Category Archives: foreign-related cases

Supreme People’s Court and “One Belt One Road”

Judge Luo Dongchuan. chief judge,#4 civil division
Judge Luo Dongchuan. chief judge,#4 civil division, at the OBOR Opinion press conference

On 7 July the Supreme People’s Court (the Court) issued an opinion (意见) policy document on how the courts should provide services and protection to “One Belt One Road” (OBOR Opinion) (关于人民法院为“一带一路”建设提供司法服务和保障的若干意见). This blogpost explains why the Supreme People’s Court issued it, what the policy document provides and what it means for legal professionals. The typical (model) cases issued at the same time include the Sino-Environment case, subject of an earlier blogpost  (and deserve closer analysis).

Why was the One Belt One Road document issued?

One Belt One Road (OBOR) is a major government strategic initiative.  As a central government institution, the Court must do its part to support OBOR.  Major SOEs contemplating investing in OBOR projects or trading with companies on OBOR recognize that their interests are best protected through legal infrastructure and the Court has an important role in this. MOFCOM and other related regulatory agencies realize this as well. Local courts linked to the Belt or the Road, are dealing with new demands because of OBOR and are looking to the Court for guidance.

The OBOR Opinion was drafted with input from these regulatory agencies and certain legal experts, but was not issued for public comment.

What the OBOR Opinion covers

The OBOR Opinion covers cross-border criminal, civil and commercial, and maritime as well as free trade zone-related judicial issues.  It also deals with the judicial review of arbitration.

Criminal law issues: the lower courts are requested to improve their work in cross-border criminal cases, and the courts are to do their part in increased mutual judicial assistance in criminal matters.  The focus is on criminal punishment of  those characterized as violent terrorists, ethnic separatists, religious extremists, and secondarily on pirates, drug traffickers, smugglers money launderers, telecommunication fraudsters, internet criminals, and human traffickers. It also calls on courts to deal with criminal cases arising in trade, investment, and other cross-border business, and deal with criminal policy and distinguishing whether an act is in fact a crime, so that each case will meet the test of law and history.  The political concerns behind criminal law enforcement issues are evident in this.

Much of the focus in the OBOR Opinion is on civil and commercial issues, including the exercise of jurisdiction, mutual legal assistance, and parallel proceedings in different jurisdictions and in particular, improving the quality of the Chinese courts in dealing with cross-border legal issues. These issues are explained in more detail below

One of the underlying goals set out in the OBOR Opinion, is to improve the international standing and influence of the Chinese courts and other legal institutions.

What does it mean for legal professionals

The OBOR Opinion signals that the Court is working on a broad range of practically important cross-border legal issues.  Some of these issues involve working out arrangements with other Chinese government agencies and are likely to require several years to implement.  The OBOR Opinion mentions that the Court:

  • seeks to expand bilateral and multilateral mutual judicial assistance arrangements, for better delivery of judicial documents, obtaining evidence, recognition and enforcement of foreign court judgments.
  • supports and promotes the use of international commercial and maritime arbitration to resolve disputes arising along One Belt One Road.  China will promote the use of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) between countries on One Belt One Road and encourage countries that have not yet acceded to the Convention to do so.
  • supports and promotes the use of various types of mediation to resolve OBOR related cross-border disputes.
  • it signals that the Court will become more involved in Chinese government initiatives such as the Asian Infrastructure Investment Bank, the conference of supreme courts under the Shanghai Cooperation Organization, and other international or regional multilateral judicial cooperation organizations.
  • is signalling the lower courts that they should limit the range of cross-border contracts being declared invalid or void.
  •  sets out the new thinking on the issue of reciprocity in the enforcement of foreign judgments, in particular that Chinese courts can take the initiative in extending the reciprocity principle to parties from other jurisdictions.  This is practically significant for foreign parties and their counsel, and has been discussed repeatedly by both practitioners and academics (such as these);
  • will improve Chinese legal infrastructure on overseas evidence, overseas witnesses giving evidence, documenting the identity of overseas parties, “to better convenience Chinese and foreign parties. ”  This would involve evolving from the current system embedded in Chinese legislation of requiring notarization and legalization of many documents (because mainland China is not yet a party to the Hague Convention on the Abolishing the Requirement of Legalization of Foreign Public Documents. This is a positive sign;
  • The Court has on its agenda further legal infrastructure on the judicial review of arbitration (as signalled at the end of last year), involving foreign/Hong Kong/Macau/Taiwan parties, aimed at supporting arbitration and having a unified standard of judicial review on the following issues:
    • refusing enforcement of arbitral awards; and
    • setting aside arbitral awards.
  • has on its agenda judicial legal infrastructure for supporting the resolution of bilateral trade, investment, free trade zone and related disputes.
  • Reflecting language in the 4th Plenum, it calls for China to be more greatly involved tin the drafting of relevant international rules, to strengthen China’s voice concerning issues of international trade, investment, and financial law.
  •  mentions that an improved version of the Court’s English language website and website on foreign-related commercial and maritime issues is forthcoming.  Specific suggestions can be emailed to supremepeoplescourtmonitor@gmail.com.

Shine light on draft judicial interpretation on “twisting the law in arbitration”!

images-1The Supreme People’s Court and Supreme People’s Procuratorate are together drafting a judicial interpretation on Article 399a of the Criminal Law, the crime of “twisting the law in arbitration.”  My understanding is that one of the criminal law divisions of the Supreme People’s Court is involved in the drafting, rather than the #4 civil division, well-known internationally for its expertise in arbitration issues. According to an article published by the Guiyang Arbitration Commission, in late April, the State Council Legislative Affairs Office distributed the draft to some arbitration commissions for comment.  Given the many legal issues it raises for domestic and foreign arbitrators (and the Chinese government’s international/regional obligations), it should be issued publicly for comment.

What is Article 399a of the Criminal Law?

Article 399a, is part of  Chapter IX:  Crimes of Dereliction of Duty.

Where a person, who is charged by law with the duty of arbitration, intentionally runs counter to facts and laws and twists the law when making a ruling in arbitration, if the circumstances are serious, he shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention; and if the circumstances are especially serious, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years.”(依法承担仲裁职责的人员,在仲裁活动中故意违背事实和法律作枉法裁决,情节严重的,处三年以下有期徒刑或者拘役;情节特别严重的,处三年以上七年以下有期徒刑.)

Article 399a,  (which seems to have been drawn from analogous provisions in Japanese and Taiwan law), was promulgated despite protests from the arbitration community. Harsh criticism continues to be published (in Chinese), such as Professor Song Lianbin’s Critical Analysis of the Crime of Deliberately Rendering an Arbitral Award in Violation of LawRecently, Duan Xiaosong, a Chinese law lecturer, published an article in a US law review on Article 399a, but the article apparently did not catch the attention of international practitioners.

Issues include:

  • Article 399a is a duty crime (one committed by officials). How is it that Chinese arbitrators who are not officials, or foreign arbitrators can commit this crime?
  • The procuratorate investigates duty crimes.  This means that the procuratorate must review an award to make a decision whether to investigate whether an award has been intentionally rendered “in violation of facts and law.” Will a procuratorate be able to conduct this review applying foreign law?
  • If a procuratorate prosecutes a case under Article 399a, it also requires a court to undertake a substantive review of an arbitral award.
  • Judicial interpretations of both the Supreme People’s Court and Procuratorate raise important issues.  As suggested in several earlier blogposts, part of the judicial reforms should include greater requirements for public comment on draft judicial interpretations. Depending on how familiar the US and EU bilateral investment treaty negotiators are with the details of Chinese law, this may be raised by negotiators.

Comment

Because this judicial interpretation has implications for China’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and the analogous arrangement with Hong Kong, the draft should be made public so that the greater arbitration community, domestic and foreign, is able to provide detailed analysis and commentary on it. This is the interests of the international and Chinese legal communities.

What you should know about foreign-related cases in the Chinese courts post 4th Plenum

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The integration of China with the outside world through investment, trading, shipping, and licensing, inevitably (in some cases) leads to litigation in a Chinese courtroom (even if a contract has an arbitration clause), as companies large and small have found out.  Some recent examples are listed below:

The Supreme People’s Court (Court) recently held its 4th National Work Conference on Foreign-Related Commercial and Maritime Adjudication (4th National Work Conference) in early November, shortly after the 4th Plenum. This is a conference that the Court organizes occasionally for judges hearing  commercial and maritime cases involving foreign parties. The Court uses work conferences to transmit the latest central legal policy, harmonize court practices consistent with those policies, and find out what the latest difficult legal issues are. (This is a practice similar to other Party/government agencies).

The 4th National Work Conference highlighted some of the provisions of the 4th Plenum:

  • Vigorously participate in the formulation of international norms;
  • Strengthen our country’s discourse power and influence in international legal affairs;
  • Strengthen law enforcement and judicial cooperation between the mainland, Hong Kong, Macau and Taiwan;
  • perfect our country’s judicial assistance systems;
  • ensure that the courtroom hearings play a decisive role.

Additionally, the Court emphasized other principles  such as —

  • vigorously asserting jurisdiction (which is also asserted vis a vis the Hong Kong courts–see this commentary on a Hong Kong divorce case), which deserves closer attention in Hong Kong;
  • Correctly applying international treaties and governing law principles.
  • Safeguarding national rights and interests.

Some background if you need it

“Foreign-related” is a concept of many years standing that means that a foreign element is involved, because of a party’s nationality, location of the property disputed, or other factors (as explained here).The concept of “foreign-related” further relates to other important questions, such as selecting arbitration outside of China and foreign governing law.

Following national work conferences, the Court  often issues follow-up “Conference Summaries” to guide the lower courts on the agreed upon approach to new or contentious issues. These do not have the status of a judicial interpretation but courts refer to them when deciding cases. According to Court rules, courts can cite judicial interpretations (but not Conference Summaries).  It doesn’t seem that the Conference Summary has yet been issued.

Status update on foreign-related cases in the Chinese courts

In China, 203 intermediate and 204 basic level courts have jurisdiction over first instance foreign-related cases.  In the period 2010-end June 2014, the Chinese courts heard 287,262 first and second instance cases foreign-related maritime and commercial cases, an increase of 41% over the previous period. The cases are mostly heard by courts in coastal areas, but as foreign investment goes inland, disputes inevitably follow.

Head’s up for the foreign legal community

Following the Work Conference, Judge Luo Dongchuan, head of the #4 Civil Tribunal of the Court, was interviewed by Legal Daily. Judge Luo mentioned many important future legal developments, highlighted below.

1. Reforms relating to four important practical issues

  • Establishing an electronic platform for service of legal process outside of the jurisdiction (intended to mean Hong Kong, Macau, Taiwan, as well as foreign countries);
  • Investigating and obtaining evidence (this is likely linked to current anti-corruption efforts by the Chinese government to pursue (and retrieve assets from) corrupt officials who have settled overseas)
  • Determining foreign law, through establishing a database of experts (Chinese and foreign).
  • Restricting parties to litigation from leaving China (Chinese legislation on these procedures is difficult to parse (see my earlier article on this subject and another related one).

2. Maritime court related reforms

  •  The Court is considering establishing maritime circuit courts, to deal with disputes arising inland arising from logistics cases in the maritime courts.
  • The Court intends to promote the maritime courts and a forum for hearing cases involving maritime pollution from on-shore sources (the largest source of maritime pollution China).
  • The Court is looking into reforming the maritime court’s jurisdiction, so that it will have jurisdiction over civil, criminal, and civil maritime cases.

3. Recognition of foreign court judgments

Judge Luo mentioned that the Court is researching the recognition and enforcement of foreign court judgments involving property.  (This appears to be at an early stage.)

3. Arbitration related reforms

Judge Luo emphasized that the Court supports arbitration.

Because arbitration is so important, the Chinese courts will try to uphold the validity of vague [poorly drafted!] arbitration clauses.

A new judicial interpretation on the judicial review of arbitration-related issues will go into the Court’s judicial interpretation drafting plan in 2015.

The Court intends to reform jurisdiction in judicial review of arbitration issues, to consolidate them in specialized courts, expanding the pilot projects underway in Guangdong, Inner Mongolia, and elsewhere (as designated by the Court.  Earlier this year, the Guangdong Higher People’s Court published a report on its experience so far.

4. Electronic platform

The Court is considering establishing an electronic platform for foreign-related cases.  This may relate to making litigation procedures for parties more transparent.

 Some unsolicited suggestions for the Supreme People’s Court

Consider the following:

  • Overhaul the Court’s English language platform, so that it provides useful official information for the foreign reader who does not know Chinese;
  • Issue more draft judicial opinions for public comment and give the public (foreign and Chinese) a more sensible time period to comment, particularly for draft regulations relating to any of the issues discussed above. The issues mentioned above are very important to the foreign business and legal community.  The current 30 day time period extremely short by international standards.  Given the opportunity, international and foreign organizations and law firms will comment, but it takes time for translation and busy lawyers and other legal professionals to make comments.
  • Consider what can be done to make the Chinese courts a more user-friendly forum for international commercial disputes.  For example, consider what is needed for China to become a party to the Hague Convention on the Legalization of Foreign Public Documents (which will involve reforms by multiple government departments) and other related conventions.  The current system of legalization of foreign evidence is difficult for foreign parties and puts the Chinese system behind the 107 countries in the world that are signatories).