Tag:dispute-resolution-and-litigation-commercial-disputes
The Decision of the Standing Committee of the National People’s Congress on Amending the Civil Procedure Law of the People’s Republic of China officially came into effect on 1 January 2024. This amendment to the Civil Procedure Law will bring significant changes to the addressing of international commercial cases, making it crucial for multinational enterprises and Chinese enterprises engaged in cross-border transactions to pay close attention and make preparations. We introduce, through a series of articles, the impact of the amendments to Civil Procedure Law on the jurisdiction of international commercial cases and cross-border litigation, assisting enterprises in adapting to the changes. We have already published Litigation in China: Expansion of the Jurisdiction of Chinese Courts over Foreign-Related Cases, Litigation in China: Choice of Chinese Courts No Longer Requests Actual Connection with China, Litigation in China: How to Avoid Constituting Responding Jurisdiction in Foreign-related Cases, Litigation in China: Two New Types of Foreign-Related Cases under the Exclusive Jurisdiction of Chinese Courts, and Litigation in China: Development of Forum Non Conveniens Rules.
Accelerating the extraterritorial service process
The issue of “difficulties in service and slow service” has long plagued the plaintiffs and courts in foreign-related commercial cases. This amendment provides various tools to address the above-mentioned problem.
Firstly, the Civil Procedure Law (2023 Amendment) incorporates previous judicial experience and introduces various alternative service methods to avoid lengthy service by means specified in treaties or through diplomatic channels as much as possible. These include:
（1）Removing the requirement for the defendant’s attorney to “have the right to accept service,” addressing the problem in judicial practice where defendants intentionally avoid service or delay litigation by not specifying “the right to accept service” in the power of attorney. This provision incorporates Article 4 of the Provisions of the Supreme People’s Court on Service of Judicial Documents in Foreign-related Civil or Commercial Cases (“Foreign-related Service Provisions”)[1].
（2）Providing that wholly-owned enterprises established by extraterritorial defendants in China can accept service on their behalf. This provision incorporates Article 12(1) of the Minutes of the National Symposium on Foreign-related Commercial and Maritime Trial Work of Courts (“Minutes”)[2]. It is important to note that the Minutes specify forwarding of service, while the Civil Procedure Law (2023 Amendment) stipulates direct service. The difference lies in the fact that under the Civil Procedure Law (2023 Amendment), courts are not required to verify whether the wholly-owned enterprise has delivered judicial documents to the extraterritorial defendant. Once the wholly-owned enterprise receives the documents, it is considered that the extraterritorial defendant has received them.
（3）Providing that when an extraterritorial natural person defendant serves as the legal representative of a Chinese enterprise, if the Chinese enterprise is a co-defendant, the Chinese enterprise can accept service on behalf of the extraterritorial natural person. Article 12(2) of the Minutes provided that “If a people’s court adopts the following methods to serve documents on a foreign natural person, it shall be deemed as effective if the receipt by the person to be served can be confirmed: Forwarding the service to the enterprise of which the foreign natural person acts as the legal representative, director, supervisor or senior executive within the territory of China.” The Civil Procedure Law (Draft Amendment) has referred to the above provision, yet it deleted scenarios of individuals acting as directors, supervisors, or senior executives, and imposed restrictions on enterprises as co-defendants to protect the privacy of natural person defendants[3]. This also falls under direct service, so the court is not required to verify whether the Chinese enterprise has delivered judicial documents to the extraterritorial natural person defendant.
（4）Providing that when the legal representative of an extraterritorial defendant is located in China, service shall be accepted by the legal representative. This provision originates from Article 533 of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People's Republic of China[4] and is also similar to Article 3 of the Foreign-related Service Provisions[5].
（5）Allowing various electronic service methods, including but not limited to fax and email, unless prohibited by the laws of the country of service.
（6）Including a new fallback service method (i.e. any other method agreed upon by the party to be served), unless prohibited by the laws of the country of service.
In accordance with Article 11 of the Foreign-related Service Provisions, the ten service methods provided by the Civil Procedure Law (2023 Amendment) (excluding service by public announcement) can be conducted simultaneously, and the date of service should be determined based on the method that achieves service first. [6]
Furthermore, the deadline for service by public announcement is shortened. The deadline for foreign-related service by public announcement is reduced from 3 months to 60 days to expedite the service process. We note that the Draft Amendment provided that service by public announcement can be conducted simultaneously with the ten aforementioned service methods, presumably to save time. However, the Civil Procedure Law (2023 Amendment) did not adopt this provision. The reason given was feedback from some courts indicating that simultaneous service by multiple methods could make it difficult to accurately determine the time of service [7], leading to disputes over when the litigation period begins.
Adding extraterritorial evidence taking methods
The Civil Procedure Law (2023 Amendment) introduces provisions for extraterritorial investigation and evidence taking, adding the following methods based on existing treaties and reciprocity principles:
（1）Taking evidence through diplomatic channels;
（2）Taking evidence from overseas Chinese parties and witnesses by Chinese embassies or consulates, as entrusted by the court;
（3）Taking evidence by using instant messaging tools if all parties agree; and
（4）Using other methods for evidence taking when all parties agree.
The precondition for the use of these new methods is that there are no prohibitive provisions in the laws of the country where the evidence or witnesses are located.
In China, the practice of extraterritorial evidence taking through treaties is very rare. According to the statistics of the Ministry of Justice on judicial assistance cases in 2022, as of the end of December 2022, the Judicial Assistance and Communication Center had sent 814 requests for service of documents to foreign countries, 6 for recognition and enforcement of judgments, and 0 for extraterritorial assistance in taking evidence based on the Hague Service Convention, the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, and bilateral civil and commercial judicial assistance treaties. This amendment adds extraterritorial evidence taking methods, significantly reducing the difficulty and time cost of extraterritorial evidence taking. This will help enhance the ability of Chinese courts to ascertain extraterritorial facts in foreign-related cases and make it more convenient for parties to apply for court orders to obtain extraterritorial evidence.
Enterprises FAQ: How can the plaintiff expedite service to overseas defendants?
This amendment provides many effective tools for expediting service, but the effects depend on the cooperation between the parties and the court. For example, (1) the plaintiff can proactively provide the address of the overseas defendant’s wholly-owned enterprise in China as the service address when filing a lawsuit; (2) if the overseas defendant is a natural person, the plaintiff can list the Chinese enterprise where the natural person serves as the legal representative as a co-defendant when filing a lawsuit, and withdraw the claim against the enterprise after completing service and response as appropriate; and (3) the parties agree in advance on flexible service methods in the contract, such as through email, social media, instant messaging apps, personal delivery, or delivery by local lawyers.
Enterprises FAQ: Can indirectly held wholly foreign-owned enterprises (“WFOEs”) accept service on behalf of its overseas shareholder?
From the provisions of the Civil Procedure Law (2023 Amendment), it is not clear whether a distinction is made between directly or indirectly held WFOEs, and we believe that the court is unlikely to make such a distinction. The reason is that, according to the SPC’s Interpretation and Application of the Minutes of the National Court Conference on Foreign-related Commercial and Maritime Trials, Article 12 of the Minutes provides that WFOEs can forward service of process because there is a close connection between overseas shareholders and domestic companies, which implies that overseas shareholders have frequent and smooth daily contacts with domestic companies and can be promptly informed of the service of process in such daily contacts. We believe that the addition of this method of service in the Civil Procedure Law is based on the same reason. Since there is no substantial difference between directly and indirectly held WFOEs in maintaining contact with overseas shareholders, the court may not limit the scope to directly held WFOEs. After the Civil Procedure Law (2023 Amendment) came into effect, WFOEs should pay special attention to strengthening mail management to avoid overseas shareholders missing relevant litigation deadlines.
Enterprises FAQ: What impact will the Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents (the “Convention”) have on extraterritorial evidence taking?
In simple terms, after the Convention came into effect in China, documents and evidence that previously required notarization and legalisation will now only require notarization and the issuance of additional certificates, shortening the time required for document preparation. For more information on the impact of the Convention on foreign litigation, please read the Introduction to the Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents released by KWM Institute.
In the next article of the series, we will discuss the impact of amendments to the Civil Procedure Law on parallel litigation. Stay tuned!
Thanks to associates Huang Yabing, Shen Yue, paralegal Liu Shuyang, and interns Tan Xiao and Zhang Xi for their contributions to this article.
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Unless the party to be served expressly indicates in the power of attorney that its agent ad litem has no right to receive the judicial documents on its behalf, the agent ad litem entrusted by it is entitled to receive the judicial documents on its behalf, and the people’s court may serve the documents on such agent ad litem.
If a people’s court adopts the following methods to serve documents on a foreign natural person, it shall be deemed as effective if the receipt by the person to be served can be confirmed: (1) Forwarding the service to the wholly foreign-owned enterprise established by the foreign natural person within the territory of China.
Report of the Constitution and Law Committee of the National People’s Congress on the Deliberation Results of the Civil Procedure Law (Draft Amendment).
Where a foreigner, the representative or key persons in charge of a foreign enterprise or organisation is within the territory of the People’s Republic of China, the people’s court may serve the litigation documents on such natural person or the representative or key persons in charge of the foreign enterprise or organization. The key persons in charge of a foreign enterprise or organisation include the directors, supervisors and senior managers of the enterprise or organisation.
Where, as the party to be served, a natural person, or the legal representative or the key persons in charge of an enterprise or other organization, is domiciled within the territory of the People’s Republic of China, the people’s court may serve the judicial documents on such natural person, legal representative or key persons in charge.
With the exception of service by public announcement, the people’s court may effect service through multiple methods concurrently, but the date of service shall be determined by the method in which service is effected first.
Report of the Constitution and Law Committee of the National People’s Congress on the Deliberation Results of the Civil Procedure Law (Draft Amendment).
