Judicial assistance between the mainland & Hong Kong at 20

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HK’s Secretary of Justice shaking hands with SPC Justice Shen Deyong

In all legal arrangements, the devil is in the details.  Important details concerning how the Hong Kong and mainland legal systems interact are found in a series of arrangements on mutual legal assistance between mainland China and Hong Kong.  An “arrangement,” for those not familiar with Hong Kong/mainland legal jargon, is a quasi-treaty document between Hong Kong and the mainland. The mainland is looking to conclude further arrangements, including in the area of criminal law.  According to 29 June report by Xinhua News:

Chinese mainland and Hong Kong are expected to confirm further judicial assistance arrangements, including those regarding criminal proceedings.

Shen [Deyong, Supreme People’s Court (SPC) executive vice president] said in an interview with Xinhua that the two sides will carry out further negotiations on judicial assistance in civil and commercial cases and will take effective measures to deal with the assistance issues in criminal cases, so the assistance arrangements cover all judicial realms between the two sides.

It appears that Justice Shen is repeating what he told Hong Kong’s Secretary of Justice Rimsky Yuen in April, 2017.

Justice Shen’s language can be traced back to the 4th Plenum Decision:

Strengthen law enforcement and judicial cooperation between the mainland, Hong Kong, Macau and Taiwan,jointly attack crossborder unlawful and criminal activities.

(I discussed this in a January, 2015 conference at the University of Hong Kong.)

Likely taking the lead in negotiating these arrangements is the Hong Kong Department of Justice (Hong Kong DOJ)’s International Law Division (and I assume others as well) and its mainland interlocutors.  I assume that a team from the Supreme People’s Court (SPC)’s Hong Kong and Macau Affairs office is among the negotiators on the other side of the table (with a team from the Supreme People’s Procuratorate involved with negotiations on criminal matters.  The Hong Kong DOJ’s website lists five mutual legal assistance arrangements, with the most recent one, signed on 20 June 2017, on the Reciprocal Recognition and Enforcement of Civil Judgments in Matrimonial and Family Cases, not yet in force.  The paper that the Hong Kong DOJ filed with the Legislative Council sets out details of the arrangement, including its scope.

This latest arrangement relates to one of many pressing practical legal issues between Hong Kong and the mainland, the large percentage of “cross-boundary marriages.” According to the Hong Kong DOJ’s consultation paper on the arrangement (the SPC did not issue a similar paper), cross-boundary marriages increased from 32% to 37% during 2009-2014 and 20-30% of divorce cases filed in Hong Kong’s family court during 2010-14 related to marriages that took place on the mainland.

This arrangement involved creative lawyering on both sides, because it involves incorporating principles from several Hague Convention to which mainland China is not a party:

  • Recognition of Divorces and Legal Separations (1970), applicable to Hong Kong, but not the mainland;
  • The Hague Convention on the Civil Aspects of International Child Abduction (1980), applicable to Hong Kong, but not the mainland;
  • International Recovery of Child Support and Other Forms of Family Maintenance (2007), not applicable to either Hong Kong or the mainland.

Many of the previous arrangements reflected Hague Conventions to which the mainland was already a party.

Commercial lawyers should note that according to an April, 2017 statement by Hong Kong’s Secretary of Justice Rimsky Yuen, it was agreed in the form of 2016 meeting minutes to prioritize an arrangement for reciprocal judgment enforcement in civil and commercial matters involving situations other than the presence of choice of court agreements.  A consultation paper has not yet been issued for that arrangement. I surmise that the arrangement will reflect the draft Hague Convention on the Recognition and Enforcement of Foreign Judgments.  Hong Kong’s DOJ has at least one representative participating in China’s delegation.  Several senior SPC judges are also on the delegation. (The other two arrangements mentioned have already been concluded.)  It can be seen from this visual from a Chinese court’s Wechat public account, that the end of 2017 has been set as the deadline for concluding that arrangement.

Arrangements involving criminal matters are much more difficult to conclude, although several prominent commentators in Hong Kong this year have called for a rendition arrangement to be concluded. Among those include Grenville Cross, former director of public prosecutions in Hong Kong and Regina Ip, former Secretary for Security.  The issues have been discussed since the late 1990’s.  This 2005 paper submitted to the Legislative Council sets out some of the basic principles that could go into a future rendition arrangements:

  • double criminality;
  • issue of death penalty;
  • non-extradition for political offenses;
  • fair trial;
  • double jeopardy;
  • habeus corpus.

There have been academic articles on many of these topics.

It appears that the increased pressure on Hong Kong relating to the rendition arrangement is related to the drafting by the mainland’s Ministry of Justice of an International Criminal Justice Assistance Law.  (No drafts have yet been released.) Fellow blogger NPC Observer notes that although the law is intended as a comprehensive statute covering all areas of international criminal justice assistance, including the mutual recognition and enforcement of criminal judgments, official discourse labels it an anti-corruption law, likely designed specifically to hunt fugitive corrupt officials overseas.  So it appears also to be linked to Operation Skynet and the Central Anti-Corruption Coordination Group.

The status of negotiations on a rendition arrangement or other arrangements related to criminal justice are unknown.  What is known is that there have been instances, including earlier this year, in which certain mainland authorities have dispensed with the niceties of official liaison. Would having an arrangement improve matters, as Grenville Cross argues, or will “extraordinary” rendition continue to occur?

It appears that upholding an important part of Hong Kong’s rule of law, as evidenced by arrangements between Hong Kong and the mainland depends on the professionalism of Rimsky Yuen, the Secretary of Justice, his Department of Justice colleagues and their mainland interlocutors.  As he told Justice Shen and others at a meeting between the SPC and Department of Justice in April, 2017:

Cooperation [on criminal cases] is significant, but considering the difference of the two legal systems, we face challenges in civil, commercial and criminal ­cooperation. It will still take some time.

Finally, paraphrasing the Guardian, analyzing the Supreme People’s Court takes time and costs money. If you like the Monitor, please make a contribution (details here.)

 

 

Improving China’s criminal petitioning (collateral appeals) system

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Petitioners at SPC (used with permission of Natalie Behring)

In recent months, the Supreme People’s Court (SPC) has been issuing one policy document after another to put some substance into the vague language of a “trial-centered” criminal justice system.  One of those documents, which the SPC issued recently along with the Supreme People’s Procuratorate and Ministry of Justice, is directed at involving lawyers in the criminal case petitioning system: Opinions on Gradually Implementing Systems For Lawyers’ Representation in Collateral Appeals (Collateral Appeals Opinion).  (The document was copied to a surprising number of Party, state, and military institutions, according to this version).

The Collateral Appeals Opinion builds on a single line in item #36 of the SPC’s 4th Court Reform Plan outline:  “Promote the establishment of a system for lawyer representation in complaint appeals [collateral appeals] cases.”  As some readers may be aware, China has a collateral appeals or criminal case petitioning (刑事申诉) system, giving a convicted person and his or her family a right to petition a court to have the case re-opened and reconsidered under the Criminal Procedure Law’s trial supervision procedures.  Criminal defense lawyers are hopeful that this will lead to more involvement by the criminal defense bar, but there are many procedural and financial arrangements still to be worked out.

It seems likely that Judge Hu Yunteng, as a member of the SPC’s judicial committee (as well as others) were involved in the drafting of this policy document. As I discussed in a February, 2017, blogpost, Judge Hu Yunteng and other colleagues on the #2 Circuit Court wrote a research report analyzing criminal collateral appeals petitioners visiting the #2 Circuit Court (第二巡回法庭刑事申诉来访情况分析报告), (which does not seem to have been made public) and in the article summarized in that blogpost, advocated hearing the views of the party’s lawyer if one has been appointed and noted that making contact with the party and his lawyer was an important way to deal with these cases.

But establishing an effective collateral appeal system system involves further issues, as highlighted by one of my students in his class paper (edited).

  1. Criminal petitioning [collateral appeal] lawyers face a dilemma: they don’t have the right to investigate evidence, read case files, or even meet their clients if their clients are now prisoners and not defendants. [Comment–section 9 of the Collateral Appeals Opinion has broad language on improving this–this is a positive step, but will require more specific implementing procedures].
  2. Article 306 of the Chinese Criminal Law, which provides that criminal defense lawyers who encourage defendants or witnesses to change their testimony should be punished criminally. This  provision makes criminal defense lawyers extremely unwilling to investigate new evidence by themselves because of the high risk.
  3. According to Chinese Criminal Procedure Law, the petitioning process should be conducted in the court which makes the original judgment. [Comment–the Supreme Peoples Procuratorate and Court media outlets recently have published proposals to have these cases should be considered by procuratorates and courts in other jurisdictions.] However, this court will have strong incentive to have these cases not successfully petitioned because their bonus and assessment are based on correctness rate of effective judgments. [My comment–this is one of the many ways the judicial performance assessment system creates obstacles to justice. So to make this reform effective, this indicator must be abolished.] Combined with the fact that there is no clear rule that needy petitioners should be assigned lawyers, they may either ignore the need for lawyers, or just assign lawyers who have little interest to really petition for their clients in these cases. So in most cases in which petitioners are in poverty, they could only seek the help of private lawyers for free service.
  4. In China there is a saying that if you want to win in petitioning you have to make a big influence to make the government notice your case, and if you want the government to notice on you, you have to use some extreme rather than some “legal” ways to petition. If petitioners hire a lawyer, the lawyer has his/her own professional responsibility standard that he or she has to follow, which may sometimes conflict with the “best interest” of the client.
  5. There a gap between the economic difficulty for ordinary daily life and economic difficulty in seeking legal service. For example, a person may not meet the criteria of economic difficulty because he or she’s earning is above the living standard. However, this person can still not able to afford legal service from a law firm because ordinarily the cost for seeking criminal defense service is above a person’s salary in a whole year. Such gap and seemingly objective standard actually causes a problem and means many people in need cannot receive the aid.

Chinese criminal justice reform–as President Trump says “it’s complicated!”

Supreme People’s Court & foreign-related disputes

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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;
  • cross-border guarantees;
  • 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.

 

 

 

Supreme People’s Court releases 2016 bankruptcy data

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

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

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

Liaoning high court looks into labor issues in bankruptcy

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

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

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

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

Research report reveals several major issues

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

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

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

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

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

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

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

Comments

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

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

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

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

Big data on China’s case database

Screen Shot 2016-07-30 at 12.13.38 PMThe Supreme People’s Court (SPC) database, China Judgments Online, receives good marks from most commentators inside and outside of China and it is one of the successes of the judicial reforms that President Zhou Qiang often discusses with visiting foreign guests as well as domestic officials.  Only now has a team of researchers from Peking University drilled down on the case database (but only through 2014, because the data was not complete for 2015) (short version found here and full version here). They found that there is room for improvement.

The researchers found that only about 50% of number of cases resolved in the Chinese courts (about 30.5 million during 2014-2015) have been uploaded to the case database (14.5 million).

Level and type of case

Almost 80% of the cases uploaded are from the basic level courts, with intermediate level courts accounting from almost 19%, and fewer than 1% from the SPC.

Approximately 63% of the cases are civil, with 20% criminal, enforcement 15%, and administrative cases less than 4%. 

Are courts uploading cases to the database consistently?

 

 

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Geographic distribution of uploaded judgments

 

The map above is based on an analysis of 2014 data.  Shaanxi, Zhejiang, Shandong, Anhui, and Hebei provinces were the best performers, particularly Shaanxi; Henan, Fujian, Hunan, Hubei, Guangxi, and Ningxia were in the second tier, uploading at least half.  The less transparent courts include Tibet, Xinjiang, and Guizhou.

[I personally expected that Shanghai, Jiangsu, and Guangdong would be more transparent.]

Are cases uploaded consistently throughout the year?

At least in 2014, there was a half year and year end rush to upload cases.  It appears that the uploading of cases is one of the items for judges performance appraisal.

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Issues cited

  • More than half of judicial documents have not been uploaded to the database, including judgments in some of the more controversial cases.
  • Technical issues complicate the uploading process.  Because the courts are administered locally, the IT systems are local as well.
  • The regulations set out vague standards for taking down a judgment/ruling. When objections are made, the cases are taken down with little review. [As I have commented in relation to streaming of court cases, the absence of privacy legislation is an issue, because judges lack specific guidance on what information is regarded as private.]
  • Large gaps exist between the coastal and inland provinces in uploading judgments, with long delays an issue as well, although the regulations require judgments to be uploaded 7 business days after they take effect (this provision is unchanged from the 2013 version).
  • Monitoring of the database is an issue.  The SPC has been stressing the quantity of judgments uploaded, while insufficient attention is paid to quality.  [This may have something to do with tendency of some Chinese academics to focus on theory or comparisons among jurisdictions, rather than engage in a more focused study on what their own court system is actually doing.]

Comment

The Chinese government has allocated  USD $40 billion to the Silk Road Fund associated with the One Belt One Road strategic initiative, to improve infrastructure overseas.  China’s judiciary, an important part of the nation’s legal infrastructure, requires better funding as well.  Even a tiny percentage of that $40 billion would go far to contribute to improve courts’ IT infrastructure, not to mention improved salaries, and the retention of the research departments of local courts.

Investment in the courts is needed to bolster the Chinese (not to mention foreign) public’s confidence in the Chinese courts’ ability to provide a better quality of justice.

As my law school classmate, Justice John Roberts, said several years ago, when confronted by budget cuts to the US federal judiciary:

At the top of my list is a year-end report that must once again dwell on the need to
provide adequate funding for the Judiciary.I would like to choose a fresher topic, but duty calls. The budget remains the single most important issue facing the courts….

The Judiciary continues to depend on the vision and statesmanship of our colleagues in the Executive and Legislative Departments. It takes no imagination to see that
failing to meet the Judiciary’s essential requirements undermines the
public’s confidence in all three branches of government. Both A Christmas
Carol and It’s a Wonderful Life have happy endings. We are encouraged
that the story of funding for the Federal Judiciary—though perhaps not as
gripping a tale—will too.

 

 

 

Chinese companies on World Bank’s name & shame list

screen-shot-2016-11-03-at-5-27-48-pmThe Supreme People’s Court and other Chinese government institutions have been making increasing use of name & shame lists to call attention to illegal behavior by institutions and individuals and to prevent them from benefiting from their illegal behavior (as I discussed in this blogpost). International institutions, such as the World Bank, Asian Development Bank, African Development Bank, Inter-American Development Bank and the European Bank for Reconstruction and Development, name and shame as well.  They list firms and individuals that have been disbarred (by their own or counterpart institution) from being awarded a multilateral development bank contract because they have been sanctioned for fraud or corruption violations (the World Bank list is here and a comprehensive introduction is found here). The World Bank cooperates with other international and national regulatory and enforcement organizations, such as the European Anti-Fraud Office and the UK’s Serious Fraud Office.

I recently published a brief blogpost on the website of the Wong MNC Center, calling attention to the significant number of Chinese companies, particularly state-owned companies, that are on the World Bank (and other multilateral development banks) blacklists. I noted that there do not seem to be clear repercussions for those companies and queried whether China’s Asian Infrastructure Investment Bank (AIIB) will follow the practice of the other multilateral development banks.AIIB has recently appointed Mr. Hamid Sharif, formerly of the Asian Development Bank, to be Director General of the AIIB’s Compliance, Effectiveness and Integrity Unit, and Gerard Sanders to be its general counsel. Sanders worked for many years in the legal department of the European Bank for Reconstruction and Development. Both men would take the disbarment system as an accepted part of the international development bank regulatory system.  Some issues I didn’t have a chance to raise:

  • A significant number of Chinese companies did not participate in the sanctioning proceedings or make use of the appeal procedures. This attitude is analogous to the way some  Chinese companies view foreign arbitration and other foreign dispute resolution (the three nos–see my earlier blogpost on this).An experienced Chinese consultant that I contacted privately remarked that Chinese firms take the “Four No” approach—do not recognize, do not accept, do not commit themselves, and there are no consequences in China;
  • Some of the Chinese companies that have been or are currently being disbarred are party to major contracts (or memoranda of understanding) under various Chinese government initiatives.  According to a recent report in the Philippine press, China Road & Bridge and affiliated companies (blacklisted by the World Bank until 2017) are among the major beneficiaries of President Duterte’s recent trip to China.  Other blacklisted companies are doing projects in Africa and Central America.
  • Officials of the Supreme People’s Procuratorate, as seen in this 2014 article, are advocating better international cooperation with anticorruption efforts in the business sector and mention the international development bank blacklists as a given part of the international anticorruption landscape.  They reveal that there are major compliance issues among Chinese SOEs operating abroad, with bribery as one of many problems and a generally prevailing indifferent attitude towards legal compliance.
  • It appears there will eventually be a better integration of the multilateral development bank blacklists with the Chinese system, but this will take time and many hours of quiet advocacy to put in place. It would be unfortunate if these efforts are accelerated because disbarment of Chinese companies under the World Bank system results in further investigations or sanctions in Europe, United Kingdom, or elsewhere in the world.