I am very honored to have been the first keynote speaker of the webinar “Deals and Disputes: China, Hong Kong, and Commercial Law” held on May 18-21 (2021). The webinar was organized by the University of Pittsburgh, with its School of Law’s Center for International Legal Education working together with its Asian Studies Center. Many thanks to Professors Ronald Brand and James Cook for the kind invitation. For those who missed it, the recording of my presentation is now available on the Youtube channel of the Center for International Legal Education.
I spoke on the Supreme People’s Court (SPC) and the Development of Chinese International Commercial Law (as I defined it). My presentation synthesizes many points that I have made separately on this blog and should be useful to students or others seeking to understand several aspects of the work of the SPC. Many thanks to Professor Pamela Bookman and Mary Buck Young for taking the time to make insightful comments on earlier drafts of my Powerpoint slides. Special thanks to (one of) my research assistants, Yuan Ye, for his work in transforming SPC statistics into a more understandable form and translating them into English.
On the afternoon of 25 September, the Supreme People’s Court (SPC) issued yet another guiding opinion providing services and guarantees, this one on providing services and guarantees in support of expanding opening to the outside world (Services & Guarantees to the Open Policy Guiding Opinions (Guiding Opinions)) (最高人民法院关于人民法院服务保障进一步扩大对外开放的指导意见). It was approved by the SPC’s Party Group, as was BRI Opinion #2.
Senior legal officials from the Ministry of Commerce (MOFCOM) and the Ministry of Foreign Affairs (MFA) spoke at the SPC press conference, in what this observer views as a cross-institutional show of support for China’s policies of opening to the outside world. At a time that government officials are focused on “dual circulation,” it is a reminder that the opening to the outside world policy remains in place and that one of the SPC’s many responsibilities is to handle those issues properly. The photo is also one illustration of the place of the SPC within China’s system (体制).
SPC Vice President Yang Wanming (杨万明) spoke first at the press conference, with the officials from MOFCOM and MFA adding comments. This signalled to the careful observer that he has assumed the responsibility for overseeing the #4 Civil Division (responsible for foreign-related commercial and maritime matters) from Luo Dongchuan (who has been transferred to Fujian Province to serve as Political Legal Commission Party Secretary).
This brief (17 articles) guiding opinion providing judicial services and guarantees (not a judicial interpretation, see this explanation of what it is) is the latest judicial policy on foreign-related (this blogpost will use the term “cross-border”, to incorporate some Hong Kong-related) legal issues (inbound and outbound) relevant to the Chinese courts, drawing on BRI Opinion #2 (issued end 2019 and BRI Opinion #1) and the June, 2020 guidance on Covid-19 and cross-border commercial issues.
As to what those judicial services and guarantees are, Justice Yang said the following:
Wherever the national strategy is deployed, the judicial services and guarantees of the people’s courts will be there (国家战略部署到哪里，人民法院司法服务和保障就到哪里.)
How does this document relate to other Chinese legislation?
To clarify the relationship between this opinion on the one hand and legislation, judicial interpretations and other types of judicial documents (such as the two BRI Opinions), Justice Yang gave a quick summary in SPC jargon:
While maintaining consistency with existing laws and regulations, judicial interpretations, and judicial policy documents, the Guiding Opinions also strengthen the macro-guidance of the people’s courts’ services and guarantees opening to the outside world from a higher level, and are organically linked to other SPC judicial policy documents for major opening-up decisions, major strategies, and major initiatives, to further improve the system of judicial services and guarantees of the work relating to opening to the outside world与现有法律法规和司法解释、司法政策文件保持一致的同时，从更高层面加强人民法院服务保障对外开放工作的宏观指导，与最高人民法院出台的其他司法服务保障国家对外开放重大决策、重大战略和重大举措的司法政策文件有机衔接，进一步完善了司法服务保障对外开放工作体系。
What is means is:
The Guiding Opinions are intended to be consistent with current law and regulations, SPC judicial interpretations, and SPC judicial policy documents.
It is intended to provide comprehensive guidance and better support government policies on opening to the outside world.
The Guiding Opinions. like many of the documents analyzed on this blog, are written in SPC jargon. Decoding this language poses challenges to those are concerned or who should be concerned about the impact of how the Chinese courts interact with the rest of the world.
Decoding the language, however, enables the careful reader to understand outstanding issues and contemplated reforms or other measures, including possible judicial interpretations.
Summary and comments
This blogpost will summarize and make some brief comments on some of the issues mentioned in each of the six sections of the documents and make a few concluding comments. There are many more issues in this document that should be explored, but I’ve been delayed by a hand injury.
1. Political stance
The first section calls for judges to raise their political stance. This is standard language in the New Era. The first article frames the documents in current political language, including that frequently used in Chinese foreign policy documents and to relevant political documents. Therefore the first article (and elsewhere) refers to multilateralism, equally situated parties, and creating a legalized, internationalized convenient business environment.
The second section focuses on basic principles of foreign-related litigation–of which it sets out three: protecting the equal rights of parties; respecting the intent of the parties; and implementing (judicial) jurisdiction according to law.
The second principle, described in Article 4, includes the right of parties to choose governing law, a court with jurisdiction and arbitration, litigation, or mediation to resolve their disputes. However, as mentioned previously, Chinese law treats choice of arbitration and litigation differently, requiring litigants choosing a (foreign court) to have an actual connection to the foreign court (see Professor Vivienne Bath’s previous scholarship on this), although there isn’t a counterpart position for arbitration. As mentioned previously, the application of foreign law by Chinese courts is a work in process. The SPC has given a great deal of publicity to its platform for the ascertainment of foreign law. which includes determinations of foreign law on a certain issue by certain authorized organizations and opinions given by members of the international expert committee of the China International Commerce Court (CICC). As I wrote close to two years ago, the China International Commercial Court (CICC) rules do not clarify a number of practical questions. Could a court request an advisory opinion from an expert and from a designated ascertainment center, and if so, what relative weight will be attached to each? Presumably, a court would give it greater weight than an opinion from an expert provided by a party.
The third principle, described more fully in Article 5, is linked to protecting China’s judicial sovereignty and repeats the statement that conflicts in jurisdiction and parallel proceedings will be resolved properly (妥善解决). This has appeared in BRI Opinions #1 and #2, but specific measures to resolve parallel proceedings have not yet been noted. Parallel and conflicting proceedings are an ongoing issue (not only between the Chinese courts and other courts outside mainland China) and will be further mentioned below. As Professor Bath discussed, several scenarios are common. One involves situations in which parties had agreed to the exclusive jurisdiction of the courts of one country, but a party brings proceedings in the courts another country (China), which accepts the case and may issue a judgment before the original court. Another set of cases involves an alleged arbitration agreement which provides for arbitration overseas, but a party brings a case in a Chinese court nonetheless. A variation has recently been noticed by two leading practicing lawyers in China. In that case, an issue that had been pleaded in arbitration proceedings in Hong Kong and reviewed by the relevant Hong Kong court was not given res judicata effect in China. The ruling by the Shijiazhuang court has been reviewed by the SPC under its Prior Review proceedings.
Although parallel proceedings in courts outside of China and in China have previously been noted primarily in maritime law (and anti-suit and anti-anti-suit orders),the parallel/conflicting proceedings issues seem to be moving to the area of Intellectual property (IP) law, likely related to the multi-jurisdiction litigation between Huawei and Conversant concerning standard essential patents, including in the UK Supreme Court and the German courts. What has been noted is one of the SPC’s research topics includes protecting China’s judicial sovereignty (national interests) through anti-suit or anti-anti-suit injunctions. The SPC Intellectual Property Court has issued an anti-suit injunction order against Conversant and the Wuhan Intermediate Court issued an anti-suit injunction order against Intel Digital (the linked article has a summary of the facts in the Wuhan case, but reserve judgment on the author’s comments on the authority of Chinese courts to issue these order).
3. Modernizing China’s foreign-related and maritime litigation systems
This third section contains four articles: application of law; fully develop the advantages of service and guarantees to cross-border trade and investment; promote the integration with the internet of foreign-related litigation; and develop diversified dispute resolution related to international commercial dispute resolution. Many of the provisions in this section repeat provisions in the BRI Opinions #1 and #2. What appears to be new is a statement that the SPC will seek to integrate prestigious foreign arbitration and mediation organizations to be part of its one stop mediation/arbitration/litigation mechanism.
4. Increase judicial protections
Article 10 mentions foreign-related administrative litigation issues. They were mentioned briefly in BRI Opinion #2 and once in BRI Opinion #1, here seeing greater stress. Section 11 focuses on cross-border intellectual property issues. It has some important new content. It mentions improving (完善涉外知识产权诉讼制度) foreign-related IP litigation procedures, putting into judicial policy previous statements by former Vice President Luo Dongchuan about the need for special IP litigation rules. It again mentions researching and responding to parallel international litigation relating to intellectual property rights and becoming a preferred place for settling IP disputes. From comments made by several leading experts in a recent webinar the Chinese courts are an important jurisdiction in IP litigation. It is unclear whether the use of anti-suit (or anti-anti-suit )injunctions by the Chinese courts will be the way that litigants are encouraged to turn to the Chinese courts to settle their global IP disputes. According to comments by several persons with expertise in Chinese IP law and related commercial issues, a number of factors are leading to the Chinese IP courts becoming an important forum for the resolution of IP disputes. Related to this, see the analysis by Doug Clark, partner in the IP law firm Rouse in this article, in which he says that the Chinese courts are looking to take on the role of setting global FRAND rates. Also see related blogposts on Mark Cohen’s blog, Chinaipr.com. These issues are complex and important.
5. Prevent and resolve major risks
This section has only two articles. Article 13 focuses on perfecting risk control mechanisms for major cases and firmly establishing an overall national security concept. These phrases are not unique to the SPC, but reflect language in Party documents, with the “overall national security concept” attributed to Xi Jinping. This article also calls on courts to coordinate the overall international and domestic situations, adhere to bottom-line thinking and risk awareness, understand the domestic and international situation and risks and challenges facing China’s opening up. The final phrase in this article calls on courts to resolutely defend our (China’s) judicial sovereignty and national security. So it seems that the concept of “judicial sovereignty” (used several times in this document) is being used to protect China’s national sovereignty.
The second one (Article 14), on guaranteeing state security and economic and social order gives a different priority to possible cross-border criminal law issues from either BRI Opinion. Neither BRI Opinion mentioned infiltration (渗透), espionage (间谍), sabotage, subversion (渗透颠覆破坏). Infiltration and espionage are mentioned immediately after the article heading. (the sentence is: “thoroughly participate in the struggle against infiltration, espionage, separatism, terrorism, and cults, by strictly combatting crimes of infiltration, subversion, and sabotage, and crimes of espionage, violent terrorism, ethnic separatism, religious extremism, and other crimes that endanger national security” 深入参与反渗透反间谍反分裂反恐怖反邪教斗争，严厉打击各种渗透颠覆破坏、间谍、暴力恐怖、民族分裂、宗教极端等危害国家安全的犯罪. (Many thanks to Chinalawtranslate.com for this translation). Other concerns, such as violent terrorism, ethnic separatism, religious extremism have been seen previously in the other two BRI documents. and article 14 again stresses criminal justice cooperation between China and the rest of the world. The reason for the change in priorities is unclear. What signal does this send to the international commercial and judicial world (international community) that infiltration, espionage, sabotage and subversion are being mentioned?
6. Increasing judicial cooperation, increase the international influence of the Chinese judiciary
These three articles address judicial cooperation, judicial exchanges, and training of judges who can handle foreign-related cases.
Article 15 concerns judicial assistance treaties, encouraging Chinese judges to participate in the negotiation of bilateral and multilateral judicial assistance treaties.
Article 16, on judicial exchanges, including highlighting exchanges with the principal international legal organizations, also summarizes ongoing SPC practices in developing exchanges with BRI judiciaries, although it is not so specified.
Article 17 calls for the better training, recruitment and promotion of persons who can deal with specialized legal issues such as cross-border finance, environmental protection, maritime law, intellectual property. Measures include joint programs with universities, exchanges with international organizations and international commercial courts, with the objective of having judges who are able to participate in the drafting or amendment of relevant international rules [a glimpse into a judiciary certain special functions] and the creation of a group of Chinese judges with an international perspective. This appears to be directed to law schools and senior personnel in the lower courts and likely involved concurrence by the SPC’s International Cooperation Bureau. As has been mentioned in earlier blogposts, the career progression for legal professionals to become judges has slowed because of the personnel reforms in the previous round of judicial reforms, under which young professionals work as judges assistants for a number of years before applying (and passing relevant examinations)to become a judge. From my observations, fixed quotas on the number of judges in a court can mean a talented, educated judges assistant in one court may wait significantly longer than a similarly qualified person in another court to become a judge.
A few concluding comments
Perhaps it is not realized that multiple documents conveying many of the same messages, with references that need decoding, may not convey the intended message to the international business community that the Chinese courts welcome and will treat fairly foreign commercial litigants, and that Chinese law is stable, transparent and predictable.
The Guiding Opinions call for increasing publicity about and the international influence of Chinese justice, and international confidence in Chinese law, through translating guiding and typical (exemplary/model) cases into foreign languages. This echoes language in BRI Opinion #2. The international community outside of China may or may not consider those sources to be primary ones in forming a view about the Chinese courts. In my view, it is more likely that the international community will look to decisions and rulings of the Chinese courts in several categories of cases: enforcement or other proceedings involving foreign (and Hong Kong) arbitral awards; parallel or competing proceedings, whether with other courts or with international arbitration; difficult commercial ones, particularly involving Chinese state-owned enterprises, or other Chinese national champions and issues related to intellectual property, particularly as it relates to “cutting-edge” technology. This observer surmises that the international judicial community will also look for a spirit of mutual respect for foreign courts and their jurisdiction.
The Guiding Opinions repeats language about Chinese courts participating in the formulation of international rules, an ongoing theme since the 2014 4th Plenum of the 18th Party Congress decision. One example is the constructive role of the SPC negotiator as a member of the Chinese delegation that participated in the drafting of the Hague Judgments Convention. But what the international community will also look for is China’s capacity to harmonize its legislation to be able to ratify the international conventions whose drafting it participates in.
The introduction to Guiding Opinions notes that comments were sought from many sources. It is unclear whether the views of international users of the Chinese court system were solicited. Other developments in which the international community may display an interest are the creation of additional institutions within the Chinese judiciary to enable the Chinese judiciary to better understand the needs of（domestic and international) users.
Many thanks to several highly knowledgeable readers who commented on earlier drafts of this blogpost.
On 27 July 2020, the Supreme People’s Court (SPC) issued Guiding Opinions Concerning Strengthening Search for Similar Cases to Unify the Application of Law (Guiding Opinions) (关于统一法律适用加强类案检索的指导意见（试行)), effective on 31 July. It is not a judicial interpretation, rather it is guidance intended to make judicial decisions more consistent, an ongoing issue in the Chinese court system. The SPC is approving the practice of judges using principles derived from prior cases to fill in the gaps in legislation and judicial interpretations. The Guiding Opinions codifies many of the practices of the Chinese courts and imposes some new requirements. It does not mean that China has become a common law legal system. As explained further below, although the Guiding Opinions do not address this question, comments by an SPC judge suggest that the special status of cases selected by the SPC by its operational divisions remains in place.
It also illustrates two larger points–that discrete judicial reforms aimed at more consistent judgments continue to be implemented even as the role of Party leadership and oversight continues to be stressed. It is also an illustration of how long it can take judicial reforms to be implemented. in my view, this discrete, technical reform has implications greater than the drafters of the Guiding Opinions realized, including a possible impact on Chinese legal education. It has the potential to make litigation a more predictable process for parties.
Case Search Requirements
What are similar cases?
Article 1 defines that–the cases that are already effective and are similar in their basic facts, disputed points, issues of law, etc. (指与待决案件在基本事实、争议焦点、法律适用问题等方面具有相似性，且已经人民法院裁判生效的案件).
When is similar case search required? (Articles 2 and 7)
When a case is proposed to be submitted to a professional or specialized (presiding) judges meeting (generally all the judges in a division) or the judicial/adjudication committee for discussion;
Relevant judicial principles are unclear or conflicting;
A court president or division head requires it under his or her supervision authority;
Other relevant situations.
That is, similar case search is not required in all cases, only when the relevant “law” is unclear.
Similar case search should be set out in the trial report for the case or in a separate precedent (similar case) report (类案检索报告) and included in the case file. As noted in my earlier blogpost, trial reports are confidential and not accessible to parties or their lawyers. Article 8 requires that the search report must include details on the platform, means of search, etc. and how the search was used.
Who searches and how?
The judge in charge of the case (承办法官) is in charge of undertaking the search and is responsible for doing it accurately and properly, using either the SPC’s database or other case databases, focusing on cases from the last three years, except for guiding cases.
Judges can use methods such as keyword search, legal provision (article of the relevant law), or related case search.
What must be searched?
These rules (in Article 4) are in line with what I have previously written:
SPC guiding cases;
SPC typical (model) cases (典型案例) and judgments or rulings of the SPC;
Reference cases issued by provincial-level higher people’s courts and decisions by those courts;
Higher-level courts in the jurisdiction in question and judgments of that court.
Except for the guiding cases, priority is given to the search of cases or cases in the past three years; if a similar case has been searched in the previous order, no search is required. Article 5 provides that judges can use methods such as keyword, legal article-linked, and case-based searches.
My understanding is that these are general principles, but the specific scope of cases that need to be searched will depend on the specifics. As I have previously written, the SPC Circuit Courts have issued cases that guide the lower courts in their circuits. The special authority of those cases remains in place. Judges reviewing issues related to the enforcement of foreign arbitral awards in China will need to look to a special set of cases (described here), for example.
I had previously written about cases selected by the operational divisions of the SPC providing guidance to the lower courts. Those retain their special authority, as indicated by comments by Senior Judge Yu Tongzhi, an editor of Reference to Criminal Trial (the joint publication of the SPC’s five criminal divisions). He noted in an article published on 31 July, that as far as criminal justice is concerned, without a doubt, the first choice for searching similar cases is to search the guidance cases contained in their publication, setting indices to the guidance cases for the convenience of readers.
Are precedents binding?
Precedents are not binding, but guiding cases should be 参照 “referred to” (the link is to SPC Research Office Deputy Director Judge Guo Feng’s authoritative explanation) unless the case conflicts with subsequently issued law or judicial interpretations. Other types of cases are not binding, but for judges to consider（参考).
How judges must respond
Article 10 imposes a new requirement on courts, if procurators, parties, their representatives (their lawyers) submit guiding cases or other cases in support of their legal position (as I had previously written had been the practice). For guiding cases, courts are required to state in the reasoning section of their judgments whether or not the guiding case was referred to and why.
For all other types of cases, the court can use its power of clarification/explanation and other means (释明等方式) to respond. It is understood that this is meant to give judges flexibility in responding to (non-guiding) judgments provided by parties–so the court may respond in its court’s judgment or in other ways. Those other ways may include: responding to the cases submitted pre-hearing, during a hearing, after a hearing, as the court considers most appropriate. We will need to observe what is done in practice, for example, whether courts respond primarily in their judgments or orally. This will be the way that a party can monitor whether the search accurately reflects prior cases, as neither a party or its counsel has access to the trial report. Other unknowns are how this system will influence administrative proceedings such as those at the Trademark Review and Adjudication Board.
Link to Inconsistent Decision Mechanism
Article 11 contains a link to the inconsistent decision mechanism discussed here, which I described as a microcosm of themes reflecting how the SPC operates, given its high bureaucratic nature.
Why case law reform?
As this blog has discussed, in the New Era, the role of Party leadership and oversight continues to be stressed (see this blogpost, for example). This discrete judicial reform is aimed at more consistent judgments. It is a critical tool that judges are already using because Chinese legislation lags behind the needs of the courts, and judicial interpretations are insufficient as well. Party policy would have an indirect impact on those cases, as would foreign law principles (mentioned here).
“Slow-cooking” judicial reform
The issuance of these rules shows the strength of the case law system and how long it can take a single judicial reform to be implemented. As mentioned in the June, 2019 blogpost, when Professor Hu Yunteng（until recently Justice Hu Yunteng, formerly a full-time member of the SPC’s judicial committee, now retired) recollected the history of the case system with Chinese characteristics, he mentioned that Jiang Huiling, then his colleague at the China Institute for Applied Jurisprudence (now Dean of the Tongji University School of Law) had looked to jurisdictions outside of China to advocate that China establish a case law system. Professor Hu Yunteng doesn’t specify whether Dean Jiang Huiling was looking to case law systems in civil or common law jurisdictions in the “West.”). In his 2016 Harvard Law Review student note, Mark Jia (now clerking on the Supreme Court), cited Li Shichun of the China Law Society to the effect that it was the National People’s Congress that opposed those seeking to establish a Chinese case law precedential system. That opposition has been overcome by widespread professional usage (as described in my 2017 Tsinghua Law Review article). It is unusual in that the practice came first and was not a top-down reform (顶级设计).
This discrete, technical reform is an important one for the rules relating to judicial decision-making better harmonized with judicial practice. There are a number of unknowns. One is whether it will result in judges feeling more comfortable in setting out their reasoning, knowing that other judges may look to it. An important question is how the practice of responding to cases will evolve–will judges tend to respond in their judgments, or as I suspect, do it orally. (As to why I think that–it is related to the desire of Chinese judges to reduce their risk under the judicial responsibility system).
In my view, this reform has the potential to make Chinese litigation a more predictable process. It is a bit of evidence of the gradual harmonization of the operations of the Chinese courts with the rest of the world, as current circumstances permit.
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:
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.
SPC Guiding Opinion III is a judicial policy document (司法政策性文件). As this blog has often commented, the Supreme People’s Court (SPC) must serve the greater situation and deal with practical legal issues, so that the SPC itself and its senior leadership are correct, politically, and professionally. One of those ways is by providing properly calibrated guidance to the lower courts and other related authorities with the appropriate political signals. For this document, Justice Luo Dongchuan provided the political background and signals in his introductory remarks at the SPC news conference. The document itself is practically oriented (as those in the system say “problem-oriented”–“问题导向”)（and the practitioners say “干活”).
From the photo above it is clear that the #4 Civil Division, headed by Judge Wang Shumei, which focuses on cross-border commercial and maritime issues, took the lead in drafting. That division is one of the smaller divisions of the SPC and “punches above its weight.”
A judicial policy document is not a judicial interpretation but as the SPC editors of a collection of these documents noted, “it is generally recognized that they have an important guiding impact on the trial and enforcement work of the courts at every level.” SPC Guiding Opinion III is one example of the many types of SPC “stealth” guidance to the lower courts. I describe it as “stealth guidance” because it affects how cases are handled, heard, and decided, but cannot be cited in a court judgment or ruling. For that reason, only the highly observant will note the impact of judicial policy documents.
I anticipated that the SPC would issue further Covid-19 pandemic guidance when I spoke [links to video] in April at a virtual event sponsored by Berkeley Law School’s Center for Law & Technology. Some of the guidance reveals frequently used litigation tactics of Chinese parties.
Selected comments on the content
The document is divided into four sections:
Civil procedure mechanics–parties, evidence, deadlines, and statutes of limitations (Articles 1-5): This section draws on the recently amended and effective civil evidence rules
Article 1 directs Chinese courts to approve applications for extensions for foreign (cross-border) parties who are delayed in being able to provide notarized and authenticated documents to evidence the identity. Delays in obtaining notarized and authenticated powers of attorney are to be treated similarly. If China had acceded to the 1961 Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, for all of China, this requirement would no longer be necessary. The Convention is applicable to Hong Kong because of UK-PRC handover arrangements, which enabled conventions originally applicable to Hong Kong pre-1997 to continue in effect.
Article 3 reveals one of the frequently used litigation tactics of Chinese parties in cross-border litigation in China–that is disputing the authenticity of a document because it has not been properly notarized and legalized. The SPC Guiding Opinion III advises lower courts to notify parties that they may reserve their arguments concerning these formalities, and focus their arguments on relevance and persuasiveness of the evidence.
2. Ascertainment (determination) and application of law
These articles remind Chinese courts to use the Law of the People’s Republic of China on the Law Applicable to Foreign-Related Civil Relationships to determine governing law (assuming a contract does not designate a governing law), and to look to the SPC Guiding Opinion I for guidance on force majeure under Chinese law. The SPC also reminds lower court judges not to substitute Chinese law if foreign law governs. This is not the first time that this type of reminder has appeared in SPC policy documents, indicating this is an ongoing problem. This section also includes guidance on the application on the UN Convention on the Sale of Goods.
Articles 8 and 9 relate to letters of credit, standby letters of credit, and demand (independent) guarantees. It reminds lower courts to correctly apply the International Chamber of Commerce (ICC)’s UCP 600 (Uniform Customs and Practice for Documentary Credits), the ICC’s URDG 758(demand guarantee rules), and the related SPC judicial interpretation concerning demand guarantees.
This likely means that Chinese contractors who have provided independent guarantees or standby letters of credit for construction projects overseas are seeking to prevent the owner of the projects from drawing on these guarantees through litigation in the Chinese courts. This case decided by the SPC in April, 2020, reverses the judgment of the Shandong Higher People’s Court in favor of the Chinese contractor. The dispute relates to a Shandong Electric Power Company (SEPCO) project in India. Previous reporting in the Indian press seen here.
3. Transport contracts
Articles 11-17 relate to various types of transportation contracts as well as shipbuilding contracts.
4. Green channel.
This last section reminds courts to use online procedures and cross-administrative region arrangements if convenient and that Hong Kong, Macau, and Taiwan related commercial cases should be handled with reference to this guidance.
How was the document drafted?
As to how the SPC determined the FAQs of the lower courts, it did what all corporates and institutions around the world do these days–convened a video conference. The participants presumably came from the maritime courts and the foreign-related civil divisions of the provincial courts.
Why did the SPC issue it?
The number of cases directly affected by this guidance is relatively small. According to statistics released with President Zhou Qiang’s report to the NPC in May, there were 17,000 first instance foreign-related commercial cases and 16,000 foreign-related maritime cases in the Chinese courts in 2019, compared with 31.5 million cases in the Chinese courts overall.
However, foreign-related cases tend to be more sensitive because, as Zhou Enlai said “外事无小事” (foreign matters are never small matters” –foreign-related matters, because they involve relations with other countries and the prestige of the Chinese state, are sensitive. That means that judges hearing cross-border cases have a particular pressure to handle these disputes in a way that is consistent with the law (of course), acceptable to the leadership of their court & to the outside world. One important aspect of SPC Guiding Opinion III is the impact on Belt & Road projects, In many of these projects Chinese companies are often contractors, or also contractors and equipment suppliers (and Chinese banks provide financing). On the civil/commercial side cross-border cases possibly involve treaty/convention obligations (or treaty-like arrangements, in the case of Hong Kong).
As issues dealt with in SPC Guiding Opinion III relate to the most important Chinese cross-border commercial issues that have arisen during the pandemic, it has an impact on the Chinese (and foreign) business community, far beyond the number of foreign-related cases in the Chinese courts, and is likely to have an impact on related arbitrations governed by Chinese law.
In March 2020, three Chinese lawyers filed civil lawsuits against (variously) the United States (US) government, President Trump, and other US government departments, attracting a great deal of attention on Chinese social media. The case that has attracted the most attention is the one in Wuhan, but according to Wechat articles, twodifferent Beijing lawyers have also filed cases. Reports of these lawsuits are now making their way into English language media.
These lawsuits involve the issue of sovereign or state immunity of foreign governments, foreign embassies/consulates in China and their diplomatic staff, international institutions, and certain other persons and entities. China’s position is absolute sovereign or state immunity– which means that states, diplomatic institutions and staff, as well as international institutions) are immune from suit and enforcement (unless they waive immunity). These issues have been discussed by practitioners and academics for quite a few years. (There have been academic discussions about China changing its position on state immunity and China has signed, but not ratified the United Nations Convention on Jurisdictional Immunities of States and Their Property, which adopts qualified immunity (not yet in force). I will not further discuss this issue as the law is quite clear.
What this blogpost will discuss is what others have not: the procedure (and the document in which the procedure is set out) by which a Chinese court decides whether to accept these cases. This bureaucratic procedure gives greater insights into how the Chinese courts operate.
The Notice is intended to provide a clear standard to the lower courts when they encounter a case involving issues of state immunity. The system described below is one of the exceptions to the registration case filing system.
The notice itself (as I have written beforeabout other types of judicial guidance documents) has an uncertain formal status under Chinese law, although as a practical matter it is binding on the lower courts. The core part of the notice follows:
To strictly enforce the provisions of the Civil Procedure Law of the People’s Republic of China and the relevant international conventions that China has acceded to and ensure the correct acceptance of civil cases involving privileges and immunities, this court has decided to establish a reporting system for cases involving privilege and immunity accepted by the people’s courts, and a notice is hereby issued as follows:
For a civil case filed with the people’s court where the defendant or third party is any of the following subjects that enjoys privilege or immunity in China, before deciding to accept it, the people’s court shall submit it to the higher people’s court with jurisdiction for examination; the higher people’s court agreeing on the acceptance shall submit its examination opinions to the Supreme People’s Court. Before the Supreme People’s Court makes a reply, no acceptance shall be made.) 保障正确受理涉及特权与豁免的民事案件，我院决定对人民法院受理的涉及特权与豁免的案件建立报告制度，特做如下通知：人民法院应在决定受理之前，报请本辖区高级人民法院审查；高级人民法院同意受理的，应当将其审查意见报最高人民法院。在最高人民法院答复前，一律暂不受理。
The entities listed include:
foreign embassies and consulates in China and their staffs;
offices of the United Nations (constituent organizations) in China and their staff;
Judging by the number of page views (12,500) of the Notice in a recent Wechat article, many legal professionals (likely including judges) were unaware that the Notice existed.
The number of cases filed in China against foreign countries, diplomatic entities or persons is unknown. One database I checked contained a case (with an English translation, that will be discussed below), and a case database has a case involving the International Red Cross, but a more litigious Chinese public means that cases likely have been filed, but I am unable to determine how many.
Under the Notice, the Supreme People’s Court (SPC) (most certainly with the concurrence of the Ministry of Foreign Affairs (MFA), although it is not so stated), has established an approval system for accepting civil cases involving the privileges and immunities of foreign governments, international organizations, etc. This is one of several types of cases (of which I am aware) for which the SPC has an approval system. Other types include cases involving the refusal to enforce foreign (foreign-related, and Hong Kong, Taiwan, Macau) arbitration awards (and related issues) and death penalty cases (the 死刑复核 system, although the nature of the review and approval are different in those cases).
The matter would be processed by the SPC’s Case Filing Division and then forwarded to the #4 Civil Division (the one considering cross-border civil and commercial cases). From the 2009 case, it is clear that the #4 Civil Division is the SPC division that replies to these requests for instructions. I would further surmise that in certain difficult cases, the SPC would consult with the MFA.
I would surmise that in practice, the courts that may see these cases (Beijing’s Chaoyang District and one or more of the Shanghai courts) are familiar with these issues and reject them without seeking instructions.
What does this show about the Chinese courts?
First, the Chinese courts understand there to be a single correct view on certain issues. This is seen more widely, with references in many documents to unifying judicial approaches to issues.
More importantly, it is one small illustration of the bureaucratic, hierarchical nature and operation (官本位) of the Chinese court system. For important issues, such as those involving the death penalty, compliance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), and issues involving state immunity and the immunity of international organizations, the SPC’s view is that a high degree of control is needed. It is clear that the SPC’s understanding is that lower court judges are unlikely to be familiar with this technical but important issue.
Why is this issue important? As I wrote last year (about the China International Commercial Court), 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 and important.
At 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.
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);
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
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 the two earlier 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 Bathof 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.
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.
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:
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
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 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 the 19th 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.
My thanks to a knowledgeable person for triggering my thinking about this and for insightful comments on an earlier draft.
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.
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.
In the last few months of 2018, the Supreme People’s Court (SPC) and China International Commercial Court (CICC) took measures to enable the CICC to start operating, although the CICC was established earlier in 2018. As SPC President Zhou Qiang reported to the National People’s Congress (NPC) in March 2018 that the CICC would be established, I expect that he will report to the NPC in March of this year that the SPC established the CICC and it has successfully begun operating. (It is likely that the National Appellate IP Court will merit a place in Zhou Qiang’s report as one of the SPC’s 2018 accomplishments, but see fellow blogger Mark Cohen (and co-authors)’s post on that development). This blogpost will summarize (and provide some commentary on) some of the recent CICC developments.
Those developments included:
issuing rules on the international commercial expert committee;
personnel measures–designating the heads of the of the #1 and #2 CICCs and the heads of the case management offices in the two offices and appointing seven additional judges;
designating several (mainland) Chinese arbitration and mediation institutions to be part of its integrated one-stop dispute resolution;
accepting several cases;
issuing rules on CICC operations (to be discussed in a following blogpost).
Rules on the international expert committee
On December 5 the SPC General Office issued the working rules of the international commercial expert committee (expert committee) (approved by the SPC judicial committee in late October) (最高人民法院国际商事专家委员会工作规则). The date of the notice of the General Office is 21 November. It answers some frequently asked questions about the expert committee. My comments are in italics.
What do members of the expert committee do?
1) preside over mediations (Article 3 (1): This was clear from the CICC Provisions. It remains to be seen how many expert committee members will feel comfortable mediating disputes. It could be that some of the Chinese members will feel more comfortable mediating disputes than the foreign or Hong Kong-based members, as some of those members have long experience as arbitrators in China, where combining mediation and arbitration (med-arb) is usual. A significant number of expert committee members are from jurisdictions where being a mediator and mediating us regarded as separate profession and skill from arbitration and adjudicating. Articles 9-13 describe the mechanics for doing so.
(2) provide an advisory opinion on specialized legal issues such as those relating to international treaties, international commercial rules, finding and applying foreign law [foreign and greater China jurisdictions] relating cases heard by the CICC and the People’s Courts at all levels (Article 3 (2): This contains a surprising expansion of the role of the experts on the committee by authorizing Chinese courts at various levels to request an expert committee member to provide an advisory opinion on international legal, international commercial and foreign law issues. A note on terminology–the English version on the CICC website uses “foreign law” while the Chinese original uses the term “域外 ” (extraterritorial), intended to include the jurisdictions of Hong Kong, Macau, and Taiwan as well as the law of foreign jurisdictions. This blogpost will use the term “foreign law” as meaning “域外 ” extraterritorial law.
The fact that expert committee members have been so authorized indicates that ascertaining (determining) foreign law is a significant practical problem for Chinese judges. I previously mentioned in this 2017 blogpost that Judge Zhang Yongjian listed ascertaining foreign law（he uses the term 外国法·) as one of many problems confronting Chinese judges hearing cross-border issues. Several articles on the Chinese version of the CICC website (plus one on the English version (by CICC Judge Gao Xiaoli) discuss this problem. Judge Gao gently pokes fun at some Chinese scholars who fail to understand relevant judicial interpretations on ascertaining foreign law. The CICC website lists the methods available to a Chinese court in ascertaining foreign law. Among the alternatives include designating one of four authorized centers to provide an expert opinion on foreign law. Articles 14-15 describe some of the mechanics by which one or more expert committee experts can provide an advisory opinion.
Under Article 15, a litigant may request through the CICC’s Expert Office that the expert appear in court to explain his or her opinion. It is up to the expert to decide whether to appear. Presumably, expenses involved, including travel and translation, would be the responsibility of the requesting party.
The rules do not clarify a number of practical questions related to this. Could a court request an advisory opinion from an expert and from a designated discernment center, and if so, what relative weight will be attached to each? Presumably, a court would give it greater weight than an opinion from an expert provided by a party. It is unclear whether experts can charge for these services. Another concern for experts could be liability, and the standard for an opinion found to be negligently made. Additionally, for the many foreign experts on the committee who do not know Chinese, it is unclear who will be responsible for translation. Presumably, the court that requested the opinion or the International Expert Committee office (see 6 (2), which states that the office provides services to experts. Perhaps the forthcoming Code of Ethics of the Expert Members will address these questions.
(3) provide advice and suggestions on the development of the International Commercial Court; (4) provide advice and suggestions on the formulation of judicial interpretations and judicial policies of the Supreme People’s Court; (5) Other matters entrusted by the International Commercial Court; The first two provisions set out a formal structure for foreigners to provide advice, suggestions, and comments on judicial interpretations, judicial policy and other developments to the SPC, a first. Article 18 anticipates that the Expert Office will direct requests for comments or advice on specific draft judicial interpretations, policies, etc. to one or more experts, as the CICC considers useful rather than expert committee members being informed about ongoing developments. However, it does enable expert committee members to make suggestions or proposals on their own initiative.
The last few months have seen a number of CICC personnel developments, including the appointment of seven additional judges. In early November, Judge Zhang Yongjian, deputy head of the #1 Circuit Court and head of the #4 Civil Division, was appointed as head of the #1 CICC and Judge Zhang Ming, deputy head of the #6 Circuit Court, was appointed head of the #2 CICC.
Judges Xi Xiangyang and Ding Guangyu, presiding judges on the #1 and #6 Circuit Courts respectively, and CICC judges, were at the same time appointed heads of the case management offices of the two courts.
Wang Shumei (deputy head of the SPC’s #4 Civil Division, specializing in maritime law);
Wei Wenchao, who has had a number of roles at the SPC, most recently as deputy head of the #5 Circuit Court. He had previously served as deputy head of the Environmental and Natural Resources Division;
Song Jianli, head of the Experts Office, who studied at Southampton Institute (now Solent University) (in addition to his studies in China), and was a visiting scholar at Cambridge, the University of Pennsylvania, and the Max Planck Institute of Comparative and International Law, and has primarily worked in the SPC’s #4 Civil Division;
Zhang Xuemei, of the SPC #2 Civil Division (domestic commercial issues);
Yu Xiaohan, also of the #4 Civil Division, and like Wang Shumei, a maritime law specialist;
Ding Guangyu, who studied at the University of Manchester and has had a number of roles at the SPC, including at the China Institute of Applied Jurisprudence, and in the #4 Civil Division;
Guo Zaiyu, who spent many years at the Hubei Higher People’s Court before transferring to the SPC’s #4 Civil Division.
It is clear from these announcements that at this time, the CICC is a part-time responsibility for the judges involved, who have their ongoing responsibilities at the SPC, either at one of the Circuit Courts, the new Intellectual Property Court, or SPC headquarters. And some senior people, such as Judge Zhang Yongjian, have triple administrative roles.
One-stop diversified dispute resolution mechanism
As an earlier blogpost flagged, the institutions clearly intended to be part of the one-stop diversified dispute resolution mechanism were the leading Chinese arbitration and mediation institutions handling foreign-related matters. Most of these institutions sent senior representatives to attend the first meeting of the experts committee, so I was not surprised to see the following institutions listed:
China International Economic and Trade Arbitration Commission (CIETAC);
Shanghai International Economic and Trade Arbitration Commission;
the Shenzhen Court of International Arbitration (SCIA);
Beijing Arbitration Commission;
China Maritime Arbitration Commission;
the Mediation Center of China Council for the Promotion of International Trade (CCPIT); and
Shanghai Commercial Mediation Center.
SCIA has an arrangement with the Hong Kong Mediation Centre since 2014 by which Mediation Centre settlements may be enforced in mainland China through a consent award issued by SCIA.
At the end of December 2018, the CICC accepted several cases, all of which can be categorized as general international commercial disputes, with none specifically related to Belt & Road projects. The disputes include: an unjust enrichment dispute involving Fujifilm and several Chinese companies, a product liability dispute involving Italian pharmaceutical company called Bruschettini (which sells its products through Sinco Pharmaceuticals Ltd., a Hong Kong-listed company), several disputes related to Thailand’s Red Bull (from this report, I surmise that the case was referred by the Beijing Higher People’s Court), and several disputes involving the validity of arbitration clauses, including one involving China Travel Service (Hong Kong) and one of its hotels. ____________________________
The author is a member of the international commercial expert committee but her views do not represent the committee, the CICC, or the SPC.
Among the many developments flagged in Supreme People’s Court (SPC) President Zhou Qiang’s 2018 report to the National People’s Congress is that the SPC will establish an international commercial tribunal (court)(最 高人民法院国际商事审判庭), as approved by the Central Leading Group for Comprehensively Deepening Reforms. The timing is unknown. The international commercial tribunal (this post will use the term “court”) as is understood clearly, must fit political and technical requirements. This blogpost will look at those, particularly the technical ones, as those are the ones that have escaped the attention of most commentators outside of China.
Although many articleshave been published in the media, both in and out of China after the public announcement to the press about the international commercial court in January, 2018, most of them have little detail on the issues. Some contain uninformed statements, such as the one that quotes an insider at the China Council for the Promotion of International Trade mentioning the use for dispute resolution of “the common law of the United States and European countries” (send the insider back to law school please!).
In the past three months, Judge Gao Xiaoli, deputy head of the SPC’s #4 civil division (photo above), and at least one other person at the SPC has released some information about the court, all of which seems to have eluded international discussions. For those who are not aficionados of Chinese foreign-related dispute resolution, Judge Gao (who often appears at UNCITRAL or international arbitration related conferences or seminars) outside as well as inside mainland China, is a formidable presence in the courtroom. Thanks to the SPC’s streaming of court hearings, it is now possible to see that from any corner of the world. She is also an impressive speaker. Judge Gao is representative of the judges engaged in technical legal work at the SPC, with a PhD in law from one of China’s leading law schools and experience studying abroad.
On the political requirements, there are at least two, both previously highlighted in this blog. The more general one was highlighted one year ago–the establishment of the international commercial court relates to a sentence in the Fourth Plenum Decision:
Vigorously participate in the formulation of international norms, promote the handling of foreign-related economic and social affairs according to the law, strengthen our country’s discourse power and influence in international legal affairs, use legal methods to safeguard our country’s sovereignty, security, and development interests.
More specifically, it appears to be the civil and commercial counterpart to the efforts noted on this blog two years ago (concerning dispute resolution in maritime cases), part of a push 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.
The other political requirement relates to the need to serve major government strategies, the BRI/OBOR one in particular, discussed in this blogpost. President Zhou Qiang’s 2018 NPC report, as his 2016 report (and presumably 2017 report) contain the phrase “provided service for the country’s major strategies.” As a central government institution, the SPC must do its part to support national major strategies. Since BRI/OBOR has been initiated, President Zhou Qiang’s report has mentioned BRI/OBOR as one of those major strategies for which the SPC has provided service.
The sources that previous commentators missed include the following:
press interview with Judge Gao in February, 2018 (the most detailed and useful, Wechat version here);
SPC’s OBOR/BRI model/typical cases (see above link and translations by the Stanford Guiding Cases project found here);
SPC’s judicial interpretation on demand guarantees, that blogpost explains that with so many Chinese companies focusing on infrastructure projects overseas, Chinese banks have issued billions of dollars in demand guarantees.
The SPC is looking at three types of investment and trade disputes:
state-state disputes (for China, generally WTO);
investor-state disputes (ICSID and other institutions, generally using UNCITRAL rules (note that CIETAC and the Shenzhen Court of International Arbitration (SCIA) also have amended their rules to be able to take investor-state disputes, with SCIA using the UNCITRAL rules;
disputes between commercial parties.
Judge Gao mentioned that they at the SPC, too have noticed the worldwide trend of other jurisdictions establishing courts to hear investor-state disputes, citing Canada among them and that they are exploring whether the Chinese courts can do so as well. However, she notes that when China acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), it made a commercial reservation, and the SPC judicial interpretation concerning the New York Convention excluded investor-state disputes, so that currently it is not possible to enforce investor-state awards through the New York Convention. Judge Gao says they are considering solutions to this issue.
Definition of OBOR/BRI disputes
Although none of the authors have mentioned this (nor have I, until now), one unrecognized issues in discussing OBOR/BRI disputes is a definitional one–what is a OBOR/BRI related dispute? It seems that in court practice, the definition is broad, including cases between Chinese contractors and their demand guarantee issuing banks, as well as cross border cases involving Chinese and parties located in OBOR countries. In my research (including a discrete inquiry with a knowledgeable person), a formal definition is lacking.
Judicial cooperation/enforcement issues
As this earlier blogpost mentioned, enforcement of foreign court judgments is on the SPC’s agenda. As Judge Gao recognizes, there needs to be a structure for judgments of this international commercial court to be enforced outside of China. She mentions (as has this blog), that China is actively participating in negotiations on the Hague Convention on the Recognition & Enforcement of Foreign Judgments, and is studying ratification of the Hague Convention on the Choice of Courts Agreements. She flags also (as has this blog) that the SPC is drafting a judicial interpretation on the recognition and enforcement of foreign civil & commercial judgments.
Practice in other jurisdictions
Judge Gao mentions that the SPC is looking at the international commercial courts in several jurisdictions, including Dubai and Singapore (as mentioned in the earlier blogpost), but also Abu Dhabi, London’s Commercial Court (it appears that someone at the SPC has read this Financial Times article on foreign litigants there), and notes that the Netherlands, Germany, and Belgium are all establishing international commercial courts that use English.
Challenges for the Chinese courts
Judge Gao forthrightly flags a list of issues (my comments in italics) that the SPC faces in establishing an international commercial court. It is likely that she and her colleagues are aware of the additional issues raised as well.
judges; she notes that Dubai and Singapore have foreign judges on their international commercial courts, but currently China’s Judges’ Law and People’s Court Organizational Law (being amended) present obstacles to having foreign judges, and without them, the court will not be international and will not be internationally credible (literally, be internationally influential) (但是如果不引进外籍专业性人才参与国际商事法庭的建设，则缺乏国际性，缺乏影响力). My earlier blogpost mentioned the nationality issue. Would qualified foreign judges (or those from Hong Kong) be willing to join the international commercial court? Judge Gao does not mention that the group of Chinese judges qualified to hear these cases is not that large, and they are overloaded with cases, judicial interpretation/other guidance drafting, and other work. Could highly qualified Chinese lawyers be appointed to this court? It is unclear, and relates to issues of how they would fit into the rigid structure of the judiciary, highlighted here.
choice of law; she mentions that parties have freedom concerning choice of law in China, so that would not be a problem. However, relating to choice of court clauses, Professor Vivienne Bath’s research on parallel proceedings in China (previously mentioned on this blog) shows that Chinese courts do not recognize the validity of those clauses when the choice “lacks an actual connection with the dispute” because of provisions in the Civil Procedure Law.
procedure; she queries whether there can be some breakthroughs in civil procedure in this area. Foreign lawyers are likely to query whether this could mean better discovery of documents. More importantly, what is not mentioned is that China’s failure to have acceded to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents will also be a major obstacle for the international commercial court. Under current Civil Procedure legislation, notarization and legalization of documents is often required. The first step is when a party files suit or when a foreign party responds. Additionally, in litigation, evidence from a foreign country often must be notarized and legalized. Notarization and legalization costs time and money and a great deal of effort. At an academic conference in 2017, experts from the institutions involved discussed how to proceed on this.
language; Judge Gao notes that the Civil Procedure Law puts obstacles in the way of the international commercial court hearing cases in English. Note that the pool of Chinese judges able to hear cases in English is not large, and would even further require recruiting judges from outside China’s judicial system.
counsel; She mentions the issue of having foreign lawyers handle cases is also an obstacle for the international commercial court, because China’s Civil Procedure Law currently does not permit it.
transparency; Judge Gao notes that Chinese judicial transparency and informatization has made great strides, so should be useful to the international commercial court. However, Judge Gao and her colleagues could usefully look at the type of information accessible to both the parties and general public (and the level of detail in judgments) in other international commercial courts.
enforcement; Judge Gao raises the issue of recognition and enforcement of judgments, discussed above.
Where does the SPC go from here?
The article by the post-doctoral student Liao Yuxi suggested that the SPC may want to request the NPC Standing Committee authorize it to suspend some of the problematic provisions of the Civil Procedure Law that Judge Gao flagged above, such as the use of language, and the qualification of judges. However many of the other issues cannot be resolved so easily, such as international enforcement and the requirement of notarization and legalization of evidence.
As for when we can expect to see some rules relating to the international commercial court, and whether drafts will be circulated for public (or even soft consultation), those are all unclear. What is clear is that many complicated legal issues face Judge Gao and her colleagues.
At China’s Arbitration Summit in late September, Liu Guixiang, Chief Judge of the #1 Circuit Court, called attention to a notice that the Supreme People’s Court (SPC) issued earlier this year to strengthen judicial review of arbitration. The notice (Notice concerning some questions regarding the centralized handling of judicial review of arbitration cases关于仲裁司法审件归口办理有关问题的通知) is linked to the likely increasing number of cases involving judicial review of arbitration matters, linked to the increasing number of arbitrations involving Chinese parties (and the One Belt One Road initiative) both in China and elsewhere in the world, including Hong Kong International Arbitration Centre. (The notice highlights data collection problems).
The notice, reproduced below, is not an SPC judicial interpretation. Unlike judicial interpretations, notices are not required to be published. It seems that the SPC itself has not officially published it, but several officialwebsites have published it, as have a number of Wechat accounts.
A quick search reveals that the notice drew on a 2014 study by the Guangdong courts summarizing the results of pilot projects (including Shenzhen) that the SPC commissioned, involving cooperation with the now independent Shenzhen Court of International Arbitration. As is usual, Guangdong and Shenzhen have led the way as pilot areas for judicial reform. The study highlighted a list of problems with the way lower courts review arbitration related issues, including lack of consistency in reviewing cases. The study also highlighted problems in tracking case data.
As Judge Liu also mentioned (as has this blog), the SPC is working on a comprehensive judicial interpretation on that subject). That judicial interpretation is still being drafted, with the #4 Civil Division of the SPC taking the lead.
A very rough translation and some comments written in italics follow. (Many thanks to an anonymous and well-informed follower of this blog for bringing the notice to my attention and for some thoughts.) Please call translation glitches/mistakes to my attention.
Supreme People’s Court
Notice Concerning Some Questions regarding the centralized handling of judicial review of arbitration cases
Fa (2017) #152
To the provincial, autonomous region, directly administered municipality higher people’s courts, People’s Liberation Army Military Court, Production and Construction Corps Branch of the Xinjiang Autonomous Region Higher People’s Court:
To try correctly judicial review of arbitration cases according to law and guarantee a unified yardstick for judicial decision-making, protect the legal rights of parties, promote the healthy and orderly development of arbitration matters and the establishment of a diverse dispute resolution mechanism, we notify the various levels of the people’s court handling judicial review of arbitration cases of the following:
I. The trial divisions (collegial panels) trying foreign-related commercial cases shall be the specialized trial divisions (below, “specialized trial divisions) responsible for undertaking the judicial review of arbitration as set out in this notice.
This means that SPC is requiring trial divisions (or collegial panels, in smaller courts) handling foreign-related commercial matters to be responsible for reviewing the arbitration related matters described in the next paragraph. It is a plus for competency/consistency in arbitration-related matters.
II. In cases in which a party applies to have the validity of an arbitration agreement recognized, cases in which application is made to cancel a domestic arbitration commission’s award, cases in which application is made to recognize (认可) and enforce a Hong Kong SAR or Macau SAR arbitration award, recognize (认可) and enforce a Taiwan area arbitration award, application is made to recognize (承认) and enforce a foreign arbitral award, shall be handled by the specialized trial divisions of each level of court.
This paragraph describes the types of cases covered by the notice–the types of judicial review of arbitration matters and that these cases should be handled by the specialized trial division of each level of court designated in the paragraph I. There is a difference in terminology (bolded above, but not in the original Chinese) when referring to the recognition of arbitral awards from Hong Kong, Macau, and Taiwan as distinguished from foreign arbitral awards, emphasizing that awards from these jurisdictions are considered part of “one country.” Notice that cases involving domestic arbitration awards or disputes over the validity of an arbitration agreement to submit a dispute to domestic arbitration are also to be reviewed by the specialized trial division. A big plus for consistency and competency in judicial review of arbitration matters.
When a specialized trial division, after review, has ruled to recognize and enforce a Hong Kong Special Administrative Region, Macau Special Administrative Region, Taiwan Region arbitration award, recognize and enforce a foreign arbitral award, the enforcement shall be transferred to the enforcement departments for enforcement.
III. When the first instance court makes a ruling which relates to the validity of an arbitration agreement relating not to accept, to reject a filing or objection to jurisdiction, and a party disagrees with the ruling and appeals, the specialized trial division of the second instance court should handle it.
This provision channels appeals relating to arbitration matters to specialists in the second instance courts, again a plus for competency and consistency.
IV. Each level of people’s court should establish a centralized administrative platform for the judicial review of arbitration awards, to strengthen the informatized management and data analysis of cases regarding applications to confirm the validity of an arbitation agreement, cases regarding applications to cancel or enforce arbitration awards of our domestic arbitration institutions, applications to recognize and enforce Hong Kong Special Administrative Region, Macau Special Administrative Region, Taiwan Region arbitration awards, cases regarding applications to recognize and enforce foreign arbitral awards, and cases relating to the judicial review of arbitration such as refusal to accept, reject the filing, or objection to jurisdiction and others relating to the confirmation of the validity of an arbitration agreement; the effective guarantee of the correct application of law and of a unified yardstick for judicial decision-making. The #4 Civil Division of the Supreme People’s Court and the People’s Courts Information Technology Service Center shall be specifically responsible for this work.
IV. This paragraph requires a platform to be established to enable better data collection of arbitration related cases. Data collection appears to be an ongoing issue for the courts. 2015 SPC rules on case file numbers (thank you to Chinalawtranslate.com for this translation), are aimed to create more consistency in filing numbers for cases, and will also be helpful in this process. Inconsistency in case files numbers was identified as a problem in the Guangdong study.) The SPC’s #4 Civil Division (in charge of cross-border civil and commercial matters) and the Information Technology Service Center are the ones responsible for ensuring this platform works. The notice does not require data results to be made public. The legal and professional public (in China and elsewhere in the world) would look forward to regular big data reports on this.
Supreme People’s Court
May 22, 2017
If you like this blogpost, please join the East Asian Legal Studies Center of Harvard Law School in supporting the Supreme People’s Court Monitor.
In late September (2017), the Supreme People’s Court (SPC) held a Belt & Road judicial conference with senior judges from 16 jurisdictions in the desert oasis of Dunhuang, famed for its Buddhist caves. As is its custom at its international conferences, the SPC released some information concerning previously unknown cross-border related initiatives, both of which have implications for the international business and legal communities. The English language reports of the conference (in China Daily and related media outlets) missed the implications. A brief article in one of the SPC’s Wechat accounts reveals that:
SPC is drafting a judicial interpretation on the recognition and enforcement of foreign civil & commercial judgments (关于承认和执行外国法院民商事判决若干问题的规定);
SPC is considering establishing a Belt & Road International Commercial Court (literally “Tribunal”) (“一带一路”国际商事法庭). (chief of the SPC’s #4 Civil Division, Judge Zhang Yongjian, must have been speaking of this when he was interviewed during the 2017 National People’s Congress meeting).
Enforcing foreign civil judgments
A recent decision by a Wuhan court to enforce a California default judgment has received worldwide attention, both professional and academic. with some noting nothing had really changed and Professor Donald Clarke correctly wondering whether an instruction had come from on high. With this news from Judge Liu, it is clear that the Wuhan decision is part of the Chinese courts’ rethink of its approach to recognizing and enforcing foreign court judgments.
Judge Liu revealed that the judicial interpretation will set out details regarding the meaning of “reciprocity” and standards for applying it (明确互惠原则具体适用的标准). In another recent article, an SPC judge considered the matter of reciprocity in more detail. Among the issues she mentioned were: 1) China not being a party to the Hague Convention on the Choice of Courts (this obstacle has been removed as China signed the Convention on 12 September 2017 (this article has a good overview); 2) China should actively participate in the drafting of the Hague Convention on the Recognition & Enforcement of Foreign Judgments (this seems to be happening, as this blog has reported). The SPC judge recognized that the current Chinese position has significant limitations and can lead to a great deal of parallel litigation (see Professor Vivienne Bath‘s scholarship on this). The SPC judge also suggested that the standards set out in mutual judicial assistance agreements could be useful in drafting standards for reviewing the recognition and enforcement of foreign judgments.
Belt & Road Commercial Court
Judge Liu also mentioned that the SPC would establish a Belt & Road dispute resolution mechanism and that the SPC was considering a Belt & Road commercial tribunal, to provide the parties of OBOR countries with fair, efficient, and low-cost one-stop legal services. It is clear from discrete developments that the SPC is looking to Singapore’s International Commercial Court and the Dubai’s International Finance Centre Courts (DIFC). One of those discrete developments is the cooperation agreement that the Shanghai Higher People’s Court and Dubai International Finance Centre Court signed in October 2016 (reported here), which must have required the concurrence of the SPC. The other discrete development is the memorandum of understanding on legal and judicial cooperation between the SPC and Singapore Supreme Court, signed in August 2017, relating to mutual recognition and enforcement of monetary judgments, judicial training for judges, and the Belt & Road initiative.
The details of the SPC’s Belt & Road commercial court (tribunal) are yet unclear. Both the DIFC and Singapore International Commercial Court have a panel of international judges, but a similar institution in China would be inconsistent with Chinese legislation. The SPC is clearly interested in promoting mediation to resolve Belt & Road disputes. This interest is visible from the September 2017 International Mediation conference in Hangzhou, at which Judge Long Fei, director of one of the sections in the SPC’s Judicial Reform Office, spoke on the benefits of international commercial mediation.
Perhaps the SPC envisions an institution analogous to the Asian Infrastructure Investment Bank and plans to cooperate more on resolving Belt & Road commercial disputes with UNCITRAL and other international organizations. We will need to see how this further develops.
It is also unclear whether the SPC will issue a draft judicial interpretation or draft regulations on the Belt & Road dispute resolution center for public comment. Although President Zhou Qiang and Executive Vice President Shen Deyong speak of the benefits of judicial transparency, it seems the benefits of public participation in judicial interpretation drafting /rule-making have yet to be fully realized.
The document establishes operating rules for the SPC after this latest round of court reforms, and therefore sets guidelines for the lower courts. It can be expected that the lower courts will issue corresponding documents. Through the Implementing Opinion, it is possible to see how much autonomy an individual judge/three judge panel has and what matters require approval by senior SPC leaders.
Opinions (as this blog has previously explained) are not judicial interpretations but a type of judicial normative document. A recent Wechat post by an SPC commercial subsidiary, Faxin (法信), described them as judicial guiding documents (司法指导性文件). That is the terminology being used for them in a series of books published by the People’s Court Press. Inconsistent legal terminology is not a new phenomenon.
The basic principles of the Implementing Opinion are said to implement central authorities’ requirements, let those who hear cases bear responsibility, clarify how cases are to be dealt with and put in place the Party group’s responsibility for enforcement (the phrase “Party group” actually is mentioned three times) and case handling. It appears that some provisions memorialize current practice, while others set out new rules.
The Implementing Opinion specifies roles of different personnel and institutions within the SPC such as the court president (and vice presidents), heads of divisions, professional judges committee, judicial committee, presiding judges, judges in charge of cases, clerks, and judicial assistants. It provides guidelines on how cases are to dealt with, from case acceptance, random case assignment, to issuing decisions.
The Implementing Opinion includes the following (selected) provisions:
Details on staffing for judges (one assistant and one clerk in the circuit courts, and some assistants and clerks at headquarters) (Article 3);
those with a leadership role (President/vice president/vice/heads of divisions) should generally be the presiding judge (Article 5), while the judges in collegial panels should change every 2-5 years;
leaders need to hear cases, that are difficult/important/guiding, etc., but specialists are designated to assist them (Article 7);
rules on who will issue judgments, mentioning that the president of the SPC signs the order for the implementation of the death penalty (this was understood to be the case already)(Article 11);
court leaders may not give oral/written instructions concerning a case (except as otherwise provided (i.e. cases that are considered by the judicial committee)(Article 12);
responsibilities of professional judges committees (a committee put into place under the judicial reforms); judicial committee (can be split into specialist civil, criminal, enforcement subcommittees) (role said to have narrowed, but include major/difficult cases affecting national interests & social stability, but also other non-case related duties such as approving judicial interpretations/judicial normative documents, etc., the judicial committees requires views be stated in the judgment (Articles 16-19);
the basic rule is random case assignment, with exceptions for major/difficult cases (Article 26-27), with electronic service of process & documents if agreed (Article 32);
basic rule is online broadcast of SPC court hearings, unless approved by leaders otherwise (Article 33), with requirements concerning the posting of rulings/judgments and other transparency requirements mentioned in the document;
circuit courts are prohibited (in general) from considering requests for instructions (the rule makes sense–it would defeat one of the purposes of having circuit courts (Article 25, this is an example);
Articles 41-43 relate to precedent case review (as suggested in my recent article) and require approval by leaders if the ruling in a case will be inconsistent with prior SPC rulings on the topic (this has been criticized as being inconsistent with judicial autonomy). Approval is required in several other situations, see Article 40 (2-4));
Articles 46-50 set forth rules for a collegiate panel to consider a case and submit it to the division leadership/professional judges committee/judicial committee;
Article 51 requires the judge responsible for the case （承办法官) to draft the decision reached according to the majority view, indicating that the role of responsible judge has administrative overtones. If not so, the judgment would be drafted by one of the judges who agreed with the majority view.
Article 58 retains existing special procedures (including special standards for transparency) for certain criminal cases, such as death penalty cases, cases involving foreigners, overseas Chinese, Hong Kong, Macau, and Taiwanese Chinese.
Article 61 provides the Central Commission for Discipline Inspection (CCDI) representative stationed at the SPC can be a member of the judicial committee (this seems to be analogous to the procedure under law under which a representative from the procuratorate can take part in judicial committee meetings). Additionally, anti-corruption officials stationed in each division can participate in professional judges committee meetings and collegiate panel discussions. Article 61 does not require their views to be adopted. It could be that their views are considered more seriously if discussions relate to matters regarding which they are competent.
Article 64 requires certain types of cases to be submitted for approval to higher levels of the SPC, including cases involving mass incidents, that will have an effect on social stability; difficult and complicated cases that will have a major effect on society; cases that will conflict with prior SPC cases; those that indicate the judge violated the law; death penalty review, major criminal cases, cases involving requests for instructions involving foreigners, overseas Chinese, Hong Kong, Macau, Taiwanese Chinese.
The vision for the reformed SPC remains a court with administrative characteristics （官本位), with concepts derived from other jurisdictions (judge’s assistant would be an example), that enables Party guidance in sensitive cases and its operations to reflect changes in Party/government policy (serving the actual situation), but seeks to be a more professional and accessible institution, hearing cases in a professional manner. It can be surmised that certain provisions from the Implementing Opinion will be incorporated into the revisions of the Organizational Law of the People’s Courts currently being drafted.
In February, 2017, the Supreme People’s Court (SPC) issued its second judicial transparency white paper, giving the official version of what the SPC has done to respond to public demands for greater transparency about the Chinese judicial system. But what are the voices from the world of practice saying? One of the issues (for a small but vocal group, foreign litigants) is inconsistent and non-transparent formalities requirements.
Chinese civil procedure legislation requires a foreign litigant to notarize and legalize corporate documents, powers of attorney & other documents. It is a time consuming and costly process, with some jurisdictions providing documents that do not meet the expectation of Chinese courts. China is not yet a signatory to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents (Hague Legalization Convention) which substitutes the faster and cheaper apostille process (note that Hague Legalization Convention continues to be applicable to Hong Kong and Macau under the terms of the joint declarations and Basic Laws for each Special Administrative Region (SAR)). About one year ago, a Ministry of Justice official published a Wechat article discussing the benefits of the Hague Legalization Convention (as well as the issues facing China in implementing it).
While this article addresses issues faced by foreign plaintiffs seeking to challenge Trademark Review and Adjudication Board decisions in the Beijing Intellectual Property Court (Beijing IP Court), according to other practitioners (who have asked not to be identified), these problems with inconsistent (and non-transparent) requirements concerning legalizing foreign corporate documentation are not limited to the Beijing IP Court, but face foreign parties appealing from intermediate courts to provincial high courts elsewhere in China. These requirements can have the effect of cutting off a party’s ability to bring an appeal, for example.
What is the solution? The long-term solution, of course, is for China to become a signatory to the Hague Legalization Convention. In the meantime, Chinese courts should be more transparent about their formalities requirements. These requirements affect all foreign parties, whether they are from One Belt, One Road (OBOR) countries or not. If China is seeking to become an international maritime judicial center or hear more OBOR commercial cases, the Chinese courts need to become more user friendly. Courts with significant numbers of foreign cases (Beijing, Shanghai, Shenzhen….) can consider reaching out to the foreign chambers of commerce, many of which have legal committees, to understand in greater detail what specific problems foreign litigants face (and convey their views to foreign audiences). Resolving this issue can create some goodwill with the foreign business community with relatively little effort.
The Supreme People’s Court (SPC) and other Chinese courts have established or upgraded their English language websites to promote better the image of the Chinese courts to the outside world. These websites are linked to policy goals set by the 4th Plenum, 4th Five Year Court Reform Plan, and other related documents. That can be seen from an announcement on the English language version of the Shanghai Maritime Court’s website:
Shanghai Maritime Court established a judicial translator team, aiming at having a bigger say in global judicial disputes and fostering judicial talents with a global vision.
“Establishing a professional translator team for maritime judiciary centers is a goal for building a global maritime judicial center,” said Zhao Hong, president of the Shanghai Maritime Court.
“It is aiming to serve a maritime powerhouse and laying a solid foundation for China’s Belt and Road initiative,” Zhao said.
A quick rating of the soft power of these English language websites follows below.
The SPC English website, while an improvement over the previous version, could be substantially improved.
Too much of the information is out of date, including much of the information on the landing page of the website. The “About” section, which could be useful to foreign courts, diplomats, journalists, researchers, students, etc. has an outdated description of the SPC leadership. In the section on Resources, the SPC white papers are published as separate pages, rather than as one downloadable PDF (as some of the Chinese maritime courts have done). The scheduled hearings section is generally out of date and also provides no information as to how an interested person would attend a hearing. The link to issues of the SPC Gazette only contains the first two pages, rather than the full issue itself. Moreover, the landing page lacks links to other English language court websites.
National Maritime Court site
China Maritime Trial: http://enccmt.court.gov.cn/chinamaritimetrial/index.html, the English language version of the national maritime court website (partial screenshot below), apparent partner to the Foreign Related Commercial website (similar look and feel) seems to be in beta mode.
Again, as with the national court website, the news on most of the landing page appears to be outdated. The white paper page does not enable the user to download a PDF version of the report providing an overview of the first 30 years of the maritime courts. Under the resources tab, under law & regs, are links to translations of SPC judicial interpretations relating to the maritime courts, but it is not apparent to anyone looking at the landing page. These translations are potentially a useful resource to all sorts of foreign readers. Under the resources tab, the cases menu is empty. The judgement tab links to translations of some judgments and rulings by the SPC and maritime courts, but without any headings or indications on the front page of the website. These translations, too, are potentially a useful resource to foreign users. It does have links to the other maritime courts (some of which have English websites, but some of the links are out of date.
National Foreign-Related Commercial Cases Website
China Foreign Related Commercial Trial: http://enccmt.court.gov.cn/ChinaForeignRelatedCommercialTrial/index.html , the English language version of the national foreign-related commercial cases court website (partial screenshot below),apparent partner to the Maritime Courts website (similar look and feel) seems to be in beta mode.
Again, as with the national court website, the news on most of the landing page appears to be outdated. Under the About tab is a list of courts that can accept foreign-related cases, but information about the jurisdiction of each court is missing. Under the Media Center, most of the information under Updates is irrelevant to the courts, the information under International Exchanges is missing, but the Specials has a translation of the SPC’s Belt & Road policy document (although followed by descriptions of the SPC’s cooperation with several Shanghai-area law schools). There is no content under the Resources tab or the Judgement tab. Translations of judicial interpretations related to foreign-related civil and commercial issues and a clearer explanation of how a foreign-related case progresses in China would be useful for the casual foreign user, including those from the Belt & Road countries.
The Shanghai Higher People’s Court website is well organized, and relatively timely, although the litigation guide has little information to guide the foreign litigant, and too much of the information, whether cases or news, is badly edited. The information on jurisdiction is not very helpful for a litigant or counsel, because it does not convey information on the jurisdiction of the Shanghai courts. It appears that translators lacked understanding of who the potential users of the site were, and had English language challenges, unlike the Shanghai maritime court (see more below).
Local Maritime court websites
Several maritime courts have English language websites, with Guangzhou and Shanghai taking the lead in presenting useful and clear information to the foreign user. The Shanghai maritime court website (http://shhsfy.gov.cn/hsfyywwx/hsfyywwx/index.html) does a good job of presenting official information clearly and in a timely manner. The Shanghai maritime court’s bilingual white paper for 2014 and 2015 is downloadable in PDF (under the Annual Report tab), the Court News is relatively timely, The case digests are useful and calendar lists upcoming court hearings (however without information concerning how an interested person could attend them). Unusually for a Chinese court website, the Judges tab has photos of judges other than the senior leadership. The Contact Us tab (unusual for a Chinese court) has only telephone numbers for the court and affiliated tribunals, rather than an email (or Wechat account). Of course the information on the Chinese side of the website is more detailed (under the white paper tab, for example, a detailed analysis of annual judicial statistics can be found), and the laws & regulations tab might usefully set out maritime-related judicial interpretations, but most of the information is well organized and relevant. Similar comments can be made about the Guangzhou maritime court’s website (http://english.gzhsfy.gov.cn/index.php).
It appears that Judge Zhao Hong, president of the Shanghai Maritime Court (and former SPC #4 Civil Division judge) and her Guangzhou counterpart, Judge Ye Liudong, have a greater sense of what the world outside of China is interested to know about the Chinese courts than many other Chinese senior court judges. The team of judges (and other judicial personnel) under her watchful eye does a good job of keeping the website current and useful.
Most of the court English language websites should be rated “room to improve,” as they fail to convey useful and timely information to foreign users.Those running the website do not seem to have a sense of what the foreign audience wants to know. That could be solved in a couple of ways: looking at some foreign court websites, consulting with a web-development company focusing on the foreign market, or recruiting some foreign lawyers or law students to be a website focus group.
The websites need to convey to a foreign audience a range of useful information worded in accessible language if they are to accomplish their goal of promoting the image of the Chinese courts. One useful piece of information that should be on a Chinese court website is a clear illustration of the steps in a civil or commercial case), aimed at individual or small business litigants. How foreigners can use the Chinese courts to protect their rights, be they related to a contract, property, or employment relationship, is a practical issue both to the hundreds of thousands of foreign residents in China as well as those foreigners with cross-border disputes with a Chinese party.
Judge Zhang Yongjian, chief judge of the Supreme People’s Court (SPC)’s #4 Civil Division (responsible for foreign, Hong Kong, Macau, and Taiwan related commercial issues) previously featured on this blog, gave an interview to Legal Daily on the sidelines of the NPC meeting. This quick blogpost sets out some of the useful information from the interview:
He provided some data on the number of cross border cases:
Total number of foreign-related cases of all types (first, second instance, retrial, enforcement) heard and resolved: 25900, up 9.38%, among which 1061 were criminal,19200 civil and 3629 administrative, and about 2000 enforcement cases. The civil and commercial cases increased almost 11% compared to last year and accounted for about 75% of all foreign-related cases.
Total number of Hong Kong, Macau, Taiwan related civil and commercial cases closed: 27053 civil and commercial cases, Judge Zhang said that they accounted for 85% of all cases involving “greater China.”
The cases coming before the Chinese courts differ from the old trading and joint venture disputes, with many more cases involving demand guarantees, international factoring, private equity funds, stock options in companies listed overseas listed companies, cross-border telecommunications (fraud?), bonded trade disputes.
(As this observer has previously predicted), the number of cases related to One Belt One Road (OBOR) is increasing relatively quickly, while the number involving the United States, Britain, Germany, are decline. Cross-border project contracting and international logistics related cases are on the increase, as well as foreign-related intellectual property cases and maritime cases. Although Judge Zhang did not say so, it appears that many of these disputes are related to Chinese companies going out as well as OBOR, and may reflect inadequate documentation of the projects. The increase in maritime cases is linked to the ongoing decline in the shipping industry. Chinese maritime courts have heard cases related to the Hanjin bankruptcy as well as large numbers of cases involving ship crew.
Challenges for the Chinese courts in hearing cross border cases: encountering many “blank spaces” in Chinese legislation; conflict of laws with neighboring countries. Other ongoing bottlenecks for Chinese courts in hearing cross-border cases–service of process to overseas parties; obtaining evidence crossborder; determining facts that have occurred abroad; determining and applying foreign law.
Judge Zhang highlighted the solutions for the Chinese courts in dealing with the difficulties:
SPC issuing judicial interpretations and other judicial guidance;
establishing a case guidance and reference system for the lower courts, including model cases, guiding cases, and selected cases (i.e. as selected by the SPC), to guide and limit judges’ discretion.
The SPC selecting some commercial cases (relating to free trade zones, internet finance, cross border investment financing) with an international impact as a model.
To enable correct and just hearing of cases, the higher and lower courts should be in touch in a timely matter and establish a system for supervision before, during and after a case. [What this means for judicial autonomy in hearing cases and the appeal system is not said.]
On the goals for 2017, those include establishing an OBOR dispute resolution center (推进设立“一带一路”争端解决中心的建立，促进“一带一路”建设). This is likely linked to the May, 2017 OBOR Conference to be held in Beijing. Judge Zhang did not further specify, but it seems unlikely to mean establishing China’s own investment dispute resolution center. Perhaps this means increasing the role of Chinese courts in hearing cross-border cases involving OBOR jurisdictions.
Judge Zhang mentioned that he and his colleagues in 2017 have a variety of difficult issues that will be the subject of judicial interpretations or policy documents. This observer hopes that they will find it appropriate to consult the international legal community when drafting the following judicial interpretations that are on their agenda:
Enforcement of foreign civil and commercial judgments (possibly related the the Judgments Convention being negotiated under the auspices of the Hague Conference on Private International Law, and in the near term, to the enforcement of judgments through mutual judicial assistance treaties;
labor issues for ship crew;
damages in marine environmental cases;
jurisdiction in foreign-related cases, particularly civil and commercial cases;
judicial review of arbitration (this has been signalled for at least two years).
Judge Zhang signalled that they want to establish an English language website on foreign-related civil and commercial matters. It is hoped that this new website will post information in a more timely manner than the current SPC English language website. An (unsolicited) recommendation is to hire an expatriate editor (similar to Xinhua and other Chinese media outlets) to assist in delivering content that meets institutional requirements and interests the foreign user.
All these developments relate back to one sentence in the Fourth Plenum Decision:
Vigorously participate in the formulation of international norms, promote the handling of foreign-related economic and social affairs according to the law, strengthen our country’s discourse power and influence in international legal affairs, use legal methods to safeguard our country’s sovereignty, security, and development interests.
The day after the Communist Party Central Committee’s Central Economic Work Conference concluded, the Supreme People’s Court’s (SPC’s) Party Committee held a meeting to study the “spirit of the Central Economic Work Conference.” According to SPC President Zhou Qiang, the Central Economic Work Conference has the following takeaways for the courts:
First, adhere to strict and impartial justice, and create an open, transparent and predictable rule of law business environment
Among the points– “We must insist on protecting the lawful rights and interests of Chinese and foreign parties equally according to law and building a more competitive international investment environment.”
Note, of course, that the foreign chambers of commerce in China have other views of the current state of the business environment at the moment, but agree that rule of law, transparency, and predictability are critical for improving China’s economic performance. The following is from the European Union Chamber of Commerce in China’s Business Confidence Survey 2016
AmCham China: “Respondents now cite inconsistent regulatory interpretation and unclear laws as their No. 1 business challenge.”
Second, use the rule of law to actively promote the supply side structural reform
Zhou Qiang called on the lower courts to work better on bankruptcy cases, give full play to the role of the information network of bankruptcy and reorganization of enterprises, actively and safely deal with “zombie enterprises”, to optimize the allocation of resources to resolve the excess capacity.
But actually, bankruptcy cases remain fraught.
According to SPC Senior Judge Du Wanhua, charged with making bankruptcy law work better, in China bankruptcy requires a unified coordination mechanism with government and courts, under Party Committee leadership.
In recent high profile corporate bankruptcies, such as LDK Solar, the local governments say that they cannot afford to rescue the companies, and so the burden must fall on creditors. The LDK case has drawn complaints from bankruptcy practitioners that the local government-led restructuring was designed to force banks to swallow the losses. Another lawyer commented that local governments’ intervention in bankruptcy cases has often disrupted their fairness.
It is likely that we will see more developments in 2017 concerning bankruptcy.
The third is to further increase the protection of property rights
Among the points Zhou Qiang made:
We must strengthen the protection of property rights of various organizations and natural persons;
We should have the courage to correct a number of mistaken cases concerning infringement of property rights.
These statements relate to three documents issued in late November and early November on protecting property rights, linked to the Central Committee/State Council’s November 4 document on the same topic, following the document issued in late October (and describe in my recent blogpost). They include:
Opinion on Fully Using the Capacity of the Courts to Strengthen Judicial Protection of Property Rights 最高人民法院关于充分发挥审判职能作用切实加强产权司法保护的意见
Implementing Opinion on Properly Handling Property Rights Cases Formed by History (Historical Property Rights Cases Opinion)(最高人民法院关于依法妥善处理历史形成的产权案件工作实施意见)
courts freezing assets far exceeding the amount in dispute (this is one example);
court confiscating the personal property of the entrepreneur and his (her) family, failing to distinguish between corporate and personal property;
courts failing to give parties opposing freezing or confiscation order a chance to be heard;
courts failing to hear disputes between government and entrepreneurs fairly.
The first document (apparently drafted by the SPC Research Department, because its head explained its implications at the press conference at which the first two documents were released) repeats existing principles that state-owned and private litigants, Chinese and foreign litigants should be treated equally. It repeats existing principles that public power must not be used to violate private property rights.
The Historical Property Rights Cases Opinion (apparently drafted by the SPC’s Trial Supervision Division, because its head explained its implications at that press conference) calls on provincial high courts to establish work groups to review mistaken cases and to avoid such tragedies in the first place, focusing on implementing the regulations restricting officials from involving themselves in court cases and the judicial responsibility system.
The third document seeks to impose better controls on the use of enforcement procedures by the lower courts.
It is hoped that these documents can play some part in improving the quality of justice in China, despite the difficulties posed while the local courts remain under local Party/government control, and may lead to the release of unfairly convicted entrepreneurs and the return of unfairly confiscated property. Perhaps these documents may provide some protection to local judges seeking to push back against local pressure. On the historical cases, the SPC Supervision Division should consider appealing to current or retired judges who may have been involved in these injustices to come forward (without fear of punishment), as they likely to be able to identify these cases. A defined role for lawyers would also be helpful.
On the equal protection of enterprises, it should be remembered that the SPC itself has issued documents that give special protection to some parties, such as “core military enterprises.”
It appears that these documents respond to the following:
years of criticism of differential legal treatment of and discrimination against private entrepreneurs;
academic studies by influential institutions on the criminal law risk faced by private entrepreneurs;
Downturn in private investment in the Chinese economy;
Lack of interest on the part of private enterprise in private-public partnerships;
Increase in investment by private enterprise abroad, most recently illustrated by the Fuyao Glass investment in Ohio;
articles such as this one describing Chinese entrepreneurs as either in jail or on the road to jail.
Fourth, proactive service for the construction of “one belt one road”
This section repeats many of the themes highlighted in the SPC’s earlier pronouncements on One Belt One Road (OBOR or Belt & Road), the maritime courts, and foreign-related commercial developments. The Chinese courts continue to grapple with the increased interaction and conflicts with courts in foreign jurisdictions. The OBOR jurisdictions are handicapped by a dearth of legal professionals with familiarity with the Chinese legal system.
We should expect to see more developments directly or indirectly linked to OBOR, including a more standardized approach to the judicial review of arbitration clauses.
Fifth, strengthen the judicial response to the risks and challenges of the economy
Among the issues that President Zhou Qiang mentioned
illegal fund-raising and other crimes;
real estate disputes;
cases involving people’s livelihood, increasing the recourse of migrant workers and other cases of wage arrears.
These are all ongoing, difficult issues for the courts. Legislation does not demarcate clearly the line between legal and illegal forms of financing as discussed here. Migrant workers, particularly in the construction industry, are often not hired under labor contracts but labor service contracts, which reduces their entitlements under the law. As the Chinese economy continues to soften, it is likely that complex real estate disputes (of the type seen in 2015) will burden the lower courts.
We are likely to see further developments in these areas.
President Zhou Qiang told the courts to make good use of judicial “big data” to detect trends and issues so the courts can put forward targeted recommendations for reference of the Party committee and government decision-makers. He has made this point repeatedly recently.
For foreign observers of China, judicial big data is in fact a useful source of indicating trends across the Chinese economy, society, and government. This blog has flagged some analyses, but there is much more than can and should be done.
On 18 November, the Supreme People’s Court (SPC) issued the Regulations on Some Issues Concerning the Trial of Independent Guarantee Disputes (Independent Guarantees Interpretation) (审理独立保函纠纷案件若干问题的规定). It was publicly released at a 22 November press conference. This document is a judicial interpretation (see this explanation) that becomes effective on 1 December. The Independent Guarantees Interpretation is important because:
it relates to guarantees issued by the four main Chinese banks (total amount of USD 353 billion in 2015), so the amounts will be far greater when the other banks are included);
large numbers of commercial transactions by Chinese companies outside of mainland China.
Along with the enormous increase in Chinese companies investing and undertaking projects abroad and being required to provide a demand guarantee when doing so has been an explosion of litigation in China [to be updated with data when available] by companies seeking to prevent the bank that has issued the demand (independent) guarantee from doing so when the foreign party to which the guarantee has been issued seeks to be paid out under the guarantee because the performance by the Chinese company fails to comply with contractual requirements. It has also led to litigation outside of China, such as in the English courts.
in a number of cases, Chinese courts have attempted to reinforce their own jurisdiction in multinational disputes by issuing stop orders to Chinese parties directing them not to make payment on negotiable instruments or guarantees issued in support of a principal contract which is the subject of litigation. In the case of a Chinese bank with international interests and assets and an international reputation,this puts the bank in a very difficult situation.
It is for that reason that Judge Zhang Yongjian, head of the #4 Civil Division of the SPC (responsible for foreign-related commercial/maritime issues) revealed (at the press conference at which the interpretation was released) that the China Banking Regulatory Commission (CBRC) and the China Banking Association have been lobbying the SPC to issue this interpretation quickly. (The drafting began in early 2013 and informal work began in 2012), while discussions about the issue date back to 2007 (if not before). A drafting group within the #4 civil division was responsible for drafting it).
For those with no background about what these are, a demand/independent guarantee (called an independent guarantee in Chinese (独立保函), is often used in construction, engineering and many other types of infrastructure projects (and trade, such has shipbuilding and turbines), when the owner of the project requires the performing party to guarantee his performance with a guarantee issued by a bank. It means that if the contractor fails to meet his obligations, the project owner can be easily compensated. The bank guarantee generally needs to be backed by company funds. These are extremely important with so many Chinese companies focusing on infrastructure projects overseas, under the Chinese government’s One Belt, One Road and Go Global strategies and Chinese companies seeking to produce goods with greater added value, as Judge Zhang noted.
The International Chamber of Commerce’s (ICC’s) Uniform Rules for Demand Guarantees (URDG 758) are the internationally agreed international standard on demand guarantees, having been officially endorsed by the UN Commission on International Trade Law (UNCITRAL) at its 44th annual session in June-July, 2011. The Independent Guarantees Interpretation sets out the applicability of URDG 758 in Chinese disputes, governing law, jurisdiction, and other issues and draws on it, the United Nations Convention on Independent Guarantees and Standby Letters of Credit, and other international rules. (Judge Zhang used the phrase “充分借鉴吸收” (fully considered and absorbed).
Maneuvering around existing domestic legislation
The language of the interpretation maneuvers around Article 5 of China’s Security (Guarantee Law) and Article 172 of the Property Law and their restrictions on independent guarantees in domestic transactions, because independent guarantees have grown to be a big business among domestic financial institutions (according to Judge Zhang) (The interpretation allows parties to agree that the provisions of URDG 758 will be applicable.).
The Security Law states:
A guarantee contract is an ancillary contract of the principal contract. If the principal contract is nullified, the guarantee contract shall be null and void accordingly. Where it is otherwise agreed in the guarantee contract, such agreement shall prevail.
Similarly, the Property Law states that “for the creation of a security right, a guarantee contract shall be concluded in accordance with the provisions of the law and other relevant laws. A guarantee contract is an ancillary contract of the principal contract. When the principal contract is nullified, the guarantee contract shall be null and void accordingly, unless otherwise stipulated by law.
Tightening the fraud exception
The interpretation tightens the fraud exception from the requirement to make immediate payment and specifies the conditions under which courts can issue stop orders. The SPC looked to the international agreements mentioned above, foreign legislation, and foreign cases when drafting its own provision (Article 12). Judge Zhang admits that the misuse of this exception by local courts has led to foreign banks being reluctant to negotiate letters of credit issued by Chinese banks. (This observer suggests that one reason could be that large local companies may pressure local courts to so rule).
Consultation process in drafting
Judge Zhang noted that the drafting process was one of the highlights of the interpretation. In my earlier blogpost on the draft interpretation, I noted that the SPC consulted with (formally or informally):
the Ministry of Commerce;
leading Chinese lawyers;
some of the leading arbitration commissions;
representatives from the principal Chinese banks and major state-owned companies.
Judge Zhang noted that they consulted with:
the lower courts;
National People’s Congress’ Legislative Affairs Commission;
State Council’s Legislative Affairs Office;
People’s Bank of China;
State Administration of Industry & Commerce;
China Banking Association;
China International Contractors Association; and
ICC China Committee.
According to an “authoritative person,” the above list is not exhaustive.
From my own contacts, and from reports of at least one conference on trade finance in Beijing attended by representatives from the ICC and the SPC, there were discussions with the ICC.
SPC judges organized research and met with financial institutions. But Judge Zhang also said that they sought public opinion through the SPC’s website. What he did not say was that the consultation period was for nine days (as I noted in my blogpost of almost three years ago).
As I said then (and have said numerous times on this blog and to individual SPC judges), my view that it is best for the SPC to solicit public comments on important civil/commercial issues such as this one and give persons a reasonable comment period, and for bilateral investment treaties to incorporate a requirement to require this.
For anyone involved in any aspect of a project in which a Chinese contractor provides a demand/independent guarantee, reviewing this judicial interpretation is crucial. I expect the commercial translation services will translate it (and law firms, Chinese and international, will issue alerts parsing its provisions).