In late May of this year (2023), the Supreme People’s Court (SPC) issued a set of typical cases on resolving real estate and construction disputes at their source provided by the SPC’s #6 Circuit Court (the circuit court covering the northwest provinces and autonomous regions), entitled “Typical Cases of Litigation Source Governance in the field of Real Estate and Construction Projects in the Circuit Courts area (巡回区房地产及建设工程领域诉源治理典型案例).   These typical cases have not received their due attention outside the Chinese court system. They are helpful for understanding how the Chinese court system is evolving under the leadership of SPC President Zhang Jun. These ten typical cases are examples of court practices that the SPC has provided to lower courts for guidance.  The guidance focuses on two principal areas:  how to implement properly the requirements of President Zhang Jun and the SPC’s Party group to serve national and social governance by resolving disputes at their source (linking to the General Secretary’s important instructions and related documents; and second, how to use “active justice” (能动司法) to achieve these objectives. 

As I flagged in May of this year, President Zhang Jun has revived the concept of “active justice.”  In that same blogpost and in earlier ones, I mentioned that resolving disputes at their source has become an important task for the Chinese courts. The cases weave together these policies in one perfectly designed package.

These cases also tell a story about how active justice and resolving disputes at their source can involve the courts undertaking some functions that should be left to the lawyers.  

Typical cases that are not cases

These ten cases are not accounts of specific court cases but rather are examples of exemplary practices. This is not the first time that the SPC has issued “typical cases” that are exemplary practices.  Since 2017, the judicial reform leading group of the SPC has issued typical cases that illustrate judicial reform practices that provide useful reference materials for other courts.   

Resolving disputes at source

Resolving disputes at source is a Party policy mentioned briefly in the 2019 fourth plenum of the 19th Party Congress decision, the  SPC document implementing that Party Congress decision, and the 5th judicial reform plan document. It was further developed in subsequent documents.  It links to the Party’s (and SPC’s) diversified dispute resolution policies. An academic article recently published unfortunately does an inadequate job of defining the policy and describing the policy’s development. Moreover, it incorporates some translation errors.  Although both authors are affiliated with prominent academic institutions with serious scholars of the Chinese courts, it appears to this reader that they failed to seek the perspective of some persons with a greater historical perspective on SPC developments.  It is another instance in which peer review did not catch inadequacies.

According to several  SPC press releases and articles related to these cases, the foundational document for recent SPC and other legal institution policies is a February 2021 Central Committee document (never publicly released)  entitled Opinions on Strengthening the Governance of Sources of Litigation and Promoting the Resolution of Sources of Contradictions and Disputes” (关于加强诉源治理推动矛盾纠纷源头化解的意见).  I surmise that the document includes the phrase “promote basic level social governance”  (促进基层社会治理) and likely “national governance.” 

The SPC issued a long and detailed document implementing that Central Committee document in September 2021, entitled Implementing Opinions on Deepening the Building of the One-stop Diversified Dispute Resolution Mechanism of the People’s Courts to Promote the Resolution of Conflicts and Disputes at Their Source (Implementing Opinions on Promoting the Resolution of Disputes at Source)(最高人民法院关于深化人民法院一站式多元解纷机制建设推动矛盾纠 纷源头化解的实施意见 that the authors of the above article missed in their research. One of the many objectives listed in this document is reducing the per capita rate of litigation. 

Why Select Real Estate and Construction Disputes?

Judge Wu Zhaoxiang, deputy head of the #6 Circuit Court (and also deputy head of the SPC’s Research Office, whom I quoted in my book chapter on the drafting of criminal procedure judicial interpretations), explained why they focused on real estate and construction disputes.  He said it is because these disputes are important. 

Within the jurisdiction of the 6th Circuit, “there are tens of thousands of lawsuits flooding into the courts every year, with huge amounts of ‘real money’ worth billions at every turn. It involves the development of business of tens of thousands of enterprises and the well-being of the people, and it is related to the country’s economic development, financial security, and social stability.” Judge Wu mentioned that some small, medium-sized, and even large real estate companies have encountered difficulties such as in funding, resulting in failure to hand over buildings in time, causing home buyers to stop paying mortgages, which has attracted a great deal of public attention. Many of the construction cases involve unpaid contractors and actual constructors. [“Actual constructors” (实际施工人) refers to companies /other entities that to which contractors have improperly subcontracted, although they may not have the proper certificates, etc. to do so]. The problem of wage arrears to migrant workers has not been completely resolved, and “collective rights protection incidents of migrant workers” still occur from time to time.

Statistics provided in one report bear this out.  Shaanxi courts accepted 13,900 construction dispute cases in 2020,  17,800 cases, in 2021 and 18,400 cases in 2022. The Qinghai courts heard more than 8,400 real estate-related cases and 10,300 construction disputes,  the Ningxia courts accepted 36,600  cases in the fields of real estate and construction since 2020, and the courts of the Xinjiang Corps accepted 15,300  real estate and construction cases in the past three years. The same report signaled that real estate and construction disputes are on the rise nationally.

Lessons from the cases

The 6th Circuit labeled the ten typical cases with the lessons to be learned (which I have italicized), similarly to the judicial reform typical cases mentioned above.  I further describe the first one, because the points in the typical cases repeat one another:

1. Adhere to the leadership of the Party to build a new pattern of governance of sources of litigation: The exemplary practice was the Shaanxi Party Committee’s Implementing Opinions on Strengthening the Governance of the Sources of Litigation and Promoting the Prevention and Resolution of the Sources of Conflicts and Disputes” (关于加强诉源治理推动矛盾纠纷源头预防化解的实施意见), which apparently assigned to provincial institutions responsibilities related to the goal of promoting the prevention of conflicts and disputes at the source.  The SPC identified three specific examples: “optimizing top-level design” and building a pattern of “government-institution linkage” by the provincial Higher People’s Court and  Housing and Construction Department jointly issuing a document aimed at promoting mediation of real estate and engineering disputes by creating a database of experts to mediate these disputes; and improving non-litigation mechanisms through a document that the provincial Higher People’s Court and Provincial Construction Cost Association jointly issued to establish a group of experts to mediate construction cost disputes; and third, the Shaanxi Higher People’s Court promoting “active justice” through reviewing typical cases and communicating with the regulators, including providing them with typical cases concerning problems discovered in the course of litigation, issuing compliance advice to large construction companies, and as well as judicial advice to administrative departments.
2. Track and pay attention to key projects to ensure zero disputes in construction projects;
3.  Work together to solve the “difficulty in obtaining certificates” to solve the difficulties and worries of the masses;
4.  Collaborative linkage revitalizes projects to achieve “three guarantees” to resolve public concerns;
5. Expanding the scope of notarization to participate in judicial assistance and adding “new troops” to pre-litigation mediation;
6. Innovate the pre-litigation identification model to promote the quality and efficiency of dispute resolution;
7.  Judicial recommendations are implemented and effective, and targeted policies are implemented for precise governance;
8.  Give full play to the exemplary role of judgments and rulings and promote the resolution of the source of conflicts;
9. Formulating and issuing compliance management suggestions to help enterprises prevent disputes; and
10. Do a good job of risk reminders to ensure the healthy development of enterprises.

Comments

SPC Vice President Yang Linping, the head of the #6 Circuit Court, repeatedly used the phrase “active justice (能动司法) in her speech announcing the significance of these cases, which was reprinted as an article published in People’s Justice (人民司法). By doing this she is promoting the new spirit of the SPC leadership under President Zhang Jun.   Some of that new spirit is putting a new spin on earlier policies, such as resolving disputes at source by promoting mediation, thereby transmitting the Fengqiao Experience.  Active justice is another old policy receiving a new spin.  “Active justice” appears to be a flexible concept and since  President Zhang Jun has started to mention it, those in various levels of courts and substantive areas have used it, generally without a specific definition. From these cases and other sources, it involves the use of less prominent functions of the courts (such as coordination with administrative authorities and liaison with the local Party committee to resolve the core problems of a dispute. Resolving disputes at source appears to be derived from Chinese medicine philosophy in seeking to resolve the root cause of disputes by using the data, insights, and multiple functions of the courts to that end.  It also is a flexible concept.

What is little discussed in articles about “active justice” thus far is why the courts are taking on some of the roles they are.  For example, one of the exemplary methods promoted in these cases and praised highly was the courts analyzing and summarizing the compliance management risks of large construction companies as derived from relevant litigation and the courts issuing suggestions for corporate compliance management as well as providing judicial suggestions to administrative agencies on how they might better exercise their regulatory authority.   

It occurred to me that in many other jurisdictions  (I don’t believe the civil or common law distinction makes a difference), it would be either law firms or events sponsored by bar associations (lawyer associations) that would host events aimed at real estate or construction counsel (in law firms, in-house, or with government) to convey their insights about recent litigation.  My initial reaction was that the situation might be different in first-tier areas of China, given that lawyers are better educated in those areas and companies have better counsel, and so the courts might be less “active” in providing advice. I, therefore, checked my initial reaction with a highly experienced judge in a first-tier city.  He said that no, courts in his municipality also issue judicial suggestions (link is to a related academic article) to enterprises and administrative agencies requiring them to improve some aspect of their operations. It is part of their work to “serve the greater situation” and courts have performance indicators concerning judicial suggestions/advice.  “So we take away a lot of business from lawyers by providing free legal advice.”