Signals in the 2019 Supreme People’s Court work report to the NPC

Screenshot 2019-04-19 at 8.49.37 AMI have spent some time decoding Supreme People’s Court (SPC) President Zhou Qiang’s March 2019 report to the National People’s Congress (NPC). As I explain below, it provides signals into how the Chinese courts are changing and may change in the post 19th Party Congress New Era.

This report is both different from and similar to previous reports. The major difference is linked to the 2019 Central Political-Legal Work Conference (at which Xi Jinping set out in his speech (重要讲话) his view of the New Era for political-legal work(新时代政法各项工作) and the accompanying Party regulations on Political-Legal Work.  As I explain below, the report is linked to other recent Party regulations, such as the Regulations on Requesting Instructions and Reporting on Major Matters (中国共产党重大事项请示报告条例)and Regulations on the Work of Selecting and Appointing Party and Government Cadres (党政领导干部选拔任用工作条例). Although the Regulations on Party Groups were only recently issued (15 April), Zhou Qiang must have been aware of their content when drafting his report. It is also likely that he was aware of the Regulations on the Evaluation of the Work of Party and Government Leading Cadres (党政领导干部考核工作条例), issued on 21 April. As I have written before on this blog, the SPC Court President’s work report must be harmonized with the latest stance on political-legal issues.

What is different?

What is different is greater emphasis on political study and Party leadership, although these are themes that found in many previous SPC court president reports.  The emphasis in this year’s report on political study is on Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era (习近平新时代中国特色社会主义思想) and Party leadership is on implementing the spirit of the 19th Party Congress  (党的十九大精神) and the January, 2019 Central Political-Legal Work Conference (全面贯…中央政法工作会议精神).

This emphasis shown by the first numbered section of the report.  It is entitled  “Deeply study and implement Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and Uphold the Party’s Absolute Leadership [emphasis added] Over the Work of the People’s Courts (深入学习贯彻习近平新时代中国特色社会主义思想坚持党对人民法院工作的绝对领导).”  The phrase “uphold the Party’s absolute leadership over the work of the people’s courts” has been used repeatedly since the 2019 Political-Legal Work Conference.  The Party Regulations on Political-Legal Work (mentioned above) use the phrase “Party’s absolute leadership.”  Li Ling (of the University of Vienna) sees this as indicating a complete and unambivalent severance from the judicial independence framework. The report identifies the primary political task for the courts to be studying Xi Jinping Thought and the 19th Party Congress decision (坚持把学习贯彻习近平新时代中国特色社会主义思想和党的十九大精神作为首要政治任务), and it calls for related training for all  350,000 court personnel (深入开展大学习大研讨大培训,对全国法院35万名干警进行全员轮训).

This section also calls for the strict implementation of the [Party] system of reporting and seeking approval for major matters [also known as requests for instructions](严格落实重大事项请示报告制度)(the Party regulations on reporting and seeking approval for major matters(Chinese version here). Those regulations appear to be linked to the Political-Legal Work Conference but were not publicly issued until the end of February).  As mentioned in my recently published article, 1995 regulations on trial work secrets require requests for instructions and their responses in a case to be placed in the supplementary file. These supplementary files are classified as trial work secrets.  There has been significant criticism over many years of the system of requesting instructions/reporting and seeking approval (as I wrote 26 years ago!), and proposals even within the SPC for the system to be “proceduralized” or “judicialized.” Some  academics have called for abolishing it. For those who can read Chinese, I recommend Renmin University Professor Hou Meng’s 2011 article analyzing the system of seeking instructions. The second judicial reform plan (under the late SPC President Xiao Yang), called for reform to the system of reporting and seeking approval/request for instructions system. In a quick search I did of the SPC’s judgment database for the phrase “sought instructions from the higher court (请示上级法院), I found almost 350 that mentioned the phrase (although a certain proportion related to requesting the higher court to designate jurisdiction).

Another indication of the emphasis on Party leadership is found in the section of the report that relates to the courts’ tasks for 2019.  Section #5 of the court tasks refers to improving the quality of court personnel–“speed up the creation of a revolutionized, regularized, specialized, professionalized team, forge a high quality court team that the Party Center relies upon and the masses are satisfied with.”  As explained in an earlier blogpost, “revolutionized” signals absolute Party leadership  (五是加快推进队伍革命化、正规化、专业化、职业化建设,锻造党中央放心、人民群众满意的高素质法院队伍). This language is consistent with the 2019 Political-Legal Work Conference and President Zhou Qiang’s speech to implement the spirit of that Political-Legal Work Conference (note that similar language is found in Procurator-General  Zhang Jun’s report to the NPC).

As in previous years, most of Zhou Qiang’s report was devoted to the SPC’s and lower courts’ accomplishments in various substantive areas and providing selected statistics to support the narrative. Those statistics reveal that most of the cases heard in the Chinese courts are civil and commercial, not criminal.  My incomplete research on the caseload of the SPC comes to a similar conclusion.

What needs to be observed (for those of us focusing on Chinese court developments) is how these recent Party regulations will be integrated with court-related legislation–for example, how the Judges Law will be amended to reflect the latest political developments. [The Judges Law was promulgated on 23 April, a future blogpost will analyze its significance].

Other issues to be observed include the following questions.  What does increased emphasis on Party leadership and political study mean for the operation of the Chinese courts and the increasingly professional judges working within the Chinese court system? The 19th Party Congress report calls for strengthening and improving Party leadership over bodies of state power.   A late January 2019 Central Committee document on strengthening the Party’s political construction (中共中央关于加强党的政治建设的意见) states that the basic nature of various institutions, including the courts (called adjudication /trial organs 审判机关) ) is that they are political institutions (中央和地方各级人大机关、行政机关、政协机关、监察机关、审判机关、检察机关本质上都是政治机关). What does this designation mean for the operation of the courts?

One of the post 19th Party Congress changes that Zhou Qiang mentions is implementing the system of seeking instructions from the Party organization and superior Party organizations and strengthening the leadership role of the Party group in operational (substantive) work and Party construction  (加强对本单位业务工作和党的建设的领导). So what does this mean, for example, for the China International Commercial Court and the SPC’s Intellectual Property Court (and their elite judges), as well as the other SPC judges together dealing with almost 35,000 cases, retaining and attracting high quality legal professionals, particularly at the lower court level (this year’s report recognized that the resignation rate in some local courts is “severe”)? Most of the 28 million cases heard in the Chinese courts were heard at the local level.  What does this mean for confidence in the Chinese court system, be it on the part of the Chinese public, the Hong Kong, Macau, and Taiwan public, and the international public?  President Zhou Qiang’s report reveals that most of the cases in the Chinese courts involve civil and commercial disputes that for the most part arise between individuals or corporate entities (in 2018 9,017,000 first instance cases involved people’s livelihood, including 1,111,000 first instance employment, medical, pension, and consumer cases), and the courts heard 1,814,000 marriage and family cases. Will integrating socialist core values into judicial interpretations promote the rights of women, not to mention other groups whose rights have traditionally not been fully protected?

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graphic from the SPC English language website

 

 

 

How the Supreme People’s Court borrows helping hands

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Book cover of the English children’s book The Borrowers, translated into Chinese as 地板下的小人

I recently visited the Supreme People’s Court’s (SPC’s) new intellectual property court (SPCIPC) (intellectual property tribunal), currently sharing a building with the Beijing Internet Court, in the Fengtai district of Beijing.  But I will leave comments on the court’s operations to Mark Cohen and other intellectual property lawyers.   From the list of SPCIPC judges in Mark’s recent blogpost, it is clear that many of them have been borrowed from the lower courts.  The blogpost includes the line “..due to the rapid establishment and staffing of this new Court, many of the judges are likely on detail from their prior jobs to the new Court, pending permanent transfer.” It is unclear whether these judges will in fact be permanently transferred to the SPC, or in fact would prefer to do so. This blogpost will shed a bit of light on the phenomenon of the SPC borrowing/temporarily detailing 借调(jiediao)  staff from the lower courts.

As with the guazhi system in the SPC described in one of last year’s blogpost, it is one of the many aspects of the personnel system of the Chinese Party/state system that shapes how the Chinese courts operate.  Under this system, a person from a lower level institution is “borrowed” to assist with work at a higher level institution.  The borrowed person’s employment relationship remains with the lower level institution.  It appears to be a practical solution to the restrictions on SPC permanent headcount imposed by the Central Staff Commission, while being able to field sufficient personnel for the new institutions such as the Intellectual Property Tribunal and Circuit Courts.  Senior judges, such as division heads and vice presidents, have many administrative obligations and less time to hear cases. It is unclear how many borrowed staff the SPC has. Some knowledgeable persons suggest that they can be found in almost every operational department of the SPC.

In my experience, the circuit courts have borrowed judges from the lower courts to serve as judge’s assistants (法官助理).  While it is an imposition for judges to be away from their homes and family, it also an opportunity for them to make themselves known to SPC judges, a connection that may be useful in their later careers, whether or not they remain in the judiciary.

He Fan, head of the planning section of  the SPC’s judicial reform office, wrote about borrowed staff in a 2015 article on his Wechat account:

For lower court judges, being seconded to the higher court to help out is a mixed event. It means that you reach a higher level of experience, broaden your horizons, increase your knowledge, and your chances of being selected by a higher court will increase.  On the other hand, it means being away from loved ones, living for others, … sometimes the opportunity for the promotion in the original court is delayed, the superior court  may not extend an olive branch, and finally only it is only in exchange for a letter of praise from the higher court.

Generally speaking, the lower-level judges are seconded to the higher courts for three reasons. First, as an assistant judge, they are incorporated into the collegial panel to handle cases; second, as a judge’s assistant, assisting the judges of the higher courts in handling the case, such as the assistants of judges in the first and second Circuit Courts of the Supreme People’s Court, who are mostly excellent candidates from the lower courts. The third is to work in the “comprehensive” (supporting) departments, to work in the higher court’s research office, the audit office, the judicial reform and other departments engaged in judicial policy research, drafting judicial rules, etc.

Law-related Wechat public accounts, 2018 update (1)

Screen Shot 2018-02-03 at 10.13.48 AM Wechat, as most people with an interest in China know, has become the preferred form of social media in China.  The legal community in China has taken to it too.

For the observer, it enables us to learn about new issues (or aspects of issues) that we didn’t know existed, and (depending on the topic), hear viewpoints other than the official one, or at least read hints of dissenting views. Those with the Wechat app on their smartphone can subscribe to these public accounts but it is also possible to find some these articles through an internet search. Note that the “Mr. Yong” about whom I wrote in 2016 lurks on Wechat, so articles published may disappear, although they often reappear elsewhere.

Some are official accounts of government entities, including the courts and others are public accounts (公众账号) established by companies, law firms, universities, societies, other organizations, or individuals. In November, 2018 the Cyberspace Administration of China said that tightened management of internet content producers would be a “new norm,: and Tencent reduced the number of permitted corporate public accounts from five to two and individual accounts from two to one.  More information on this development elsewhere.

Below is the first part of a guide to some useful law-related Wechat public accounts focusing on accounts related to the Supreme People’s Court (SPC) Please contact me through the comment function or email with additional suggestions.

The official Party and government accounts enable the user to keep current on the issues and latest Party and government position in that area of law–new policy, new legislation, and new reforms, or the official response to a current hot topic.  The Central Political-Legal Commission has one, the Central Supervision Commission, as do both the SPC and Supreme People’s Procuratorate, as well as their local counterparts. Academic journals have a different audience that requires more nuance.

As I’ve written before, Party/government authorities use Wechat public accounts to reach out to a public that is moving away from traditional media to smartphones. Party/government policy is encouraging courts to do so.  There is some but not complete overlap between articles that appear on an institution’s website and Wechat account. There is complete overlap when more political matters are involved, such as the latest important speech of a leader. Even some articles published in institutional public accounts may have a “netizen” tone and use netizen slang and images.

Institution Account name
National Supervision Commission 中央纪委监委网站
Central Political-Legal Commission 中央政法长安剑 (recently renamed, read here

Official accounts linked to the SPC

 linked to SPC and its affiliated institutions
Institution Account name Content
Supreme People’s Court 最高人民法院 Official view of SPC; also republishes Xinhua articles
People’s Court Daily 人民法院报 Official view of SPC; also republishes Xinhua articles
Institute for Applied Jurisprudence

 

(since July, 2018, under the new institute director, the account has published  fewer articles than previously)

中国应用法学研究所 Had previously carried accounts of conferences and academic talks, translations of foreign materials; other articles
China Applied Jurisprudence (academic journal)(from Sept., 2018) 中国应用法学 Publishes excerpts from journal articles (recent article included: article on people’s assessors pilot project; also republishes other articles of interest to editor; translations of foreign materials, including an excerpt from “Building a Diverse Bench” (NYU Brennan Center publication)
Journal of Law Application (academic journal affiliated with National Judges College 法律适用 Publishes excerpts from journal articles, some by judges, others by academics
Alternative Dispute Resolution Reform in China 多元化纠纷解决机制 Articles on alternative dispute resolution in China and foreign experience
Database Faxin (affiliated with the People’s Court Press) 法信 Case analysis, analysis of cases on specific issues
China Trial (journal) 中国审判 Excerpts from articles in the journal
People’s Judicature 人民司法 Excerpts from articles in the journal
Case Research Institute of National Judges College 司法案例研究院 Case analysis, excerpts from its academic journal (Journal of Law Application (Cases))
SPC Information Center 智慧法院进行时 Reports on informatization of courts
Administrative enforcement and administrative trial

 

行政执法与行政审判 Articles related to administrative litigation & enforcement

 

National Judges College 国家法官学院 Official account; articles reporting on the National Judges College &    its local branches
People’s Assessors 人民陪审 Articles related to the people’s assessor system & its reforms

 

Several SPC judges and SPC officials have Wechat public accounts.  They have obtained approval to have them.   Among them are:

Individual affiliated with SPC Account name Content
He Fan (何帆), head of the planning department of the SPC’s Judicial Reform Office 法影斑斓 Judicial reform
Yu Tongzhi (于同志), judge of SPC #2 Criminal Division, editor of 刑事审判参考 说刑品案 Excerpts from the journal, articles on criminal law and criminal procedure issues (some republished), including original articles by Judge Yu himself, generally on broader criminal law issues.
Wang Dongmin (王东敏), judge of the SPC #2 Civil Division 法律之树 Issues of civil and civil procedure law

As a general (but not directed comment), if judges on the SPC express views on issues that may come before them, it would appear to raise issues similar to those that arise in the rest of the world–the propriety of extrajudicial writing–a sample of writings on this issue from other jurisdictions found here. Persons who can provide relevant information concerning relevant SPC ethics provisions, and restrictions in civil law rather than common law jurisdictions, please contact me.

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.