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Supreme People’s Court Developments, December 2024-January 2025

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from the report on the 2025 Central Political-Legal Work Conference on one of the SPC’s websites

See below a brief summary of recent developments  (or at least the principal recent developments) at the Supreme People’s Court (SPC) in January 2025 (as of January 19, the date of publication of this post) and December 2024.

January 2025

  1. On January 8th, the Party leadership heard the SPC Party Group’s report on the SPC’s work, along with those of other institutions.  I mention the requirement for this report in my 2024 article;

certain phrases (such as “report to a superior on their work” [shuzhi 述职] imply a hierarchical relationship between the SPC and the Central Political-Legal Committee and the Party Center. The fact that the SPC reports to the Party leadership can be seen in public reports on the leadership of the political-legal institutions meeting with Xi Jinping and other senior leaders before the annual sessions of the National People’s Congress and Chinese People’s Political Consultative Congress, although the materials actually submitted to the Party leadership are not publicly accessible.)

2.  January is when many important conferences are held that have an impact on the work of the courts: the Central Political-Legal Work Conference (中央政法工作会议) and the National Conference of Higher Court Presidents （Higher Court Presidents Conference 全国高级法院院长会议),  at which the spirit of the Political-Legal Work Conference is transmitted and the goals for judicial work in 2025 are announced. The SPC has held this conference annually for many years. In the recent historical past (the early 1990’s, for example), the Higher Court Presidents Conference was called the National Court Work Conference.

3. Policy documents: 

a. In early January, the SPC and the All-China Federation of Overseas Chinese (Overseas Chinese Federation 中国侨联权益保障部) issued a joint policy document on the strengthening the judicial protection work of the interests of overseas Chinese and returned overseas Chinese and their families in the New Era (关于加强新时代侨益司法保护工作的意见), and related reference cases.  The document seeks to ease litigation formalities for these groups and promote resolving disputes through mediation, among other matters, such as improving research on Overseas Chinese-related issues, such as through establishing a research base, as has been done with other issues.  The title of this document differs from Zhou Qiang era policy documents, but the goal of providing judicial support for an important national policy goal is the same. 

The SPC’s Research Office led the drafting of this document, in cooperation with the Overseas Chinese Federation.  This responsibility is consistent with the role of the Research Office, which deals with many legal policy and cross-internal institutional matters, such as Hong Kong, Macau, and Taiwan-related issues and the transition to the Civil Code.  It does not hear cases.

This is the first joint policy document between the SPC and Overseas Chinese Federation. Closer cooperation between the two institutions began in 2018, with 30 courts piloting closer cooperation with local Overseas Chinese Federations, and with the 2020 establishment of a “general-to-general” online mediation mechanism (the SPC has established this type of mechanism with the China Securities Regulatory Commission and other institutions).    The policy document is linked to language in recent Party Plenums on protecting the rights of returned Overseas Chinese and Overseas Chinese and their families.

b. Opinions of the Supreme People’s Court on Serving Technological Innovation with High-quality Trial Services 最高人民法院关于以高质量审判服务保障科技创新的意见.  The press conference report is here.  China IP Law Update’s summary in English is here.  If time had permitted, I would discuss the links in this document with the recent Party Plenum and other Party initiatives.

4. Judicial interpretations:

a. The SPC issued its second interpretation of the Marriage and Family Part of the Civil Code, aimed at addressing common troublesome issues facing the courts, such as property division when a cohabiting couple split, many issues relating to divorcing couples, including property division and ownership of a company established by a couple.  To provide further guidance on applying the interpretation, the SPC issued typical cases. This interpretation provides important insights into family law issues in current Chinese society.  

b.  The SPC joined with the Supreme People’s Procuratorate to issue the Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Cases of Attacks on Police Officers (关于办理袭警刑事案件适用法律若干问题的解释).  From the provisions of this interpretation,  the confusion lower-level procuratorates and courts had about the application of Article 277 of the Criminal Law is apparent.

5. Other typical cases issued in January included: one on protecting natural reserves and national parks; another on punishing rural saohei (underworld forces) crimes; protecting the rights and interests of foreign investors; and refusing to pay wages (6200+ cases in the past four years)

6. The SPC established its Judges’ Disciplinary Committee, with President Zhang Jun as the chair.  At the first meeting, he noted that the establishment of a judges’ disciplinary committee and the implementation of a judges’ disciplinary system are political requirements for implementing the decisions and arrangements of the CPC Central Committee.  In 2021, I published a book chapter on Chinese judicial disciplinary developments, available here.

December 2024

December is the end of the year, so the SPC always issues many documents–judicial interpretations, policy documents, guiding and typical cases etc. at year’s end.  2024 was no exception. Among the documents worth noting:

  1. Judicial interpretations and meeting minutes

a. The SPC and the China Securities Regulatory Commission (CSRC) issued meeting minutes (conference summary) on bankruptcy (insolvency)  and reorganization of listed companies.  From the document number, it appears that the SPC took the lead in drafting it and it provides an update to a 2012 conference summary that the SPC issued itself. A DeHeng law firm partner comments here on the meeting minutes. The CSRC is soliciting public comments on Regulatory Guidelines for Listed Companies No. 11 – Matters Related to Bankruptcy and Reorganization of Listed Companies (this link contains the text and an explanation).  

b. On December 25, the SPC issued a Decision on Amending the Supreme People’s Court’s Regulations on Acknowledgement and Execution of Civil Judgments from Taiwan Area Courts, Chinese original 最高人民法院关于修改《最高人民法院关于认可和执行台湾地区法院民事判决的规定》的决定.  An English language summary is available here.  From a quick look, most amendments are procedural or unsurprising. Some reflect amendments to the Civil Procedure Law or codifying court practice. The provision “the people’s court shall make a ruling not to acknowledge a civil judgment if acknowledging it would violate fundamental principles of state laws, such as the one-China principle, or undermine state sovereignty, security, or social public interests” is consistent with analogous provisions and codifies what has been court practice.

2.  Guiding cases: on December 25, the SPC issued six guiding cases on state compensation issues, some of which provide glimpses of problems with prison management; On December 24, the SPC issued the first group of guiding cases on labor issues.

3. Typical cases: The SPC issued many typical cases in December 2024. As I mentioned previously, President Zhang Jun favors using typical cases to guide the lower courts in correctly applying the law.

The SPC issued typical  cases on: the protection of the rights and interests of the elderly; administrative public interest litigation (second group), issued jointly by the SPC and SPP;  “one letter and two books”  labor law supervision, issued jointly by the SPC, the SPP and the All-China Federation of Trade Unions;  wage arrears, issued in cooperation with the All-China Federation of Trade Unions and the Ministry of Human Resources and Social Security;  two groups of financial loan dispute mediation cases, issued by the  State Financial Supervision and Administration Bureau and the SPC, with one case providing a model for dealing with non-performing microloan cases; rights and interests of Taiwan compatriots, linked to the Party’s policy on promoting cross-straits integration and development; crimes involving counterfeit safety production qualification certificates (linked to a policy document issued in July, 2024 that does not appear to be publicly available (关于进一步加强安全生产资格证书涉假案件刑事审判工作的通知)); petty corruption (each case provides insights into the world of official corruption); punishing illegal production, sales, and use of eavesdropping and stealing equipment, with several cases involving the hidden filming (and marketing of those films) of people having sex in hotel rooms; inheritance disputes (first  and second group); criminal punishment of illegal fishing; and traffic accident liability.

3. Policy documents: Guiding Opinions on Improving the Quality and Efficiency of Trial Work and Promoting the Substantial Resolution of Contradictions and Disputes （关于在审判工作中促进提质增效 推动实质性化解矛盾纠纷的指导意见).  This document focuses on civil and administrative disputes, promoting mediation (Fengqiao Experience) and the resolution of the substance of disputes (as discussed here).  I will draw on this document in a forthcoming article.

4. Plans: 

a. the SPC issued the Sixth Five-Year Judicial Reform Outline.  This article links to the text of the Outline and the related press release. I will publish an article later this year providing a summary and analysis of this document. 

b.  the SPC issued the National Court Education and Training Plan (2024-2028).  I analyzed the previous two plans here and here.  Training of judges handling foreign-related matters receives special attention (see my earlier analysis).

5.  National People’s Committee (NPC) Standing Committee’s Recording & Review:  SPC judicial interpretations and other judicial documents must be filed with the NPC Standing Committee. At the end of 2023, the NPC SC adopted a decision strengthening the recording and review mechanism (see the NPC Observer’s analysis). On 22 December 2024, the Legislative Affairs Commission of the NPC Standing Committee gave its view in its annual report on Recording and Review that a July 2024 Supreme People’s Court interpretation that directed lower courts to retroactively apply a new provision in the recently revised Company Law concerning equity transfers,  controversial in the business community,  was inconsistent with the Legislation Law. The Legislative Affairs Commission stated that the “[they] will urge the relevant judicial interpretation-making authorities to take appropriate measures to properly handle the matter.”  The SPC issued a follow-up interpretation two days after the annual report was made public， signaling that the SPC had been previously been informed.  Although the problematic July 2024 interpretation must have been reviewed by the Legislative Affairs Commission in draft form before it was approved by the SPC judicial committee, as required by Article 18 of the SPC’s Judicial Interpretation Work Provisions, it appears that that whichever office of the Legislative Affairs Commission initially reviewed the SPC’s draft and the office responsible for recording and review took different views. 

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Thank you, subscribers, for your patience.  The blog will transition from being completely researched and written by me (including discussions with knowledgeable persons and experienced judges, for the avoidance of doubt) sometime after Chinese New Year. I plan to involve my research assistants more in analysis and writing, although I have at least one long analytical blogpost that I will complete soon.   I want to focus on consolidating and developing my research in longer pieces.

 

alternative dispute resolution, bankruptcy, bankruptcy law, BRI, case database, Case law, Communist Party and the Courts, foreign-related cases, NPC, Role of the Supreme People's Court

What’s New in the 2024 Supreme People’s Court report to the National People’s Congress?

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Susan Finder and Zhu Xinyue

I. Overview of the 2023 SPC Work Report

Supreme People’s Court (SPC) Work Reports to the National People’s Congress (NPC) appear to the casual reader as much of a muchness. Like all official work reports, it provides a perfectly positioned overview of the previous year’s accomplishments and a high-level summary of 2024 work priorities.

To the attentive reader,  the March 2024 SPC Work Report to the NPC  (2024 SPC Work Report or Report) signals something new and different compared to its predecessor reports.  This much-delayed blogpost flags only some of what is new.  I have italicized many of my comments. (Please contact me if I have not mentioned your area of interest.)

The 2024 SPC Work Report signals that since President Zhang Jun took office, he has vigorously implemented new policies and set new priorities. Accordingly, the Report highlights Zhang Jun era keywords. Conveniently for the reader, they are contained in this single report.  A single phrase or sentence in this report links to one or more SPC documents, initiatives, and guiding/typical cases.

As in previous years, local court cases or innovations are considered accomplishments and heralded on local court WeChat accounts. Last year’s report, in contrast, was President Zhou Qiang’s last and served as an official summary of his accomplishments over the previous five years.

Several phrases in the first paragraph of  the 2024 Work Report (bolded) signal the new themes in this report:

… by focusing on the working theme of “justice and efficiency”, insisting on active justice, deepening and realizing service for the overall situation and justice for the people, we have made solid progress in promoting the modernization of judicial work聚焦“公正与效率”工作主题，坚持能动司法，做深做实为大局服务、为人民司法，推动审判工作现代化迈出坚实步伐…

As the regular reader of this blog could predict, the word “active ( 能动)” and the watchword or keyword  “active justice (能动司法)  can be found throughout the report.

Some statistics

The initial section of the 2024 SPC  Work Report provides overall statistics from the SPC and the entire court system.  The SPC accepted 21,081 cases and concluded 17,855 cases, representing a year-on-year increase of 54.6% and 29.5%, respectively. These numbers reflect the end of the pilot project to reorient the four levels of the Chinese courts and the corresponding increase in retrial applications made to the SPC. It can be anticipated that those numbers will be even higher in the 2024 calendar year. As I have previously written, most of the civil and administrative retrial applications to the SPC are unsuccessful, but it requires SPC judicial time to review them. For Americans, a useful but not entirely appropriate analogy is the petition for certiorari to the Supreme Court.

The report states that courts at all levels accepted 45.574 million cases and concluded 45.268 million cases, with 15.6% and 13.4% yearly increases, respectively.  Most cases in Chinese courts are civil/commercial (60.05%) or enforcement cases (29.34%).  I would be grateful if a reader could provide comparative statistics (from other jurisdictions) on enforcement.  My reaction is that the proportion of enforcement cases is relatively large. See the chart below:

These numbers likely are linked to the poor economy, which from comments by friends in the court system, means an increase in business disputes and business-related crime.  These increases are evident despite policies to reduce the number of disputes entering the courts and resolve cases filed before they reach the hearing stage. Those policies include: resolving cases at their source, resolving others through mediation, (now promoted under the keyword/title of Fengqiao Experience),  and promoting arbitration.  Some judges have remarked privately that it also has to do with the low cost of litigation.

II.  Serve the overall situation effectively and ensure high-quality development and high-level security with active justice

The title of this section combines several watchwords/keywords 提法/关键词, robustly signaling that President Zhang Jun led the drafting of this report.

The ten subsections in this section must be understood as ones that were priority areas for the Chinese courts in 2023. I have selected only a few of the subsections out of the ten:

Assisting the Strengthening of the Construction of the Financial Rule of Law

This subsection in the 2024 SPC Work Report is positioned immediately after the sections on safeguarding national security and social stability, promoting public security governance, and fighting corruption, reflecting its priorities in the SPC’s work. Although both the 2023 and 2024 SPC Work Reports address judicial support for finance, the 2024 SPC Work Report emphasizes strict regulatory enforcement in the banking and securities sectors, both subsumed under the category“financial trials.”

The Chinese courts concluded 3.032 million financial cases, an 8% year-on-year increase, and heard 861 money-laundering cases, involving 1,019 individuals, with increases of 23.5% and 22.2%, respectively. The money-laundering cases are likely linked to the ongoing multi-institutional anti-money-laundering campaign of which the SPC is a participating institution. The Report stresses the importance of “compliance in financial activities, strict punishment for senior management illegalities (高管违法要严罚), and holding intermediaries accountable for negligence.” The report illustrated the last two policies by mentioning a securities false statement case in which senior managers were found liable and an intermediary bore 20% joint and several liability.  Given those signals, it will not be surprising that the Shanghai, Beijing, and Chengdu-Chongqing Financial Courts have made analogous judgments in 2023 and 2024. The allocation of liability in these cases is a current issue. The Report also mentioned two financial law-related judicial suggestions that the SPC issued, rarely, if ever mentioned in the past, linked to last year’s judicial interpretation on judicial suggestions/advice (司法建议).

 Promoting the Development and Growth of the Private Economy in Accordance with Law

This subsection, new in comparison with last year’s report, links to the July 2023 Central Committee and State Council document on promoting the private economy,  focusing on measures contained in a September 2023  policy document and typical cases.  It includes a paragraph discussing the measures in that policy document and highlighting that the courts heard 42 cases of property rights-related wrongful convictions.  The SPC issued 12 typical retrial  cases (civil, criminal, and administrative) involving the rights of private enterprises and private entrepreneurs. Cases of bribery and embezzlement involving non-state employees amounted to 6,779, involving 8,124 individuals, with a year-on-year increase of 26.6%. Although the SPC intends to enhance legal certainty, boosting business confidence and stabilizing expectations, other sources report on profit-oriented law enforcement at the local level, often leading to the jailing of private entrepreneurs and the confiscation of their assets.

III   Safeguarding and Enhancing People’s Livelihood through  Active Justice

The section title above replaces “The Path of Judicial Services for the People With Chinese Characteristics” in the 2023 report.

New themes introduced include “Supporting Guaranteed Delivery of Commercial Housing and Stable Livelihoods,” to deal with issues related to the ongoing crisis involving real estate developers.

  • Safeguarding Housing Rights: The financial collapse of many real estate developers has meant disputes along the real estate development supply chain. A 2023 SPC judicial interpretation prioritizes homebuyer rights, clarifying the order of claim repayment in disputes over unsuccessful delivery of sold commercial housing.
  • Strengthening Housing Pre-sale Supervision: The SPC issued Judicial Suggestion No. 1 to promote contract online signing and pre-registration, enhance pre-sale funds supervision for commercial housing, strengthen pre-sale information inquiries, and warn about home buying risks.  [These suggestions do not seem to have been made public.]
  • Restructuring the Financial Chain of Homebuying: In response to a financial chain rupture of a private real estate enterprise in Hunan Province, a court-facilitated restructuring revitalized 16.8 billion yuan, resolving housing delivery issues for 16,000 households by facilitating the merger and restructuring of 13 related companies.  This type of case was mentioned in a typical case that the SPC issued last year.

IV. Promoting National and Social Governance through Active Justice Which Practically Grasps the Front End and Treats the Disease Before it’s too Late 

As could be anticipated, this section emphasizes judicial suggestions, among other matters.

Deepening the Effective Use of Judicial Suggestions: The Report emphasized judicial suggestions that fill legal gaps and governance deficiencies, mentioning the regulations on comprehensive governance-oriented judicial suggestions, discussed here. This is yet another initiative emphasized by President Zhang Jun. The SPC led with Judicial Suggestions No. 1 to No. 5, and lower courts issued 9,429 suggestions.

V. Ensuring Judicial Justice through Actively Performing Duties 

This section underscores Party leadership within the judicial system, with the primacy of the Party’s political construction. It promotes “strengthening Party nature, emphasizing practical work, and achieving new accomplishments” (“强党性、重实践、建新功”) through solid “learning of ideology” (扎扎实实“学思想”) and outlines the result of “deepening investigation and research and solidifying thematic education”( 大兴调查研究，让主题教育走深走实) and implementing “investigation promoting case handling, and case handling also being investigation” (“调研促进办案、办案也是调研”).

The Report indirectly addresses public concerns about the China Judgements Online database by emphasizing efforts to improve transparency in judicial proceedings (裁判文书上网) and the “People’s Court Case Database”,  such as posting 2.165 million documents online in 2023, with a year-on-year increase of 111.6%, covering a wider range of trial areas and case types, with the SPC and higher courts posting 35,000 documents, a 370% increase. The 2024 Report details measures for the uniform application of legal standards, including 15 judicial interpretations, 13 guiding cases, and 610 typical cases. As discussed here, the “People’s Court Case Database” contains SPC-approved cases, and judges must search this database.   “Legal Response Network (法答网)” (analysis to come) launched on July 1, 2023, facilitates communication among courts and has received 280,000 legal application inquiries, answering 230,000. Insights from this platform have led to the revision or drafting of 27 judicial interpretations and regulatory documents.

More specific selected statistics

Bankruptcy cases: 29,000 bankruptcy cases were concluded, marking a year-on-year increase of 68.8%. Additionally, 1,485 bankruptcy restructuring and settlement cases were concluded. Local court white papers on bankruptcy (link is to the Shanghai court white paper) are an undervalued source of insights on more specific bankruptcy trends, such as the type of companies going bankrupt and the length the companies have been in business. One law firm report on bankruptcy flagged missingness on the SPC’s bankruptcy platform and the rate at which local courts accepted bankruptcy cases.

Foreign-related civil and commercial cases: 24,000 foreign-related civil and commercial cases and 16,000 maritime cases were concluded, representing annual increases of 3.6% and 5.3%. The average trial time decreases by nearly 10 days. 16,000 cases of judicial review of commercial arbitration were concluded, reflecting a 5% year-on-year increase. During this period, 552 arbitration awards were revoked, remaining stable year-on-year, while 69 foreign arbitration awards were recognized and enforced, representing a 16.9% increase. This section mentions a Shanghai Financial Court case in which the court stopped payment on a demand guarantee, although in fact most of such lawsuits are unsuccessful.

Deepening the diversification of dispute resolution: Since 2013, court cases have increased by an average annual rate of 13%, doubling over 10 years. Judges handled an average of 357 cases annually in 2023, up from 187 in 2017.  The courts successfully mediated 11.998 million disputes through people’s mediation, administrative mediation, and industry-specific mediation organizations/institutions, representing a 32% increase year-on-year and accounting for 40.2% of the total civil and administrative cases filed.

Fully leveraging the role of scientific evaluation as a “command baton”: The annual case closure rate was adjusted to the closure rate within the trial period, which reached 97.7% last year, a 2 percentage point increase. A special case cleanup initiative concluded 1,914 lawsuits pending for over three years and 2,455 pending cases involving 6,909 individuals, accounting for 81.3% and 86.8%, respectively, of the total cases.  The title of this section is significant. Judges at all levels of courts feel that “command baton.”

VI. 2024 Work Targets

As readers of this blog could anticipate, the 2024 work arrangements of the courts are focused on the modernization of judicial work, active justice, and other 2023 top keywords. The work arrangements listed here are more general than the types of work plans mentioned in my article.  They are intended to signal to the NPC and general public the overall direction of the SPC’s work in the current year. For the most part, the arrangements are expressed in phrases or single sentences.

Criminal cases: Implement the holistic national security concept, severely punish crimes threatening national security and public safety, promote the normalization of crackdowns on gangs and evil [sometimes used against local entrepreneurs], and severely crack down on telecommunications network fraud, cross-border gambling, and corruption, with harsher punishment for bribery crimes. All if not most of these crimes were flagged during January’s annual Central Political-Legal Work Conference.

Intellectual property and digital rights: Strictly protect intellectual property rights and promote their transformation and application, and serve the development of new productive forces. Justice Tao Kaiyuan published an article in People’s Daily in late March explicating the link between the development of new productive forces and the improvement of intellectual property rights protection. Strengthen personal information protection and improve digital rights protection rules. The latter two presumably imply inter-institutional cooperation.

Bankruptcy and Economic Development: Increase work on hearing bankruptcy cases and give full play to “active rescue” and “timely liquidation”. We can expect to see the courts accepting more bankruptcy cases this year. Deepen the compliance reform for companies involved in criminal cases and continue to optimize the growth of the private economy. Properly handle real estate development and affordable housing contract disputes, and actively serve the new model of real estate development (recent Party/state initiative). Strengthen hearing and enforcement work in “agriculture, rural areas and farmers” (“三农”) to support rural revitalization. The latter is consistent with previous SPC policy.

Ecological and Social Justice: Serve ecological civilization [the environment]  and green and low-carbon development in accordance with the law. Strengthen the protection of the rights of women, children, the elderly, disabled people, etc. (It is unclear whether that will include a better legal infrastructure for sexual harassment cases.) Strengthen administrative trials, supervise and support administrative agencies to administer according to law and strictly enforce the law. Promote judicial advice/suggestions and national and social governance.

Court administration.  Improve the quality and efficiency of court hearings and accelerate the modernization of trial work. Deepen the comprehensive supporting reform of the judicial system and formulate the “Sixth Five-Year Plan” reform outline for the people’s courts. [It is unclear when it will be issued] Comprehensively and accurately implement the judicial responsibility/accountability system (see related documents here), and further implement  “supervision/”review” system  (阅核制) by senior court leaders. That system is one of President Zhang Jun’s initiatives.  Improve the hierarchical selection system for judges and promote the coordinated use of posts and establishments across administrative regions. This seems to be a reform to share judicial headcount. Deepen the “three-in-one” reform of criminal, civil, and administrative cases in intellectual property, environmental resources, and juvenile matters.

Foreign-related and Grassroots Courts: Enhance the foreign-related judicial hearing system (consistent with my observations about the importance of foreign-related matters) and efficiency. Do a good job of “replying to letters and visits“, and strengthen the management of the source of letters and visits.

Grassroots Courts:  Practice the “Fengqiao Experience” in the new era, promote resolving cases at source (诉源治理), provide practical guidance for mediation, and vigorously create “Fengqiao Style People’s Tribunals.” The SPC has issued six groups of related typical cases and the Chinese court media has begun to report on the creation of such people’s tribunals. The Report mentions strengthening relatively weak grassroots courts (相对薄弱基层法院), another initiative by President Zhang Jun. Under this initiative (full text of measures unavailable), 106 relatively weak local courts are targeted for additional support. The SPC has set quotas for each province, as well as a goal of removal from the list within one to three years.

Supervision, Guidance and Digital Courts: Strengthen supervision and guidance (stressed by President Zhang Jun, as mentioned above), deepen trial management, use the “People’s Courts Case Database” and improve the “Legal Response Network 法答网”. [More on this in a later blogpost, but it appears to be an updated version of letters to the 人民司法 (People’s Justice) mailbox)]. Develop a nationwide court “one network” and digital courts (数字法院) to boost efficiency. Note that the term “smart courts” (智慧法院), the subject of books, articles, and PhD dissertations in Chinese and English,  appears to have been dropped.

Court Supervision and Integrity: The final section for the most part repeats principles seen previously, such as improving political, professional, and professional ethical qualities. It flags improving the training of professional trial talents in foreign-related, intellectual property, and other fields and stresses the use of personnel assessment of all court staff.

Finally, I conclude with this extended quotation from the Report:

 the new development of the work of the people’s courts in the new era and new journey is fundamentally due to the leadership of General Secretary Xi Jinping and the scientific guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. It has benefited from the effective supervision of the National People’s Congress and its Standing Committee, the strong support of the State Council, the democratic supervision of the National Committee of the Chinese People’s Political Consultative Conference, the supervision of the National Supervision Commission and the Supreme People’s Procuratorate, the democratic supervision and support of various democratic parties, the Federation of Industry and Commerce, people’s organizations and non-party personages, and the enthusiastic concern, support and help of local party and government organs at all levels, deputies to the National People’s Congress, members of the National Committee of the Chinese People’s Political Consultative Conference, all sectors of society and the general public.

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Many thanks to an anonymous peer reviewer!

References to “I, me or mine” are to Susan Finder rather than Zhu Xinyue. Finally, I’d like to express my appreciation to followers of this blog for their patience.

bankruptcy law, foreign-related cases, Maritime courts

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

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Justice Tao Kaiyuan

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

Future Developments

Justice Tao released information on the following developments:

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

Ongoing Issues

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

Expanding the SPC’s Circle of Friends

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

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

Qualities of Foreign-Related Judges

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

alternative dispute resolution, bankruptcy law, financial court, foreign-related cases, judicial interpretations

Judicial services & guarantees to aid China’s economy

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Justice He Xiaorong at the press conference

I am going to experiment with a shorter format, starting with this blogpost.

On 22 July, the Supreme People’s Court (SPC) held a news conference with the National Development and Reform Commission (NDRC) to announce their latest policy document providing judicial services and guarantees to accelerate the socialist market system in the New Era (为加快完善社会主义市场经济体制提供司法保障).  Justice He Xiaorong appears to be the SPC senior official in charge of the #1 Civil Division. From his appearance at the press conference, Zheng Xuelin, the head of the #1 Civil Division, must have taken the lead in drafting this document, but the subject matter reflects input from many divisions of the SPC, although none of them are mentioned. Wang Renfei, head of the NDRC’s Division of Economic Reform, also appeared at the press conference.  It is linked to a May, 2020 document of the Central Committee and State Council on improving the market economy in the New Era.

These policy documents that provide judicial services and guarantees are one of the hallmarks of the SPC in the New Era, as General Secretary Xi Jinping has called on the SPC to provide judicial services and guarantees to the important policy initiatives and strategies of the Party and state. Since Xi Jinping became General Secretary, at the annual Central Political-Legal Work Conference, he has given instructions to the political-legal institutions that the judicial organs provide “judicial services and guarantees” for major Party and government policies. For that reason, the SPC has increased the number of policy documents in which it has provided services and guarantees to the work of the Party and state. Consistent with Xi Jinping’s instructions, Party leadership, in the most recent inspection of the SPC, requested that the SPC strengthen its “services and guarantees” to the work of the Party and state.   This latest policy document has 29 articles, covering the topics of:

  • judicial protection of market entities, especially small entities;
  • judicial protection of property rights;
  • establishing a fair, just, and orderly competitive market system;
  • a legalized business environment suitable for high-quality economic development;
  • judicial protection of people’s livelihood;
  • improve foreign-related guarantees; and
  • one-stop diversified dispute resolution with Chinese characteristics.

There are a few new provisions, but most of the provisions are a repackaging of current or previous issues, many of which had been mentioned in a recent SPC New Era policy document and discussed on this blog. Some, while not new, send welcome signals.  The careful reader can pull out of the bureaucratic language of this document ongoing issues facing the Chinese courts and even some initiatives not previously mentioned.  An unscientific selection below follows:

  1. Judicial protection of market entities

This section repeats principles or raises issues such as:

  • parties being treated equally; protecting the individual and property rights of entrepreneurs (an ongoing issue–see this 2016 blogpost);
  • Absorb and transform beneficial international/foreign experience –this document uses the language “beneficial experience from legal systems with mature market entities” (吸收借鉴国际成熟市场主体法律制度的有益经验). This phrase is repeated elsewhere in the document. As I wrote in 2017–“a careful review of official statements, publications, and actions by the SPC and its affiliated institutions, as well as research by individual SPC judges [and teams of SPC judges] shows an intense interest in how the rest of the world deals with some of the challenges facing the Chinese judiciary coupled with a recognition that any possible foreign model or provision will need to fit the political, cultural, economic, and institutional reality of China, and that certain poisonous ideas must not be transplanted.”  This continues to be true (given the gaping holes in Chinese legislation, as seen from the perspective of Chinese judges), including a careful review of relevant US law.
  • Abuses by senior leaders in SOEs, causing loss of state assets (and likely benefiting private pockets), as seen in this phrase: “further clarify the relationship between state-owned property owners and agents, properly handle cases of loss of state-owned assets due to insider control, related transactions, and illegal guarantees by legal representatives, and pursue directors in accordance with the law. Supervisors and senior managers violate their legal responsibilities and obligations of loyalty and diligence. Promote state-owned enterprises to improve their internal supervision systems and internal control mechanisms, standardize  the positioning of powers and responsibilities and exercise methods, and improve the modern corporate system with Chinese characteristics.”
  • Improve the protection for small investors (relates to ongoing initiatives by the Shanghai Financial Court) and is connected with the most recent conference summary on bond disputes (全国法院审理债券纠纷案件座谈会纪要).  It mentions a forthcoming judicial interpretation on group securities litigation, apparently mentioned for the first time (及时出台证券纠纷代表人诉讼司法解释).  The Shanghai Financial Court has issued pilot regulations that will be considered by the SPC.
  • Exiting the market, the goal to be applicable to all sorts of legal and natural persons (signaling further developments relating to individual bankruptcy), establishing a better cooperative mechanism with government on bankruptcy (not new).

2. Judicial protection of property rights

Many of these have been discussed on this blog previously:

Better protection for property rights of private enterprises (discussed two years ago at the beginning of the anti-organized crime campaign).  It again mentions prevent the abuse of public power to infringe private property rights such as illegally sealing up, seizing, and freezing property rights of private enterprises;

Improving the hearing of cases involving land and real property condemnation (as this blogpost discussed, an underlying problem is the failure of related government departments to comply with legal requirements);

One article (#11) is devoted to improving intellectual property rights protection, but it does not flag anything not previously mentioned.

3.  Establishing a competitive market system

Article 12 re-emphasizes a concept basic to a market (oriented) economy–respect for the voluntariness and spirit of contract (尊重合同自愿和契约精神).

One provision in this section has attracted the greatest amount of attention–reducing the allowable interest rate for private lending, signaling a reversal of the provisions in the 2015 interpretation on private lending, which the document states will be amended soon.  The other provision that is repeated here (first mentioned three years ago), is stopping SOEs from using their easy access to bank capital to on-lend funds on the private market, for greater profit than their core businesses 规范、遏制国有企业贷款通道业务，引导其回归实体经济).

This section signals that the SPC will be working on more detailed provisions on taking security as a result of the Civil Code (进一步研究细化让与担保的制度规则和裁判标准).

4. legalized business environment suitable for high-quality economic development

Among the provisions mentioned here is better coordination between the financial regulators and the courts  (and legal oversight by the courts) (主动加强与金融监管机构的沟通协调，支持、促进金融监管机构依法履职，加强金融风险行政处置与司法审判的衔接，协助做好金融风险预警预防和化解工作).

5. judicial protection of people’s livelihood

This section mentions improving judicial protection for the consumer, better personal data protection, and improving protections for workers in new types of enterprises (i.e., working under algorithms).

6. Foreign-related commercial issues

Two new bits of information in this section are: the mention of exploring the establishment of a judicial review system for international investment arbitration (探索建立健全国际投资仲裁领域的司法审查机制 and issuing guidance on the recognition and enforcement of foreign commercial arbitration awards (适时出台涉外国民商事判决承认与执行的规范指引). This may evidence an expected increase in foreign arbitral awards sought to be enforced in China, in light of the (expected) increased number of Belt and Road Initiative related disputes.

7. One-stop diversified dispute resolution

This section repeats many of the current buzzwords (as discussed in my May blogpost), such as “resolving disputes from the source,” the “Fengqiao Experience,” giving mediation priority, and linking litigation with mediation.  However, as mentioned in earlier blogposts, some aspects of better mediation of disputes requires deeper reforms, such as changing incentives or evaluation of SOE executives.

bankruptcy law, Company Law, judicial documents, transparency

The National Civil Commercial Trial Work Conference Draft Conference Summary or how the SPC guides the lower courts through issuing conference summaries

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Screenshot 2019-12-25 at 5.30.17 PM
Screenshot of the explanation accompanying the draft conference summary

In early August, the Supreme People’s Court (SPC) issued the National Civil Commercial Trial Work Conference Conference Summary (Draft of the SPC #2 Civil Division for the Solicitation of Opinions from the Public) 全国法院民商事审判工作会议纪要 (最高人民法院民二庭向社会公开征求意见稿. The draft, which sets a comment deadline of 25 August and includes a brief (but useful) introduction, provides a summary of current critical legal issues in domestic commercial law. As explained below, this document provides an excellent example of one of the ways that the SPC guides the lower courts through issuing judicial normative documents 司法文件 or 司法规范性文件 (also called judicial regulatory documents and judicial guidance documents (司法指导性文件) and uses national court conferences to derive a consensus on critical legal issues. The 123-article draft document relates to legal issues, rather than the political issues discussed at length in Justice Liu Guixiang’s speech (as described in a recent blogpost). The fact that this draft was issued for public comment and so quickly shows that guidance from the SPC to the lower courts is needed quickly at a time where the domestic Chinese economy is facing downward economic pressure.  I  explain what this document is, why it was issued for public comment, and its implications. The planned summary of the issues will need to wait until time permits (perfect is the enemy of the good).

Collection of Guidance Documents of the SPC

Conference Summary

It is a fact that the Supreme People’s Court (SPC) issues a broad range of documents that guide the lower courts in addition to its judicial interpretations.  Several recent posts on this blog (and two of my recent book chapters) have focused on several of those documents. One of the documents that the SPC issues is entitled “conference summary/meeting minutes” (会议纪要), which is also a type of Party/government document (as mentioned in earlier blogposts).

As I explained “earlier” (25 years ago) in my 1993 article, the SPC uses specialized court conferences as a way of transmitting central legal policy, unify or harmonize court practices in accordance with that policy, and obtain an overview of court practices and problems.  Although conference summaries do not have the status of a judicial interpretation, the lower courts will generally decide cases according to its provisions. “Harmonizing court practice” means in Chinese judicial parlance that judges are applying the law similarly.

The SPC entitles conference summaries “judicial normative documents”（司法文件) judicial guidance documents (司法指导性文件) and sometimes judicial policy documents” (司法政策性文件).  As I’ve written before, this fuzzy use of terminology is not unusual. An (authoritative) follower has proposed using the English translation “judicial regulatory document” for 司法规范性文件.  An authoritative person (who cannot be named), concurred with the follower’s proposal. The book pictured above, edited by a group from the People’s Court Press (affiliated with the SPC),  includes a number of conference summaries (some with commentary by drafters). The editors commented that “although judicial guidance documents are not judicial interpretations and cannot be cited in a court judgment document as the basis of a judgment, it is generally recognized that they have an important guiding impact on the trial and enforcement work of the courts at every level.”

Public Consultation

This conference summary appears to be one of the few that has been issued for public consultation (the previous civil/commercial conference summary was also issued for public comment (see here).  My understanding is that the usual practice has been to solicit the views of certain experts outside the court system in the drafting process (as well of many in the court system).  As to why this draft has been issued for public comment, a knowledgeable person said it was to “hear views from all parts of society (听取社会各界的意见). I surmise that the #2 Civil Division (the division that took the lead in drafting the conference summary) took the view that it was useful to understand the views and comments that “the market” (the legal professional community) has relating the rules in the conference summary before finalizing it. This way the conference summary can be amended before it is finalized to account for any useful comments and the #2 Civil Division can anticipate issues that may arise when the conference summary becomes effective.

Purpose, Implications and Drafting Procedures

In the introduction to the draft, the SPC described its purpose in issuing this conference summary.  “The main purpose is in relation to various problems encountered in the process of trial practice, to provide some resolution methods that judges can use as a reference when discussing reasoning in the application of specific laws, to unify judicial thinking, and limit judicial discretion, work hard to have the masses feel justice in every case”   (主要目的是就审判实践中遇到的一些问题，提出解决方案，作为法官在具体法律适用、进行说理论证时的参考，统一全国法院的裁判思路，约束法官自由裁量空间，提高司法公信力，稳定当事人、法律工作者及社会的预期，努力让人民群众在每一个司法案件中感受到公平正义).  The conference summary has implications for the legal professional community as a whole (particularly lawyers and in-house counsel) because it signals what approach the lower courts are likely to take to current controversial issues.

According to the notice, the drafters of the conference summary combined the legal issues set out in Justice Liu’s report with issues raised by delegates at the conference and issues derived during the process of preparing for the conference.  As described in the book chapters mentioned above (and in great detail in a book chapter stuck in the production pipeline), this is representative of judicial interpretation and judicial document drafting.

Substantive Content

From the number of articles relating to specific issues, it is possible to see where the inadequacies in current legislation exist and where the courts lack consensus on important commercial law issues.  Since the draft was issued, Chinese law firms have published articles focusing on specific issues. Time does not permit me to explain its provisions now.

  1. Issues related to the application of the General Principles of Civil Law and its relationship with other legislation (5 articles)(《民法总则》适用的法律衔接问题（5条）)
  2. Trial of company disputes (22 articles) (关于公司纠纷案件的审理（22条）)
  3. Trial of contract disputes (26 articles) (关于合同纠纷案件的审理（26条)
  4. Trial of security disputes (18 articles)(关于担保纠纷案件的审理（18条)
  5. Financial consumer rights protection disputes (6 articles)(关于金融消费者权益保护纠纷案件的审理（6条)
  6. Trial of securities disputes (11 articles)关于证券纠纷案件的审理（11条）
  7. Trial of business trust dispute cases (7 articles)(关于营业信托纠纷案件的审理（7条）)
  8. Property insurance disputes (6 articles)(关于金融消费者权益保护纠纷案件的审理（6条）)
  9. Trial of commercial paper disputes (4 articles)(关于票据纠纷案件的审理（4条)
  10. Bankruptcy cases (13 articles) (关于破产纠纷案件的审理（13条）
  11. Trial of cases involving third party objection to enforcement and withdrawal of a case (5 articles) (关于案外人执行异议之诉和第三人撤销之诉纠纷案件的审理（5）
  12. Cases with both civil and criminal aspects (2 articles) 关于民刑交叉纠纷的处理（2条）
  13. Etc. (1 article)
bankruptcy law, Communist Party and the Courts, Company Law, shadow lending, US federal courts

Signals from the Supreme People’s Court’s national civil/commercial trial work conference

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Justice Liu Guixiang in a photo from some years ago

During the first week of July,  the Supreme People’s Court (SPC) held its civil/commercial work conference (民商事工作会议), at which senior SPC and lower court leaders (and other leaders) gathered to hear about the latest SPC policies concerning civil and commercial cases.

As this blog has noted, most of the work of the Chinese courts involves civil and commercial disputes, not criminal cases. President Zhou Qiang gave an important speech which set the tone for the conference, but the one that the practitioners (judges and lawyers) are paying close attention is the keynote speech by Justice Liu Guixiang, full-time member of the SPC Judicial Committee and organizer of the conference. From the content of Justice Liu’s speech, it appears that the focus was domestic commercial cases.  For those who want to review the text in full, it is available here and here (the second version was published on the Wechat account Empire Lawyers (法客帝国)and includes an introduction and highlighting by the lawyer who has the account.) (The last conference was in December 2015.) This blogpost highlights some of the many issues his speech raises.

(For those not familiar with SPC work conferences, the description I provided 25 years ago remains accurate: “Another important way through which the [SPC] uses these meetings is to transmit central legal policy, unify court practices in accordance with such policy, and obtain an overview of current court practices and problems.”)

Justice Liu Guixiang is a senior member of the SPC and one of a relatively few senior judges who graduated from the University of International Business and Economics (UIBE) (formerly affiliated with the predecessor to the Ministry of Commerce (MOFCOM)) and so is familiar with cross-border issues in particular (and was earlier head of the #4 Civil Division, in charge of cross-border issues). He is well known to the international community. Justice Liu has been given responsibility for the SPC’s campaign to basically resolve enforcement difficulties within two or three years (as the former head of the Enforcement Bureau).  Because problems in the Chinese economy means that many more business deals in China are ending up as disputes in the Chinese courts, the SPC needs to signal to the lower courts how important issues should be handled and to the senior political leadership that the courts are supporting the Party and its core.

Justice Liu conveyed messages on two types of issues to two parts of the audience for his speech.  The two parts of his audience were (are) the political leadership and tens of thousands of judges involved with civil and commercial issues, as well as others in the court system.   The two types of issues are political issues and legal issues, both on substantive law and procedural law.  People outside of China might be tempted to dwell on the political messages (as this analysis does, as time doesn’t permit better analysis of the legal issues), but the messages on legal issues are those ones that will have the greatest impact on the court system and on practitioners. The speech will be reviewed, discussed, and used as the basis for further work in the court system, and attentive lawyers and in-house counsel know that the content of the speech will affect their litigation strategy and business. I’ve spotted one synopsis on the takeaways from the conference from one of Beijing’s prestigious law firms and more are following.

Political issues

The first part of his speech addressed political issues, but that part also includes some highlighting of critical legal issues. He states that politics is the most important. Justice Liu repeats some of the “innovative” language from January’s Political-Legal Work Conference that I mentioned in a blogpost earlier this year (with which his speech is harmonized).  “As a political and legal organ, the people’s court is first and foremost a political organ. It must put political construction in the first place and clearly talk politics” )人民法院作为政法机关，首先是政治机关，必须把政治建设摆在首位，旗帜鲜明讲政治 )(I was tested on the phrase “talk politics/讲政治“ recently by some persons in the system with a sense of humor).

Principle #1 (of four)–“To uphold the absolute leadership of the Party. The leadership of the Party is the fundamental requirement of socialism with Chinese characteristics, and it is the root and soul of the people’s court.”…However, “the erroneous thoughts of so-called “constitutionalism”, “separation of powers” and “judicial independence” of the West must be resolutely resisted. This is a major issue of political principle and we cannot be vaguely ambiguous.” One commentator noted that this principle is greater than any ordinary principle of law.

This language harkens back to that used by President Zhou Qiang in January 2017. Why this was included, when the audience would know these principles clearly?  Likely for senior political leadership to see that the courts are harmonized with the Center and to ensure that the Center knows that SPC leadership is doing everything to ensure court cadres (judges and other court officials) are as well.

Principle #2, serve the Party and the greater situation.

Justice Liu reminds his audience that “it is necessary to fully realize that there is no rule of law that does not have political positions or political views” (没有不具有政治立场、政治观点的法治). In civil and commercial trials, we must have a stable political stance, determine the political direction correctly, pay attention to the political effect, consider the political influence (impact), and be good at analyzing complicated issues from the perspective of politics, from the perspective of the fundamental interests of the people, and from the perspective of the overall economic and social development of the party and the country, integrate politics in civil and commercial trial work.” （在民商事审判中必须站稳政治立场，把准政治方向，注重政治效果，考虑政治影响，善于从政治角度从人民群众根本利益角度、从党和国家经济社会发展大局的角度分析处理错综复杂的民商事矛盾纠纷，把政治融入具体的民商事审判业务中.

Interestingly, he notes that the system of recording interference by senior court leaders and other Party/government leaders has not been effective, and this must be implemented as well as the judicial responsibility system (问题在于我们在审判实务中没有不折不扣地落实好，非法过问案件登记制度的功能没有得到有效发挥。必须采取有效措施把这项与司法责任制相配套的改革措施落到实处).  This appears to be a reflection of the concern of many judges that they will be held responsible for judicial decisions that they made because they were under pressure to do so from senior court officials or local officials.

American civil (and criminal) procedure law professors would be intrigued to know that “so-called long-arm jurisdiction” merited mention in Justice Liu’s speech (“Pay close attention to the United States’ all-around suppression in the fields of economy, politics, science and technology, etc. and the implementation of so-called ‘long-arm jurisdiction”‘to bring new challenges to our country’s judiciary;高度关注美国从经济、政治、科技等领域对我国进行全方位打压，实施所谓“长臂管辖”给我国司法带来的新挑战.

Justice Liu includes in this section several legal issues and highlights the way that Chinese judges should think when hearing cases:

When making judgments, we must fully consider the overall situation of economic and social development, political effects, and social effects.  When dealing with major and sensitive cases, we must pay attention [carefully listen] to the opinions of financial supervision departments, state-owned asset management departments, and social organizations such as  small and medium enterprise associations to accurately grasp the overall situation of social stability, social impact, and political impact. 我们在作出判断时，要充分考虑经济社会发展大局、政治效果、社会效果. 在处理重大敏感案件时，要注意听取金融监管部门、国有资产管理等部门以及中小企业协会等社会组织的意见，精确把握社会稳定大局、社会影响、政治影响。

Justice Liu called for more work on bankruptcy law, particularly strengthening coordination with government, resolving obstacles in bankruptcy liquidation and reorganization, and introduce judicial interpretations to deal with the legal issues. In order to prevent and resolve major risks, the people’s courts should issue judicial interpretations or judicial policies on issues such as bond defaults that directly affect financial security and social concerns, equity pledges of listed companies, and Internet lending.

He calls for deepening supply-side structural reform and promoting high-quality economic development; clearing out “zombie enterprises”; preventing financial risks, protecting the legitimate rights and interests of private enterprises, establishing a legalized business environment, and other civil and commercial matters, and mentions the “Fengqiao Experience,” but in relation to the 2018 SPC Joint Opinion with the China Securities Regulatory Commission on increasing diversified dispute resolution for securities disputes and a single dispute resolution platform linking litigation and other forms of dispute resolution.  He flags future work in using other forms of dispute resolution to resolve financial/securities disputes.

Legal issues

Substantive legal issues are the ones that have attracted the interest of judges and other legal professionals. Politics is also visible in the way that Judge Liu phrased his summary of the legal issues briefly noted below  (particularly his use of dialectical analysis, consistent with Party Center language). (This analysis will be expanded later as time permits). The issues that he is highlighting are the major ones, particularly regarding commercial issues.  He is providing the view of the SPC (likely drawing on the views of the #2 Civil Division, the division focusing on domestic commercial issues), and is signaling where Chinese courts are in disagreement and should conform.

As to why Chinese courts disagree or are unclear on these issues, and why this speech will unify courts’ approaches, it has to do with Chinese legislation and judicial interpretations. Judge Liu’s speech is a type of judicial policy document, in essence. As I mentioned in a recent blogpost, rules or policies included in SPC judicial policy documents may eventually be crystallized in SPC judicial interpretations and eventually codified in national law, but that process is slow and cannot meet the needs of the lower courts. The lower courts need to deal properly (politically and legally) with outstanding legal issues pending a more permanent stabilization of legal rules. This is true for judicial policy documents in all areas of the law, not only in commercial law.  Therefore Justice Liu used this conference to convey the SPC’s views:

  1.  He flags the issues where Chinese courts disagree: validity of external guarantees given by companies; the validity of a contract if a fake chop is used; scope of the security rights when a security contract and registrations are inconsistent; guarantee contracts linked to shareholding (让与担保）; how to adjust damages, how to implement the right to terminate a contract (如公司对外担保的效力问题、盖假章合同的效力问题、合同约定与登记簿记载不一致的担保物权的范围问题、让与担保问题，甚至连违约金如何调整、解除权行使的条件等一些常见问题);
  2. Methodology–in trying difficult and new civil and commercial issues, judges should search for “similar cases” and determine whether prior cases have derived related principles.  This links with my recent blogpost flagging the SPC’s development of its case law system (with Chinese characteristics). Justice Liu does not use the word “precedent.” He directs judges to consider whether principles in prior cases are applicable, if not, reasons should be given, and if an old principle is to be reversed, reasons should be given and these should be discussed by either the specialized judges committee or judicial committee. He stresses what I had mentioned previously, that principles are needed on what the scope of “similar cases” are.
  3. On disputes involving Value Adjustment Mechanisms (VAMs), judges should seek to coordinate the conflicts of interest between investors, companies and creditors. and implement the principle of capital maintenance and the principle of protecting the legitimate rights and interests of creditors, and to balance the interests of investors, shareholders, the company, and its creditors;
  4. He repeats SPC policy on an old FAQ (frequently asked question)–what if a contract violates a local policy, normative document, or ministerial rule–should a court invalidate the contract? The answer is no, the court needs to consider whether there is a violation of public order (公共秩序), which he says is mostly seen in violations of law or State Council administrative regulations;
  5.  How to protect all types of entities equally and provide special protection to groups such as minority shareholders and financial consumers;
  6. He gives practical guidance to for judges grappling with a theoretical legal issue–how to understand the status of the relevant law when the General Principles of Civil Law (2017) is inconsistent with earlier legislation such as the 1986 General Principles of Civil Law,  the 1999 Contract Law, the Company Law (last amended in 2018). The new law supersedes inconsistent prior law, but if provisions of the 2017 law are inconsistent with the special part of the Contract Law, the Contract Law prevails (on the theory that specialized provisions prevail)
  7. Issues related to the validity of contracts, including contracts that never went into force,
  8. Corporate guarantees to third parties–an issue regarding which there has been a great deal of litigation and court rulings have varied widely,  He sets down some rules;
  9. How to correctly understand a provision of the Company Law Judicial Interpretation #2, that gives creditors the right to seek the liquidation of a company in certain circumstances;
  10. Private lending (particularly interest-related issues);
  11.  Issues related to a debtor or guarantor using company shares to secure an obligation, and the related rights of the company and its creditors, voting rights and rights to dividends in the company., and whether the creditor has a priority right. Justice Liu notes the law is silent on the validity of such agreements but the SPC takes the view that these agreements are valid, as long as no mandatory provisions of law are violated;
  12. Remedies for a third party–raising objections in enforcement proceedings, requests for retrial, and applying to proceedings.
  13. How to deal with cases with both civil and criminal aspects–if civil and criminal case involves the same facts, it should be referred for criminal investigation first, and if there is some dispute, it can be coordinated by the local political-legal committee.  The major issue in practice is how to determine whether “the same facts are involved.”  Justice Liu points his audience to several factors. This is also an old issue in the Chinese courts, but has taken on new importance now that the Chinese government is using criminal prosecution to deal with abuses in the financial system that affect the interests of consumers and investors.

Not said in Justice Liu’s speech is whether the broad substantive content will be reissued in a form more useful to frontline judges (and other members of the legal community).  If practice is any guide, that is likely we will see a conference summary (会议纪要)–the SPC issued a conference summary based on the 2015 conference 11 months after the conference itself, on one set of issues.

 

 

alternative dispute resolution, bankruptcy law, big data, Case law, Communist Party and the Courts, court reforms

What to Expect in the Fifth Round of Judicial Reforms

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Screen Shot 2018-07-29 at 8.10.14 AM

On July 24, the Chinese authorities held the first post-19th Party Congress national conference  on judicial reform in Shenzhen, entitled “Promoting Comprehensive Deepening of Judicial Reform.”  Holding the conference in Shenzhen is significant, because it is considered synonymous with reform and openness. The leaders on the podium in the photo above (members of the Leading Small Group on Judicial Reform) (all men), include:

  1. Secretary of the Central Political Legal Committee, Guo Shengkun (Guo);
  2. President of the Supreme People’s Court (SPC), Zhou Qiang;
  3. Chief Procurator General Zhang Jun;
  4. Central Military Commission Political Legal Committee Party Secretary;
  5. Minister of Public Security;
  6. Minister of State Security;
  7. Commander of the People’s Armed Police.

Attendees of the conference included the Party Secretaries of the Political Legal Committees of all provinces/autonomous regions/cities, and likely senior leaders from all of the systems.

Readers of this blog will not be surprised that comprehensive deepening of judicial reform was the subject of the conference as a December, 2017, blogpost flagged that the new phraseology is “deepen the reform of the judicial system with comprehensive integrated reforms” (深化司法体制改革综合配套改革) (and there is a significant overlap with some of the issues Judge Jiang mentioned). The language is found deep in Xi Jinping’s 19th Communist Party Congress Report.

The quick (and incomplete) summary below is of some of the court-related issues from the report of Guo’s speech at the conference that He Fan (head of the planning section of the SPC’s judicial reform office) posted on his Wechat public account.  He was one of the many attendees.   None of the analysis below (in italics) should be attributed to him.

It can be expected that the court-related issues will be incorporated into the next judicial reform plan outline. What is on the court-related reform list?  What issues remain unresolved?

  1. Strengthen and optimize Communist Party leadership, Scientifically position the responsibilities and boundaries of the Party Committee, Political and Legal Committee, strengthen functions such as overall coordination, planning and deployment, supervision and implementation.   This of course listed first.What does this mean in practice for judicial system and particularly the operation of the criminal justice system, such as the ongoing campaign against organized crime (see this earlier blogpost)? 
  2.  Clarify the functions of the four-level courts,–improve the SPC circuit courts’ working mechanism; establish the Shanghai Financial Court, steadily expand the Internet Court pilots; explore the deepening of the reform of cross-administrative district courts and procuratorates, and explore the establishment of a national-level intellectual property appeal hearing mechanism.

Developments have occurred on some of these. The Shanghai Circuit Court will start operations soon, with regulations on its jurisdiction just issued and well-regarded judges appointed to senior positions.  The mention of an intellectual property appeals court is significant, as that has been mentioned in earlier government documents and it is on the wish list of the intellectual property law community.  The cross-administrative district courts are mentioned in the previous court reform plan, with some pilot projects. On SPC’s circuit courts are taking on a greater percentage of the SPC’s cases, (as mentioned earlier on this blog) SPC judges work in the circuit courts while their families remain in Beijing, so at some personal cost to judges involved.

3.  Improve institutional management, promote a combination of flat management and professionalization, adhere to the simultaneous transformation of comprehensive and operational entities, and promote the return of judicial personnel to the front line.  As this blog has repeatedly mentioned (and He Xin/Kwai Hang Ng have detailed in their new book, Embedded Courts), Chinese courts (as courts and political/legal institutions) have large “comprehensive offices” (engaging in functions not directly related to judicial work).  A recent study of several courts in Zhejiang province published in an academic journal affiliated with the China Institute of Applied Jurisprudence detailed the percentages. With the reduction in the number of judges and the explosion in the number of cases, there is a great amount of pressure to allocate more judges to the “front line” of handling cases.  Judges with some measure of seniority inevitably have both administrative and judicial responsibilities.

4.  Improve the supervision management mechanism of the president and division chiefs, and standardize the functions of the judicial committee, the committee of court leaders, which has a number of functions, often serving to diffuse responsibility for difficult cases  (Embedded Courts has more insights on this, and this blog has an earlier post on proposed reforms and related problems). Improve the professional judges meeting (mentioned in last year’s SPC regulations, I hope to have something more to say on this in a later blogpost). Improve the disciplinary mechanism of judges. (It would be an improvement to have greater transparency on the results.) Accelerate the construction of an electronic file with the simultaneous generation of the case and the entire process online case handling system.  This has been an ongoing proposal.  Shenzhen is taking the lead with this. Also it would be an improvement to have greater transparency on cases filed.

6. On judicial “standardization” –improve reference to similar cases, case guidelines, the guiding case mechanisms, implement mandatory search system for similar cases and related cases. We will carry out an in-depth national judicial standardization inspections.  This is sending two signals–greater implementation of China’s case law system (as I have written about earlier), and the continued use of government/Party inspection campaigns (reflecting the administrative aspects of the Chinese courts).

7. Improve the  performance appraisal system. Scientifically set the performance appraisal indicator system for handling cases, and guide judicial personnel to handle more cases, handle cases quickly, and handle cases well. Use big data technology to accurately measure the quality of the case and strive for convincing results. The assessment results are used as an important basis for the level of salary, job promotion…This is an important and unresolved issue for the Chinese courts–how to appraise judges.  Outside of China, many scholars have written about this, including Carl Minzner, William Hurst & Jonathan Kinkel. A good deal of research has been done within the Chinese court system concerning this (see this summary of a report published earlier this year by a team of Guangdong Higher People’s Court judges–discussing how the “civil servant/administrative model” predominates and suggesting that China should be looking to other jurisdictions for models, as judicial evaluation is a worldwide issue.  Case closing percentages continues to be very important for Chinese judges.  Is big data technology the answer?  Is this consistent with encouraging judges to write more reasoned decisions?  This appears to signal  a continuation of the judge as factory worker system described in this blogpost. 

8. In the area of criminal law, and criminal procedure, there are mixed developments.  On the one hand, greater encouragement for using the plea bargaining with Chinese characteristics (please see Jeremy Daum’s deep dive into the pilots). The merging of the arrest and prosecution stages is also mentioned.  Guo also mentioned  measures to enable appointing defense counsel in death penalty cases, having full coverage of defense counsel in criminal cases (Jeremy Daum has comments also on the system of stationing lawyers in detention houses), requiring lawyers to represent petitioners in criminal collateral appeals cases, as well as greater use of live witnesses at trial。  The National Judges College academic journal Journal of Law Application just published an article by a Beijing Higher Court judge, reviewing the duty lawyer scheme, with analogous findings to Jeremy’s.

9.  For those interested in how the supervision commission is/will affect criminal cases, Guo mentions establishing a system for linking the supervision’s investigatory system with the criminal procedure system (said to improve the battle against corruption, the question is the extent to which individual rights are protected).

10.  On foreign related matters, Guo mentions innovating foreign-related work, and improving cooperation on international enforcement and judicial cooperation.  These continue to be difficult issues, with no likely resolution in sight, particularly criminal and also civil.  As I have mentioned before China is participating in the drafting of the Hague Convention on the Recognition and Enforcement of Foreign Judgment, but there are major inconsistencies between the provisions of the draft convention, and the Choice of Court Convention which China signed last September.

Guo highlights improving an initial appointment system for judges and procurators, expanding open recruitment so that talented people will be attracted to becoming and remain judges.  He calls for better coordination between the law schools and professional training, systems for provincial level appointment of judges (and procurators), with better policies on temporary appointment (挂职) (a system used for academics to work in the system for a period of one or two years, and judges/procurators from higher levels to work at the basic level or in a poorer area), exchanges, promotions, and resignation.

In his recommendations, Guo tips his hat to judicial (and procurator) dissatisfaction with status and pay with his statement “uphold resolving a combination of ideological and practical issues, motivate cadres and police to the greatest extent possible.” 坚持解决思想问题和解决实际问题相结合，最大限度调动政法干警积极性”-as this blog has reported, a combination of those issues, excessive work, and significant amounts of time allocated to “studying documents” has led younger experienced judges (and procurators) to decide to resign.

 

 

 

administrative cases, bankruptcy law, Communist Party and the Courts, judicial interpretations

What’s on the Supreme People’s Court’s judicial interpretation agenda (II)?

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SPC General office document issuing the 2018 judicial interpretation plan

The Supreme People’s Court (SPC) has a yearly plan for drafting judicial interpretations, as set out in its 2007 regulations on judicial interpretation work , analogous to the National People’s Congress (NPC) and its legislative plans. Judicial interpretations, for those new to this blog, are binding on the SPC itself and the lower courts, and fill in some of the interstices of Chinese law (further explained here).

On 10 July, the SPC’s General Office issued the document above. It sets out a list of 48 judicial interpretation projects for 2018 (with several for 2019) for which the SPC judicial committee’s had given project initiation/approval (立项) designating one or more SPC divisions/offices with primary drafting responsibility (this process to be detailed in a forthcoming article).  It appears to be the first time this type of document was publicly released (please contact me with corrections).  If so, it is a concrete step in increasing the SPC’s transparency (addressed in part in one of my forthcoming academic articles). The projects, deadlines, and some brief comments (some longer than others) follow below.

(“Project initiation”/”project approval” is a procedure well-known to those of us who have been involved in foreign investment projects in China, where it involves approval from the planning authorities, primarily for infrastructure projects, but is an initial procedure used by regulatory authorities of all types, Party and state. For the SPC, it reflects one of the planned economy aspects of the way it operates.

The document classifies the 48 projects into three categories:

  1. 2018 year-end deadline;
  2. 2019 half-year deadline;
  3. 2019 deadline.

This post will discuss the projects in the second and third categories, the ones with deadlines in 2019.

From these we can see which projects are the highest priority and where the SPC sees gaping regulatory holes need to be filled, reflecting its political-legal priorities. Often specific issues have already been on the agenda of the relevant division of the SPC for some time before they have been officially been approved by the SPC’s judicial committee.

As discussed in my previous blogpost, several of the interpretations listed for 2018 have already been issued. It is unclear which other drafts will be made public for comment, as the 2007 regulations do not require it to do so. Making this list known may put some pressure on the SPC to undertake more public consultation.  Few if any interpretations in the area of criminal or criminal procedure law have been issued for public comment.

First half of 2019 deadline

  1. Standardizing the implementation of the death penalty (规范死刑执行).  Apparently this will focus on more setting out more detailed guidelines concerning how the death penalty is implemented, linked to the Criminal Procedure Law and the SPC’s interpretations of the Criminal Procedure Law.

This article on a legal website sets out the steps in implementation and notes that parading of the persons to be executed is prohibited (although this rule seems to be ignored in too many localities).  A recent scholarly article provides some detail (in Chinese). It is possible that 2008 regulations on suspension of the death penalty will be updated. Responsibility of the #1 Criminal Division.  Given the sensitivity of issues related to the death penalty, it is significant that the SPC leadership decided to make this list public, given that this interpretation is on the list.

2. Judicial interpretation on harboring and assisting a criminal.  These provisions occur in various parts of the Criminal Law and are also mentioned in the organized crime opinion discussed in this earlier blogpost.  Drafting responsibility of the #4 Criminal Division.

3.  Interpretation relating to the protection of heroes and martyrs.  With the incorporation of the protection of heroes and martyrs in the Civil Code and the passage of the Heroes and Martyrs Protection Law earlier this year, drafting of a related judicial interpretation was expected.  Responsibility of the #1 Civil Division.

4.Interpretation on technical investigators in litigation.  Responsibility of the #3 Civil Division) (IP Division).  I look forward to Mark Cohen’s further comments on this.

5. Interpretation on the recognition and enforcement of foreign court judgments.  This blog flagged this development last year.  Judge Shen Hongyu of the # 4 Civil Division, who wrote this article on issues related to the recognition and enforcement of foreign court judgments, is likely involved in the drafting.  Drafting responsibility of the #4 Civil Division.

6. Disputes over forestry rights, apparently an area with many disputes.  The Environmental and Natural Resources Division is responsible for drafting.

7.Regulations on responsible persons of administrative authorities responding to law suits, relating to new requirements in the amended Administrative Litigation Law. and the 2018 judicial interpretation of the Administrative Litigation Law. The Administrative Division is in charge of drafting.

8.Regulations on the consolidated review of normative documents in administrative cases.  The Administrative Division is in charge of drafting this.

9. Regulations on the consolidated hearing of administrative and civil disputes, apparently related to item #22 in the previous blogpost. Responsibility of the Administrative Division.

10.  Application of the criminal law to cases involving the organization of cheating on state examinations (linked to Amendment #9 to the Criminal Law). The Research Office is responsible for drafting.

11. Application of the criminal law to crimes involving network use and aiding persons in such crimes (cyber crimes).  This article discusses some of the issues. The Research Office is responsible for drafting this.

End 2019 deadline

  1. Jointly with the Supreme People’s Procuratorate, Interpretation on Certain Issues Related to the Application of Law in Criminal Cases of Dereliction of Duty (II), likely updating interpretation (I) in light of the anti-corruption campaign and the establishment of the National Supervision Commission.
  2. Interpretation on limiting commutation during the period of the suspension of death sentences.  See related research in English and Chinese. The #5 Criminal Division is responsible for this.
  3. Interpretation on the trial of labor disputes (V), likely dealing with some of the most pressing labor law issues facing the courts that are not covered by the preceding four interpretations or relevant legislation.   The #1 Civil Division is in charge of drafting.
  4. Regulations on maritime labor service contracts, likely connected with China’s accession to the 2006 Maritime Labor Convention and a large number of disputes in the maritime courts involving maritime labor service contracts.  The #4 Civil Division is in charge of drafting.
  5. Regulations on the hearing of administrative cases, likely filling in the procedural gaps in the Administrative Litigation Law and its judicial interpretation.  The Administrative Division is responsible for drafting this.
  6.  Personal information rights disputes judicial interpretation, linked to the Civil Code being drafted.  Implications for individuals and entities, domestic and foreign. Responsibility of the Research Office.
  7.  Amending (i.e. updating) the 2001 Provisions of the Supreme People’s Court on Certain Issues Concerning Application of Urging and Supervision Procedure, relating to the enforcement of payment orders by creditors.  Responsibility of the Research Office.

 

 

 

 

administrative cases, bankruptcy law, Communist Party and the Courts, judicial interpretations

What’s on the Supreme People’s Court’s judicial interpretation agenda (I)?

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Screen Shot 2018-07-18 at 8.34.32 AM
SPC General office document issuing the 2018 judicial interpretation plan

The Supreme People’s Court (SPC) has a yearly plan for drafting judicial interpretations, as set out in its 2007 regulations on judicial interpretation work  (I have not been able to locate a free translation, unfortunately), analogous to the National People’s Congress (NPC) and its legislative plans.  Judicial interpretations, for those new to this blog, are binding on the SPC itself and the lower courts, and fill in some of the interstices of Chinese law (further explained here).  On 10 July, the SPC’s General Office issued the document above. It sets out a list of 48 judicial interpretation projects for 2018 (with several for 2019).  The document details the projects for which the SPC judicial committee had given project initiation/approval (立项), designating one or more SPC divisions/offices with primary drafting responsibility (this process to be detailed in a forthcoming article).  It appears to be the first time this type of document was publicly released (please contact me with corrections).  If so, it is a concrete step in increasing the SPC’s transparency (addressed in part in one of my forthcoming academic articles). The projects, deadlines, and some brief comments (some longer than others) follow below.

(“Project initiation”/”project approval” is a procedure well-known to those of us who have been involved in foreign investment projects in China, where it involves approval from the planning authorities, primarily for infrastructure projects, but is an initial procedure used by regulatory authorities of all types, Party and state. For the SPC, it reflects one of the “planned economy” aspects of the way it operates.

The document classifies the 48 projects into three categories:

  1. 2018 year-end deadline;
  2. 2019 half-year deadline;
  3. 2019 deadline.

From these we can see which projects are the highest priority and where the SPC sees gaping regulatory holes that need to be filled, reflecting its political-legal priorities. Often specific issues have already been on the agenda of the relevant division of the SPC for some time before they have been officially been approved by the SPC’s judicial committee.

Several of the listed interpretations have already been issued.  The SPC has solicited public opinion at least one of these draft interpretations, and it is unclear which other drafts will be made public for comment, as the 2007 regulations do not require it to do so. Making this list known may put some pressure on the SPC to undertake more public consultation.

This post will discuss the projects in the first category only, with a follow-up post discussing the projects in the second and third categories.

30 projects with a 2018 year-end deadline

  1. Regulations on the jurisdiction of the Shanghai Financial Court.  The NPC Standing Committee decision required the SPC to do so and included some broad brush principles on the new court’s jurisdiction.  As the SPC has announced that the court will be inaugurated at the end of August,  this is likely to be the highest priority project.  The Case Filing Division is in charge.
  2. Regulations on pre-filing property protection provisional measures (关于办理诉前财产保全案件适用法律若干问题的解释 ), a type of pre-filing injunction.  These regulations are for non-intellectual property (IP) cases, as item 18 below addresses provisional measures in IP cases (in which a great deal of interest exists in the intellectual property rights community, as these order can affect a company’s business). The Case Filing Division is in charge.  These regulations could benefit from some market input.
  3. Interpretation with the Supreme People’s Procuratorate on the Handling of Cases of Corruption and Bribery (II), likely updating the 2016 interpretation to reflect the establishment and operation of the National Supervisory Commission and addressing issues that have arisen in practice.  Issues to be covered likely include ones discussed in issued #106 of Reference to Criminal Trial (the journal of the SPC’s five criminal divisions, mentioned here) .  The #3 Criminal Division is in charge of drafting, but it is likely that the supervision commission will be/is one of the institutions providing input.  As I have mentioned earlier, the SPC generally does not solicit public opinion when drafting criminal law judicial interpretations.
  4. Judicial interpretation on the handling of criminal cases of securities and futures market manipulation.  This is linked to the government’s crackdown on abuses in the financial sector (see this report on the increase in regulatory actions) and is linked to last summer’s Financial Work Conference. The #3 Criminal Division is responsible.  It is likely the China Securities Regulatory Commission will provide input during the drafting process.
  5. Judicial interpretation on the handling of cases involving the use of non-public information for trading (Article 180 of the Criminal Law). Guiding case #61 involved  this crime.  It is likely that the principle from the guiding case will be incorporated into this judicial interpretation, as frequently occurs.  Again linked to the crackdown on the financial sector and again, it is a task for the #3 Criminal Division.
  6. Judicial interpretation on the handling of underground banking (地下钱庄) cases.  Large amounts of money are being whisked out of China unofficially.  Linked again to the crackdown on the financial sector as well efforts to slow the outflow of funds from China, and likely the People’s Bank of Chin.  Again, a task for the #3 Criminal Division.
  7. Interpretation on challenges to enforcement procedures in civil cases, related to the campaign to basically resolve enforcement difficulties within two to three years.  Drafting this is a task for the #1 Civil Division.
  8. Interpretation on evidence in civil procedure.  Important for lawyers and litigants, domestic and foreign.  Drafting this is a task for the #1 Civil Division.
  9. Interpretation on civil cases involving food safety. Food safety is an area in which public interest cases are contemplated.  These cases have been politically sensitive.  Drafting this is a task for the #1 Civil Division.
  10. Interpretation on construction contracts (II). The initial interpretation dates back to 2004. These type of disputes generally involve a chain of interlocking contracts and often regulatory and labor issues. Some of the larger cases have been heard by the SPC. Drafting this is a task for the #1 Civil Division.
  11. Interpretation on the designation of bankruptcy administrators.  Issues surrounding bankruptcy administrators have been ongoing in the bankruptcy courts, as has been discussed in earlier blogposts. Drafting this is a task for the #2 Civil Division.
  12. Regulations on the consolidating the bankruptcy of company affiliates, again an area where regulation is insufficient, posing issues for bankruptcy judges (as has been discussed in earlier blogposts). Drafting this is a task for the #2 Civil Division.
  13. Regulations on the civil and commercial cases relating to bank cards.  The drafting of this interpretation has been underway for several years, with a draft issued for public comment in June.  There have been a large number of disputes in the courts involving bank cards.  Drafting this is a task for the #2 Civil Division.
  14. Interpretation on legal provisions relating to financial asset management companies acquiring, managing, and disposing of non-performing assets.  The legal infrastructure related to non-performing assets is inadequate, as has been pointed out by all participants, including judges. The Shenzhen Intermediate Court has run several symposia bringing together leading experts from the market.  Drafting this is a task for the #2 Civil Division.
  15. Interpretation on the trial of internet finance cases (civil aspects), as existing judicial interpretations inadequately address the issues facing the lower courts. Drafting this is a task for the #2 Civil Division.
  16. Judicial interpretation on the statute of limitations in the General Provisions of the Civil Code (just issued), which was the responsibility of the #1 and #2 Civil Divisions as well as the Research Office. The General Provisions changed the length of the statute of limitations.
  17. Judicial interpretation on administrative cases involving patent authorization and confirmation. It appears to be the counterpart in the patent area of a 2017 judicial interpretation relating to trademarks.  I look forward to “brother blogger” Mark Cohen’s further comments on this. Drafting this is a task for the #3 Civil Division.
  18. As mentioned above, pre-filing injunctions in intellectual property cases (知识产权纠纷诉前行为保全案件适用法律若干问题的解释 ), a type of pre-filing injunction.  There is great deal of interest in the intellectual property rights community concerning these injunctions, as these orders can affect a company’s business. I look forward to Mark Cohen’s further comments on this. Drafting this is a task for the #3 Civil Division.
  19. Regulations on issues relating to the International Commercial Court.  Those were the responsibility of the #4 Civil Division and the interpretation was issued at the end of June.  See the previous blogpost for further comments.
  20.  Regulations on the scope of environmental and natural resources cases, with drafting responsibility placed on the Environmental and Natural Resources Division. These relate to current government efforts to improve the environment.  I would anticipate that these would include provisions on cross-regional centralized jurisdiction, so that pressure from local government will be reduced. Several provinces have already introduced such guidelines.
  21. Interpretation on compensation for harm to the environment, also with drafting responsibility placed on the Environmental and Natural Resources Division.  This is related to an end 2017 Central Committee/State Council General Office document on reforming compensation for harm to the environment. Again, Drafting responsibility with the Environmental and Natural Resources Division.
  22. Regulations on the trial of administrative agreements.  There is a tension between the administrative and civil/commercial specialists, as reflected in the area of Public Private Partnerships  (PPPs)(see this earlier blogpost).  This has practical implications for both the domestic and foreign business community, as the government is seeking to expand the use of PPPs and avoid local government abuse of them.  Drafting responsibility with the Administrative Division and the Ministry of Finance is likely to be providing input.
  23. Regulations on administrative compensation cases, drafting responsibility with the Administrative Division.
  24. Interpretation related to agency issues in retrial (再审) cases.  With the many governance problems of Chinese companies, these issues frequently arise.  Drafting responsibility with the Judicial Supervision Division.
  25. Interpretation on the enforcement of notarized debt instruments.  Lenders often use this provision to seek more efficient enforcement.  This is related to the campaign to improve enforcement as well as government policy relating to the financial sector.  This research report by one of Beijing’s intermediate court shows that asset management companies are often the creditors and the large amounts of money are involved. Drafting responsibility with the Enforcement Bureau.
  26. Interpretation relating to the enforcement of cases involving company shareholding.  Given the complexities of shareholding in China, including the frequent use of nominee arrangements, these are difficult issues for judges to deal with.  See a recent presentation by one of the circuit court judges on this issue.  Drafting responsibility with the Enforcement Bureau.
  27.  Regulations on reference pricing when disposing of property.  This too is related to the enforcement campaign as well as efforts to clean up the enforcement divisions of the local courts by requiring more transparent procedures.
  28. Interpretation on the Handling of Cases of Crimes Disturbing the Administration of Credit Cards (II), updating the SPC’s 2009 interpretation, found here. Responsibility of the Research Office, which can coordinate with criminal divisions involved as well as interested authorities such as the China Banking Regulatory Commission.
  29. Interpretation on cases involving both civil and criminal issues.  This is a longstanding issue, and with the crackdown on the private lending sector, this has come to the fore.  Among the many issues include: if the defendant is criminally prosecuted first and assets are confiscated, how can affected borrowers or other parties  be compensated.  Drafting responsibility with the research office, likely involving several civil and criminal divisions.
  30. Regulations on the implementation of the People’s Assessors Law. As the law and the follow up SPC notice are too general for courts to implement, more detailed rules are needed.  The Political Department (it handles personnel related issues) and Research Office are involved in drafting.

See the next blogpost for a discussion of interpretation in the second and third categories.

 

 

 

bankruptcy law, Commercial law

Supreme People’s Court reports on its bankruptcy accomplishments

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The warm sun and shopping mall Christmas decorations were not what drew Supreme People’s Court (SPC) President Zhou Qiang and a large group of senior court and other government leaders to Shenzhen on Christmas Day–it was a rare national bankruptcy trial work conference. It sends signals about the importance of bankruptcy post 19th Party Congress.

This appears to have been one of the last official activities of Grand Justice Du Wanhua, who has taken the lead in promoting bankruptcy work in the courts (see earlier blogposts) and is a classmate of President Zhou Qiang. Du, who turns 64 in January, is retiring.  Takeaways from the conference include:

  • some statistics;
  • the latest political/professional policy on bankruptcy;
  • some informed comments on where the challenges are (with some of my further comments in italics).

Statistics

The Chinese courts accepted 8984 bankruptcy & compulsory liquidation cases in 2017 (through 21 December), heard by 97 bankruptcy divisions (up from 6 in 2016, a consequence of a 2016 SPC notice, described here).  The courts concluded 4404 bankruptcy cases through November.

Reforms aimed at speeding up cases moving from enforcement to bankruptcy proceedings are showing some initial success, with the Guangdong courts handling over 43,000 in the second half of 2017, of which 10,000 were handled by the Shenzhen courts.

Latest bankruptcy policy statements

President Zhou Qiang conveyed the macro policy on bankruptcy.

  • adhere to problem orientation (必须坚持问题导向) (one of the current political slogans);
  • if at all possible, merge or reorganize, less bankruptcy liquidation 尽可能多兼并重组，少破产清算 (the current policy);
  • Explore establishing a simplified procedure and a pre-reorganization system (简易破产程序、预重整制度) (this idea, a borrowing of pre-packaged administration from US/English law has been discussed by academics and others for some years, but this prominence seems to be new.  Pre-packaged administration is a bankruptcy/insolvency procedure under in which a company arranges to sell all or some of its assets to a buyer before appointing an administrator to facilitate the sale. It involves a company’s institutional creditors agreeing to it, so it is understandable that would be an attractive idea in China);
  • intermediate courts in larger cities and economically developed areas should establish bankruptcy divisions or collegial panels (this follows from an announcement in 2016, discussed here);
  • use informatization to improve the hearing of bankruptcy cases (信息化建设提高破产审判质效).

Du Wanhua had more specific signals to the lower courts.

  • improve professionalism;
  • improve the bankruptcy administrator system, promote establishing a bankruptcy administrator society, bring in a competitive system;
  • improve the enforcement to bankruptcy system,  accelerate cases that can’t be enforced transferred to bankruptcy proceedings;
  • use reorganization as much as possible through the market and legal methods to save companies in trouble;
  • establish a normalized government/courts unified coordinated system (要建立常态化的“府院破产统一协调机制”), protect the rights of each party on an equal basis;
  • use informatization.
  • handle carefully bankruptcy cases involving debts that are mutual/joint guarantees, guide financial creditors to convert the debt into equity or other methods that simplify the debtor relationship and enable the company to survive;
  • handle carefully the consolidated bankruptcy of affiliated companies, balance the conflicts between the rights and interests of each party.
  • improve cross-border bankruptcy trial work.

 On problems facing bankruptcy courts

Professor Li Shuguang of the China University of Political Science & Law, one of the preeminent Chinese bankruptcy law scholars, who attended the conference, had informed comments, citing the following challenges for the bankruptcy courts:

  1. The relationship between the courts and government when hearing bankruptcy cases needs to be resolved. (Despite the official talk of a united approach by courts & government, discussed above, it remains a challenge. For some local color, see this excerpt from an article by a team of Zhejiang bankruptcy judges on real estate developer bankruptcy:

If a real estate developer is having a crisis, government will involve itself first, and only if administrative measures don’t work, will they think of judicial measures. This creates problems in transitioning from administrative to judicial procedures. For example, how should a court treat the legal authority of the creditor settlement arrangement of the special work team formed by government to deal the crisis? Once the company goes into bankruptcy procedures, government hasn’t withdrawn completely, and on the one hand, all sorts of bankruptcy matters require coordination and cooperation by many government departments, and on the other hand government will give instructions and suggestions about bankruptcy work, considering the needs of the local economy, stability, and other interests.

3.  Many local courts are afraid to accept bankruptcy cases and even establish unreasonable barriers to for local protection–new systems need to be put in place.

4.  On bankruptcy administrators, there need to be more detailed rules on selection, oversight, administration, operation. [I can testify to this, based on the questions raised on one of my Wechat chat groups about bankruptcy administrators and the many articles published on bankruptcy law-related Wechat public accounts.] 

5. Professor Li asks how Chinese bankruptcy law can be reformed to effectively rescue companies, to enable courts to identify salvageable companies, properly protect the rights of creditors and shareholders.  More detailed rules are needed on preferences in bankruptcy.  These are ongoing issues for Chinese bankruptcy courts, as the current system protects local government interests.

6.  There exist a group of specific issues related to bankruptcy liquidation, such as how to expand the pool of assets available to the creditors, balance the interests of various creditors, deal with the relationship between creditor committees (under the bankruptcy law) and financial institution creditors committee (these committees were put in place from 2016, see more details here).  This also relates to issues of transparency and procedure, particularly what information will be available to members of the creditor committee, and at what point. An important area where legal infrastructure is lacking, as discussed in this Wechat article.

Among those issues is how to protect the interests of consumers who have purchased property from a bankrupt real estate developer.  This is an important practical issue for all involved (including local governments) because an increasing number of real estate developers are going into bankruptcy.  A recent Wechat article analyzes a 2015 SPC ruling that requires the bankruptcy administrator to perform the purchase and sale contract where payment has been made in full.  In practice, courts take different approaches to variations on this scenario.

7.  He echoes Du Wanhua on issues related to consolidation of bankruptcy cases involving corporate affiliates and the transfer of cases from enforcement to bankruptcy, raising the problem of the courts performance indicators.

8. Professor Li opens up the issue of “informatization,” so that it becomes a platform collecting and analyzing bankruptcy data, and information sharing mechanism for all involved.  This comment echoes my own experience that the electronic platform is not helpful for a researcher seeking access to bankruptcy documents, as few are accessible, not even those that are otherwise publicly available. Some bankruptcy judges have responded to my discrete inquiries that little information is available because it is possible to set access restrictions on information.)

9.  He raises the increasingly prominent issue of cross-border bankruptcy, in which judges lack legislation and experience to deal with these issues, and suggests that at an appropriate time harmonization of Chinese cross-border bankruptcy standards with international ones.  By this, he is likely referring to the UNCITRAL model law on cross-border insolvency.  These issues are ongoing ones for the professional community in Hong Kong and increasingly in the rest of the world, see this law firm alert. This has been a frequent topic of academic analysis.

Finally, Professor Li states (what is clear from the comments above) that bankruptcy legislation is inadequate–the judicial interpretations the SPC has issued. deal with only a small portion of the outstanding issues and there isn’t time to draft a long judicial interpretation.  As judges are hearing bankruptcy cases, large numbers of technical issues have arisen [I can testify to this, based on the questions raised on one of my Wechat chat groups.]  SPC academic journals and academic studies address specific issues, see these articles. Professor Li suggests that a “conference summary” be issued based on this conference and input from bankruptcy court professionals. （A conference summary is explained in this blogpost.)

Quick comment

Finally, this area of law is a microcosm of issues facing the Chinese courts, whether it is the requirement for the SPC and lower courts  to reflect current Party/government policy in what they do, relationship between the courts and government, issues with judicial professionalism, large number of technical issues but a lack of legislation, related issues that affect the ordinary person, consideration of foreign law models, and the disconnect between international and Chinese practice.

bankruptcy law, big data, Court Operations, Court Reform, death penalty

China’s draft court law

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Screen Shot 2017-09-10 at 8.40.56 PM
Screenshot of trial in the Haidian district court

A draft of the first comprehensive overhaul of China’s court law since 1979 (the organic/organizational law of the people’s courts) is now open for public comment (until 4 October).  A translation of the draft is available at Chinalawtranslate.com (many thanks to those who made it possible).  A translation of the current law is here and an explanation of the amendments has also been published.  The draft is significantly longer than the earlier version of the law (66 vs. 40 articles). It retains much of the framework of the old law, incorporates legislative changes as well many of the judicial reforms, particularly since the Third and Fourth Plenums, and leaves some flexibility for future reforms. As with the current law, Communist Party regulations address (and add another layer to) some of the broad issues addressed in the draft law. Some comments:

Drafting process

The drafting process (the explanation has the details) reflects the drafting of much Chinese legislation (further insights about the process from Jamie Horsley here)–several years of soft consultation by the drafters of relevant Party and government authorities, plus one month of public consultations. Among the central Party authorities consulted were: Central Commission for Discipline Inspection, Central Organizational Department (in charge of cadres); Central Staffing Commission (in charge of headcount); Central Political Legal Committee.  On the government side: Supreme People’s Court and Procuratorate; State Council Legislative Affairs Office; Ministry of Finance, National People’s Congress Legal Work Committee. Investigations and consultations were also done at a local level.

General Provisions

Some of the dated language from the 1979 version has been deleted (references to the “system of the dictatorship of the proletariat,” “socialist property,” and the “smooth progress of the socialist revolution.” replaced by “lawful rights and interests of legal persons,” and protection of national security and social order. Although the draft court law deletes language that distinguishes among owners of different types of Chinese companies, Chinese criminal law still does (see this chart setting out sentencing guidelines, for example).

Article 10 of the draft incorporates judicial responsibility systems into the law (a prominent feature of the recent judicial reforms), but a topic regarding which dispassionate analysis is hard to find.

The draft contains clear statements about judicial openness and the right of the masses (i.e. ordinary people, that term is alive and well) to know about the work of the courts (according to law).

Organization of the courts

The draft mentions some of the specialized and special courts that have been established over the last thirty years:

Article 14 incorporates the guiding case system into the draft.

Article 15 of the draft crystallizes the SPC’s circuit courts (tribunals) into law (SPC regulations on the jurisdiction of those courts found here).

Article 24 gives space for establishing cross-administrative region courts (the time has not yet been ripe for establishing them).

Articles 26 and 27 give courts some flexibility on their internal structure (courts in remote areas with few cases need not establish divisions, while large city courts can have multiple specialized ones. (Earlier blogposts have mentioned establishing bankruptcy divisions, for example.)

Trial Organization

This section of the draft law incorporates the current judicial reforms in several ways, including:

  • In Articles 30-31, on the operation of collegial panels and requiring the court president to be the presiding judge when s(he) participates in a collegial panel;
  • Mentioning in Article 32 that the members of the collegial panel are the ones to sign their judgments and dissenting opinions are to be recorded;
  • Article 34 gives space for eliminating the role of people’s assessors to determine issues of law;
  • Article 37 incorporates into law previous SPC regulations on judicial interpretations and guiding cases, specifying that they must be approved by the SPC judicial committee;
  • Article 40 contains provisions imposing liability on members of the adjudication/judicial committee for their comments and their votes. It also incorporates into the law SPC regulations on disclosing the views of the judicial committee in the final judgments, except where the law provides it would be inappropriate;
  • Article 41 also incorporates into the law the specialized committees mentioned in judicial reform documents (briefly discussed in prior blogposts).

Court Personnel

Article 42 requires court presidents to have legal knowledge and experience.  It has long been an issue that court presidents have been appointed more for their political than legal expertise.

It appears that the reform of having judges below the provincial level appointed by the provincial level is not yet in place,

This section of the draft court law incorporates the personnel reforms set out in the judicial reform documents in several ways: quota judge system; selecting higher court judges from the lower courts; the roles of judicial assistants and clerks (changed from the old model); other support personnel in the courts; a new career track for judges, including judicial selection committees; preference to hiring judges with legal qualifications;

Safeguards for the courts’ exercise of authority

Article 56 gives courts the right to refuse to engage in activities that violate their legally prescribed duties (with this end the phenomenon of judges sweeping streets?);

Article 57 relates to reforms relating to enforcement of judgments (and the social credit system);

Article 59 relates to threats to judges’ physical safety and personal dignity, that occur several times a year in China, and have been the subject of SPC regulations;

Scope for further reforms for judicial personnel management (including salary reform!) are included in this section.

Article 60 reiterates the principle that judges may only be transferred, demoted, dismissed according to procedures specified by law (Party procedures  to which most judges are subject,are governed by Party rules.)

Article 62 relates to judicial (and judicial personnel training)–some earlier blogposts have shed light on this topic.

Article 64 incorporates into the draft law President Zhou Qiang’s focus on the informatization (including use of the internet and big data) of the Chinese courts.

Etc.

My apologies to readers for the long gap between posts, but several long haul trips from Hong Kong plus teaching have left me no time to post.

bankruptcy law, Communist Party and the Courts, shenzhen

Forthcoming individual bankruptcy legislation revealed in letter to President Zhou Qiang’s mailbox

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Screen Shot 2017-07-27 at 12.48.54 PMMost readers of this blog are unlikely to know that the Supreme People’s Court (SPC) publishes on its website responses to selected letters to President Zhou Qiang that make suggestions and give opinions. In a July 11 response, the SPC revealed that individual bankruptcy legislation is on its agenda. As I suggest below, actual legislation is likely to come later.

The letter said:

Dear Mr. Pan Dingxin:

We received your proposal, and after consideration, we respond as follows:

establishing and implementing an individual bankruptcy system is beneficial for those individuals or households who have fallen into serious financial distress to exempt some of their debts and enable them again through their hard work to achieve normal business and living conditions. Because of this, it has an important function to protect individuals and households that have fallen into financial difficulties. However an individual bankruptcy system relates to the establishment and improvement of an individual credit system and commercialization of commercial banks or their further marketization and other factors.  At the same time, the implementation of an individual bankruptcy system requires the National People’s Congress or its Standing Committee to legislate. We believe that with development and improvement of the socialist market economic, the National People’s Congress or its Standing Committee will promulgate an individual bankruptcy law on the basis of the experience with the “PRC Enterprise Bankruptcy Law.” The Supreme People’s Court will definitely actively support the work of the relevant departments of the state, and promote the implementation of an individual bankruptcy system.

Thank you for your support of the work of the Supreme People’s Court!

Supreme People’s Court

June 15, 2017

Screen Shot 2017-07-22 at 9.37.15 PM Few are aware that Shenzhen has been working on draft individual bankruptcy legislation for several years now, looking to Hong Kong’s experience and legislation, described in a recent report as a “complete” individual bankruptcy system (“完善的个人破产制度”).  The process has been going on for so long that the team (designated by the local people’s congress and lawyers association) and headed by a Shenzhen law firm partner published a book one year ago with its proposed draft and explanations.

Although Professor Tian Feilong of Beihang University’s Law School has been recently widely quoted for his statement about Hong Kong’s legal system undergoing “nationalisation,”  this is an example, known to those closer to the the world of practice, that Hong Kong’s legal system is also seen as a source of legal concepts and systems that can possibly be borrowed.  The drafting team looked at Hong Kong (among other jurisdictions) and others in China have proposed the same as well.

Shenzhen’s municipal intermediate court has completed an (award-winning) study on judicial aspects of individual bankruptcy shared with the relevant judges at the SPC.

If recent practice is any guide, individual bankruptcy legislation will be piloted in Shenzhen and other regions before  nationwide legislation is proposed, and it will be possible to observe the possible interaction between those rules and the government’s social credit system. So national individual bankruptcy legislation appears to be some years off.

As to why the SPC has a letter to the court president function, the answer is on the SPC website: it is to further develop the mass education and practice campaign (mentioned in this blogpost four years ago) and listen to the opinions and suggestions of all parts of society (the masses).  Listening to the opinion and suggestions of society are also required of him as a senior Party leader, by recently updated regulations. The regulations are the latest expression of long-standing Party principles.

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Welcome to the “Court President’s Mailbox”

 

 

administrative cases, bankruptcy law, Commercial law, Family Law, foreign courts, juvenile courts, Labor law

Welaw Monitor (微律观察) #2

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I am traveling at the moment, so my time to review articles published on Wechat is limited.  But below are some links of interest.

Screen Shot 2017-06-17 at 10.04.02 AM
Huazhen (Flower Town) emotional counseling

Oldies but goodies

Several prominent media sources, the South China Morning Post among them, are running articles on China’s clean-up of the financial sector, this one pointing to the government’s focus on privately owned insurance companies.

But those reading Wechat would have known that several years ago, China’s legal analysts had been writing  articles such as “China’s private entrepreneurs are all on their way to jail  or China’s businesspeople are either in jail or on their way to jail. 

China’s Good Samaritan case Peng Yu back in the news-  a backgrounder plus-retired SPC judge Cai Xiaoxue criticizes as does former judge & Peking U Professor Fu Yulin.

Detention Center Law draft

The Ministry of Public Security (MPS) has recently issued its draft Detention Center Law for public comments (link to Chinalawtranslate.com’s translation.  The draft has caused a great deal of comment within China and those concerned about the treatment of fellow human beings in criminal detention in China should read these articles:

The MPS is drafting the Detention Center Law, but the entire legal world is opposed

10 years of calls for separating detention from criminal investigation

Professor Chen Ruihua, defects of the detention system and how it should be reformed

Professor Chen Ruihua–the detention centers should be transferred to the justice authorities

Commercial law

China’s distraught buy online counseling packages, but does China’s consumer protection legislation protect them if there are no standards for counseling?

Party discipline

A Cangzhou court president is under investigation. Is it connected to the strip search of a woman lawyer?

In CCDI hearing procedures, will evidence provided by the accused be considered?  The answer is, the scope is limited

Criminal law

Three SPC judges (likely to have been on the drafting team) unpack the asset recovery regulations (discussed in this January blogpost). It shows they looked to foreign legislation when doing so;

 20 years of bribery prosecutions, with 9 acquittals

SPC on anti-drug day, with white paper and 10 typical cases

Is it rape if the sexual contact comes after the coercion?

Supervision Commission

The first father’s day after being transferred to the Supervision Commission

Labor law

Does “remote working” in China mean the place of employment has changed?

Don’t make these 10 mistakes when terminating employees

Family law issues & property

Leta Hong Fincher’s book Leftover Women discusses the Marriage Law interpretation & home purchases.  This Wechat post sets out a chart with various scenarios related to marriage & home purchase--a very handy reference.

Bankruptcy

10 typical bankruptcy cases from Suqian, Jiangsu Province, including some real estate companies

Chongqing courts borrow concepts of personal bankruptcy from abroad when dealing with private (shadow) borrowing cases

The many inadequacies in China’s non-performing asset legislation

Judiciary

A review of the Party’s work at the SPC since the 18th Party Congress

 

 

 

 

administrative cases, bankruptcy law, Commercial law, Family Law, foreign courts, juvenile courts, Labor law

Welaw Monitor (微律观察) #1

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I am tweaking the type of content on the blog, cutting down on the long analytical blogposts.   I will provide links to reports and analysis on court and other legal matters on Wechat. I am concentrating on writing a book and some other related writing and editing projects.

It remains my hope that some followers with the financial wherewithal to do so will consider supporting (in some fashion) the blogs that are enabling the English speaking and reading public to perceive (through translation or bite-sized analysis) the “elephant” that is the Chinese legal system, among them Chinalawtranslate.com and this blog.

Commercial law

14 situations where the corporate veil can be pierced

Criminal law

Public security v. SPC & SPP on what is prostitution–does that include other types of sexual services?

SPC vice president Li Shaoping on drug crimes–relevant sections of Criminal Law should be amended, better evidentiary rules needed for drug crimes, & death penalty standards need to be improved

Hebei lawyer’s collateral appeal statement, alleges torture during residential surveillance, procedural errors (part of China’s innocence project

China’s financial crime trading rules are unclear

Defendant changed his story on appeal but the appeal court ruled he was the killer

25 criminal law case summaries from People’s Justice magazine 

Criminal procedure law

public security does not want the procuratorate supervisors in police stations

A corrupt official’s polygraph problems

Supervision Commission

Its power should be caged

Beijing supervision authorities take someone into custody, will shuanggui be abolished?

Party discipline

On confession writing

10 No nos for Party members using Wechat

Administrative litigation law

SPC issues 10 typical administrative cases, including one involving the Children’s Investment Fund

Those disputing compensation for expropriation of rural land must first apply for a ruling–land is now part of the Harbin Economic and Technical Zone (unpacking of  case #46 of #2 Circuit Court’s case summaries)

Labor law

Important study by the Guangzhou Intermediate Court on labor disputes 2014-16, with many insights & a section devoted to sex discrimination issues

Don’t make these 10 mistakes when terminating employees

Family law

Status report on family court reforms (& difficult issues for judges)

 Why it’s so hard to deal with school bullying in China

How juvenile justice should be improved (the semi-official view)

Judiciary

300 cases in 100 days–a team of young judges & expedited criminal cases

Environmental Law

Procuratorate has brought 79 public interest law suits in Yunnan (press report)

Bankruptcy

Why bankruptcy is so difficult and what needs to improve

Lawyers

 legal qualification system needs changing, the profession needs those with non-law undergraduate training

 

 

 

bankruptcy law, big data, Uncategorized

Supreme People’s Court releases 2016 bankruptcy data

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7427ea09324917a26ee719The Supreme People’s Court (SPC) issued 2016 data on bankruptcy cases on 24 February: 5665 cases were accepted by the Chinese courts while 3602 were closed.  This is up substantially from 2015, when 3568 cases were accepted.  This is an increase of 53.8% over 2015.   Of these, 1041 were bankruptcy reorganization cases, up 85.2% over 2015. As this blog has previously reported,  long delays in filing bankruptcy cases have meant that practically all bankruptcy cases have been liquidation rather than reorganization cases. This is contrast to the downward trend in bankruptcy cases 2005-2014, shown in the graph published on this earlier blogpost. These numbers represent only a tiny proportion of what the Chinese government terms “zombie enterprises,” but it does show that the SPC has been doing its part to serve the nation’s major economic strategies.

What has the SPC done to support this important government strategy highlighted in the 5th Plenum?  In reverse chronological order, a quick list of some of the highlights:

  1. In February, 2017, the SPC issued guidance  to the lower courts on transferring cases that are in debt enforcement proceedings into bankruptcy, so that bankruptcy reorganization has a chance of working. Justice Du had flagged the importance of this a year ago. The Zhejiang Higher People’s Court piloted measures because the courts of that province are piloting bankruptcy reforms. As reported in a December, 2016 blogpost, close to half (40-50%) of the unsatisfied enforcement cases are ones that are wholly unsatisfied, with a goodly portion involving corporate judgment debtors. Judge Du pointed out that unsatisfied judgments because of local protectionism have led to conflicts between creditors and “fierce” conflicts between courts. He called for courts not to engage in “buck passing” on enforcement cases that are transferred to another court for bankruptcy procedures.
  2. In December, 2016, the SPC and lower court judges (as well as Chinese bankruptcy practitioners and scholars) were involved in dialogue with American bankruptcy judges and practitioners on bankruptcy issues, under the framework of US Department of Commerce initiative
  3. On 1 August 216, launched a bankruptcy electronic information platform  (it harmonizes with President Zhou Qiang’s promotion of information technology in the Chinese courts). According to the SPC’s press release, close to 9000 cases are in the database. The platform has assembled relevant documents on some high profile cases, such as Dongbei Special Steel. This platform has received a good market response with 9,760,000 page views as of early February, 2017 (likely to be primarily bankruptcy professionals).
  4. In June, 2016, as this blog has reported earlier, the SPC has required lower courts to establish specialized bankruptcy divisions (4 on the provincial level, 47 intermediate courts, and 22 basic level courts).  One of the aims of the SPC is to create a corps of more competent judges to handle bankruptcy cases. Given the link between the bankruptcy of large state owned enterprises and social stability highlighted by judges writing on this topic previously, serving as a bankruptcy judge in China requires a set of skills unneeded in other jurisdictions.
  5. As more and more companies go into bankruptcy, (as highlighted in this blogpost), more labor litigation can be expected. Senior SPC judges have highlighted that people are increasingly aware of their rights. Those with the means are going to court to try to protect them. The SPC is likely to work on technical issues highlighted in the report such as: how to characterize labor claims in bankruptcy, and whether they should be treated as labor disputes or claims against the bankruptcy estate; whether labor disputes needed to be submitted first to labor arbitration; how the courts can better obtain files from labor arbitration authorities and can ensure labor disputes are addressed and not avoided; and how to ensure that bankrupt enterprises pay social insurance payments for their employees.
  6. Expect to see the SPC focus on bankruptcies (or reorganization) in important areas of the Chinese economy, such as real estate.  This analysis published by a member of the Shanghai Bar Association highlighted some of the complex interests relating to the bankruptcy reorganization of real estate companies : is it practicable;  the workers; the lender, who are often private (shadow) lenders; the individual purchasers. These cases generally involve a string of companies.

    images
    ©Evan Eckard 
bankruptcy law, Commercial law, Labor law, Uncategorized

Liaoning high court looks into labor issues in bankruptcy

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While Zhou Qiang’s statements on  judicial independence, mistaken “Western” thinking, and separation of powers continue to be discussed inside and outside of China, others in the Chinese legal community face more prosaic and difficult issues of how to protect workers when companies go into bankruptcy.  This is a particular issue in the northeastern provinces, particularly in Liaoning.

According to statistics released in the past month (January, 2017), there were 345 other bankruptcy cases accepted by the Liaoning courts, aside from the bankruptcy of Dongbei Special Steel, which has received the lions share of attention outside of China. While strikes are regularly reported in the English language media , what is not known that in many of these bankruptcy cases, employees have gone to court.

A research report by the Liaoning Higher People’s Court (Liaoning High Court) recently released in the People’s Court Daily (the Supreme People’s Court’s )SPC) newspaper, giving the report the SPC’s semi-official imprimatur) drilled down on 79 labor cases related to enterprise bankruptcy that arose in 2015-16. The Liaoning High Court did not specify the overall number of bankruptcy-related labor cases the provincial courts accepted.  A quick search reveals several hundred, the exact number depending on how the search is framed.

The research report provides a glimpse into the concerns of the judiciary, involvement of counsel in these disputes (a more general report on representing workers was recently published, available here), inadequacies of related legislation, and chaotic record keeping of these companies.

Research report reveals several major issues

The report identified the top issue to be the re-employment of workers, citing two large scale bankruptcies, the Hongmei Group (MSG manufacturer) and Badaohao Coal Mine. (A 2014 social media posting criticized the Hongmei Group’s violation of labor law).

A second issue was that bankruptcy caused group labor litigation, particularly by senior staff, who were more highly paid, and older, but faced difficulties being reemployed (and likely had the funds to hire a lawyer).  The report noted that this group had overly high expectations from litigation and if their individual claims were not supported by the court, they would resort to group litigation or petitioning.The research report mentioned, with a positive spin, that labor lawyers were involved  to resolve disputes.

The litigants raised more varied claims rather than simply wages, including: damages; determination of a labor relationship; social insurance; work-related injury; wages and status; etc., as shown by the chart below.

screen-shot-2017-02-02-at-8-50-40-amUnlike ordinary labor cases, most cases were decided by court judgment, not mediated. In 66% of the cases, the plaintiff’s claim was upheld in whole or part, with a dismissal of the plaintiff’s claims in 28% of cases.

The report also illustrates the importance of social stability related procedures.  Although a Chinese law firm partner criticized as quite vague and incompatible with the existing labor law system  the requirement in a 2016 State Council policy document that a worker resettlement plan (for certain industries)  be approved by the workers’ congress or all workers, this is not new and is taken seriously by local judges.  The requirement is contained in Liaoning provincial level legislation (and other legislation) and compliance was noted by the research team. (The team noted that after the resettlement plan was approved (for Hong Mei Group and Badaohao Coal) was approved by the workers congress, it was reported to the local labor and union authorities authorities.

Compliance with labor law related formalities, by both  companies and employees created problems for judges hearing these claims, such as in work-related injury cases, where companies failed to pay legally required wages to employees and employees failed to submit needed documentation.  Some of the companies continued to pay employees under old “planned-economy” systems rather than comply with current labor law, requiring employees to work overtime without overtime pay, a particular issue in the Badahao Coal Mine bankruptcy.

Inadequacies of legislation highlighted by the team included: how to characterize labor claims in bankruptcy, and whether they should be treated as labor disputes or claims against the bankruptcy estate; whether labor disputes needed to be submitted first to labor arbitration; how the courts can better obtain files from labor arbitration authorities and can ensure labor disputes are addressed and not avoided; and how to ensure that bankrupt enterprises pay social insurance payments for their employees.

Comments

The research team (at least on the version publicly available) did not further explore the reasons for the failure of these bankrupt companies (likely many SOEs) to comply with basic labor law requirements, why local labor arbitration authorities avoided hearing cases, or why the Liaoning High Court needed to issue the recommendation that  “labor administrative departments should also strengthen the daily management and supervision of the enterprises before their bankruptcy.”

This report contains a disturbing signal about the disposal of assets of bankrupt companies.  This is significant because the government is promoting the use of bankruptcy. The report recommended that the liquidation group effectively dispose of tangible and intangible assets of the bankrupt companies such as coal mines and well-known trademarks, and implement better supervision and management, to ensure that the realization of bankruptcy assets to maximize the protection of the employees.

Liaoning bankruptcies may be an illustration of what an bankruptcy lawyer recently commented in Caixin:  “falsifying financial reports and asset transfers has often occurred in SOE bankruptcy cases to escape obligations. Meanwhile, local governments’ intervention has also often disrupted the fairness of such cases.”

It appears that employees of the bankrupt companies are the ones who suffer the most when these cases are not handled fairly.As the research team recognized, employees are the weaker party. The team recommended that local government provide a coordination mechanism and funding to secure the workers’ claims against the company, so that the company can withdraw from the market but overall societal interests are balanced.  Whether local Liaoning governments do so remains to be seen.

bankruptcy law, Commercial law, Monitor

How Zhejiang courts support its economy

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zhejiang

My apologies to blog followers for my absence.  I will address Zhou Qiang’s comments on judicial independence in a later blogpost, for which I want to do some more detailed research than is possible at this time.

This blogpost will look at a less contentious question–what does the profile of civil and commercial disputes in Zhejiang province mean for the Zhejiang/Chinese economy and the role of the courts (in civil/commercial disputes).

Judge Zhang Hengzhu, head of the #2 civil division of the Zhejiang Higher People’s Court (High Court), spoke in early January at a conference organized by Tiantong & Partners, the boutique litigation law firm on civil and commercial disputes in his province.

What is special about Zhejiang?

The Zhejiang economy is dominated by small and medium enterprises (SMEs), many integrated with the global economy.  These companies are private, family-owned companies. Judge Zhang noted that these companies tend to have irregular corporate governance, with vague lines between property ownership by the company founder, the company, and affiliates.

Civil & commercial litigation in Zhejiang

Zhejiang (and Jiangsu) are the two most litigious provinces in China. The Zhejiang courts accepted over a million cases (1,112,900) in the first nine months of 2016, up 11% over 2015, of which over half (572,300) were civil and commercial cases, up 7% year on year.  [Comment–year-end numbers will be even higher.]

A significant proportion of those cases during that period were bad debt-related. About 17% of those cases (136,500) were private (shadow) lending disputes, involving total amounts in disputes of RMB 78.366 billion (almost USD 11.4 billion).  Private/shadow lending in Zhejiang is a supplement or replacement for bank financing. During the same period, about half as many financial disputes were accepted (85,400), up almost 20%, but the total amounts in dispute were RMB 232 billion, or USD 33.79 billion).  [Comment–year-end numbers will be even higher.]

How Zhejiang courts support SME economy

Judge Zhang commented on what the Zhejiang courts have been doing to support the province’s SME-dependent economy.  Those actions, which appear unusual those unused to the Chinese judicial system, include:

  • Taking the lead to generate judicial guidance on private (shadow) lending.  In 2009,  the High Court was the first to issue provincial level guidance. which it updated in 2013.
  • In 2013, it issued a concurrence (in the form of a meeting summary) with the provincial procuratorate and public security department on criminal law issues relating to collective fundraising.
  • The High Court is working with the provincial financial institutions on the disposal of non-performing assets.
  • It was one of the first provincial courts to take steps to generate judicial guidance on bankruptcy law and to take steps to deal with zombie enterprises (after raising it with the provincial Party secretary and government, who issued written instructions (批示）。
  • In late 2016, establishing a joint mechanism with fourteen departments of the provincial government to advance the use of bankruptcy and related issues, such as re-employment of workers, use of land formerly used by bankrupt enterprises, generating bankruptcy-favorable tax policies (document on the mechanism found here).

 

 

 

bankruptcy law, big data

Updated data on Chinese bankruptcy law

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Senior Shanghai Maritime Court judges participating in video conference 

Senior Judge Du Wanhua, tasked with making Chinese bankruptcy and corporate restructuring law work better (see these earlier blogposts), spoke recently on a video conference held by the Chinese courts, where he released a few points of big data on Chinese bankruptcy law and highlighted (in this version) current and forthcoming court policy on bankruptcy.  The data he released can be expected to be part of the conversation when the 21st US-China [or China-US, depending on your perspective] Legal Exchange takes place in Beijing and Shanghai on 13 and 15 December 2016 on bankruptcy law.

The video conference concerned one of the vexed issues of Chinese bankruptcy law, how to transfer cases from enforcement to bankruptcy proceedings, but Du Wanhua’s talking points as released were more general. Some of his points are highlighted below.

Updated data on bankruptcy cases

The Chinese courts have accepted 3463 bankruptcy cases through October of this year, up almost 30% year on year, of which 2249 have been closed, up almost 60%.  At the same time, the business registration authorities (the State Administration of Industry and Commerce (SAIC) and local counterparts), have cancelled the registration of 396,000 companies.

Transitioning from enforcement to bankruptcy procedures

Judge Du revealed that close to half (40-50%) of the unsatisfied enforcement cases  are ones that are wholly unsatisfied, with a goodly portion involving corporate judgment debtors. (As mentioned in earlier blogposts, there is no procedure to transfer cases from enforcement procedures to bankruptcy). Judge Du mentioned that the SPC had already drafted guidance which have been discussed by the SPC’s Judicial Committee and would be issued soon. He noted that unsatisfied judgments because of local protectionism have led to conflicts between creditors and  “fierce” conflicts between courts. He called for courts not to engage in “buck passing” on enforcement cases that are transferred to another court for bankruptcy procedures.

Establish coordination system for bankruptcy cases

Echoing themes in earlier statements by Judge Du and others in the Chinese courts, he calls for localities to establish a unified coordination mechanism for enterprise bankruptcy work, with government and courts, under Party Committee leadership, to plan state asset protection, safeguarding of financial safety, resettlement and reemployment of workers, and for the bankruptcy of non-state owned enterprises to proceed smoothly.

Will this coordination system improve matters?  The jury is still out.

 

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bankruptcy law

Supreme People’s Court’s new bankruptcy information platform

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Screen Shot 2016-08-06 at 12.12.56 PMOn 1 August, President Zhou Qiang of the Supreme People’s Court (SPC) inaugurated the SPC’s new enterprise bankruptcy and reorganization electronic information platform, linked here and accessible through the Supreme People’s Court’s website (www.court.gov.cn).  The English title and slogans could have benefited from a 5-minute consultation with a native speaker, but more importantly, some of the functions still appear to be in Beta mode.  The platform has three parts.

It provides information for the public on:

  • Debtors (债务人信息). :

 This function seems to be in Beta mode because when you click further for more details,Screen Shot 2016-08-07 at 9.03.31 AMno further information is available.  This section is intended to provide the most recent annual report, related litigation, and information on assets of the company from the industrial and commercial authorities’ database and enable “one-stop shopping” for distressed assets.

Bankruptcy notices, such as this one with a plan on the distribution of the assets of a Xinjiang tomato processing company;

  • Bankruptcy rulings made by the local courts, such as this one by the Qidong (Jiangsu) court on accepting the bankruptcy case of a Nantong marine engineering company;
  • Laws and regulations (primarily SPC regulations related to bankruptcy);
  • Bankruptcy related news, primarily reports on new regulations issued and bankruptcy-related initiatives or conferences, such as this one in Zhejiang, on the crisis in Zhejiang’s ship-building industry);
  • Typical (model) bankruptcy and liquidation cases (see an explanation of typical/mode cases here), so far just a re-publication of the typical cases that the SPC issued in June.

Second, bankruptcy administrators are required by these regulations to upload information to issue to parties to the bankruptcy.

Third, judges are required to upload their bankruptcy/liquidation rulings to this platform.

For parties, the platform enables them to have current information on the status of their cases and upload documents to submit to the court or bankruptcy administrator.

The SPC issued regulations on the operation of the platform in late July, available here. It seems likely that the SPC considered the bankruptcy platform of other major jurisdictions in the process.  This platform is part of the SPC’s Internet Plus/smart courts policy to provide greater transparency, easier access to information, and “greater informatization,” for some of the reasons described in this short article–particularly having tangible results and promoting the use of information technology.

For anyone seeking to drill down into the details of how bankruptcy and liquidation law is being implemented in China’s political and economic environment, and particularly for lawyers and others doing due diligence and distressed asset investors (domestic or foreign), the platform is unquestionably very useful.

 

 

 

 

bankruptcy law, Communist Party and the Courts

Chinese courts recruiting more bankruptcy forces

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imgres-1The Supreme People’s Court (SPC) recently issued a notice  (notice concerning the plan for establishing liquidation and bankruptcy trial divisions in intermediate courts)(bankruptcy division notice) (关于在中级人民法院设立清算与破产审判庭的工作方案) aimed at establishing liquidation and bankruptcy trial divisions in China’s intermediate courts and increasing the number of judges and support staff focusing on liquidation (winding up companies not in bankruptcy) and bankruptcy-related issues, to implement the central leadership decision to use bankruptcy law to reduce the number of zombie enterprises.

SPC Judge Du Wanhua had foreshadowed this development in many previous statements. The SPC required the concurrence of the Central Staffing Commission, a Party-State organization that regulates staffing in Party and state entities. A summary of the bankruptcy division notice follows below:

  • Establish bankruptcy divisions in intermediate courts, with some courts taking the lead;

In the directly administered cities, at least one intermediate court should establish a bankruptcy division, intermediate courts in provincial capitals and cities of deputy provincial level also. At lower levels, it will depend on economic development, local need, and professional infrastructure, with provincial courts to make arrangements with staffing authorities.

The following locations will take the lead in establishing bankruptcy divisions: Beijing, Shanghai, Tianjin, Chongqing; and the provincial capitals (and cities of deputy provincial level) of Jilin, Jiangsu, Zhejiang, Anhui, Shandong, Henan, Hubei, Hunan, Guangdong, and Sichuan. These arrangements are to be put in place by the end of July, with the other areas to follow by year end. This blog has reported on previous bankruptcy developments in Jiangsu,  Zhejiang, Anhui, Shandong, and Guangdong.

  • Sets out the work of  bankruptcy divisions;

Try compulsory liquidation and bankruptcy cases, guide lower courts trying these types of cases; coordinate with other courts on these issues; manage and train bankruptcy administrators.

  • Describes the jurisdiction of the bankruptcy divisions;

Intermediate courts should be responsible for the compulsory liquidation and bankruptcy of companies registered at the business registration authorities (administration of industry and commerce) of its own level and below, with variations possible if the provincial high court approves.

  • Staffing principles

Staffing should be according to judicial reform principles and linked to the caseload–the judges should be those familiar with liquidation and bankruptcy from the same or lower courts and they should have a clerk and judicial assistance on a 1:1:1 principle.

  • Measures needed

Improved measures are needed to supervise and evaluate liquidation and bankruptcy work; expedited liquidation and bankruptcy procedures need to be explored; promote reforms in trying liquidation and bankruptcy cases; put in place judicial responsibility (this relates to the judicial lifetime responsibility system announced in September, 2015) to ensure an honest judiciary.

  • Coordinate better with local Party/state authorities

Liquidation and bankruptcy divisions should report regularly to the local Party committee/government to seek their support and major issues should be reported to the SPC.

Some thoughts

This is a positive step although it cannot deal with the underlying political issues related to implementing bankruptcy law in China, particularly local government interference in bankruptcy cases.  Putting in place more qualified judges and support staff is a critical part of making bankruptcy law work.  The political support of the local authorities remains critical and the local judiciary provides a training and liaison function. The bureaucratic level of a troubled company (state owned enterprise) affects the ability of a court to deal its issues.

Academics reaching out beyond the universities and social media is playing a positive role in creating a corp of more competent bankruptcy specialists in the judiciary.  The Bankruptcy Law and Restructuring Research Center of the China University of Political Science and Law, directed by Professor Li Shuguang  has established a Wechat public account, which provides bankruptcy and liquidated news to the profession, including judges, as well chat groups in which Chinese bankruptcy professionals can share their experiences and tap into the experience and knowledge of others.