Supreme People’s Court & 43 other central institutions commit to punishing judgment debtors

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cover sheet for this document

For many years, one of major issues for the Chinese court system has been that enforcing a judgment is difficult (there is scholarship on whether that is in fact the case). Supreme People’s Court (SPC) Justice Liu Guixiang, however, interviewed in January, 2016, noted that the number of cases involving unsatisfied judgments rose from 3.4 million in 2013 to 4.8 million in 2015 and said “The problem of some litigants escaping enforcement by transferring or hiding properties is still serious.”

For this reason, resolving difficulties in enforcement (执行难), one of the Chinese courts’ “three difficulties,” is one of the performance targets for the SPC’s judicial reforms.  The 4th Five Year Court Reform Plan calls for “establishing a legal system for credit supervision, deterrence and punishment of those not fulfilling judgments against them.” The document analyzed in this blogpost fulfils that performance target and is an important building block in the construction of China’s social credit credit system.

The document analyzed is a long memorandum of understanding (MOU) concluded by the SPC and 43 other central institutions and issued in late January, 2016. It is not the first time that Chinese government institutions have used MOUs, but it appears to be the largest one of its type. The document builds on previous work by the SPC in linking its judgment debtor database with other regulators, described in an earlier blogpost.  It appears that the SPC’s Enforcement Bureau, headed by Justice Liu Guixiang, head of the #1 Circuit Court, took the lead in negotiating it.  He provides more background on the SPC’s enforcement efforts in this interview.

This (much longer than usual) blogpost looks at what entities are a party to the MOU, what type of document it is, what it does, and one report on how it is being implemented and issues that it raises.

44 Institutions

The 44 cooperating institutions include government, Communist Party institutions, a public institution, and a government controlled non-profit organization, listed below in the same order as the document itself:

National Development & Reform Commission (NDRC), SPC, People’s Bank of China (PBOC), Central Organization Department, the Central Propaganda/Publicity Department, the Central Staffing Commission (SCOPSR), Central Guidance Commission on Building Spiritual Civilization, Supreme People’s Procuratorate (SPP), Ministry of Education (MOE), Ministry of Industry & Information Technology (MIIT), Ministry of Public Security (MPS), Ministry of State Security (MSS), Ministry of Civil Affairs (MCA), Ministry of Justice (MOJ), Ministry of Finance (MOF), Ministry of Human Resources and Social Security (MHRSS),  Ministry of Land & Natural Resources (MLNR), Ministry of Environmental Protection (MEP), Ministry of Housing and Urban-Rural Development, Ministry of Transport, Ministry of Agriculture (MinAg), Ministry of Commerce (MOFCOM), Ministry of Culture, National Health & Family Planning Commission (NHFPC), State Owned Assets Supervision and Administration Commission (SASAC), General Administration of Customs (Customs), State Administration of Taxation (SAT), State Administration of Industry and Commerce (SAIC), General Administration of Quality Supervision, Inspection, & Quarantine (AQSIQ), State Administration of Work Safety (Work Safety Administration), China Food & Drug Administration (CFDA), State Forestry AdministrationState Intellectual Property Office (SIPO), China National Tourism Administration (National Travel Administration), State Legislative Affairs OfficeState Internet Information OfficeChina Banking Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC), China Insurance Regulatory Commission (CIRC), State Administration of Civil ServiceState Administration of Foreign ExchangeCommunist Youth League,  All  China Federation of Industry & CommerceChina Railway Corporation.

What is this document?

This document was issued in the form of a two page notice by 44 institutions to provincial governments and authorities, giving the policy basis, including a 2005 Central Political Legal Committee document linked here as well as the recent Plenums and other documents.  It has four pages of chops (seals) of those institutions, attaching a ten page MOU and almost 40 page appendix (where the bulk of the content is).

It appears to be the first time (or at least one of the first times) that a large group of central Party-state institutions has concluded an MOU. It shows that despite ongoing criticism of Western rule of law concepts, the Chinese Communist Party and Chinese government finds it useful to borrow some of them for its own uses.

Like the commercial version with which many of us are more familiar, this MOU is an agreement between the SPC, SPP, and regulatory bodies–in this case government, Party, dual purpose (entities that are both Party and state) organizations, an important SOE, and several public institutions. Some questions about this practice will be discussed below.

Using MOUs to do so seems to be borrowed from the United States (other jurisdictions use them, too, but among regulators or between courts), and is being used for the same reasons that US federal government  agencies do (and apparently without an explicit statutory  basis).   as described in excerpts from this 2012 report by the US Administrative Conference by two professors, one from Harvard Law School and Vanderbilt University Law School (follow-up recommendations found here):

A typical MOU assigns responsibility for specific tasks, establishes procedures,
and binds the agencies to fulfill mutual commitments. These
agreements resemble contracts, yet they are generally unenforceable
and unreviewable by courts…Nevertheless, there appears to be no generally applicable
statutory or executive branch policy regarding the use of MOUs, leaving
their content largely to the discretion of the agencies.

Agencies sign MOUs for a variety of purposes, including (1) delineating jurisdictional lines, (2) establishing procedures for information sharing or information production, (3) agreeing to collaborate in a common mission, (4) coordinating reviews or approvals where more than one agency has authority to act in a particular substantive area, and (5) in rarer cases (and potentially subject to additional procedures under the Administrative Procedure Act (APA)) agreeing on substantive policy. Their content varies widely. Some MOUs are quite detailed, although they tend to be short documents, often less than ten pages. MOUs may specify goals, assign responsibilities, establish metrics, commit personnel and funding, and establish responsibility for oversight. Some include deadlines for revisiting and updating the agreement. Others are more like framework documents that outline principles and leave more detailed elaboration to subsequent agreements or “implementing arrangements.”

This Chinese MOU is for reasons (1), (2), and (3).  There is no dispute resolution clause (unlike most commercial MOUs) and in this case the SPC is one of the parties.  Chinese public policy and legal academic literature, with the occasional article in the official press has promoted the use of MOUs as a useful tool for coordination by government agencies (i.e., getting them on the same page).  In fact, a number of them can be seen on the regional level, such as a recent one coordinating the tax authorities of Beijing, Tianjin, and Hebei.

A quick search of MOUs involving courts outside of China reveals one between the Supreme Court of New South Wales and the Courts of the Dubai International Financial Courts,  between the Supreme Court of Indonesia and the Federal Court and Family Court of Australia, and other similar  agreements.

What does this document do?

It provides for information sharing and joint implementation of penalty measures.  Regarding privacy issues, it requires record keeping of users, operators, and visitors, and the establishment of necessary technical measures to protect the data security of sensitive crucial information and prevent unauthorized operations.

Information sharing and joint implementation of penalty measures

The MOU commits all those other institutions to use their authority to implement sanctions against judgment debtors, both individuals and entities, as set out on the SPC’s lists of judgment debtors, which the SPC will update regularly. These institutions are obligated to issue provisions to implement the agreed upon measures to their bureaucratic subordinates. The measures that the institutions are implementing are not new ones, as the appendix makes clear. The NDRC commits to operating the social credit platform, Credit China, linked here. All the other government departments and entities commit to enforcing or coordinating the enforcement of the penalty measures through their regulatory systems to reporting to the NDRC and SPC quarterly through the social credit platform.

Measures

Most of the MOU sets out an outline of the measures and the entities responsible for implementing them.

It requires each entity and provincial level government to issue implementing regulations.  This spring has seen some regulations issued at the provincial level to implement the MOU, but few regulations seem to have been issued on the regulatory level.

Legal analysis and reality check

A Hubei judge set out his analysis of the legality of restricting high consumption by judgment debtors and a reality check on how the system is working in an article published in late April in People’s Court Daily. He said it raises jurisprudential questions, because the Constitution protects a citizen’s personal and property rights, and those constitutional rights include consumption rights.  The Legislation Law provides that limits on a citizen’s personal freedom, which restrictions on high consumption can be considered to be, can only be set out in national law and interpretations of national law by the SPC.

On the topic of the operation of the system, the judge mentions that the system is only in place for a number of economically advanced areas, but is not in place nationally, and in some areas, although the system is on place at the top-level, it is not implemented at the district level.  It is in place for the banks and transportation, but not yet for other authorities such as the industrial and commercial, educational, and travel authorities. How to link local systems with the national system is a problem not yet resolved.

Some comments and questions

A few comments and questions come to mind. It seems likely that the issuance of this document was approved by the political leadership at a high level, such as the Central Leading Group for Deepening Overall Reform.  This document does not appear to have sparked much public discourse in China, but that may be because many members of the legal community, many of whom are Communist Party members, may be concerned about improperly discussing Central policy ((妄议中央), as discussed in this earlier blogpost.

What is the status of this document under Chinese law? An MOU is not one of the types  documents mentioned by the SPC’s regulations on documents or on judicial interpretations, unless it can be said to be covered by Article 9 of the former regulations (setting out the principal types of documents, which may imply that other ones may also be issued (人民法院公文的种类主要有).  That being said, the SPC has been signing MOUs with courts outside of mainland China for many years, and a report of the SPC entering into an MOU can be found from 2013, also relating to enforcement of judgments, so it seems clear the SPC takes the view that it has the inherent authority to conclude them.  Is it binding on the lower courts?  It appears to be the case, from the reports on the document in lower court websites.  Can lower courts conclude MOUs with their counterparts at the local level?  It is also unclear.

What are the domestic and international implications of the SPC and 43 other government/Party institutions concluding this MOU?  How is this to be understood by Chinese and foreign legal professionals, and the Chinese and foreign public?  Does it have any implications for China’s obligations under the WTO, of China establishing, or designating, and maintaining tribunals, contact points and procedures for the prompt review of all administrative actions relating to the implementation of laws, regulations, judicial decisions and administrative rulings of general application…which shall be impartial and independent of the agency entrusted with administrative enforcement (emphasis added) and shall not have any substantial interest in the outcome of the matter?  What implications does this document have for China’s bilateral investment treaty (BIT) negotiations with the United States and the European Union?  The US model BIT (as is usual) includes an obligation of fair and equitable treatment of covered investments and EU BITs contain similar language.

Other issues that this raises include–what procedural rights will individuals or entities have to challenge their designation as judgment debtors, and the penalty measures imposed upon them?  What assurance would those individuals or entities have that their challenge would be heard fairly by the courts, if the SPC is a party to these arrangements?

Quick guide to the penalty measures

What follows is a rough summary of the MOU in table form.  In the MOU, in a few instances, relevant institutions undertake to  forbid judgment debtors (either individuals or entities) from the activities listed below, but generally it uses other words–“restrict” (限制) (which usually means forbid), “consider seriously” (审慎性参考),  and review strictly (从严审核). How are front-line staff to implement “consider seriously” and “review seriously”?

Measures Responsible entity
1. Approval for establishing securities co., investment management co., futures co.; & registration of private investment fund—consider as factor/evidence

Restrict issuing bonds, acquiring listed co.

CSRC to implement restriction on acquiring listed co., NDRC re issuing bonds
2. Issuing securities on the interbank—review strictly PBOC
3. Establishing a financing guarantee co.; restrict the appointment the appointment as a director, supervisor, or senior management of a financial institution CBRC, CSRC, NDRC, CIRC, MIIT, MOF, MOC, PBOC, SAIC & other authorities with authority to approve appointments of financial institutions
4.Assist in reviewing information concerning govt. procurement & restricting participation in govt procurement MOF
5. Restrict the establishment of insurance companies, purchase of high premium insurance products with cash value; restrict natural person & senior personnel, controller of a corporate judgment debtor from purchasing high premium insurance products CIRC
6.Consider seriously when considering the approval of the establishment of commercial banks or branches, offices and the acquisition of partial or full shareholding of commercial banks CBRC
7. Assist in suspending share option plans or terminate the ability of persons to exercise share options of domestic state controlled listed companies SASAC, MOF
8. Consider seriously judgment debtor status in the approval or management of quotas for QDIIs and QFIIs SAFE
9. When financial institutions consider financing/extending credit to a entity, consider whether it, or its legal representative, actual controller, director, supervisor, or senior management are judgment debtors, if so, approve strictly CBRC, PBOC
10. Cooperate in restricting judgment debtors from applying for subsidy-type funds & social security funding support NDRC, MOF, MHRSS, SASAC etc.
11. In implementing policies for favorable treatment in investment, tax, import/export, etc., review whether the institution, its legal representative, actual controller, director, supervisor, or senior management are judgment debtors; seriously consider in implementing these policies NDRC, MOFCOM, Customs, SAT, AQSIQ
12. Focus & increase regulatory attention on judgment debtors & the legal representatives, actual controllers, directors, supervisors, senior management of judgment debtors; increase random checks; impose administrative measures according to law/administrative regulations Market and industrial regulators
13.For individual judgment debtors, restrict them from appointment to be a wholly state owned company director, supervisor, as well as a director or supervisor, or senior manager of a state-controlled company; for those already so serving, submit an opinion that the person should not continue to serve SASAC, MOF etc
14. For individual judgment debtors, restrict them from being registered as the legal representative of a public institution SCOPSR
15.Through Credit China website, make company credit information accessible to the public NDRC & SAIC
16.Publicize to the public through the principal news websites information about judgment debtors State Information Internet Office
17.Restrict the recruitment/hiring as civil servants or public institutions staff Central Organizational Department, MHRSS, State Civil Service Administration
18.For those state organs, companies, public institutions, social organizations or their leaders, or members that are judgment debtors, forbid designation as a civilized unit or moral model or cancel such designation Central Propaganda Department, Central Guidance Commission on Building Spiritual Civilization
19.Restrict from taking flights, soft sleeper and certain other specified non-necessary forms of transportation Ministry of Transportation, China Railway Corporation
20. Restrict judgment debtors & their legal representatives, principal responsible persons, those directly connected with fulfilling obligations, actual controllers from staying in 4 star hotels & above; restrict consumption at nightclubs & golf courses National Travel Administration, MOFCOM, MPS, Ministry of Culture
21. Restrict judgment debtors & their legal representatives, principal responsible persons, those directly linked to fulfilling obligations from purchasing real estate; assist in restricting judgment debtors from engaging in transactions involving state owned company assets, state assets, etc. MLNR, MHRUC, SASAC, other relevant authorities
22.   Cooperate in providing information about 4 star & above hotels; restrict judgment creditors and their legal representatives, principal responsible persons, those directly involved in fulfilling obligations, actual controls, from participating in tour groups; restrict them from enjoying travel related services; restrict judgment debtors from consuming services in resort areas MOFCOM, Nation Travel Administration
23. Restrict the children of judgment debtors and the legal representative, principle responsible person, and those directly involved in fulfilling obligations, actual controllers from studying at expensive private schools SPC, MOE
24. Assist in reviewing judgment debtor’s identity, passports, vehicle registration; assist in locating judgment debtors, restrict them from exiting the country; assist in seizing and sealing vehicles MPS
25. Restrict the use of state-owned forestry land; restrict applications for focal forestry construction projects; restrict application for focal grasslands protection projects NDRC, State Forestry Administration, MinAg
26.Review information about Customs certificates and qualifications of judgment debtors; restrict them from being companies confirmed by Customs; for import/export goods & other Customs operations, implement strict controls; Customs
27. Review information concerning product safety approval & licensing; restrict engaging in food, drug & other industries; restrict persons from being the responsible person, director, supervisor, or senior manager CFDA, AQSIQ, Work Safety Administration, SAIC
28. Cooperate in reviewing registration information concerning fishing ship by judgment creditors MinAg
29.Cooperate in reviewing information concerning judgment debt passenger & freight vehicle registration Ministry of Transportation
30.Cooperate in reviewing information concerning whether lawyers or law firms are judgment debtors; restrict judgment debtors for a certain time from being designated as advanced or outstanding MOJ
31.Assist in reviewing the marriage registration of judgment debtors MCA, MFA, NHFPC
32.Assist with establishing a file to investigate, prosecute, etc. of the crime of refusing to enforce a judgment or ruling SPP & MPS
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Accessing Chinese criminal law legal developments via Wechat (updated)

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defense counsel in a Beijing court

This brief blogpost, updated with content on the 18 April judicial interpretation on corruption offenses, supplements my earlier blogpost on legal Wechat public accounts.

Defender (辩护人), one of the leading criminal law Wechat public accounts recently published a list of the most widely read Wechat criminal law Wechat public accounts with user statistics (as of 15 April).

Given that criminal law is more sensitive that commercial law in China, posts that relate to more difficult topics sometimes disappear.

Some of the most useful posts in recent days relate to the 18 April judicial interpretation on corruption offenses.  Several posts package the judicial interpretation together with the statement by officials from the Supreme People’s Court (SPC) and Procuratorate (SPP)–that statement gives important background information about the legislative history and intent of the drafters. Related posts put the interpretation into chart form, providing easy reference to all participants in the criminal justice system.  As might be expected, more sensitive analyses may disappear, such as this one An analysis  by Si Weijiang, a well known defense lawyer. A PDF version can be found here, so that readers may judge for themselves (斯伟江 • 迟来量刑标准调整:反腐高压下的调整).

Within the past week, this one was published, setting out the legal basis and jurisdiction of departments of the public security authorities to open a file (立案) and begin an investigation.  One of the departments focuses on anti terrorism (反恐怖部门), authorized to open a file for seven different crimes.

In March of this year, at the “Two Meetings,” Zhu Lieyu spoke out in favor of removing detention houses (where pre-trial suspects are held), from the jurisdiction of the public security authorities. Recent posts on some of these criminal law public accounts include one listing the titles, location, and telephone numbers of  detention houses in Zhejiang Province, and an earlier one in Defender with an open letter from 37 Yunnan lawyers drawing attention to the poor conditions in several detention houses in Kunming for defense counsel to meet with clients.

Other posts call attention to cases or categories of cases that might otherwise escape public attention, such as Chen Yichao, a Gansu company executive accused of corruption, and tried in recent days, whose assets were seized by the authorities and transferred to the personal accounts of the procuratorate and Party disciplinary officials investigating his case (in violation of relevant regulations) (and an analogous case from Anhui) as well as an article from a court website questioning the punishment of petitioners for extorting the government, and a judgment by the Jiangsu Higher People’s Court in re-trial proceedings overturning the conviction of a petitioner for extortion.  Another post that must be read is this one, about (former) officials from the justice system who have been tortured.

Another recent post lists embezzlement cases decided since Criminal Law Amendment (9) became effective, with the court, amount embezzled, and sentence.

For the many persons inside and outside of China who are trying to understand China’s anti-corruption system, these public accounts provide valuable information on what happens as cases go from Party disciplinary investigation to the procuratorate to court, and the arguments defense lawyers are making on behalf of their clients,including the exclusion of evidence obtained by torture.

 

Company Law interpretation improving minority shareholder rights issued for public comment (updated)

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soft consultation meeting on draft in 2015

You have less than one month to provide your views to the Supreme People’s Court (SPC) and influence the SPC’s thinking on Company Law issues. The SPC is looking expand the rights that (minority) shareholders, creditors, and employees have vis a vis the company and its majority shareholder or actual controller.

On 12 April, the Supreme People’s Court issued its draft Company Law interpretation for public comment, (linked here, with part of a bilingual version found here.  WestlawChina has a translation, available to subscribers).

Comments should be sent to the addresses specified in the notice: by email to: gsfjss_yang@163.com or by mail/courier to Judge Yang Ting, #2 Civil Division, at the SPC.

The deadline for public comments is 13 May.  Issuing the draft for public comment required the approval of the SPC leadership (the judicial committee), according to SPC regulations.

Many foreign investors take minority stakes in Chinese companies (or lend to Chinese companies) and find, to their sorrow, that the majority shareholder has abused his position and the minority shareholder or creditor.  The files of law firms, accounting firms, arbitration organizations, and Chinese courts are filled with these cases.

To the cognoscenti, this judicial interpretation reads as a guide to (combatting) the well-known strategies of unscrupulous majority shareholders, which include: fraudulent board or shareholder resolutions; board/shareholder resolutions adopted without the necessary quorum; board/shareholder resolutions approving related party transactions that harm creditors; blocking minority shareholder access to company books and records.

All entities with investments in China are affected by this provisions in this draft judicial interpretation.  The International Finance Corporation, Temasek, Kuwaiti Investment Authority and others should have their lawyers review and provide comments on its provisions.  The law committees of the foreign chambers of commerce in China and Hong Kong (Amcham, Eurocham, Auscham, SingCham, etc.) and the lawyers for the PE/VC communities (not to mention the banks) should consider submitting comments, as well as those interested in Chinese corporate governance.  Its provisions apply to both private (limited liability) and public companies (ones limited by shares), although some provisions only apply to private companies.

The issues in the draft interpretation, highlighted below, reflect the issues that have arisen in litigation in the lower courts on the rights of shareholders, particularly minority shareholders, particularly since the Company Law was amended at the end of 2013. Many of its provisions will be applicable to arbitration proceedings involving Chinese companies.

There has been an increase in litigation among shareholders and litigation between shareholders and companies and that is likely reflected in the statistics of arbitration organizations hearing disputes involving Chinese companies.

Thus far, I have seen one law firm analyze the draft, and I will update this blogpost with links to other analysis as I encounter them,  such as this one by the Han Kun law firm. A quick guide to some of the issues highlighted in the draft follows below.

Validity of decision of a resolution/decision of a board of directors/shareholders meeting/shareholders general meeting

These issues are addressed in the first 12 articles of the draft, putting some meat on the bare bones  of the Company Law, and giving minority shareholders, creditors, and employees greater rights.

Comments

Under this draft, shareholders, directors, supervisors, or senior management, creditors, and employees with a direct interest in the matter may file a challenge to the validity of a resolution under Article 22(1) of the Company Law, which provides that the contents of a resolution of one of those meetings are be invalid if they are in violation of laws or administrative regulations.

As to the grounds for invalidation, the draft specifically mentions: a shareholder abusing his power as a shareholder through a resolution that harms the interests of the company or other shareholders and decisions that excessively (过度) distributes profits or improper related party transactions that harm the interests of creditors. The draft also enables parties to apply for an order to stop the implementation of the invalid resolution.

Shareholder’s right to know

The second section of the draft interpretation  defines further and provides procedures for enforcing a shareholder’s right to know under Article 33 (for private companies) and 97 (for companies limited by shares). It is not unusual for a company to block minority shareholder access to company books and financial records, particularly when there has been a falling out between shareholders.

Under Article 33, a company shareholder can inspect and duplicate the company’s articles of association, the minutes of the shareholders’ meetings, the resolutions of the board of directors, the resolutions of the board of supervisors, and the financial and accounting reports of the company.  Under Article 97, the rights of shareholder in a listed company are more limited. Under the draft, a shareholder will be able to designate an agent to review the company records, particularly important for financial and accounting records.  The exercise of the right to know is often the precondition for being able to file suit under the first section.

Enforcing the right to have profits distributed

Section three of the draft sets out three articles setting out procedures by which a shareholder can enforce his right to have profits distributed.

Enforcing rights of first refusal

Section four of the draft addresses the right of first refusal–the priority right that existing shareholders have to purchase the shareholding of a party intending to transfer all or part of his shareholding to a third party.  Anyone involved in corporate practice in China will have encountered situations in which the selling shareholder engages in various types of strategies (generally misleading the other shareholders) to avoid selling to an existing one.

The draft defines “under the same conditions” as used in Article 71 of the Company Law as being holistic–the price, payment method, timeline for payment, and other factors. The draft also sets out the content of the notice to other shareholders, and most importantly, spells out situations in which a contract transferring shareholding to a third party can be invalidated, which include failing to inform the other shareholders (and other legal requirements) and changing (i.e. reducing) the conditions of sale to the third party after the existing shareholders have waived their right.  The author of the article mentioned above mentions that the draft does not deal with indirect structures, designed to prevent the existing shareholder from exercising his rights, as illustrated by the Fosun/Shanghai Soho dispute.

Derivative litigation

The last five articles of the draft address the mechanics of derivative litigation, including the type of company approval required for the litigation to be settled (mediated), as well as the important issue of the plaintiffs claiming reasonable lawyers, notaries, assessors, and other related fees. The draft permits what is known as “double derivative” litigation–the pursuit of a claim on behalf of a wholly owned subsidiary, a concept found in Delaware and English law. This recent article reviews recent Chinese cases on double derivative litigation, including one from the SPC, and quotes from the American Law Institute’s book Corporate Governance: Analysis and Recommendations.

Questions?

Those with further questions about providing comments on this draft may either use the comment function on this blog or email me at: supremepeoplescourtmonitor.com.

 

What China’s judicial reform white paper says about its vision for its judiciary

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Portrait of Qing dynasty inspector

Over one year has elapsed since the Supreme People’s Court (SPC) has implemented the judicial reforms set out in the February, 2015 4th five year plan for reforming the judiciary.  While thousands of words have been written in Chinese and English, some praising,  criticizing, mocking, and bemoaning the reforms, it was only in late February, 2016 that the SPC issued a comprehensive official assessment, focusing on its achievements. That official assessment takes the form of a bilingual white paper (White Paper) issued in early March (but full text released on-line only in English), plus a section of President Zhou Qiang’s work report devoted to the judicial reforms, a first for the SPC.  I surmise that it was approved by the Judicial Reform Leading Group.

This blogpost looks at the vision for the Chinese judiciary that the White Paper conveys, by looking at several sections.

 

Chinese court system and the reform process

The description of the reform process in the first section of the White Paper tells us who/what is driving the reform process, the nature of the process, the core issues, and how the judicial reform process is being monitored.

Facts highlighted:

  • During 2014-2015,13 out of 19 plenary sessions held by the Central Leading Group for Deepening Overall Reform involved judicial reform, where 27 judicial reform documents were adopted.
    • A partial list of those 27 documents is found here.
  • The Social System Reform Specialized Group (the Central Leading Group for Judicial Reform) is in charge of judicial reform;
  • The SPC has a leading group in charge of judicial reform, replicated at the provincial level, and any judicial reform plans piloted by them need to be approved by the SPC or above (the 4th Judicial Reform Five Year Plan states this).

According to this section, the four core judicial reform measures are:

  • improving the classified management of judicial personnel [treating judges differently from clerks and other support personnel and civil servants0;
  • the judicial accountability system [the lifetime responsibility system set out in regulations issued in September, 2015, but only implemented in areas piloting judicial reform, controversial among judge and academics];
  • professional protection of judicial personnel ;
  • unified management of personnel, funds and properties of local courts below the provincial level.

These four measures will be piloted throughout the country in several rounds before they are implemented nationwide.

Comments

From the description of the reforms we can see that the specific reforms discussed in the remainder of the report have been cleared by the Party leadership.  It seems reasonable to assume that each reform involved hundreds of hours of policy paper drafting by SPC staff and internal and cross-institutional discussions, and responses to comments during those discussions.

What the White Paper did not mention is that the Central Leading Group for Deepening Overall Reform and the Central Leading Group for Judicial Reform established their own inspectorate for monitoring the progress of reform,including judicial reform, (reviving a traditional institution).  It is unclear which reforms will be targeted this year for inspection. The separate inspectorate seems to indicate that these Central Leading Groups want their  own source of information on how reforms are being implemented.

 

Judicial independence (Ensuring Independent and Impartial Exercise of Judicial Power Pursuant to Law)

One of the messages conveyed in this section is that local courts do not belong to local governments but are established by the State at the local level to exercise judicial power on behalf of the State. The goal as stated in this section, is to “form an institutional environment and social atmosphere that respects [the] judiciary, supports [the] judiciary and trusts [the] judiciary.”

It  lists about a dozen measures. What is new in this section:

  • a summary of the policy thinking on judicial appointments and funding of the local courts.  On judicial appointments, judges will be selected by judicial selection committee at the provincial level in terms of professionalism, and will be appointed and removed according to common standards. This is a push in the direction of professionalism, and away from the phenomenon noted in the past few years of having chief judges who lacked a legal education.  On the funding issue, the Central Government will fully guarantee the funding of the local courts. The provincial fiscal departments manage the funds of local courts below the provincial level, the local courts will submit their budgets to the provincial fiscal departments, and  budget funds will be appropriated by the centralized payment system of the national treasury.
  • Fuller discussion of cross-administrative district courts to hear administrative cases–piloted in Beijing and Shanghai and other locations, under the umbrella of a policy document of the SPC that has not been made public. The concept is to have cases against local governments heard outside of the area in which they arose.  The SPC recent policy document on the development of the greater Beijing area has further content in that area.

This section also discusses the following reforms, previously discussed: circuit courts; cross-administrative division courts; intellectual property courts (by Mark Cohen, chinipr.com); administrative cases being centralized in one court (Shenzhen is one of the pilot project venues); maritime courts; environmental protection divisions; official interference.

Improving the way the courts function ( Improving the Functional Mechanism of Adjudicative Powers)

The fourth section of the White Paper provides useful insights into how the judiciary is intended to operate post reform.  It starts out with a statement that judicial power is a judging power in essence and emphasizes impartiality, neutrality and personal experience.”

The focus on this section is on reforms to the way Chinese courts operate. As I have written previously, they have operated in many of the same ways that other Party and government organs operate.     This section describes pilot reforms, new policies, or regulations concerning the following (among others):

  • personnel reforms described above (but do not mention the pay rise that goes along with it in at least some courts);
  • senior judges within a court (court presidents, vice presidents, division chiefs) will no longer approve judgments, except for a small number going to the judicial committee);
  • senior judges will hear cases instead of concentrating solely on administrative matters;
  • courts will establish a specialized judges council made up of judges in specialized areas (criminal, civil, etc) to provide views to judges hearing cases on the interpretation of substantive issues, on an equal basis rather than seniority;
  • the SPC has abolished irrational performance indicators and forbidden senior judges from involving themselves in cases that they have not heard;
  • the SPC has issued policy guidance on the reform of judicial committees (not yet made public).  The principles set out follow generally what was described by President Zhou Qiang earlier, but include judicial committee discussion of “major and complicated cases concerning national diplomacy, security and social stability and those required by law.”  The guidance calls for more transparency (unclear whether to be within the court or greater), better record-keeping, and less involvement by judicial committees with specific cases. As discussed in an earlier blogpost, judicial committees have often been a route for transmitting the views of local officials and have been been implicated in some of the wrongful conviction cases);

    judicial committee

    judicial committee ©SPC

  • judicial responsibility/accountability system, mentioned above;
  • regulations on the jurisdiction of different levels of courts in civil cases (described in this blogpost).

These reforms look to do a number of things that are significant within strictures of the Chinese system: distinguish judges from other Party cadres and give them better status and pay; break down or reconstitute some of the basic internal structures of the courts that have facilitated corruption, unjust cases, and discouraged talented judges; abolish performance indicators that have been poisonous for judges and litigants alike.

 The vision

The vision that the SPC  has for the Chinese judiciary and judges can be seen from the description of the reforms above.  The SPC intends to create a more professional judiciary (with a lower headcount), that is better paid, more competent, has performance indicators that look more like other jurisdictions, with an identity and operating mechanisms separate from other Party/government organs, that will be more autonomous, no longer under the thumb of local authorities, but operates within the big tent of Party policy.  To be incorporated in the judicial reforms, the implications of each measure must have been thoroughly discussed by the Party leadership and the Party leadership is using its own institutions to monitor results.  Will the judicial reforms achieve their goal of making people feel justice in every case?  For that, the jury (or is it the people’s assessors(also being reformed)?) is still out.

Profiling Judge Merrick Garland on Wechat

urlI recently published a profile of Judge Merrick Garland, President Obama’s nominee for the Supreme Court, on a Wechat public account.  The English version is linked here  (so far about 7600 page views) and the Chinese version is linked here (about 5500 page views).  Many thanks to: the holder of the public account, for inviting me to write the article and commenting insightfully on an initial draft; four of my students at the School of Transnational Law of Peking University, who translated the English article into Chinese, and several others, in China and elsewhere, who provided comments; and one of Judge Garland’s classmates, who generously shared an anecdote about him.

China’s international maritime judicial center

20160313104344_51387I recently published an article in The Diplomat entitled “China’s Maritime Courts: Defenders of ‘Judicial Sovereignty,” focusing on what Supreme People’s Court President Zhou Qiang meant when he mentioned that China would establish an international maritime judicial center (国际海事司法中心).  Many thanks to Professor Vivienne Bath for her research on parallel proceedings and choice of court issues involving China, as well as several others who provided their insights.

Data from the Supreme People’s Court on administrative cases

Screen Shot 2016-04-01 at 6.46.11 PMWith the amendment of the Administrative Litigation Law and implementation of the case registration system in 2015, the number of administrative cases accepted by the Chinese court increased by 55%, to 299,765. The statistics provided only give a very partial picture of the distribution of cases. A search of cases for this post revealed that generally the decision of the government agency was upheld. This blogpost omits information on trademark cases because those are covered by the chinaipr.com blog.

Cases challenging city planning, condemnation, real estate registration: 35,726 cases, up 59%.  While the total number of cases upholding the government decision isn’t given, in most of the cases searched, the individual was unsuccessful, such as this one from Ningxia.

Cases challenging decisions by the public security authorities totalled 24,974 cases, up 72%.  China’s public security authorities exercise a broad scope of authority, including minor offenses that would be misdemeanor offenses in many other jurisdictions.    A quick search of the SPC database reveals many cases in which petitioners have challenged administrative punishments:

 Cases brought in various provinces, challenging the authority of the local public security authorities to impose administrative penalties on people for petitioning near Zhongnanhai, where state leaders live: in Jiangsu, a man sought a retrial in his challenge to the authority of the Yizheng (Jiangsu) public security;  in Shandong, a similar (unsuccessful challenge), as well as Hubei.

Challenges to family planning authority decisions or claims against that authority totalled 2188, down 56%. One of those was a case in Chongqing, involving a man claiming against the family planning authorities for surgery gone wrong.