The China International Commercial Court & the development of case law with Chinese characteristics

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Article in 30 December edition of People’s Court Daily

On 30 December 2019, I was quoted in an article that appeared in Supreme People’s Court (SPC) media (see the screenshot above).

“中国国际商事法庭的运作时间不长,但从迄今为止的运作中可以清楚看到,其受理案件非常慎重,会选择对中国相关法律发展产生影响的案件。”最高人民法院国际商事专家委员、北京大学国际法学院常驻知名学者Susan Finder表示,从首批案件的裁判文书可以明显看出,中国国际商事法庭的判决和裁定对于下级法院的法官和法律界人士来说,可能是重要的“软先例”,即权威性的裁判。

The CICC has been in operation a short time…What is clear from its operations so far is that it is carefully choosing its cases, only selecting cases that will have an impact on the development of relevant Chinese law. What seems evident from the initial rulings, at least, is that the judgments and rulings of the CICC are likely to be significant for lower court judges and members of the legal community as “soft precedents,” authoritative decisions….

It is an excerpt from a brief article that I am setting out below as I wrote it in English (I have added (Chinalawtranslate.com’s) translation of excerpts from certain documents) and Chinese translation (many thanks to a knowledgeable person who took a break from year-end case closing to do this elegant translation).

I am honored to have this opportunity to comment on some of the first rulings and judgments of the China International Commercial Court (CICC). This brief commentary will address the significance of CICC judgments and rulings and the CICC arbitration-related rulings.

The CICC has been in operation a short time and it is early days to provide a more detailed analysis of its operations. What is clear from its operations so far is that it is carefully choosing its cases, only selecting cases that will have an impact on the development of relevant Chinese law. What seems evident from the initial rulings, at least, is that the judgments and rulings of the CICC are likely to be significant for lower court judges and members of the legal community as “soft precedents,”  authoritative decisions that are highly persuasive although not binding on the lower courts. Authoritative commentators in China and abroad have noted that the arbitration rulings fill a gap in Chinese arbitration law. The rulings are also consistent with the position taken by courts in some major jurisdictions that also find that the parties expressed their intent to arbitrate any dispute although their contract was never finalized. In the view of this commentator, they are part of China developing its own case guidance system, highlighted in item #26 of the 5th Judicial Reform Outline, in particular the phrase “Improve working mechanisms for mandatory searches and reporting of analogous cases and new types of cases” “完善类案和新类型案件强制检索报告工作机制” . It was previously mentioned in Opinions on Putting a Judicial Responsibility System in Place and Improving Mechanisms for Trial Oversight and Management (Provisional) –“on the foundation of improving working mechanisms such as consulting similar cases and judgment guidance a mechanism is to be established requiring the search of similar cases and relevant cases, to ensure a uniform judgment standard for similar cases, and the uniform application of law “最高人民法院关于落实司法责任制完善审判监督管理机制的意见(试行), (六) 在完善类案参考、裁判指引等工作机制基础上,建立类案及关联案件强制检索机制,确保类案裁判标准统一、法律适用统一 .

Moreover, thus far, five judges formed the members of the collegial panel, all of whom are the Chinese court’s most outstanding specialists on cross-border issues, including the judicial review of arbitration. This indicates the importance to which the Supreme People’s Court attaches to CICC cases.

In this commentator’s view, addition to CICC cases, other cases decided by or selected by the Supreme People’s Court would be classified as such. For example, cases decided by the Supreme People’s Court Intellectual Property Rights Court 最高人民法院知识产权法庭 would also be allocated to the category that I call “Supreme People’s Court soft precedents.” Other Supreme People’s Court soft precedents would include cases in the Supreme People’s Court Gazette 最高人民法院公报案件,  cases in the trial guides published by the various operational divisions 各个业务庭发表的审判业务指导丛书选的案件,and cases of the specialized judges committees of the SPC operational divisions 和各个业务庭专业法官会议案件。

In my view, cases decided by the collegial panels of the Supreme People’s Court are also persuasive, but not as persuasive as Supreme People’s Court cases in the categories described above. Supreme People’s Court circuit court cases are very persuasive to the courts within their jurisdiction. This case law is needed to supplement law and judicial interpretations and guide the lower courts correctly, as many new issues come before the courts before the legislative organs have time to amend legislation. I see China evolving its own case law, looking to traditional law and foreign jurisdictions for reference, but settling upon rules that fit China’s special situation, that may include some of the points I mention above. CICC decisions, whether rulings or judgments, will send important signals to the market, and are likely to be significant worldwide, as there is a documented increase in international arbitration cases where either the contract in dispute is governed by Chinese law or Chinese law is relevant in various ways.

The Chinese version:

中国国际商事法庭与有中国特色判例法的发展

我很荣幸有这个机会就中国国际商事法院(CICC)的首批裁定和判决发表意见。本短评将侧重中国国际商事法庭的判决和裁定以及仲裁司法审查裁定的重要性。

中国国际商事法庭的运作时间不长,对其运作进行更详细的分析还为时过早。 但从其迄今为止的运作中可以清楚看到的是,中国国际商事法庭选择其受理的案件非常慎重,只选择会对中国相关法律发展产生影响的案件。 至少从首批裁定可以明显看出,中国国际商事法庭的判决和裁定对于下级法院的法官和法律界人士来说,可能是重要的“软先例”,即权威性的裁判,虽然对下级法院没有约束力,但具有很强的说服力。 国内外权威专家均指出,这批裁定填补了中国仲裁法的一项空白。 这些裁定也与一些主要法域法院的立场保持了一致,也即尽管双方当事人的合同并未最后敲定,但双方都表示有意将争议提交仲裁。 在本文作者看来,这些裁判构成中国发展自己的案例指导制度的一部分,正如第五个司法改革纲要第26项所强调的,特别是“完善类案和新类型案件强制检索报告工作机制” 。 此前,最高人民法院关于落实司法责任制完善审判监督管理机制的意见(试行)曾提及“(六) 在完善类案参考、裁判指引等工作机制基础上,建立类案及关联案件强制检索机制,确保类案裁判标准统一、法律适用统一 。”

此外,到目前为止,合议庭均由五名法官组成,全部都是中国法院在跨境问题(包括仲裁司法审查)方面最杰出的专家。 由此可见最高人民法院对国际商事法庭案件的重视程度。

本文作者认为,除国际商事法庭案件外,最高人民法院审理或选取的其他案件也将被归入此类案例。例如,最高人民法院知识产权法庭判决的案件,也可归为所说的“最高人民法院软判例”,最高人民法院其他软判例还包括最高人民法院公报案例、各个业务庭发表的审判业务指导丛书选的案例和各个业务庭专业法官会议案例。我认为,最高人民法院合议庭判决的案件也具有说服力,但是没有上述几类案例的说服力强。 最高人民法院巡回法庭案例对其辖区内的法院具有很强的说服力。 由于立法机关往往来不及修改立法,许多新问题就摆在了法院面前,因此需要以判例来补充法律和司法解释以正确指导下级法院。 我看到中国正在发展自己的判例法,参考传统法律和外国司法管辖区的做法,但最终确定适合中国特殊国情的规则,这可能包括上文提到的一些要点。 国际商事法庭的裁判,无论是裁定还是判决,都将向市场发出重要信号,而且很可能在全球范围内产生重大影响,因为已有相关文件显示,争议合同适用中国法,或者中国法在不同方面予以适用的国际仲裁案件不断在增加。

Happy New Year!

Update from #1 China International Commercial Court

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

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

CICC Expert Committee Office Renamed

A brief notice appeared on the China International Commercial Court (CICC)’s websites on 9 August, announcing that the Office of the International Commercial Expert Committee (Expert Committee) of the Supreme People’s Court (SPC) (国际商事专家委员会办公室) had been renamed the Coordination and Guidance Office (协调指导办公室) for the CICC from 21st June 2019. The main duties of the Office are described as directing and coordinating construction, adjudication management and external exchange (负责指导协调国际商事法庭建设、审判管理、对外交流; 负责国际商事专家委员日常工作等) of the CICC, and also in charge of the routine work of members of the Expert Committee. I surmise that these functions are meant to convey that the office will not only support activities related to the Expert Committee but also be responsible for a variety of matters, such as coordinating the drafting of rules and the wide variety of administrative matters that go along with any administrative entity in China, particularly one that deals with foreigners. The notice also announced that from 23rd July 2019, Ms. Long Fei, who has a Ph.D. from China University of Political Science and Law, has been appointed as the Deputy Director (Person in Charge) of the Coordination and Guidance Office. She had formerly been the Director of Department of Guidance Service, Judicial Reform Office of the SPC. She brings to the new role many years of work on diversified dispute resolution related issues.

Some comments on the China International Commercial Court rules

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from the CICC website

The Supreme People’s Court (SPC) is gradually building the infrastructure for the China International Commercial Court (CICC).  An important part of it was put into place in December 2018, when the SPC issued the Procedural Rules for the China International Commercial Court of the Supreme People’s Court (For Trial Implementation) (CICC Procedural Rules). Other rules are yet to be issued. From the Chinese original of the CICC Procedural Rules, they were issued by the SPC’s General Office 最高人民法院办公厅关于印发《最高人民法院国际商事法庭程序规则(试行)》的通知 (document number (法办发〔2018〕13号).  The SPC’s judicial committee discussed the draft CICC Procedural Rules in late October, indicating the importance that the SPC leadership attaches to the CICC.  However, the SPC did not issue the CICC Procedural Rules as a judicial interpretation.

As to why they were issued with the indication “For Trial Implementation” and by the SPC’s General Office rather than as a judicial interpretation, the Monitor has her theories (readers are welcome to propose alternative explanations). As for why “For Trial Implementation,” it is likely that the SPC intends to further amend the CICC Procedural Rules once it has greater experience using the rules and has more reaction from counsel that has litigated before the CICC and the market generally.  As to why the SPC issued the CICC Procedural Rules as a General Office normative document rather than a judicial interpretation, it may be surmised that it is linked to the SPC practice of issuing judicial interpretations when judicial policy has stabilized (this practice is discussed in another article in the academic article production pipeline), and the judicial interpretation can be in place for a relatively long period.  Additionally, issuing the CICC Procedural Rules as a judicial interpretation would involve more formalities and scrutiny under the 2007 SPC rules on judicial interpretation work.

As this blog (and other commentators have mentioned), the drafters of the China International Commercial Court rules had to draft carefully to remain within the constraints of existing law and judicial interpretations,  as judicial normative documents (司法规范性文件) of which this is an example, may not conflict with either source of law. The CICC Procedural Rules reflect a number of themes seen in SPC cross-border matters:

As noted here also, The CICC Procedural Rules are not long (40 articles), with one-quarter of its provisions devoted to mediation.  In comparison, the DIFC court rules. Singapore International Commercial Court (SICC) Practice Directions,  and Netherlands Commercial Court Rules of Procedure are much longer. But the length of the CICC Procedural Rules is consistent with the length of other SPC rules.

A few specific comments and general comments follow below.

Specific comments

Case Acceptance

Article 8 lists the documents that a plaintiff needs to provide when filing suit, highlighting the new and old in Chinese cross-border dispute resolution.  The old is the documentary requirements that a foreign (offshore) plaintiff and his/her foreign agent must provide.   Because China has not yet acceded to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, an offshore plaintiff must provide notarized/certified and legalized versions of corporate or individual identification documents,

As to what is new, requiring a plaintiff to submit a Pretrial Diversionary Procedures Questionnaire (in addition to a statement of claim and other such documents) is a type of document that is often required by courts in other jurisdictions and reflects background research that the drafters had done on other jurisdictions.

Pre-trial Mediation

The CICC emphasizes the importance of mediation and promotes the concept of a one-stop integrated model through integration with the leading foreign-related mediation organizations within China. The three international commercial court rules mentioned above also encourage the use of mediation but do not limit the mediation institution used to domestic ones.

Article 17 and 18, Pre-trial Mediation:   Article 17 relates to a case management conference called by the Case Management Office of the relevant CICC rather than the judge assigned to the case, as set out the SICC Practice Directions (and other international commercial courts). The institution of a case management conference appears to be a concept borrowed from outside of China. It is to be convened within seven working days from the date of the service of the plaintiff’s documents on the defendant.  In other jurisdictions, however, case management conferences are generally scheduled after the defendant has served his documents on the plaintiff.  Query whether an exchange of documents would be more conducive to effective mediation.

Article 17 mentions that the time limit for mediation should generally not exceed twenty working days. This deadline puts pressure on the mediators and parties to come to an agreement quickly.  It appears “generally should not exceed” language contains flexibility so that if parties are in negotiations, the deadline could be extended. As to what occurs in practice, Danny McFadden, Managing Director of the Centre for Effective Dispute Resolution (CEDR) Asia Pacific, well-known as a mediator (and trainer in mediation) )and former interim UN Director of Mediation) commented that in his experience: “When parties are keen to hold a mediation it can be administered and take place within a matter of days. However on average, from when CEDR is initially contacted by the parties/lawyers, the mediator and date of the mediation is agreed, mediation documents are exchanged  and to the end of the actual mediation, it takes 5 to 6 weeks.”。

Under the CICC Procedural Rules, mediation will be conducted by one or more members of the CICC Expert Committee or one of the Chinese mediation institutions designated by the CICC. The case management conference is to be held online (assuming the videolink from the CICC will be good enough).  The resulting memorandum is then issued by the Case Management Office. Under the SICC Practice Directions (and rules of some of the other international commercial courts), the case memorandum is prepared by the parties. It is not mentioned in the CICC Procedural Rules whether the parties will have an opportunity to comment on the memorandum.

Trial procedures

The section on trial procedures primarily focuses on the pre-trial conference.  Article 27 contains a long list of items that should be included in the pre-trial conference (indicating the drafters of the CICC Procedural Rules made reference to the practices of other international commercial courts.) Either the entire collegial panel or a single judge may convene the pre-trial conference, which may be held either online or in person.

Article 31 sets out the procedure under which the collegial panel can request one or more member of the International Commercial Expert Committee (Expert Committee) provide an expert opinion on international treaties, international commercial rules, or foreign law.

Trial procedures, therefore, will follow those set out in the Civil Procedure Law.

A few (and not comprehensive) general comments follow below.

Challenges for the CICC

There are no small matters in foreign affairs (外事无小事)Zhou Enlai’s saying) –both domestically and internationally, foreign-related matters, because they involve relations with other countries and the prestige of the Chinese state, are sensitive.  For the CICC judges, particularly the leaders, this imposes particular pressure to handle these disputes in a way that is acceptable to SPC leadership and to the outside world.

CICC judges have many other cases to deal with–As may be apparent from the previous blogpost on the CICC, the CICC is not a full-time job for any of the judges involved.  That means that judges need to deal with possibly complex international commercial cases on a part-time basis.

Limitations of Chinese substantive law–To the extent that the CICC needs to apply Chinese substantive law, that also presents a challenge.  As CICC Judge (and deputy head of the #1 Circuit Court) Zhang Yongjian mentioned almost three years ago: “there are numerous types of foreign-related cases, with many difficult cases. On the one hand, there are many legislative “blank spaces.”  涉外案件类型多样化,疑难案件层出不穷.一方面,会出现更多的立法空白.”  Chinese contract law (even with related judicial interpretations) is considered by Chinese legal professionals to lack insufficient detail(see comments here, for example。

To the extent that a CICC judgment needs to be enforced outside of China, it will involve enforcement issues (previously discussed on this blog).outside of China. One important development since the blogpost is the conclusion of the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region.  Implementing legislation has not yet been promulgated in Hong Kong.

Opportunities for the CICC

Piloting new rules and procedures–The CICC also presents the SPC with opportunities to pilot new rules and procedures in cross-border cases and to make appropriate reference to foreign beneficial experience.  (For the avoidance of doubt, the Monitor is not advocating that the SPC import foreign law wholesale (照搬外国法).)  This earlier blogpost mentions my encounter several years ago with a senior Beijing academic who made this accusation against some SPC personnel).

One important area that would be beneficial for the CICC to focus on is discovery procedures.  CICC judges are aware of US lawyers and overly broad requests for documents in discovery, but they should be able to find an appropriate solution that fits Chinese reality, perhaps using the pre-trial case management conference as a forum to require parties to provide documents and other evidence to opposing counsel.  Without some sort of discovery, foreign plaintiffs may be reluctant to use the CICC as a forum.

I plan to come back to the topic of the CICC from time to time, as more information about CICC cases becomes available (and as I have my own personal experience with CICC operations),

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The author is a member of the CICC’s Expert Committee but her views do not represent the committee, the CICC, or the SPC.