Supreme People’s Court updates its Belt & Road policies

Screen Shot 2019-12-29 at 9.15.50 PMAt a press conference on 27 December (2019) the Supreme People’s Court’s (SPC) #4 Civil Division (the division focusing on cross-border commercial issues) announced it had issued three documents: a judicial interpretation and two judicial policy documents. The documents are connected directly or indirectly to the Belt & Road Initiative (BRI) and improving China’s foreign investment environment.

  1. Interpretation on Several Issues Regarding the Application of the “People’s Republic of China Foreign Investment Law” (FIL Interpretation) (最高人民法院关于适用〈中华人民共和国外商投资法〉若干问题的解释);
  2. Opinion on providing services and guarantees for the Belt & Road (BRI Opinion #2) (关于人民法院进一步为“一带一路”建设提供司法服务和保障的意见); and
  3. Opinion on providing services and guarantees for Construction of the Lingang area of the Shanghai Pilot Free Trade Zone (Lingang FTZ Opinion) (关于人民法院为中国(上海)自由贸易试验区临港新片区建设提供司法服务和保障的意见).

The two Opinions update two of the SPC’s two major policy documents on cross-border issues: the 2015 Opinion on Providing Services and Guarantees for the Belt & Road (BRI Opinion, and Opinion on Providing Guarantees for the Building of Pilot Free Trade Zones (FTZ Opinion). Policy documents do not have the force of law. They are examples of how the SPC supports the Party and government by issuing documents to support important strategies or initiatives (serving the greater situation (服务大局). In the New Era, the SPC has issued over dozen policy documents that provide “judicial services and guarantees” for major government strategies or initiatives, many more than before.  These Opinions are intended to harmonize the two earlier policy documents with post 19th Party Congress developments and priorities, including those mentioned in the Fourth Plenum Decision. I had previously reviewed earlier the documents in detail.  My analysis of the Pilot FTZ Opinion can be found here and I have previously written and spoken about the BRI Opinion.  This blogpost draws on correspondence I had recently with Professor Vivienne Bath of the University of Sydney, but I am solely responsible for the views expressed here.  This blogpost discusses BRI Opinion #2.

2.  Belt & Road Opinion #2

This document is longer than the other two put together and has much more substantive and political content. Comments on the first section will focus on the political issues, while comments on the rest of the document will discuss the other content in the document:

  • political signaling on discrete issues;
  • judicial policy changes;
  • signaling to various audiences;
  • instructions and guidance to the lower courts;
  • highlighting future possible changes to SPC positions on legal issues;
  • promoting or supporting certain government initiatives within the courts;
  • reiterating basic policies.

New requirements and tasks (Section 1)

In keeping with post 19th Party Congress trends and the spirit of the 2019 Political-Legal  Work conference, BRI Opinion #2 has more politically oriented content and references than the 2015 BRI Opinion. As it must be harmonized with the latest Party and government policy, it includes the latest judicial policy jargon, such as “improving the business environment” and “creating an international, law-based and convenient business environment with stability, fairness, transparency, and predictability.”

The first section includes a long paragraph on working principles. For the casual reader, the principles are an odd hotpot of political, substantive, procedural, and administrative matters but in keeping with its role in the document. It is all about political signaling. To the person unfamiliar with these documents, it gives the reader the impression that if she put her chopsticks in one place in the hotpot, she would pull up support for international arbitration and if in another, support for constructing litigation service centers.

Policy changes and signaling (section 2)

This section contains seven apparently unconnected provisions. They are linked by their political and practical importance: judicial cooperation in criminal law; protecting the right of domestic and cross-border parties; supporting multilateralism; supporting the development of international logistics; supporting opening up in the financial sector; supporting the development of information technology, intellectual property, and green development. This section is a combination of signaling to the political authorities and the lower courts.

One notable provision is on judicial cooperation in the area of criminal law. Article 4 mentions the Beijing Initiative for the Clean Silk Road, and zero tolerance for corruption.  Doing something about cross-border corruption offenses is not a matter primarily of the SPC, as this analysis notes and has greater implications for state-owned enterprises (SOEs). This provision calls for the people’s courts to work with the judicial organs of other countries and regions along the “Belt and Road” to build jointly a judicial anti-terrorism mechanism, and curb the spreading of terrorism.  The link to the SPC is that we can anticipate that some staff from the SPC would be involved in negotiating regional or bilateral arrangements relevant to anti-terrorism (along with the Ministry of Foreign Affairs and Public Security Ministry). In an indirect way, it illustrates how the SPC works with other Party and government departments on legal issues, one of the distinctive functions of the SPC that rarely receives much attention.

On signaling to the lower courts, in addition to the section on financial cases, discussed in the previous blogpost, Article 6 is a reminder to the lower courts to apply the relevant rules of determining contract validity and liabilities in civil and commercial cases involving free trade agreements or cooperation documents signed between China and other countries. In any case, it is their obligation in applying relevant law.  Perhaps the SPC has issued the reminder because lower courts have failed to do too often.

Although Article 11 (on environmental protection) has received attention from a prominent environmental lawyer who saw the inclusion of cross-border environmental public interest litigation in the Opinion as ground-breaking, knowledgeable persons suggested it is a merely a reminder to local courts that they can take such cases provided current legal requirements are met, such as jurisdiction over the defendant, location of the pollution, and the social organization meeting specified requirements.

Specific policy (Section 3)

Section 3 contains signals on changes to specific judicial policies, reminders to the lower courts and also political signals, including highlighting SPC accomplishments. Article 13 signals to the lower courts some new policy on contract interpretation. It addresses situations that commonly arise when one party alleges fraud or collusion to avoid contract liability. The SPC reminds lower courts that evidence should be reviewed carefully, and the evidentiary standard should be beyond a reasonable doubt(根据排除合理怀疑的证据规则严格认定欺诈、恶意串通).  Article 13 directs courts to apply foreign law if the choice of foreign law would uphold contract validity.

This section has quite a few reminders to the lower courts to do what they should already be doing, such as: actively applying international conventions applicable to China; respecting international practices and international commercial rules; fully respecting parties’ governing law choice and explaining how they determined it; taking a restrictive approach towards declaring contracts invalid. Governing law is a sore spot in certain maritime matters, where the Chinese courts in a number of cases have set aside parties’ choice of law for a failure to have an actual connection.

Extending the influence of Chinese law abroad is a policy that received new impetus in the November, 2019 Decision of the 4th Plenum of the 19th Party Central Committee, and therefore it is found in Article 20 and again in Article 21 (in the following section).  Linked to this is language on increasing the prestige of the Chinese courts and the China International Commercial Court in particular. The language echoes and extends the 4th Plenum of the 18th Party Central Committee and BRI #1 Opinion, by calling on the people’s courts to extend the influence of Chinese law, publish typical cases tried by Chinese courts in multiple languages, lay a solid foundation for courts and arbitration institutions to correctly understand and apply Chinese laws, and strengthen the understanding and trust of international businesses of Chinese law. From the fact that the SPC envisions Chinese courts as having a role in assisting foreign courts and arbitration institutions to “correctly understand and apply Chinese law” shows that the SPC has a distinctive understanding of the role of a court.

On related accomplishments, one relates to typical cases in foreign languages and the other to the creation of the foreign law ascertainment platform. In 2019, the SPC published typical cases on cross-border issues in English, by publishing a pair of books on China Foreign-Related Commercial Cases and Maritime Cases (in China). It has also published a book of Chinese cases translated into English through Springer. On foreign law ascertainment, the accomplishment is the SPC having established a bilingual foreign law ascertainment platform, that assembles in one platform the available resources for ascertaining foreign law and a number of cases that involve ascertaining foreign law. There has been discussion in China as to whether courts should take such an active role in ascertaining foreign law, but the SPC has made a policy decision that it should.

International Commercial Court and One-Stop Dispute Resolution (Sections 4 and 5)

The BRI Opinion #2 contains several provisions related to the China International Commercial Court (CICC), with some mention of its expert committee.  Article 23 mentions working with international commercial courts outside of China to establish various types of exchanges and cooperation, including training judges. It is unclear whether this a reference to increasing cooperation under the Standing International Forum of Commercial Courts or other future initiatives.

These two sections also signals to the lower courts policy changes and policies to be stressed. One policy to be noted is implementing the policy of mediating first (贯彻调解优先原则), which is already incorporated into the CICC rules.  Some of the difficulties in mediating cross-border disputes involving state-owned enterprises were discussed in this earlier blogpost and at the workshop on implementing the Singapore Mediation Convention that I attended in December (2019).

Some new developments underway are mentioned in this section, linking to the central government’s policy of supporting Hong Kong’s role as an international dispute resolution center. Article 34 calls for support for increased cooperation with the Hong Kong International Arbitration Centre and other Hong Kong-based arbitration institutions, and appropriately involving Hong Kong-based institutions in CICC’s one-stop model. Article 35 mentions supporting offshore arbitration institutions being able to hear cases in China. (a development underway in recent months).

An important practical issue is raised in Article 31, which mentions improving the mechanism of coordinating cross-border bankruptcy (insolvency), and exploring (探索) applying the systems of the principal bankruptcy procedures and the center of the debtor’s main interests. This is likely linked to domestic development of bankruptcy law and the recognition that with BRI and thousands of Chinese companies investing abroad, some number will (or have) gone into bankruptcy (insolvency) proceedings. “Improving” and “exploring” mean that they are on the agenda of the SPC. It appears that the first related development occurred in Hong Kong in January 2020, when Judge Jonathan Harris granted recognition and assistance to mainland liquidators of CEFC (description of the case and link to judgment found here).  He concluded his judgment by stating” the extent to which greater assistance should be provided to Mainland administrators in the future will have to be decided on a case by case basis and the development of recognition is likely to be influenced by the extent to which the court is satisfied that the Mainland, like Hong Kong, promotes a unitary approach to transnational insolvencies.”

As I discussed in a recent blogpost and earlier, the SPC is seeking to use the CICC and its decisions (judgments/rulings) to guide the lower courts and to pilot reforms that are replicable (a Chinese judicial reform concept), as stated in Article 22 and 25: “the role of cases in determining rules and guiding behavior…and the role of the CICC in providing models and guidance shall be developed.  (发挥国际商事法庭示范引领作用…发挥好案例的规则确定 和行为指引作用).

Article 24 concerns presumptive reciprocity and mentions gradually promote reciprocity between commercial courts. This may signal that the judicial interpretation on enforcement of foreign court judgments is further delayed and that the SPC is taking a gradual approach by working towards mutual recognition and enforcement of international commercial court judgments, which would involve a smaller group of foreign judgments.

Themes that are not new in this section include supporting parties’ right to choose an appropriate dispute resolution forum.  It can be imagined that the #4 Civil Division judges considered that this basic principle needed repeating. Another ongoing theme, with more political coloration, is encouraging BRI dispute resolution, including investor-state dispute resolution to be heard in China. This is mentioned explicitly in Article 28, which lists measures “so that more international commercial disputes can be efficiently resolved in China.”  This is not new, but is part of a push that this blog noted as early as 2016, to move the locus of China-related dispute resolution from London and other centers in Europe (or elsewhere) to China, where Chinese parties will encounter a more familiar dispute resolution system.

Article 32 mentions investment dispute resolution, and supporting “relevant departments in improving international investment dispute resolution mechanisms and organizations, respecting the dispute resolution clauses in bilateral and multilateral investment agreements, and resolving international investment disputes in a fair and efficient manner.”  This appears to be an acknowledgment that the SPC is in discussions with the Ministry of Foreign Affairs and other institutions on dealing with difficult issues related to enforcing international investment dispute arbitration awards in China (discussed here).

Personnel & Institutional Matters

The concluding section includes a notice in Article 37 to the lower courts that they shall “strengthen and improve the mechanism of coordination and guidance, and step up communication and cooperation with the relevant entities and departments.” This is a theme seen in many of the opinions issued by the SPC and reflects one of the many functions of the Chinese courts.

As discussed in the preceding blogpost, references in Article 38 and 39 to exchanges and training send signals within the SPC and its institutions, as well as lower courts about the types of programs that may be promoted, permitted or explored. It is likely that the National Judges College, its provincial branches, and its partners will continue to train foreign judges, as has expanded greatly in recent years. It appears that there could be greater possibilities for Chinese judges to go on exchange with other countries than has been possible in recent years. From my own contacts and experience with It may also provide the basis for a local court or division of the SPC to apply for funding to hold a legal roundtable or host an international exchange.

Concluding remarks

This Opinion is typical of New Era SPC policy documents providing guarantees and support for specific Party and government strategies and initiatives.  For a reader from outside the Chinese government system (体制), it takes knowledge of a constellation of related policies and practices to decode. This blogpost has been able to identify some of them.

BRI Opinion #2 has a great deal of content, not all discussed in this blogpost. Some have practical importance for practitioners in China and elsewhere.  But a larger question to consider, that likely was not in minds of the drafters, is whether this type of policy-oriented document is useful in reassuring foreign governments, foreign state-owned companies, and commercial entities that their dispute is best heard in China?  From my discussions with practitioners in various parts of the world, they may not be aware that BRI Opinion #2 even exists.

 

 

 

 

How are Supreme People’s Court Opinions structured?

Screen Shot 2019-12-29 at 9.15.50 PM

27 December SPC Press conference:from left, Li Guangyu (spokesperson); Justice Luo Dongchuan (vice president); Judge Wang Shumei (head of #4 Civil Division); Gao Xiaoli (deputy head, #4 Civil Division)

When the Supreme People’s Court (SPC) issues an “opinion” (意见), it is not issuing a judgment or ruling.  It is issuing a policy document, without the force of law.  In the New Era, the SPC has issued over dozen policy documents that provide “judicial services and guarantees” for major government strategies or initiatives, many more than before. They are examples of how the SPC supports the Party and government by issuing policy documents to support important strategies or initiatives (serving the greater situation (服务大局). What few, if any have written about is the structure of these opinions that support important strategies or initiatives as they relate to civil and commercial law issues. Understanding the structure is key to understanding the documents. Understanding opinions is important for understanding current issues in the courts and the future direction of judicial policy.

This blogpost uses the two opinions announced at the 27 December 2019 press conference pictured above, at which Justice Luo Dongchuan and Judges Wang Shumei and Gao Xiaoli (head and deputy head of the #4 Civil Division) introduced the two opinions (and a judicial interpretation). A subsequent blogpost will highlight what is new in these three documents. All three are connected directly or indirectly to the Belt & Road Initiative (BRI) and improving China’s foreign investment environment. The two opinions are:

  1. Opinion on providing services and guarantees for the Belt & Road (2) (BRI Opinion #2) (关于人民法院进一步为“一带一路”建设提供司法服务和保障的意见); and
  2. Opinion on Providing Services and Guarantees for Construction of the Lingang area of the Shanghai Pilot Free Trade Zone (Lingang FTZ Opinion) (关于人民法院为中国(上海)自由贸易试验区临港新片区建设提供司法服务和保障的意见).

The Opinions update two of the SPC’s two major recent policy documents on cross-border issues: the 2015 Opinion on Providing Services and Guarantees for the Belt & Road (BRI Opinion, and Opinion on Providing Guarantees for the Building of Pilot Free Trade Zones (FTZ Opinion).

The BRI Opinion #2 and Lingang FTZ Opinion are intended to harmonize the two earlier policy documents with post 19th Party Congress developments and priorities, including those mentioned in the  2019 19th Party Central Committee Fourth Plenum Decision. I had previously reviewed the BRI Opinion and FTZ Opinions in detail.  My analysis of the Pilot FTZ Opinion can be found here and I have previously written and spoken about the BRI Opinion.

Lower courts may issue documents that supplement the SPC’s policy documents, as is true with these Opinions.  This is a subject that I have written about on this blog and elsewhere before. The Shanghai Higher People’s Court has already issued a guidance document that provides related services and guarantees, with important content.

The two Opinions also link to three different events or matters–the promulgation of the Foreign Investment Law; the Second Belt & Road Forum for International Cooperation; and Xi Jinping’s visit to Shanghai and establishment of the Lingang Special Area of the Shanghai FTZ.

Structure of these Opinions

The structure of the two opinions is typical for SPC civil and commercial opinions “providing judicial services and guarantees” for major government strategies and initiatives.  Opinions often (but not always) start out with a first section with titles analogous to the section titles of these two Opinions:

I. Comprehensively grasping the new requirements and new tasks in serving the “Belt and Road” Initiative

I. Enhance understanding and get aligned with the mission of offering judicial services and guarantees to the New Area

A sample of the language of the first section is quoted below, from the second paragraph of the BRI Opinion #2:

Keeping committed to the concept of further providing judicial services and
guarantees by the people’s courts for the “Belt and Road” Initiative: The people’s courts shall firmly take the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as the guideline; study and fulfill the spirit of the19th CPC National Congress and the Second, Third, and Fourth Plenary Sessions of the 19th CPC Central Committee, as well as the essence of the key speech of General Secretary Xi Jinping on the Second Belt and Road Forum for International Cooperation; strengthen consciousness of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment…

The purpose of this initial section is two-fold. The first is to notify the lower courts of the political goals, background, and principles of the Opinion. The second to signal to the political-legal hierarchy that the policies that the SPC sets out in the body of the opinion are harmonized with the latest Party/government policies.

There are no hard and fast rules concerning the body of opinions, as analogous sections may occur in different order.  It may depend on the drafters and the topic involved.

The second section of the BRI Opinion has its counterpart in the third section of the Lingang FTZ Opinion:

II. Further performing the role of judicial trials, and serving and guaranteeing the joint construction of the “Belt and Road” with high quality in all aspects

III. Strengthen judicial trial function and maintain an institutional regime in the New Area focusing on investments/trade liberalization

These sections are meant to notify the lower courts about current relevant judicial policy, and implicitly inform them of any changes from previous policy and what the lower courts must do in support of that policy goal. The policies are likely to be linked to current Party/government policy.  From the BRI Opinion #2:

The people’s courts shall support the opening-up policy in the financial sector; the exemplary role (示范作用) of financial courts shall be maximized; eligible courts shall be encouraged to build special trial teams for financial cases; the application of law in foreign-related financial cases shall be further regulated and standardized;…valuable experiences of foreign countries in efficiently hearing financial cases shall be drawn upon…

Article 10, in Section III of the Lingang FTZ Opinion calls for

closer ties and communication mechanisms with the financial regulatory authorities shall be built to facilitate the construction of an integrated and efficient financial management system, in a bid for a better environment for doing business, for prevention of financial risks and for better national financial security.

In support of the opening-up policy in the financial sector, the SPC is promoting the role of financial courts (currently Shanghai, others to follow) in providing new mechanisms or methods in hearing cases or in their operations.  That is visible from the Shanghai Financial Court’s innovations in class actions in the sphere of securities law claims (claims against issuers, underwriters, directors and management, control parties, etc. for false and misleading disclosure upon initial issuance or in periodic reporting).  The Shenzhen intermediate court has established a special trial team for financial cases but not a separate court. From Article 10 of the Lingang FTZ Opinion, it can be anticipated that the Shanghai Financial Court has or will establish special communication channels with the financial regulators.

The titles of the third section of the BRI Opinion #2 is:

III . Further improving the application of law in cases involving the Belt and Road Initiative, and building a stronger rule-based business environment that is governed by law

From BRI Opinion #2:

13. The people’s courts shall vigorously carry forward the contract spirit and the good faith principle, and determine the acts of fraud and malicious collusion based on the rules of evidence beyond a reasonable doubt. If, in a civil or commercial case involving the construction, operation, purchasing, or bidding process of a project, there is a discrepancy on contract validity between the laws of the relevant countries, the people’s courts shall apply the law that holds the contract valid without damaging the honest party or benefiting the dishonest one, and promote mutual trust and benefits between the participants in the Belt and Road Initiative.

Each article in the third section of the BRI Opinion #2 focuses on a specific policy that the SPC wants the lower courts to promote.  In article 13, the SPC is seeking to control the tendency of lower courts to find a contract invalid because of allegations of fraud or malicious collusion, likely made by a Chinese litigant seeking to avoid contractual liability.  The Lingang FTZ Opinion does not have an exact counterpart to section III of the BRI Opinion #2, but has articles that focus on specific policies to be promoted, such as “properly handling cross-border bankruptcy cases….”

The title of the final section of BRI Opinion # 2 is:

VI. Further strengthening the organizational structure and team building to coordinate efforts to serve and guarantee the Belt and Road Initiative.

The last section relates to institutional and personnel matters. Take the following paragraph in the BRI Opinion #2 as an example:

39. The role of international exchange and research platforms such as international forums, legal roundtables..shall be further strengthened, and the exchanges and cooperation with the judicial systems of other countries shall be conducted. Training and studying programs for foreign judges shall be supported, and foreign legal service providers and think-tanks for the Initiative shall be invited to China to exchange views with Chinese counterparts so as to promote the formation of a diverse and interactive platform for legal exchanges….

Content in the last paragraph of the Lingang FTZ Opinion has some analogous provisions:

Establish a study training program and talent cultivation mechanism in line with international standards…Efforts shall be made to…(2) further expand international judicial communication channels, organize international judicial forums….

These provisions send signals within the SPC and its institutions, as well as lower courts about the types of programs that may be promoted, permitted or explored.  It is likely that the National Judges College, its provincial branches, and its partners will continue to train foreign judges, as has expanded greatly in recent years.  It appears that there could be greater possibilities for Chinese judges to go on exchange with other countries than has been possible in recent years.   It may also provide the basis for a local court or division of the SPC to apply for funding to hold a legal roundtable or host an international exchange. For the Lingang FTZ Opinion, it gives the Shanghai courts priority in organizing international programs and establishing programs to send outstanding young judges focusing on cross-border commercial issues on educational programs either in China or abroad.

The official report states that the SPC Party Group approved the two Opinions.  It appears from my previous research that pre-19th Party Congress, SPC policy documents did not necessarily require SPC Party Group approval. I surmise since the Party Political-Legal Work Regulations were promulgated in January 2019, it has now become a requirement, because Article 15 requires Party Groups/Committees to be responsible for setting major policies and directions.

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My thanks to a knowledgeable person for triggering my thinking about this and for insightful comments on an earlier draft.

Central Inspection Group gives feedback to the Supreme People’s Court (2020 edition)

Photo of CIG feedback meeting

In September, 2019, this blog reported that Central Inspection Group (CIG) #4 would inspect the work of the Supreme People’s Court (SPC) Party Group for approximately two months.  On 10 January 2020, Chinese media reported on CIG #4’s feedback to the SPC’s Party group. The summary and brief analysis below is based on the press release published in state media, rather than the full report given to the SPC.  Palpably better judicial transparency does not include Party documents of this nature. This process signals to the world outside of China that the SPC has a different role in the Chinese political system from the supreme courts of other major jurisdictions.

Chen Xi, Politburo Member, head of the Organization Department, and deputy head of the Leading Small Group on Central Inspections chaired the meeting. In the audience was: the head of the CIG #4 Group and its leader; members of the supervision office ( 监督检查室) of the CCDI/National Supervision Commission, leaders from relevant bureaus of the Party Organizational Department, leaders from the CCDI/Supervision Commission office stationed at the SPC, leaders of the SPC, and other responsible persons from the SPC. The results and the recommendations of what needs to be improved, as in 2017, were conveyed to the Standing Committee of the Politburo. The inspection group found that:

the study and implementation of Xi Jinping’s new era of socialist thinking with Chinese characteristics are not deep enough, the implementation of the Party’s line, direction, and policies and the Party’s central decision-making and deployment were not satisfactory.  There is insufficient focus on Party political construction;  the strengthening of political ideology and professional ethics of the cadre team (加强干部队伍思想政治和职业道德建设还不够到位) is not satisfactory; it insufficiently fulfills the duties and mission of the state’s highest judicial organ (履行国家最高审判机关职责使命还不够). The requirements of “justice for the people and fair justice” have not fully penetrated the entire court work process.   In every aspect, the trial management system and the supervision mechanism for the operation of judicial power are incomplete (各方面,审判管理体制和审判权力运行监督机制还不够健全完善). The strict implementation of the Party’s main responsibilities has not been put in place in a comprehensive manner, and minor problems are ignored; there are still problems with violations of the spirit of the Central Eight Point Regulations. There are still gaps in implementing the Party’s organizational policies for the New Era; leadership building and cadre construction are not in place. Party-building work of the institution and at the basic level is weak. Issues identified in the last inspection have not been corrected and corrective mechanisms are not in place.

In 2017, the CIG found: “four consciousnesses” need to be further strengthened; political discipline and political rules are not implemented strictly enough; the leadership role of the Party group is insufficiently developed;  there are some gaps in the coordination of the advancement of the system of judicial system reform; the implementation of responsibility system for ideological attitude (意识形态责任制落实不够有力); there are weak links in Party construction; organizational construction is not systematic enough; internal Party political life is not strict enough; relevance of ideological-political work is not strong; some Party leading cadres’ Party thinking is diluted (有的党员领导干部党的观念淡漠); the role of the basic level Party organization as a fighting fortress is insufficient; comprehensive strict governance of the Party is not strong, the implementation of the central eight-point regulations is not strict enough; formalism and bureaucratic issues still exist; tourism using public funds, abuse of allowances and subsidies still occurs; personnel selection is not standardized; cadre management is not strict enough; there are some areas of clean government risk.

This report revealed that some information involving leaders had been referred to the CCDI/National Supervision Commission, Party’s Organization Department, and other departments for further handling. The 2017 report contained similar language as well.

Chen Xi made demands of Zhou Qiang and other members of the SPC Party leadership. Among those is to implement the Party’s absolute leadership over the work of the courts, strengthen its “service and guarantees” to the work of the Party and state (see my 2019 article on one aspect), and implement judicial reforms. One of the demands he made with significant practical significance (flagged by a Wechat account popular among judges) is for measures for SPC judges (and likely lower court judges as well) that further restrict the employment of judges who have resigned and stricter conflict of interest rules for relatives of judges who are lawyers. [It is unclear whether these future measures will slow the resignation of SPC (or lower court) judges.]

He called upon the Party Group to raise their political position (提高政治站位) and arm their brains with Xi Jinping New Era Socialism with Chinese Characteristics thinking (用习近平新时代中国特色社会主义思想武装头脑–a current slogan, for those not aware of recent developments).

Comments

For the outside observer, handicapped by a limited ability to decode Party jargon, the summary of the feedback raises many questions but also provides insights.

Although the feedback appears to be devastating criticism of the SPC, a quick comparison to CIG feedback to the Supreme People’s Procuratorate and the Ministry of Justice indicates that the language (at least in the press reports) is standard for CIG feedback to Party and state institutions. It thus provides insights into the thinking of the political leadership about how it views the law and legal institutions, including the courts.  It appears to treat the SPC as just another Party/state institution to be inspected.

Part of current Party policy seeks to bolster domestic and international confidence in the SPC and the lower courts.  At the same time, this press release describes the SPC as insufficiently fulfilling the duties and mission of the state’s highest judicial organ, and that some of its operations are inadequate.  No specific examples are provided. What are the qualifications of the CIG members to make this decision and what type of evaluation mechanism have they used?  What will be the impact of this feedback within the institution, within the Chinese legal community, and on the views of people in and outside of China towards the SPC?

The feedback also reveals continuing concern about Party building, political ideology, the Party thinking of senior SPC personnel, and implementation of Party policy.  It can be seen from my recent blogpost that SPC leaders seek to craft their policies, actions, initiatives, and other decisions to hit the target of being politically correct (post 19th Party Congress and post 4th Plenum) while being “problem-oriented” (坚持问题导向) that is, addressing relevant practical issues facing the court system.  The practical issues facing the court system are primarily civil disputes. We do not have overall statistics for the number of cases in the Chinese courts in 2019, but if the Shenzhen courts are any indication, the number of cases they accepted increased by 24%, with most of the cases being civil or commercial disputes. That means a substantial part of the work of the SPC must be directed towards creating a framework for dispute resolution in which domestic (and international) civil and commercial litigants can have greater trust.

 

Challenges for Supreme People’s Court leaders in the new era

Screenshot 2019-12-21 at 2.07.48 PMOne of the little-discussed aspects of being in a leadership role in the Supreme People’s Court (SPC) in the New Era is ensuring that policies, actions, initiatives, and other decisions hit the target of being politically correct (post 19th Party Congress and post 4th Plenum) while being “problem-oriented” (坚持问题导向) that is, addressing relevant practical issues facing the court system.  This is true for President Zhou Qiang as well as the vice presidents (each of whom is responsible for several divisions (主管), according to bureaucratic principles), the division heads, deputy heads, and equivalents in the affiliated institutions of the SPC, whether they be the circuit courts, National Judges College, or the China Institute of Applied Jurisprudence (CIAJ).

After the recent Central Economic Work Conference, Party Secretary and President Zhou Qiang convened a meeting of the SPC’s Party Committee, to discuss the implications for the courts, all of which appear to be the major initiatives of the SPC.  I have added numbers and deleted some provisions (translation thanks to Google translate). He said:

We must:

  1. deepen the comprehensive supporting reforms of the judicial system;
  2. vigorously promote the construction of smart courts;
  3. continuously improve the quality and efficiency of court work, and create a stable, fair, transparent, and predictable business environment for the rule of law.
  4. continue to strengthen judicial protection of intellectual property rights and intellectual property rights;
  5. improve the rule of law environment that supports the development of private economy, implement comprehensive, legal, and equal protection of property rights, protect the legitimate rights and interests of private enterprises and entrepreneurs in accordance with the law, and allow entrepreneurs to concentrate on starting a business..and operating with peace of mind.
  6. It is necessary to increase the judicial protection of intellectual property rights and provide strong judicial services and guarantees for the implementation of the innovation-driven development strategy. It is necessary to serve to ensure the healthy and rapid development of the digital economy, handle the relationship between the protection of digital rights and the development of the digital economy, protect personal information in accordance with the law, properly handle legal issues related to the digital economy platform, and better serve and guarantee the development of the digital economy.
  7. …Strengthen research on new situations and issues in the economic and financial field; do a good job in financial and bankruptcy trials; and effectively improve capacity of the people’s courts in risk prevention and resolution.
  8.  …It is necessary to serve a high level of opening up to the outside world, strengthen foreign-related commercial and maritime trials, protect the legitimate rights and interests of Chinese and foreign parties on an equal basis in accordance with the law, and provide powerful judicial services and guarantees for a wider, wider, and deeper opening.
  9. It is necessary to severely punish crimes in accordance with the law, actively participate in the special struggle to combat crime and eliminate evil, resolutely safeguard national security and social stability….

So what more specific measures hit the target? They include the following:

  • In November, Vice President Luo Dongchuan, when he made comments at the SPC Intellectual Property Court (Tribunal) on establishing a diversified technical fact investigation mechanism–see the language  in the Chinese version of the article (“raise political stance, fully recognize the importance of establishing and perfecting a technical fact investigation mechanism 罗东川强调,要提高政治站位,充分认识建立健全多元化技术事实查明机制的重要意义);
  • In December, Vice President Jiang Bixin, said such measures included improving environmental protection of the Yellow River Basin and high-quality development;
  • In December, head of the administrative division, Judge Huang Yongwei (mentioned on this blog when he was president of the National Judges College), said it included the judicial interpretation on administrative agreements, which he characterized as “having a positive effect on effectively protecting the legitimate rights and interests of the people in administrative agreements, advancing the government of the rule of law, building a credible government, optimizing the rule of law to do business, improving the ability of government administration, and advancing administrative trials in the people’s courts.”
  • For Yang Yongqing, deputy head of the #2 Civil Division, and one of the drafters of the recently promulgated 9th Civil and Commercial Trial Work Conference Summary (draft discussed here, the Conference Summary to be discussed in a future blogpost) (and Cao Shibin, head of the CIAJ, it meant going to one of the provincial courts to give lectures on civil and commercial issues.  Judge Yang explained what the conference summary means for trying cases involving a company that has provided security to a third party, as well as cases involving applications for relief by third parties.  Cao spoke on “Ethics and Judgment -Application of Judicial Reasoning in Civil and Commercial Trial Work”, starting from the challenges and difficulties facing the profession of judges.
  • Jiang Huiling, vice president of the National Judges College (NJC), in charge since Judge Hu Yunteng has retired: in November he addressed what implementing the 4th Plenum decision means for the NJC: “continuously promoting the modernization of education and training systems and education and training capabilities. The NJC should effectively translate its efforts into practical actions to promote development, gather the wisdom of all faculty and staff, study and judge the situation, … study in-depth the implications of constructing an “international first-class judicial institution (建设‘国际一流司法学府’)” [the goal that President Zhou Qiang has set for the National Judges College in its new five-year plan).”

This critic will “stay out of the region of immediate practice” (quote of Matthew Arnold, see a screenshot of a caricature that was one of my (late) father’s favorites).

 

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SPC Updates its Guidance on Judicial (Adjudication) Committees

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

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

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

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

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

A quick list of what is new follows:

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

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

 

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

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

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

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

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

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

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

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

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

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

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.