Monthly Archives: July 2017

bankruptcy law, Communist Party and the Courts, shenzhen

Forthcoming individual bankruptcy legislation revealed in letter to President Zhou Qiang’s mailbox

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Screen Shot 2017-07-27 at 12.48.54 PMMost readers of this blog are unlikely to know that the Supreme People’s Court (SPC) publishes on its website responses to selected letters to President Zhou Qiang that make suggestions and give opinions. In a July 11 response, the SPC revealed that individual bankruptcy legislation is on its agenda. As I suggest below, actual legislation is likely to come later.

The letter said:

Dear Mr. Pan Dingxin:

We received your proposal, and after consideration, we respond as follows:

establishing and implementing an individual bankruptcy system is beneficial for those individuals or households who have fallen into serious financial distress to exempt some of their debts and enable them again through their hard work to achieve normal business and living conditions. Because of this, it has an important function to protect individuals and households that have fallen into financial difficulties. However an individual bankruptcy system relates to the establishment and improvement of an individual credit system and commercialization of commercial banks or their further marketization and other factors.  At the same time, the implementation of an individual bankruptcy system requires the National People’s Congress or its Standing Committee to legislate. We believe that with development and improvement of the socialist market economic, the National People’s Congress or its Standing Committee will promulgate an individual bankruptcy law on the basis of the experience with the “PRC Enterprise Bankruptcy Law.” The Supreme People’s Court will definitely actively support the work of the relevant departments of the state, and promote the implementation of an individual bankruptcy system.

Thank you for your support of the work of the Supreme People’s Court!

Supreme People’s Court

June 15, 2017

Screen Shot 2017-07-22 at 9.37.15 PM Few are aware that Shenzhen has been working on draft individual bankruptcy legislation for several years now, looking to Hong Kong’s experience and legislation, described in a recent report as a “complete” individual bankruptcy system (“完善的个人破产制度”).  The process has been going on for so long that the team (designated by the local people’s congress and lawyers association) and headed by a Shenzhen law firm partner published a book one year ago with its proposed draft and explanations.

Although Professor Tian Feilong of Beihang University’s Law School has been recently widely quoted for his statement about Hong Kong’s legal system undergoing “nationalisation,”  this is an example, known to those closer to the the world of practice, that Hong Kong’s legal system is also seen as a source of legal concepts and systems that can possibly be borrowed.  The drafting team looked at Hong Kong (among other jurisdictions) and others in China have proposed the same as well.

Shenzhen’s municipal intermediate court has completed an (award-winning) study on judicial aspects of individual bankruptcy shared with the relevant judges at the SPC.

If recent practice is any guide, individual bankruptcy legislation will be piloted in Shenzhen and other regions before  nationwide legislation is proposed, and it will be possible to observe the possible interaction between those rules and the government’s social credit system. So national individual bankruptcy legislation appears to be some years off.

As to why the SPC has a letter to the court president function, the answer is on the SPC website: it is to further develop the mass education and practice campaign (mentioned in this blogpost four years ago) and listen to the opinions and suggestions of all parts of society (the masses).  Listening to the opinion and suggestions of society are also required of him as a senior Party leader, by recently updated regulations. The regulations are the latest expression of long-standing Party principles.

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Welcome to the “Court President’s Mailbox”

 

 

Commercial law, foreign-related cases

Chinese courts & formality requirements

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apostille
Hong Kong Apostille (from internet)

In February, 2017, the Supreme People’s Court (SPC) issued its second judicial transparency white paper, giving the official version of what the SPC has done to respond to public demands for greater transparency about the Chinese judicial system. But what are the voices from the world of practice saying? One of the issues (for a small but vocal group, foreign litigants) is inconsistent and non-transparent formalities requirements.

Chinese civil procedure legislation requires a foreign litigant to notarize and legalize corporate documents, powers of attorney & other documents. It is a time consuming and costly process, with some jurisdictions providing documents that do not meet the expectation of Chinese courts.   China is not yet a signatory to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents  (Hague Legalization Convention)   which substitutes the faster and cheaper apostille process (note that Hague Legalization Convention continues to be applicable to Hong Kong and Macau under the terms of the joint declarations and Basic Laws for each Special Administrative Region (SAR)).  About one year ago, a Ministry of Justice official published a Wechat article discussing the benefits of the Hague Legalization Convention (as well as the issues facing China in implementing it).

While this article addresses issues faced by foreign plaintiffs seeking to challenge Trademark Review and Adjudication Board decisions in the Beijing Intellectual Property Court (Beijing IP Court), according to other practitioners (who have asked not to be identified), these problems with inconsistent (and non-transparent) requirements concerning legalizing foreign corporate documentation are not limited to the Beijing IP Court, but face foreign parties appealing from intermediate courts to provincial high courts elsewhere in China. These requirements can have the effect of cutting off a party’s ability to bring an appeal, for example.

What is the solution?  The long-term solution, of course, is for China to become a signatory to the Hague Legalization Convention.  In the meantime, Chinese courts should be more transparent about their formalities requirements.  These requirements affect all foreign parties, whether they are from One Belt, One Road  (OBOR) countries or not. If China is seeking to become an international maritime judicial center or hear more OBOR commercial cases, the Chinese courts need to become more user friendly.  Courts with significant numbers of foreign cases (Beijing, Shanghai, Shenzhen….) can consider reaching out to the foreign chambers of commerce, many of which have legal committees, to understand in greater detail what specific problems foreign litigants face (and convey their views to foreign audiences). Resolving this issue can create some goodwill with the foreign business community with relatively little effort.

 

Case law, Communist Party and the Courts, Court Reform

China’s Evolving Case Law System In Practice

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1200px-Tsinghua_University_Logo.svgI recently published an article in the Tsinghua China Law Review on Chinese case law in practice, building on several blogposts I had previously written and articles by fellow bloggers Jeremy Daum and Mark Cohen.  Many thanks are due to the persons who shared their experience and observations with me. A special thank you is due to the persons who provided detailed comments on earlier drafts.

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Judicial assistance between the mainland & Hong Kong at 20

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HK’s Secretary of Justice shaking hands with SPC Justice Shen Deyong

In all legal arrangements, the devil is in the details.  Important details concerning how the Hong Kong and mainland legal systems interact are found in a series of arrangements on mutual legal assistance between mainland China and Hong Kong.  An “arrangement,” for those not familiar with Hong Kong/mainland legal jargon, is a quasi-treaty document between Hong Kong and the mainland. The mainland is looking to conclude further arrangements, including in the area of criminal law.  According to 29 June report by Xinhua News:

Chinese mainland and Hong Kong are expected to confirm further judicial assistance arrangements, including those regarding criminal proceedings.

Shen [Deyong, Supreme People’s Court (SPC) executive vice president] said in an interview with Xinhua that the two sides will carry out further negotiations on judicial assistance in civil and commercial cases and will take effective measures to deal with the assistance issues in criminal cases, so the assistance arrangements cover all judicial realms between the two sides.

It appears that Justice Shen is repeating what he told Hong Kong’s Secretary of Justice Rimsky Yuen in April, 2017.

Justice Shen’s language can be traced back to the 4th Plenum Decision:

Strengthen law enforcement and judicial cooperation between the mainland, Hong Kong, Macau and Taiwan,jointly attack crossborder unlawful and criminal activities.

(I discussed this in a January, 2015 conference at the University of Hong Kong.)

Likely taking the lead in negotiating these arrangements is the Hong Kong Department of Justice (Hong Kong DOJ)’s International Law Division (and I assume others as well) and its mainland interlocutors.  I assume that a team from the Supreme People’s Court (SPC)’s Hong Kong and Macau Affairs office is among the negotiators on the other side of the table (with a team from the Supreme People’s Procuratorate involved with negotiations on criminal matters.  The Hong Kong DOJ’s website lists five mutual legal assistance arrangements, with the most recent one, signed on 20 June 2017, on the Reciprocal Recognition and Enforcement of Civil Judgments in Matrimonial and Family Cases, not yet in force.  The paper that the Hong Kong DOJ filed with the Legislative Council sets out details of the arrangement, including its scope.

This latest arrangement relates to one of many pressing practical legal issues between Hong Kong and the mainland, the large percentage of “cross-boundary marriages.” According to the Hong Kong DOJ’s consultation paper on the arrangement (the SPC did not issue a similar paper), cross-boundary marriages increased from 32% to 37% during 2009-2014 and 20-30% of divorce cases filed in Hong Kong’s family court during 2010-14 related to marriages that took place on the mainland.

This arrangement involved creative lawyering on both sides, because it involves incorporating principles from several Hague Convention to which mainland China is not a party:

  • Recognition of Divorces and Legal Separations (1970), applicable to Hong Kong, but not the mainland;
  • The Hague Convention on the Civil Aspects of International Child Abduction (1980), applicable to Hong Kong, but not the mainland;
  • International Recovery of Child Support and Other Forms of Family Maintenance (2007), not applicable to either Hong Kong or the mainland.

Many of the previous arrangements reflected Hague Conventions to which the mainland was already a party.

Commercial lawyers should note that according to an April, 2017 statement by Hong Kong’s Secretary of Justice Rimsky Yuen, it was agreed in the form of 2016 meeting minutes to prioritize an arrangement for reciprocal judgment enforcement in civil and commercial matters involving situations other than the presence of choice of court agreements.  A consultation paper has not yet been issued for that arrangement. I surmise that the arrangement will reflect the draft Hague Convention on the Recognition and Enforcement of Foreign Judgments.  Hong Kong’s DOJ has at least one representative participating in China’s delegation.  Several senior SPC judges are also on the delegation. (The other two arrangements mentioned have already been concluded.)  It can be seen from this visual from a Chinese court’s Wechat public account, that the end of 2017 has been set as the deadline for concluding that arrangement.

Arrangements involving criminal matters are much more difficult to conclude, although several prominent commentators in Hong Kong this year have called for a rendition arrangement to be concluded. Among those include Grenville Cross, former director of public prosecutions in Hong Kong and Regina Ip, former Secretary for Security.  The issues have been discussed since the late 1990’s.  This 2005 paper submitted to the Legislative Council sets out some of the basic principles that could go into a future rendition arrangements:

  • double criminality;
  • issue of death penalty;
  • non-extradition for political offenses;
  • fair trial;
  • double jeopardy;
  • habeus corpus.

There have been academic articles on many of these topics.

It appears that the increased pressure on Hong Kong relating to the rendition arrangement is related to the drafting by the mainland’s Ministry of Justice of an International Criminal Justice Assistance Law.  (No drafts have yet been released.) Fellow blogger NPC Observer notes that although the law is intended as a comprehensive statute covering all areas of international criminal justice assistance, including the mutual recognition and enforcement of criminal judgments, official discourse labels it an anti-corruption law, likely designed specifically to hunt fugitive corrupt officials overseas.  So it appears also to be linked to Operation Skynet and the Central Anti-Corruption Coordination Group.

The status of negotiations on a rendition arrangement or other arrangements related to criminal justice are unknown.  What is known is that there have been instances, including earlier this year, in which certain mainland authorities have dispensed with the niceties of official liaison. Would having an arrangement improve matters, as Grenville Cross argues, or will “extraordinary” rendition continue to occur?

It appears that upholding an important part of Hong Kong’s rule of law, as evidenced by arrangements between Hong Kong and the mainland depends on the professionalism of Rimsky Yuen, the Secretary of Justice, his Department of Justice colleagues and their mainland interlocutors.  As he told Justice Shen and others at a meeting between the SPC and Department of Justice in April, 2017:

Cooperation [on criminal cases] is significant, but considering the difference of the two legal systems, we face challenges in civil, commercial and criminal ­cooperation. It will still take some time.

Finally, paraphrasing the Guardian, analyzing the Supreme People’s Court takes time and costs money. If you like the Monitor, please make a contribution (details here.)