judicial interpretations after close coordination and harmonization with the NPC Standing Committee’s Legislative Affairs Commission.

Professional Judges Meeting Guiding Opinion

The Guiding Opinion is linked to the judicial responsibility system, about which my forthcoming book chapter will have more discussion.  Professor He Xin addresses that system, among other topics in his recently published academic article.

The Guiding Opinion authorizes certain senior members of a court (court president, vice president, head of division, as part of their supervisory authority (under the Organic Law of the People’s Courts) to chair meetings of judges (who exactly will attend depends on the court- to discuss certain types of cases and provide advice to the single judge or three judge panel hearing a case. (In my informal inquiries, I have found that interns are sometimes permitted to attend, but sometimes not). The types of cases mentioned in Article 4 of the guiding opinions and listed below are not complete, but raise both legal and politically sensitive issues:

  • ones in which the panel cannot come to a consensus,
  • a senior judge believes approaches need to be harmonized;
  • involving a mass (group) dispute which could influence social stability;
  • difficult or complicated cases that have a major impact on society;
  • may involving a conflict with a judgment in a similar case decided by the same court or its superior;
  • certain entities or individuals have made a claim that the judges have violated hearing procedure. 

Before the discussion, the judge or judges involved in the case are required to prepare a report with relevant materials, possibly including a search for similar cases, which may or may not be the same as the trial report described in my July, 2020 blogpost, 

The guiding opinions sets out guidance on how the meeting is to be run and the order in which persons speak.

Depending on the type of case involved, a case may be further referred to the judicial committee or the matter may be resolved by the meeting providing their views to the collegial panel. 

Article 15 of the guiding opinions provides that participating in these meetings is part of a judge’s workload. The guiding opinions provide that a judge’s expression of views at these meetings should be an important part of his or her performance appraisal, evaluation, and provision, and the materials can be edited into meeting summaries, typical cases, and other forms of guidance materials,   which can be used for additional points in performance evaluation.  One of the operational divisions of the SPC and at least one circuit court has published edited collections of their professional judges meetings, with identifying information about the parties removed.

Comments

From my non-scientific survey of judges at different levels of court and in different areas of law, my provisional conclusion is as follows. Judges hearing civil or commercial cases seem to hold these meetings more often, particularly at a higher level of court.  Criminal division judges seem to hold such meetings less often (at least based on my small sample), but the meetings are considered to be useful. 

 Frequency seems to depend on the court and the division, with one judge mentioning weekly meetings, while others mentioned that they were held occasionally. Most judges that I surveyed considered the meetings useful, because they provided collective wisdom and enabled judges to consider the cases better. One judge noted that it may also result in otherwise unknown relevant facts coming to light. 

I would also add my perception that it also gives the judges dealing with a “difficult or complicated case” (substantively or politically) in a particular case the reassurance that their colleagues support their approach, even if the judges involved remain responsible under the responsibility system. This is important when judges are faced with deciding cases in a dynamic area of law with few detailed rules to guide them, or where the policy has changed significantly within a brief time. My perception is that this mechanism provides a more collegial environment and better results that the old system of having heads of divisions signing off on judgments. I would welcome comments from those who have been there.

The Guiding Opinions provide yet another illustration of how Chinese courts operate as a cross between a bureaucracy and a court, from the rationale for holding the meeting to the use of meeting participation as an important part of performance evaluation. 

Although the slogan (of several years ago) is that judges should be treated more like judges,  the Guiding Opinion appears to treat lower court judges analogous to secondary or university students, to be given grades for their class participation.  

What are the implications of this mechanism?

Litigants and their offshore counsel (Chinese counsel would know this) need to know that the result in their case in a Chinese court may be influenced by judges who are not in the courtroom when their counsel advocates orally. Written advocacy should still have an impact on professional judge committee discussions.  It appears that counsel is not informed that the case has been referred to a professional judges committee for discussion and it is not possible for counsel to know who is part of the committee and apply for judges to be recused in case of a concern that there has been a conflict of interest. 

Would it result in more commercial parties deciding that arbitration is a better option, as they have better control over dispute resolution in their particular case?  My perception is that the decision concerning appropriate dispute resolution is based on other factors, and the existence of the professional judges meeting as a mechanism to provide views to judges hearing a case has little impact on that decision.  I welcome comments on that question.

__________________________________________

Many thanks to those who participated in the survey and also to those who commented on an earlier draft of this blogpost.  

Supreme People’s Court’s 2020 Accomplishments in Transitioning to the Civil Code

 

photo of a meeting of the SPC’s judicial committee. I surmise a screen for viewing presentations is not visible.

On 30 and 31 December 2020, the Supreme People’s Court (SPC) delivered  its first batches of documents designed to ensure a seamless transition to the Civil Code on 1 January 2021, about which I wrote last recently and in November, 2020. Several SPC leaders spoke at a press conference on the morning of 30 December 2020 to announce the issuance of these documents, with Justice He Rong taking the lead.  Justice He Rong also gave highlights of items on the SPC’s agenda on the transition to the Civil Code for 2021, but those details will be forthcoming in a subsequent blogpost.

I correctly predicted that the SPC judicial committee would meet one or more times before year-end and we readers of SPC media will see one or more long catalogues of cancelled and amended judicial interpretations and other judicial normative documents published on or before 1 January 2021.

We can  see the results of the long hours of work of unknown numbers of people, particularly within the SPC, the National People’s Congress Legislative Affairs Commission (NPC LAC), and  many “relevant departments” in drafting these judicial interpretations.  Justice He Rong mentioned the timely guidance of the (NPC LAC) (我们得到了全国人大常委会法工委的及时指导),  support and coordination from the Supreme People’s Procuratorate, and support and help from central state organs and academics and the public.  Timely guidance from the NPC LAC signals (as mentioned previously), that SPC staff spent unknown numbers of hours  ensuring that these judicial interpretations were properly harmonized. 

It is unclear to me whether those of us outside the system will ever learn about the amount of work involved. I surmise the responsibility of delivering this timely and properly  depended on the project management skills of the Research Office.  If foreigners could give recommendations to SPC leaders concerning “models of socialist labor (动模范),” I would recommend it to all involved in the transition to the Civil Code. 

Given the very general provisions of the Civil Code, these judicial interpretations (and more to come) are crucial for the operation of the Chinese legal system, despite theoretical questions about their binding nature beyond the court system.

As of 1 January 2021, the following judicial interpretations and other normative documents implementing the Civil Code have been issued (the English titles below are rough translations).  I will link to English translations as they become available. Unless otherwise noted, a document is a judicial interpretation. Among the many aspects of the drafting process, per the SPC’s relevant five year plan, socialist core values have been incorporated into the judicial interpretations.

The judicial interpretations 

Scattered comments are in italics. Where judicial interpretations have numbering , for example (1), it suggests that the drafters anticipate further comprehensive interpretations as the greater situation (大局) evolves:

  1. Decision on invalidating certain judicial interpretations and judicial normative documents (关于废止部分司法解释及相关规范性文件的决定). It canceled 116 of them, some of which I recall reviewing for my 1993 article;
  2. Regulations on timing application  of the Civil Code (

    关于适用《中华人民共和国民法典》时间效力的若干规定).  These rules relate to application of Civil Code for disputes etc. that arose pre-Civil Code. Although the general rule is that the then current law and judicial interpretations will be applied, for some types of cases  the Civil Code will be applied. (If it better protects a party’s rights and interests, upholds social and public order, and promotes socialist core values). Chart with explanation linked here.

  3. Interpretation on the application of the marriage and family part of the Civil Code (1) (最高人民法院关于适用《中华人民共和国民法典》婚姻家庭编的解释(一)). Note article 1 links ongoing domestic violence to the term “abuse” in the Civil Code. Chart with judicial interpretation, Civil Code, and prior judicial interpretation linked here
  4. Interpretation on the application of law to labor disputes (1) 最高人民法院关于审理劳动争议案件适用法律问题的解释(一).  

  5.  Interpretation on the application of law to construction contracts (1)(最高人民法院关于审理建设工程施工合同纠纷案件适用法律问题的解释(一));
  6. Interpretation on the application of law to the property (rights in rem) part of the Civil Code] (1) (最高人民法院关于适用《中华人民共和国民法典》物权编的解释(一)). Rules relate both to immovable (real) and movable property, and authority of both courts and arbitral institutions;
  7. Interpretation on the application of law to the inheritance part of the Civil Code (1) (最高人民法院关于适用《中华人民共和国民法典》继承编的解释(一)). Chart with judicial interpretation, Civil Code, and prior judicial interpretation linked here
  8. Interpretation regarding the system of taking security) ( 关于适用
    《中华人民共和国民法典》有关担保制度的解释). This is a comprehensive interpretation on secured interests (besides mortgages, guarantees, liens, pledges, it also has content concerning factoring, finance leasing, and retention of title, as well as the giving of security by companies. It specifies that independent (demand) guarantees continue to be governed by the 2016 judicial interpretation on that topic. Those latter regulations are crucial to BRI infrastructure projects, as mentioned in this blogpost.
  9. Decision on amending the interpretation on the application of the Trade Union Law and 27 other civil law related judicial interpretations  related to civil-related judicial work (关于修改《最高人民法院关于在民事审判工作中适用〈中华人民共和国工会法〉若干问题的解释》等二十七件民事类司法解释的决定);
  10. Decision on amending the judicial interpretation on the hearing of patent tort disputes and 18 other intellectual property-related judicial interpretations (关于修改《最高人民法院关于审理侵犯专利权纠纷案件应用法律若干问题的解释(二)》等十八件知识产权类司法解释的决定);
  11. Decision on amending the “SPC Provisions on some issues concerning people’s courts seizing goods being shipped by rail” and 18 other enforcement-type judicial interpretations (关于修改
    《最高人民法院关于人民法院扣押铁路运输货物若干问题的规定》等十八件执行类司法解释的决定)。 Comparison chart linked here;
  12. Decision on amending the “Official Reply of the Supreme People’s Court on Whether the Right to Use of Allotted State-Owned Land of a Bankrupt Enterprise Shall Be Classified as Insolvent Property” and 29 other commercial-type judicial interpretations (最高人民法院关于修改《最高人民法院关于破产企业国有划拨土地使用权应否列入破产财产等问题的批复》等二十九件商事类司法解释的决定)
  13. Decision on amending the “Provisions of the Supreme People’s Court about Several Issues Concerning the Civil Mediation Work of the People’s Courts” and 19 other civil procedure-related judicial interpretations (最高人民法院关于修改《最高人民法院关于人民法院民事调解工作若干问题的规定》等十九件民事诉讼类司法解释的决定);
  14. Notice that certain guiding cases are not to be further used for reference (最高人民法院关于部分指导性案例不再参照的通知). This is a judicial normative document, not a judicial interpretation.
  15. SPC issues amended “regulations on civil causes of action” (最高人民法院印发修改后的《民事案件案由规定》).  This is a judicial normative document, not a judicial interpretation. This link contains both the decision itself to amend the causes of action and the amended causes of action. Compensation for sexual harassment is listed (#372), but detailed provisions on the elements have not yet been issued.

As for the review of local level judicial guidance documents for consistency with the Civil Code, mentioned in the November blogpost, the Shanghai Higher People’s Court has reported that it has met its performance goal.  Another blogpost will discuss new SPC guidance(that I  flagged a year and a half ago, in the current judicial reform program) directed towards reining in local court guidance, or as seen another way, strengthening the SPC’s firm guiding hand!

Civil Code & Supreme People’s Court update

Merry Christmas to all blog readers who celebrate!

The Supreme People’s Court media outlets posted a brief article on 23 December updating the court system and legal professionals on progress towards seamless transition to the Civil Code on 1 January, about which I wrote last month, by reporting on a . From that notice, it appears that the staff of the SPC’s Research Office (which coordinates judicial interpretations and is in charge of guiding cases) and other staff members of the SPC’s Leading Small Group for Implementing Civil Code Work 民法典贯彻实施工作领导小组 (Leading Small Group) will have long nights of work until the end of the year.

The notice reported on a recent meeting chaired by Justice He Rong. She is the executive vice president (and deputy Party Secretary of the SPC) and led a meeting of the entire Leading Small Group and the SPC’s judicial committee to review the work of the committee.The decision was to “approve in principle” decisions concerning canceling and amending 591 judicial interpretations and related judicial normative documents (judicial documents) and 139 guiding cases. “Approval in principle” (原则通过), as discussed here, is not mentioned by the SPC’s 2007 regulations on judicial interpretations but is one of the SPC’s long-established practices. It means that the judicial committee has approved it, subject to some “minor” amendments. Minor amendments are more than typographical errors and relate to specific substantive matters.

Justice He reminded meeting participants that the smooth transition to the Civil Code was highly valued by General Secretary Xi Jinping, so that it was part of the SPC’s political responsibility to complete the work properly and timely.   But the focus of this blogpost is again on the practicalities, rather than the political aspects of this project.

Although it was said to be Justice He’s guidance, I surmise that it was the drafters’ thinking to  take this comprehensive cleanup as an opportunity to focus on making the Civil Code easy for users to apply, and strive to build a clear, concise, and highly targeted judicial interpretation system. I read from the language of this notice that the drafters plan to issue more comprehensive judicial interpretations on broad areas of law (such as the one on taking security that is has been issued for comment) rather than ones relating to specific questions of law. 

The judicial committee decided to cancel 116 judicial interpretations and other judicial documents, and approved in principle amendments to 14 other general judicial interpretations and other judicial documents, and another 111 judicial interpretations and judicial documents in the areas of:

  1. civil law (27),
  2. commercial law (29);
  3. intellectual property law (18);
  4. civil procedure law (19); and 
  5. enforcement procedures (18).

So it seems likely the SPC judicial committee will meet one or more times before year end and we readers of SPC media will see one or more long catalogue of cancelled and amended judicial interpretations and other judicial normative documents published on or before 1 January 2021. I hope the hard work of the team involved over many months is properly acknowledged.

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