All posts by Supreme People's Court Monitor

Susan Finder has been observing the PRC Supreme People's Court for over 20 years, and was the first person to engage in a close analysis of its operations. She taught Chinese law and other subjects in the Law Department of the City University of Hong Kong, before putting her knowledge to work in the China practice group of Freshfields Bruckhaus Deringer, one of the first international law firms to recognize the importance of the China market. She had the good fortune to study with three of the early pioneers of Chinese legal studies: Jerome Cohen, R. Randle Edwards, and Stanley Lubman and to have many leading practitioners and legal academics among her classmates at Harvard Law School (J.D.) and Columbia Law School (LL.M). Susan Finder speaks and reads (Mandarin) Chinese and Russian and some German.

Dean Jiang Huiling on Chinese Judicial Reform

On 7 January 2022, Dean of Tongji University’s School of Law and Professor Jiang Huiling gave a guest lecture in my School of Transnational Law class.  We were honored to hear Dean Jiang provide his unique perspective and insights on over 20 years of Chinese judicial reform and his insights on future developments. He has been involved with Chinese judicial reform starting from the first plan in 1999 (see also more about his background here).  This blogpost summarizes his presentation. I have inserted my occasional comments in italics. If a point is not more fully elaborated, it means he did not do so.

He spoke on the following six topics:

1. Brief History of Chinese Judicial Reform
2. How Judicial Reform Actions  Are Taken
3. From the 4th to the 5th Judicial Reform Plan
4. Strategic Move: From Judicial Reform to “Zhengfa” (政法) Reform
5. Technical Measures: Rule of Law
6. Future Direction

1. Brief History

Dean Jiang went briskly through the history of judicial reform, commenting that in the first judicial reform plan, the focus was on raising public and professional awareness about the judiciary。 The second one, in which the Central Government greatly supported the SPC to undertake work mechanism (工作机制) reforms, not touching on structural reforms such as the status of judicial personnel. He noted that there was great progress during the second judicial reform plan. He called the third judicial reform plan a test before the New Era, and said that a decision had been taken to de-localize the judiciary and change the status of the judges and prosecutors, but at the end, there wasn’t internal confidence that the legal profession and society would accept such changes.  He called the fourth judicial reform plan a structural, systematic, and radical change to the judicial system, especially the decision that judges would not be treated as ordinary civil servants.  Dean Jiang characterized the fifth judicial reform plan as comprehensive and supplementary, and part of the Zhengfa reforms (as he further explained in the latter part of his presentation).

What were the lessons learned?

  • Right (科学) concept of the judicial system (universal and with Chinese characteristics)–that the legal profession and the leading party accepted the value of the rule of law and the importance of the judiciary;
  • Theoretical preparation–although he thought scholars had not done enough;
  • Consensus for change–the judiciary is regarded as and is a bureaucracy–there is that consensus among both court leaders, who are legal professionals and with a Party role, and ordinary judges, who are legal professionals;
  • Common achievements of human civilization–that means learning from other countries–China had done so not only in science and technology but also in law and democracy. Chinese judicial  reformers had benefited from the open policy–he himself was an example; and
  • Critical role of strong leadership–legal professionals could not initiate fundamental changes themselves–it needed court and political leadership to do so–he quoted General Secretary Xi Jinping on the ability to do what could not have been done before.

2. How Judicial Reform Actions are Taken

Dean Jiang rapidly made the following six points:

  1. Judicial awareness and enlightenment;
  2. Negative case matters;
  3. Reform for branches and reform for all (parochialism);
  4. Top-down design and comprehensive reform–the court system is part of the political system and reform has to be done by the Central Government;
  5.  Coordination with other departments–in China, unlike in other countries, some matters require coordination with other departments, such as the Ministry of Finance;
  6. A group of devoted experts–both within the judiciary and among academics.

3. From the 4th to the 5th Judicial Reform Plan

Dean Jiang mentioned that the two plans are connected, but that significant differences exist in the value or orientation of the two plans. The fourth one made radical (revolutionary) changes to the judicial system. The fifth one is a new phase, and comes after the completion of the fourth one, which made the following fundamental changes:

  1. Structural changes–delocalizing the judicial system
  2. Status of the judges and prosecutors
  3. Changes to the internal operation of the judiciary
  4. Improvements to the guarantees for judges and prosecutors.

Although these reforms are not completed, these were the focus of their work in the judicial reform office of the SPC and of the Central Government.

The 4th judicial reform plan focused on the following:

1. Separation of administrative region and judicial jurisdiction area–delocalization, as Xi Jinping said, the judicial power is a central power, uniform application of law, so that the law is not applied in favor of one locality;
2. Judiciary-centered litigation system–“in the real world in China, the judiciary does not always have the final say”–and in the past the public security and prosecutors had the final say rather than the judges. The reform to have personnel and financing of courts at the provincial level is part of this reform;
3. Optimization of internal power allocation–as a court is a bureaucracy with different entities with different functions, and the leaders have different functions from ordinary judges;
4. Operation of hearing and adjudicatory power
5. Judicial transparency;
6. Judicial personnel–this is basic but very important; and
7. Independence of the court–this is basic but very important.

The 5th judicial reform plan:

  1. Party’s leadership 
  2. Work for the country’s overall task and situationsubject of one of my forthcoming articles
  3. Litigation service–treat litigants properly and give them judicial services– the courts have public funds to pay for legal representation if people do not meet the standard for legal aid
  4. Judicial transparency–“always on the way”
  5. Responsibility-based judicial operation
  6. Court’s organization and function–reforms in that area (he referred to the recent repositioning of the four levels of the court system, among others)
  7. Procedural system
  8. Enforcement reform
  9. Court personnel system reform–better training of judges
  10. Smart court–using technology

The bolding above reflects his stress on those points in his presentation.

Dean Jiang mentioned that the Central Government put the court system into a bigger picture, but that the prior reforms were needed to make the judicial system more professional.  It is for this reason that the Central Government mentions the phrase “judicial reform” much less than before.

The bigger picture is involving the court system more in the development of the whole country. This reflects a change in China’s overall policy, and we Chinese legal professionals need to understand this.

Comparing the 4th and 5th Reform Plans:

  • Similar, but different;
  • Duplicated, but deepening and supplementary;
  • To those unfinished tasks, less emphasis

He said these should be seen in the context of the national plan for achieving the rule of law, and from 2035, China will have achieved rule of law and be a modernized, democratic country–the second 15-year plan will be about rule of law.  He thinks that the timing is insufficient.

4. Strategic Move: From Judicial Reform to “Zhengfa” (政法) Reform

1. Before 2012, judicial work mechanism reform
2. From 2013,Judicial system reform
3. From 2017,Comprehensive supplementary reform of the judicial system
4. From 2019, Promoting Comprehensive
Reform in Zhengfa Area
5. From 2020,Xi Jinping rule of law thoughts

On point 4 above, that relates to a comprehensive document adopted in 2019 [Implementing Opinion On the Comprehensive Deepening Reforms of the Political-Legal Sector 关于政法领域全面深化改革的实施意见, not publicly available but mentioned previously on this blog], of which judicial reform plays only a small part.  From 2020, Xi Jinping rule of law thoughts plays an important guiding role in the role of law. He said all law students and legal professionals should read it because it will have an important impact on the building of rule of law in China.

Structure of the new arrangement:

  • Breadth: From the judiciary to other related areas
  • Depth: From judicial system reform to broader systematic innovation–the latter means is moving from judicial system reform to areas previously little discussed, such as Party leadership and the role of the Political-Legal Commission, and the relationship between the Party and the law.
  • Goal: From fair, efficient, and authoritative judicial system to modernization of Zhengfa work system and capability—that is, that the judicial system is to be part of a modernized governance system and governance capability [国家治理体系和治理能力现代化–from the Decision of the 4th Plenum of the 19th Party Congress]. That is the goal for the next 30 years. It means the rule of law in the future will have a major part to play as part of modernized governance, and the courts will have an even more important role to play in supporting this modernized state governance (this is in my draft article). It may not be apparent from the English words, but it is a change.
  • Method: From branch-driven to Central Committee-driven–how to get there? He says this wording is not quite accurate as the 4th Judicial Reform Plan was also Central Committee driven, but because the Central Government put the project of the rule of law into the modernization of state governance, it has a different method for treating reform in the legal area, but he thinks that change of method is only an improvement.
  • Nature: Chinese style and self-owned brand–when you read English language literature on building a fair and independent judicial system from abroad you will see many common points. In the current arrangement–in the Zhengfa reforms, Chinese characteristics have a great deal of weight and also in the reconstruction of the legal system. Although China has learned a great deal from other countries, China has to go on its own way, since it has its own history, political situation and historical stage and there is a change in the international situation. China has changed its position in the world. He is getting accustomed to this new way to this new way of judicial reform and it will be more difficult for foreigners to understand it.

The change of emphasis can be seen from the VIP (very important research projects of 2021), which are all more general than before:

No. 67. Practice and Experiences of the Party Comprehensively Promote Law-based governance
No. 68. Socialist Legal Theory with Chinese Characteristics
No. 69. Spirit of Socialist Rule of Law
No. 70. Constitution-centered Socialist Legal System with Chinese Characteristics
No. 71. Promoting Comprehensive
Reform in Zhengfa Area

Dean Jiang described the 2019 document mentioned above as containing the following areas of reform.

Seven Areas of Zhengfa Reform:

  1. Party’s leadership of the Zhengfa work–that is the Chinese situation
  2. Deepening reforms of Zhengfa institutions–not only the courts and the prosecutors, but changing the overall structure of Zhengfa institutions
  3. Deepening reform of systems of law implementation–we combined  Legislative Affairs Office (of the State Council 法制办) into the Ministry of Justice [MOJ]–that’s an important change
  4. Deepening reform of social governance system–the Zhengfa Wei important for social governance–one of the most popular words is “governance“–how to support social stability, social development; innovative spirit, people’s lives;
  5.  Public Zhengfa service system–public legal service is part of Zhengfa service–all the political-legal organs will work together to provide efficient high-quality services for the people-人民为中心–Xi Jinping says all our work needs to be people-centered;
  6. Zhengfa profession management reform–no major change here
  7. Application of IT technology–no major change here–continued application of IT in the Zhengfa area

These are seven areas of Zhengfa reform, based on the prior judicial reforms, but now going to a new stage. Governance is a crucial word.

5. Technical Measures

This is what he has devoted his life to before.

  • Law is a profession, and the judicial system is the carrier of law and justice.
  • Law is also science of law.
  • Rule of law is one of the most technical way of state governance.
  • Rule of law will have no efficacy without the joint efforts of other institutions.

He listed 10 legal issues for consideration for reference and research, as these are the most important topics:

  1. Structural reform: local judicial power, or central judicial power–at the present time, the Central Government cannot manage all those 200,000+ judges and prosecutors, and at first stage, the provincial level is taking that over, but he is not sure of the final judicial model
  2.  Organizational reform: bureaucratic or judicial, especially the internal organs–this is a more technical reform, including internal and external organs, different tiers of the court and branches of the judiciary, including the procuracy;
  3. Functions of the four tiers of court:  their role and function–cylinder, or cone (his metaphor of 20 years ago)–should the SPC concentrate on judicial interpretations and a small number of cases, and does not need 400 judges–this relates to the pilot program of late last year on the repositioning of the four levels of the Chinese court; the local courts will focus on factual issues;
  4.  Personnel reform: Profession, or ordinary public servant–this is still an ongoing issue, and in his view, some continental European countries have not resolved this issue either. Although there are improvements, judges and prosecutors feel that it is not sufficient, given their new role in society, and the importance of their work. He agrees, having been a former judge.
  5.  Procedural reform: Court-centered litigation system, fair trial, simplification of procedure–how to make things fairer, and given the more than 10% annual increase in cases, a big burden on judges in particular, how to simplify procedure. This links to the recent amendments to the Civil Procedure Law, which focuses on simplification of procedures and giving online procedures the same status as offline.
  6.  Adjudication committee: advisory, or adjudication–there is a great deal of discussion about it–it is the highest decision-making body in a court (see this blogpost).
  7. Judicial responsibility system: The hearing officer makes the decision, and decision-maker takes the responsibility–司法责任制–this is another tricky one–this is required by the Central Government, a step forward towards the rule of law, instead of having a judge’s boss approve his decision (because the court is bureaucracy)–for China, this is a step towards the rule of law, but there is still a long way to go.
  8.  Supervision over “four types of cases”–that means for most cases, judges take responsibility for their cases, but for difficult, controversial, and possibly having an impact on social stability–because junior judges have different capacities from the more senior–for those four types of cases, the court president and senior court leaders are involved to oversee or supervise (see translation of guidance here, commentary to come)–he has not found useful academic papers on this point;
  9.  ADR (Diversified dispute resolution): this is a traditional topic–optimizing the allocation of resources of dispute resolution
  10. Judicial administration: local government loses its administrative power, but what internal administration;
  11. Judicial democracy: lay judge system–different from common law jury (but China can learn from the common law jury–having them focus on factual rather legal issues)–the law has changed, but academic work is insufficient.
  12. Judicial transparency–this is an old issue, to make the judiciary more transparent to the parties and the public.

These are the major issues in the next five years. These technical legal issues are very interesting and need legal scholars to look at them to support the Zhengfa reforms.

6. Future Direction

  1. Xi Jinping rule of law thoughts–inevitable guideline–some of political and strategic, but it provides some guidelines for basic principles;
  2.  Rule of law-driven first;
  3. Politics driven and guarantee–politics should be a consideration but it should not be unbalanced.  Political role of the rule of law-leading the legislative institutions.  Guarantee means guaranteeing the executive implementation of law, supporting the judiciary, and being a model of a law-abiding citizen; This will be very important in putting judicial reform forward;
  4. To complete those halfway reforms–judicial personnel reforms;
  5.  More rethought and theoretical guide–scholars criticize the judiciary for having an insufficient theoretical basis;
  6.  Dealing with the other judicial civilizations–we never stopped, especially in technical areas, and for our legal professionals, that has never stopped. We need to work together for all of humanity.

Supreme People’s Court Monitor 2019-2021 Year-end Reports

Screenshot 2018-12-07 at 5.48.29 PM
The Monitor as “Fargo North” Decoder

The Supreme People’s Court Monitor published 35 posts in 2019, 26 posts in 2020, and 26 in 2021, with about 34,000  page views each year,  primarily from:

  • United States;
  • (Mainland) China;
  • Hong Kong SAR;
  • United Kingdom.

Germany, Australia and Singapore trailed the others by a significant margin. Mainland China was in second place in 2019.  In 2020 and 2021, the Monitor had almost the same number of views from mainland China and Hong Kong.  I wish I knew the distribution of my readers in mainland China–whether they are working in the System (体制), or are academics, students, or lawyers. I was very pleased to meet some readers when I spoke in November 2019 at the Fourth Qianhai Legal Intelligence Forum, (a conference held annually in Shenzhen, supported by the Supreme People’s Court (SPC)).

Why did I do less blogging in 2020  and 2021 as compared to 2019? Perhaps it can be attributed to competing professional obligations–including writing several academic-style articles and one academic blogpost.  Fortunately, 2021 saw the academic blogpost and three long articles emerge from the academic publishing machine.  I have yet to see the third long article (book chapter), which has been published. I presume that one is stuck in a warehouse, awaiting the resumption of flights from the rest of the world to Hong Kong.

One draft academic article, in which I have invested too much time,  is back on the back burner after two perceptive readers pointed out what I was feeling, that it had gone down too many research rabbit holes (掉进无底洞).   I now know that an SPC document will be issued soon that I presume will change some of the article’s content, so it is just as well that the draft is back on a slow simmer. I’m instead following the advice of one reader to spin off parts of the draft into separate articles. One will soon be ready for the editorial sausage machine.  A second one, on a topic separate from the “rabbit hole” article,  is affected by documents issued to implement the recent reforms to the four levels of the Chinese courts as well as the Civil Procedure Law amendments.  When I return to that “rabbit hole” article, it will benefit from what I have learned in researching the one that I expect can enter the editorial sausage machine soon.

In the New Era (and the Covid-19 Era), it is an even greater challenge to decode for readers outside of mainland China SPC developments insightfully in under 1500 words.  I hope I have gone some way to meeting that target.  I sometimes have my doubts.

Since the blog was founded almost nine years ago:

Page views: 233, 109
Jurisdictions: 200? (per WordPress)
Posts: 323

Most followers use Twitter to follow the Monitor. Although Twitter is not accessible in mainland China without a VPN, 16% of the Monitor’s Twitter followers are based there.

A special thank you to my anonymous “peer reviewers”, who have given forthright (in one case very blunt), insightful and helpful comments on draft blogposts.

Supreme People’s Court’s 2021 Year-End Accomplishments

Photo from the “look back meeting” described below

Apologies to readers for the long gap between posts–I have been focusing on yet another academic article and am finding that even so-called “short articles” take much longer than anticipated, especially when the topic reveals more and more complexities than were apparent when I submitted the abstract to the journal months ago.

So instead of any involved analysis, I’ll list some of the year-end (from December) accomplishments of the Supreme People’s Court (SPC) with some brief notes. Another aspect of the SPC being a cross between a Party-state organ and a court is that it needs to meet year-end goals and submit year-end reports. The SPC’s judicial reform leading group recently discussed and approved its year-end report (最高人民法院司法改革领导小组2021年工作总结报告).  The judicial reform leading group is headed by President Zhou Qiang. Other members include Justices He Rong, Ma Shizhong (head of the Political Department), He Xiaorong, and Shen Liang. The Judicial Reform Office presumably drafted by the report. It is likely a constituent part of the SPC’s year-end report to go to the Party leadership, before the annual Central Political-Legal Work Conference.

Another aspect of the SPC being a cross between a Party-state organ and a court is that it is inspected by Party inspection groups and is a focal point of campaigns on the education and rectification of political-legal organs.

Among the SPC’s year-end accomplishments are the following.  For the avoidance of doubt, judicial interpretations, judicial documents, and typical cases are all means by which the SPC guides the lower courts. I will have more to say about this topic in the unfinished academic article mentioned above.

Judicial interpretations

  1. Online Mediation Rules of the People’s Courts (人民法院在线调解规则).  Online mediation is an important focus of the SPC, as could be seen from this white paper on Diversified Dispute Resolution from early 2021 and from other efforts of the SPC to promote resolving disputes at their source, as consistent with the deployment of the Party Center (党中央关于“将非诉讼纠纷解决机制挺在前面”的重大部署要求.  The responsible person of the SPC’s Case Filing Division (presumably the head) pointed out that these rules “had created an online diversified dispute resolution model with Chinese characteristics hat differed from ADR or ODR” )形成了有别于ADR和ODR的中国特色在线多元纠纷解决模式). His statement appears designed to be more politically correct than accurate. It is clear that the SPC follows government policy in using “diversified dispute resolution” rather than “alternative dispute resolution,” (ADR)  but the English language abbreviation”ODR,” according to my research, is intended to be a general term to capture all sorts of online dispute resolution and not meant to promote one particular model of online dispute resolution. The underlying implication is that “ODR” reflects a “Western” approach. However other (mainland) Chinese government departments use “ODR” without issue.  Additionally, the Hong Kong government uses the term “ODR” to refer to its online dispute resolution platform, eBRAM.
  2. Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate (SPP) on Several Issues Concerning the Application of Law in Handling Criminal Cases Endangering Food Safety (最高人民法院 最高人民检察院关于办理危害食品安全刑事案件适用法律若干问题的解释). As a joint judicial interpretation, it was approved by the judicial (adjudication) committee of the SPC first and next by the Procuratorial Committee of the SPP.
  3. Several Provisions of the Supreme People’s Court on the Application of Prohibition Order Preservation Measures in Eco-environmental Infringement Cases(最高人民法院关于生态环境侵权案件适用禁止令保全措施的若干规定) –relating to injunctions to stop environmental pollution, either before or after a party has filed suit.  We can expect more and more SPC interpretations and documents related to environmental pollution.
  4. Relevant Provisions of the Supreme People’s Court on Issues concerning Applications for Verification of Arbitration Cases under Judicial Review 最高人民法院关于仲裁司法审查案件报核问题的有关规定. This decision by the SPC updates the 2017 provisions of the same name, adding one article and a clause in another. The new Article 3  requires higher people’s courts to submit draft rulings in judicial review of arbitration matters in domestic arbitration (non-foreign, Hong Kong, Macau or Taiwan-related) if the higher court intends to concur with a lower court ruling that the arbitral award violated social public interest.   The new second clause of Article 4 requires the higher people’s court to submit the matter to the SPC within 15 days.
  5. Several Provisions on the Compulsory Enforcement by People’s Court of Company Shareholding (最高人民法院关于人民法院强制执行股权若干问题的规定). This appeared on the 2019 judicial interpretation agenda, so it has slipped by two years. The provisions apply to enforcing judgments or rulings against shareholder equity in either limited liability companies or companies limited by shares, but not including companies limited by shares that are listed.
  6. Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Disputes over Compensation for Personal Injury in Railway Transport
    最高人民法院关于审理铁路运输人身损害赔偿纠纷案件适用法律若干问题的解释  This interpretation concerns persons injured in railway transport accidents, excluding accidents on passenger trains.

On the “coming attractions” discussed in some earlier blogposts, the SPC’s judicial committee (adjudication committee) spent many hours on 30 December 2021 discussing the draft judicial interpretation of the General Part of the Civil Code.  When I wrote last about the draft of the General Part, I noted that Judge Guo Feng, deputy head of the Research Office,  mentioned that the General Part (1) interpretation is scheduled to be submitted to the SPC’s judicial (adjudication) committee before year-end.  That means that Judge Guo (and likely one or more of the principal drafters) were in the room to discuss the draft article by article.  The judicial committee finally decided to approve the draft “in principle.”  Approval in principle” (原则通过), as discussed here, is not mentioned by the SPC’s 2007 regulations on judicial interpretations but is one of the SPC’s long-established practices. It means that the judicial committee has approved it, subject to some “minor” amendments. Minor amendments are more than typographical errors and relate to specific substantive matters.  So it is likely that after the SPC amends the provisions that the judicial committee  considered needed more work, a quasi-final draft will go back to the National People’s Congress Standing Committee (NPCSC LAC)’s Legislative Affairs Commission  because SPC guidance provides that “liaison with the NPCSC LAC must be timely, and after major revisions to the judicial interpretation draft after consulting with the NPC LAC, the view of the NPCSC LAC  should be solicited again.”  I expect that the draft of the General Part judicial interpretation will be finalized before the National People’s Congress meeting, so that the report can mention this accomplishment.

As I have mentioned many times in the course of 2021, we do not know what was on the SPC’s 2021 judicial interpretation agenda. Those of us outside the System can only hope that the 2022 agenda will be released and that the judicial reform agenda will continue to be released.

Judicial documents (incomplete list)

  1. Provisions of the Supreme People’s Court and the Ministry of Justice on Providing Legal Aid for Defendants in Death Penalty Review Cases 最高人民法院 司法部关于为死刑复核案件被告人依法提供法律援助的规定.  These are joint regulations issued by the two institutions and for therefore are classified as “judicial documents,” as discussed here.  These provisions establish a mechanism for the Ministry of Justice to appoint legal aid lawyers to defendants whose cases are being submitted to the SPC for death penalty review.  If a defendant appoints his or her own lawyer), then the legal aid lawyer stops providing services.
  2. Provisions on Judges’ Disciplinary Work Procedures (for Trial Implementation)《法官惩戒工作程序规定(试行).  I will follow up with analysis at some point as I published a book chapter on judicial discipline at the beginning of 2021.  These provisions do not change the conclusion in my chapter.
  3. Opinions on Strengthening the Substantive Trial of Sentence Reduction and Parole Cases (关于加强减刑、假释案件实质化审理的意见).  This is another multiple institution document, intended to tighten up procedures for sentence reduction and parole cases.  They are in part a response to a 2020 tragedy in Beijing, in which a prisoner whose sentence was commuted killed one man and injured two more.  The incident further revealed that the corruption discussed in this 2015 blogpost continues to exist.
  4. Notice of the Supreme People’s Court on Studying and Implementing the “Decision of the Standing Committee of the National People’s Congress on Amending the Civil Procedure Law of the People’s Republic of China.”最高人民法院关于认真学习贯彻《全国人民代表大会常务委员会关于修改〈中华人民共和国民事诉讼法〉的决定》的通知.  This notice and the amended Civil Procedure Law are of practical importance to tens of thousands of Chinese judges and litigants in the Chinese courts, individuals and entities, domestic and foreign.  The notice signals that the SPC is working on amendments to the Civil Procedure Law judicial interpretation (the previous version plus commentary was published in two volumes). This reform relates to the reorienting of four levels of the courts, will increase the number of cases heard with one judge, promotes mediation and smart courts.
  5. and  6. Two Judicial Services and Safeguards Opinions, one on  Providing Judicial Services and Safeguards for Promoting the Development of the West in the New Era and Forming a New Pattern and  Opinions on Providing Judicial Services and Safeguards for Promoting the High-quality Development of the Central Region in the New Era(最高人民法院关于为新时代推进西部大开发形成新格局提供司法服务和保障的意见( and 关于为新时代推动中部地区高质量发展提供司法服务和保障的意见.  Related to these two is a document from November 2021– Conference Summary of the Work Promotion Meeting Serving and Safeguarding Ecological Protection and High-quality Development of the Yellow River Basin.最高人民法院服务保障黄河流域生态保护和高质量发展工作推进会会议纪要.  That document in turn relates to a  2020Judicial Services and Safeguards Opinion. These are part of a large number of documents providing judicial services and safeguards for Party Center strategies and initiatives, particularly related to regional integration.  The article I have temporarily set aside to write this blogpost discusses the purposes and impacts of these documents.  I have previously written about these documents often, such as these quick analyses of their structure and purposes.  Both  Opinions link to Party Center-State Council documents. More analysis to come when I am able to finish the last five pages of the “short academic article” mentioned above.

Reshaping the judiciary

In the fall of 2021, the Party Center launched the second round of the rectification and education of national political-legal organs, with a leading group leading and an office assisting in implementing the campaign. The SPC was one of the focal points (along with other central organs). Just before Christmas, the SPC held a “looking back” meeting to discuss what was revealed and progress made in response.  The SPC established a leading small group and office to handle matters properly.  (For those interested in further details, please see this webpage.) President Zhou Qiang noted in his work report that the SPC has effectively rectified a batch of stubborn diseases (one of the targets of this inspection) and resolutely eliminated a batch of black sheep (literally, a group of horses that harm the masses) (一批害群之马).  The same phrasing is reported from the Ministry of Justice and other political-legal institutions at both the central and local levels. Related to  the rectification and education campaign are several new SPC opinions. Those include one strengthening the judicial responsibility system, and creating a new court team  关于在加快推进司法责任体系改革和建设中进一步加强人民法院队伍建设的意见 and another on enforcement.  The SPC has issued another related opinion found here, on the “four types of cases.”   Perhaps unrelated to stubborn diseases and black sheep is decisions by some SPC judges to continue their careers elsewhere.

Finally

I wish all readers a happy and healthy new year, both “Western” and Chinese.  I also hope that this year brings us, located in and out of mainland China, opportunities to gather together to discuss legal developments in China from different perspectives quietly, without rancor or blame, but with mutual respect.

————————————————————————————————————

I would like to express my appreciation to anonymous two peer reviewers of a previous draft of this blogpost. Special thanks to the person who caught a significant error in the draft.

 

Update on Civil Code Judicial Interpretations

Judge Guo Feng at a workshop at Tsinghua University

Judge Guo Feng, deputy head of the Supreme People’s Court (SPC)’s Research Office, with the ranking of first level inspector (a senior non-leadership position  ( 一级巡视员spoke in late October at the annual meeting of the China Law Society’s Civil Law Research Group, at which he revealed further information about the SPC’s timetable on issuing further interpretations of the Civil Code, as well as senior SPC leadership’s thinking about judicial interpretations.  Please see this recent blogpost if a refresher about judicial interpretations would be helpful. I have italicized my brief comments.

In his remarks, he revealed the methodological thinking behind the drafting of the Civil Code judicial interpretations.  He expresses a principle that I have heard from others at the SPC–that there is a  palpable line between the SPC’s power of judicial interpretation and the NPC’s legislative power and power of legislative interpretation.  For many in the legal world outside of China (and some inside China based on this and several other recent academic articles), it appears to be an invisible red line. As for what should be the focus of judicial interpretations, I believe that internally they will be able to have a sense, from discussions with colleagues in other divisions, lower court judges and from lawyers, if comments are sought from them:

The first is how to grasp the degree, that is, how to achieve an appropriate degree in the design and expression of the specific content, specific system, and specific clauses of judicial interpretation. The core of moderation is how the judiciary can perform its duties and responsibilities in accurately applying the law, and cannot overstep and covet the legislative authority’s legislation and the power of legislative interpretation.

The second is how to achieve a balance of quantity, that is, in the face of the 1,260 legal provisions in the seven parts of the Civil Code, which ones should be judicially interpreted? What should not be judicially interpreted? Which Parts and which chapters should be the focus  for some judicial interpretations? Furthermore, in each separate judicial interpretation,  how much content and complexity should be in each provision?

Interpretation Agenda & Timetable

Judge Guo mentioned that the Civil Code judicial interpretations on the judicial interpretation agenda include one on the General Part and the Contract Parts of the Civil Code. The General Part Judicial Interpretation (1) draft (最高人民法院关于适用<中华人民共和国民法典>总则编的解释(一)》was discussed this spring. The Contract Part interpretation has been discussed at several other academic conferences in Beijing besides the one described in the earlier blogpost.

Judge Guo mentioned that the General Part (1) interpretation is scheduled to be submitted to the SPC’s judicial (adjudication) committee before year-end and the Contract Part Judicial interpretation is scheduled to be submitted to the judicial (adjudication) committee by the end of the first quarter of 2022.  I surmise that Court President Zhou Qiang wants to include the promulgation (or the upcoming promulgation) of the Contract Part of the Civil Code as one of the SPC’s accomplishments in 2021. So I have my doubts that public comments will be sought on the draft. The Tort and Personality Rights judicial interpretation drafts are still at the research stage.  He also mentioned that they do not plan to issue a comprehensive draft of the Personality Rights Part, but instead be guided by practice, and focus on issuing an interpretation on Article  997 (relating to the right of a party to seek an injunction to stop violations of the person’s personality rights). On the Contract Part judicial interpretation, I had previously said “as to whether this judicial interpretation will be issued by the end of this year, I personally have my doubts. “

Issues Going Forward

Judge Guo mentioned that they are facing issues concerning overlapping provisions in different parts of the judicial interpretations of the Civil Code, such as the provisions in judicial interpretation of the General Part of the Civil Code overlapping with provisions in the judicial interpretation of Contract Part, and overlapping provisions between the Personality Rights Part and the Tort Part.  He says that these issues regarding the planning of the interpretations need to be solved by the academic community and the SPC together. I have my doubts, however, that those in the academic community, unless they have spent time at the SPC, will be able to provide useful advice to the drafters on how to harmonize the different provisions in the judicial interpretations of the Civil Code in a user-friendly way, that enables an overworked basic level court judge (or her judge’s assistant or intern) to quickly and easily find the correct rule.

Finally,  Judge Guo mentioned that the SPC’s judicial committee decided that in the future, it will no longer engage in large and comprehensive judicial interpretations, and will no longer engage in excessively lengthy judicial interpretations, and encourage focused judicial interpretations.  My guess is some persons in the political leadership commented on the long judicial interpretations, of which the SPC has issued quite a few in the past few years.  I imagine that this will be the case until the amended Arbitration and Bankruptcy Laws are promulgated.  Then there will be a demand from the lower courts and the Chinese legal community for comprehensive judicial interpretations that consolidate previous interpretations, to the extent relevant, discard irrelevant provisions, and provide further detail to new provisions.  

___________________________________________

Many thanks to certain anonymous readers of an earlier draft of this blogpost. They are not responsible for any errors or “erroneous views.”

Reorienting the Four Levels of China’s Court System–Part 1

At the end of September, the Supreme People’s Court (SPC) issued Implementing Measures for the Pilot Reform of Improving the Positioning of Four Levels of Courts in Terms of Adjudication Levels and Functions  (Four Level Court Reform Pilot Measures). The only translation available seems to be behind Westlaw China’s paywall.  A quick summary of its backstory, provisions, and implications as related to the SPC follows below. The impact on the lower courts will be significant, but this reform needs to be analyzed together with other current reform documents to see the larger picture.

Backstory

As the NPC Observer previously wrote, this reform was included in both the 2019 SPC’s fifth five-year court reform plan and the recent Plan for Building the Rule of Law in China (2020–2025).  The National People’s Congress Standing Committee granted the authorization for this Pilot Reform in the summer.  SPC President Zhou Qiang highlighted the principal reforms in his explanation to the NPC Standing Committee. The Party leadership (the Central Deepening Reform Commission) approved the reform in June, based on submission documents from the SPC. The drafters of the reform stated the proposal (改革方案稿) was based on research and specialist discussions  (调研论证, although neither the approval document nor the submissions are available).  I surmise that the research draws on earlier work by predecessors of the drafters. The roots of this reform can be seen in the SPC’s fourth five-year court reform plan, for which the SPC issued extended commentary (thankfully for the researcher).  SPC research on this issue dates back to the spring of 2012, if not earlier.

This reform is one of many court (and other political-legal system) reforms that the Party leadership approved in January 2019, as part of its Implementing Opinion On the Comprehensive Deepening Reforms of the Political-Legal Sector《关于政法领域全面深化改革的实施意见. That meant that the measures approved in that document became important reform responsibilities (tasks) for the institutions involved (确定的重要改革任务).

The outside analyst of this and another court (and other Chinese legal) reforms is at a disadvantage in seeking to be thorough as might be possible in more transparent jurisdictions. It is not possible to know, for example, what the Party leadership reviews when it considers these submissions (my guess is a detailed executive summary, while responsible aides read more extended reports) and whether the SPC’s submission was approved unchanged.

What It Means for the SPC

The Four Level Court Reform Pilot Measures cover civil, administrative, and criminal cases, with the focus on civil and administrative cases. Among the objectives of the Four Level Court Reform Pilot Measures is to make the SPC a supreme court (with Chinese characteristics), rather than just China’s highest court.

As I wrote in my short article on the U .S.-Asia Law’s website and earlier on this blog, the SPC considers large numbers of retrial applications, primarily in the circuit courts.  This document narrows considerably the flow of retrial applications that can be submitted to the SPC, although the new standards incorporate necessary flexibility.   (Ironically, I have just written an article on this process).

The intent is for the SPC to focus on a smaller number of more important cases. As stated in Article 1: “the Supreme People’s Court shall focus on supervising and guiding adjudication work at the national level and ensuring the correct and uniform application of the law.”

According to the drafters’ commentary, the intent is for the SPC to focus on (judicial/legal) policy formulation (政策制定) and social governance (社会治理), about which I spoke recently, and is a subject of another forthcoming article. This has been the thinking of the SPC leadership for over five years, if not longer–Judge He Xiaorong, current head of the #2 Circuit Court (and former head of the SPC’s judicial reform office) stated six years ago–when writing about the circuit courts:”

…the center of the work of SPC headquarters will shift to supervision and guidance, primarily trying cases that have a major guiding function in unifying the application of law, that can become guiding cases.”

The drafters of the Four Level Court Reform Pilot Measures state that the intent is to establish a working mechanism in which the Supreme People’s Court judgments are directly transformed into guiding cases and promote relevant judgments to become an important source for optimizing the formulation and content of judicial interpretations, as well as modifying and abolishing judicial interpretations.  We will need to wait for further measures from the SPC on this.

Narrowing the Flow of Retrial Cases

The 2021 reforms change the standard of review for civil and administrative cases. The reforms set out a two-branch test: compulsory and permissive jurisdiction. Under Article 14, compulsory jurisdiction includes cases in which:

  1.  the higher court’s ruling or judgment was erroneous and the case has guiding significance in the application of law; or
  2. in the past three years, higher people’s courts have unresolved major differences in the application of the law in similar cases for which binding judgments or rulings have been rendered by the SPC or different high people’s courts; or
  3. any other circumstances where the SPC considers it should here the cases.

The language of #3 is familiar language to anyone who spends time reading Chinese legislation.

Article 11 sets forth conditions under which applicants can apply to the SPC for retrial, but the SPC has flexibility in accepting the cases:

  1. applicants consider that the higher people’s court applied the law erroneously, but do not object to the facts determined, principal evidence, and procedures of the higher people’s court, or
  2. if the court’s judicial (adjudication) committee considered the case.

Article 13 authorizes the SPC to remand a case back to the higher people’s court if it considers that there are unclear facts or procedural errors, or alternatively, the higher people’s court erred in applying the law, but the issue does not merit SPC consideration.

Applicants must make an undertaking when applying for reconsideration that they undertake not to object to the above matters, and are directed to focus their application on the disputed issues and the grounds for their argument. At this point, detailed implementing measures have not yet been issued.

Inconsistent Decisions

One issue that the drafters mentioned in their commentary is inconsistent judgments or rulings made by different divisions of the SPC.  In practice, that issues relating to the same body of law may be determined by different divisions of the SPC or different teams of SPC judges in the circuit courts and headquarters. They arise either through litigation or court administrative-type procedures. While SPC judges  (as I understand it) search for similar cases, it is inevitable that different people have different views on legal issues.  An example of this arose recently in the area of arbitration law, in which the SPC’s Intellectual Property Court ruled that the arbitration agreement in a software contract providing for foreign arbitration was invalid, because the dispute lacked a “foreign element,” while the SPC’s #4 Civil Division has upheld arbitration agreements providing for foreign arbitration between two Chinese parties.

In that earlier blogpost  I wrote that, unlike some other legal systems, the SPC has not evolved an en banc or enlarged panel of judges, but the Four Level Court Reform Pilot Measures illustrates that someone involved with court reform has looked to other jurisdictions and borrowed but not transplanted the concept. For the avoidance of doubt, borrowing legal concepts from abroad is consistent with Xi Jinping Legal Thought.  The Plan for Building the Rule of Law in China (2020–2025) includes among its main principles: “learn from the useful experience of foreign rule of law (借鉴国外法治有益经验).”

Articles 18  and 19 set forth two options for resolving cross-division differences in views on legal issues.  Article 18 involves the creation of an enlarged collegial panel with five or more members from different divisions.  Consistent with the SPC’s administrative nature, the divisions (circuit courts, or intellectual property court) must apply to the SPC’s Trial Administration Office, which in turn must seek the approval of the SPC President.  The  President may designate a Justice (SPC Vice President) to sit as the presiding judge.  The alternative set out in Article 19 is to apply to the Trial Administration Office to establish a cross-division specialized judges committee (its functions discussed here). I surmise that the second alternative will be used more frequently.

What to expect?

I surmise that there will be a transition period, as the cases accepted under the old retrial system are processed by SPC headquarters and circuit courts.  So my guess is that 2022 will see fewer cases than 2021 and 2020, and 2023 will see even fewer cases.  I expect that the SPC’s Intellectual Property Court to continue to have a large number of cases (over 3000 in 2020).  In 2020, the greatest proportion of their cases were civil and administrative appeals. My uninformed guess is this trend will continue.

It is possible that as a consequence of this reform, the China International Commercial Court will hear more cases than before.  But as I said and wrote earlier this year, I surmise that they will continue to pick their cases carefully, focusing on those which raise issues in which existing law and judicial interpretations are unclear and involve issues that frequently arise in practice. These CICC principles are consistent with those in the Four Level Court Reform Pilot Measures.

As for the other divisions of the SPC, my guess is that they will be able to find enough major cases to keep themselves busy while also spending more time on judicial policy and judicial interpretations, not to mention other matters.  The principles in this reform do not affect long-standing mechanisms of the SPC, such as death penalty review or the prior review of arbitration-related decisions by the #4 Civil Division. As I hinted in a recent blogpost, I believe that in the next year or two, a great deal of time will be invested in issuing judicial interpretations to fill out the broad principles of the Civil Code, but the interpretations will themselves be issued in a codified fashion.

How & Why the Supreme People’s Court serves the Belt & Road Initiative

I’m honored to be speaking in a few days (remotely) in a webinar sponsored by the Pacific-Asian Legal Studies program of the University of Hawaii at Manoa’s William S. Richardson School of Law on how and why the Supreme People’s Court Serves the Belt & Road Initiative (sign up link is here).

The event will take place at 2 pm, 5 November, Hawaii time, which translates into 8 am on 6 November in the GMT +8 timezone (Hong Kong, mainland China, Singapore, etc.), 11 am in Sydney, and 8 pm on the US East Coast.  The timing doesn’t work well for England (midnight) or Europe. I believe a recording will be available at a later date.

 

 

Coming Attractions on the Supreme People’s Court’s Foreign-related Commercial & Maritime Law Agenda

Justice Tao Kaiyuan

Because the Supreme People’s Court (SPC) has not released its judicial interpretation agenda for 2021 (as previously mentioned), the observer seeking to determine what is on that drafting priority list and must rely on occasional reports in the professional and academic press. In August, SPC Vice President Tao Kaiyuan, (link to her speech at the Brookings Institution in 2015) who appears to have assumed responsibility for the #4 Civil Division and foreign-related commercial and maritime matters, published a short article in one of the SPC’s media outlets. For those able to read the language of SPC official documents, her article provided insights into future developments, ongoing issues, expanding the Chinese courts’ circle of friends, and the qualities that Chinese judges must possess.

Future Developments

Justice Tao released information on the following developments:

  1. The SPC will issue a Conference Summary on the 2021 National Symposium on Foreign-Related Commercial and Maritime Trial Work (2021年全国涉外商事海事审判工作座谈会会议纪要) to resolve difficult issues in practice and unify judgment standards.  She did not further detail the difficult issues that need unifying in the Conference Summary. As mentioned here, although conference summaries are not judicial interpretations and cannot be cited in a court judgment document as the basis of a judgment, it is generally recognized that provide important guidance to the work of the courts and judges will decide cases according to its provisions.  Generally, they are issued to address issues regarding which the lower courts have inconsistent views, but time or the fluidity of the situation does not permit a judicial interpretation to be issued.
  2. The SPC is in the process of researching and drafting a judicial interpretation on the application of international treaties and international practices (研究制定涉外民商事案件适用国际条约和国际惯例). This topic has been mentioned in previous Belt & Road- related opinions. I surmise that it was finally realized that this topic needed to be addressed if the Chinese courts are to be increasingly engaged with the outside world, as is signaled by the Party’s Five-Year Plan for Constructing the Rule of Law (2020-2025);
  3. The SPC is drafting a judicial interpretation on the ascertainment (determination) of foreign (extraterritorial) law in foreign-related civil and commercial cases. This, too, is a long outstanding issue, mentioned in earlier blogposts including one from 2014;
  4. SPC and the Supreme People’s Procuratorate are researching and drafting a judicial interpretation on compensation for damages to marine natural resources and the environment. I surmise the interpretation will address cases with both criminal and civil aspects, relating to compensation for harm to the environment.
  5. Justice Tao mentions that SPC judges will continue to participate in the UNCITRAL  Working Group VI draft convention on the judicial sale of ships, the Hague Conference on Private International Law Jurisdiction Project, and the other drafting international rules.  As I have previously mentioned, while sometimes the SPC sends one of its judges to participate in the Chinese delegation negotiating an international convention, in other projects other central institutions take the lead in negotiation and consult with the SPC on issues relating to the courts.  She did not mention the hard work needed to harmonize Chinese legislation with international conventions.

Ongoing Issues

Justice Tao also mentioned that the SPC will continue to research parallel proceedings, cross-border bankruptcy, cross-border data transfer, sovereign immunity, and other such issues.  I surmise that cross-border bankruptcy is high on the research priority list, as the National People’s Congress Standing Committee has started work on amending the Bankruptcy Law, but cross-border data transfer is an important one as well. Parallel proceedings, in my view, are likely to become a greater, rather than a lesser point of tension between China and certain other jurisdictions.

Expanding the SPC’s Circle of Friends

Justice Tao has a paragraph on China deepening international judicial cooperation and continuing to expand the Chinese judiciary’s “circle of friends”(朋友圈). She mentions actively creating opportunities for Chinese judges to enter the international judicial stage, participate in important international conferences and international forums, learn about the experience of foreign counterparts in the rule of law, strengthen the external communication of China’s judicial system, judicial culture, and judicial reform.

As seen from my perspective, many opportunities for Chinese judges to speak exist, but overly complicated bureaucratic procedures with which they must comply set formidable obstacles preventing them from directly communicating with the outside world. I’ll eventually have more to say on the SPC and its communication with the outside world, but others could use the SPC’s English language website  (about which I previously commented) as one of many measures of the quality of its foreign discourse.  I have heard a number of SPC judges speak to foreign audiences.  Some, particularly those who have spoken at Hong Kong International Arbitration Centre or other arbitration-related events, have a keen sense of their foreign audience, but others package five or ten minutes of insightful remarks, generally at the end, preceded by twenty minutes if not more of press release type information, by which time they have lost the audience.  Justice Tao does not mention interactions going in the other direction, that is, expanding their circle of friends by welcoming foreigners to the Chinese courts as interns or affiliated scholars. The Chinese courts continue to benefit from the Federal Judicial Center’s hospitality to (the late) Judge Zou Bihua and other Chinese judges.  

Qualities of Foreign-Related Judges

In the concluding section, Justice Tao addresses the need for training (about which I have written recently) and the qualities required of  Chinese judges focusing on foreign-related commercial and maritime matters.  Those qualities mirror current policy on judicial personnel, as previously discussed on this blog–they must be both politically and professionally competent and ethical.

China’s Civil Code to have a Contract Part Judicial Interpretation

photo of workshop

Because the Supreme People’s Court (SPC) has not released its judicial interpretation agenda for 2021 (as previously mentioned), the observer seeking to determine what is on that drafting priority list must rely on occasional reports in the professional and academic press.  Last month, several academic Wechat accounts reported on discussions of a draft of a judicial interpretation of the Contract Part of the Civil Code  民法典合同编司法解释(草案). The one I’m relying upon contains the more detailed report on the discussion, including the names of those discussing the draft on behalf of the SPC.  I’ll flag from this article why this discussion was held, what can be learned from the report on the discussion, and a quick preview of the interpretation itself.  But first, a few words about why this interpretation is needed and what it is intended to do.

Background on judicial interpretations

Through judicial interpretations, the SPC is seeking to “unify court judgments,”  to ensure that court decisions throughout the country and at various levels of courts are more consistent.  This principle is set out in the current and previous judicial reform plans. Establishing a Chinese case law system assists in this, but is insufficient.  As seen from the SPC, judicial interpretations are intended to address issues in which statutory law is either ambiguous or contains a gap, causing judges to misunderstand (the law) and issue decisions inconsistent with legislative intent (see more below).  The SPC  identifies those issues through the multiple stages in the judicial interpretation drafting process.

.Judges, particularly at the basic level, need to issue judgments efficiently in commercial cases. They face a combination of a large number of cases and relatively short deadlines in domestic civil procedure.  Recent reforms to the jurisdiction of the courts will require basic level courts to deal with even more cases.   They cannot assume that most cases will settle, as shown by my own research (concerning certain courts) and those of some others  (in certain courts) . The Contract Part of the Civil Code is not detailed enough for judges to rely upon to decide contract cases efficiently and consistently.  A more active National People’s Congress (NPC)  (and its Standing Committee) is not able to fill in the gap.  Therefore the SPC must be the one to do so.

As I have written before in this blog and in my recent book chapter, the SPC and the NPC, and NPC Standing Committee (NPCSC), most often the NPCSC Legislative Affairs Commission (LAC), communicate during the course of judicial interpretation drafting.  SPC rules require that a judicial interpretation draft be submitted to the relevant committees of the NPC or relevant department of the NPCSC to solicit their views before the final draft is submitted to the SPC judicial (adjudication) committee. Additional relevant guidance cited in my chapter reminds drafters that “liaison with the NPCSC LAC must be timely, and after major revisions to the judicial interpretation draft after consulting with the NPC LAC, the view of the NPCSC LAC  should be solicited again.”  Therefore the views of the two institutions are harmonized before the judicial interpretation is finalized by judicial committee approval.

Broad Consultation of Opinions

As I wrote in my recent book chapter, discussions of draft judicial interpretations by specialists are a regular part of the SPC’s judicial interpretation drafting process.  I described this as “broad consultation outside the gated community.”  The reason workshops are organized is to solicit the views of experts on specialized or technical subject matter. Those invited for these meetings tend to be senior academics, either from the country’s major universities or CASS, as was the case here.

The workshop was held at Renmin University, while a second similar workshop was held at CASS.  Participants included experts from the NPC LAC,  Renmin, Peking and Tsinghua Universities, China University of Political Science and Law,  China Academy of Social Sciences, Jilin University, Beijing Institute of Technology, Central University of Finance and Economics, University of International Business and Economics among others.

The normal practice is for SPC drafters to assess the views given by those experts at the workshops and consider whether they should be adopted or further taken into consideration. Professor Wang Liming, who is a member of the China International Commercial Court expert committee, was one of the leaders who spoke.

It can be determined from the workshop report which personnel at the SPC were involved in drafting and what the issues are.  As to personnel, Justice Liu Guixiang spoke at the beginning of the workshop, which means he is the most senior SPC judge responsible for the draft interpretation. Justice Liu is a full-time member of the judicial committee with vice-ministerial rank. Others from the SPC who spoke included Judge Guo Feng, deputy head of the Research Office,  Chen Longye, head of the civil section of the Research Office, Jiang Jiadi, a staff member of the same section, Judge Lin Wenxue, head of the #2 Civil Division (responsible for domestic commercial issues) and Judge Zeng Hongwei, a judge in the #2 Civil Division.  The #2 Civil Division hears appeals and retrials (再审) (and applications for retrial), unlike the Research Office, and therefore sees first hand some of the issues arising in the lower courts.  I surmise that Chen, Jiang and Zeng are the ones who are shouldering the bulk of the drafting work.  Judges Guo and Lin would have many other responsibilities.  The persons primarily involved in drafting discussed their parts of the interpretation.

Preview of the Interpretation

The first chapter of the draft interpretation is “General Provisions,” in which Chen Longye of the Research Office took the lead.  Judge Zeng Hongwei took the lead in discussing the second chapter on contract establishment. Issues included:

  •  contract interpretation;
  • trade practices;
  • application of non-contractual obligations;
  •  contract formation;
  • contract terms;
  • form of the contract; and
  • agency contracts,

Chapters 3 and 4 of the draft relate to the validity of and the performance of contract. Also, the #2 Civil Division took the lead in drafting because Judges Lin Wenxue and  Zeng Hongwei spoke.  From the discussion, it appears that the controversial questions were the oldies but goodies, the ones that occur in practice:

  • contract validity and  the obligation to report for approval;
  • defective contracts;
  • contracts in violation of mandatory provisions;
  • consequences of validity;
  • signing related issues, involving corporate seals and individual fingerprints;
  •  debtor’s right of defense in the transfer of creditor’s rights;
  • repayment of debts, debts by shares, joint debts, indivisible debts;
  • contract performance by a third party or to a third party or repayment by a third party;
  • Repayment by third parties; and
  • changes in circumstances.

Chapters 5 and 6 concern preservation of contract (保全), contract modification and transfer.  Judge Guo Feng and Jiang Jiadi of the  Research Office took the lead.  Issues included:

  • scope of rights,
  • scope of rights exclusive to the debtor
  •  right of subrogation
  • right of cancellation in “contract preservation;”
  • Contract modification and transfer;
  • role of a third party in the litigation of the creditor’s rights and debt transfer disputes,

Chapters 7 and 8 relate to  “Termination of Contract Rights and Obligations, Liability for Breach of Contract”.   Chen Longye took the lead in discussing the following issues, among others:

  • liability for compensation for contractual obligations after the breach;
  •  termination and its consequences;
  • the timing of termination;
  • determination of losses due to breach of contract;
  • liquidated damages, deposits, delay in receipt; and
  • force majeure.

When will the Interpretation be Issued?

As to whether this judicial interpretation will be issued by the end of this year, I personally have my doubts.  I have not found any reports of discussion of this draft in the lower courts or with the NPCSC LAC.  These steps are a usual part of judicial interpretation drafting.  Contract law is fundamental to business.  Those in SPC leadership are unlikely to approve this interpretation unless they think it meets the target of dealing with the unclear issues that lower courts and practitioners frequently encounter in practice.  The scope of consultation is unknown, such as whether some lawyers or companies will be consulted, or whether the entire draft will be issued for public comment. It is also unknown whether selected foreign contract law specialists have or will be approached for their comments.  We have to wait for further developments.

___________________________________________

Many thanks to certain anonymous readers for their insightful comments on earlier versions of this blogpost. They are not responsible for any errors or “erroneous views.”

Why I Research China’s Supreme People’s Court

I was honored to be invited by the New York University School of Law’s U.S. Asia Law Institute to contribute a short essay to their Perspectives blog, entitled Why I Research China’s Supreme People’s Court

 Many thanks to those involved in the entire process, including those who commented on earlier drafts!

What’s on the Supreme People’s Court’s financial law agenda?

Justice Liu Guixiang Speaking

This year, the Supreme People’s Court (SPC) has not released its judicial interpretation agenda to the general public, so observers concerned about what the SPC is doing in specific areas of law must be attentive to what SPC leaders mention in either speeches in major conferences or articles in the media.  Justice Liu Guixiang, a member of the judicial committee with deputy ministerial status, spoke in early September at the 4th Annual  Conference on Serving Small and Medium Sized Investors .  His speech was one of many leader’s speeches  (visible in the link领导人讲话) delivered at this conference sponsored by the China Association for Public Companies, Securities Association of China and other securities industry associations. (For the careful listener (or reader) his speech provides insights on what can be expected from the SPC in the near future in the area of financial law.  It is linked to  China’s development of its securities market and dealing with the increasing number of financial fraud cases and civil disputes. Some of what he told the audience illustrate, in the area of financial and securities law,  how the SPC operates in the New Era.  Those include:

  1. the SPC plans to issue a new conference summary on financial trials (金融审判座谈会纪要) before the end of the year, to unify trial standards. This is linked to government policies on the prevention and resolution of financial risks;
  2. the SPC plans to amend the 2003 interpretation
    Some Provisions of the Supreme People’s Court on Trying Cases of Civil Compensation Arising from False Statement in Securities Market, as it is outdated, particularly the requirement of an administrative penalty before investors can file suit. The interpretation is inconsistent with the amended Securities Law;
  3. the SPC will guide the lower courts on the hearing of securities group cases  (证券集体诉讼制度), particularly focusing on financial fraud, providing better relief to investors, and assisting to stabilize the market in its transition to a registration based listing system.  He stressed that the SPC would require lower courts to apply the principle of harmonizing standards for fault and administrative penalties in financial fraud cases, distinguishing different types of fault, and “striking hard” in cases of intentional financial fraud (要求人民法院在处理财务造假等案件中,基于“过错与处罚相一致”原则,区分过错类型,依法严厉打击故意造假行为过错与处罚相一致);
  4.  The SPC will provide guidance to the local courts on strictly applying new rules (in the Civil Code and the SPC’s judicial interpretation) on guarantees provided by listed companies and will also provide further guidance on the bankruptcy (and reorganization ) of listed companies.  
  5. The SPC will cooperate further with relevant government organs and other institutions to further develop non-litigation solutions to securities disputes. One example Justice Liu likely had in mind was the recently promulgated notice jointly issued by the General Office of the SPC and the China Securities Regulatory Commission (CSRC) on establishing an online system for linking the CSRC’s electronic platform with the SPC’s mediation electronic platform, to enable mediated settlements within the securities and future mediation systems to become enforceable through judicial confirmation online (在线申请司法确认或出具调解书等诉调对接工作) This August 2021 document is entitled Notice on Establishing a Linkage Between Mediation and Litigation “General to General” Online Securities and Futures Disputes Mechanism  最高人民法院办公厅 中国证券监督管理委员会办公厅关于建立“总对总”证券期货纠纷在线诉调对接机制的通知.  That document, which implements the Party Center’s concept — social governance pattern of co-construction, co-governance and sharing (建立共建共治共享社会治理格局)includes a joint meeting system between the two institutions and affiliated organizations, with the CSRC’s Investor Protection Bureau and the China Securities Small and Medium Investor Service Center Co., Ltd. taking an important part. The linkage between mediation and litigation is part of diversified dispute resolution. It calls for analogous linkage at the local level between offices of the CSRC and the courts. The SPC has issued other documents previously,  particularly the Supreme People’s Court and the China Securities Regulatory Commission of Issuing Opinions on Comprehensively Advancing Establishment of Diversified Resolution Mechanism of Securities and Futures Disputes. The SPC’s 2021  bilingual report on its diversified dispute resolution reforms (2015-2020) provides more details on this and other reforms.
  6. Finally, Justice Liu called for promoting the securities representative litigation mechanism (mentioned in Article 95 of the Securities Law and further developed in a 2020 judicial interpretation, Provisions of the Supreme People’s Court on Several Issues Concerning Representative Actions Arising from Securities Disputes). The Shanghai Financial Court has taken the lead in these cases. What Justice Liu means is using the results in representative litigation to resolve outside of the courts other similar securities & futures disputes, particularly group disputes. This is an example of implementing the SPC’s diversified dispute resolution policies. This mechanism is can also be characterized as linking to the Party Center’s current policy of mediating first and resolving disputes at their source to reduce the quantity of litigation  (党中央关于“将非诉讼纠纷解决机制挺在前面,从源头上减少诉讼增量), as discussed in greater detail in the bilingual report.

____________________________________________

Those with more specialized knowledge in Chinese securities law should provide corrections or comments by using the blog’s comment function.

The 996 typical cases

Document heading for the 996 typical cases

On 26 August 2021, the Ministry of Human Resources and Social Security (MHRSS) along with the Supreme People’s Court (SPC) issued a second set of typical (典型 model/exemplary cases). As I have explained before, these are summaries or edited versions of cases, not original labor arbitration or court decisions. These are on overtime labor and personnel disputes (人力资源社会保障部、最高人民法院联合发布超时加班劳动人事争议典型案例) that I’ll call the “996 typical cases,” a central level institutional response to the widespread use of 996 overtime work in the technology sector and elsewhere. The cases themselves are entitled “the second set of typical personnel and labor disputes cases (劳动人事争议典型案例(第二批). The version that the SPC published on its two websites (court.gov.cn and chinacourt.org) lacks the document headers that accompanied the release of the cases. That version had the mutually agreed statement about the cases (joint statement) and the cases themselves. Thankfully for this analysis, the Inner Mongolian Higher People’s Court released a version that includes the headers. The comments below focus not on the rules embedded in the typical cases, but on the SPC’s use of typical (model or exemplary) cases.  These cases are:

  • a product of institutional joint cooperation, as memorialized in a 2017 document mentioned in the joint statement;
  • a typical use of typical cases in the New Era; and
  • Used by the labor arbitration tribunals under the MHRSS system and the courts to unify legal standards.

Institutional joint cooperation

The 996 typical cases are a product of cooperation between the MHRSS and the SPC, as memorialized in the policy documentOpinions of the MHRSS and the SPC on Strengthening the Building of a Mechanism of Connection between Arbitration and Litigation of Labor and Personnel Disputes,  (No. 70, MHRSS)(《关于加强劳动人事争议仲裁与诉讼衔接机制建设的意见》(人社部发〔2017〕70号).  Two quick comments on the cooperation are as follows.

  1. More such cooperation can be predicted in general.  Greater cooperation between the SPC and other government and Party departments is a feature of the New Era, as I mentioned earlier this year. Coordination with other central Party and state organs is a customary function of the SPC that is being repurposed, in part, in the New Era. Coordination with other central organs appears to be an increasingly important part of New Era governance.  Therefore, the statement accompanying the cases stated the following:

In recent years, the MHRSS and the SPC have actively guided the implementation of the “Opinions on Strengthening the Construction of a Cohesive Mechanism for Labor and Personnel Dispute Arbitration and Litigation” , and the cohesion mechanism for adjudication and adjudication has been realized… In the next step, the two departments will continue to jointly develop guidelines, publish cases, and strengthen information comparison, and continue to promote the convergence of adjudication procedures and the unification of the application of law, so as to better achieve an efficient and orderly connection between arbitration and justice, and realize labor disputes. The dispute resolution is an organic unity of political, legal and social effects.

2.  As can be seen from the statement above, we can expect further cooperation between the MHRSS and the SPC in the form of joint guidelines, more typical cases, and information sharing.  All of these are flagged in the 2017 Opinion mentioned above.

What we can see from the document numbers of the 2017 Opinion, the first set of joint typical labor cases and the 996 typical cases is that they all have an MHRSS document number.  (See analysis of the first set of cases here.)That means both the Opinion and the typical cases are an initiative of the MHRSS that required concurrence by the SPC. The Opinion  sets out the agreement between the two institutions:

The departments of HRSS shall positively and voluntarily strengthen communication and coordination with the people’s courts. The people’s courts shall specify that a tribunal [division] or office [庭室] is uniformly responsible.

So we can see from this language that at each level of court, a division (tribunal) or office (likely to be the Research Office) is responsible for liaising with the HRSS authorities.  At the level of the SPC, it is understood to be the Civil Division #1, which is responsible for labor-related issues among many other civil law issues, and within that division, a group of people (likely judges with special competence in labor issues) was involved with liaising with the MHRSS to agree upon a draft version of the statement and the typical cases.  Given the administrative nature of the SPC and previous practice, it seems likely that what was agreed upon at the staff level was reviewed by the head or deputy head of the Civil Division #1 and approved by the SPC vice president in charge of the Civil Division #1. It is likely the cases were cleared at an analogous senior level at MHRSS as well.

As to why these particular cases, it is likely that they are scenarios that regularly occur in the labor arbitration tribunals and the courts, but where decisions are inconsistent because the law is unclear.

Use of Typical Cases in the New Era

The release of the 996 typical cases is a typical use of typical cases in the New Era.  As discussed in further detail last year,  this is part of popularization of law (普法教育), an old development repurposed in the post 4th Plenum of the 19th Party Congress New Era. I first wrote about typical cases in 1993:

 

 

The release of these 996 typical cases is linked to the popularization of law responsibility system set out in this document: General Offices of the Party Central Committee and State Council Opinions on a Popularization of Law Responsibility System of State Organs Regarding “whoever enforces that law, explains the law.” (中共中央办厅 国务院办公厅印发《关于实行国家机关“谁执法谁普法”普法责任制的意见》Section 6 calls for judge, procurators, administrative enforcement personnel, and lawyers to establish a “using cases to explain the law” system.

Therefore MHRSS personnel are encouraged to use cases to explain the law, and the 2017 Opinion encourages MHRSS personnel to cooperate with the SPC in doing so. The message to the general public as set out in the joint statement is:

On the one hand, it reminds employers of the risks of illegal activities and promotes the regulation of labor according to law; on the other hand, it clarifies the expectations of workers’ rights protection and guides workers to protect their rights in a rational way.

Releasing these cases also hits another target for those involved: fulfilling their obligations under the current Party history study and education campaign: “I do real things for the masses”(“我为群众办实事,” therefore in the first sentence of the joint statement).

 996 Typical Cases Used to Unify Legal Standards

What the SPC’s version of the 996 typical cases omitted (likely unintentionally) is guidance from the two institutions on how the 996 typical cases are to be used:  “local [labor] arbitration agencies and people’s courts,  shall refer to it in handling cases.”

Last year’s guidance on case searches clarifies that the lower courts must search  SPC typical cases when doing a similar case search and that these cases are not binding, but for reference, or quite persuasive. These cases will provide guidance to both labor institutions and courts, providing a more unified standard on these overtime issues.  It will also indirectly pressure employers to amend their labor handbooks and change other labor practices to be consistent with these cases.

Concluding thoughts

These cases are not expected to completely resolve the overwork culture in Chinese companies. They are intended to set a clearer standard for the labor arbitration commissions and courts to apply (and lawyers or other advocates to meet), as well as to reduce the number of cases in which courts overturn labor arbitration commission determinations related to overtime and overwork. They also provide societal guidance (社会导向)by providing a timely signal to companies and Chinese society on these issues. They also evidence that the SPC is “strengthening judicial safeguards of people’s livelihood” (加强民生司法保障). Most importantly it shows that the MHRSS and the SPC are doing “real things for the masses.”

_______________________________

Many thanks to those who commented on an earlier version of this blogpost.

Training foreign-related legal personnel for the Chinese courts

President Zhou Qiang visiting the University of International Business & Economics

Since the Fourth Plenum of the 19th Party Congress, and especially since President Xi Jinping spoke about the need for China to train foreign-related legal personnel  (涉外法治人才), the Supreme People’s Court (SPC) press, SPC leadership, and others important to the SPC leadership, such as Shen Deyong, former executive vice president of the SPC and current leaders of the CPPCC have reiterated the importance of “foreign-related legal personnel” to China and the people’s courts.  Training “foreign-related legal personnel” is incorporated into the Party’s Plan for Building the Rule of Law (2020-2025), an indication of its importance.  Shen Deyong  criticized the way that “foreign-related legal personnel” is used within government institutions– “team is too small, their numbers are too few, they are scattered and the market is chaotic.””涉外法律服务人才队伍建设还存在一些问题和不足,主要呈现队伍“小”、人才“少”、分布“散”、市场“乱”的特点.  I would add to the issues that he flagged that policies directed towards attracting  “foreign-related legal personnel” to the courts inevitably encounter the special characteristics of the courts’ personnel system as it has evolved since the quota judge reform was implemented, both the training system and especially career advancement from judges assistant to quota judge.

Foreign-related legal personnel policy

The language about increasing “foreign-related legal personnel” in the courts is not new but dates back to at least 2015 and the  Opinion of the Supreme People’s Court on Providing Judicial Services and Safeguards for the Construction of the “Belt and Road” by People’s Courts (BRI Opinion #1). It was reiterated in the 2019  Opinions of the Supreme People’s Court on Further Providing Judicial Services and Guarantees by the People’s Courts for the “Belt and Road” Initiative (BRI Opinion #2) and the 2020 Guiding Opinions of the Supreme People’s Court on the People’s Courts Serving and Guaranteeing the Further Opening Up to the Outside World (Open Economy Guiding Opinion). Article 15 of BRI Opinion #1 calls for improving training for Chinese judges on their professional capacity (业务能力) and improving overall judicial quality. Article 38 of BRI Opinion #2 and Article 16 of the Open Economy Guiding Opinion both have language about cooperating with universities to develop training and teaching plans so as to train and prepare a pool of international legal practitioners….”  A knowledgeable person has reminded me that repetition in consecutive documents is an indication of importance (and I would add the difficulty of resolving the problem).

As readers of this blog know, the Chinese courts need “foreign-related legal personnel” in many areas. Those include working on cross-border cases across a broad range of procedural and substantive areas,  undertaking research related to cross-border judicial policy and cross-border legal issues that have an impact on the judiciary, as well as working on a range of issues related to the SPC’s and lower courts’ interactions with the outside world.

Court cooperation with universities

The SPC has designated a number of China’s leading law schools and legal research institutions as Belt & Road research bases, including: the International Law Institute of the China Academy of Social Sciences; Tsinghua University School of Law; Wuhan University School of Law, Southwest University of Political Science and Law; China University of Political Science and Law, Shanghai University of Political Science and Law; Dalian Maritime University, and East China University of Political Science and Law. The SPC is thus able to draw on the research capacities of China’s law schools and involve law students in the legal issues facing the Chinese courts. Participating in this research can also motivate students to enter the courts after graduation.

Law students apply to become judges assistants after graduation for a variety of reasons. Some become further interested after internships (see this blogpost on SPC interns–a version with more data may appear later).  Other law school graduates are motivated by presentations by outstanding judges at their law school (SPC Judge Gao Xiaoli’s 2015 talk at the Peking University School of Transnational Law earned her many new fans), while still others recognized that a job “in the system” would resolve their hukou problems and enable them to live in Beijing, Shanghai, or other major cities. Yet others are motivated to use their education in the service of the public. I can say with authority that law graduates with knowledge of transnational law, fluency in English (and other foreign languages) are working as legal assistants in courts all over China.  Recruitment of legal assistants is a local matter, so the #4 Civil Division of the SPC (in charge of foreign commercial matters) and likely the Political Department of the SPC (in charge of personnel) lacks statistics on the number of “foreign-related legal personnel” working in the local courts.

Special characteristics of the courts’ personnel system

I write about the judiciary’s personnel system with some trepidation as I am well aware that my knowledge of the regulatory system is incomplete. (Some of the relevant regulations cited in analyses of the personnel reforms are not accessible to those outside the court system.)   On the issue of placement of junior “foreign-related legal personnel,”  I have not heard from either knowledgeable persons, former students, or other junior personnel in the Chinese court system that specific policies have been implemented within the court system (the Political Department of the SPC is responsible at the national level, and locally, political departments of local courts are responsible) to channel judges assistants recruited from China’s law schools with transnational training and experience into roles in which their academic background can be used and their “foreign-related” legal skills can be developed. In the absence of specific policy, too many local court leaders appear to see the young people with a transnational legal background and experience merely as workers that can be put to work in the national judicial machine (司法民工). Judges assistants from higher courts are sometimes sent down to the local level to work for two years, in line with young cadre development policy.

Training

If the three documents cited above have language about training, it seems likely that a training plan is somewhere in the approval pipeline.  My guess is that this is yet another matter that requires coordination among multiple institutions within the SPC, including the #4 Civil Division–the ones asking for the training to be done, with the Political Division and the National Judges College.  As I wrote last year, a new national court training plan (2019—2023年全国法院教育培训规划)) is underway.  As senior leadership has called for cultivating  “foreign-related legal personnel,” it seems likely that the SPC will eventually issue (perhaps not publicly) a training plan for judges handling all sorts of foreign-related issues, both civil-commercial and criminal.

Career advancement

Another issue for foreign-related legal personnel in the courts is career advancement for judges assistants.  As I mentioned in passing in an earlier blogpost, career advancement from judges assistant to quota judge has slowed. Specific promotion criteria are set locally.   Local studies have been done on the role of the judges assistant but have not surmounted the language barrier (see this one from one of the Chongqing Intermediate People’s Courts)  that provide specific data and specific analysis deriving from local conditions.  From my observations, fixed quotas on the number of judges in a court can mean a talented, educated judges assistant in one court may wait significantly longer than a similarly qualified person in another court to become a judge.

Concluding thoughts

Unless the SPC can evolve better national policy directed towards a career for “foreign-related legal personnel,”  some of them will leave, disappointed with the failure of the judicial system to use their talents, despite the official publicity. There will be many companies and law firms, some dealing with the issues I described previously, that will value them.

 

 

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.”

 

Update on judicial interpretations

One of the most important functions (职能) of the Supreme People’s Court (SPC) is issuing judicial interpretations (司法解释), which it issues for the most part unconnected with a specific “case or controversy” but rather drawing on many cases that have previously arisen in the lower courts. They are a critically important way that the SPC unifies the application of law. The extent to which SPC judicial interpretations are binding is one of several fundamental uncertainties attaching to this function, as the National People’s Congress (NPC) Standing Committee is authorized to review them and may require amendments to them or more, and it is unclear how much they bind institutions outside the court system.  But what can be said is that they are critically important to the operation of the Chinese legal system, The SPC, particularly its headquarters in Beijing,  focuses on judicial interpretation work for reasons connected with the slow pace and abstract language of Chinese legislation, although Chinese (and foreign) scholars, lawyers and other commentators sometimes criticize the SPC’s expansive reading of laws. 

About one month ago (in June 2021), the SPC updated its 2007 Judicial Interpretation Work Provisions (JI Work Provisions) in this decision  关于修改《最高人民法院关于司法解释工作的规定》的决定).  [See a refresher on the legislative basis of judicial interpretations, if needed.] The JI Work Provisions describe the types of judicial interpretations the SPC can issue, which institutions can propose drafting judicial interpretations, the drafting process, the promulgation process, the filing process, etc. The update was a minimally invasive one, adding to Article 6  a new category of documents, now classified as judicial interpretations–rules (规则). Rules are defined in a new paragraph of Article 6, as follows: “The judicial interpretations regulating the trial practices of people’s courts shall adopt the format of “Rules”–the intention being that when the SPC issues court rules, they should be in the form of 规则. That means that from now on there are five types of judicial interpretations:

The amendments underwhelm this observer, who had read many SPC documents signaling that many changes were needed. Two of those are Article 26 of the 2019 Fifth Five-Year Judicial Reform Plan Outline and Article 2 (3) of the  2020 Opinions of the Supreme People’s Court on Improving the Work Mechanism for Unifying the Standards for Application of Law (Opinion on Improving the Work Mechanism) :

#26 Improve mechanisms for the uniform application of law. Strengthen and regulate work on judicial interpretations, complete mechanisms for researching, initiating, drafting, debating, reviewing, publishing, cleaning up, and canceling judicial interpretations, to improve centralized management and report review mechanisms….

Article 2 (3) of the Opinion on Improving the Work Mechanism:

Judicial interpretation is an important part of the socialist judicial system with the Chinese characteristics and an important duty of the Supreme People’s Court. For special issues of application of laws in judicial work, especially the unspecific and unclear provisions of the laws which result in difficulty in understanding and enforcement, changes in circumstances which result in different understanding of the basis for handling cases, different standards used for rulings of specific cases in same type and other relevant issues, the Supreme People ’s Court shall strengthen investigation and study and formulate judicial interpretations in a timely manner strictly in accordance with the law. In respect of the judicial interpretations involving the interests of the people or major and complicated issues, public comments shall be solicited openly. It is imperative to further standardize the procedures for formulation of judicial interpretations, improve the mechanism for research, project initiation, draft, argumentation, review, promulgation, clearing and repeal and improve centralized management and record-filing review mechanism.

The question is, why after all this language about providing more details about judicial interpretation procedures, did the SPC leave the rules unchanged, except for adding one new category of judicial interpretations? The SPC’s press conference announcing the 2020 Opinion on Improving the Work Mechanism does not shed any light on this question.   

I surmise that the SPC leadership decided that it was most prudent to leave the regulations unchanged because it is best to leave maximum flexibility in the drafting process. The language in the documents above on improving judicial interpretation procedures remains significant as reminders to the SPC Research Office and others involved in the judicial interpretation drafting process. The Research Office is the gatekeeper for reviewing proposals, examining and coordinating the drafting of judicial interpretations. It also acts as the liaison when other central institutions forward their draft legislation and judicial interpretations to the SPC for comments, coordinating the SPC’s response with other divisions and offices, with a knowledgeable person noting that “the view of the Research Office prevails.”

The SPC liaises with the NPC Legislative Affairs Commission during the judicial interpretation drafting process to harmonize the views of the institutions. In an article published on 21 July by China University of Political Science and Law Professor Luo Xiang on appraisals by administrative institutions in criminal cases, he compared an article in the Criminal Procedure Law judicial interpretation issued for comment with the final version, noting that “the Office for Criminal Law of the Legislative Affairs Commission of the National People’s Congress clearly held a negative attitude [to the language of the article in the original draft] “(全国人大法工委刑法室则明确持否定态度).

As I understand the language in the two documents quoted above, they serve as further reminders that the Research Office staff should review the package of documents that come before them before the documents are forwarded to the SPC Judicial Committee (Adjudication Committee) for consideration with these factors in mind (among others):

  • does it clear that the divisions (tribunals) involved have done sufficient research and investigation about the issues that arise in practice;
  • is it sufficiently comprehensive, with the right amount of discretion given to the lower courts and accommodate varying judicial competence, economic and social development; and
  • does it incorporate the views of relevant internal and external stakeholders?

On the topic of flexibility in procedures, take the example of public consultation. As I mentioned in January,  the Regulations on JI Work Provisons do not specify a minimum (or maximum) time period for soliciting opinions from the public. 

Reviewing the comment periods for some of the other judicial interpretations and other judicial documents for which comments were solicited in 2020, the deadlines appear to vary significantly.  I surmise that the deadline is set by the team in charge of drafting the judicial interpretation. In November 2020, the SPC solicited public comments on proposed amendments to its judicial interpretations related to the taking of security for 18 days, while comment periods for other judicial interpretations and judicial documents seem to be often one month and sometimes two months

It appears many judicial interpretations do not involve public consultation. Consulting the public is optional, unlike consulting internal and other official stakeholders. Article 17 of the JI Work Provisions requires approval by two SPC leaders–the vice president in charge of that type of issue, plus either the court president or the executive vice president (currently Justice He Rong). As I wrote in my recently published book chapter, a review of SPC judicial interpretation public consultations reveals that few, if any, have been in the area of criminal law or criminal procedure law. One experienced SPC judge gave his view of why that was so:

It’s the SPC’s bureaucratic nature! It thinks that the power to draft interpretations is with it and it is completely within its ability to draft good judicial interpretations. So therefore no democratic procedure has been formed to broadly consult different parts of society during the drafting process. The practice always has been internal consultation, generally consulting gongjianfasi [公检法司] [public security, procuratorate, courts, and administration of justice], and experts, the various divisions and offices of the SPC, and then it is submitted and approved. If timing is rushed, one or two experts will be consulted.

My book chapter, describing what I called “gated community” procedures,  explores other reasons as well.

Another topic mentioned by the documents cited above is project approval or initiation, also discussed in further detail in my book chapter. Since 2018, the SPC has provided the domestic and international professional world with more transparency about its judicial interpretation agenda by making public the document by which the SPC leadership gave project approval (立项) to proposals for drafting judicial interpretations. The SPC has a yearly plan for drafting judicial interpretations, as set out in the JI Work Provisions, analogous to the National People’s Congress (NPC)’s legislative plans. It should be noted that the JI Work Provisions do not require the project approval document to be made public. This year, the judicial interpretation agenda has not [yet] been released. It is unclear whether it is a matter that was overlooked in the flood of other documents issued or for some other reason.

 

Invisible Belt & Road Disputes

slide from my presentation

In academic and many professional discussions of Belt & Road Initiative (BRI) disputes, the focus is on disputes between the Chinese and foreign parties.  Few mention disputes between two or more Chinese parties but linked with a BRI project.   (Professor Vivienne Bath of the University of Sydney Law School is one of the few exceptions.)   These are what I call “invisible  BRI disputes,” because few in the academic world and a small group in the professional world have noticed them.

I mentioned these type of disputes during my keynote speech at the University of Pittsburgh School of Law and Asian Studies Center’s “Deals and Disputes: China, Hong Kong, and Commercial Law” webinar when I spoke about the role of the Supreme People’s Court (SPC) in developing “Chinese international commercial law” (as I defined the term).–as can be seen in the slide above.

Although I made inquiries with some authoritative persons in the world of Chinese arbitration and the judiciary,  they were unable to give even a vague estimate of the number of these invisible BRI disputes, but all had the sense that they have been increasing and will continue to increase, both in arbitration and in the courts, as more projects undertaken by Chinese contractors overseas encounter unanticipated problems and enter into dispute settlement proceedings with one or more foreign counterparties and thereafter seek to claim their losses from their Chinese subcontractors (or sub-subcontractors) or suppliers or prevent their banker from paying out under a demand guarantee (or counter-guarantee).

The Belt and Road Initiative: Legal Risks and Opportunities Facing Chinese Engineering Contractors Operating Overseas (Engineering Contractors Book), written by a group of highly experienced Chinese legal advisers to major Chinese contractors, identified some of the risks to Chinese companies when doing contracting projects overseas.  As this and other sources have written, Chinese contractors are often engineering, procurement, construction (EPC) contractors in BRI jurisdictions.

This blogpost looks at three types of business risks leading to invisible disputes, as identified by the authors of the Engineering Contractors Book and others advising Chinese engineering contractors.  I look forward to others taking this topic forward.

Invisible Dispute #1

The Engineering Contractors Book said of the risks of subcontracting to other Chinese companies: “illegal subcontracting and multilevel subcontracting has become one of the biggest risks to Chinese contractors nowadays…[T]he choice of subcontractor is very important, which will result in one honors all; one damns all.” The book gives this example of invisible dispute #1.

 Company A is a large [Chinese] international contractor… Company A undertakes the general contracting, and completes sets of equipment, engineering consultation and engineering design, project management and engineering supervision, installation and debugging and technical services of various domestic industrial projects. A project in Country F in Southeast Asia was developed and executed by two subsidiaries of Company A: Company B and Company C. Company B is a trading company. This was the first time that it carried out foreign projects. Previously, Company B had no overseas project experience and personnel with relevant experience. Company C is an enterprise whose main business is project design, debugging and tests. In the selection of equipment suppliers, materials suppliers and other suppliers, Company B chose enterprises that had cooperated with Company A in other projects. Problems concerning these enterprises occurred during the installation, debugging and operation process, resulting in project delay, repeated procurement and increased costs. In the stage of commissioning and trial, Company C subcontracted the work to Company K, and Company K subcontracted to Company P, which was also a subcontractor of the employer. This subcontracting mode caused many problems, which led to project delay and triggered the employer’s claim.

According to a recent article in the Chinese press, about 70% of these disputes are heard in Chinese domestic arbitration.  A legal adviser to a provincial-level state-owned engineering contractor wrote recently about several of such cases heard in the courts.

In correspondence, an arbitrator who has heard these cases commented:

subcontracting and multilevel subcontracting are common phenomena, especially overseas. When the contractor cannot finish on time, the employer looks to the local construction team….

these cases are troublesome.  The problem is obtaining the crucial evidence, not because of any local restrictions, but because after projects go into operation, there are major changes to the site [of the construction project], so loss is difficult to determine. [In one case[ there were several boxes of peripheral and circumstantial evidence, in English, Arabic, and Chinese, but they did not form a chain of evidence.

Invisible Dispute #2

The authors of the Engineering Contractors Book wrote about demand guarantee risk.  In their view, fraudulent claims by the employer (and beneficiary of a demand guarantee) in a construction project are a significant risk because some employers may make claims in bad faith; international legal harmonization on the issue of fraud in demand guarantees is insufficient.  Invisible dispute #2 arises when an employer seeks to draw on the demand guarantee and the Chinese contractor files a claim against its bank, requesting the court to issue an injunction to stop payment under the demand guarantee on the basis of fraud.  Sometimes the project owner’s overseas bank is added, involving demand guarantees given by a Chinese contractor operating overseas and its bank. One example was mentioned in an earlier blogpost and another example is found in the deal list of a leading Chinese disputes lawyer:

Represented Beijing xxxx International Engineering Technology Co., Ltd. in an overseas construction letter of guarantee dispute before the ….. High People’s Court (first instance) and the Supreme People’s Court (second instance)–

The hearing of cases involving demand guarantees (standby letters of credit) appears to be an important area in which Chinese style case law will supplement the principles in the Civil Code, its relevant judicial interpretation, and the SPC’s 2016  judicial interpretation on independent (demand) guarantees.  At the end of last year (2020), the Shanghai Higher People’s Court issued a policy document on improving the hearing of foreign-related financial cases  (上海法院服务保障进一步扩大金融业对外开放若干意见), one point of which calls for the courts to improve the hearing of demand guarantees. The policy document was accompanied by typical cases (典型案例), one of which was a demand guarantee case heard by the Shanghai Financial Court.

I expect two further authoritative decisions will harmonize how legal and finance professionals understand Chinese law related to demand guarantees.  Those decisions will be made in two cases that the China International Commercial Court (CICC) has heard but has not yet decided. The cases involve demand guarantee (standby letter of credit) issues and the question of the standard for fraud and the issuance of an injunction.  If the SPC takes a case as a CICC case, it means that the legal issue is considered important enough to require a panel of five Supreme People’s Court (SPC) judges to hear the case.  The decisions will be soft precedents, ones that fill in a gap in statutory law and judicial interpretations.

Invisible Dispute #3

The authors of the Engineering Contractors Book wrote about supplier (often Chinese supplier) risk:  “if contractors fail to enhance the selection and management of suppliers, they are likely to face difficulties during the project execution. In practice, there are many cases in which contractors suffer losses due to improper selection or poor management of suppliers…Some suppliers use various unreasonable means to guarantee their profits in the bidding and follow-up process, which will inevitably bring greater risks to contractors.” My comments here are limited to Chinese supplier risk.

One example that can be identified most easily is related to the construction of Justice House in Tbilisi, Georgia.  Disputes over the quality of equipment and related issues ended up in litigation in the Sichuan Higher People’s Court.

Concluding thoughts

It is understood that first and third type of disputes may be heard by Chinese arbitral tribunals or courts, depending on whether the contracts have arbitration clauses, while the demand guarantee cases are generally heard in the courts.  Chinese legal professionals have commented that these cases are challenging for both arbitral tribunals and the courts to hear, particularly if much of the evidence is outside of China and especially if technical expertise is needed. Another issue raised by one of the authors cited is the choice (application) of law, as some jurisdictions may require that local law apply to any subcontracting, but Chinese courts tend to apply Chinese law.

Two recent articles in the Chinese professional legal press by a senior Chinese construction lawyer focused on a recent initiative to establish a qualification system for expert witnesses in construction engineering disputes.  It is even more challenging for Chinese courts to hear disputes that may involve foreign technical expertise.  Yet another issue relates to evidence formed abroad.   A third issue, not mentioned in this blogpost, relates to the greater need for dispute adjudication boards in construction disputes heard in the Chinese courts. Both the China International and Economic and Trade Arbitration Commission (CIETAC) and the Beijing Arbitration Commission have such rules in place, although with different titles.

These invisible BRI 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, or as the current slogan has it “筹推进国内法治和涉外法治.”

____________________________

Many thanks to Sun Wei, partner with the Zhong Lun Law Firm, and some authoritative persons for sharing their insights. The author alone is responsible for the above views.

SPC WHITE PAPERS & ANNUAL REPORTS WITH ENGLISH TRANSLATIONS

I’ve just created a page with links to SPC white papers and annual reports with English translations. As I commented there, these reports are useful for the professional and academic public outside of China. It would be a service to the professional and academic publics inside and outside of China if these reports could be accessed in one place on the SPC’s official website in their Chinese and English versions (to the extent there are English versions). For the English versions, making them more accessible could also be understood (for some) as telling the story of the Chinese courts better to the English-reading international public. Please use the comment function to suggest additional links and additional reports and make corrections.

The Supreme People’s Court & the Development of Chinese International Commercial Law

I am very honored to have been the first keynote speaker of the webinar “Deals and Disputes: China, Hong Kong, and Commercial Law” held on May 18-21 (2021).   The webinar was organized by the University of Pittsburgh, with its School of Law’s Center for International Legal Education working together with its Asian Studies Center. Many thanks to Professors Ronald Brand and James Cook for the kind invitation.   For those who missed it, the recording of my presentation is now available on the Youtube channel of the Center for International Legal Education.

I spoke on the Supreme People’s Court (SPC) and the Development of Chinese International Commercial Law (as I defined it).  My presentation synthesizes many points that I have made separately on this blog and should be useful to students or others seeking to understand several aspects of the work of the SPC.   Many thanks to Professor Pamela Bookman and Mary Buck Young for taking the time to make insightful comments on earlier drafts of my Powerpoint slides. Special thanks to (one of) my research assistants, Yuan Ye, for his work in transforming SPC statistics into a more understandable form and translating them into English.

Mainland-Hong Kong Insolvency “Arrangement” Forthcoming

For those for whom the timing is right, tomorrow’s (14 May afternoon) event gives the interested person an opportunity to watch a discussion in real-time concerning a new hard-law legal “Arrangement”  (it is now clear that the document is not so entitled) between the Mainland (presumably the Supreme People’s Court (SPC) and the Hong Kong Special Administrative Region (Hong Kong SAR) on bankruptcy (insolvency) law and learn about relevant recent updates. The document is the Conference Summary [Meeting Minutes] on Procedures for the Mutual Recognition of and Assistance in Insolvency Procedures by the Courts of the Mainland and the Hong Kong SAR (内地与香港特别行政区法院相互认可和协助破产程序的会谈纪要).  At the same time, the SPC is releasing an Opinion approving pilot projects to implement the Conference Summary  最高人民法院关于开展认可和协助香港特别行政区破产程序试点工作的意见.  A pilot project approach is usual when the SPC wants to test whether procedures are workable before implementing them nationwide.

social media posting by one of Hong Kong’s leading barristers chambers describes it as the “most momentous cross-border insolvency development in a generation. ”  Although it is not so stated, I surmise (by reviewing the press conference announcing the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region” (the Supplemental Arrangement (关于内地与香港特别行政区相互执行仲裁裁决的补充安排), that the official signing of the new insolvency Arrangement will be held in the morning, after which a press conference will be held. My guess, based on that press conference, is that  SPC Vice President Yang Wanming (杨万明副院长) will sign on behalf of the SPC and that Hong Kong SAR Secretary for Justice Teresa Cheng will sign on behalf of the Hong Kong SAR Government.  The link to the SPC’s press conference indicates that Vice President Yang Wanming will in fact sign and that Judge Si Yanli will participate in the signing ceremony and the press conference.

According to the social media posting above, Mr. Justice Jonathan Harris, current Companies and Insolvency Judge of Hong Kong’s High Court, will be delivering a keynote speech during the afternoon Forum announced above.   My guess (without any factual basis) is that Judge Si Yanli will give a keynote as well.  The Arrangement is likely to have involved a great deal of hard work on the part of all involved in the drafting.

Justice Harris’s judgments contain valuable insights into some of Hong Kong’s cross-border insolvency-related issues, such as the intersection between stock exchange listings and insolvency.  His decision in the Winding-Up Proceedings of China Huiyuan Juice Group is a good example:

As I explained at the outset of this decision the court is hearing many petitions to wind-up listed companies whose businesses are in the Mainland.  Since the court resumed hearings in May more than half the petitions I have heard have involved listed companies. Remarkably petitions to wind-up Hong Kong incorporated companies operating domestic businesses are currently a minority…  What is now quite clear is that the use of the group structures I have described present difficulties.  It will be useful if I describe these and what I anticipate will be their impact for creditors and shareholders in Hong Kong and other jurisdictions….

As will be apparent from this decision the practice has developed of Mainland businesses listing in Hong Kong using corporate vehicles which have no connection with the Mainland, which is commonly the COMI [Center of Main Interest], , or Hong Kong where the business is to be listed.  The structure is made more complicated by group architecture which involves inserting between the listed company and the mainland companies at least one, and my impression is commonly more than one, intermediate subsidiary incorporated in a different offshore jurisdiction.  As this decision demonstrates this structure creates a significant barrier to steps being taken by creditors and shareholders to enforce rights using the courts of Hong Kong, which is the legal system that they have probably assumed they will be able to access if they need to take steps to enforce their legal rights against a company listed here.

As I have previously written,  cross-border bankruptcy (insolvency) law is an area of particular focus of the SPC.  Phrases in two 2020 SPC Opinions signal this Arrangement. Article 16 of the November 2020 SPC Opinion  on Providing Support and Guarantees for Shenzhen to Build Itself into a Pilot Demonstration Zone for Socialism with Chinese Characteristics (最高人民法院关于支持和保障深圳建设中国特色社会主义先行示范区的意见) states:

Promote the establishment of a cross-border bankruptcy recognition and assistance mechanism推动建立跨境破产认可与协助机制.

Additionally, Article 12 of the September 2020 SPC  Guiding Opinions on Further Expanding People’s Court Service Safeguards for Expanding the Opening Up to the World (Open Policy Guiding Opinions)) (最高人民法院关于人民法院服务保障进一步扩大对外开放的指导意见) contains the following (translation thanks to Chinalawtranslate):

12. Properly handle cross-border bankruptcy [insolvency], financial, and enforcement cases. Adhere to the principle of equal protection for similar claims, actively participate in and promote the formulation of international treaties on cross-border bankruptcy [insolvency], improve the coordination mechanisms for cross-border bankruptcy [insolvency] and protect the rights and interests of creditors and investors in accordance with the law…12.妥善处理跨境破产、金融、执行案件。 坚持同类债权平等保护原则,积极参与和推动跨境破产国际条约的制定,完善跨境破产协调机制,依法保护债权人和投资人权益。

This single issue illustrates the close reading skills needed to understand SPC Opinions.

Further analysis of the implications of the Arrangement will need to follow its release.

Soft and Hard Law Arrangements & Other Agreements Between the Mainland Authorities and the SAR Governments

1st Joint conference meeting on the Hong Kong BRI Arrangement

If you have never heard of hard and soft law  Arrangements (安排) and other agreements between Mainland authorities and the Hong Kong and Macau Special Administrative Region (SAR) governments, do not be surprised.  The classification is my own and I see it as useful to capture the types of Arrangements and other soft law agreements that have been signed between certain Mainland authorities and the Hong Kong SAR and the Macau SAR, as well as Arrangements between the two SARs. This blogpost highlights several of the more important soft law Arrangements and other agreements between the mainland authorities and the SAR governments.  

This classification harmonizes with the analysis of Professor Wang Heng of the University of New South Wales concerning Belt & Road Initiative Agreements.  

Definition of Arrangements

Although I have written previously about Arrangements between the Supreme People’s Court (SPC) and the Hong Kong Special Administrative Region (SAR) Government, I have not seen an official definition of “Arrangement.”     It appears to be used as a form of agreement between certain Mainland authorities  (intended to include institutions such as the Supreme People’s Court and the Standing Committee of the National People’s Congress as well as ministries and commissions under the State Council ( and it seems some counterparts at the provincial level) and the government of the Hong Kong or Macau SAR.  Some are between the two SARs. I have not seen an equivalent to the Law on the Procedure for the Conclusion of Treaties.  Perhaps guidance exists internally. I surmise (from my blogpost on the recent SPC Arrangement) that the Hong Kong and Macau Affairs Office supervises Arrangements.

What I had not realized until recently that Arrangements are far more numerous and cover a broader range of areas than most legal professionals outside of China (including me) are generally aware of.   Both types of Arrangements can include affiliated measures, such as joint [steering] conferences 联席会议 (related to one of my recent posts ) and yearly implementation measures, such as agreed areas for cooperation.   

Hard and Soft Law Arrangements

 The “Hard Law Arrangements” often have content that is somewhat analogous to a treaty between sovereigns-that is, they have normative content, while the “Soft Law Arrangements” have more soft law content, some more analogous to the ones Professor Wang Heng discussed in the BRI content, while others have language found in domestic Chinese government documents.  I will borrow the definition that Professor Wang Heng uses in his article: soft law refers to quasi-legal obligations or law-like promises that are not legally binding but may affect state behavior.  His definition draws on earlier work, such as that of my colleague Professor Francis Snyder.  (My colleague has a forthcoming book chapter on soft law.)

Professor Wang Heng describes Belt & Road Initiative (BRI) primary agreements (soft law agreements) as largely emphasizing project development rather than rule development. This is also seen to some extent with “soft law Arrangements.” 

“Hard Law” Arrangements

“Hard Law Arrangements” and other “hard law” agreements between mainland authorities and the Hong Kong and Macau SARS are well-known, so this section only mentions a few of the most prominent: 

Professor Henry Gao noted in an article that during the negotiations leading to the conclusion of the CEPAs, it had been suggested that they should be called free trade agreements (FTAs) but they were named  “Closer Economic Partnership Arrangements” instead. He commented that in substance, the two CEPAs are no different from the other FTAs around the world.

For those interested, the Ministry of Commerce (MOFCOM) has a webpage that consolidates the related Macau supplemental agreements.

  •  Dispute Resolution Arrangements

Hong Kong’s Ministry of Justice has a webpage (available in multiple languages) with links to arbitration-related Arrangements as well as recognition and enforcement of civil and commercial judgments Arrangements.  The webpage also links to Arrangements involving other Hong Kong SAR government departments. It appears that some agreements mentioned on that webpage may be soft law documents, but I have not seen the full text of some of these documents and so cannot confirm.

An Arrangement on the Mutual Recognition and Enforcement of Arbitral Awards between the Supreme People’s Court and the Macau SAR Government also exists.

Many other hard law Arrangements have been signed, but I have not seen a single repository of these documents. It is my hope that the Hong Kong Government can do so.

Soft Law Arrangements and Other Soft Law Agreements

It appears that less attention has been paid to soft law Arrangements and other soft law agreements.  There are also memoranda of understanding (MOU), with analogous usage to those in BRI projects. A number of the important ones are highlighted below.

  • July, 2017 National Development and Reform Commission, People’s Government of Guangdong Province, Government of the Hong Kong Special Administrative Region, Government of the Macao Special Administrative Region Framework Agreement  on Deepening Guangdong-Hong Kong-Macao Cooperation in the
    Development of the Greater Bay Area Greater Bay Area (GBA Framework Agreement)

This Framework Agreement is a soft law agreement that links hard and soft law content. In discussing BRI soft law agreements, Professor Wang Heng mentions Project-Linked Agreements and Mechanism-Creating Agreements and mentions that some combine both. The GBA Framework Agreement mentions some of the above hard law Arrangements, with a great deal of new soft law content aimed at promoting the development of the GBA.  It flags what was then forthcoming BRI Arrangements. Among the goals cited:

deepen co-operation between the Bay Area and related countries and regions in… legal and dispute resolution services… and to build an important support area for pursuing the Belt and Road Initiative.for Hong Kong…

establish a centre for international legal and dispute resolution services in the Asia-Pacific Region…

This is the document that attracted my interest in “soft law Arrangements.”  Several articles relate to developing Hong Kong’s role in dispute resolution, such as:

2.To support Hong Kong in developing high value-added maritime services, including…maritime law and dispute resolution,

26. To support Hong Kong in establishing itself as a centre for international legal and dispute resolution services in the Asia-Pacific region to provide relevant services for the Belt and Road Initiative.

The Hong Kong BRI  Arrangement links to Article 34 of the SPC’s 2019  Opinion On Further Providing Judicial Services and Guarantees by the People’s Courts for the “Belt and Road” Initiative (BRI Opinion #2). That article contains language about supporting the Hong Kong SAR to develop as a regional legal service and dispute resolution center and Hong Kong playing a more important role in jointly developing the BRI:

The development of the regional legal service and dispute resolution center of the Hong Kong Special Administrative Region (“Hong Kong SAR”) shall be further supported, the cooperation between arbitration institutions in Hong Kong such as Hong Kong International Arbitration Centre and arbitration institutions in the Mainland, the arbitration institutions in the Hong Kong SAR shall be introduced to the construction of the “one-stop” dispute resolution platform of international commercial courts… and the Hong Kong SAR shall play a more important role in the joint development of the “Belt and Road” Initiative. 进一步支持香港特别行政区区域法 律服务和纠纷解决中心的建设,支持 香港国际仲裁中心等仲裁机构与内地 仲裁机构的合作,在国际商事法庭 “一站式”纠纷解决平台建设中适当 引入香港特别行政区仲裁机构…不断发挥 香港特别行政区在共建“一带一路” 中的重要作用。

The Arrangement establishes a joint conference mechanism (that features in a number of Arrangements) comprising responsible officials from the National Development and Reform Commission (NDRC), the Hong Kong and Macao Affairs Office of the State Council and other relevant departments as well as senior representatives of the HKSAR.  The SPC has participated in at least two of these meetings, but from the reports on the meetings, does not appear to be a joint conference member institution.

The  Hong Kong BRI Arrangement could be linked to the 2019 Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region and the 2020 Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong SAR. Although  BRI Opinion #2 explicitly restates the Chinese government’s desire that more international commercial disputes (including BRI ones) be resolved in China, this clause is also a recognition that the Hong Kong International Arbitration Centre is often selected in contracts between Chinese companies and foreign companies, including in BRI disputes, as evidenced in Professor Matthew Erie‘s recently published article.

Under the Arrangement, the two sides have agreed, in related documents, upon major areas of work and in 2020, allocation of responsibilities and have established an annual joint conference. It is unclear whether a similar set of documents exist for the Hong Kong BRI Arrangement.

The Macau and Hong Kong BRI Arrangements are quite different from one another and deserve further analysis. Under the Macau BRI Arrangement, for example, the Macau SAR Government undertakes to be a platform for liaison with Lusophone countries.

It is unclear why there is no courtesy English translation of this Arrangement (as there is for the Hong Kong BRI Arrangement). The content of this Arrangement provides insights into plans for Hong Kong and the Mainland to cooperate in the area of science and technology, but time does not permit further analysis.

A final comment is that it appears to be difficult to locate the full text of some of the soft law Arrangements reported.

More to Come?

I surmise that the Hong Kong and Macau SARs’ futures will involve more hard and soft law Arrangements and other agreements with the Mainland.  The topic of these agreements deserves closer attention. I hope that someone with an interest, the time, and the language skills can take this research forward. 

 

RECORDING & REVIEW PT. 8: “SAME LIFE, DIFFERENT VALUES,” OR HOW THE NPC LEGISLATIVE AFFAIRS COMMISSION REVIEWS JUDICIAL INTERPRETATIONS

Written by Dongyu Sun.  Edited by Susan Finder and Changhao Wei.

This post also appears on the NPC Observer.

On December 15, 2005, a loaded truck rolled over on a mountain road in Chongqing, crushing a trishaw carrying He Yuan and her two friends to school. All three perished in the accident. What thrust this tragedy into the national spotlight, however, was the drastically different amounts of compensation their families received. The trucker’s employer settled with the families of Yuan’s friends for over 200,000 RMB each, but was willing to pay hers only 80,000 RMB—because she, unlike her classmates, had a rural hukou (or household registration).[1] The company cited a 2003 Supreme People’s Court (SPC) interpretation on the application of law in personal injury cases (2003 Interpretation), which created two separate standards for compensating the deaths of urban and rural residents.

As a result of this effectively hukou-based rule, countless victims’ families have found themselves in the same position as Yuan’s. The Chinese public has dubbed this phenomenon “same life, different values” [同命不同价] and has persistently criticized the 2003 Interpretation. Some citizens have requested that the NPC Standing Committee (NPCSC) conduct a constitutional review of the Interpretation.

It was not until 2020 that the NPCSC’s Legislative Affairs Commission publicly addressed these requests in its annual report on “recording and review” (R&R) [备案审查]. This report’s timing and content are significant. Below, we will first take a closer look at the 2003 Interpretation and the controversy surrounding hukou-based compensation standards, before returning to the Commission’s report.

The SPC’s 2003 Interpretation

Under article 15 of the 2003 Interpretation, in a civil case where the deceased victim was an urban resident, the defendant must generally pay twenty times the previous year’s per capita disposable income of urban residents of the relevant province for the victim’s death. For a victim who was a rural resident, the previous year’s per capita disposable income of rural residents[2] is used as the base instead. The urban per capita disposable income is consistently several times higher than its rural counterpart across China. In practice, courts mainly used the victim’s hukou to determine the applicable standard. Article 12 of the 2003 Interpretation contains similar residence- (hence hukou-) based compensation standards when the victim has been permanently disabled. At the time, the standards in the 2003 Interpretation were considered appropriate for China and in line with official policy that made distinctions based on hukou.

Within a few years, the SPC publicly acknowledged that the dual standards created inequities between urban and rural victims. Then-SPC President Xiao Yang told media in 2007 that the SPC had already formed “a preliminary view” on “same life, different values,” and would issue new rules after that year’s NPC session. But in 2008, an SPC vice president disclosed that it was not possible for the SPC to reach a consensus on a replacement standard.[3] Instead, the SPC issued measures in 2006 and 2011 directing the lower courts to consider factors in addition to hukou (such as a victim’s “habitual residence”) in applying the 2003 compensation standards. Basic level courts encountered many difficulties in implementing this guidance, however, so hukou largely remained the determining factor.

The issue of the dual compensation standards arose during the drafting of China’s Tort Liability Law [侵权责任法].[4] One draft would have set a uniform national standard for death compensations, based on the average annual salaries of urban employees nationwide, while another would have provided an individual-based rule.[5] The NPCSC in the end did not adopt either provision and left the rules in the 2003 Interpretation intact. The Tort Liability Law did make one limited change in response to cases like He Yuan’s: under article 17 (now codified as article 1180 of the Civil Code [民法典]), if multiple people died because of the same tort, a court could award their families the same amount of death compensation without regard to their individual circumstances.

From these developments, it is clear that the authorities considered that the hukou-based rules fit the reality of unequal development of China’s urban and rural regions.[6] They thought that an individual-based rule would give judges too much discretion, but that uniform rules would either create too much burden for rural tortfeasors (if based on urban income level), or be unfair to urban victims (if tied to rural income level). So the 2003 Interpretation, plus the SPC’s flexible measures, were considered the least worst.

Fang Shimin’s Request for Review

Over the years, Chinese citizens have requested the NPCSC to review the validity of the 2003 Interpretation through its R&R process, explained here in more detail. In sum, that process is an oversight tool that empowers the NPCSC Legislative Affairs Commission (LAC) to reject a sub-statutory legal document if it deems the document unconstitutional, unlawful, contrary to the Communist Party’s major policies, or otherwise “clearly inappropriate.”

The Southern Metropolis in January 2021 reported on such a citizen request and the LAC’s reply. Mr. Fang Shimin, a retired manager of an Anhui mine company with an interest in the law, wrote to the LAC in mid-2018, arguing that the 2003 Interpretation’s hukou-based rules violated the guarantee in Article 33 of the Constitution that all citizens are “equal before the law.”

The LAC (specifically, its Office for Recording and Reviewing Regulations) disagreed with Mr. Fang. It responded to him in December 2018, after having consulted with the SPC and its own Office for Civil Law. The LAC explained that the differential compensations were constitutional because they did not in fact make up for the victims’ disabilities or lost lives, but were instead economic relief to the victims or their families. The LAC’s reply did also acknowledge that there were some issues with the 2003 Interpretation that need to be “studied and resolved,” including how to define the compensation more reasonably so that “most citizens would accept them.”

Recent Policy Change & Reform Pilots

The turning point for the hukou-based compensation rules came in late 2013, when the Communist Party decided to “accelerate” hukou reform. A few months later, the State Council issued a major policy document that called for abolishing the distinction between urban and rural hukou and replacing both with “resident hukou” [居民户口]. By February 2017, all mainland provinces had implemented this reform. The State Council also ordered companion reforms to other institutions (e.g., social welfare programs) consistent with the uniform “resident hukou” system, but one government researcher said at the time that there would be “a long way to go” before the urban-rural disparity in social benefits disappears.

After a few years of development, in April 2019, the Party Central Committee and the State Council issued a joint policy document to further hukou reform and to promote integrated development of urban and rural areas. The document specifically requires “reforming the personal injury compensation system and equalizing compensation standards for urban and rural residents.”

To implement this directive, the SPC soon required provincial-level courts to initiate pilot programs to equalize compensation standards. According to our research, almost all courts have decided to conduct the pilots within the whole province, while a few limited their scope to a few designated cities. The majority of provinces are experimenting with uniform compensation standards in all civil cases involving personal injury, but a few are testing them in only a subset of tort cases, for instance, those arising from traffic accidents. As for the new compensation standards, most provinces are now applying the urban standards under the 2003 Interpretation to all victims, whereas some are trying out new formulae, such as the per capita disposable income of all residents of a province.

The pilots are still underway as of this writing. The SPC has not indicated when they would end.

The LAC’s Report

It was against this backdrop that the LAC again responded to citizens’ requests to review the SPC’s 2003 Interpretation. According to its 2020 R&R report, some citizens (like Mr. Fang before them) argued that “the inequalities in judicial trial practices that have resulted from the [2003 Interpretation’s] different calculation standards were inconsistent with the relevant constitutional spirit”—namely, the equality principle.

The LAC responded:

After review, we think that as the society develops and makes progress, the State has proposed the integrated development of urban and rural areas, and the gaps between urban and rural development and the residents’ living standards will gradually narrow, so the differences between standards for calculating compensations for personal injury to urban and rural residents should accordingly be abolished.

我们审查认为,随着社会发展进步,国家提出城乡融合发展,城乡发展差距和居民生活水平差距将逐步缩小,城乡居民人身损害赔偿计算标准的差异也应当随之取消。

The LAC then mentioned the ongoing pilot programs to equalize the compensation standards as authorized by the SPC and reported that it had “advised” the SPC to “timely” amend its 2003 Interpretation after “summarizing lessons learned from the pilots.”

It thus appears that the LAC dodged the constitutional question raised by the citizens’ requests. Instead, it relied on two other grounds under the R&R’s governing rules—new state policies and changed realities—to disapprove the hukou-based rules in the 2003 Interpretation. Yet, curiously, Liang Ying, head of the LAC’s Office for Recording and Reviewing Regulations, affirmed the constitutional nature of the LAC’s review of the 2003 Interpretation in an interview with the Legal Daily. If so, then why did the LAC was not more forthcoming about its true reasoning in its official report?

It might have concerns for the ramifications of using the Constitution to invalidate the SPC’s hukou-based standards. Although the post-2014 hukou reforms have removed the urban-rural classification, they have neither ended the hukou system nor instantly improved the urban-rural inequality created by the prior classification. Most citizens continue to obtain critical social services and benefits—compulsory education, healthcare, affordable housing, unemployment benefits, pension, veterans’ benefits, among many others—from the local government at the place of their hukou. (Rural migrants may access urban benefits, but only if they meet the often-stringent residency requirements, especially in megacities.[7]) Except under a few now-integrated welfare programs, rural residents in general still receive social entitlements of inferior quality. For instance, the State Council maintains separate rules for the urban and rural subsistence allowance programs. And by end of 2020, only 7 of 31 mainland provinces had achieved (rough) parity of subsistence allowances between urban and rural residents; in all other provinces, eligible urban residents received at least 20 percent (and up to 130 percent) more allowances than rural residents.

Were the LAC to reject officially the 2003 Interpretation’s dual compensation standards on constitutional grounds, it would render other hukou-based rules—rules that disfavor rural residents—susceptible to the same constitutional challenge. By contrast, relying on policy and societal changes that are specific to personal injury compensation would give the LAC more leeway to turn away constitutional attacks on other hukou-based rules. By framing the controversy over the 2003 Interpretation as one of policy, therefore, the LAC can signal that other hukou-based rules are open to change, but also make clear that the changes will come only at the authorities’ discretion.

_____________________________________________

SUN Dongyu graduated from the School of Transnational Law of Peking University in 2018, with a Juris Doctor degree in American law and a Juris Master degree in Chinese law. He was recently awarded a German Chancellor Fellowship by the Alexander von Humboldt Foundation in Germany for the year 2021–22. He currently works as a research assistant to Professor Susan Finder. 

Changhao Wei is a Postdoctoral Fellow at Yale Law School’s Paul Tsai China Center, where he focuses on China’s legislative process and constitutional enforcement mechanisms. He is the founder, manager, and editor of NPC Observer, a website that covers China’s national legislature, the National People’s Congress.

_    _    ___-

[1] Rural hukou was officially “agricultural hukou” [农业户口], and urban hukou “non-agricultural hukou” [非农业户口].

[2] The Interpretation uses the term “per capita net income of rural residents” [农村居民人均纯收入], but the National Bureau of Statistics has stopped using that metric since 2016 and has replaced it with the “per capita disposable income of rural residents” [农村居民人均可支配收入].

[3] See Zhang Xudong [张旭东], The Theoretical Paths to Solving the Conundrum of “Same Life, Different Values” [破解“同命不同价” 难题的理论路径], Mod. L. Sci. [现代法学], no. 6, 2008, at 97, 98.

[4] See Zhang Xinbao [张新宝], An Interpretation of the Death Compensation System in the Tort Liability Law [《侵权责任法》死亡赔偿制度解读], China Legal Sci. [中国法学], no. 3, 2010, at 22, 23.

[5] Id.

[6] Zhang, supra note 4, at 98.

[7] See, e.g., Kam Wing Chan, China’s Hukou System at 60: Continuity and Reform, in Handbook on Urban Development in China 59, 73–74 (Ray Yep et al. eds., 2019).