Brief comments on the China International Commercial Court

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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