Tag Archives: draft judicial interpretations

China’s Civil Code to have a Contract Part Judicial Interpretation

photo of workshop

Because the Supreme People’s Court (SPC) has not released its judicial interpretation agenda for 2021 (as previously mentioned), the observer seeking to determine what is on that drafting priority list must rely on occasional reports in the professional and academic press.  Last month, several academic Wechat accounts reported on discussions of a draft of a judicial interpretation of the Contract Part of the Civil Code  民法典合同编司法解释(草案). The one I’m relying upon contains the more detailed report on the discussion, including the names of those discussing the draft on behalf of the SPC.  I’ll flag from this article why this discussion was held, what can be learned from the report on the discussion, and a quick preview of the interpretation itself.  But first, a few words about why this interpretation is needed and what it is intended to do.

Background on judicial interpretations

Through judicial interpretations, the SPC is seeking to “unify court judgments,”  to ensure that court decisions throughout the country and at various levels of courts are more consistent.  This principle is set out in the current and previous judicial reform plans. Establishing a Chinese case law system assists in this, but is insufficient.  As seen from the SPC, judicial interpretations are intended to address issues in which statutory law is either ambiguous or contains a gap, causing judges to misunderstand (the law) and issue decisions inconsistent with legislative intent (see more below).  The SPC  identifies those issues through the multiple stages in the judicial interpretation drafting process.

.Judges, particularly at the basic level, need to issue judgments efficiently in commercial cases. They face a combination of a large number of cases and relatively short deadlines in domestic civil procedure.  Recent reforms to the jurisdiction of the courts will require basic level courts to deal with even more cases.   They cannot assume that most cases will settle, as shown by my own research (concerning certain courts) and those of some others  (in certain courts) . The Contract Part of the Civil Code is not detailed enough for judges to rely upon to decide contract cases efficiently and consistently.  A more active National People’s Congress (NPC)  (and its Standing Committee) is not able to fill in the gap.  Therefore the SPC must be the one to do so.

As I have written before in this blog and in my recent book chapter, the SPC and the NPC, and NPC Standing Committee (NPCSC), most often the NPCSC Legislative Affairs Commission (LAC), communicate during the course of judicial interpretation drafting.  SPC rules require that a judicial interpretation draft be submitted to the relevant committees of the NPC or relevant department of the NPCSC to solicit their views before the final draft is submitted to the SPC judicial (adjudication) committee. Additional relevant guidance cited in my chapter reminds drafters that “liaison with the NPCSC LAC must be timely, and after major revisions to the judicial interpretation draft after consulting with the NPC LAC, the view of the NPCSC LAC  should be solicited again.”  Therefore the views of the two institutions are harmonized before the judicial interpretation is finalized by judicial committee approval.

Broad Consultation of Opinions

As I wrote in my recent book chapter, discussions of draft judicial interpretations by specialists are a regular part of the SPC’s judicial interpretation drafting process.  I described this as “broad consultation outside the gated community.”  The reason workshops are organized is to solicit the views of experts on specialized or technical subject matter. Those invited for these meetings tend to be senior academics, either from the country’s major universities or CASS, as was the case here.

The workshop was held at Renmin University, while a second similar workshop was held at CASS.  Participants included experts from the NPC LAC,  Renmin, Peking and Tsinghua Universities, China University of Political Science and Law,  China Academy of Social Sciences, Jilin University, Beijing Institute of Technology, Central University of Finance and Economics, University of International Business and Economics among others.

The normal practice is for SPC drafters to assess the views given by those experts at the workshops and consider whether they should be adopted or further taken into consideration. Professor Wang Liming, who is a member of the China International Commercial Court expert committee, was one of the leaders who spoke.

It can be determined from the workshop report which personnel at the SPC were involved in drafting and what the issues are.  As to personnel, Justice Liu Guixiang spoke at the beginning of the workshop, which means he is the most senior SPC judge responsible for the draft interpretation. Justice Liu is a full-time member of the judicial committee with vice-ministerial rank. Others from the SPC who spoke included Judge Guo Feng, deputy head of the Research Office,  Chen Longye, head of the civil section of the Research Office, Jiang Jiadi, a staff member of the same section, Judge Lin Wenxue, head of the #2 Civil Division (responsible for domestic commercial issues) and Judge Zeng Hongwei, a judge in the #2 Civil Division.  The #2 Civil Division hears appeals and retrials (再审) (and applications for retrial), unlike the Research Office, and therefore sees first hand some of the issues arising in the lower courts.  I surmise that Chen, Jiang and Zeng are the ones who are shouldering the bulk of the drafting work.  Judges Guo and Lin would have many other responsibilities.  The persons primarily involved in drafting discussed their parts of the interpretation.

Preview of the Interpretation

The first chapter of the draft interpretation is “General Provisions,” in which Chen Longye of the Research Office took the lead.  Judge Zeng Hongwei took the lead in discussing the second chapter on contract establishment. Issues included:

  •  contract interpretation;
  • trade practices;
  • application of non-contractual obligations;
  •  contract formation;
  • contract terms;
  • form of the contract; and
  • agency contracts,

Chapters 3 and 4 of the draft relate to the validity of and the performance of contract. Also, the #2 Civil Division took the lead in drafting because Judges Lin Wenxue and  Zeng Hongwei spoke.  From the discussion, it appears that the controversial questions were the oldies but goodies, the ones that occur in practice:

  • contract validity and  the obligation to report for approval;
  • defective contracts;
  • contracts in violation of mandatory provisions;
  • consequences of validity;
  • signing related issues, involving corporate seals and individual fingerprints;
  •  debtor’s right of defense in the transfer of creditor’s rights;
  • repayment of debts, debts by shares, joint debts, indivisible debts;
  • contract performance by a third party or to a third party or repayment by a third party;
  • Repayment by third parties; and
  • changes in circumstances.

Chapters 5 and 6 concern preservation of contract (保全), contract modification and transfer.  Judge Guo Feng and Jiang Jiadi of the  Research Office took the lead.  Issues included:

  • scope of rights,
  • scope of rights exclusive to the debtor
  •  right of subrogation
  • right of cancellation in “contract preservation;”
  • Contract modification and transfer;
  • role of a third party in the litigation of the creditor’s rights and debt transfer disputes,

Chapters 7 and 8 relate to  “Termination of Contract Rights and Obligations, Liability for Breach of Contract”.   Chen Longye took the lead in discussing the following issues, among others:

  • liability for compensation for contractual obligations after the breach;
  •  termination and its consequences;
  • the timing of termination;
  • determination of losses due to breach of contract;
  • liquidated damages, deposits, delay in receipt; and
  • force majeure.

When will the Interpretation be Issued?

As to whether this judicial interpretation will be issued by the end of this year, I personally have my doubts.  I have not found any reports of discussion of this draft in the lower courts or with the NPCSC LAC.  These steps are a usual part of judicial interpretation drafting.  Contract law is fundamental to business.  Those in SPC leadership are unlikely to approve this interpretation unless they think it meets the target of dealing with the unclear issues that lower courts and practitioners frequently encounter in practice.  The scope of consultation is unknown, such as whether some lawyers or companies will be consulted, or whether the entire draft will be issued for public comment. It is also unknown whether selected foreign contract law specialists have or will be approached for their comments.  We have to wait for further developments.

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Many thanks to certain anonymous readers for their insightful comments on earlier versions of this blogpost. They are not responsible for any errors or “erroneous views.”

Supreme People’s Court Solicits Comments on Court Online Procedures

On 21 January, the Supreme People’s Court (SPC) issued  for public comment regulations on online hearings, applicable to civil (commercial), administrative and enforcement cases, and certain criminal cases, entitled Regulations on Some Issues Related to People’s Courts Handling Cases Online (English translation available at Chinatranslate.com) 关于人民法院在线办理案件若干问题的规定(征求意见稿). This topic is likely to be of interest to foreign and foreign-invested users of the Chinese court system (although they are a tiny minority of users). Judging by the number of articles in the English-language professional media on China’s internet and online courts, the draft may also attract comments from interested professionals outside of China. One issue I would hope is clarified is whether they apply to cross-border cases (cases involving jurisdictions outside of (mainland) China, as my quick reading is that the draft is unclear.  (Corrections welcome!) .

It is likely that the SPC’s Judicial Reform Office took primary responsibility for drafting the regulations because the email and physical mail address for comments is directed to that office.  The deadline for comments is 5 February.  I surmise the 16 day comment period  is linked to the upcoming Chinese new year’s (spring festival) holiday, rather than disinterest in receiving comments from foreign, foreign-invested, or foreign-related institutions or individuals.  In the experience I have had personally or been aware of through other foreign institutions involved in commenting on draft interpretations, SPC judges have taken comments from foreign Chambers of Commerce in China, foreign-invested companies, and foreign professional bodies seriously. Some of the foreign Chambers of Commerce, for example, have legal committees, but it would take some time for them to organize a translation of the draft and assemble comments from committee members.

The SPC regulations on judicial interpretation work do not specify a minimum (or maximum) time period for soliciting opinions from the public.  Reviewing the comment periods for some of the other judicial interpretations and other judicial documents for which comments were solicited in 2020, the deadlines appear to vary significantly.  I surmise that the deadline is set by the team in charge of drafting the judicial interpretation (or other judicial document). In November, the SPC solicited public comments on proposed amendments to its judicial interpretations related to the taking of security for 18 days, while comment periods for other judicial interpretations and judicial documents seem to be often one month and sometimes two months

Where comments were solicited on judicial interpretations and other judicial documents in the area of intellectual property law, the general public, including the foreign public, seems to be given more time to make comments.  That may reflect the international nature of intellectual property law and long-term interactions between intellectual property specialists at the SPC and foreign intellectual property judges and other foreign experts knowledgeable about China’s intellectual property system. As Mark Cohen commented when the SPC’s Intellectual Property Court was established: [a specialist intellectual property appellate court] “has been a focus of much discussion between US and Chinese experts over 20 or more years, notably between the SPC and former CAFC [Court of Appeals for the Federal Circuit] Chief Judge Rader, former USPTO [United States Patent and Trademark Office] Director Kappos and others (including the author/owner of this blog {Mark Cohen]).”

I surmise that the persons soliciting comments would accept comments submitted after the formal deadline. That has been my own experience, but  in relation to another area of law.  To be safe, those planning to submit comments after the deadline are advised to contact the persons whose emails are listed in the notice, to ensure that their comments will in fact be read and considered.