On 12 March 2015, Zhou Qiang, president of the Supreme People’s Court (Court) delivered his work report to the NPC, putting the best face on where the Chinese courts are and where they’re going. He described court reforms as being in a “deep water area” (深水区)(a high risk area). This blogpost will highlight issues that other commentators (outside of China) have so far missed:
- the mismatch between the focus of the work report and the work of the courts;
- what the work report (on other than criminal cases reveals); and
- the challenges to the Court leadership in the year ahead.
What is the mismatch?
© Tiantong & Partners; charts illustrating SPC report
The primary focus of the work report (as always) is law and order, as seen from the perspective of Communist Party leadership, particularly state security related offenses (including terrorism and “splittism”) as well as ordinary crimes. A big difference in this year’s report is that President Zhou Qiang apologized for previous miscarriages of justice and highlighted efforts to prevent future ones. Other commentators have already focused
on these both of these important developments and and other issues related to the criminal justice system.
bar chart: 2010-2014 increase in cases resolved by courts (in 10K) Pie chart: civil/commercial/IP; admin; re-trial/govt compens/enforcement/; parole; other/criminal
What the work report reveals is that most cases heard in the Chinese courts are not criminal and that the number of cases heard by the courts is rising.
What are cases are the Chinese courts hearing?
The pie chart (distributed as an attachment to President Zhou Qiang’s report at the NPC), illustrates that over 63% of the cases heard in the Chinese courts are civil cases (including commercial, family law and intellectual property cases), not criminal. Criminal cases (including parole related cases
) account for something over 10% of cases (as others
have discussed, many minor offenses are handled as administrative, rather than criminal offenses).
A closer look at civil cases in the Chinese courts
A bit of arithmetic reveals (unfortunately the authors of the Report did not set out a corresponding chart), that 34% of civil cases (2,782,000) in 2014 were commercial cases (up 8.5% year on year), while 66% were what classified as civil cases (in the narrow sense, described below).
(These cases are illustrated in the chart to the left that has the ¥
1. Finance cases (824,000)(a broad category including various types of loans, credit cards, securities, futures, insurance etc.).
2. Sales contracts disputes (664,000).
3.Intellectual property (110,000, up 10% year on year)(I the detailed analysis of this can be found here
, by my fellow blogger, Mark Cohen, at the ChinaIPR blog
4. Corporate disputes (12,000) (shareholder, merger and acquisition, creditor initiated bankruptcy);
5. Maritime cases (12,000).
Foreign-related cases (5804), )these, although a focus of foreign law firms alerts and the press, are a tiny drop in the sea of Chinese civil cases. Many cases involving foreign companies actually involve their China incorporated subsidiaries.
The number of finance cases suggests a large number of disputes relating to loans by financial institutions.
(These cases are illustrated in the chart that has two people standing next to one another and the pie chart below.)
2014 civil cases in the Chinese courts
In 2014, 5,228,000 civil cases were heard in the Chinese courts (up almost 6% year on year):
1. Family law cases (1,619,000),(this category includes contested divorces, inheritance, support cases), accounting for about 30% of civil cases. The chart above 13% year on year increase in inheritance cases (showing an increasing number of people have assets worth fighting in court over, and perhaps also inadequate estate planning).
2. Loan cases not involving financial institutions (between individuals, company and individual, or two companies) （1,045,600), accounting for almost 20% of civil cases. (The categorization has changed, making a year on year comparison not easily possible).
3. Labor cases (374, 324), accounting for 7.16% of all civil cases. These include appeals from labor arbitration as well as cases that can be directly brought in the courts).
4. Environmental tort cases (3331) (up 51% year on year).
5. Product liability cases are up 44%, but the base or total number for 2014 is not set out.
6. Cases involving rights of rural residents (219,00)(rights to rural residential land, transfer of contracted land) migrant laborers seeking unpaid wages).
7. Construction disputes are up almost 18% (base or total number for 2014 not set out).
These numbers speak to:
1. changes to the Chinese family;
2. a large number of loans that are under the radar of the financial authorities;
3. employees who are increasingly rights conscious;
4. continued litigation risk for foreign companies doing business in China (including through subsidiaries), because as perceived “deep pockets”, Chinese litigants often target them in product liability cases.
First instance administrative cases (companies or individuals suing the government) (131,000) continue to be a tiny number, although up 8.3%, and it remains to be seen whether the amended Administrative Litigation Law (Administrative Procedure Law) will lead to an increase in cases.
Enforcement cases (compulsory enforcement of court judgments or orders, arbitral awards, etc) account for 3,430,000, a 14% increase year on year. This suggests that fewer people (companies) are complying with dispute resolution voluntarily.
10% increase in cases accepted (will be a challenge to the courts if this trend continues because the intent is to cut the number of judges), amount in dispute is up 15%.
Court reforms already in a “deep water area”
Zhou Qiang highlighted that court reforms are already in a “deep water area” (high risk area) and the courts:
- need to penetrate interest group barriers;
- have the courage to move their own “cheese”;
- need to use “the knife” against itself (presumably to cut out corrupt, poorly or non-performing judges);
- deal with many deep-seated problems;
- make progress on a long list of reforms:
- continue and expand pilot reforms on changing the financing and personnel appointments of the local courts to all provinces/directly administered cities;
- implement hearing-centered litigation reforms;
- make progress on case filing reforms (to resolve the long term problem of litigants facing obstacles when they file suit);
- put in place a system with dealing with assets seized and confiscated by the courts (to avoid violation of property rights and further judicial corruption in this process);
- implement the prohibition against defendants wearing prisoner’s garb in court;
- further implement judicial reforms related to petitioning;
- promote alternative dispute resolution, such as arbitration, people’s mediation, administrative mediation etc.
- continue work on pilot projects on expedited criminal procedures (for minor matters);
- improve the people’s assessors system.
All of these reforms create tremendous challenges for the courts. The number of cases accepted by the courts in 2014 (15,651,000) was up about 10%. The judicial reforms to petitioning and other reforms will channel more disputes into the court system. Planned personnel reforms are leading to an exodus of young judges. Many of the planned judicial reforms are intended to the way the courts operate internally and interact with other institutions. The 4th Five Year Court Reform Plan sets out target dates for accomplishing certain major judicial reforms. The salary gap between what an experienced lawyer in private practice in a major law firm and a counterpart in the judiciary is large, leading many talented people to prefer the greater financial benefits and professional flexibility that comes with being a lawyer.
The political leadership has approved the 4th Five Year Court Reform Plan. Issuing it raises expectations among ordinary people as well as those in legal profession. The pressure is on for the Court leadership to deliver on the promised judicial reforms.