Update from #1 China International Commercial Court

The Monitor at the #CICC/#1 Circuit Court, December 2018

In recent days, I had the opportunity to meet with  Zhang Yongjian, chief of the #1 China International Commercial Court (CICC) who provided some updates about the cases accepted by that court.  In addition to the three rulings (posted on the CICC website) that the #1 CICC had issued, he mentioned that a ruling in one of the cases was forthcoming, as was a judgment in another. He mentioned that in considering some of the cases, certain members of the expert committee have provided expert opinions, as is authorized by the CICC rules.  Additionally, the #1 CICC has accepted a sixth case, filed directly with the court. Zhang Yongjian mentioned the issues in that case relate to entrusted/nominee shareholding. The other cases accepted thus far are ones that had been referred by lower courts.

Supreme People’s Court Establishes a Mechanism for Resolving Inconsistent Decisions

 

Screenshot 2020-01-17 at 12.11.48 PM

On 11 October, the Supreme People’s Court (SPC)  issued brief guidance establishing a mechanism for resolving its inconsistent decisions, entitled “Implementing Measures on Establishing a Mechanism for Resolving Differences in the Application of Law (Implementing Measures) (关于建立法律适用分歧解决机制的实施办法).  The guidance did not appear in Chinese legal media until the end of October. The intent of the guidance is to create a mechanism to resolve the old problem of inconsistent court decisions concerning the same issue (same cases decided differently 同案不同判) made by Chinese courts and even within the SPC. Widespread use of the SPC’s judgments database has brought this phenomenon to greater public attention.  With the explosion in the number of cases in the Chinese courts and in the SPC in particular in recent years, the issue of divergent views within the SPC on the same issue is likely to be occurring even more frequently.  The concern about uniformity or consistency of judicial decisions has its roots in the traditional Chinese legal system and is an ongoing topic of discussion among Chinese judges, legal practitioners, legal academics, and law students.

For those with an interest in the details of how the SPC operates, this document does not have the status of a judicial interpretation but the SPC’s judicial committee has approved it, as is evident from the title of the document (measures/办法 and the document number 法发〔2019〕23号 (Fa Fa (2019) #23.  Judicial interpretations must have one of four titles and have a document number with  Fa Shi 法释.  The reason that the SPC judicial committee approved it is linked to Article 7 of the recently released guidance on judicial committees: “the adjudication [judicial] committee of the Supreme People’s Court is to unify law through means such as adopting and drafting judicial interpretations and normative documents (规范性文件), and publishing guiding cases.”

This mechanism has its antecedents in several previous judicial reform documents, and is one that is contained reform measure #23 of the last round of judicial reforms and reform measure #26 of the current round::

#23….Complete and improve working mechanisms for the uniform application of law.

#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. Improve the guiding cases system, complete mechanisms for reporting, selecting, publishing, assessing, and applying cases. Establish mechanisms for high people’s courts filing for the record trial guidance documents and reference cases. Complete mechanisms for connecting the work of case discussion by presiding judges and collegial panel deliberations, the compensation commission, and the judicial committee. Improve working mechanisms for mandatory searches and reporting of analogous cases and new types of case. (完善统一法律适用机制。 加强和规范司法解释工作,健全司法解释的调研、立项、起草、论证、审核、发布、清理和废止机制,完善归口管理和报备审查机制。完善指导性案例制度,健全案例报送、筛选、发布、评估和应用机制。建立高级人民法院审判指导文件和参考性案例的备案机制。健全主审法官会议与合议庭评议、赔偿委员会、审判委员会讨论案件的工作衔接机制。完善类案和新类型案件强制检索报告工作机制)

A brief summary of the mechanism is set out, followed by my preliminary thoughts on the mechanism and related issues.

The mechanism

The Implementing Measures, which went into effect on 28 October,  provide that if certain SPC entities or lower courts discover that the SPC has issued valid judgments (判决) or rulings (裁定) (the Chinese term is “生效裁判”) which apply the law differently (存在法律适用分歧), or an ongoing case may result in the later decision applying the law differently from that in a previous SPC case, the matter should be brought to the attention of the SPC judicial committee through an application process managed by the Trial Management Office.

Article 1 of the Implementing Measures designates the SPC judicial committee (also translated as adjudication committee 审判委员会) as the institution to resolve and guide differences in the application of law.

Article 2 authorize  operational divisions of the SPC (业务部门), the higher people’s courts and specialized people’s courts to submit an application to the SPC’s Trial Management Office which may be eventually considered by the SPC’s judicial committee if either:

  1. there is a discrepancy in the application of law of judicial decisions of the SPC that are already effective (最高人民法院生效裁判之间存在法律适用分歧的);
  2. or there is a difference in the application of law between the conclusions in a case being tried and principles or standards on the application of law already determined in effective decisions of the SPC  (在审案件作出的裁判结果可能与最高人民法院生效裁判确定的法律适用原则或者标准存在分歧的).

Article 3 authorizes the China Institute of Applied Jurisprudence  (CIAJ) to submit an application to the Trial Management Office if it encounters differences in the application of law in effective judgments of the SPC that it encounters during its focused research work on like cases decided consistently (类案同判专项研究).

If the Trial Management Office determines the matter should be accepted (project initiation) (立项), that office is required to refer the matter to the CIAJ, which is required to provide an initial view to the Trial Management Office within five working days.  Presumably, they will do little additional research and will focus on reviewing the materials submitted by the entity involved.  In some situations, it appears to put CIAJ in the odd position of reviewing its own work.  The Trial Management Office forwards the initial view of the CIAJ to the SPC operational division involved for further review and response.  The operational division involved may involve experts in needed. The operational division should draft a response (复审意见) in a timely manner to the Trial Management Office, which should submit a request to an SPC leader (presumably the relevant SPC vice president) to place the matter on the judicial committee agenda.  Once the judicial committee makes a decision, the entity that applied for a determination is to be informed.  The Trial Management Office is required to provide a proposal containing the form and scope of the decision by the judicial committee for approval (提出发布形式与发布范围意见).  It can be anticipated that determinations on non-sensitive topics may be made public, while those on more sensitive topics will be distributed either solely within the court system or to a relevant category of judges. Article 11 of the Implementing Measures requires SPC operational divisions, local courts, and specialized courts to make reference and implement (参照执行) the SPC judicial committee’s decision in the course of their work. Presumably that will depend on how widely distributed the determination is.

Some preliminary thoughts

In my view, the mechanism is a microcosm of themes reflecting how the SPC operates.  As mentioned above, the SPC decides (either through judgments or rulings) large numbers of cases yearly, and the SPC responds to an unknown number of requests for instructions (请示), mostly on legal issues, which means that in practice that issues on the same body of law may be determined by different divisions of the SPC or different teams of SPC judges. So differences in legal issues may arise either through litigation or court administrative-type procedures. While SPC judges in practice (as I understand it) search for similar cases, it is inevitable that different people have different views on legal issues.  Unlike some other legal systems, the SPC has not evolved an en banc or enlarged panel of judges (this description of how France’s highest court operates provides a good example) as the final institution for resolving these issues.  Designating the SPC’s judicial committee reflects the traditional administrative way (官本位) that SPC makes major decisions concerning legal issues.  As I described in a recent blogpost, the members of the SPC’s judicial committee are its senior leaders.

I surmise that many of the differences in views will be resolved before the matters reach the judicial committee.  In comments made on the Implementing Measures, Justice He Xiaorong (head of the #2 Circuit Court) mentions that he has inaugurated a system of enlarged panels of judges that include those with a public law and private law background, and familiar with civil, criminal, and administrative law, to consider cases involving difficult issues. That system will reduce somewhat the pipeline of issues possibly entering this mechanism.  For those issues that enter the mechanism, it is possible that opposing views may be harmonized when the operational division of the SPC needs to respond to the points summarized by the CIAJ.  I predict that relatively few questions will go to the SPC judicial committee itself.  The mechanism may have been designed with that goal in mind or may have that impact.

Additionally, from my reading of the Implementing Measures, the drafting could have benefited from more input from greater input either within the SPC or without, which could have avoided some of the problems I point out below. I surmise that the drafters were so used to the terminology used within the SPC, they did not realize that lack of clarity will confuse the lower courts and the greater legal community, for whom this system may have practical implications. In particular, the Implementing Measures:

  1.  do not define what is meant by differences in the application of law (法律适用分歧).  Presumably, a major difference in the application of law is intended and the SPC judicial committee (and its gatekeeper, which appears to be the Trial Management Office) will consider carefully which inconsistencies merit a determination by the judicial committee. My understanding is that the judicial committee is reluctant to reverse its determinations on particular legal issues within a short time, as it seeks to provide legal certainty on particular issues through judicial interpretations and other documents.  As I described in my 2019 article on the SPC and FTZs, rules or policies included in SPC judicial policy documents may eventually be crystallized in SPC judicial interpretations and eventually codified in national law, but that process is slow and cannot meet the needs of the lower courts, which need to deal properly (politically and legally) with outstanding legal issues pending a more permanent stabilization.
  2. do not define the term “裁判,” which generally refers to judgments (判决) and rulings (裁定). To a casual reader, at least, it is not clear whether it is intended to include responses to requests for instructions (requests for advisory opinions, 请示).  As I wrote in a blogpost earlier this year, some responses to requests for instructions are entitled fuhan 复函 and others dafu 答复. The editors (from the SPC) of a two-volume collection of responses described them as ‘usually called quasi-judicial interpretation documents’ (往往被称为准司法解释性文件) and ‘a necessary supplement to judicial interpretations’ (它是对司法解释一种必须的补充).  It is not unusual for these responses to conflict with one another, as reasonable people can disagree and multiple institutions within the SPC issue responses on the same or related bodies of law.  I have not noticed a document (at least one that was made public–I’d be grateful to be informed otherwise) describing an existing mechanism requiring the drafters of these responses to review related responses issued by other divisions. Differences in the application of law could also arise between an existing response and later judgment, or draft judgment.
  3. do not define what is meant by “业务部门” (operational departments/divisions).  Does it include the SPC’s Research Office (which one knowledgeable person described as a comprehensive operational department (综合业务部门)), which often issues responses to requests for instructions?
  4. are very weak on specific procedures for when a question of law should be referred to this mechanism.  Consider, for example, a case that is being considered by one of the divisions of the SPC.  2017 SPC regulations on the SPC’s responsibility system mention professional  (presiding) judges meetings (as discussed in a 2017 blogpost and again several times this year.  The Implementing Measures do not specify whether the issue should be reviewed by the division’s professional judges meeting before it is submitted to the Trial Management Office. Presumably that will be the case, as the judicial committee guidance requires it. In Justice He Xiaorong, clarifies that the professional judges meeting is an important institution for resolving differences in the application of law.   As a practical matter, will this procedure suspend civil litigation procedures?  It is unclear.
  5. do not clarify what will be included in the package of documents that goes to the Trial Management Office. Will it be similar to the documents that go to the judicial committee under its new guidance on judicial committees? It appears that the Implementing Measures are not well integrated with the new guidance on judicial committees.   I surmise (please message me if I am mistaken) that the drafting of the Implementing Measures and the guidance on judicial committees was siloed, a frequent problem in the Chinese and other bureaucracies, so that the drafters of the Implementing Measures were unaware of the details of the new judicial committee guidance. As I wrote last month, those contain more specific requirements concerning the content of the report that the judges are required to prepare for the judicial committee, including arguments by both/all parties, prosecution/defense counsel and a clear listing of the issues on the application of law that require discussion and decision by the adjudication committee, the opinions of the professional (presiding) judges meeting.  The guidance also requires judges preparing these reports to search for similar or related cases. I surmise that these requirements will be consolidated in practice.
  6. give special authority to the CIAJ in the course of its research work on like cases. It is also possible that CIAJ could encounter major inconsistencies in its other work, such as compiling its Selection of People’s Court Cases (mentioned in my 2017 Tsinghua China Law Review article). Moreover, it is curious that the CIAJ is given this special authority but not an analogous institution in the National Judges College. Article 3 authorizes the CIAJ to submit an application relating to differences in the application discovered in the course of its work, while the Judicial Case Academy of the SPC (under the National Judges College) (see a list of its 2018-2019 research projects) has no such authority, giving the careful reader the impression that the CIAJ led the drafting of the Implementing Measures.  It appears to be a version of a phenomenon I described in a draft article, that because the SPC is a large organization, with many entities competing for top leadership attention, policy documents are sometimes drafted with  consideration of institutional interests, as a policy document approved by the SPC judicial committee can be seen as representing an undertaking by SPC leadership to the institutional goals of division or entity involved.

Supreme People’s Court President’s Zhou Qiang’s virtual mailbox

One of the more unusual features of the Supreme People’s Court (SPC)’s website is the “Court President’s mailbox,”  by which individuals can send an email to SPC President Zhou Qiang (to yzxx@court.gov.cn), and where selected responses are published. President Zhou Qiang established it in 2013, almost exactly six years ago. As to why the SPC has a letter to the court president function, the answer is on the SPC website and the article announcing the launching of the mailbox:

it is to “further develop the mass education and practice campaign [mentioned in this blogpost six years ago] and to listen to the opinions and suggestions of all parts of society (the masses).

Listening to the opinions and suggestions of society is also required of Zhou Qiang as a senior Party leader.  It was part of the mass education and practice campaign and continues to be a fundamental principle in the current “Don’t forget the Party’s original aspirations and firmly remember your mission” campaign.

President Zhou Qiang listed establishing the Court President mailbox as an accomplishment in his 2018 report to the National People’s Congress.

Local courts have followed the SPC’s model by establishing their ownCourt President’s mailboxes.” From my own experience, not all [non-spam] emails either to President Zhou Qiang’s or a local court president’s email box are considered to merit a response.

The language of the responses is surprising for the reader used to the very formal language of SPC documents.  (One follower of this blog was so surprised that he ask.ed me about this). Many of them start with

Hello! We received your proposal (or query), and after consideration, we respond as follows:您好!《关于…..》收悉。……经研究,答复如下:

And end with this language:

Thank you for your support of the work of the Supreme People’s Court! 感谢您对人民法院执行工作的关心和支持!

A  quick but unscientific survey of recently published responses follows. As to why people write, judging from my own experience and the content of published responses, it appears that it is one of the few ways to bring a problem (unrelated to a dispute) to the attention of the court authorities.  I have no way of determining whether the responses are representative of the letters submitted, but I surmise that the letters are typical (典型).

Proposals

Some responses relate to specific proposals. Among recent proposals include anonymizing references to HIV infected persons, stipulating the ceiling interest rate in private lending disputes, and uniforms for judges and judges assistants (specific recommendation not described).

Queries

Some responses relate to queries on specific practical issues for litigants, such as whether a plaintiff must provide the defendant’s identity card number when filing a lawsuit, and the deadline for an administrative agency to enforce an administrative penalty or fine.

 Issues with the social credit system

Responses to persons seeking to lift restrictions against them imposed by the judgment debtors part of the social credit system seem to constitute a substantial number of responses. In 2019, those included letters published on 8 October. 28 June, 12 June, 17 April, 31 January, among others. If affected persons need to write to Zhou Qiang to resolve their problem, it means that the mechanism in the social credit system for lifting restrictions on judgment debtors once they have complied does not work as well in practice as advertised, to the disadvantage of affected persons.

Issues with the operation of the SPC’s case database (裁判文书网)

Letters raising problems with the operation of the SPC’s case database (China Judgments Online) include letters published on 20 August, 16 July, 28 February. Users complain about problems with the search function, slow loading of pages, and other technical problems.  In one response the SPC complains about the database being used by companies using webcrawler or web scraping software, and their efforts to combat this by installing software to prevent it.  The SPC does not explain why this should be an issue.

(Complaints about the operation of the SPC’s case database are heard worldwide, judging by comments made at a recent international academic conference on Chinese law at 40 years and other academic conferences.)  As a consequence many researchers use alternative providers that offer better search functions and loading times.  I understand that the SPC has met with some of these alternative providers, but frustrations with the official database continue.

Who writes the responses?

Most responses lack a specific author. Occasionally a response is published in the name of the SPC’s Research Office or Data Center.  The careful reader detects inconsistencies in the way that letters are answered, with some persons addressed as Comrade, others by name, while others by Mr./Ms.

A natural question for legal professionals to ask is about the legal authority of these responses, as some of these responses are republished on Wechat public accounts focusing on law or legal information websites.  The answer seems to be “it depends”.  One recent response to a question concerned the time limit for an administrative agency to apply to a court to enforce an administrative penalty or fine was given by the SPC’s Research Office.  The Research Office is the SPC’s “gatekeeper” for judicial interpretations and is involved in drafting or coordinating the drafting (depending on the topic) of judicial interpretations (an academic article stuck in the production pipeline will provide more details).  Although the response is not legally binding (unlike a judicial interpretation), a Research Office response is likely to be highly persuasive guidance.  It is one of many tools in the the SPC’s guidance toolbox.

 

SPC Updates its Guidance on Judicial (Adjudication) Committees

2016 meeting of SPC judicial committee, to which NPC, CPCC representatives, and certain experts were invited

On 22 September the Supreme People’s Court (SPC) updated its guidance to the lower courts on judicial committees (关于健全完善人民法院审判委员会工作机制的意见). (also translated as “adjudication committees”) (审判委员会). For those new to this blog, these committees are made up of certain senior members of a court, and they have special decision-making authority, as detailed below. They decide cases that are too difficult or important for an individual judge or judicial panel to decide, to ensure the optimal substantive result (as seen from the institutional perspective of the courts).

The document is a policy document (explained here), as indicated by its document number 法发〔2019〕20号). Lower courts (and the specialized courts) can issue further detailed guidance, have in the past and will do so.  In 2010 the SPC issued guidance on judicial committees (2010 guidance), which I analyzed in this article, Reforming-judicial-committees.  The article includes some insights from a number of judges with whom I spoke at the time.  Reforming judicial committees has been on the SPC’s agenda since the prior round of judicial reforms, as my 2014 blogpost discusses. I predicted that reform would occur “in the medium term.”  There are is a great deal of writing about judicial committees in English and especially in Chinese.  My 2014 blogpost links to some of the English language research, and other insights about how judicial committees work can be found in Embedded Courts, the prize-winning book by NG Kwai Hang and He Xin.

The broad consensus on judicial committee reform can be seen in Articles 36-39 of the Organic Law of the People’s Courts, as amended in 2018 (2018 People’s Courts Law), but the 2019 guidance sets out more detailed rules.

This blogpost will highlight some of the issues that come to mind in a quick review.

A quick list of what is new follows:

  • There are some changes in the format of SPC Opinions (意见) so that it is usual for them to begin with a list of basic principles.
  • As to be expected, Party leadership and related principles are listed at the top of both the 2019 and 2010 guidance.  Both stress upholding Party leadership of the work of the people’s courts, with the 2019 guidance referring to “upholding the Party’s absolute leadership over the work of the people’s courts.”  This should not at all be surprising, as the phrase has been used repeatedly since the 2019 Political-Legal Work Conference. The Party Regulations on Political-Legal Work use the phrase “Party’s absolute leadership.” As I mentioned earlier this year, Li Ling (of the University of Vienna) sees this as indicating a complete and unambivalent severance from the judicial independence framework.
  • On membership of judicial committees, The 2018 People’s Courts Law and the new guidance retain the old system of having the court president and vice-presidents, but no longer requires division heads (庭长) to be members, but refers to “experienced”(资深) judges and to the possibility of having full-time members.  The  SPC already does this.  Justices Hu Yunteng, Liu Guixiang, Pei Xianding, and He Xiaorong are full-time members of the judicial committee, which gives them a bureaucratic rank equivalent to being an SPC vice president, with attendant privileges. It is likely that the Central Staffing Commission regulates the number of persons who can be SPC vice presidents.  Judging by the SPC website, some SPC judicial committee members are not SPC Party Group members, although of course there is some overlap.
  • Another innovation in the 2018 People’s Courts Law, repeated in the 2019 guidance, is having specialized judicial committees, to focus on more specialized issues, and to deal with the problem of having non-specialist judges making decisions on issues regarding which they are not familiar.  This provision consolidates ongoing practice in both the SPC and lower courts  My understanding is that the Shenzhen Intermediate Court was one of the earlier courts to establish specialist judicial committees.  The roots of this innovation lie in the 2004-2008 Second Judicial Reform Five Year Plan Outline. (This also illustrates the time it takes for some judicial reforms to be adopted.)
  • On the functions of judicial committees, new language mentions “sensitive, major, and difficult cases such as those involving national security, diplomacy, or social stability.”  That language is new as compared to the 2010 guidance.  It is not new to the SPC, as it appears in the SPC’s 2017 judicial responsibility regulations, about which I wrote.  I surmise that this is just spelling out what had been the general practice.   Most of the other functions are consistent with previous guidance.
  • The operational language is more detailed than before and gives a glimpse into the bureaucratic nature of the Chinese court system ( a collegial panel or single judge who thinks a case should go to the judicial committee  “submit an application and report it up to the court president for approval level by level; and where an application is not submitted, but the court president finds it necessary, they may request that the adjudication committee deliberate and make a decision. The language enabling a court president to designate a case for judicial committee discussion likely represents a consolidation of practice, rather than something new.
  • Other procedures in the operational section are new, reflecting the new institution of the professional judges committee and much more specific requirements concerning the content of the report that the judges are required to prepare for the judicial committee, including arguments by both/all parties, prosecution/defense counsel and a clear listing of the issues on the application of law that require discussion and decision by the adjudication committee, the opinions of the professional (presiding) judges meeting. In a clear signal about how the SPC sees the importance of case research, it also requires judges preparing these reports to search for similar or related cases.
  • The 2019 guidance requires judicial committee members with a conflict to recuse themselves  (the language is unclear about whether a party can apply to do that).  This is new, and reflects many years of criticism of the failure to have a recusal mechanism.
  • The 2019 guidance also imposes a quorum requirement on judicial committee meetings, both the plenary and specialized committee meetings. Certain outsiders (people’s congress delegates, scholars, etc) may attend, as well as the chief procurator at the same level or his delegate (this latter provision is not new).
  • Decisions are made by at least half of the members attending and dissenting opinions must be recorded in the case file. It does not mention that dissenting opinions will be mentioned in the judgment issued to the parties and the public. As before, the decision of the judicial committee is binding on the judge or judges who heard the case (principle of democratic centralism).
  •  The 2018 People’s Court Law and new guidance require the decision and reasoning in cases discussed by the adjudication committee to be disclosed in the judgment documents unless the law provides otherwise, so a significant step forward in judicial committee transparency.  The lack of judicial committee transparency had been criticized for many years.
  • Judicial committees at all levels of the courts are now required to create an audio or visual recording of the entire process of judicial committee meetings and keep them confidential. Judicial committee proceedings are required to be incorporated in a court’s caseflow management system. It is not clear from the guidance who or which entity would have access.
  • Those not involved in judicial committee proceedings (outside leaders, senior judges not involved) are forbidden from involving themselves in judicial committee proceedings.  If this didn’t happen in practice, it wouldn’t have been included in this guidance.
  • Similarly, the language in the 2019 rules on judicial committee members and other maintaining confidentiality and work discipline, and not leaking trial work secrets (I discuss this in my article published earlier this year.  If this didn’t happen in practice, it wouldn’t have been included in this guidance.

Although for many years proposals have been made to abolish the judicial committee, I have rarely heard anyone who has worked in the Chinese judicial system agree with that proposal.  It seems more likely that the SPC thinking is maintaining the judicial committee system is appropriate for China at this time, given the level of professionalism nationwide, the need to share/avoid responsibility for making difficult decisions, and the greater political environment.  This guidance appears to be designed to deal with some of the abuses of the judicial committee system, have greater (but not complete) transparency, incorporate new court institutions, and generally improve how the committees operate.

 

Central Inspection Group inspecting the Supreme People’s Court (again)

Screenshot 2019-09-11 at 8.45.00 AM

Mobilization meeting for the Central Inspection Group’s inspection of the SPC

This week the Supreme People’s Court’s (SPC’s ) media outlets are carrying this 10 September report of the Central Inspection Group (CIG) #4’s mobilization meeting to inspect the SPC’s Communist Party group.  The same group is also inspecting the Supreme People’s Procuratorate (SPP). Senior leaders (that with a bureaucratic rank of deputy bureau chief and above 副局级以上干部) of the SPC and its institutions attended in person (as well as related personnel). Those in the SPC’s six circuit courts  (巡回法庭) attended by videolink.  Zhao Fengtong is heading  (this English biography is outdated) the inspection group. He gave a speech at the mobilization meeting. President Zhou Qiang, who chaired the meeting, spoke as well. A search of Caixin’s website reveals that Zhao Fengtong has headed many such inspection groups. News of the inspection was announced on the Central Commission for Discipline Inspection (CCDI) website last week and other media outlets. The inspection is part of the current round of CIG inspections, which total 37 Party, government, and other entities.  A CIG group last inspected the SPC almost three years ago. The previous mobilization meeting and inspector results were previously mentioned on this blog.

The China Law Society (a mass (government-organized non-government organization)) and the Ministry of Justice are being inspected in this round of inspections. Each has held its own mobilization meeting.

The inspection appears to be one example of the strengthening of Party leadership in the SPC. The inspection appears to be linked to language in earlier documents to strengthen the leadership of the Communist Party (加强党的领导) and to strengthen Party political construction (党的政治建设).  The Party Center issued a document on political construction earlier this year.

The remarks that Zhao Fengtong made are consistent with the document on political construction. Some of the points that Zhao Fengtong and Zhou Qiang made are highlighted below (along with my brief comments in italics):

  • the SPC, as a central organ, assumes a major political responsibility and glorious historical mission (重大政治责任和历史使命).  This phrase is to be found in SPC policy documents supporting important government initiatives;
  • Inspections are political supervision and a comprehensive political examination of the implementation by the Party Group of a Central and national organ of its political responsibility and duties (巡视是政治监督,是对中央和国家机关党组织履行政治责任和职责使命情况的全面政治体检). The term “political inspection” appears to be used frequently since earlier this year–the report on the previous mobilization meeting did not use this term.
  • The focus is on inspecting how the SPC is implementing the Party line, direction and policies and the major decisions that the Party Center has announced (重点监督检查落实党的路线方针政策和党中央重大决策部署情况);
  • The inspection will search out political deviance (深入查找政治偏差).  This phrase is found in the document on political construction–“put efforts into discovering and correcting political deviation” (着力发现和纠正政治偏差).

President Zhou Qiang stated that the Party group fully supports the work of the inspection group, will correct the problems found, will not delay or blame.  He mentioned that the institution will combine support for the work of the inspection group with current work (要把配合做好巡视工作与抓好当前工作结合起来).  The SPC is a court, to whom the public looks for justice. Informal inquiries indicate that the SPC has an even larger civil and commercial caseload this year.  Although earlier this year it raised the minimum amount in dispute for cases that it will take, the current state of the economy means that the SPC is facing a large increase in civil/commercial disputes. Domestic cases have a six-month deadline for resolution, placing a great deal of pressure on judges to resolve them timely, either by encouraging settlement or issuing judgments (or rulings).  

As in the previous round, the CIG is inspecting the SPC for approximately two months. The inspection group has provided an email and telephone number for those wishing to provide further information.

Background on CIGs and how they operate can be found in a 2016 New York Times article (focusing on the Ministry of Public Security’s inspection) and this scholarly article by Professor Fu Hualing of the University of Hong Kong’s law faculty.

Rooting the Singapore Mediation Convention in Chinese soil

Screenshot 2019-09-01 at 3.15.52 PM

tree planting in Fujian ©xinhua

The signing of the  UN Convention on Enforcement of Mediated Settlement Agreements (Singapore Mediation Convention) in early August by the United States, China, and 44 other countries is one of the significant events for international commercial lawyers, although it has been lost in the roar of more major geopolitical events.  Signing the convention appears to have been a last-minute decision by the government of the People’s Republic of China, as this post by Zhong Lun partner Sun Wei in the third week of July does not give a clear signal as to whether China would sign. In several events at which I spoke or attended this month, the topic of the Singapore Mediation Convention came up.  So I’d like to draw on the wisdom of others (and add some of my own thoughts) to talk about the challenges to be faced in rooting the Singapore Convention in [mainland] Chinese soil.

I’ll note that Professors Peter Corne and Matthew Erie have written about the same topic recently for the well-regarded blog Opinio Juris about the background and some of the challenges that China faces in implementing the Singapore Mediation Convention.  I appreciate their link to my March, 2019 blogpost on the closed-door workshop held at the International Law Institute of the Chinese Academy of Social Sciences on the Singapore Convention. They have written in detail about the lack of commercial mediation legislation, inconsistencies between the Convention and domestic PRC law, and the lack of private-sector or other robust mediation centers.  I’ll add to the analysis several (generally unrecognized) factors:

  • taking a more flexible approach to mediation legislation;
  • changing state-owned enterprise (SOE) and SOE senior manager metrics and performance indicators to facilitate mediated settlements;
  • convincing senior SPC personnel that settlement agreements (as defined by the Singapore Mediation Convention) are more likely to lessen rather than increase the workload of the courts (this has been flagged by Sun Wei in one of his posts);
  • having persons committed to making change within bureaucratic institutions.

Flexible approach to mediation legislation

A number of people have written (and even more have spoken) about the obstacles posed by the lack of a Chinese commercial mediation law or general mediation law.  But perhaps it is best to follow the usual Chinese legislative approach, and test what is needed through [possibly temporary] [State Council] regulations. Once the outlines of what needs to go into a law are clear, drafters can look to China’s own experience, the 2018  UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation and experience abroad (characterized as beneficial foreign experience).

Implications for SOEs

On changing SOE (and manager) metrics and performance indicators, Professors Jack Coe, Jr. (Pepperdine University School of Law) and Lucy Reed (National University of Singapore(NUS)) made the comments below on investor-state mediation earlier this year in a conference in Hong Kong on investor-state dispute settlement (ISDS). Although they were not speaking specifically of China, in my view, the principles are also applicable to China and also apply to settlement agreements of SOEs with commercial entities in other jurisdictions:

Relatedly, governments ought to more fully embrace principles of resource management and prudent stewardship in considering how in a given case mediation might bring an end to a risk-laden dispute, allowing the government officials legitimately to declare victory, and then return to the State’s other business. Additionally, we need to study domestic corruption laws and other municipal disincentives to government settlements with foreign investors. State officials [and senior SOE managers] ought to be free to end disputes without fear of corruption charges later being brought against them, in turn putting the settlement itself at risk.

Professor Lucy Reed discussed a 2016 survey that NUS’ Centre for Investment Law (which she headed) conducted on obstacles to settlement in ISDS (for those who aren’t familiar with her, she is one of the leading international commercial and investment arbitrators):

the top obstacle to settlement in ISDS, by far, is the State’s desire to avoid responsibility for a settlement and to defer decision making to third-party arbitrators. The second greatest obstacle is the political risk involved. The third one is the difficulty of getting budget approval when there is a voluntary settlement instead of an arbitral award. Fourth is,as Jack Coe mentioned, a fear of public criticism, media criticism,
and even allegations of corruption in taking a bribe in order to settle a case with a potentially hated investor. Fifth was the fear of setting a precedent, meaning opening the floodgates to being sued again and again because you make a settlement. Then there are structural inefficiencies; because there are so many agencies involved, it is just hard to get approval.

The survey also looked at what might incentivize governments to invite a mediator to participate. Professor Reed said:

By far the most important factor was the desire to save time and money, so, please remember this one.  Second, obviously, is when the case is known to be weak and might be lost. Third is appreciating the certainty of a settlement, over which they have some control, as compared to the uncertainty of an arbitration decision, which you might win but you also mightlose and lose big. And the fourth factor actually was the desire to preserve a long-term relationship, if the relations are not already fractured as they often are in big investments.

All of these obstacles and incentives have their Chinese characteristics. One incentive, a variation of the fourth factor that Professor Reed identified, is that it enables a Chinese contractor that has a dispute with a host country (or state-owned company) to resolve a dispute (to its satisfaction) without losing its eligibility for future work in that market. This is a real concern for Chinese contractors, who are major players in the international construction/contracting market.

Resolving issues for SOEs is likely to require a commitment by multiple institutions involved in administering SOEs and its managers (State-owned Assets Supervision and Administration Commission (SASAC), the Communist Party’s Organization Department (组织部), and the Ministry of Finance among others. In a mock mediation session (based on an actual case) that was part of a Great Britain China Centre event that I attended this spring, the benefits of mediated settlements in achieving the goals of all parties involved in a BRI project was brought home.  Convincing the SOEs and their regulators will be an important part of making the Singapore Mediation Convention work in China.

Implications of the Singapore Convention for the Chinese courts

As Sun Wei wrote earlier, the Chinese courts are concerned that overworked [I would add, and very studious] Chinese judges will need to deal with a flood of enforcement cases when China ratifies the Convention. He cited data to show that generally parties comply with a mediated settlement and rarely seek compulsory enforcement proceedings. Another major concern of the Chinese courts is that Chinese judges will need to review claims of fraudulent cross-border mediation as well as fraudulent litigation and mediation. But the evidence so far would indicate that the Singapore Mediation Convention would reduce rather increase the workload of the Chinese courts. But the deeper question is the reliability of that data and relevance to China’s legal environment and the legal environment outside of China in which Chinese companies operate. There are more minor issues, such as an additional cause of action (if I understand Chinese civil procedure law correctly), but those aren’t the principal concerns.

Who is committed?

Planting the Singapore Convention in Chinese soil requires work by many related government institutions.  The hard work in determining what needs to be done cannot be done one person (or even a team of people) in one institution, but requires persuasion and appeals to institutional self-interest of multiple institutions, and persons committed to making the Singapore Convention work in their regulatory area.

Many thanks to a knowledgeable person for his thoughtful comments on an earlier draft of this blogpost.

Supreme People’s Court Monitor at the Supreme People’s Court (III)

I am prefacing this blogpost with a statement that nothing in it (or future blogposts, for that matter) represents the Supreme People’s Court (SPC), the China International Commercial Court (CICC), or the  International Commercial Expert Committee (Expert Committee).

On the afternoon of 21 August, Professor Liu Jingdong of the International Law Institute of the Chinese Academy of Sciences (pictured below) and I spoke at the SPC, invited by the #4 Civil Division.  Ms. Long Fei, Deputy Director (Person in Charge) of the CICC Coordination and Guidance Office. chaired the proceedings and Judge Wang Shumei, head of the #4 Civil Division, gave concluding remarks.  Professor Liu had previously been a guazhi scholar (seconded/temporarily assigned) in the #4 Civil Division (appointed as a deputy division chief, as is the practice). He felt the event was a reunion with his former colleagues.  This was the first event to involve lectures by CICC Expert Committee members to judges and other staff at the SPC, including several members of the CICC.  I trust that other Expert Committee members will have the same opportunity in the future.  I am grateful to all those involved in making all the arrangements needed for the event to take place and to all of those who took time away from dealing with difficult cases and other work to listen to and interact with Professor Liu and me.

 

The audience of about 40 people (pictured below) included Hu Shihao, head of the Judicial Reform Office, Li Xiao, deputy director of the Research Office, Judge Guo Zaiyu (of the CICC), and many others, including a group of students interning in the #4 Civil Division (seated in the back row).  After the formal part of the lecture (and a question and answer session), I was very happy to be able to take a few minutes to share with the students some of my thoughts about takeaways from their internships.

I spoke about the impact of the Belt and Road on the Chinese courts (about which I have previously spoken), market reaction outside of China to the CICC, and some modest suggestions relating to the Expert Committee.  I gave my presentation in Chinese, as I knew some in the audience would have difficulty understanding English, although my “foreigner’s Chinese” (洋式中文) may have been a challenge to understand. Professor Liu spoke on the “legalization” of the Belt & Road”  (the subject of his 2017 article in 政法论坛). One of my suggestions was that this not be a one-off event. The official report on the event (in People’s Court Daily), is also on the Chinese version of the CICC website.