Tag Archives: Belt & Road

alternative dispute resolution, arbitration, BRI, CICC, Expert Committee, foreign courts, foreign-related cases, international commercial court, judicial interpretations

New Group of Supreme People’s Court Belt & Road Typical Cases

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At the end of September (2023) the Supreme People’s Court (SPC) issued its fourth group of Belt & Road (BRI) Typical /Model /Exemplary ) (this post will use the translation “typical”) Cases (第四批涉“一带一路”建设典型案例) (see an alternative link in case the official website is unavailable).  An English translation is available here.  Along with the cases, the SPC issued a press release in the form of answers by a responsible person of the SPC’s #4 Civil Division to a reporter’s questions (为高质量共建“一带一路”提供有力司法服务和保障——最高人民法院民四庭负责人就发布第四批涉“一带一路”建设典型案例相关问题答记者问).

“For the avoidance of doubt,” the points made by these typical cases (please see last year’s blogpost for a refresher on typical cases) apply to all types of foreign-related cases, whether or not they involve the BRI in some way.  Including “BRI” in the title highlights that these cases contribute to supporting the BRI (on the 10th anniversary of the strategy) and developing (“constructing” 建设) “foreign-related rule of law.” I’ll make several quick points about the cases and derive some useful information from the press release.

1.  Typical cases

This group of 12 typical cases includes:

  1. three cases relating to letters of credit and demand guarantees (#3 Jiangsu Puhua Co., Ltd. v. Bank of East Asia (China) Co., Ltd. Shanghai Branch; #4 China Power Construction Group Shandong Electric Power Construction Co., Ltd. v. GMR KAMALANGA Energy Ltd., et al (the SPC case was mentioned in this blogpost; and #5 Union of Arab and French Banks (UBAF) (Hong Kong) Ltd. [UBAF (Hong Kong) Ltd.] and Bank of China Co., Ltd. Henan Branch);
  2. Two cases involving professional services-related issues (#6 Fusheng (Tianjin) Financial Leasing Co., Ltd. v. Grant Thornton AG (a tort case) and #8 Tianwei New Energy Holdings Co., Ltd. v. Davis Polk & Wardwell LLP (contract dispute));
  3. Enforcement of a foreign  (Singapore) court judgment (#12, enforcement application by Shuang Lin Construction Pte. Ltd. ). The SPC and the Singapore Supreme Court have a related memorandum so it is unsurprising that a case involving an application to enforce a Singapore judgment was selected. See this 2023 factsheet with a listing of the other Singapore agreements with the SPC);
  4. Enforcement of foreign and Hong Kong arbitral awards  (#10, China Small and Medium Enterprises Investment Co., Ltd. v.  Russian Sakhalin Seafood Co., Ltd. & Oriental International Economic and Technical Cooperation Company, objection to enforcement case)( #11 Noble Resources International Pte. Ltd.’s application for recognition and enforcement of the Hong Kong International Arbitration Center arbitration award);
  5. One case involving the Convention on the International Sale of Goods (CISG), #1, Exportextil Countertrade SA) and Nantong Meinite Medical Products Co., Ltd;
  6. One case involving financial derivatives (#9, Standard Chartered Bank (China) Co., Ltd. v. Zhangjiakou United Petrochemical Co., Ltd.) ;
  7. One equity transfer-related case (#7, a China International Commercial Court case), Zhang Moumou and Xie Moumou v. Shenzhen Aoxinlong Investment Co., Ltd;
  8. One treaty interpretation case (#2, Nippon Property & Casualty Insurance (China) Co., Ltd. Shanghai Branch and others and Robinson Global Logistics (Dalian) Co., Ltd).

A 2022 blogpost explains the selection process. I’ll leave the discussion of the implications of these cases to the law firms, some scholars, and some other websites and focus on the takeaways from the press release. The press release updates last year’s report on the SPC’s work in foreign-related cases in support of related policies.

2. Political importance

The press release ties the work of the SPC to the January 2018 Party Central Committee and State Council General Office policy document on BRI dispute resolution (summarized here and discussed further in my “neverending article”) and flags that the SPC has conscientiously implemented the decisions and arrangements of the Party Central Committee.  The one-year gap between the third and fourth groups of typical BRI cases signals that the SPC leadership considers this a priority area. The phrase at the beginning of the press release (“providing powerful judicial services and guarantees (safeguards) for high-quality joint construction of the “Belt and Road”)  signals the continuing importance of providing judicial “services and safeguards” for major national strategies, including the BRI, whether in the form of a document or typical cases.

3. Takeaways From the Press Release

a.  CICC and other international commercial courts

The press release mentions the China International Commercial Court (CICC), its expert committee, and the establishment of local international commercial courts.  The CICC has accepted a total of 27 international commercial cases, 17 of which have been concluded. A judgment was posted in July on the Chinese version of the CICC website but has yet to be translated.

Although the CICC is often linked to the BRI, the cases that the CICC has accepted include parties from jurisdictions that are not participating in the BRI, such as the United States. Among the typical cases released this time, one is a CICC case.  The press release notes that the SPC  will revise the CICC-related judicial interpretations to reflect the amendments to the foreign-related section of the Civil Procedure Law.

The BRI-related services and safeguards policy documents, about which I have previously written (and about which I have more to say in the neverending article) served as the policy framework for establishing local international commercial courts. The SPC has approved twelve local courts in Suzhou, Beijing, Chengdu, Xiamen, Changchun, Quanzhou, Wuxi, Nanning, Hangzhou, Ningbo, Nanjing, and Qingdao as “international commercial courts (tribunals).” It requires some detective work to determine the jurisdiction of each international commercial court.

b. Encouraging mediation and an organic connection between litigation, arbitration and mediation

The  SPC reiterates its accomplishments in establishing a “one-stop” diversified resolution mechanism for international commercial disputes to achieve an organic connection between litigation, arbitration, and mediation.  As mentioned in the 2022 report, ten international commercial arbitration institutions and two international commercial mediation institutions are part of the SPC’s “one-stop” mechanism.

c. Improving rules in foreign-related commercial cases

On improving the system of applicable rules for foreign-related commercial laws and unifying judicial standards, the spokesperson flagged that the SPC issued the Conference Summary [Meeting Minutes] on Foreign-Related Commercial and Maritime Trial Work (Foreign-Related Commercial  & Maritime Law Conference Summary (Chinese and bilingual versions) (see my previous blogpost on the document), setting forth the SPC’s views on 111 issues in foreign-related matters.  In my “neverending article,”  I describe conference summaries (会议纪要 ) as intermediate documents, issued after courts confront new issues arising from a major policy document or new situation when the approaches of the lower courts need to be harmonized but it is not yet appropriate to issue a judicial interpretation.  A book recently published by the drafters of the Foreign-Related Commercial  & Maritime Law Conference Summary （《全国法院涉外商事海事审判工作座谈会会议纪要》理解与适用） reveals that after the #4 Civil Division prepared an initial draft, they “broadly sought comments”  from relevant SPC departments, relevant State Council ministries and commissions, and selected experts. That means that the document represents a greater consensus of the relevant institutions on the issues addressed than commentators realized.

Additionally, in the past ten years, the SPC has issued guidance on foreign-related matters to the lower courts in the form of judicial interpretations (32), policy documents (9), guiding cases (18), and almost 150 typical cases. These statistics update those set out in the 2022 report.

d. Actively participating in legislation revision

As mentioned in the 2022 report, the SPC has actively participated in the revision of foreign-related laws such as the Civil Procedure Law (to come into effect next 1 January and the Arbitration Law (amendments ongoing, see this blogpost on the SPC’s contribution).  My neverending article has a more extended discussion of this.

e.  “Forthcoming Attractions”

The press release flags some “forthcoming attractions” related to the SPC’s foreign-related judicial work.

  1. The SPC is  (and has been) working on several relevant judicial interpretations (as mentioned in earlier blogposts).

a.   Coming soon is the Interpretation on Several Issues Concerning the Application of the “Law of the People’s Republic of China on the Law Applicable to Foreign-Related Civil Relationships” (2) (关于适用〈中华人民共和国涉外民事关系法律适用法〉若干问题的解释（二）. The spokesperson revealed that the judicial interpretation had already been approved by the SPC’s judicial committee. It incorporates provisions  relating to ascertaining foreign laws.

b. As mentioned above, the SPC  will revise the CICC-related judicial interpretations to reflect the amendments to the foreign-related part of the Civil Procedure Law. The press release does not mention amending the comprehensive judicial interpretation of the Civil Procedure Law to reflect those amendments, but I surmise those are also being contemplated.

c. A third judicial interpretation, the “Interpretation on Several Issues Concerning the Application of International Treaties and International Practices in the Trial of Foreign-Related Civil and Commercial Cases”（关于审理涉外民商事案件适用国际条约和国际惯例若干问题的解释） is still in draft.  Because the original provisions on the application of international treaties in the General Principles of Civil Law were abolished when the Civil Code was promulgated, leaving the rules for the application of international treaties unclear, the SPC is drafting an interpretation to deal with a group of issues.  Those include the application of international treaties, the relationship between party autonomy and the application of international treaties, the choice of application of international treaties that are not in force in China, the application of international practices (two typical cases discuss the application of the Uniform Customs & Practice for Documentary Credits (UCP 600) and public order treaty reservations.

2. Databases on foreign law and expertise on foreign law.

With the support of some CICC expert committee members, one of the SPC’s BRI research databases and foreign law ascertainment service agencies,  a foreign (non-mainland Chinese)legal database with legislation, international law documents and other legal information on ten ASEAN countries, seven South Asian countries and the ASEAN international organization has been created. Separately another service provider has created a BRI expert legal database.  The 2022 report flagged these developments.

3. Judicial materials and training on foreign-related matters

The Supreme People’s Court is compiling a “Compilation of Common Laws and Regulations in Foreign-related Civil and Commercial Matters” to assist new hires and will increase the training and guidance to improve judicial competence on the application of international treaties. Improving judicial training on foreign-related matters has been an ongoing issue.  Post-Covid, a number of training programs for judges and judges assistants on foreign-related matters have been held.

The most recent one was a national program, held at the National Judges College, focused on training senior personnel in foreign-related matters, at which Justice Tao Kaiyuan spoke.  Those speaking at the program (from the relevant departments) included representatives from the Central Foreign Affairs Commission, the Legislative Affairs Commission under the National People’s Congress Standing Committee, Ministry of Foreign Affairs,  Ministry of Commerce, as well (presumably) senior personnel from the SPC’s #4 Civil Division and the International Cooperation Bureau (which deals with treaty negotiation and  judicial assistance matters). Local courts that have run such programs  include  Beijing (with the assistance of the University of International Business and Economics).

4. Judicial Assistance

China has concluded 171 bilateral judicial assistance treaties with 83 countries and has acceded to nearly 30 related international conventions (no change from October, 2022). In contrast to twenty or even ten years ago, the number of judicial assistance matters dealt with by the Chinese courts has increased.  The press release mentions improving the quality and efficiency of international judicial assistance such as better cooperation in the cross-border service of judicial documents,  cross-border investigation and evidence collection, ascertainment of foreign law, and recognition and enforcement of foreign (extra-territorial) judgments and arbitral awards.  This does not yet mean that it is possible for foreign litigators to take depositions in mainland China for foreign court proceedings. Service of process was an issue in this 2022 case in the Southern District of New York.

BRI, Case law, CICC, foreign-related cases, judicial documents, judicial interpretations

The Supreme People’s Court & the Development of Chinese International Commercial Law

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I am very honored to have been the first keynote speaker of the webinar “Deals and Disputes: China, Hong Kong, and Commercial Law” held on May 18-21 (2021).   The webinar was organized by the University of Pittsburgh, with its School of Law’s Center for International Legal Education working together with its Asian Studies Center. Many thanks to Professors Ronald Brand and James Cook for the kind invitation.   For those who missed it, the recording of my presentation is now available on the Youtube channel of the Center for International Legal Education.

I spoke on the Supreme People’s Court (SPC) and the Development of Chinese International Commercial Law (as I defined it).  My presentation synthesizes many points that I have made separately on this blog and should be useful to students or others seeking to understand several aspects of the work of the SPC.   Many thanks to Professor Pamela Bookman and Mary Buck Young for taking the time to make insightful comments on earlier drafts of my Powerpoint slides. Special thanks to (one of) my research assistants, Yuan Ye, for his work in transforming SPC statistics into a more understandable form and translating them into English.

Commercial law, foreign-related cases, Hong Kong, International law, One belt one road

Supreme People’s Court’s New Policy on Cross-border Commercial Issues and Covid-19

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Screenshot 2020-06-18 at 7.32.24 AM
From left, Li Guangyu, SPC spokesperson; SPC Vice President Justice Luo Dongchuan; Judge Wang Shumei, head of #4 Civil Division

On 16 June, the Supreme People’s Court (SPC) held a news conference (pictured above), to announce that it had issued “Guiding Opinion on the Proper Handling of Civil Cases Involving the Novel Coronavirus Outbreak in Accordance with the Law (III)” (SPC Guiding Opinion III).” SPC Guiding Opinion focuses on the most important cross-border commercial issues that have arisen in the Chinese courts this spring as a result of the Covid-19 pandemic.  This brief blogpost provides some comments and an overview of the document, leaving the detailed analysis to the law firms that are sure to analyze it.

What is this document?

SPC Guiding Opinion III is a judicial policy document (司法政策性文件). As this blog has often commented, the Supreme People’s Court (SPC) must serve the greater situation and deal with practical legal issues, so that the SPC itself and its senior leadership are correct, politically, and professionally. One of those ways is by providing properly calibrated guidance to the lower courts and other related authorities with the appropriate political signals.  For this document, Justice Luo Dongchuan provided the political background and signals in his introductory remarks at the SPC news conference. The document itself is practically oriented (as those in the system say “problem-oriented”–“问题导向”)（and the practitioners say “干活”).

From the photo above it is clear that the #4 Civil Division, headed by Judge Wang Shumei, which focuses on cross-border commercial and maritime issues, took the lead in drafting. That division is one of the smaller divisions of the SPC and “punches above its weight.”

A judicial policy document is not a judicial interpretation but as the SPC editors of a collection of these documents noted, “it is generally recognized that they have an important guiding impact on the trial and enforcement work of the courts at every level.”  SPC Guiding Opinion III is one example of the many types of SPC “stealth” guidance to the lower courts.  I describe it as “stealth guidance” because it affects how cases are handled, heard, and decided, but cannot be cited in a court judgment or ruling. For that reason, only the highly observant will note the impact of judicial policy documents.

I anticipated that the SPC would issue further Covid-19 pandemic guidance when I spoke [links to video] in April at a virtual event sponsored by Berkeley Law School’s Center for Law & Technology. Some of the guidance reveals frequently used litigation tactics of Chinese parties.

Selected comments on the content

The document is divided into four sections:

  1. Civil procedure mechanics–parties, evidence,  deadlines, and statutes of limitations (Articles 1-5): This section draws on the recently amended and effective civil evidence rules

Article 1 directs Chinese courts to approve applications for extensions for foreign (cross-border) parties who are delayed in being able to provide notarized and authenticated documents to evidence the identity.  Delays in obtaining notarized and authenticated powers of attorney are to be treated similarly. If China had acceded to the 1961  Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, for all of China, this requirement would no longer be necessary. The Convention is applicable to Hong Kong because of UK-PRC handover arrangements, which enabled conventions originally applicable to Hong Kong pre-1997 to continue in effect.

Article 3 reveals one of the frequently used litigation tactics of Chinese parties in cross-border litigation in China–that is disputing the authenticity of a document because it has not been properly notarized and legalized. The SPC Guiding Opinion III advises lower courts to notify parties that they may reserve their arguments concerning these formalities, and focus their arguments on relevance and persuasiveness of the evidence.

      2. Ascertainment (determination) and application of law

These articles remind Chinese courts to use the Law of the People’s Republic of China on the Law Applicable to Foreign-Related Civil Relationships to determine governing law (assuming a contract does not designate a governing law), and to look to the SPC Guiding Opinion I for guidance on force majeure under Chinese law.  The SPC also reminds lower court judges not to substitute Chinese law if foreign law governs.  This is not the first time that this type of reminder has appeared in SPC policy documents, indicating this is an ongoing problem.  This section also includes guidance on the application on the UN Convention on the Sale of Goods.

Articles 8 and 9 relate to letters of credit, standby letters of credit, and demand (independent) guarantees. It reminds lower courts to correctly apply the International Chamber of Commerce (ICC)’s UCP 600 (Uniform Customs and Practice for Documentary Credits), the ICC’s URDG 758(demand guarantee rules), and the related SPC judicial interpretation concerning demand guarantees.

This likely means that Chinese contractors who have provided independent guarantees or standby letters of credit for construction projects overseas are seeking to prevent the owner of the projects from drawing on these guarantees through litigation in the Chinese courts. This case decided by the SPC in April, 2020, reverses the judgment of the Shandong Higher People’s Court in favor of the Chinese contractor.  The dispute relates to a Shandong Electric Power Company (SEPCO) project in India. Previous reporting in the Indian press seen here.

3. Transport contracts

Articles 11-17 relate to various types of transportation contracts as well as shipbuilding contracts.

4. Green channel.

This last section reminds courts to use online procedures and cross-administrative region arrangements if convenient and that Hong Kong, Macau, and Taiwan related commercial cases should be handled with reference to this guidance.

How was the document drafted?

As to how the SPC determined the FAQs of the lower courts, it did what all corporates and institutions around the world do these days–convened a video conference. The participants presumably came from the maritime courts and the foreign-related civil divisions of the provincial courts.

Why did the SPC issue it?

The number of cases directly affected by this guidance is relatively small. According to statistics released with President Zhou Qiang’s report to the NPC in May, there were 17,000 first instance foreign-related commercial cases and 16,000 foreign-related maritime cases in the Chinese courts in 2019, compared with 31.5 million cases in the Chinese courts overall.

However, foreign-related cases tend to be more sensitive because, as Zhou Enlai said “外事无小事” (foreign matters are never small matters” –foreign-related matters, because they involve relations with other countries and the prestige of the Chinese state, are sensitive. That means that judges hearing cross-border cases have a particular pressure to handle these disputes in a way that is consistent with the law (of course), acceptable to the leadership of their court & to the outside world.  One important aspect of SPC Guiding Opinion III  is the impact on Belt & Road projects, In many of these projects Chinese companies are often contractors, or also contractors and equipment suppliers (and Chinese banks provide financing). On the civil/commercial side cross-border cases possibly involve treaty/convention obligations (or treaty-like arrangements, in the case of Hong Kong).

As issues dealt with in SPC Guiding Opinion III relate to the most important Chinese cross-border commercial issues that have arisen during the pandemic, it has an impact on the Chinese (and foreign) business community, far beyond the number of foreign-related cases in the Chinese courts, and is likely to have an impact on related arbitrations governed by Chinese law.

Communist Party and the Courts, Expert Committee, foreign investment law, foreign-related cases, international commercial court

Supreme People’s Court updates its Belt & Road policies

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

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

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

2.  Belt & Road Opinion #2

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

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

New requirements and tasks (Section 1)

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

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

Policy changes and signaling (section 2)

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

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

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

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

Specific policy (Section 3)

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

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

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

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

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

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

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

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

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

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

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

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

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

Personnel & Institutional Matters

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

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

Concluding remarks

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

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

 

 

 

 

Communist Party and the Courts, Expert Committee, foreign investment law, foreign-related cases, international commercial court

How are Supreme People’s Court Opinions structured?

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

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

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

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

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

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

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

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

Structure of these Opinions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From BRI Opinion #2:

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

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

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

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

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

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

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

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

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

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

______________________________

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

circuit courts, foreign-related cases, international commercial court, judges

China International Commercial Court starts operating

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The author in front of CICC #1,  December 2018

In the last few months of 2018,  the Supreme People’s Court (SPC) and China International Commercial Court (CICC) took measures to enable the CICC to start operating, although the CICC was established earlier in 2018.  As SPC President Zhou Qiang reported to the National People’s Congress (NPC)  in March 2018 that the CICC would be established, I expect that he will report to the NPC in March of this year that the SPC established the CICC and it has successfully begun operating. (It is likely that the National Appellate IP Court will merit a place in Zhou Qiang’s report as one of the SPC’s 2018 accomplishments, but see fellow blogger Mark Cohen (and co-authors)’s post on that development). This blogpost will summarize (and provide some commentary on) some of the recent CICC developments.

Those developments included:

  • issuing rules on the international commercial expert committee;
  • personnel measures–designating the heads of the of the #1 and #2 CICCs and the heads of the case management offices in the two offices and appointing seven additional judges;
  • designating several (mainland) Chinese arbitration and mediation institutions to be part of its integrated one-stop dispute resolution;
  • accepting several cases;
  • issuing rules on CICC operations (to be discussed in a following blogpost).

Rules on the international expert committee

On December 5 the SPC General Office issued the working rules of the international commercial expert committee (expert committee) (approved by the SPC judicial committee in late October) (最高人民法院国际商事专家委员会工作规则). The date of the notice of the General Office is 21 November.  It answers some frequently asked questions about the expert committee. My comments are in italics.

What do members of the expert committee do?

1) preside over mediations (Article 3 (1): This was clear from the CICC Provisions.  It remains to be seen how many expert committee members will feel comfortable mediating disputes. It could be that some of the Chinese members will feel more comfortable mediating disputes than the foreign or Hong Kong-based members, as some of those members have long experience as arbitrators in China, where combining mediation and arbitration (med-arb) is usual. A significant number of expert committee members are from jurisdictions where being a mediator and mediating us regarded as separate profession and skill from arbitration and adjudicating.  Articles 9-13 describe the mechanics for doing so.

(2) provide an advisory opinion on specialized legal issues such as those relating to international treaties, international commercial rules, finding and applying foreign law [foreign and greater China jurisdictions] relating cases heard by the CICC and the People’s Courts at all levels (Article 3 (2): This contains a surprising expansion of the role of the experts on the committee by authorizing Chinese courts at various levels to request an expert committee member to provide an advisory opinion on international legal, international commercial and foreign law issues. A note on terminology–the English version on the CICC website uses “foreign law” while the Chinese original uses the term  “域外 ” (extraterritorial), intended to include the jurisdictions of Hong Kong, Macau, and Taiwan as well as the law of foreign jurisdictions.  This blogpost will use the term “foreign law” as meaning “域外 ” extraterritorial law.

The fact that expert committee members have been so authorized indicates that ascertaining (determining) foreign law is a significant practical problem for Chinese judges.  I previously mentioned in this 2017 blogpost that Judge Zhang Yongjian listed ascertaining foreign law（he uses the term 外国法·) as one of many problems confronting Chinese judges hearing cross-border issues. Several articles on the Chinese version of the CICC website (plus one on the English version (by CICC Judge Gao Xiaoli) discuss this problem.  Judge Gao gently pokes fun at some Chinese scholars who fail to understand relevant judicial interpretations on ascertaining foreign law. The CICC website lists the methods available to a Chinese court in ascertaining foreign law. Among the alternatives include designating one of four authorized centers to provide an expert opinion on foreign law.  Articles 14-15 describe some of the mechanics by which one or more expert committee experts can provide an advisory opinion.

Under Article 15, a litigant may request through the CICC’s Expert Office that the expert appear in court to explain his or her opinion.  It is up to the expert to decide whether to appear. Presumably, expenses involved, including travel and translation, would be the responsibility of the requesting party.

The rules do not clarify a number of practical questions related to this. Could a court request an advisory opinion from an expert and from a designated discernment center, and if so, what relative weight will be attached to each?  Presumably, a court would give it greater weight than an opinion from an expert provided by a party.  It is unclear whether experts can charge for these services. Another concern for experts could be liability, and the standard for an opinion found to be negligently made.  Additionally, for the many foreign experts on the committee who do not know Chinese, it is unclear who will be responsible for translation.  Presumably, the court that requested the opinion or the International Expert Committee office (see 6 (2), which states that the office provides services to experts. Perhaps the forthcoming Code of Ethics of the Expert Members will address these questions.

(3) provide advice and suggestions on the development of the International Commercial Court; (4) provide advice and suggestions on the formulation of judicial interpretations and judicial policies of the Supreme People’s Court; (5) Other matters entrusted by the International Commercial Court; The first two provisions set out a formal structure for foreigners to provide advice, suggestions, and comments on judicial interpretations, judicial policy and other developments to the SPC, a first. Article 18 anticipates that the Expert Office will direct requests for comments or advice on specific draft judicial interpretations, policies, etc. to one or more experts, as the CICC considers useful rather than expert committee members being informed about ongoing developments.  However, it does enable expert committee members to make suggestions or proposals on their own initiative.  

Personnel developments

The last few months have seen a number of CICC personnel developments, including the appointment of seven additional judges. In early November, Judge Zhang Yongjian, deputy head of the #1 Circuit Court and head of the #4 Civil Division, was appointed as head of the #1 CICC and Judge Zhang Ming, deputy head of the #6 Circuit Court, was appointed head of the #2 CICC.

Judges Xi Xiangyang and Ding Guangyu, presiding judges on the #1 and #6 Circuit Courts respectively, and CICC judges, were at the same time appointed heads of the case management offices of the two courts.

Judge Song Jianli has been appointed the head of the CICC Expert Office.

The additional seven judges are:

  1. Wang Shumei (deputy head of the SPC’s #4 Civil Division, specializing in maritime law);
  2. Wei Wenchao, who has had a number of roles at the SPC, most recently as deputy head of the #5 Circuit Court. He had previously served as deputy head of the Environmental and Natural Resources Division;
  3. Song Jianli, head of the Experts Office, who studied at Southampton Institute (now Solent University) (in addition to his studies in China), and was a visiting scholar at Cambridge, the University of Pennsylvania, and the Max Planck Institute of Comparative and International Law, and has primarily worked in the SPC’s #4 Civil Division;
  4. Zhang Xuemei, of the SPC #2 Civil Division (domestic commercial issues);
  5. Yu Xiaohan, also of the #4 Civil Division, and like Wang Shumei, a maritime law specialist;
  6. Ding Guangyu, who studied at the University of Manchester and has had a number of roles at the SPC, including at the China Institute of Applied Jurisprudence, and in the #4 Civil Division;
  7. Guo Zaiyu, who spent many years at the Hubei Higher People’s Court before transferring to the SPC’s #4 Civil Division.

It is clear from these announcements that at this time, the CICC is a part-time responsibility for the judges involved, who have their ongoing responsibilities at the SPC, either at one of the Circuit Courts, the new Intellectual Property Court, or SPC headquarters.  And some senior people, such as Judge Zhang Yongjian, have triple administrative roles.

One-stop diversified dispute resolution mechanism

As an earlier blogpost flagged, the institutions clearly intended to be part of the one-stop diversified dispute resolution mechanism were the leading Chinese arbitration and mediation institutions handling foreign-related matters.  Most of these institutions sent senior representatives to attend the first meeting of the experts committee, so I was not surprised to see the following institutions listed:

  1. China International Economic and Trade Arbitration Commission (CIETAC);
  2. Shanghai International Economic and Trade Arbitration Commission;
  3. the Shenzhen Court of International Arbitration (SCIA);
  4. Beijing Arbitration Commission;
  5. China Maritime Arbitration Commission;
  6. the Mediation Center of China Council for the Promotion of International Trade (CCPIT); and
  7. Shanghai Commercial Mediation Center.

SCIA has an arrangement with the Hong Kong Mediation Centre since 2014 by which Mediation Centre settlements may be enforced in mainland China through a consent award issued by SCIA.

First cases

At the end of December 2018, the CICC accepted several cases, all of which can be categorized as general international commercial disputes, with none specifically related to Belt & Road projects.  The disputes include: an unjust enrichment dispute involving Fujifilm and several Chinese companies, a product liability dispute involving Italian pharmaceutical company called Bruschettini (which sells its products through Sinco Pharmaceuticals Ltd., a Hong Kong-listed company), several disputes related to Thailand’s Red Bull (from this report, I surmise that the case was referred by the Beijing Higher People’s Court), and several disputes involving the validity of arbitration clauses, including one involving China Travel Service (Hong Kong) and one of its hotels.   ____________________________

The author is a member of the international commercial expert committee but her views do not represent the committee, the CICC, or the SPC.

 

foreign courts, foreign investment law, foreign-related cases, One belt one road

Update on China’s international commercial court

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Judge Gao Xiaoli

Among the many developments flagged in Supreme People’s Court (SPC) President Zhou Qiang’s 2018 report to the National People’s Congress is that the SPC will establish an international commercial tribunal (court)(最 高人民法院国际商事审判庭), as approved by the Central Leading Group for Comprehensively Deepening Reforms. The timing is unknown. The international commercial tribunal (this post will use the term “court”) as is understood clearly, must fit political and technical requirements. This blogpost will look at those, particularly the technical ones, as those are the ones that have escaped the attention of most commentators outside of China.

Background

Although many  articles have been published in the media, both in and out of China after the public announcement to the press about the international commercial court in January, 2018, most of them have little detail on the issues. Some contain uninformed statements, such as the one that quotes an insider at the China Council for the Promotion of International Trade mentioning the use for dispute resolution of “the common law of the United States and European countries” (send the insider back to law school please!).

In the past three months, Judge Gao Xiaoli, deputy head of the SPC’s #4 civil division (photo above), and at least one other person at the SPC has released some information about the court, all of which seems to have eluded international discussions. For those who are not aficionados of Chinese foreign-related dispute resolution, Judge Gao (who often appears at UNCITRAL or international arbitration related conferences or seminars) outside as well as inside mainland China, is a formidable presence in the courtroom. Thanks to the SPC’s streaming of court hearings, it is now possible to see that from any corner of the world.  She is also an impressive speaker. Judge Gao is representative of the judges engaged in technical legal work at the SPC, with a PhD in law from one of China’s leading law schools and experience studying abroad.

Political requirements

On the political requirements, there are at least two, both previously highlighted in this blog.  The more general one was highlighted one year ago–the establishment of the international commercial court relates to a sentence in the Fourth Plenum Decision:

Vigorously participate in the formulation of international norms, promote the handling of foreign-related economic and social affairs according to the law, strengthen our country’s discourse power and influence in international legal affairs, use legal methods to safeguard our country’s sovereignty, security, and development interests.

More specifically, it appears to be the civil and commercial counterpart to the efforts noted on this blog two years ago (concerning dispute resolution in maritime cases),  part of a push to move the locus of China-related dispute resolution from London and other centers in Europe (or elsewhere) to China, where Chinese parties will encounter a more familiar dispute resolution system.

The other political requirement relates to the need to serve major government strategies, the BRI/OBOR one in particular, discussed in this blogpost.  President Zhou Qiang’s 2018 NPC report, as his 2016 report (and presumably 2017 report) contain the phrase “provided service for the country’s major strategies.” As a central government institution, the SPC must do its part to support national major strategies. Since BRI/OBOR has been initiated, President Zhou Qiang’s report has mentioned  BRI/OBOR as one of those major strategies for which the SPC has provided service.

Technical requirements

Further background

The sources that previous commentators missed include the following:

In the press interview, Judge Gao reviews what the SPC has done so far in this area, including several developments previously highlighted on this blog:

  • SPC’s One Belt One Road (BRI/OBOR) policy document;
  • SPC’s OBOR/BRI model/typical cases (see above link and translations by the Stanford Guiding Cases project found here);
  • SPC’s judicial interpretation on demand guarantees, that blogpost explains that with so many Chinese companies focusing on infrastructure projects overseas, Chinese banks have issued billions of dollars in demand guarantees.

 Technical issues

The SPC is looking at three types of investment and trade disputes:

  • state-state disputes (for China, generally WTO);
  • investor-state disputes (ICSID and other institutions, generally using UNCITRAL rules (note that CIETAC and the Shenzhen Court of International Arbitration (SCIA) also have amended their rules to be able to take investor-state disputes, with SCIA using the UNCITRAL rules;
  • disputes between commercial parties.

Judge Gao mentioned that they at the SPC, too have noticed the worldwide trend of other jurisdictions establishing courts to hear investor-state disputes, citing Canada among them and that they are exploring whether the Chinese courts can do so as well.  However, she notes that when China acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), it made a commercial reservation, and the SPC judicial interpretation concerning the New York Convention excluded investor-state disputes, so that currently it is not possible to enforce investor-state awards through the New York Convention. Judge Gao says they are considering solutions to this issue.

Commercial disputes

Definition of OBOR/BRI disputes

Although none of the authors have mentioned this (nor have I, until now), one unrecognized issues in discussing OBOR/BRI disputes is a definitional one–what is a OBOR/BRI related dispute?  It seems that in court practice, the definition is broad, including cases between Chinese contractors and their demand guarantee issuing banks, as well as cross border cases involving Chinese and parties located in OBOR countries.  In my research (including a discrete inquiry with a knowledgeable person), a formal definition is lacking.

Judicial cooperation/enforcement issues

As this earlier blogpost mentioned, enforcement of foreign court judgments is on the SPC’s agenda.  As Judge Gao recognizes, there needs to be a structure for judgments of this international commercial court to be enforced outside of China.  She mentions (as has this blog), that China is actively participating in negotiations on the Hague Convention on the Recognition & Enforcement of Foreign Judgments, and is studying ratification of the Hague Convention on the Choice of Courts Agreements.  She flags also (as has this blog) that the SPC is drafting a judicial interpretation on the recognition and enforcement of foreign civil & commercial judgments.

Practice in other jurisdictions

Judge Gao mentions that the SPC is looking at the international commercial courts in several jurisdictions, including Dubai and Singapore (as mentioned in the earlier blogpost), but also Abu Dhabi, London’s Commercial Court (it appears that someone at the SPC has read this Financial Times article on foreign litigants there), and notes that the Netherlands, Germany, and Belgium are all establishing international commercial courts that use English.

Challenges for the Chinese courts

Judge Gao forthrightly flags a list of issues (my comments in italics) that the SPC faces in establishing an international commercial court. It is likely that she and her colleagues are aware of the additional issues raised as well.

  • judges; she notes that Dubai and Singapore have foreign judges on their international commercial courts, but currently China’s Judges’ Law and People’s Court Organizational Law (being amended) present obstacles to having foreign judges, and without them, the court will not be international and will not be internationally credible (literally, be internationally influential) (但是如果不引进外籍专业性人才参与国际商事法庭的建设，则缺乏国际性，缺乏影响力). My earlier blogpost mentioned the nationality issue. Would qualified foreign judges (or those from Hong Kong) be willing to join the international commercial court? Judge Gao does not mention that the group of Chinese judges qualified to hear these cases is not that large, and they are overloaded with cases, judicial interpretation/other guidance drafting, and other work. Could highly qualified Chinese lawyers be appointed to this court?  It is unclear, and relates to issues of how they would fit into the rigid structure of the judiciary, highlighted here.
  • choice of law; she mentions that parties have freedom concerning choice of law in China, so that would not be a problem.  However, relating to choice of court clauses, Professor Vivienne Bath’s research on parallel proceedings in China (previously mentioned on this blog) shows that Chinese courts do not recognize the validity of those clauses when the choice “lacks an actual connection with the dispute” because of provisions in the Civil Procedure Law.
  • procedure; she queries whether there can be some breakthroughs in civil procedure in this area.  Foreign lawyers are likely to query whether this could mean better discovery of documents. More importantly, what is not mentioned is that China’s failure to have acceded to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents will also be a major obstacle for the international commercial court. Under current Civil Procedure legislation,  notarization and legalization of documents is often required. The first step is when a party files suit or when a foreign party responds. Additionally, in litigation, evidence from a foreign country often must be notarized and legalized. Notarization and legalization costs time and money and a great deal of effort. At an academic conference in 2017, experts from the institutions involved discussed how to proceed on this.
  • language; Judge Gao notes that the Civil Procedure Law puts obstacles in the way of the international commercial court hearing cases in English.  Note that the pool of Chinese judges able to hear cases in English is not large, and would even further require recruiting judges from outside China’s judicial system.
  • counsel; She mentions the issue of having foreign lawyers handle cases is also an obstacle for the international commercial court, because China’s Civil Procedure Law currently does not permit it.
  • transparency; Judge Gao notes that Chinese judicial transparency and informatization has made great strides, so should be useful to the international commercial court.  However, Judge Gao and her colleagues could usefully look at the type of information accessible to both the parties and general public (and the level of detail in judgments) in other international commercial courts.
  • enforcement; Judge Gao raises the issue of recognition and enforcement of judgments, discussed above.

Where does the SPC go from here?

The article by the post-doctoral student Liao Yuxi suggested that the SPC may want to request the NPC Standing Committee authorize it to suspend some of the problematic provisions of the Civil Procedure Law that Judge Gao flagged above, such as the use of language, and the qualification of judges.  However many of the other issues cannot be resolved so easily, such as international enforcement and the requirement of notarization and legalization of evidence.

As for when we can expect to see some rules relating to the international commercial court, and whether drafts will be circulated for public (or even soft consultation), those are all unclear.  What is clear is that many complicated legal issues face Judge Gao and her colleagues.

 

 

 

 

 

alternative dispute resolution, Commercial law, foreign-related cases, One belt one road

SPC reveals new Belt & Road-related initiatives

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Judge Liu Guixiang (SPC judicial committee member & head of #1 Circuit Court) speaking at conference

In late September (2017), the Supreme People’s Court (SPC) held a Belt & Road judicial conference with senior judges from 16 jurisdictions in the desert oasis of Dunhuang, famed for its Buddhist caves.  As is its custom at its international conferences, the SPC released some information concerning previously unknown cross-border related initiatives, both of which have implications for the international business and legal communities.  The English language reports of the conference (in China Daily and related media outlets)  missed the implications.  A brief article in one of the SPC’s Wechat accounts reveals that:

  • SPC is drafting a judicial interpretation on the recognition and enforcement of foreign civil & commercial judgments (关于承认和执行外国法院民商事判决若干问题的规定);
  • SPC is considering establishing a Belt & Road International Commercial Court (literally “Tribunal”) (“一带一路”国际商事法庭). (chief of the SPC’s #4 Civil Division, Judge Zhang Yongjian, must have been speaking of this when he was interviewed during the 2017 National People’s Congress meeting).

Enforcing foreign civil judgments

A recent decision by a Wuhan court to enforce a California default judgment has received worldwide attention, both professional and academic. with some noting nothing had really changed and Professor Donald Clarke correctly wondering whether an instruction had come from on high.  With this news from Judge Liu, it is clear that the Wuhan decision is part of the Chinese courts’ rethink of its approach to recognizing and enforcing foreign court judgments.

Judge Liu revealed that the judicial interpretation will set out details regarding the meaning of “reciprocity” and standards for applying it (明确互惠原则具体适用的标准).  In another recent article, an SPC judge considered the matter of reciprocity in more detail.  Among the issues she mentioned were: 1) China not being a party to the Hague Convention on the Choice of Courts (this obstacle has been removed as China signed the Convention on 12 September 2017 (this article has a good overview); 2) China should actively participate in the drafting of the Hague Convention on the Recognition & Enforcement of Foreign Judgments (this seems to be happening, as this blog has reported).  The SPC judge recognized that the current Chinese position has significant limitations and can lead to a great deal of parallel litigation (see Professor Vivienne Bath‘s scholarship on this).  The SPC judge also suggested that the standards set out in mutual judicial assistance agreements could be useful in drafting standards for reviewing the recognition and enforcement of foreign judgments.

Belt & Road Commercial Court

Judge Liu also mentioned that the SPC would establish a Belt & Road dispute resolution mechanism and that the SPC was considering a Belt & Road commercial tribunal, to provide the parties of OBOR countries with fair, efficient, and low-cost one-stop legal services.  It is clear from discrete developments that the SPC is looking to Singapore’s International Commercial Court and the Dubai’s International Finance Centre Courts (DIFC).  One of those discrete developments is the cooperation agreement that the Shanghai Higher People’s Court and Dubai International Finance Centre Court signed in October 2016 (reported here), which must have required the concurrence of the SPC. The other discrete development is the memorandum of understanding on legal and judicial cooperation between the SPC and Singapore Supreme Court, signed in August 2017, relating to mutual recognition and enforcement of monetary judgments, judicial training for judges, and the Belt & Road initiative.

The details of the SPC’s  Belt & Road commercial court (tribunal) are yet unclear.  Both the DIFC and Singapore International Commercial Court have a panel of international judges, but a similar institution in China would be inconsistent with Chinese legislation.  The SPC is clearly interested in promoting mediation to resolve Belt & Road disputes. This interest is visible from the September 2017 International Mediation conference in Hangzhou, at which Judge Long Fei, director of one of the sections in the SPC’s Judicial Reform Office, spoke on the benefits of international commercial mediation.

Perhaps the SPC envisions an institution analogous to the Asian Infrastructure Investment Bank and plans to cooperate more on resolving Belt & Road commercial disputes with UNCITRAL and other international organizations.  We will need to see how this further develops.

It is also unclear whether the SPC will issue a draft judicial interpretation or draft regulations on the Belt & Road dispute resolution center for public comment.  Although President Zhou Qiang and Executive Vice President Shen Deyong speak of the benefits of judicial transparency, it seems the benefits of public participation in judicial interpretation drafting /rule-making have yet to be fully realized.