Press conference announcing the judicial interpretation on the application of international treaties & international practices
What is the Supreme People’s Court’s (SPC’s) contribution to developing the national strategy of “foreign-related rule of law (涉外法治)”? My forthcoming article in China Law & Society Review sets out a broad framework for understanding what it is, but inevitably, like all academic works, the specific details will be out of date as soon as it is published. It can only be current as of the last time I was able to make substantial amendments, that is, in November 2023. The slow process of finalizing the article (particularly the references) meant that I could incorporate references to the Tenth Politburo Study Session on Foreign-Related Rule of Law. Since then, the SPC has continued to contribute to the national strategy of developing foreign-related rule of law. This blogpost flags those recent developments without duplicating what others have already written. The recent developments include the SPC issuing the following since October, 2023:
December 2023, Interpretation by the Supreme People’s Court of Several Issues Concerning the Application of International Treaties and International Practices in the Trial of Foreign-Related Civil and Commercial Cases. The SPC held a press conference (see the photo above) and also issued a related press release (translation here) as well as typical cases (see below). Justice Wang Shumei (previously the head of the #4 Civil Division) highlighted that this interpretation was needed because the previous provisions on the application of international treaties in the General Principles of Civil Law were abolished when the Civil Code was promulgated, leaving the rules for the application of international treaties unclear. This LinkedIn post summarizes its content.
November 2023 Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Law of the People’s Republic of China on the Application of Laws to Foreign-Related Civil Relations (II). As this LinkedIn post details, the focus of the interpretation is on the ascertainment of foreign law. How to ascertain foreign law has been an outstanding issue, as reflected in articles by SPC judges and several judicial policy documents over the past 10 years. A paper (Chinese original here) written by CICC expert Xiao Yongping for the 2022 China International Commercial Court appointment ceremony, reviewing cases involving the ascertainment of foreign law flags some of the problems: “a lack of rules over proof by professional institutions in China has spawned a range of drawbacks, including the vague criteria for determining the admissibility of the opinions of professional institutions, the omission of analysis and reasoning of proof opinions in judgments, and the unclear rules over which party should bear the fees for proof.”
The interpretation specifies that the burden is on the parties to provide the content of the chosen law if they have a choice-of-law agreement, but it falls to the court to ascertain foreign law if the parties lack a choice-of-law agreement. Other provisions are intended to change the practice of Chinese courts deciding that they cannot ascertain foreign law and it is preferable to apply Chinese law instead. Please see this Library of Congress article for further details.
typical cases
January, 2024, ten typical cases relating to the judicial review of arbitration 仲裁司法审查典型案例 These typical (model/exemplary) cases have attracted commentary from practitioners, see here (but note that the author of the article had not noticed that the end 2022 Conference Summary [also translated as “Meeting Minutes”] of the National Symposium on Foreign-Related Commercial and Maritime Trial Work (Foreign-Related Commercial & Maritime Law Conference Summary had clarified that arbitral awards made by overseas arbitration institutions arbitrations seated in Mainland China are regarded as foreign-related arbitral awards (rather than foreign awards), as had a previous typical case. As to why the SPC is issuing multiple typical cases concerning the same issue, repetition means that the issue is important. Other commentary that appeared in People’s Court Daily was republished on the China International Commercial Court website (Chinese version).
Typical cases are a type of SPC soft law. They are a tool by which the SPC seeks to unify the judgment (adjudication) standards of the Chinese courts. They are a means by which the SPC seeks to harmonize the decisions of the Chinese courts to be consistent with SPC policy (or said another way, strengthen the firm guiding hand of the SPC). That guidance can relate to substantive or procedural issues, because the issues that come before the Chinese courts far outpace the infrastructure of existing law, including judicial interpretations. The number of typical cases relating to arbitration matters therefore also signals that China’s Arbitration Law is insufficient for the current needs of the Chinese courts. Additionally, given the role of the SPC in social governance, typical cases also enable the SPC to do its part to further the latest Party policy, in this instance, the development (construction) of foreign-related rule of law. As highlighted severaltimes on this blog, SPC President Zhang Jun appears to favor using typical cases to guide the lower courts and I expect this website (currently down) is the one that will be repurposed to make various types of typical cases more easily available.
Other judicial normative documents
The document that can be so classified is the December, 2023 Work Guidelines of the Supreme People’s Court for the One-Stop Diversified International Commercial Dispute Resolution Platform (for Trial Implementation) (One-Stop Platform Guidelines). Since the China International Commercial Court was established, the SPC has stressed (and the academic world far more!) the innovation of the “One-Stop Platform.” This new document draws together SPC and lower court experience and thinking on how a “One-Stop Platform” should operate in the Chinese context. Among other innovations, it has detailed provisions concerning neutral evaluation. The incorporation of neutral evaluation into the One-Stop Platform Guidelines shows that the SPC (and the Chinese judicial system more generally) continues to make reference to “beneficial foreign/international experience.”
Concluding Comments
As flagged in several press conferences or press releases issued in recent months, the issuance of these judicial interpretations, typical cases, and other judicial normative documents is linked to the importance the Party leadership places on developing foreign-related rule of law, as illustrated by the November 2023 Politburo study session. As shown by my 1993 article on the SPC, foreign-related matters were historically at the margins of its work. One old-timer described the #4 Civil Division (the division handling foreign-related civil and commercial matters) to me as “小众“–niche–with a relatively small number of judges and responsible for a more limited range of issues, in comparison to the other SPC civil divisions.
These recent SPC documents taken together, provide insights into the important role of the SPC in developing Chinese law, in this case, foreign-related law–because many important provisions are missing from National People’s Congress (+ its Standing Committee) legislation, it falls to the SPC, through judicial interpretations, typical cases, and documents such as Meeting Minutes/Conference Summaries to fill in the gaps that enable the courts and the Chinese legal system to operate. It should be clear that the SPC is providing some of the basic building blocks for the construction (development) of foreign-related rule of law. Happy Year of the Dragon to all readers and followers!
At the end of September (2023) the Supreme People’s Court (SPC) issued its fourth group of Belt & Road (BRI) Typical /Model /Exemplary ) (this post will use the translation “typical”) Cases (第四批涉“一带一路”建设典型案例) (see an alternative link in case the official website is unavailable). An English translation is available here. Along with the cases, the SPC issued a press release in the form of answers by a responsible person of the SPC’s #4 Civil Division to a reporter’s questions (为高质量共建“一带一路”提供有力司法服务和保障——最高人民法院民四庭负责人就发布第四批涉“一带一路”建设典型案例相关问题答记者问).
“For the avoidance of doubt,” the points made by these typical cases (please see last year’s blogpost for a refresher on typical cases) apply to all types of foreign-related cases, whether or not they involve the BRI in some way. Including “BRI” in the title highlights that these cases contribute to supporting the BRI (on the 10th anniversary of the strategy) and developing (“constructing” 建设) “foreign-related rule of law.” I’ll make several quick points about the cases and derive some useful information from the press release.
1. Typical cases
This group of 12 typical cases includes:
three cases relating to letters of credit and demand guarantees (#3 Jiangsu Puhua Co., Ltd. v. Bank of East Asia (China) Co., Ltd. Shanghai Branch; #4 China Power Construction Group Shandong Electric Power Construction Co., Ltd. v. GMR KAMALANGA Energy Ltd., et al (the SPC case was mentioned in this blogpost; and #5 Union of Arab and French Banks (UBAF) (Hong Kong) Ltd. [UBAF (Hong Kong) Ltd.] and Bank of China Co., Ltd. Henan Branch);
Two cases involving professional services-related issues (#6 Fusheng (Tianjin) Financial Leasing Co., Ltd. v. Grant Thornton AG (a tort case) and #8 Tianwei New Energy Holdings Co., Ltd. v. Davis Polk & Wardwell LLP (contract dispute));
Enforcement of a foreign (Singapore) court judgment (#12, enforcement application by Shuang Lin Construction Pte. Ltd. ). The SPC and the Singapore Supreme Court have a related memorandum so it is unsurprising that a case involving an application to enforce a Singapore judgment was selected. See this 2023 factsheet with a listing of the other Singapore agreements with the SPC);
Enforcement of foreign and Hong Kong arbitral awards (#10, China Small and Medium Enterprises Investment Co., Ltd. v. Russian Sakhalin Seafood Co., Ltd. & Oriental International Economic and Technical Cooperation Company, objection to enforcement case)( #11 Noble Resources International Pte. Ltd.’s application for recognition and enforcement of the Hong Kong International Arbitration Center arbitration award);
One case involving the Convention on the International Sale of Goods (CISG), #1, Exportextil Countertrade SA) and Nantong Meinite Medical Products Co., Ltd;
One case involving financial derivatives (#9, Standard Chartered Bank (China) Co., Ltd. v. Zhangjiakou United Petrochemical Co., Ltd.) ;
One equity transfer-related case (#7, a China International Commercial Court case), Zhang Moumou and Xie Moumou v. Shenzhen Aoxinlong Investment Co., Ltd;
One treaty interpretation case (#2, Nippon Property & Casualty Insurance (China) Co., Ltd. Shanghai Branch and others and Robinson Global Logistics (Dalian) Co., Ltd).
The press release ties the work of the SPC to the January 2018 Party Central Committee and State Council General Office policy document on BRI dispute resolution (summarized here and discussed further in my “neverending article”) and flags that the SPC has conscientiously implemented the decisions and arrangements of the Party Central Committee. The one-year gap between the third and fourth groups of typical BRI cases signals that the SPC leadership considers this a priority area. The phrase at the beginning of the press release (“providing powerful judicial services and guarantees (safeguards) for high-quality joint construction of the “Belt and Road”) signals the continuing importance of providing judicial “services and safeguards” for major national strategies, including the BRI, whether in the form of a document or typical cases.
3. Takeaways From the Press Release
a. CICC and other international commercial courts
The press release mentions the China International Commercial Court (CICC), its expert committee, and the establishment of local international commercial courts. The CICC has accepted a total of 27 international commercial cases, 17 of which have been concluded. A judgment was posted in July on the Chinese version of the CICC website but has yet to be translated.
Although the CICC is often linked to the BRI, the cases that the CICC has accepted include parties from jurisdictions that are not participating in the BRI, such as the United States. Among the typical cases released this time, one is a CICC case. The press release notes that the SPC will revise the CICC-related judicial interpretations to reflect the amendments to the foreign-related section of the Civil Procedure Law.
The BRI-related services and safeguards policy documents, about which I have previously written (and about which I have more to say in the neverending article) served as the policy framework for establishing local international commercial courts. The SPC has approved twelve local courts in Suzhou, Beijing, Chengdu, Xiamen, Changchun, Quanzhou, Wuxi, Nanning, Hangzhou, Ningbo, Nanjing, and Qingdao as “international commercial courts (tribunals).” It requires some detective work to determine the jurisdiction of each international commercial court.
b. Encouraging mediation and an organic connection between litigation, arbitration and mediation
The SPC reiterates its accomplishments in establishing a “one-stop” diversified resolution mechanism for international commercial disputes to achieve an organic connection between litigation, arbitration, and mediation. As mentioned in the 2022 report, ten international commercial arbitration institutions and two international commercial mediation institutions are part of the SPC’s “one-stop” mechanism.
c. Improving rules in foreign-related commercial cases
On improving the system of applicable rules for foreign-related commercial laws and unifying judicial standards, the spokesperson flagged that the SPC issued the Conference Summary [Meeting Minutes] on Foreign-Related Commercial and Maritime Trial Work (Foreign-Related Commercial & Maritime Law Conference Summary (Chinese and bilingual versions) (see my previous blogpost on the document), setting forth the SPC’s views on 111 issues in foreign-related matters. In my “neverending article,” I describe conference summaries (会议纪要 ) as intermediate documents, issued after courts confront new issues arising from a major policy document or new situation when the approaches of the lower courts need to be harmonized but it is not yet appropriate to issue a judicial interpretation. A book recently published by the drafters of the Foreign-Related Commercial & Maritime Law Conference Summary （《全国法院涉外商事海事审判工作座谈会会议纪要》理解与适用） reveals that after the #4 Civil Division prepared an initial draft, they “broadly sought comments” from relevant SPC departments, relevant State Council ministries and commissions, and selected experts. That means that the document represents a greater consensus of the relevant institutions on the issues addressed than commentators realized.
Additionally, in the past ten years, the SPC has issued guidance on foreign-related matters to the lower courts in the form of judicial interpretations (32), policy documents (9), guiding cases (18), and almost 150 typical cases. These statistics update those set out in the 2022 report.
d. Actively participating in legislation revision
As mentioned in the 2022 report, the SPC has actively participated in the revision of foreign-related laws such as the Civil Procedure Law (to come into effect next 1 January and the Arbitration Law (amendments ongoing, see this blogpost on the SPC’s contribution). My neverending article has a more extended discussion of this.
e. “Forthcoming Attractions”
The press release flags some “forthcoming attractions” related to the SPC’s foreign-related judicial work.
The SPC is (and has been) working on several relevant judicial interpretations (as mentioned in earlier blogposts).
a. Coming soon is the Interpretation on Several Issues Concerning the Application of the “Law of the People’s Republic of China on the Law Applicable to Foreign-Related Civil Relationships” (2) (关于适用〈中华人民共和国涉外民事关系法律适用法〉若干问题的解释（二）. The spokesperson revealed that the judicial interpretation had already been approved by the SPC’s judicial committee. It incorporates provisions relating to ascertaining foreign laws.
b. As mentioned above, the SPC will revise the CICC-related judicial interpretations to reflect the amendments to the foreign-related part of the Civil Procedure Law. The press release does not mention amending the comprehensive judicial interpretation of the Civil Procedure Law to reflect those amendments, but I surmise those are also being contemplated.
c. A third judicial interpretation, the “Interpretation on Several Issues Concerning the Application of International Treaties and International Practices in the Trial of Foreign-Related Civil and Commercial Cases”（关于审理涉外民商事案件适用国际条约和国际惯例若干问题的解释） is still in draft. Because the original provisions on the application of international treaties in the General Principles of Civil Law were abolished when the Civil Code was promulgated, leaving the rules for the application of international treaties unclear, the SPC is drafting an interpretation to deal with a group of issues. Those include the application of international treaties, the relationship between party autonomy and the application of international treaties, the choice of application of international treaties that are not in force in China, the application of international practices (two typical cases discuss the application of the Uniform Customs & Practice for Documentary Credits (UCP 600) and public order treaty reservations.
2. Databases on foreign law and expertise on foreign law.
With the support of some CICC expert committee members, one of the SPC’s BRI research databases and foreign law ascertainment service agencies, a foreign (non-mainland Chinese)legal database with legislation, international law documents and other legal information on ten ASEAN countries, seven South Asian countries and the ASEAN international organization has been created. Separately another service provider has created a BRI expert legal database. The 2022 report flagged these developments.
3. Judicial materials and training on foreign-related matters
The Supreme People’s Court is compiling a “Compilation of Common Laws and Regulations in Foreign-related Civil and Commercial Matters” to assist new hires and will increase the training and guidance to improve judicial competence on the application of international treaties. Improving judicial training on foreign-related matters has been an ongoing issue. Post-Covid, a number of training programs for judges and judges assistants on foreign-related matters have been held.
The most recent one was a national program, held at the National Judges College, focused on training senior personnel in foreign-related matters, at which Justice Tao Kaiyuan spoke. Those speaking at the program (from the relevant departments) included representatives from the Central Foreign Affairs Commission, the Legislative Affairs Commission under the National People’s Congress Standing Committee, Ministry of Foreign Affairs, Ministry of Commerce, as well (presumably) senior personnel from the SPC’s #4 Civil Division and the International Cooperation Bureau (which deals with treaty negotiation and judicial assistance matters). Local courts that have run such programs include Beijing (with the assistance of the University of International Business and Economics).
4. Judicial Assistance
China has concluded 171 bilateral judicial assistance treaties with 83 countries and has acceded to nearly 30 related international conventions (no change from October, 2022). In contrast to twenty or even ten years ago, the number of judicial assistance matters dealt with by the Chinese courts has increased. The press release mentions improving the quality and efficiency of international judicial assistance such as better cooperation in the cross-border service of judicial documents, cross-border investigation and evidence collection, ascertainment of foreign law, and recognition and enforcement of foreign (extra-territorial) judgments and arbitral awards. This does not yet mean that it is possible for foreign litigators to take depositions in mainland China for foreign court proceedings. Service of process was an issue in this 2022 case in the Southern District of New York.
In March of this year, Supreme People’s Court (SPC) Vice President Justice Tao Kaiyuan released, by the standards applicable to senior SPC leaders, forthright public comments about the state of Chinese international commercial dispute resolution and her proposed solutions in an article in the SPC’s glossy journal China Trial (中国审判 ). Based on the article, she appears to continue to have responsibility for the #4 Civil Division, the one focusing on cross-border commercial matters and arbitration. I summarize her comments below. My comments on her assessment are in italics.
Her overall assessment is that there is much to be done to make China a preferred destination for international commercial dispute resolution, as the political leadership would like. I agree and would add that Chinese institutions could improve their soft power in specific, discrete ways by “making reference to the beneficial experience of foreign institutions” (对世界上的优秀法治文明成果要积极吸收借鉴) or considering some new ideas. Why it is so difficult merits extended discussion (elsewhere). It appears to require some legal and institutional flexibility, openness to outsiders and outside practices, and practical thinking about how those ideas or practices could adapted to the Chinese environment. It seems these qualities are in short supply these days when the emphasis is on self-reliance and in judicial reform, “Chinese style and self-owned brand.” Justice Tao draws on the beneficial international experience of several SPC judges to make a suggestion that implies greater institutional flexibility. She does not address the possible legal obstacles, but what is important is the signal that she is considering ideas other than the tried and true.
China’s legal infrastructure lags behind the trend of international developments
Justice Tao points to what the international community has done in harmonizing international commercial legal rules through the New York Convention [Convention on the Recognition and Enforcement of Foreign Arbitral Awards], Singapore Convention on Mediation, Hague Judgments Convention, and the Mauritius Convention, as well as the related Model Laws. She notes that China has only ratified and implemented the New York Convention, while the other conventions have not been ratified or lack supporting measures. The Civil Procedure Law and Arbitration Law are being revised, and commercial mediation and investment arbitration legislation are absent.
While I will leave the analysis of the current amendments to the Civil Procedure Law to those who have greater expertise than I, I believe neither the amendments nor the latest socialist education campaign will sway litigants who have selected the New York, English, Hong Kong, or Singapore courts for dispute resolution. It is difficult to know whether issues lie in the original draft proposed by the SPC or have resulted from comments from the NPC’s Legislative Affairs Commission or other institutions involved in commenting on the draft before it was made public.
She recommends “promoting” the revision of the Arbitration Law to incorporate more elements from the Model Law, specify the seat of arbitration, and accelerate the efficiency of the enforcement of arbitral awards. It is not clear what she means by the latter and she may be just expressing a general concern with efficiency.
On the Arbitration Law, it is not apparent whether there has been any progress since I last wrote about the SPC’s contribution to the complicated amendment process in December of last year. From press reports of discussions of the draft and related training sessions, it appears that work is continuing behind the scenes until major points of disagreement are resolved. Other than the summary of the statement that Justice Tao made to the Chinese People’s Political Consultative Conference (CPPCC)’s Committee on Social and Legal Affairs last year, we do not know what views the SPC expressed and the bases for those views. That being said, this is not usual when it relates to the SPC contributing to the drafting or amendment of legislation. As I wrote then, it appears from her summary that views from several different divisions and offices of the SPC are reflected in what she said, including the #4 civil division (responsible for international arbitration matters), #3 civil division (intellectual property and anti-monopoly), and the enforcement bureau.
On the Singapore Mediation Convention and Chinese commercial mediation legislation, this is the second official signal I have seen from the SPC that such a law is needed–the one seen earlier was in the SPC’s Specialized Report on Foreign-Related adjudication work. Drafting such legislation would be within the bureaucratic authority of the Ministry of Justice. It is understood that the Ministry of Justice is communicating with the Ministry of Commerce, to draw on the technical expertise that resides with the Chinese negotiator of the Singapore Mediation Convention and the UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation and those who worked to support the Chinese negotiator. This 2021 article by Professor Jiang Lili of the China University of Political Science and Law on mediation legislation challenges does not give positive signals about an internationalized commercial mediation law, but that may predate the ongoing communications. Justice Tao flags researching the feasibility of ratifying the Hague Judgments Convention and the “Singapore Mediation Convention”. A team at the Chinese Academy of Social Sciences has already undertaken detailed research on what would be required for China to ratify the Singapore Mediation Convention. I am not aware of serious research related to the possible ratification of the Hague Judgments Convention. Mr. Wen Xiantao of the Ministry of Commerce has recently published a comparison of the New York, Singapore Mediation Convention, and Hague Judgments Convention.
On investment arbitration legislation, Justice Tao suggests that a mechanism should be put in place to enable the recognition and enforcement of Washington Convention (ICSID) awards. She does not detail the mechanics. That means that she has recognized the issue and it may mean others are considering how it could be most easily done.
2. Chinese international commercial dispute resolution institutions lack sufficient voice and are not competitive enough
She points to international commercial courts elsewhere in the world and to international long-term contracts and high-value transactions still mainly being based on the application of Anglo-American law, the dominance of dispute resolution (China-related, presumably) still being in the hands of the United States and the West, and the competitiveness of Chinese institutions being insufficient. Involvement in litigation or arbitration she finds not conducive to the protection of China’s relevant sovereignty, security, development interests and overseas interests. I have heard and read this often and would not expect Justice Tao to state otherwise.
I do not take Justice Tao’s comments as a scientific assessment of where arbitration cases involving Chinese parties are being heard. My own unscientific sample based on inquiries with senior lawyers at major Chinese and international law firms indicates a preference for Hong Kong International Arbitration Centre (HKIAC), Singapore International Arbitration Centre, and ICC International Court of Arbitration clauses, depending on the location of the project. I see a preference in major transactions for English law rather than New York law, reflected in the involvement of the “magic circle” [English] law firms and some of the “red circle” firms representing major SOEs in major arbitration or litigation. She does not specify what she means by “international long-term contracts”–possibly the FIDIC set of construction contracts. On the competitiveness of Chinese institutions, prior to Covid, Chinese institutions were actively marketing themselves, and this practice is starting to come back this year. Chinese dispute resolution institutions might want to do a better job of listening to issues raised by users. This practice seems to be usual among the leading international arbitration institutions, but in my experience, Chinese arbitration institutions have not sufficiently borrowed this practice.
3. Improvements needed with the China International Commercial Court (CICC)
Justice Tao says that the CICC cannot play its intended role because it lacks full-time judges, full-time staff, and its own budget. (I had flagged this in 2018), but such matters are not usually made public. The fact that she mentions this signals deep frustration. The significant number of staff that the SPC borrows from the lower courts also suggests that other central institutions are benefiting from greater headcount in preference to the SPC. Justice Tao also proposes that Hong Kong and Macau part-time judges be permitted to join the CICC.
Whether such judges would meet the requirements set by the Organic Law of the People’s Courts and the Judges Law does not seem to be clear. What is important is the signal that she is considering new ideas. It appears that Justice Tao is looking to the beneficial experience of SPCjudges as part-time judges with United Nations institutions.
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Many thanks to the highly knowledgeable peer reviewers, who commented on several earlier drafts of this article.
Justice Tao Kaiyuan, speaking at the Beijing Arbitration Commission
Among the many issues that I am discussing in my “neverending article” is the role of the Supreme People’s Court (SPC) in the complicated process of drafting new legislation and amending existing legislation, as is sometimes revealed in the “Services and Safeguards Opinions” about which I write often. The role of the SPC is for the most part unseen and unnoticed. Because the Arbitration Law is so critically important to dispute resolution between Chinese and non-Chinese parties, this blogpost highlights the SPC’s role in the unfinished process of revising the Arbitration Law and includes some of my own comments on the positions taken by the SPC. I flag one particular issue that in my view would benefit from discussion and analysis by those with international arbitration law expertise.
Justice Tao Kaiyuan participated in a meeting of the Chinese People’s Political Consultative Conference (CPPCC)’s Committee on Social and Legal Affairs on 30 May on the Arbitration Law draft revision (link is to the Chinese original) and provided a summary of some of the work of the SPC and lower courts in “pushing forward the progress of amending the Arbitration Law. ” (Mao Xiaofei of the Chinese Academy of Social Sciences, International Law Institute has kindly shared her translation into English of the Arbitration Law revision, which includes a comparison with the current text.)
The 2020 document Guiding Opinions of the Supreme People’s Court on the People’s Courts Serving and Guaranteeing the Further Opening Up to the Outside World (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) about which I previously wrote, contains the phrase “push forward the progress of amending the Arbitration Law (and several other laws) (推动仲裁法、海商法、海事诉讼特别程序法等国内商事海事法律的修法进程). Additionally, the Annual Report on Judicial Review of Commercial Arbitration (2019), edited by the SPC’s #4 Civil Division (I had a cameo role in improving the English version) also mentions the SPC will support the amendment of the Arbitration Law. Persons whose eyes glaze over when reading official documents would miss this curious phrase. Few persons outside of China have access to the Annual Report.
Xu Liquan, one of the deputy heads of the CPPCC, also spoke at the 30 May meeting discussing the Arbitration Law draft and revealed arbitration statistics I had not previously seen–that Chinese foreign-related enterprises have a dispute rate of up to 10% ( 涉外企业纠纷发生率高达10%) in cross-border transactions, over 90% select arbitration as the dispute resolution method, but a large majority select arbitration outside of China. Mr. Xu did not mention the source of these statistics, but I understand them to be derived from a report by the China Arbitration Institute of the China University of Political Science and Law (CUPL). The report summarizes the China Arbitration Institute’s survey of more than 100 foreign-related enterprises recommended by the State-Owned Assets Supervision and Administration Commission (SASAC). The full report has not yet been made public.
From these statistics, it can be seen that if China wants to be considered a more attractive destination for commercial dispute resolution, improving the Arbitration Law is crucial.
A translation (amended machine translation) of Justice Tao’s remarks (I surmise they are a summary) follows below, along with some of my own comments in italics.
Some background on her remarks, for those who need it: The Ministry of Justice, as the regulator of arbitration institutions, is the institution charged with providing draft amendments to the Arbitration Law to be forwarded to the National People’s Congress Standing Committee. (I myself had the good fortune to be involved in a cameo role in this process as a consultant to the Great Britain China Centre (GBCC) before and during the pandemic. )
The Supreme People’s Court has been actively participating in this work, and supports the revision of an arbitration law that is based on China’s national conditions, draws on international practices, and takes into account the development stage of our country’s arbitration industry.
Justice Tao signals the SPC’s very active involvement in providing input to the Ministry of Justice. It appears from her summary that views from several different divisions and offices of the SPC are reflected in what she said, including the #4 civil division (responsible for international arbitration matters), #3 civil division (intellectual property and anti-monopoly), and the enforcement bureau. I surmise that it will actively involve itself in commenting on the draft of the Arbitration Law when it is considered by the National People’s Congress Standing Committee.
“Drawing on international practices” is a broad term, including the UNCITRAL Model Law and “international practices” of leading courts on arbitration-related issues. On China’s national conditions, although most foreign practitioners are aware of the top 3-5 Chinese arbitration institutions, the vast majority are funded by local governments. The local arbitration institutions have appointed arbitrators sometimes more for their official position than their knowledge of arbitration, and have management and staff with varying levels of competency. Local lawyers prefer the courts, where an appeal is possible if the initial decision is unfavorable.
Regarding further opening up of the domestic arbitration market and allowing overseas arbitration institutions to conduct business in the Mainland. In recent years, the Supreme People’s Court has successively issued a number of judicial documents to support the introduction of foreign arbitration institutions to set up branches to carry out arbitration business in the construction of Lingang New Area of China (Shanghai) Pilot Free Trade Zone, Hainan Free Trade Port and Beijing “two zones” [pilot free trade zone and service trade zone]. In the next step, we will support the opening of the arbitration market in other pilot free trade zones.
I wrote a report on this almost two years ago. There are many practical issues to be ironed out, and Zero Covid plus the unamended Arbitration Law makes it even less likely that a major foreign arbitration institution will agree to commit to opening an office in China that handles cases.
Regarding the reasonable expansion of the scope of arbitration cases. We agree with the suggestion that intellectual property, sports, and anti-monopoly disputes be included in the scope of arbitration, but it depends on the type [of dispute], and only civil and commercial disputes should be submitted to arbitration.
There has been a great deal of discussion in China about the arbitrability of intellectual property, sports, and anti-monopoly disputes, with cases having been heard in the courts. See this detailed discussion of the sports law issues here in an earlier volume of the Beijing Arbitration Commission’s annual volume Commercial Dispute Resolution In China: An Annual Review And Preview by Guo Cai and Jeffrey Benz. On intellectual property issues, a search in Chinese or English will turn up many articles–this one by Baker & McKenzie and this one by the intellectual property firm SIPS are two of many. The arbitrability of antimonopoly disputes in China has been discussed by both practitioners and academics. Another highly disputed issue is the scope of the disputes that are arbitrable, linked to the definition of “civil and commercial” disputes in the areas of intellectual property and anti-monopoly law.
However, we suggest further research on whether the international investment arbitration between the host country and the investor should be regulated by the Arbitration Law. First, international investment arbitration is different from commercial arbitration, and it is suggested to retain the provision that commercial arbitration applies to civil and commercial disputes between equal parties. Second, the investment protection agreement signed by my country provides different solutions to international investment disputes. According to the commercial reservation statement made when our country joined the “Convention on the Recognition and Enforcement of Foreign Arbitral Awards”, the recognition and enforcement of arbitration awards disputed between the host country and investors, the Convention does not apply.
Some of the Belt & Road “Services and Safeguards Opinions” have flagged investment arbitration as an issue of concern. Enabling investment arbitration in China involves a number of interlinked issues. I recommend Professor Chi Manjiao’s recent article on the many complicated issues related to improving Chinese law on investment arbitration.
Regarding the boundary between confidentiality and disclosure of information in the process of judicial review of arbitration. We agree with the suggestion that the advantage of arbitration confidentiality should be maintained in arbitration judicial review cases. It is difficult to make specific provisions in the Arbitration Law drawing the line between confidentiality and transparency, and it is suggested that it can be resolved through judicial interpretation. In judicial practice, judges do not involve facts irrelevant to arbitration judicial review when writing documents. The parties may also request the people’s court not to disclose the judgment documents on the grounds that the case involves personal privacy and commercial secrets. In the future, it may be considered to establish clearer rules to further balance the relationship between arbitration confidentiality and judicial openness.
Drawing the line between confidentiality and transparency is an issue worldwide, so it makes sense to leave this matter to the SPC to provide more detailed rules through a judicial interpretation.
On the protection of the rights and interests of third parties (案外人). The Arbitration Law should protect the legitimate rights and interests of third parties, but the current draft amendment to the Arbitration Law [Article 84] stipulates that the prerequisite for a third party to challenge the subject matter of enforcement is that the enforcement has not yet been completed, and even if the grounds are valid and the People’s Court decides to terminate the enforcement, it still cannot negate the validity of the arbitral award that has harmed his or her legitimate rights and interests, and this situation is particularly prominent when the parties to an arbitration case apply for arbitration in bad faith or sham arbitration. Therefore, it is necessary to introduce a system of application for setting aside an arbitral award by a third party, so as to fundamentally solve the problem that the current system of remedies for third parties in the draft amendment is insufficient to adequately protect their lawful rights and interests.
This is the section that I hope will attract discussion by those highly knowledgeable about arbitration law. Article 84 of the consultation draft of the Arbitration Law gives third parties in [domestic] arbitration enforcement proceedings the right to challenge the subject matter of the enforcement. Justice Tao is taking the view that the remedies for third parties in the draft are insufficient, and third parties should have the right to apply to a court to set aside the arbitral award at the enforcement stage. It appears that Justice Tao was persuaded by the views of the SPC’s Enforcement Bureau, as set forth in an article published a year ago by Judge Shao Changmao, head of one of its offices. Silence by other divisions does not necessarily signal agreement.
In my view, incorporating such a provision in the Arbitration Law could lead to even more challenges to arbitral awards and appears to signal a return to earlier law, in which courts could set aside domestic arbitral awards. It likely reflects the SPC’s concern with stopping sham dispute resolution, whether it is sham litigation (subject to criminal penalties) sham mediation (about which I have written earlier), or sham arbitration. However, it could lead to the “cure being worse than the disease.” The Chinese arbitration community is likely to take the view that this will not be helpful in making China become a more attractive destination for cross-border arbitration.
I surmise that incorporating this provision would make major international arbitration institutions more reluctant to establish case management offices in China. It would mean that Chinese courts could set aside their awards, which they could not do if the award was considered to have been made outside the mainland. I look forward to further discussion by the international arbitration community on the appropriateness of incorporating such a provision in the Arbitration Law.
Finally, amending the Arbitration Law, from my own brief involvement in the process and discussions with persons involved, is more complex that it appears but is a crucially important matter for the future of Chinese and China-related dispute resolution. Once the law is finalized, the process deserves a study of its own. The final version of the amended Arbitration Law will be an indication of the balance between internationalization (harmonization with international practice) and Chinese characteristics.
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Many thanks to three anonymous peer reviewers for their comments on earlier drafts of this blogpost.
My apologies to the patient followers of this blog for the long gap between blogposts.
On August 24 and 25, 2022, the Supreme People’s Court (SPC) held a China International Commercial Court International Commercial Expert Committee (Expert Committee) reappointment ceremony and seminar on cross-border dispute resolution. The SPC reappointed my former colleague, Emeritus Professor Peter Malanczuk and me to the International Commercial Expert Committee (Expert Committee) of the China International Commercial Court (CICC). For those who read Chinese, the CICC website has posted the speeches or articles of those who presented. I’ll summarize the proceedings in slightly more detail than the official English reports. Then I’ll follow separately with a few comments on the ceremony and seminar and my experience as a CICC expert thus far.
Professor Malanczuk and I joined 21 other CICC experts in the hybrid reappointment ceremony, with many residing in Beijing attending in person. All others, including Professor Malanczuk and I, attended online.
President Zhou Qiang and Vice President Tao Kaiyuan of the Supreme People’s Court spoke at the reappointment ceremony, over which Executive Vice President He Rong presided. Senior officials of the Ministry of Foreign Affairs, Ministry of Commerce, National Reform and Development Commission, and China Council for the Advancement of Foreign Trade spoke thereafter. Excerpts from their official speeches are available here.
Representatives of the National People’s Congress and Chinese People’s Political Consultative Conference then spoke, followed by Expert Committee members Professor Zhang Yuejiao, Rimsky Yuen SC (former Secretary for Justice of the Hong Kong Special Administrative Region and Co-Chair of the Hong Kong International Arbitration Centre (HKIAC)), and Sir William Blair, retired head of the London Commercial Court.
Professor Zhang provided an overview of the first four years of CICC, including some of her thoughts and suggestions, She pointed out that due to inadequacies in the mechanism (organizational establishment) [inadequate] budget, and the impact of pandemic controls, the role of the members of the Expert Committee is limited, few opportunities have been created to enable members to interact and the members to interact with CICC judges, and finally, foreign experts have rarely participated. She had a number of suggestions, including that the expertise of members should be better used and that training sessions be organized at which members would speak.
Rimsky Yuen spokeabout the CICC facilitating greater interactions between the Chinese judiciary and judiciaries of other jurisdictions, such as participating in the activities of the Standing Forum of International Commercial Courts. As the Co-Chair of HKIAC, he thanked the SPC for including HKIAC in the One-Stop Diversified Dispute Resolution Mechanism.
Following the reappointment ceremony, the first panel addressed “the Latest Developments and Frontier Issues of International Commercial Courts,” with a mix of Chinese and foreign speakers, including Justice Tao Kaiyuan.
The last group of speakers on the first day, for the most part, Chinese expert committee members, discussed resolving complex commercial disputes. Judge Wang Shumeiprovided a very useful summary of Chinese judicial practice in complex cases.
On the second day, the first session, “Functioning within the “One-stop” Diversified International Commercial Dispute Resolution Mechanism” had presentations from all the members of the CICC’s One-Stop Mechanism.
I spoke as part of the last panel, on civil legal assistance, which was chaired by Professor Lu Song. Judge Shen Hongyu, deputy head of the #4 Civil Division and CICC judge, gave closing observations. I gave an update on trends in civil international judicial assistance and their challenges. Among the many speakers on my panel was Judge Gao Xiaoli, who gave an update on what the SPC is doing in judicial assistance in civil and commercial matters. She included statistics and an explanation of the platform that enables the SPC and Ministry of Justice (the designated Central Authority in most judicial assistance treaties and conventions) to communicate more quickly.
Judge Wang Shumei (head of the #4 Civil Division and CICC judge) and Justice Tao Kaiyuan gave concluding remarks.
Comments
Reappointment ceremony and seminar
I was disappointed that Beijing and central institution Covid-19 restrictions did not permit those of us living outside of mainland China to participate in person. In my view, the in-person event in 2018 was important for all, as well as for me personally. I surmise that for the SPC organizers, it was important that at least some portion of the people from outside China appointed as experts appear in person because it demonstrated to other institutions and the SPC leadership that the foreign/offshore experts valued the appointment. It was also an opportunity for people to connect, albeit briefly. So the experts could meet other experts, the CICC judges, and others attending the ceremony on that hot August morning in Beijing. For me personally, it was an opportunity to experience a high-level official event on-site, observe the dynamics, and connect with others. A Zoom event cannot substitute for an in-person meeting but in the current circumstances, it was the only alternative.
The reappointment ceremony and seminar had takeaways for the careful observer. The speeches of the officials of the “relevant central institutions” (有关中央部门) as actually delivered appeared to reflect the official discourse of the institution involved. I surmise some of the discourse may have been less sharp if the person anticipated he would see the foreign experts in person. Justice Tao Kaiyuan’s presentation sent needed signals about the ongoing importance of openness, the role of the CICC in integrating China with international practice, and the role of CICC expert committee members as bridges to the international commercial world.
Of course, I found the presentations and comments by SPC judges particularly significant. As for the other seminar presentations, the ones I found most interesting were the ones in which I learned something new and did not require me to use my homemade “useful content detector” to find the nuggets of insights inside layers of slogans. There were quite a few, but not all, that fit that bill.
The Chinese versions of my and other speakers’ papers were published on the Chinese version of the CICC website under “最新资讯 and are accessible from the landing page. It is unclear to me why the English versions are hidden under “Research Articles.”
On the topic of my own presentation, my suggestion that China (mainland) accede to the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents (Apostille Convention) was reported in the official press.
Some thoughts on my own experience on the CICC Expert Committee thus far
I will not repeat the comments I made over a year ago on my blog about the CICC. I would echo the sentiments that several Expert Committee members expressed at the seminar, that four years is not long in the development of a judicial institution, particularly when it coincides with a global pandemic. I would add that it has also coincided with important reforms to the institution of which it is a part.
When I spoke at the SPC in 2019, I made a number of modest suggestions concerning the Expert Committee (some previously mentioned on this blog), such as using the Expert Committee as a bridge between the SPC and the international legal world, to assist persons engaged in judicial interpretation drafting or judicial reform to understand better a foreign legal provision or mechanism that they were considering, or for the experts to be invited to speak at a judicial training session. These suggestions require those doing the actual work of administering the Expert Committee to make this resource known within the large bureaucratic institution of the SPC. It is possible that this proposal was lost or forgotten. Another possibility is that those responsible are more accustomed to dealing with routine bureaucratic matters rather than anything out of the ordinary.
Following up on my proposal (some of which were echoed by Professor Zhang in her remarks) means dealing with the concept and reality of “内外有别” (there are differences between the insiders and outsiders, often used to distinguish the foreign from the domestic) and the bureaucratic foreign affairs system if the Expert Committee member is foreign. I had also suggested inviting Expert Committee members visiting Beijing to present at the SPC, as this would have helped demonstrate the varied types of expertise among Expert Committee members, but the pandemic has mooted this suggestion, at least for the foreseeable future. This seminar should have compensated, in part.
As for my personal involvement with Expert Committee matters, I have been involved in some translation reviews for the SPC, as my social media followers would know, and have commented on some draft judicial interpretations and other draft rules.
My view is that with any institutional change in China, taking the long view and continuing communications with thoughtful people in the System are crucial. I echo my friend Jeremy Daum’s comments of a year ago, published on his blog:
regardless of how actively we [the United States] pursue opportunities to engage with China on legal reform, China will continue to learn from the US. Active collaboration and exchanges merely gives us an opportunity to better ensure that our own system is correctly understood, and an opportunity to learn from what is happening in China. As mentioned above, it also helps us better understand China itself, both the problems it is addressing and the goals it is working towards.
Legal exchanges of course also inform China and help them understand us. Mutual understanding is a valuable goal in its own right, but we further learn about ourselves (and about others) from hearing their perceptions of our own legal system fed back to us.
I hope I can be considered to have done something positive for better understanding and engagement through this blog and my involvement with the CICC.
Finally, I want to take some time to focus on my longer writing projects, particularly consolidating almost ten years of blogposts and almost that many years of interviews into something more accessible. For that reason, I will post to my blog going forward about once a month going forward. If any readers have written articles (in either Chinese or English) related to the SPC, especially its operations, please feel free to email them to: supremepeoplescourtmonitor@gmail.com or send them via social media.
In January 2022, the Supreme People’s Court (SPC) issued a Conference Summary [also translated as “Meeting Minutes”] of the National Symposium on Foreign-Related Commercial and Maritime Trial Work (Foreign-Related Commercial & Maritime Law Conference Summary (bilingual version here) (全国涉外商事海事审判工作座谈会会议纪要). From unauthorized versions released, it can be seen that it was another SPC year-end accomplishment. Although this document is not a judicial interpretation and cannot be cited in Chinese court judgments, it is crucially important for legal professionals outside of China dealing with cross-border commercial issues involving China and for Chinese legal professionals focusing on cross-border commercial issues involving the rest of the world.
The conference summary has 111 provisions. The focus is on legal issues because the target audience of domestic judges understands the political framing. The conference summary applies to foreign-related cases and to Hong Kong, Macau, and Taiwan-related cases by reference (see Article 111, set out at the end of this post). They are in the following categories:
foreign-related commercial (涉外商事部分), the longest:
Maritime (海事部分);
Judicial review of arbitration (仲裁司法审查部分).
This blogpost will explain why the conference summary was issued, its legal and policy basis, and why it addressed those particular issues and will leave the majority of the content of the conference summary for the experts in practice and academia.
Why this conference summary?
The conference summary (meeting minutes) is based on a national conference on foreign-related commercial and maritime trial work held in Nanjing in June of last year and the issues that the SPC would have heard raised by lower court judges.
When asked the question of why this conference summary was issued, an SPC judge is likely to say “to resolve difficult issues in practice and unify judgment standards.” But a fuller answer to this question for a larger audience requires further details.
As to why a conference summary and not rely on “case law” with Chinese characteristics, including China International Commercial Court cases, SPC cases, and various types of typical or SPC selected cases as “soft precedents,” the answer is that the SPC is issuing this conference summary to guide lower court judges (and possibly judges in other divisions of the SPC) practically and efficiently and for some additional reasons. The simple answer is that “case law” is not effective enough to practically guide lower court judges. If it were, the SPC would not have issued this document. I have seen a number of academic articles (in English) that illustrate a misunderstanding of what the SPC is doing.
Additionally, I surmise that at the Nanjing conference, behind closed doors, SPC judges heard about inconsistent approaches or requirements from lower court judges. I surmise they also heard from lower court judges uncertainty in the approach that they should take concerning issues where the law is unclear. The judicial evaluation system values deciding cases correctly. Moreover, the most recent SPC policy focuses on unifying the application of law. Its leadership has established a leading small group to that end. So for all these reasons, lower court judges would look to the SPC for clarification. What is contained in the conference summary is the SPC’s current consensus on major cross-border commercial, maritime, and arbitration review-related issues, based on their further research and consideration.
In the busiest courts where many of these cases arise, judges are under enormous pressure to decide cases timely and accurately, especially after the recent changes to the jurisdiction of lower courts under the reorientation of the four levels of the people’s courts and the issuance of other documents changing the jurisdiction of the lower courts in commercial cases. “Codifying” the principles from cases and issues considered by the SPC in the form of a conference summary is the most useful and efficient form of guidance for lower court judges. 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, they provide important guidance to the work of the courts concerning issues about which existing law and judicial interpretations are unclear. Judges will rely on its provisions to decide cases.
The legal basis for the conference summary derives from the SPC’s authority under Article 10 of the Organic Law of the People’s Courts to supervise the lower courts.
As for an answer to the question of why not issue a judicial interpretation–time, fluidity, and attenuated basis for some of the conference summary’s provisions do not permit a judicial interpretation to be issued. One example of the attenuated basis and fluidity is Article 100, which”codifies” the Guangzhou Intermediate People’s Court decision in the Brentwood case (discussed here). It establishes welcome certainty to the enforceability of arbitral awards made by overseas arbitration institutions arbitrations seated in Mainland China. It provides that such awards are regarded as foreign-related arbitral awards (rather than foreign awards) in Mainland China. It is likely to be helpful to the overseas arbitration institutions that are considering establishing case management offices in China, as is now possible under Shanghai and Beijing regulations. As mentioned before, the Arbitration Law being revised, the current draft addresses the issue, and the SPC is likely to issue a comprehensive judicial interpretation thereafter.
Moreover, for some of the procedural provisions, such as those relating to the recognition and enforcement of foreign judgments, it gives the SPC a chance to pilot its guidance, before formalizing it in the form of a judicial interpretation. A recent Wechat article (with further details) flags that in 2021, three foreign judgments and nine Hong Kong, Macau, and Taiwan judgments were recognized and enforced. Likely more applications were made but not decided.
Other provisions consolidate existing guidance in a form that is easier for the lower courts to grasp quickly. Article 22, on obtaining an opinion on foreign or international law from a China International Commercial Court (CICC) expert committee expert, for example, repeats what is to be found in CICC guidance. The same can be said about Article 11, on the topic of electronic service of process, promoted in several Belt & Road-related SPC Opinions. It should be noted that China maintains its traditional approach to service of process from foreign jurisdictions.
Articles 18-20 address a few of the ongoing issues related to the application of international conventions and treaties in the Chinese courts. Article 18 answers the question of what a court should do if the relevant treaty or convention is silent or China has made a reservation on that issue. The answer is to use the Law on the Laws Applicable to Foreign-Related Civil Relations to determine the applicable law. Article 20 focuses on what a Chinese court should do if it is applying Chinese law if Chinese law has conflicting positions and China has acceded to a relevant treaty or convention. A report on a recent workshop involving the SPC, the Beijing #4 Intermediate People’s Court, and academics from the China Academy of Social Sciences and other institutions flags some of the many other unresolved issues.
Article 30 addresses an important question for Chinese and foreign banks, suppliers to Chinese EPC contractors, and project owners, particularly in Belt & Road jurisdictions–how easily can a Chinese court stop payment on a demand (independent) guarantee? The answer is, strictly according to the provisions of the relevant judicial interpretation. Article 30 provides that when a court hears an application to stop payment on the basis of fraud (which can be filed as a preliminary matter or during the course of litigation or arbitration), it must examine the independent letter of guarantee stop payment application submitted by the parties in according to Article 14 of the (updated) Provisions on Several Issues Concerning the Hearing of Independent Letter of Guarantee Dispute Cases, and conduct a preliminary substantive examination on whether there are fraudulent grounds for stop payment in accordance with the provisions of Article 12 and set out its finding of facts and reasoning as required by Article 16.
The Bigger Picture
This conference summary is another form of SPC soft law. It harmonizes the decisions of the Chinese courts to be consistent with SPC policy (or said another way, strengthens the firm guiding hand of the SPC).
This document reflects the awareness of its drafters, the judges of the #4 Civil Division of the SPC, that the issues that come before the Chinese courts far outpace the infrastructure of Chinese foreign-related commercial law. Given the larger trends I described in my brief article last fall, we can expect the SPC to continue to play an important role in developing China’s body of law related to cross-border commercial matters.
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111.【涉港澳台案件参照适用本纪要】涉及香港特别行政区、澳门特别行政区和台湾地区的商事海事纠纷案件，相关司法解释未作规定的，参照本纪要关于涉外商事海事纠纷案件的规定处理)。111. [The application by reference of this conference summary to cases involving Hong Kong, Macao and Taiwan]. As for commercial and maritime cases involving the Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan, which are not otherwise stipulated in relevant judicial interpretations, shall be handled with reference to the provisions of this conference summary on foreign-related commercial and maritime cases.
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).
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.”
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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 Press conference announcing the policy document
On the afternoon of 25 September, the Supreme People’s Court (SPC) issued yet another guiding opinion providing services and guarantees, this one on providing services and guarantees in support of expanding opening to the outside world (Services & Guarantees to the Open Policy Guiding Opinions (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). It was approved by the SPC’s Party Group, as was BRI Opinion #2.
Senior legal officials from the Ministry of Commerce (MOFCOM) and the Ministry of Foreign Affairs (MFA) spoke at the SPC press conference, in what this observer views as a cross-institutional show of support for China’s policies of opening to the outside world. At a time that government officials are focused on “dual circulation,” it is a reminder that the opening to the outside world policy remains in place and that one of the SPC’s many responsibilities is to handle those issues properly. The photo is also one illustration of the place of the SPC within China’s system (体制).
SPC Vice President Yang Wanming (杨万明) spoke first at the press conference, with the officials from MOFCOM and MFA adding comments. This signalled to the careful observer that he has assumed the responsibility for overseeing the #4 Civil Division (responsible for foreign-related commercial and maritime matters) from Luo Dongchuan (who has been transferred to Fujian Province to serve as Political Legal Commission Party Secretary).
This brief (17 articles) guiding opinion providing judicial services and guarantees (not a judicial interpretation, see this explanation of what it is) is the latest judicial policy on foreign-related (this blogpost will use the term “cross-border”, to incorporate some Hong Kong-related) legal issues (inbound and outbound) relevant to the Chinese courts, drawing on BRI Opinion #2 (issued end 2019 and BRI Opinion #1) and the June, 2020 guidance on Covid-19 and cross-border commercial issues.
As to what those judicial services and guarantees are, Justice Yang said the following:
Wherever the national strategy is deployed, the judicial services and guarantees of the people’s courts will be there (国家战略部署到哪里，人民法院司法服务和保障就到哪里.)
How does this document relate to other Chinese legislation?
To clarify the relationship between this opinion on the one hand and legislation, judicial interpretations and other types of judicial documents (such as the two BRI Opinions), Justice Yang gave a quick summary in SPC jargon:
While maintaining consistency with existing laws and regulations, judicial interpretations, and judicial policy documents, the Guiding Opinions also strengthen the macro-guidance of the people’s courts’ services and guarantees opening to the outside world from a higher level, and are organically linked to other SPC judicial policy documents for major opening-up decisions, major strategies, and major initiatives, to further improve the system of judicial services and guarantees of the work relating to opening to the outside world与现有法律法规和司法解释、司法政策文件保持一致的同时，从更高层面加强人民法院服务保障对外开放工作的宏观指导，与最高人民法院出台的其他司法服务保障国家对外开放重大决策、重大战略和重大举措的司法政策文件有机衔接，进一步完善了司法服务保障对外开放工作体系。
What is means is:
The Guiding Opinions are intended to be consistent with current law and regulations, SPC judicial interpretations, and SPC judicial policy documents.
It is intended to provide comprehensive guidance and better support government policies on opening to the outside world.
The Guiding Opinions. like many of the documents analyzed on this blog, are written in SPC jargon. Decoding this language poses challenges to those are concerned or who should be concerned about the impact of how the Chinese courts interact with the rest of the world.
Decoding the language, however, enables the careful reader to understand outstanding issues and contemplated reforms or other measures, including possible judicial interpretations.
Summary and comments
This blogpost will summarize and make some brief comments on some of the issues mentioned in each of the six sections of the documents and make a few concluding comments. There are many more issues in this document that should be explored, but I’ve been delayed by a hand injury.
1. Political stance
The first section calls for judges to raise their political stance. This is standard language in the New Era. The first article frames the documents in current political language, including that frequently used in Chinese foreign policy documents and to relevant political documents. Therefore the first article (and elsewhere) refers to multilateralism, equally situated parties, and creating a legalized, internationalized convenient business environment.
The second section focuses on basic principles of foreign-related litigation–of which it sets out three: protecting the equal rights of parties; respecting the intent of the parties; and implementing (judicial) jurisdiction according to law.
The second principle, described in Article 4, includes the right of parties to choose governing law, a court with jurisdiction and arbitration, litigation, or mediation to resolve their disputes. However, as mentioned previously, Chinese law treats choice of arbitration and litigation differently, requiring litigants choosing a (foreign court) to have an actual connection to the foreign court (see Professor Vivienne Bath’s previous scholarship on this), although there isn’t a counterpart position for arbitration. As mentioned previously, the application of foreign law by Chinese courts is a work in process. The SPC has given a great deal of publicity to its platform for the ascertainment of foreign law. which includes determinations of foreign law on a certain issue by certain authorized organizations and opinions given by members of the international expert committee of the China International Commerce Court (CICC). As I wrote close to two years ago, the China International Commercial Court (CICC) rules do not clarify a number of practical questions. Could a court request an advisory opinion from an expert and from a designated ascertainment center, and if so, what relative weight will be attached to each? Presumably, a court would give it greater weight than an opinion from an expert provided by a party.
The third principle, described more fully in Article 5, is linked to protecting China’s judicial sovereignty and repeats the statement that conflicts in jurisdiction and parallel proceedings will be resolved properly (妥善解决). This has appeared in BRI Opinions #1 and #2, but specific measures to resolve parallel proceedings have not yet been noted. Parallel and conflicting proceedings are an ongoing issue (not only between the Chinese courts and other courts outside mainland China) and will be further mentioned below. As Professor Bath discussed, several scenarios are common. One involves situations in which parties had agreed to the exclusive jurisdiction of the courts of one country, but a party brings proceedings in the courts another country (China), which accepts the case and may issue a judgment before the original court. Another set of cases involves an alleged arbitration agreement which provides for arbitration overseas, but a party brings a case in a Chinese court nonetheless. A variation has recently been noticed by two leading practicing lawyers in China. In that case, an issue that had been pleaded in arbitration proceedings in Hong Kong and reviewed by the relevant Hong Kong court was not given res judicata effect in China. The ruling by the Shijiazhuang court has been reviewed by the SPC under its Prior Review proceedings.
Although parallel proceedings in courts outside of China and in China have previously been noted primarily in maritime law (and anti-suit and anti-anti-suit orders),the parallel/conflicting proceedings issues seem to be moving to the area of Intellectual property (IP) law, likely related to the multi-jurisdiction litigation between Huawei and Conversant concerning standard essential patents, including in the UK Supreme Court and the German courts. What has been noted is one of the SPC’s research topics includes protecting China’s judicial sovereignty (national interests) through anti-suit or anti-anti-suit injunctions. The SPC Intellectual Property Court has issued an anti-suit injunction order against Conversant and the Wuhan Intermediate Court issued an anti-suit injunction order against Intel Digital (the linked article has a summary of the facts in the Wuhan case, but reserve judgment on the author’s comments on the authority of Chinese courts to issue these order).
3. Modernizing China’s foreign-related and maritime litigation systems
This third section contains four articles: application of law; fully develop the advantages of service and guarantees to cross-border trade and investment; promote the integration with the internet of foreign-related litigation; and develop diversified dispute resolution related to international commercial dispute resolution. Many of the provisions in this section repeat provisions in the BRI Opinions #1 and #2. What appears to be new is a statement that the SPC will seek to integrate prestigious foreign arbitration and mediation organizations to be part of its one stop mediation/arbitration/litigation mechanism.
4. Increase judicial protections
Article 10 mentions foreign-related administrative litigation issues. They were mentioned briefly in BRI Opinion #2 and once in BRI Opinion #1, here seeing greater stress. Section 11 focuses on cross-border intellectual property issues. It has some important new content. It mentions improving (完善涉外知识产权诉讼制度) foreign-related IP litigation procedures, putting into judicial policy previous statements by former Vice President Luo Dongchuan about the need for special IP litigation rules. It again mentions researching and responding to parallel international litigation relating to intellectual property rights and becoming a preferred place for settling IP disputes. From comments made by several leading experts in a recent webinar the Chinese courts are an important jurisdiction in IP litigation. It is unclear whether the use of anti-suit (or anti-anti-suit )injunctions by the Chinese courts will be the way that litigants are encouraged to turn to the Chinese courts to settle their global IP disputes. According to comments by several persons with expertise in Chinese IP law and related commercial issues, a number of factors are leading to the Chinese IP courts becoming an important forum for the resolution of IP disputes. Related to this, see the analysis by Doug Clark, partner in the IP law firm Rouse in this article, in which he says that the Chinese courts are looking to take on the role of setting global FRAND rates. Also see related blogposts on Mark Cohen’s blog, Chinaipr.com. These issues are complex and important.
5. Prevent and resolve major risks
This section has only two articles. Article 13 focuses on perfecting risk control mechanisms for major cases and firmly establishing an overall national security concept. These phrases are not unique to the SPC, but reflect language in Party documents, with the “overall national security concept” attributed to Xi Jinping. This article also calls on courts to coordinate the overall international and domestic situations, adhere to bottom-line thinking and risk awareness, understand the domestic and international situation and risks and challenges facing China’s opening up. The final phrase in this article calls on courts to resolutely defend our (China’s) judicial sovereignty and national security. So it seems that the concept of “judicial sovereignty” (used several times in this document) is being used to protect China’s national sovereignty.
The second one (Article 14), on guaranteeing state security and economic and social order gives a different priority to possible cross-border criminal law issues from either BRI Opinion. Neither BRI Opinion mentioned infiltration (渗透), espionage (间谍), sabotage, subversion (渗透颠覆破坏). Infiltration and espionage are mentioned immediately after the article heading. (the sentence is: “thoroughly participate in the struggle against infiltration, espionage, separatism, terrorism, and cults, by strictly combatting crimes of infiltration, subversion, and sabotage, and crimes of espionage, violent terrorism, ethnic separatism, religious extremism, and other crimes that endanger national security” 深入参与反渗透反间谍反分裂反恐怖反邪教斗争，严厉打击各种渗透颠覆破坏、间谍、暴力恐怖、民族分裂、宗教极端等危害国家安全的犯罪. (Many thanks to Chinalawtranslate.com for this translation). Other concerns, such as violent terrorism, ethnic separatism, religious extremism have been seen previously in the other two BRI documents. and article 14 again stresses criminal justice cooperation between China and the rest of the world. The reason for the change in priorities is unclear. What signal does this send to the international commercial and judicial world (international community) that infiltration, espionage, sabotage and subversion are being mentioned?
6. Increasing judicial cooperation, increase the international influence of the Chinese judiciary
These three articles address judicial cooperation, judicial exchanges, and training of judges who can handle foreign-related cases.
Article 15 concerns judicial assistance treaties, encouraging Chinese judges to participate in the negotiation of bilateral and multilateral judicial assistance treaties.
Article 16, on judicial exchanges, including highlighting exchanges with the principal international legal organizations, also summarizes ongoing SPC practices in developing exchanges with BRI judiciaries, although it is not so specified.
Article 17 calls for the better training, recruitment and promotion of persons who can deal with specialized legal issues such as cross-border finance, environmental protection, maritime law, intellectual property. Measures include joint programs with universities, exchanges with international organizations and international commercial courts, with the objective of having judges who are able to participate in the drafting or amendment of relevant international rules [a glimpse into a judiciary certain special functions] and the creation of a group of Chinese judges with an international perspective. This appears to be directed to law schools and senior personnel in the lower courts and likely involved concurrence by the SPC’s International Cooperation Bureau. As has been mentioned in earlier blogposts, the career progression for legal professionals to become judges has slowed because of the personnel reforms in the previous round of judicial reforms, under which young professionals work as judges assistants for a number of years before applying (and passing relevant examinations)to become a judge. 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.
A few concluding comments
Perhaps it is not realized that multiple documents conveying many of the same messages, with references that need decoding, may not convey the intended message to the international business community that the Chinese courts welcome and will treat fairly foreign commercial litigants, and that Chinese law is stable, transparent and predictable.
The Guiding Opinions call for increasing publicity about and the international influence of Chinese justice, and international confidence in Chinese law, through translating guiding and typical (exemplary/model) cases into foreign languages. This echoes language in BRI Opinion #2. The international community outside of China may or may not consider those sources to be primary ones in forming a view about the Chinese courts. In my view, it is more likely that the international community will look to decisions and rulings of the Chinese courts in several categories of cases: enforcement or other proceedings involving foreign (and Hong Kong) arbitral awards; parallel or competing proceedings, whether with other courts or with international arbitration; difficult commercial ones, particularly involving Chinese state-owned enterprises, or other Chinese national champions and issues related to intellectual property, particularly as it relates to “cutting-edge” technology. This observer surmises that the international judicial community will also look for a spirit of mutual respect for foreign courts and their jurisdiction.
The Guiding Opinions repeats language about Chinese courts participating in the formulation of international rules, an ongoing theme since the 2014 4th Plenum of the 18th Party Congress decision. One example is the constructive role of the SPC negotiator as a member of the Chinese delegation that participated in the drafting of the Hague Judgments Convention. But what the international community will also look for is China’s capacity to harmonize its legislation to be able to ratify the international conventions whose drafting it participates in.
The introduction to Guiding Opinions notes that comments were sought from many sources. It is unclear whether the views of international users of the Chinese court system were solicited. Other developments in which the international community may display an interest are the creation of additional institutions within the Chinese judiciary to enable the Chinese judiciary to better understand the needs of（domestic and international) users.
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Many thanks to several highly knowledgeable readers who commented on earlier drafts of this blogpost.
For a longer project, I am carefully analyzing the Supreme People’s Court’s (SPC’s) 2019 Opinions on the People’s Courts Providing Further Services and Guarantees for Belt & Road Construction (BRI Opinion #2) (关于人民法院进一步为“一带一路”建设提供司法服务和保障的意见, about which I previously wrote in January (at some length). Each phrase in an SPC Opinion has a particular meaning and usually a backstory. As I said in January, it takes knowledge of a constellation of related policies and practices to decode SPC Opinions. Those of us outside the Chinese court system realistically can be expected to identify only a portion of the references. This blogpost focuses on two phrases in Article 25 of BRI Opinion #2–“publish typical (model/exemplary) cases on an irregular basis, issue white papers at a suitable time (不定期公布典型案例, 适时发布白皮书).
What’s new?
In public speeches this month (August, 2020), two SPC judges revealed that the suitable time for issuing a white paper and model cases somewhat related to the BRI is “soon.” As I (and many others) have written, the SPC has used the political importance of the BRI to improve the legal infrastructure for and personnel handling the judicial review of arbitration. (As others have written, under Chinese arbitration law, the courts have a greater role in the review of arbitration.), Judge Shen Hongyu, deputy head of the SPC’s #4 Civil Division revealed in a speech in early August, reported in Legal Daily, that “in the future, a bilingual white paper annual report on the judicial review of arbitration in 2019 and analysis of typical cases on the judicial review of arbitration will be issued” (将发布《2019年度仲裁司法审查案件白皮书》（中英双语版）以及仲裁司法审查典型案例分析). The same news was repeated by #4 Civil Division Judge Ma Dongxu and Judge Shen Hongyu in a recent conference (held on-line) of the Chinese Arbitration Law Society.
White Papers
Issuing a judicial review of arbitration white paper would be a first for the #4 Civil Division and a step forward in transparency about the work of the SPC and judicial review of arbitration in particular. From the title, I surmise that the white paper will be nationally focused, similar to the SPC’s annual bilingual intellectual property white paper and environmental protection white paper. Although I have previously written about difficulties in locating full text versions of Chinese court white papers, I am quite sure that this white paper will be made accessible.
Late last year, the Beijing #4 Intermediate Court (and China University of Political Science and Law) issued a big data study of cases involving the judicial review of arbitration cases (analyzed here in English) I surmise that the SPC’s white paper it will show the success of the new judicial interpretations that the SPC issued in late 2017 and related notices as well as the pro-arbitration policy of the SPC. Greater openness about the judicial review of arbitration would be welcome by all interested parties. It is unclear whether the #4 Civil Division will give consolidated information about the cases that it reviews through the Prior Approval system, which is its version of the qingshi (请示，request for instructions), about which I have previously written. This article in the Kluwer Arbitration Blog provides a good summary of Chinese practitioner objections to the request for instruction procedures in the Prior Approval system.
Publishing typical cases
As I wrote last month and many times previously on this blog, the SPC frequently uses typical/model/exemplary cases, in several ways, including to supplement judicial interpretations and legislation. That was made clear by last month’s guidance on similar case search. The #4 Civil Division (the cases are issued by the SPC itself, of course) and the Supreme People’s Court Intellectual Property Court (SPCIPC) often use typical cases in analogous ways–unifying judicial standards. The press release that the SPC released in June on typical cases involving ship crew members was by SPC standards, quite blunt in pointing out the inadequacy of related law. (“Our country has not formulated a special crew law.. it lacks more targeted regulations…Typical cases combine the characteristics of the protection of the rights and interests of seafarers, analyze the law and reasoning, and fill the gap between the norms and the facts by extracting the main points of the judgments (我国尚未制定专门的船员法…缺乏更有针对性的规定。典型案例结合船员权益保护的特点，析法说理，通过裁判要旨的提炼，填补规范与事实之间的空隙)
Justice Luo Dongchuan, formerly the SPC vice president responsible for both the #4 Civil Division and the SPCIPC pointed out the gap-filling role of typical cases more discretely. (He has since been transferred to Fujian Province to serve as Secretary of the Provincial Party Committee’s Political-Legal Commission).The SPC issued BRI-related typical/model cases in 2015 and 2017 and BRI guiding cases in 2019. (For those interested, Stanford Law School’s Guiding Cases Project has translated the model and guiding cases (note that there is a trademark symbol for B & R cases). The legal rules in typical/model cases and guiding cases may eventually be incorporated into a judicial interpretation or legislation (explained in my earlier article).
Importance of the White Paper
I wrote in December of last year that one aspect of being in a leadership role in the SPC (referring to the president, vice presidents, division heads, deputy heads, and their equivalents in the affiliated institutions of the SPC) is ensuring that policies, actions, initiatives, and other decisions hit the target of being politically correct (post 19th Party Congress and post 4th Plenum) while being “problem-oriented,” that is, addressing relevant practical issues. Judge Shen skillfully hit that target in her speeches. She linked her first presentation to language in the Decision of the 4th Plenum of the 19th Party Congress, stating that “promoting external publicity on the rule of law and spreading the voice of the rule of law in China is an important manifestation of serving the overall situation of the Party and the country ( 推进对外法治宣传，传播中国法治声音，是服务党和国家工作大局的重要体现). As I asked in January, does it hit the target with foreign audiences? Is engaging special publicity for foreigners in fact useful in reassuring foreign governments, foreign state-owned companies, commercial entities, and individuals that their dispute is best heard in China?
Rather than special publicity, the bilingual white paper and model cases, aimed at both domestic and foreign audiences, are in fact better vehicles by which the domestic and foreign legal communities can assess how Chinese courts supervise arbitration, and how that compares to other jurisdictions. Because many trade, investment, and licensing agreements involving Chinese parties have arbitration clauses, this white paper is sure to be reviewed carefully by many.
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.
photo from the First International Commercial Court’s opening ceremony (the grey suits are the new court summer uniforms)
At the end of June, the Supreme People’s Court (SPC) held ceremonies to mark the establishment of its international commercial tribunals (国际商事法庭)(this post will use the phrase “international commercial court,” or “CICC” as the official media are using both terms). The provisions establishing the international commercial courts went into effect on July 1. As I wrote earlier this year, political and technical requirements shaped the CICC, as will be explained below.
These (partial) comments do not set out an overview of the court, as that has already been done by several law firms (and there are likely to be more), including Zhong Lun (published on the Kluwer Arbitration blog) and Herbert Smith Freehills.
Comments
In my view, those drafting the structure of the CICC were constrained by Chinese law, the nature of the Chinese court system and related regulatory systems. Although some Chinese commentators have referred to the CICC privately as a “mini-circuit court,” the CICC incorporates innovations, some of which have not been recognized by commentators thus far and provisions from the latest round of judicial reforms. The brief judicial interpretation establishing the CICC leaves related questions unanswered, some of which I will raise below. I expect some of those questions to be gradually answered as regulations underpinning the CICC are issued.
The small team of judges and limited jurisdiction of the court are likely to mean that overall trends in Belt & Road dispute resolution are unlikely to be significantly affected by its establishment. As a court focused on international commercial issues staffed by some of China’s most knowledgeable judges in that area, the court is likely to have a positive effect on the competence of the Chinese judiciary regarding international trade and investment issues, particularly as the SPC leadership knows that the international legal community is monitoring the court’s operation. It is unclear from recent reports whether the SPC will allocate additional resources to support its operation, which to this outside observer would be a shortsighted approach to take, as even something as apparently simple as translating judgments into English (as appears to be the intention of the court) is time-consuming.
Structure of the court
From Judge Gao’s press interview earlier this year (the subject of that earlier blogpost, a full English translation of which is found on the CICC website,) it is clear that she and her other colleagues involved in drafting the judicial interpretation were well aware of international commercial courts that had been or were being established elsewhere in the world. This research was provided by the China Institute for Applied Jurisprudence, the SPC’s in-house think tank (briefly described in this earlier blogpost).
However, the political imperatives of establishing the CICC as a priority matter meant that the SPC was constrained by the realities of current Chinese law. Because judicial interpretations of the SPC cannot contravene the civil procedure, judges and other national law (National People’s Congress legislation) [and there appeared to be insufficient time and possibly appetite for promulgating legislation piloting exceptions to these provisions]. This meant that the language of the court could not be English, the procedural law had to be Chinese civil procedure law, and the judges had to be judges so qualified under current Chinese law.
Jurisdiction of the court
As has explained elsewhere, under Article 2 of its Provisions, the CICC has jurisdiction over five types of cases, three of which are rather flexible (cases under a higher people’s court jurisdiction that it applies to have the SPC hear; first instance international commercial cases that have a nationwide significant impact; any other international commercial cases that the SPC considers appropriate to be tried by the CICC). This enables the CICC to control its caseload, as the eight judges on the CICC are likely to have their existing caseload in the SPC division or circuit court in which they are working, plus major obligations in drafting judicial interpretation or analogous judicial guidance. I am personally unaware of cases in which a higher people’s court has required the SPC to hear a case within its jurisdiction (please contact me if you have such information) but it can be anticipated that a higher people’s court may prefer to rid itself of a difficult case (either legally or more likely institutionally) to avoid a mistaken decision.
Judges of the court
As has been noted elsewhere, the eight judges appointed to the CICC are all SPC judges, although Article 4 of the CICC provisions appears to permit qualified judges from the lower courts to be selected. Those provisions do not mention whether a selection committee (one of the current judicial reforms) was used to select the current CICC judges, or whether a selection committee will be used for future appointments. There are in fact experienced judges in some of the lower courts who are able to use English as a working language. However, the exigencies of needing to appoint judges in a brief period of time (and possible SPC headcount restrictions, after the SPC has cut headcount under the quota judge system) meant that all CICC judges are from the SPC. This means a number of judges are relatively junior.
Expert committee
The expert committee to be established (rules yet to be issued) is an innovation under Chinese court practice. Unlike many other major jurisdictions, the Chinese courts lack user committees or advisory committees. This could be a useful way of bringing international input before the Chinese courts in a formal way. although the usefulness of the institution may depend on how often the committee meets and how familiar its members are with the Chinese court system. Presumably acting as a mediator or providing an expert opinion on a matter of foreign law will be optional (further details to be revealed when those rules are issued). Some persons may prefer to provide general advice to the SPC rather than involve themselves in the specifics of a particular dispute.
Evidence before the court
The CICC will not require translations into Chinese of evidence, if the parties so agree, or require evidence to be notarlized and legalized. As I wrote previously, China has not yet acceded to the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents, so in Chinese court litigation, notarization and legalization of documents is often required., starting when a party files suit or when a foreign party responds. It is not clear whether the CICC will require notarization and legalization of foreign party authorization of counsel. It is an innovation possible within the constraints of current law, that the CICC will consider evidence even if evidence from outside of China has not been notarized and legalized. Notarization and legalization costs time and money and a great deal of effort. It is understood that China is considering acceding to the Hague Legalization Convention.
Mediation and arbitration linking mechanism
The mechanism to link mediation, arbitration and litigation is an important part of the judicial reform measures (mentioned in this blogpost on diversified dispute resolution). Which mediation and arbitration institutions will link to the CICC are unclear (and the rules for selecting those institutions), but the policy document underpinning the CICC refers to domestic rather than foreign or greater China institutions. The Shenzhen Court of International Arbitration and Hong Kong Mediation Centre have entered into a cooperative arrangement to enable cross-border enforcement of mediation agreements, so presumably, this is a model that can be followed for Hong Kong.
Enforcement
The CICC provisions do not add new content on the enforcement of their judgments. As this earlier blogpost mentioned, enforcement of its own (and that of Chinese lower courts abroad) and foreign court judgments in China is on the SPC’s agenda. As I have written (and spoken about) previously, China (with SPC participation in its delegation) has been taking an actively part in negotiations on the Hague Convention on the Recognition & Enforcement of Foreign Judgments, (the link includes the draft convention) and has signed but not yet ratified the Hague Convention on the Choice of Courts Agreements.
Borrowing beneficial ideas from abroad
It appears that the drafters of the CICC provisions considered some of the practices of Frankfurt High Court International Commercial Chamber in their draft: No translation of documents which are drafted in the English language (if there is consent); witnesses can be heard in English;and extensive use of video conferencing or other electronic means.
Some outstanding questions
Will the mediation and arbitration linking mechanism be able to link with jurisdictions outside of mainland China? Under Chinese law, preliminary measures (interim measures) such as injunctions, property or evidence preservation are not available for offshore arbitration. Will the CICC mechanism be able to change this, or will changes to current law be required, as seems more likely?
Will difficult issues before the CICC be referred to the SPC’s judicial committee or other institutions within the SPC? As I wrote about a year ago, the SPC has adopted new judicial responsibility rules, setting out guidance under which cases heard by a collegiate panel are referred to a professional judges committee or the SPC’s judicial committee. Query whether difficult cases that have been discussed by the entire body of CICC judges will be referred further. The CICC includes several of the SPC’s most knowledgeable judges on cross-border matters (as well as the head (chief judge) and deputy heads of the #4 Civil Division, the division focusing on cross-border/international matters). These details are likely to be worked out over time.
Will the two CICC courts have their own support staff? Will it have its own case acceptance office? Is the intention to give more work to existing staff, or will there be an increase in headcount to support the new institution? The CICC judges need resources to support their work, whether it be in translation or research assistance. If the consequence of the establishment of the CICC is to give additional work to existing personnel, it is not out of the question that someone involved may collapse from overwork. SPC President Zhou Qiang noted in his most recent report to the NPC that there have been deaths from overwork in the lower courts. Some of the Chinese courts’ most experienced and knowledgeable judges in the area of cross-border commercial law have been appointed to the court.
Concluding Comments
The establishment of the court and its English language website gives foreign outside observers a chance to monitor how a Chinese court deals with and decides commercial cases, creating even greater pressure on the SPC and a small team of its most competent international commercial judges.
In my view, the establishment of the CICC will not affect how highly sophisticated lawyers draft dispute resolution clauses for large-scale Belt & Road projects. Many of those lawyers will still draft clauses providing for offshore arbitration because of the New York Convention (and the corresponding arrangement between Hong Kong and the mainland) and some concern about Chinese arbitration institutions. I have personally found it is difficult to get an accurate grasp of what current practice is with Belt & Road related dispute resolution clauses, given the range of deals under the Belt & Road Initiative. It is difficult to predict how the CICC may change those practices. The CICC and its associated dispute resolution mechanism provide an alternative to existing dispute resolution mechanisms. Will it show itself to be a more attractive way to resolve international commercial disputes, efficient and cost-effective, while maintaining high quality? We will need to monitor how it develops.
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Many thanks to those who commented on earlier drafts of this blogpost.
partial screenshot from SPC website of the most recently issued judicial interpretations
While Supreme People’s Court (SPC) judicial interpretations are unquestionably binding on the lower courts, one of the many questions that Chinese legislation does not answer clearly is the broader extent to which they are binding. [2007 SPC regulations state that “the judicial interpretations issued by the Supreme People’s Court have the force of law (具有法律效力). The issue poses both theoretical and practical questions and is one that I had been exploring earlier this week offline with several blog followers (and some others in the Chinese legal community), in relation to Chinese law governed arbitration.
Coincidentally on 5 April Wang Jun, former dean of the Law School of the University of International Business and Economics and senior consultant to Cyan Law (采安律师事务所) posted his analysis of a recent Chinese court case on the firm’s Wechat account that raises the issue of whether judicial interpretations are binding in a Chinese law governed arbitration (court cases, of course lack binding precedential value, as I wrote in my Tsinghua China Law Review last year).
The court case was a ruling in response to an application to cancel (set aside) an arbitral award of the Shangrao [Jiangxi] Arbitration Commission, one of the 250 or so domestic arbitration commissions, in a private lending dispute. The parties that applied to cancel the award alleged that the arbitral tribunal’s failure to apply the cap on interest in the Supreme People’s Court 2015 interpretation on private lending evidenced that the arbitral tribunal had twisted the law in arbitration.
The court ruled:
the arbitral award is the result of the independent judgment of the arbitration tribunal. If it finally determines that there is a gap between the principal and interest of the loan owed by …[the debtor] and the judicial interpretation, that is within the scope of the arbitral tribunal’s understanding and application of law, not an act of twisting the law in arbitration. Moreover…[the applicants] did not provide this Court with evidence that the arbitrators had sought or accepted bribes, committed malpractices for personal benefits or perverted the law in the arbitration. Therefore, [the applicants] application ton cancel the arbitral award lacks a factual and legal basis. This Court does not support it according to law.
Wang Jun (and his team) commented:
Whether the judicial interpretations of the Supreme People’s Court as a matter of course apply to arbitration cases has always been a controversial matter. We believe that judicial interpretations are what the Supreme People’s Court has promulgated regarding how specifically to apply the laws in the courts’ trial [adjudication] work. It is limited to court trials [adjudication] and does not necessarily apply in arbitration cases. And Article 7 of the Arbitration Law expressly provides that arbitration should be based on facts, in line with the law, fair and reasonable settlement of disputes. Therefore, it can be argued that arbitral tribunals do not necessarily have to be bound by the judicial interpretation of the Supreme People’s Court when hearing cases.
On the issue of applying judicial interpretations in arbitration
The initial response to my question of whether judicial interpretations are binding was that views differ among (Chinese) arbitrators, but that it is an issue arbitrators keep in mind because of the power of courts to review arbitral awards. A number of senior Chinese arbitrators, who have heard cases both inside and outside China, further shared their views with me. One commented that because judicial interpretations in China serve as an important source of interpretation of law, as more detailed and convincing guidance on how Chinese legislation should be applied, that he usually followed (applied) judicial interpretations of Chinese substantive law in arbitration. He distinguished the rare case where he might think that the judicial interpretation was wrong. Another arbitrator commented that in his experience in Chinese law governed arbitrations, judicial interpretations were considered binding. A third prominent arbitrator sought to distinguish domestic arbitrations from foreign-related and international arbitrations, where the standards of review were different.
Is practice any different when non-Chinese arbitrators are sitting as arbitrators? Does it make a difference if the arbitration is seated outside of [mainland] China, or does it depend? Those with further information, please share what you know through the comment function or by Wechat or email.
The latest buzz within the Chinese international commercial legal community on Belt & Road related legal developments appears not to have surmounted the Great Wall of the Chinese language. The buzz is that a comprehensive judicial interpretation relating to arbitration is on route to promulgation.
On 4 December the Supreme People’s Court (SPC) issued a news release that its judicial committee had approved a judicial interpretation on judicial review of arbitration in principle, entitled Provisions on Some Issues Related to the Trial of the Judicial Review of Arbitration (Judicial Review of Arbitration Interpretation) (最高人民法院关于审理仲裁司法审查案件若干问题的规定). “Approval in principle” (原则通过) 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. However, the news release did not specify what those “minor” issues were or set a deadline for issuing the interpretation. In December of last year (2016), the SPC’s judicial committee also approved in principle the #4 Company Law interpretation, but that interpretation was not formally issued until August of this year. This observer surmises (without any basis in facts or rumors) that the interpretation will be promulgated before Chinese new year so it can be one of the 2017 accomplishments of the SPC’s #4 Civil Division (but then again, that may be overly optimistic.
The new interpretation will focus on the issues that courts frequently encounter when arbitration-related cases come before them, dealing with gaps in current judicial interpretations (and likely the outdated Arbitration Law, (The Arbitration Law is also the subject of discussions among practitioners, academics, and others.) The interpretation will incorporate new provisions on the types of cases, case acceptance, jurisdiction, procedure, the application of law and other questions. It appears that it will incorporate the provisions described in the Notice concerning some questions regarding the centralized handling of judicial review of arbitration cases (the subject of the last blogpost). It is hoped that the new interpretation will provide for a hearing procedure when cases involving the SPC’s prior approval procedure.
For those not familiar with the intricacies of China’s judicial review of arbitration issues, a 1995 SPC circular sets out a prior approval procedure, requiring local court rulings to refuse to enforce foreign-related/”greater China”/foreign arbitration awards to be submitted for eventual review by the SPC. It is currently an internal administrative type procedure, with no explicit option of a hearing.
The SPC announcement described the drafting of the Judicial Review of Arbitration Interpretation as having begun in 2016. This blog reported in late 2014 that Judge Luo Dongchuan, then head of the SPC’s #4 Civil Division, mentioned that a new judicial interpretation on the judicial review of arbitration-related issues will go into the Court’s judicial interpretation drafting plan in 2015 and that the SPC intends to reform jurisdiction in judicial review of arbitration issues, to consolidate them in specialized courts.
A follow up post will describe the latest buzz on the Belt & Road international commercial tribunal.
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Judge Liu Guixiang speaking at the China Arbitration Summit
At China’s Arbitration Summit in late September, Liu Guixiang, Chief Judge of the #1 Circuit Court, called attention to a notice that the Supreme People’s Court (SPC) issued earlier this year to strengthen judicial review of arbitration. The notice (Notice concerning some questions regarding the centralized handling of judicial review of arbitration cases关于仲裁司法审件归口办理有关问题的通知) is linked to the likely increasing number of cases involving judicial review of arbitration matters, linked to the increasing number of arbitrations involving Chinese parties (and the One Belt One Road initiative) both in China and elsewhere in the world, including Hong Kong International Arbitration Centre. (The notice highlights data collection problems).
The notice, reproduced below, is not an SPC judicial interpretation. Unlike judicial interpretations, notices are not required to be published. It seems that the SPC itself has not officially published it, but several officialwebsites have published it, as have a number of Wechat accounts.
A quick search reveals that the notice drew on a 2014 study by the Guangdong courts summarizing the results of pilot projects (including Shenzhen) that the SPC commissioned, involving cooperation with the now independent Shenzhen Court of International Arbitration. As is usual, Guangdong and Shenzhen have led the way as pilot areas for judicial reform. The study highlighted a list of problems with the way lower courts review arbitration related issues, including lack of consistency in reviewing cases. The study also highlighted problems in tracking case data.
As Judge Liu also mentioned (as has this blog), the SPC is working on a comprehensive judicial interpretation on that subject). That judicial interpretation is still being drafted, with the #4 Civil Division of the SPC taking the lead.
A very rough translation and some comments written in italics follow. (Many thanks to an anonymous and well-informed follower of this blog for bringing the notice to my attention and for some thoughts.) Please call translation glitches/mistakes to my attention.
最高人民法院
关于仲裁司法审查案件归口办理
有关问题的通知
法[2017]152号
Supreme People’s Court
Notice Concerning Some Questions regarding the centralized handling of judicial review of arbitration cases
Fa (2017) #152
各省、自治区、直辖市高级人民法院，解放军军事法院，新疆维吾尔自治区高级人民法院生产建设兵团分院：
To the provincial, autonomous region, directly administered municipality higher people’s courts, People’s Liberation Army Military Court, Production and Construction Corps Branch of the Xinjiang Autonomous Region Higher People’s Court:
To try correctly judicial review of arbitration cases according to law and guarantee a unified yardstick for judicial decision-making, protect the legal rights of parties, promote the healthy and orderly development of arbitration matters and the establishment of a diverse dispute resolution mechanism, we notify the various levels of the people’s court handling judicial review of arbitration cases of the following:
I. The trial divisions (collegial panels) trying foreign-related commercial cases shall be the specialized trial divisions (below, “specialized trial divisions) responsible for undertaking the judicial review of arbitration as set out in this notice.
This means that SPC is requiring trial divisions (or collegial panels, in smaller courts) handling foreign-related commercial matters to be responsible for reviewing the arbitration related matters described in the next paragraph. It is a plus for competency/consistency in arbitration-related matters.
II. In cases in which a party applies to have the validity of an arbitration agreement recognized, cases in which application is made to cancel a domestic arbitration commission’s award, cases in which application is made to recognize (认可) and enforce a Hong Kong SAR or Macau SAR arbitration award, recognize (认可) and enforce a Taiwan area arbitration award, application is made to recognize (承认) and enforce a foreign arbitral award, shall be handled by the specialized trial divisions of each level of court.
This paragraph describes the types of cases covered by the notice–the types of judicial review of arbitration matters and that these cases should be handled by the specialized trial division of each level of court designated in the paragraph I. There is a difference in terminology (bolded above, but not in the original Chinese) when referring to the recognition of arbitral awards from Hong Kong, Macau, and Taiwan as distinguished from foreign arbitral awards, emphasizing that awards from these jurisdictions are considered part of “one country.” Notice that cases involving domestic arbitration awards or disputes over the validity of an arbitration agreement to submit a dispute to domestic arbitration are also to be reviewed by the specialized trial division. A big plus for consistency and competency in judicial review of arbitration matters.
When a specialized trial division, after review, has ruled to recognize and enforce a Hong Kong Special Administrative Region, Macau Special Administrative Region, Taiwan Region arbitration award, recognize and enforce a foreign arbitral award, the enforcement shall be transferred to the enforcement departments for enforcement.
III. When the first instance court makes a ruling which relates to the validity of an arbitration agreement relating not to accept, to reject a filing or objection to jurisdiction, and a party disagrees with the ruling and appeals, the specialized trial division of the second instance court should handle it.
This provision channels appeals relating to arbitration matters to specialists in the second instance courts, again a plus for competency and consistency.
IV. Each level of people’s court should establish a centralized administrative platform for the judicial review of arbitration awards, to strengthen the informatized management and data analysis of cases regarding applications to confirm the validity of an arbitation agreement, cases regarding applications to cancel or enforce arbitration awards of our domestic arbitration institutions, applications to recognize and enforce Hong Kong Special Administrative Region, Macau Special Administrative Region, Taiwan Region arbitration awards, cases regarding applications to recognize and enforce foreign arbitral awards, and cases relating to the judicial review of arbitration such as refusal to accept, reject the filing, or objection to jurisdiction and others relating to the confirmation of the validity of an arbitration agreement; the effective guarantee of the correct application of law and of a unified yardstick for judicial decision-making. The #4 Civil Division of the Supreme People’s Court and the People’s Courts Information Technology Service Center shall be specifically responsible for this work.
IV. This paragraph requires a platform to be established to enable better data collection of arbitration related cases. Data collection appears to be an ongoing issue for the courts. 2015 SPC rules on case file numbers (thank you to Chinalawtranslate.com for this translation), are aimed to create more consistency in filing numbers for cases, and will also be helpful in this process. Inconsistency in case files numbers was identified as a problem in the Guangdong study.) The SPC’s #4 Civil Division (in charge of cross-border civil and commercial matters) and the Information Technology Service Center are the ones responsible for ensuring this platform works. The notice does not require data results to be made public. The legal and professional public (in China and elsewhere in the world) would look forward to regular big data reports on this.
最高人民法院
2017年5月22日
Supreme People’s Court
May 22, 2017
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As the days count down to the 19th Party Congress, all Party/government institutions are preparing for it, including the Supreme People’s Court (SPC). On 19 September, the SPC issued an emergency notice (pictured above), calling on the lower courts to strengthening law enforcement work to provide a good judicial environment for the holding of the 19th Party Congress. The SPC, as other Party/government institutions, issue emergency notices from time to time (here’s one from the Ministry of Education), generally linked to a politically significant event. The full text for the SPC notice hasn’t been released (or if it has, it has escaped me). It is meant to send signals to the SPC staff and to the lower courts.
Some of the signals:
improve performance indicator systems (indicating too many courts still have dysfunctional performance indicators);
handle more cases, handle them well, handle them quickly (多办案、办好案、快办案, language better suited to the factory floor);
ensure that the goal of having difficulties in enforcement basically resolved in three years is achieved (again….);
clear up those unresolved cases (要抓好长期未结案件清理,确保依法妥善清理案件)–this is being taken seriously by court leaders, again judges (and their clerks, assistants and interns). The PhDs (and Master’s degree holders) praised by the SPC may feel they are somewhere between a model production worker and a real judge (or clerk.). (Of the SPC quota judges, about 1/3 have PhDs, with over half holding a master’s degree), and PhDs are not unusual in the lower courts, at least in major cities.) An unscientific survey shows judges and their support staff doing more overtime during the pre-19th Party Congress and pre-Golden Week holiday to meet this target;
reminds the lower courts about the case registration reform and reminds judges that cases should be accepted, even towards year end, when courts are concerned about their case closing numbers, especially the number of cases that will be carried over to the next year, and warns them against reporting false closing statistics (坚决杜绝人为抬高立案门槛、拖延立案、年底前提前关门不收案等突出问题), （切实防止虚假报结、强迫撤诉);
reminds courts about another important but controversial judicial reform, implementing the judicial responsibility system (insightful analysis and research from within the courts on this is coming out, see this recent article in the National Judicial College’s journal);
it reminds judges of ways to deal with the increase and cases and reduction in headcount–use diversified dispute resolution, separate simple from complicated cases, and try similar cases together.
The SPC released some year to date (end August) statistics (I’m drilling down on the state of transparency in this area)–close to 16 million newly accepted cases (15.89 million), no breakdown on how cases are categorized, closed cases up to 12.67 million (up 15.7%). This indicates continued high pressure on first instance judges and their assistants. I’m awaiting data on what the vortex of reforms means for retaining high quality judges.
On 22 December, the Supreme People’s Court (SPC) posted four big data reports drafted jointly by its Information Center and the Judicial Cases Research Center (affiliated with the National Judicial College).
The bar chart above, from the divorce report, shows the number of divorce cases heard in the courts in 2014-September, 2016, stating that the 2016 cases have increased almost 11% over the same time the year before. A subsequent chart shows that domestic violence as the cause for divorce in 27.8% of cases.
The reports appear to be products of the recently established SPC big data company. The analysis in the reports is restricted to bullet points, rather the more detailed analytical reports that are found on the websites/Wechat public accounts of courts and lawyers. (Suggestion to (any) readers from the SPC– translations of these reports would be a useful addition to the English version of the SPC’s website).
Anyone looking for more than current statistics and basic analysis is advised to search for more detailed analysis done by law firms, local courts, some of the legal media companies, and some of the other divisions of the SPC. On the topic of divorce, for example, an SPC judge published this analysis earlier this year, generally considered to be the most authoritative summary of the issues in Chinese divorce law.
The 4th Five Year Court Reform Plan (Court Reform Plan) flagged the SPC’s big data company and the stress that the SPC is placing on big data:
22. Deepen reforms of judicial statistics.Reform mechanisms for judicial statistics with the idea of “big data, big picture, and big service” as a guide; make a system of standards for judicial statistics that has scientific classifications and complete information, gradually building a model for analysis of empirical evidence that complies with the reality of judicial practice and judicial rules, and establish a national archive of court judgment opinions and a national center for big data on judicial information. (translation from @Chinalawtranslate)
The Court Reform Plan signals that the stress is on judicial statistics and using big data for internal use rather than for public access, as “complete information” is not provided to the public, with death penalty statistics the best-known example. Although judicial transparency is greater before (especially for those of us with a historical perspective), from time to time SPC media sources reiterate that judicial personnel are required to keep state secrets (as the Judges Law and other legislation require).
At the moment, transparency of judicial statistics and analysis varies greatly across provinces. Jiangsu Province’s high court, for example, has judicial statistics on its homepage:
Many law firms publish big data analysis of specific types of cases in their area of practice, such as this analysis of credit card fraud cases in Guangzhou (22% of the defendants were represented by counsel) and drug cases in Guangzhou (less than 15% represented by counsel). An analysis of drug cases in Guangdong (Jieyang, a center for the methamphetamine business) by the local court, has important insights into the routinization of criminal justice, the inadequacy of court judgments, and the way that the trial itself and the role of defense counsel (if hired) is marginalized.
Big data analyses can be found in a range of substantive areas, ranging from finance disputes to construction disputes, some by law firms and others by local courts. My fellow blogger, Mark Cohen, recently highlighted the data analysis provided by IPHouse, a firm started by a former SIPO Commissioner. They are useful to the lawyer/in-house counsel planning or considering litigation strategy, as well as for policy-makers and academics. Each provides a glimpse of how (and sometimes why) the Chinese legal system works as it does.
Wechat, as most people with an interest in China know, has become the preferred form of social media in China. The legal community in China has taken to it too.
Some are official accounts of government entities, including the courts and others are public accounts (公众账号) established by companies, law firms, individuals, and other organizations. Ir Each has its benefits for the user located outside of China.
To access these public accounts, it does not matter where in the world you are located, but you need a smart phone to install the Wechat app. The accounts can be accessed through “search official accounts” or “Add contacts” and typing in either the Wechat ID or the name of the account. The accounts can also be accessed through computer or table as well, by searching for the account in question.
The official government accounts enable the user to keep current on the issues and latest government position in that area of law–new policy, new legislation, and new reforms. The Supreme People’s Court, for example, has one, as does the Supreme People’s Procuratorate, as well as their local counterparts.
Another category is the less official public accounts. Some are affiliated with official organizations, while others are not, while others are in a grey area. The writing tends to be aimed at the professional, with less bureaucratic language. Some accounts are aimed at practicing lawyers, more focused on civil and commercial law than criminal law or administrative law, but both can be found. Some accounts publish writings by the account holder, while others accept articles submitted by followers. One very popular type of article is one that reviews the law and cases in a particular area of law.
Some of the legal public accounts that I follow (or are highly recommended by those that I know) are listed below. The list has now updated with further information provided by a 31 January article in Empire Lawyers and Lawread on the top 10 public accounts. Please use the comment function (or email me) to suggest additional accounts.
Arbitration: Wechat ID: cnarb1, account of Lin Yifei, mentioned in an earlier blogpost. I highly recommend it to both practitioners and others interested in arbitration.
Labor law:Wechat ID: laodongfaku (劳动法库) (with over 200,000 followers (this is mentioned in Empirelawyers top 10; Wechat ID: ldfview （子非鱼说劳动法);
Civil law 海坛特哥 (haitanlegal), account of Chen Te, formerly of the Beijing Higher People’s Court, now a lawyer (高衫legal) [his earlier posts focused on medical law], Wechat ID: gaoshanlegal; 审判研究, Wechat ID: spyjweixin; 法客帝国， Wechat ID: Empirelawyers; 审判研究, Wechat ID: msspck.
Criminal law: 辩护人 (bianhuren1993); 刑事实务, Wechat ID: xingshishiwu, with over 200,00 followers; 刑事审判参考 Wechat ID: criminailaw.
Judiciary: There are many, among them are: 法影斑斓 , account of He Fan, judge in the judicial reform office of the Supreme People’s Court, Wechat ID: funnylaw1978 and JunnyLaw (JunnyLaw1977) the newly established account of Jiang Qiang, a judge in the #1 Civil Division of the Supreme People’s Court, so far, articles focusing on civil law issues.
Civil litigation, 天同诉讼圈, Wechat ID: tiantongsusong (in the top 10), established by Tian Tong & Partners), with over 250,000 followers;
International law: Wechat ID: ciil 2015 国际法促进中心
IP law–知识产权那点事, Wechat ID: IPR888888. The posting of 30 January, for example, includes the Supreme People’s Court judgment 11 January in its retrial of the Castel wine trademark infringement case and an article on indirect infringements of copyright on the Internet.
Aggregators/General–智和法律新媒体, Wechat ID: zhihedongfang; 法律博客, Wechat ID: falvboke, 法律读品， Wechat ID: lawread, 尚格法律人, wechat ID: falvren888 (followed by at least 130,000 legal professionals). 法律读库 Wechat ID: lawreaders, followed by 500,000 (in top 10); 法律讲堂, Wechat ID: yunlvshi, established by a partner with the Yingke Law Firm (also listed among the top 10).
This linked article written by Chen Te discusses how legal professionals can market themselves through a public account as well as some of the issues of having a public account.
Wechat, as most people with an interest in China know, has become the preferred form of social media in China. The legal community in China has taken to it too. Some are official accounts of government entities, including the courts and others are public accounts (公众账号) established by companies, law firms, individuals, and other organizations. Each has its benefits for the user located outside of China.
To access these public accounts, it does not matter where in the world you are located, but you need a smart phone to install the Wechat app. The accounts can be accessed through “search official accounts” or “Add contacts” and typing in either the Wechat ID or the name of the account. The accounts can also be accessed through computer or table as well, by searching for the account in question.
The official government accounts enable the user to keep current on the issues and latest government position in that area of law–new policy, new legislation, and new reforms. The Supreme People’s Court, for example, has one, as does the Supreme People’s Procuratorate, as well as their local counterparts.
Another category is the less official public accounts. Some are affiliated with official organizations, while others are not, while others are in a grey area. The writing tends to be aimed at the professional, with less bureaucratic language . Some accounts are aimed at practicing lawyers, more focused on civil and commercial law than criminal law or administrative law, but both can be found. Some accounts publish writings by the account holder, while others accept articles submitted by followers. One very popular type of article is one that reviews the law and cases in a particular area of law.
Some of the legal public accounts that I follow (or are highly recommended by those that I know) are listed below. Please use the comment function (or email me) to suggest additional accounts.
Arbitration: Wechat ID: cnarb1, account of Lin Yifei, mentioned in an earlier blogpost. I highly recommend it to both practitioners and others interested in arbitration.
Judiciary: There are many, among them are: 法影斑斓 , account of He Fan, judge in the judicial reform office of the Supreme People’s Court, Wechat ID: funnylaw1978 and JunnyLaw (JunnyLaw1977) the newly established account of Jiang Qiang, a judge in the #1 Civil Division of the Supreme People’s Court, so far, articles focusing on civil law issues.
International law: Wechat ID: ciil 2015 国际法促进中心
IP law–知识产权那点事, Wechat ID: IPR888888. The posting of 30 January, for example, includes the Supreme People’s Court judgment 11 January in its retrial of the Castel wine trademark infringement case and an article on indirect infringements of copyright on the Internet.
This linked article written by Chen Te discusses how legal professionals can market themselves through a public account as well as some of the issues of having a public account.
The Supreme People’s Court and Supreme People’s Procuratorate are together drafting a judicial interpretation on Article 399a of the Criminal Law, the crime of “twisting the law in arbitration.” My understanding is that one of the criminal law divisions of the Supreme People’s Court is involved in the drafting, rather than the #4 civil division, well-known internationally for its expertise in arbitration issues. According to an article published by the Guiyang Arbitration Commission, in late April, the State Council Legislative Affairs Office distributed the draft to some arbitration commissions for comment. Given the many legal issues it raises for domestic and foreign arbitrators (and the Chinese government’s international/regional obligations), it should be issued publicly for comment.
What is Article 399a of the Criminal Law?
Article 399a, is part of Chapter IX: Crimes of Dereliction of Duty.
Where a person, who is charged by law with the duty of arbitration, intentionally runs counter to facts and laws and twists the law when making a ruling in arbitration, if the circumstances are serious, he shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention; and if the circumstances are especially serious, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years.”(依法承担仲裁职责的人员，在仲裁活动中故意违背事实和法律作枉法裁决，情节严重的，处三年以下有期徒刑或者拘役;情节特别严重的，处三年以上七年以下有期徒刑.)
Article 399a is a duty crime (one committed by officials). How is it that Chinese arbitrators who are not officials, or foreign arbitrators can commit this crime?
The procuratorate investigates duty crimes. This means that the procuratorate must review an award to make a decision whether to investigate whether an award has been intentionally rendered “in violation of facts and law.” Will a procuratorate be able to conduct this review applying foreign law?
If a procuratorate prosecutes a case under Article 399a, it also requires a court to undertake a substantive review of an arbitral award.
Judicial interpretations of both the Supreme People’s Court and Procuratorate raise important issues. As suggested in several earlier blogposts, part of the judicial reforms should include greater requirements for public comment on draft judicial interpretations. Depending on how familiar the US and EU bilateral investment treaty negotiators are with the details of Chinese law, this may be raised by negotiators.
Comment
Because this judicial interpretation has implications for China’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and the analogous arrangement with Hong Kong, the draft should be made public so that the greater arbitration community, domestic and foreign, is able to provide detailed analysis and commentary on it. This is the interests of the international and Chinese legal communities.
Supreme People's Court Monitor 
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