Asset recovery, Chinese style

unnamedThe Supreme People’s Court (SPC) and Procuratorate (SPP) issued their first judicial interpretation of 2017, Provisions on Several Questions Concerning the Application of the Procedure of Confiscating Illegal Gains in Cases Where the Criminal Suspects or Defendants Absconded or Died (Asset Recovery Interpretation). It went into effect on 5 January. It is possible that the timing is related to the Central Commission for Discipline Inspection annual conference.

It is an important piece of quasi-legislation enabling the Chinese authorities to recover assets that are the proceeds of corruption and other crimes within China and internationally, where the criminal suspect or defendant has absconded, left the jurisdiction, or died.   If your jurisdiction is one that already has in place treaty arrangements with China that will enable the Chinese authorities to seek recovery of assets, the interpretation bears close review.   Canada, for example, has supplemented its criminal judicial assistance treaty with a specialized asset recovery agreement.

Background

The recovery and forfeiture of the proceeds of corruption and other crimes has become a priority issue because the anti-corruption campaign under Xi Jinping has made it so.  Although the Criminal Procedure Law was amended in 2012 to enable the authorities to confiscate assets of persons who had or were suspected of committing certain major crimes (see Articles 280-283), in the view of the SPP and SPC, the Asset Recovery Interpretation was needed because the law itself was inadequate. The drafters identified four issues:

  1. the range of crimes to which asset recovery could be applied was too narrow;
  2. major disagreements existed concerning procedures and standards of evidence;
  3. local authorities lacked experience with asset recovery;
  4. procedures and relative responsibilities of different authorities were unclear, making it difficult when negotiating with foreign governments.

The actual drafting of the Asset Recovery Interpretation began shortly after the 4th Plenum and before the Skynet operation was launched.The drafting of this interpretation was a high-profile project for the two institutions. The SPP and SPC worked with the CCDI,  the Central Political-Legal Committee, National People’s Congress Legislative Affairs Commission, Ministry of Foreign Affairs, Ministry of Public Security, Ministry of Justice, and other authorities to produce a draft a practicable system that could be used when negotiating with foreign countries, meet the policy targets of the Party, and contain legal standards specific enough for the procuratorate and courts.

The Asset Recovery Interpretation also draws on the interactions the SPP and SPC have had as part of multi-institutional dialogues on the recovery of the proceeds of corruption with a variety of multilateral institutions, such as the World Bank, Asian Development Bank, as well as bilateral interactions such as with the United States government, for example, through the US-China Joint Liaison Group on Law Enforcement Cooperation.

The drafting of the Asset Recovery Interpretation was flagged in the Fourth Plenum Decision:

Strengthen international cooperation on anti-corruption, expand strength to pursue stolen goods and fugitives overseas, as well as for repatriation and extradition.

Asset recovery through the courts was included in the SPC’s 4th Five Year Plan:

16. Standardize judicial procedures for disposing of assets involved in a case.Clarify the standards, scope, and procedures for people’s courts’ disposition of property involved in the case. Further standardize judicial procedures in criminal, civil and administrative cases for sealing, seizing, freezing and handling of assets involved in a case.

…expand the scope covered by regional and international judicial assistance. Promote the drafting of a Judicial Assistance Law in Criminal Matters.

The drafting of the interpretation was the responsibility of the #2 Criminal Division of the SPC and the Law and Policy Research Office of the SPP.

 Some important provisions

This blogpost cannot provide a comprehensive description of the interpretation which expands/further details the procedures set out in Articles 280-283 of the Criminal Procedure Law and related law, but notes the following provisions.

1. The Asset Recovery Interpretation expands the scope of the crimes to which asset recovery applies. Article 280 of the Criminal Procedure Law authorizes a people’s procuratorate to apply to a court  for confiscation of illegal gains and other property related to the case in serious crimes (重大犯罪案件) such as corruption, bribery or terrorist activities where the criminal suspects or defendants have absconded and have not been found one year after the public arrest warrants were issued, or where the criminal suspects or defendants have died.

Article 1 of the interpretation expands the term “such as” (等) by specifying that confiscation can be applied to the following crimes among others:

  1.  Corruption; embezzlement of public funds; possessing huge amounts of property from unknown sources; concealing overseas savings; privately dividing state-owned assets; privately dividing assets that had been confiscated;
  2. Bribe-taking; exploiting influence to take bribes; bribery by an individual or entity; giving bribes to persons with influence; introducing bribery;
  3. Organizing, leading, or participating in terrorist organizations; helping terrorist organizations, preparing to carry out terrorist activities; advocating terrorism or extremism, and incitement of carrying out of terrorist activities; using extremism to sabotage the enforcement of laws; forcing others to wear clothing and signs that advocate terrorism or extremism; illegally possessing articles that advocate terrorism or extremism;
  4. Endangering state security; smuggling; money laundering, financial fraud; mafia-type organizations, and drugs.
  5. Telecommunications and internet fraud.

As many others have written in other contexts, some of the crimes listed above have been over-broadly applied in China–some to persons who disagree with the government and others to private entrepreneurs.

Language in extradition treaties is flexible enough to enable foreign governments to refuse to extradite or assist in the recovery of assets from persons that the host government considers a political dissident rather than a criminal. However, those persons can anticipate that their domestic assets may be the subject of confiscation procedures.

2. The definition of assets of crime draws on relevant language in the UN Corruption Convention on proceeds of crime, and so include proceeds of crime that have been transformed or converted, in part or in full, into other property, as well of proceeds of crime have been intermingled with property acquired from legitimate sources.

3.The Asset Recovery Interpretation sets out needed details in the procedure by which assets can be confiscated, including detailing the evidence the procuratorate has to provide to a court in the application for confiscation, matters to be set out in the notice issued by a court that accepts the application; persons to whom the notice should be serviced and media outlets where the notice should be published.  (Under Article 281 of the Criminal Procedure Law, the notice concerning the application needs to be in effect for six months.)

Under Article 281, close relatives and interested parties (and their representatives) can apply to attend the court hearing at which the confiscation of assets application is reviewed, but “interested parties” had not been defined, nor had the details of how the first instance and appeal procedures were to be conducted.

4.  The Asset Recovery Interpretation details the procedures for seeking international cooperation in the recovery of assets, including the type of order the lower court should issue and documentation that the lower court must prepare.  The bundle of documentation must be reported up to the SPC and after the SPC reviews it, the SPC prepares a request letter, the contents of which are specified in the interpretation.  These request letters generally are transferred abroad via the Ministry of Justice, which is usually designated the competent national authority under treaty or convention arrangements.

Next steps

The SPC anticipates that the Asset Recovery Interpretation will lead to an increase in cases, but are aware these issues and procedures are new to the lower courts, so it is requiring lower courts to designate certain judges to hear these cases and for these judges to undergo training on the Asset Recovery Interpretation and related issues.

The SPC calls on cooperation with related departments on the recovery of proceeds of crime from abroad, saying that it cannot fight the battle alone. (不能依靠某一个部门单兵作战).

Foreign jurisdictions can anticipate an increase in requests from China and it is likely that the mainland will request that the Hong Kong authorities negotiate a related arrangement. It will raise further concerns for those former Chinese officials accused of the crimes described above living in jurisdictions with an extradition or mutual legal assistance in criminal matters treaty. For lawyers in China and abroad, it represents a new practice opportunity.

 

 

2016 Supreme People’s Court Monitor year-end report

ornate-1045572_1280In 2016, the Supreme People’s Court Monitor published 67 posts and had close to 30,000 page views, from 150 countries (regions), primarily from:

  • United States;
  • Hong Kong;
  • (mainland) China; and
  • Australia.

with the United Kingdom, Germany, and Singapore trailing. Unfortunately too many “Belt & Road” countries are at the bottom part of the list of 150 jurisdictions.

Over half of the Monitor followers use Twitter to follow the Monitor.Although Twitter is not accessible in mainland China without a VPN, 26% of the Monitor’s Twitter followers are based there.

I am often asked about the profile of my blog followers. Like my sister blog, China IPR, my followers include academics, students, journalists, government officials, judges (current or retired), staff of international organizations as well as practicing attorneys (in private practice, in-house, government service and with NGOs).  The Monitor has some email followers in (mainland) China but they generally keep a very low profile.

I am honored to have my blog listed as a Chinese law resource by law schools and other institutions around the world, including: Harvard and Yale Law Schools, and Oxford’s Bodleian Library.  Many thanks to those professors who have recommended the Monitor to students.  Thank you also to those journalists and scholars writing about the Chinese judiciary who have cited the Monitor.

Many thanks to those professors who have recommended the Monitor to students.  Thank you also to those journalists and scholars writing about the Chinese judiciary who have cited the Monitor.

I am honored to be a Distinguished Scholar in Residence at the School of Transnational Law of Peking University (in Shenzhen).  We have outstanding students and I have excellent colleagues.

I am honored to have been invited to speak at quite a few conferences in 2016:

  • one in Xiamen, organized by the Xiamen Maritime Court, sponsored by the Supreme People’s Court and Fujian Higher People’s Court, with support from the British Consulate General Guangzhou. It was not only international (with the London Maritime Arbitration Association) but included judges, in-house counsel, lawyers and academics.
  • several conferences sponsored by the University of Hong Kong; one by the City University of Hong Kong; and one by the Chinese University of Hong Kong;
  • University of Southern California’s US-China Institute’s China Card Institute (I recommend host Clay Dube’s presentation and Robert Schrum’s presentation in particular, available on the USC website and Youtube, both looking at the demonization of China and Chinese people in the US;

I was very happy to a be a guest lecturer in classes at:

  • University of Hong Kong;
  • Chinese University of Hong Kong;
  • NYU Shanghai;
  • Shanghai Jiaotong University and
  • Fordham Law School.

Also it was a special honor to engage in dialogue with Professor Jerome Cohen at NYU Law School’s US-Asia Law Institute.

Finally, a particular thank you to certain members of the Chinese legal community:

  • administrators of the Wechat public accounts that have published my articles;
  • those who have translated those articles into Chinese;
  • those Chinese judges and lawyers who shared their insights with my classes and with me; and
  • those judges who arranged for me to visit their courts.

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Supreme People’s Court adds four more circuit courts

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Meng Jianzhu meeting circuit court judges

The latest National People’s Congress Standing Committee (NPCSC) gave formal approval to the Supreme People’s Court (SPC) to establish four more circuit courts, located in Nanjing, Zhengzhou, Chongqing and Xian.  The Leading Small Group on Comprehensive Reform had given the nod to the SPC and its preparations at the beginning of November, so approval by the NPCSC was a foregone conclusion. The four new circuit courts held ceremonies on 28 and 29 December to inaugurate their operations. This means that circuit courts now cover the entire country. As discussed in my earlier blogpost, these are actually subdivisions of the SPC rather than being separate courts.

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Map of new circuits (thanks to Chinalawtranslate)

This blogpost looks at:

  • What the official reports signal about the Chinese judiciary; and
  • What these circuit courts mean for the Chinese judiciary now and in the future.

Signalling in official reports

The official reports related to the circuit court celebrated the circuit court judges and the courts themselves as both “red and expert.”

In this report, on their meeting with Meng Jianzhu, secretary of the Central Political Legal Committee, a subheadline has him meeting with circuit court “cadres” (孟建柱在会见最高人民法院巡回法庭干部…), while the first line of the report uses the phrasing “judge and other staff”  (全体法官和工作人员).  Meng Jianzhu stressed that close [flesh and blood] ties between the Party and the people in the judicial field is the important mission of the Supreme People’s Court Circuit Courts the circuit courts are under the leadership of his committee], while at the same time saying that “we should adhere to the [policy] direction of the judicial system reform,..create a professionalized trial team…”

Other reports note that of the 54 judges, 41 have either master’s or doctorate degrees. An infographic with photos of the senior judges and a map of the jurisdictions of the circuit courts can be found here.

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3rd circuit court judges receiving petitioners

Are the circuit courts just reception offices for petitioners?

This blogpost will draw on the insights of Zhou Yibin, one of my students at the School of Transnational Law of Peking University, located in Shenzhen, where I am privileged to teach some of China’s best and brightest.

Analyzing the documents related to the establishment of the circuit courts, she comments the circuit courts’ function of “trying important cross-administrative civil, commercial and administrative cases to ensure justice is repeatedly emphasized, while  diverting petitioners’ visits away from Beijing [as reported in this blogpost], reducing the workload for SPC .

Although the SPC knows that the pressure of petitioners’ visits is the direct reason to establish circuit courts, the SPC still wishes that the circuit courts will function more as courts to deal with the judicial localization [local protectionism] problem rather than another petitioners’ reception office. She notes that the huge pressure of dealing with petitioners visits and complaints  with small elite teams, means that they are working very efficiently.

Statistics are available for 2015 for the #1 and #2 Circuit Courts, and in 2016 for the #2 Circuit.In 2015, the #1 Circuit Court accepted 898 cases and closed 843, while the #2 Circuit Court accepted 876 and closed 810.  For the #2 Circuit Court, about half were civil and commercial cases (of which about 20% were transprovincial), while the remaining half was split between criminal and administrative cases.  The #2 Circuit Court dealt with 33,000 petitioners, while the #1 Circuit Court dealt with fewer than 11,000.  Through end September, 2016, the #2 Circuit Court had accepted 907 cases, and the number of petitioners had dropped considerably in 2016 to an average of 70-80 persons per day, down from almost 180 per day, with fewer petitioners complaining about injustices in litigation. It is understood that the number of cases accepted by the #1 Circuit Court has also increased in 2016 in comparison to 2015, although statistics are not yet available.

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Petitioners visiting the #2 circuit court, per month

 

 

 

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opening of 3rd & 4th circuit courts

Zhou Yibin notes the following issues, among others:

  1. First, limited by territorial jurisdiction and subject amount in controversy, there aren’t enough cross-jurisdictional cases for the circuit courts to try. She found that the head of the #1 Circuit Court had said the same.
  2. Mid-career SPC judges may be reluctant to be assigned to the circuit courts, when they have family in Beijing.
  3. Having circuit courts may lead to more inconsistencies among SPC judgments.

She wrote: the circuit courts are not likely to be an effective barrier to judicial local localization/protectionism. That local protectionism happens when the local courts abuse their adjudication power to protect local litigants’ interests. Judicial localization is the caused by the administration of judicial system and unconstrained exercise of administrative and political power.When it comes to judicial activities, local Party/government officials  tend to unduly influence the judges by leaving notes or giving direct instructions when they want to protect local interests. That is exactly why in 2015, the general office of the Central Committee of the CCP and the general office of the State Council jointly issued a notice requiring judges and clerks keep a record if any officials interfere cases in any form [see this earlier blogpost].

From this aspect, when the real concern is abuse of power and lack of institutional design to rein power, judicial reform in any form, would only be a “back-end pain killer”, rather than real surgery that can directly solve the source.

Conclusion

She concludes: as to whether circuit courts should continue to exist, people who are pessimistic about circuit courts characterize it as window-dressing. They believe circuit courts would not be the real key to deal with judicial localization and there exist better alternatives to deal with petitioners’ visits than circuit courts; therefore, the circuit courts should be eliminated before it creates further inconsistency and chaos to judicial system.

Zhou Yibin thinks circuit courts should continue to exist for the following reasons.

First, in 2015, SPC altered the amount in controversy and lower the barrier for case acceptance. Therefore, we can expect circuit court to play a more important role in providing neutral venue so as to fight with judicial localization.

Second, there are other efforts to curb judicial localization collectively. At the same time with setting up circuit courts, SPC is also exploring to set up cross-administrative courts. Currently, this experiment is steadily progressing in Shenzhen, Shanghai and Beijing. This wave of judicial reform has just started, and we need to allow a little bit more time for the circuit courts and cross-administrative courts to grow, to engage in trial and error and to mature.

Third,  aside from dealing with judicial localization, the circuit courts serve as pilot for SPC to improve the quality of its legal policy role by research into local legal issues and greater interaction with local legal communities. This is an important institutional function that is totally left out in the opponents’ objection. There are certainly institutional costs to maintain circuit courts, but we cannot ignore the institutional function of innovation that circuit courts serve.

I would also add to this that from the statistics provided above, the effect of the #2 Circuit Court’s work related to administrative cases can be seen in the reduction in the number of petitioners, particularly those complaining about injustices in the lower courts.

[For those who want to visit the circuit courts, detailed information about their location can be found here. As part of its efforts towards greater transparency and outreach to the foreign legal community, perhaps in the new year the SPC will publish clearer guidance on how foreigners can visit Chinese courts (although this is not likely to be a priority matter).]

 

Supreme People’s Court & big data

On 22 December, the Supreme People’s Court (SPC) posted four big data reports drafted jointly by its Information Center and the Judicial Cases Research Center (affiliated with the National Judicial College).

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The bar chart above, from the divorce report, shows the number of divorce cases heard in the courts in 2014-September, 2016, stating that the 2016 cases have increased almost 11% over the same time the year before. A subsequent chart shows that domestic violence as the cause for divorce in 27.8% of cases.screen-shot-2016-12-27-at-7-11-32-am

The reports appear to be products of the recently established SPC big data company.  The analysis in the reports is restricted to bullet points, rather the more detailed analytical reports that are found on the websites/Wechat public accounts of courts and lawyers.  (Suggestion to (any) readers from the SPC–  translations of these reports would be a useful addition to the English version of the SPC’s website).

Anyone looking for more than current statistics and basic analysis is advised to search for more detailed analysis done by law firms, local courts, some of the legal media companies, and some of the other divisions of the SPC.  On the topic of divorce, for example, an SPC judge published this analysis earlier this year, generally considered to be the most authoritative summary of the issues in Chinese divorce law.

The 4th Five Year Court Reform Plan (Court Reform Plan) flagged the SPC’s big data company and the stress that the SPC is placing on big data:

22. Deepen reforms of judicial statistics.Reform mechanisms for judicial statistics with the idea of “big data, big picture, and big service” as a guide; make a system of standards for judicial statistics that has scientific classifications and complete information, gradually building a model for analysis of empirical evidence that complies with the reality of judicial practice and judicial rules, and establish a national archive of court judgment opinions and a national center for big data on judicial information. (translation from @Chinalawtranslate)

The Court Reform Plan signals that the stress is on judicial statistics and using big data for internal use rather than for public access, as “complete information” is not provided to the public, with death penalty statistics the best-known example. Although judicial transparency is greater before (especially for those of us with a historical perspective), from time to time SPC media sources reiterate that judicial personnel are required to keep state secrets (as the Judges Law and other legislation require).

At the moment, transparency of judicial statistics and analysis varies greatly across provinces. Jiangsu Province’s high court, for example, has judicial statistics on its homepage:screen-shot-2016-12-26-at-9-27-32-pm

Many law firms publish big data analysis of specific types of cases in their area of practice, such as this analysis of credit card fraud cases in Guangzhou (22% of the defendants were represented by counsel) and drug cases in Guangzhou (less than 15% represented by counsel). An analysis of drug cases in Guangdong (Jieyang, a center for the  methamphetamine business) by the local court, has important insights into the routinization of criminal justice, the inadequacy of court judgments, and the way that the trial itself and the role of defense counsel (if hired) is marginalized.

Big data analyses can be found in a range of substantive areas, ranging from finance disputes to construction disputes, some by law firms and others by local courts.  My fellow blogger, Mark Cohen, recently highlighted the data analysis provided by IPHouse, a firm started by a former SIPO Commissioner.  They are useful to the lawyer/in-house counsel planning or considering litigation strategy, as well as for policy-makers and academics. Each provides a glimpse of how (and sometimes why)  the Chinese legal system works as it does.

 

What the Central Economic Work Conference means for the Chinese courts

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©China Daily

The day after the Communist Party Central Committee’s Central Economic Work Conference concluded, the Supreme People’s Court’s (SPC’s) Party Committee held a meeting to study the “spirit of the Central Economic Work Conference.”  According to SPC President Zhou Qiang, the Central Economic Work Conference has the following takeaways for the courts:

First, adhere to strict and impartial justice, and create an open, transparent and predictable rule of law business environment 

Among the points– “We must insist on protecting the lawful rights and interests of Chinese and foreign parties equally according to law and building a more competitive international investment environment.”

Note, of course, that the foreign chambers of commerce in China have other views of the current state of the business environment at the moment, but agree that rule of law, transparency, and predictability are critical for improving China’s economic performance.  The following is from the European Union Chamber of Commerce in China’s  Business Confidence Survey 2016 

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AmCham China: “Respondents now cite inconsistent regulatory interpretation and unclear laws as their No. 1 business challenge.”

Second,  use the rule of law to actively promote the supply side structural reform

Zhou Qiang called on the lower courts to work better on bankruptcy cases, give full play to the role of the information network of bankruptcy and reorganization of enterprises, actively and safely deal with “zombie enterprises”, to optimize the allocation of resources to resolve the excess capacity.

But actually, bankruptcy cases remain fraught.

According to SPC Senior Judge Du Wanhua, charged with making bankruptcy law work better, in China bankruptcy requires a unified coordination mechanism  with government and courts, under Party Committee leadership.

In recent high profile corporate bankruptcies, such as LDK Solar, the local governments say that they cannot afford to rescue the companies, and so the burden must fall on creditors. The LDK case has drawn complaints from bankruptcy practitioners that the local government-led restructuring was designed to force banks to swallow the losses. Another lawyer commented that local governments’ intervention in bankruptcy cases has often disrupted their fairness.

It is likely that we will see more developments in 2017 concerning bankruptcy.

The third is to further increase the protection of property rights

Among the points Zhou Qiang made:

  • We must strengthen the protection of property rights of various organizations and natural persons;
  • We should have the courage to correct a number of mistaken cases concerning infringement of property rights.

These statements relate to three documents issued in late November and early November on protecting property rights, linked to the Central Committee/State Council’s November 4 document on the same topic, following the document issued in late October (and describe in my recent blogpost). They include:

All three relate to (well-known) abuses of China’s justice system, including:

  • turning business disputes to criminal cases (a risk for both Chinese and foreign businesses);
  • courts freezing assets far exceeding the amount in dispute (this is one example);
  • court confiscating the personal property of the entrepreneur and his (her) family, failing to distinguish between corporate and personal property;
  • courts failing to give parties opposing freezing or confiscation order a chance to be heard;
  • courts failing to hear disputes between government and entrepreneurs fairly.

The first document (apparently drafted by the SPC Research Department, because its head explained its implications at the press conference at which the first two documents were released) repeats existing principles that state-owned and private litigants, Chinese and foreign litigants should be treated equally.  It repeats existing principles that public power must not be used to violate private property rights.

The Historical Property Rights Cases Opinion (apparently drafted by the SPC’s Trial Supervision Division, because its head explained its implications at that press conference) calls on provincial high courts to establish work groups to review mistaken cases and to avoid such tragedies in the first place, focusing on implementing the regulations restricting officials from  involving themselves in court cases and the judicial responsibility system.

The third document seeks to impose better controls on the use of enforcement procedures by the lower courts.

Comments

It is hoped that these documents can play some part in improving the quality of justice in China, despite the difficulties posed while the local courts remain under local Party/government control, and may lead to the release of unfairly convicted entrepreneurs and the return of unfairly confiscated property. Perhaps these documents may provide some protection to local judges seeking to push back against local pressure.  On the historical cases, the SPC Supervision Division should consider appealing to current or retired judges who may have been involved in these injustices to come forward (without fear of punishment), as they likely to be able to identify these cases. A defined role for lawyers would also be helpful.

On the equal protection of enterprises, it should be remembered that the SPC itself has issued documents that give special protection to some parties, such as “core military enterprises.”

It appears that these documents respond to the following:

  • years of criticism of  differential legal treatment of and discrimination against private entrepreneurs;
  • academic studies by influential institutions on the criminal law risk faced by private entrepreneurs;
  • Downturn in private investment in the Chinese economy;
  • Lack of interest on the part of private enterprise in private-public partnerships;
  • Increase in investment by private enterprise abroad, most recently illustrated by the Fuyao Glass investment in Ohio;
  • articles such as this one describing Chinese entrepreneurs as either in jail or on the road to jail.

Fourth, proactive service for the construction of “one belt one road” 

This section repeats many of the themes highlighted in the SPC’s earlier pronouncements on One Belt One Road (OBOR or Belt & Road), the maritime courts, and foreign-related commercial developments. The Chinese courts continue to grapple with the increased interaction and conflicts with courts in foreign jurisdictions. The OBOR jurisdictions are handicapped by a dearth of legal professionals with familiarity with the Chinese legal system.

We should expect to see more developments directly or indirectly linked to OBOR, including a more standardized approach to the judicial review of arbitration clauses.

Fifth, strengthen the judicial response to the risks and challenges of the economy

Among the issues that President Zhou Qiang mentioned

  •  Internet finance;
  • Internet fraud;
  • illegal fund-raising and other crimes;
  • real estate disputes;
  • cases involving people’s livelihood, increasing the recourse of migrant workers and other cases of wage arrears.

These are all ongoing, difficult issues for the courts. Legislation does not demarcate clearly the line between legal and illegal forms of financing as discussed here. Migrant workers, particularly in the construction industry, are often not hired under labor contracts but labor service contracts, which reduces their entitlements under the law. As the Chinese economy continues to soften, it is likely that complex real estate disputes (of the type seen in 2015) will burden the lower courts.

We are likely to see further developments in these areas.

President Zhou Qiang told the courts to make good use of judicial “big data” to detect trends and issues so the courts can put forward targeted recommendations for reference of the Party committee and government decision-makers. He has made this point repeatedly recently.

For foreign observers of China, judicial big data is in fact a useful source of indicating trends across the Chinese economy, society, and government.  This blog has flagged some analyses, but there is much more than can and should be done.

Updated data on Chinese bankruptcy law

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Senior Shanghai Maritime Court judges participating in video conference 

Senior Judge Du Wanhua, tasked with making Chinese bankruptcy and corporate restructuring law work better (see these earlier blogposts), spoke recently on a video conference held by the Chinese courts, where he released a few points of big data on Chinese bankruptcy law and highlighted (in this version) current and forthcoming court policy on bankruptcy.  The data he released can be expected to be part of the conversation when the 21st US-China [or China-US, depending on your perspective] Legal Exchange takes place in Beijing and Shanghai on 13 and 15 December 2016 on bankruptcy law.

The video conference concerned one of the vexed issues of Chinese bankruptcy law, how to transfer cases from enforcement to bankruptcy proceedings, but Du Wanhua’s talking points as released were more general. Some of his points are highlighted below.

Updated data on bankruptcy cases

The Chinese courts have accepted 3463 bankruptcy cases through October of this year, up almost 30% year on year, of which 2249 have been closed, up almost 60%.  At the same time, the business registration authorities (the State Administration of Industry and Commerce (SAIC) and local counterparts), have cancelled the registration of 396,000 companies.

Transitioning from enforcement to bankruptcy procedures

Judge Du revealed that close to half (40-50%) of the unsatisfied enforcement cases  are ones that are wholly unsatisfied, with a goodly portion involving corporate judgment debtors. (As mentioned in earlier blogposts, there is no procedure to transfer cases from enforcement procedures to bankruptcy). Judge Du mentioned that the SPC had already drafted guidance which have been discussed by the SPC’s Judicial Committee and would be issued soon. He noted that unsatisfied judgments because of local protectionism have led to conflicts between creditors and  “fierce” conflicts between courts. He called for courts not to engage in “buck passing” on enforcement cases that are transferred to another court for bankruptcy procedures.

Establish coordination system for bankruptcy cases

Echoing themes in earlier statements by Judge Du and others in the Chinese courts, he calls for localities to establish a unified coordination mechanism for enterprise bankruptcy work, with government and courts, under Party Committee leadership, to plan state asset protection, safeguarding of financial safety, resettlement and reemployment of workers, and for the bankruptcy of non-state owned enterprises to proceed smoothly.

Will this coordination system improve matters?  The jury is still out.

 

US Federal Judiciary Strategic Plan Attracts Thousands of Chinese Readers

Cover of Strategic Plan for the Federal Judiciary

In September 2015, the Judicial Conference of the United States issued its updated strategic plan.  Likely much to Justice Roberts’ surprise, (but not Justice Alito, who met that month with Supreme People’s Court (SPC) President Zhou Qiang), the plan (or at least the translation of selected sections) is attracting thousands of new readers in China. (likely more than it did in the US)  The translation was set out in two 3/4 page articles published in People’s Court Daily in late September.  As the translators, headed by Judge He Fan of the SPC, said, “for Chinese judicial reforms, there is no lack of things we can draw on.” They translated all of the major issues set out below (taken directly from the strategic plan) and selected strategies and goals related those issues that resonate with the Chinese judiciary.

As the US transitions to a new president who not only will appoint a Supreme Court justice, but also fill 105 vacancies in the federal courts, the strategic plan provides food for thought for all concerned about if and how justice is delivered around the world.

Preamble

The federal judiciary is respected throughout America and the world for its excellence, for the independence of its judges, and for its delivery of equal justice under the law.Through this plan, the judiciary identifies a set of strategies that will enable it to continue as a model in providing fair and impartial justice.

Mission

The United States Courts are an independent, national judiciary providing fair and impartial justice within the jurisdiction conferred by the Constitution and Congress. As an equal branch of government, the federal judiciary preserves and enhances its core values as the courts meet changing national and local needs.

Core Values

Equal Justice: fairness and impartiality in the administration of justice; accessibility of court processes; treatment of all with dignity and respect

Judicial Independence: the ability to render justice without fear that decisions may threaten tenure, compensation, or security; sufficient structural autonomy for the judiciary as an equal branch of government in matters of internal governance and management

Accountability: stringent standards of conduct; self-enforcement of legal and ethical rules; good stewardship of public funds and property; effective and efficient use of resources

Excellence: adherence to the highest jurisprudential and administrative standards; effective recruitment, development, and retention of highly competent and diverse judges and staff; commitment to innovative management and administration; availability of sufficient financial and other resources

Service: commitment to the faithful discharge of official duties; allegiance to the Constitution and laws of the United States; dedication to meeting the needs of jurors, court users, and the public in a timely and effective manner.

Issue 1. Providing Justice

How can the judiciary provide justice in a more effective manner and meet new and increasing demands, while adhering to its core values?

Issue 2. The Effective and Efficient Management of Public Resources

How can the judiciary provide justice consistent with its core values while managing limited resources and programs in a manner that reflects workload variances and funding realities?

Issue 3. The Judiciary Workforce for the Future

How can the judiciary continue to attract, develop, and retain a highly competent and diverse complement of judges and staff, while meeting future workforce requirements and accommodating changes in career expectations?

Issue 4. Harnessing Technology’s Potential

How can the judiciary develop national technology systems while fostering the development of creative approaches and solutions at the local level?

Issue 5. Enhancing Access to the Judicial Process

How can courts remain comprehensible, accessible, and affordable for people who participate in the judicial process while responding to demographic and socioeconomic changes?

Issue 6. The Judiciary’s Relationships with the Other Branches of Government

How can the judiciary develop and sustain effective relationships with Congress and the executive branch, yet preserve appropriate autonomy in judiciary governance, management and decisionmaking?

Issue 7. Enhancing Public Understanding, Trust, and Confidence

How should the judiciary promote public trust and confidence in the federal courts in a manner consistent with its role within the federal government?