Supreme People’s Court updates its Belt & Road policies

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 earlier the 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 Bath of 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.

 

 

 

 

The China International Commercial Court & the development of case law with Chinese characteristics

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Article in 30 December edition of People’s Court Daily

On 30 December 2019, I was quoted in an article that appeared in Supreme People’s Court (SPC) media (see the screenshot above).

“中国国际商事法庭的运作时间不长,但从迄今为止的运作中可以清楚看到,其受理案件非常慎重,会选择对中国相关法律发展产生影响的案件。”最高人民法院国际商事专家委员、北京大学国际法学院常驻知名学者Susan Finder表示,从首批案件的裁判文书可以明显看出,中国国际商事法庭的判决和裁定对于下级法院的法官和法律界人士来说,可能是重要的“软先例”,即权威性的裁判。

The CICC has been in operation a short time…What is clear from its operations so far is that it is carefully choosing its cases, only selecting cases that will have an impact on the development of relevant Chinese law. What seems evident from the initial rulings, at least, is that the judgments and rulings of the CICC are likely to be significant for lower court judges and members of the legal community as “soft precedents,” authoritative decisions….

It is an excerpt from a brief article that I am setting out below as I wrote it in English (I have added (Chinalawtranslate.com’s) translation of excerpts from certain documents) and Chinese translation (many thanks to a knowledgeable person who took a break from year-end case closing to do this elegant translation).

I am honored to have this opportunity to comment on some of the first rulings and judgments of the China International Commercial Court (CICC). This brief commentary will address the significance of CICC judgments and rulings and the CICC arbitration-related rulings.

The CICC has been in operation a short time and it is early days to provide a more detailed analysis of its operations. What is clear from its operations so far is that it is carefully choosing its cases, only selecting cases that will have an impact on the development of relevant Chinese law. What seems evident from the initial rulings, at least, is that the judgments and rulings of the CICC are likely to be significant for lower court judges and members of the legal community as “soft precedents,”  authoritative decisions that are highly persuasive although not binding on the lower courts. Authoritative commentators in China and abroad have noted that the arbitration rulings fill a gap in Chinese arbitration law. The rulings are also consistent with the position taken by courts in some major jurisdictions that also find that the parties expressed their intent to arbitrate any dispute although their contract was never finalized. In the view of this commentator, they are part of China developing its own case guidance system, highlighted in item #26 of the 5th Judicial Reform Outline, in particular the phrase “Improve working mechanisms for mandatory searches and reporting of analogous cases and new types of cases” “完善类案和新类型案件强制检索报告工作机制” . It was previously mentioned in Opinions on Putting a Judicial Responsibility System in Place and Improving Mechanisms for Trial Oversight and Management (Provisional) –“on the foundation of improving working mechanisms such as consulting similar cases and judgment guidance a mechanism is to be established requiring the search of similar cases and relevant cases, to ensure a uniform judgment standard for similar cases, and the uniform application of law “最高人民法院关于落实司法责任制完善审判监督管理机制的意见(试行), (六) 在完善类案参考、裁判指引等工作机制基础上,建立类案及关联案件强制检索机制,确保类案裁判标准统一、法律适用统一 .

Moreover, thus far, five judges formed the members of the collegial panel, all of whom are the Chinese court’s most outstanding specialists on cross-border issues, including the judicial review of arbitration. This indicates the importance to which the Supreme People’s Court attaches to CICC cases.

In this commentator’s view, addition to CICC cases, other cases decided by or selected by the Supreme People’s Court would be classified as such. For example, cases decided by the Supreme People’s Court Intellectual Property Rights Court 最高人民法院知识产权法庭 would also be allocated to the category that I call “Supreme People’s Court soft precedents.” Other Supreme People’s Court soft precedents would include cases in the Supreme People’s Court Gazette 最高人民法院公报案件,  cases in the trial guides published by the various operational divisions 各个业务庭发表的审判业务指导丛书选的案件,and cases of the specialized judges committees of the SPC operational divisions 和各个业务庭专业法官会议案件。

In my view, cases decided by the collegial panels of the Supreme People’s Court are also persuasive, but not as persuasive as Supreme People’s Court cases in the categories described above. Supreme People’s Court circuit court cases are very persuasive to the courts within their jurisdiction. This case law is needed to supplement law and judicial interpretations and guide the lower courts correctly, as many new issues come before the courts before the legislative organs have time to amend legislation. I see China evolving its own case law, looking to traditional law and foreign jurisdictions for reference, but settling upon rules that fit China’s special situation, that may include some of the points I mention above. CICC decisions, whether rulings or judgments, will send important signals to the market, and are likely to be significant worldwide, as there is a documented increase in international arbitration cases where either the contract in dispute is governed by Chinese law or Chinese law is relevant in various ways.

The Chinese version:

中国国际商事法庭与有中国特色判例法的发展

我很荣幸有这个机会就中国国际商事法院(CICC)的首批裁定和判决发表意见。本短评将侧重中国国际商事法庭的判决和裁定以及仲裁司法审查裁定的重要性。

中国国际商事法庭的运作时间不长,对其运作进行更详细的分析还为时过早。 但从其迄今为止的运作中可以清楚看到的是,中国国际商事法庭选择其受理的案件非常慎重,只选择会对中国相关法律发展产生影响的案件。 至少从首批裁定可以明显看出,中国国际商事法庭的判决和裁定对于下级法院的法官和法律界人士来说,可能是重要的“软先例”,即权威性的裁判,虽然对下级法院没有约束力,但具有很强的说服力。 国内外权威专家均指出,这批裁定填补了中国仲裁法的一项空白。 这些裁定也与一些主要法域法院的立场保持了一致,也即尽管双方当事人的合同并未最后敲定,但双方都表示有意将争议提交仲裁。 在本文作者看来,这些裁判构成中国发展自己的案例指导制度的一部分,正如第五个司法改革纲要第26项所强调的,特别是“完善类案和新类型案件强制检索报告工作机制” 。 此前,最高人民法院关于落实司法责任制完善审判监督管理机制的意见(试行)曾提及“(六) 在完善类案参考、裁判指引等工作机制基础上,建立类案及关联案件强制检索机制,确保类案裁判标准统一、法律适用统一 。”

此外,到目前为止,合议庭均由五名法官组成,全部都是中国法院在跨境问题(包括仲裁司法审查)方面最杰出的专家。 由此可见最高人民法院对国际商事法庭案件的重视程度。

本文作者认为,除国际商事法庭案件外,最高人民法院审理或选取的其他案件也将被归入此类案例。例如,最高人民法院知识产权法庭判决的案件,也可归为所说的“最高人民法院软判例”,最高人民法院其他软判例还包括最高人民法院公报案例、各个业务庭发表的审判业务指导丛书选的案例和各个业务庭专业法官会议案例。我认为,最高人民法院合议庭判决的案件也具有说服力,但是没有上述几类案例的说服力强。 最高人民法院巡回法庭案例对其辖区内的法院具有很强的说服力。 由于立法机关往往来不及修改立法,许多新问题就摆在了法院面前,因此需要以判例来补充法律和司法解释以正确指导下级法院。 我看到中国正在发展自己的判例法,参考传统法律和外国司法管辖区的做法,但最终确定适合中国特殊国情的规则,这可能包括上文提到的一些要点。 国际商事法庭的裁判,无论是裁定还是判决,都将向市场发出重要信号,而且很可能在全球范围内产生重大影响,因为已有相关文件显示,争议合同适用中国法,或者中国法在不同方面予以适用的国际仲裁案件不断在增加。

Happy New Year!

Update from #1 China International Commercial Court

The Monitor at the #CICC/#1 Circuit Court, December 2018

In recent days, I had the opportunity to meet with  Zhang Yongjian, chief of the #1 China International Commercial Court (CICC) who provided some updates about the cases accepted by that court.  In addition to the three rulings (posted on the CICC website) that the #1 CICC had issued, he mentioned that a ruling in one of the cases was forthcoming, as was a judgment in another. He mentioned that in considering some of the cases, certain members of the expert committee have provided expert opinions, as is authorized by the CICC rules.  Additionally, the #1 CICC has accepted a sixth case, filed directly with the court. Zhang Yongjian mentioned the issues in that case relate to entrusted/nominee shareholding. The other cases accepted thus far are ones that had been referred by lower courts.

China International Commercial Court & the Supreme People’s Court Monitor

IMG_3582I am prefacing this blogpost with a statement that nothing in it (or future blogposts, for that matter) represents the Supreme People’s Court (SPC), the China International Commercial Court (CICC), or its newly established International Commercial Expert Committee (Expert Committee).

As can be seen from the above photo taken in the SPC, with President Zhou Qiang, Vice President Luo Dongchuan and others, I was among the first group of experts appointed to the CICC’s International Commercial Expert Committee. Former World Trade Organization Appellate Judge Zhang Yuejiao and I were the only two women who attended the initial meeting on 26 August.  I’ll set out some comments on the Expert Committee and the initial meeting.

The Expert Committee is the first official SPC committee that includes foreigners and others from outside of mainland China, and it may be the first of its nature within the Chinese justice (司法) system.  The Expert Committee was established as a way to involve foreigners in the CICC.  As I wrote earlier this year, unlike Singapore or Dubai, because of the restrictions of Chinese law, the CICC could not invite foreign judges to serve on the court.  Among the 32 experts appointed to the Expert Committee include many leading specialists in international arbitration and dispute resolution, including judges, arbitrators, scholars and practitioners from inside and outside China.  The detailed rules on how the CICC and the Expert Committee will operate (and interact) are still being drafted.  The provisions on the establishment of the CICC anticipate that the experts on the Expert Committee will be able to mediate disputes and provide opinions on foreign law, among other functions.

The initial meeting was held on a Sunday morning, likely to accommodate President Zhou Qiang’s schedule or that of the other senior officials who attended the meeting.  SPC  newly appointed Vice President Luo Dongchuan chaired the proceedings.  Future events will reveal his relationship, if any with the CICC.  He had previously headed the SPC’s #4 Civil Division and was most recently the head of Xinjiang’s Supervision Commission. The senior officials who attended from outside the SPC included Mr. Xu Hong, head of the Department of Treaties and Law of the Ministry of Foreign Affairs (MFA), several officials from the Department of Treaties and Law of the Ministry of Commerce (MOFCOM), as well as representatives from China’s major arbitration institutions.  A large group of officials from the SPC also attended, seated in the row behind the experts.  The CICC judges sat separately.  President Zhou Qiang presented all the experts present with their letters of appointment, followed by speeches by officials from MFA and MOFCOM, and several of the most prominent experts on the Expert Committee, including Huang Jin, President of the China University of Political Science and Law, Sir William Blair, former High Court judge and judge in charge of the Commercial  Court in London, and Rimsky Yuen, former Hong Kong Secretary for Justice.

The remaining two hours of the meeting consisted of brief presentations by some of the SPC judges involved and several experts, while other experts provided comments.  Both Judge Zhang Yuejiao and I spoke.  My brief presentation was on “the CICC: An Important Step in the Internationalization of the Chinese Courts.”  I raised a few of the legal issues that I had raised in earlier blogposts.  I concluded by reminding the attendees that the CICC could be a great opportunity to train a new generation of Chinese international judicial personnel, and that I was looking forward to the CICC giving a chance to some of my students at the Peking University School of Transnational Law to intern there!