Supreme People’s Court & foreign-related disputes

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Judge Zhang Yongjian, chief judge of the Supreme People’s Court (SPC)’s #4 Civil Division (responsible for foreign, Hong Kong, Macau, and Taiwan related commercial issues) previously featured on this blog, gave an interview to Legal Daily on the sidelines of the NPC meeting. This quick blogpost sets out some of the useful information from the interview:

He provided some data on the number of cross border cases:

  • Total number of foreign-related cases of all types (first, second instance, retrial, enforcement) heard and resolved: 25900, up 9.38%, among which 1061 were criminal,19200 civil and 3629 administrative, and about 2000 enforcement cases. The civil and commercial cases increased almost 11% compared to last year and accounted for about 75% of all foreign-related cases.
  • Total number of Hong Kong, Macau, Taiwan related civil and commercial cases closed: 27053 civil and commercial cases, Judge Zhang said that they accounted for 85% of all cases involving “greater China.”

The cases coming before the Chinese courts differ from the old trading and joint venture disputes, with many more cases involving demand guarantees, international factoring, private equity funds, stock options in companies listed overseas listed companies, cross-border telecommunications (fraud?), bonded trade disputes.

(As this observer has previously predicted), the number of cases related to One Belt One Road (OBOR) is increasing relatively quickly, while the number involving the United States, Britain, Germany, are decline. Cross-border project contracting and international logistics related cases are on the increase, as well as foreign-related intellectual property cases and maritime cases. Although Judge Zhang did not say so, it appears that many of these disputes are related to Chinese companies going out as well as OBOR, and may reflect inadequate documentation of the projects. The increase in maritime cases is linked to the ongoing decline in the shipping industry.  Chinese maritime courts have heard cases related to the Hanjin bankruptcy as well as large numbers of cases involving ship crew.

Challenges for the Chinese courts in hearing cross border cases:  encountering many “blank spaces” in Chinese legislation; conflict of laws with neighboring countries.  Other ongoing bottlenecks for Chinese courts in hearing cross-border cases–service of process to overseas parties; obtaining evidence crossborder; determining facts that have occurred abroad; determining and applying foreign law.

Judge Zhang highlighted the solutions for the Chinese courts in dealing with the difficulties:

  • SPC issuing judicial interpretations and other judicial guidance;
  • establishing a case guidance and reference system for the lower courts, including model cases, guiding cases, and selected cases (i.e. as selected by the SPC), to guide and limit judges’ discretion.
  • The SPC selecting some commercial cases (relating to free trade zones, internet finance, cross border investment financing) with an international impact as a model.
  • To enable correct and just hearing of cases, the higher and lower courts should be in touch in a timely matter and establish a system for supervision before, during and after a case. [What this means for judicial autonomy in hearing cases and the appeal system is not said.]
  • On the goals for 2017, those include establishing an OBOR dispute resolution center (推进设立“一带一路”争端解决中心的建立,促进“一带一路”建设). This is likely linked to the May, 2017 OBOR Conference to be held in Beijing.  Judge Zhang did not further specify, but it seems unlikely to mean establishing China’s own investment dispute resolution center. Perhaps this means increasing the role of Chinese courts in hearing cross-border cases involving OBOR jurisdictions.

Judge Zhang mentioned that he and his colleagues in 2017 have a variety of difficult issues that will be the subject of judicial interpretations or policy documents. This observer hopes that they will find it appropriate to consult the international legal community when drafting the following judicial interpretations that are on their agenda:

  • Enforcement of foreign civil and commercial judgments (possibly related the the Judgments Convention being negotiated under the auspices of the Hague Conference on Private International Law, and in the near term, to the enforcement of judgments through mutual judicial assistance treaties;
  • cross-border guarantees;
  • labor issues for ship crew;
  • damages in marine environmental cases;
  • jurisdiction in foreign-related cases, particularly civil and commercial cases;
  • judicial review of arbitration (this has been signalled for at least two years).

Judge Zhang signalled that they want to establish an English language website on foreign-related civil and commercial matters.  It is hoped that this new website will post information in a more timely manner than the current SPC English language website. An (unsolicited) recommendation is to hire an expatriate editor (similar to Xinhua and other Chinese media outlets) to assist in delivering content that meets institutional requirements and interests the foreign user.

All these developments relate back to one sentence in the Fourth Plenum Decision:

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

 

 

 

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China’s international maritime judicial center

20160313104344_51387I recently published an article in The Diplomat entitled “China’s Maritime Courts: Defenders of ‘Judicial Sovereignty,” focusing on what Supreme People’s Court President Zhou Qiang meant when he mentioned that China would establish an international maritime judicial center (国际海事司法中心).  Many thanks to Professor Vivienne Bath for her research on parallel proceedings and choice of court issues involving China, as well as several others who provided their insights.

Bulking up the Chinese maritime courts

December, 2015 Maritime courts conference

December, 2015 Maritime courts conference

The South China Sea continues to be in the news. But one of the many unnoticed developments related to the Supreme People’s Court (SPC) and the Chinese seas is the recent “bulking up” of the Chinese maritime courts.

The Chinese maritime courts, established 30 years ago, are said to be the busiest in the Asia Pacific region, and hear cases arising in Chinese waters, coastal and inland. In 2015, the maritime courts heard about 31,000 cases, a 43% increase year on year, with cases involving foreign parties accounting for about 15%.

The “bulking up”  of the maritime courts has occurred through the following recent events:

  • establishment of a maritime court training campus and research base;
  • two conferences convened by the SPC in December, 2015  on reforms to the maritime courts; and
  • two February, 2016 judicial interpretations revamping the jurisdiction of the maritime courts.

These developments are responding to both international and domestic factors and link to earlier government/Party initiatives

This blogpost will highlight some of the international developments.

Party initiatives guiding the reform of the maritime courts

Reforming the maritime courts was foreshadowed in the 4th Plenum Decision, Supreme People’s Court 4th Five Year Plan for reforming the courts and more specifically in One Belt One Road Opinion:

From the 4th Plenum:

Adapt to the incessant deepening of opening up to the outside world, perfect foreign-oriented legal and regulatory systems, stimulate the construction of new structures for an open economy. 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.

From the court reform plan:

Reform the maritime case jurisdiction system. Further clean up the system for trial of maritime matters. Scientifically determine the scope of jurisdiction for maritime courts, establish working mechanisms better suited for maritime courts hearing of cases.

The One Belt One Road SPC Opinion highlighted some of the current reforms to the maritime courts, in some detail.

SPC new training center

December’s national maritime courts conference was held in Qingdao, where the maritime court training campus was established.  SPC President Zhou Qiang, who presided over the conference, described its purpose as:

to implement the decisions and arrangements of the CPC Central Committee, to accelerate the trial of maritime personnel training, promote maritime judicial theory and innovative practice.  It is an important measure for promoting the development of maritime trial work and advances international maritime justice.

A senior staff member of the Central Political Legal Committee and officials of Ministry of Foreign Affairs, State Ocean Administration, and other government agencies also attended the conference.

New regulations on jurisdiction of maritime courts

As mentioned above, in February, 2016, two regulations on the jurisdiction of the maritime courts were issued by the SPC.  Those regulations had been previously highlighted in several conferences and SPC documents, including the November, 2014 4th National Work Conference on Foreign-Related Commercial and Maritime Adjudication, OBOR Opinion, and December, 2015 Maritime Courts conference.  These regulations had been issued for less than two weeks in November for public comment, making it difficult if not impossible for interested foreign parties to comment.

One of the new regulations relates to the geographical jurisdiction of several maritime courts, principles for determining jurisdiction in administrative cases and objections to jurisdiction.  The other expands the scope of cases that can be heard by the maritime courts, setting out over 112 categories of cases that can be brought. In the section on ocean and sea navigable waters exploitation and environmental protection related disputes, ocean and sea navigable waters construction disputes are included, such as underwater dredging construction, land reclamation and ..artificial islands.

International maritime justice

Zhou Qiang had the following to say about the goals of reforming the maritime courts to improve their international  prestige.

  • Make the maritime courts  internationally influential.  We have already established ourselves as the Asia Pacific area maritime judicial center (确立了亚太地区海事司法中心的地位).  (A corollary to this (derived from conference presentations) appears to be a push to move the locus of maritime dispute resolution from London and other centers in Europe to China, where Chinese parties will encounter a more familiar dispute resolution system);
  • Increase China’s influence over the development of international maritime rules.  Improve China’s contribution to international maritime law, effectively safeguarding national sovereignty, security and development interests. (This is directly related to the 4th Plenum Decision.)
  • Strengthen the sense of national sovereignty (要强化国家主权意识), exercise jurisdiction over all types of maritime development and utilization of marine waters within the jurisdiction of the country.  This refers to all the marine waters China claims in the South China Sea and elsewhere, according to a Chinese maritime law expert.

Commercial issues

From comments by (foreign) maritime law practitioners, it appears that major European and American shipping companies have concerns about the Chinese maritime courts.  Concerns include:

  • Chinese courts, particularly the maritime courts, have repeatedly refused to enforce choice of court clauses when the chosen forum has no actual connection with the dispute.    Chinese maritime courts rely on the principle in Article 34 of the Civil Procedure Law that the choice of court selected by the parties must have a connection to the matter (although China’s choice of law legislation does not require a choice of law to have a connection) to disregard choice of courts clauses in bills of lading or other documentation, even if  proceedings have begun in other jurisdictions. This often occurs in cases involving bills of lading.
  • Related to this is that the Chinese maritime courts are sometimes the site of parallel proceedings, when there may be proceedings elsewhere in the world relating to the same dispute.  Some of these cases were described in a talk at the University of Hong Kong by Professor Vivienne Bath of the University of Sydney and will be incorporated into a forthcoming article.

The larger issue, of course, is that while the Chinese maritime courts now include some very highly trained and experienced judges, the emphasis on Chinese national interests and national sovereignty leads non-Chinese and private enterprise litigants to question whether their dispute will be considered fairly.

 

 

 

 

Supreme People’s Court and “One Belt One Road”

Judge Luo Dongchuan. chief judge,#4 civil division

Judge Luo Dongchuan. chief judge,#4 civil division, at the OBOR Opinion press conference

On 7 July the Supreme People’s Court (the Court) issued an opinion (意见) policy document on how the courts should provide services and protection to “One Belt One Road” (OBOR Opinion) (关于人民法院为“一带一路”建设提供司法服务和保障的若干意见). This blogpost explains why the Supreme People’s Court issued it, what the policy document provides and what it means for legal professionals. The typical (model) cases issued at the same time include the Sino-Environment case, subject of an earlier blogpost  (and deserve closer analysis).

Why was the One Belt One Road document issued?

One Belt One Road (OBOR) is a major government strategic initiative.  As a central government institution, the Court must do its part to support OBOR.  Major SOEs contemplating investing in OBOR projects or trading with companies on OBOR recognize that their interests are best protected through legal infrastructure and the Court has an important role in this. MOFCOM and other related regulatory agencies realize this as well. Local courts linked to the Belt or the Road, are dealing with new demands because of OBOR and are looking to the Court for guidance.

The OBOR Opinion was drafted with input from these regulatory agencies and certain legal experts, but was not issued for public comment.

What the OBOR Opinion covers

The OBOR Opinion covers cross-border criminal, civil and commercial, and maritime as well as free trade zone-related judicial issues.  It also deals with the judicial review of arbitration.

Criminal law issues: the lower courts are requested to improve their work in cross-border criminal cases, and the courts are to do their part in increased mutual judicial assistance in criminal matters.  The focus is on criminal punishment of  those characterized as violent terrorists, ethnic separatists, religious extremists, and secondarily on pirates, drug traffickers, smugglers money launderers, telecommunication fraudsters, internet criminals, and human traffickers. It also calls on courts to deal with criminal cases arising in trade, investment, and other cross-border business, and deal with criminal policy and distinguishing whether an act is in fact a crime, so that each case will meet the test of law and history.  The political concerns behind criminal law enforcement issues are evident in this.

Much of the focus in the OBOR Opinion is on civil and commercial issues, including the exercise of jurisdiction, mutual legal assistance, and parallel proceedings in different jurisdictions and in particular, improving the quality of the Chinese courts in dealing with cross-border legal issues. These issues are explained in more detail below

One of the underlying goals set out in the OBOR Opinion, is to improve the international standing and influence of the Chinese courts and other legal institutions.

What does it mean for legal professionals

The OBOR Opinion signals that the Court is working on a broad range of practically important cross-border legal issues.  Some of these issues involve working out arrangements with other Chinese government agencies and are likely to require several years to implement.  The OBOR Opinion mentions that the Court:

  • seeks to expand bilateral and multilateral mutual judicial assistance arrangements, for better delivery of judicial documents, obtaining evidence, recognition and enforcement of foreign court judgments.
  • supports and promotes the use of international commercial and maritime arbitration to resolve disputes arising along One Belt One Road.  China will promote the use of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) between countries on One Belt One Road and encourage countries that have not yet acceded to the Convention to do so.
  • supports and promotes the use of various types of mediation to resolve OBOR related cross-border disputes.
  • it signals that the Court will become more involved in Chinese government initiatives such as the Asian Infrastructure Investment Bank, the conference of supreme courts under the Shanghai Cooperation Organization, and other international or regional multilateral judicial cooperation organizations.
  • is signalling the lower courts that they should limit the range of cross-border contracts being declared invalid or void.
  •  sets out the new thinking on the issue of reciprocity in the enforcement of foreign judgments, in particular that Chinese courts can take the initiative in extending the reciprocity principle to parties from other jurisdictions.  This is practically significant for foreign parties and their counsel, and has been discussed repeatedly by both practitioners and academics (such as these);
  • will improve Chinese legal infrastructure on overseas evidence, overseas witnesses giving evidence, documenting the identity of overseas parties, “to better convenience Chinese and foreign parties. ”  This would involve evolving from the current system embedded in Chinese legislation of requiring notarization and legalization of many documents (because mainland China is not yet a party to the Hague Convention on the Abolishing the Requirement of Legalization of Foreign Public Documents. This is a positive sign;
  • The Court has on its agenda further legal infrastructure on the judicial review of arbitration (as signalled at the end of last year), involving foreign/Hong Kong/Macau/Taiwan parties, aimed at supporting arbitration and having a unified standard of judicial review on the following issues:
    • refusing enforcement of arbitral awards; and
    • setting aside arbitral awards.
  • has on its agenda judicial legal infrastructure for supporting the resolution of bilateral trade, investment, free trade zone and related disputes.
  • Reflecting language in the 4th Plenum, it calls for China to be more greatly involved tin the drafting of relevant international rules, to strengthen China’s voice concerning issues of international trade, investment, and financial law.
  •  mentions that an improved version of the Court’s English language website and website on foreign-related commercial and maritime issues is forthcoming.  Specific suggestions can be emailed to supremepeoplescourtmonitor@gmail.com.