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, and Litigation in China: Two New Types of Foreign-related Cases under the Exclusive Jurisdiction of Chinese Courts.
I. Change of forum non conveniens rules
The 2023 Amendment incorporates new forum non conveniens rules. In fact, however, this Amendment actually elevates the long-established rules on forum non conveniens in judicial interpretation to legal provisions. Moreover, it improves the conditions for applying the rules. As such, the Amendment does not constitute an addition of a new system. By comparing the texts before and after the amendment, minor changes can be found as follows:
First, the Civil Procedure Law (2023 Amendment) amends the condition from “The case does not involve the interests of the State, citizens, legal persons or other organizations of the People’s Republic of China” as set forth in the judicial interpretation to “The case does not involve the sovereignty, security or public interests of the People’s Republic of China.” It deletes the wording on individual interests and retains that on national and public interests. In practice, the weakness of the judicial interpretation is that, once the interests of individual parties are involved, most cases cannot satisfy the condition of applying forum non conveniens rules. As a result, the rules cannot apply to some cases with inconvenient circumstances. The Civil Procedure Law (2023 Amendment) focuses the scrutiny on national and public interests, rather than individual interests. However, this does not mean that individual interests will no longer be considered. By adding “it is obviously inconvenient for the parties to participate in the proceedings thereof,” the amended text takes individual interests into consideration.
Second, “the laws of the People’s Republic of China are not applicable to the case, as well as there are significant difficulties in the determination of facts and application of laws by the people’s court” is replaced with “it is obviously inconvenient for a people’s court to hear the case and for the parties to participate in the proceedings thereof”. The 2023 Amendment also considers the convenience of the parties in addition to that of the court. When judging the convenience of a court to hear a case, judicial practices show that the following factors can be considered: whether the applicable laws are foreign laws, whether the service is convenient, whether the evidence is in a foreign language and needs to be obtained abroad, and whether preservation and enforcement of judgment can be realised in China, etc.[1]There is no clear standard to judge whether it is convenient for a party to file a lawsuit. We believe that, in commercial cases, it is a common practice for the parties to engage professional lawyers for litigation. In this regard, Chinese and foreign parties may not need to attend court proceedings in person and may only bear monetary costs. Therefore, the circumstances that constitute obvious inconvenience to the parties are limited. At least, the fact that a party is a Chinese citizen or resides in China will not constitute the circumstance of “obvious inconvenience”.
Lastly, a catch-all provision is added to solve a party’s dilemma of having no timely access to remedies in a foreign court. Compared with the judicial interpretation, the Civil Procedure Law (2023 Amendment) adds a mechanism for re-accepting a case. The prerequisites for a case to be re-accepted are that the foreign court refuses to exercise jurisdiction, fails to take necessary measures to hear the case, or fails to conclude the case within a reasonable period. A party needs to prove that one of the above conditions is met in re-filing the lawsuit, by presenting the legal documents of the foreign court on refusing to exercise the jurisdiction, providing the provisions on trial procedures and time limits in the foreign procedural law, or otherwise.
II. Enterprises FAQ: How can a foreign party raise a forum non conveniens issue in a Chinese court?
The premise of raising an forum non conveniens issue is that a Chinese court has jurisdiction over the case. Therefore, the time limit for raising the issue is not subject to the prescribed period for raising an objection to jurisdiction. In practice, however, lawyers usually advise the parties to raise forum non conveniens issues along with jurisdiction objections (if any), in order to increase the court’s inclination to uphold the claim for jurisdiction objection.
III. Enterprises FAQ: Can a third party raise a forum non conveniens issue?
Third parties can be classified into two categories: those without independent right of claim and those with independent right of claim. If a third party is listed in the statement of claim by the plaintiff, it usually falls into the former category - a third party without independent right of claim. As the third party without independent right of claim assists either the plaintiff or the defendant to make their claims, but asserts no independent claims, it has no right to raise an objection to jurisdiction[2]. However, if a third party with independent right of claim voluntarily joins the litigation, it has the status of the plaintiff and should be deemed to have accepted the jurisdiction of the court which accepts the lawsuit[3]. Based on the above-mentioned basic theories of jurisdiction objection, we believe that a third party may also have no right to raise a forum non conveniens issue.
In the next article of the series, we will discuss the impact of amendments to the Civil Procedure Law on rules on extraterritorial service and evidence collection. 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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In (2021) Yue 13 Min Xia Zhong No.19: In light of the circumstances and relevant evidence of this case, the parties concerned are Hong Kong subjects and this case does not involve the interests of Mainland citizens, legal persons or other organisations. The main disputed legal facts of this case occur in the Hong Kong SAR, and the parties concerned have agreed in the clauses of the bank credit involved in this case to apply the laws of the Hong Kong SAR. As such, the courts of the Hong Kong SAR do have certain advantages in the trial of this case. However, considering that the parties are obliged to provide the laws of the Hong Kong SAR when they choose to apply the laws of the region, the parties to this case have both engaged a mainland attorney, the written materials in foreign languages involved in the case have Chinese translations, the case can be heard online and served electronically, and it’s convenient to travel between this city and Hong Kong, among others, whether in terms of substantive proceedings or procedural affairs, the identification of the applicable law in this case, the convenience for the parties to participate in litigation, the complexity of service procedures, the language used in the trial, and the acquisition of evidence in the case are not enough to constitute major and obvious inconvenient factors for the mainland courts. Therefore, there is no major difficulty in ascertaining the facts and applying the law in the case by the court. In addition, the appellant HSBC also believes that even if it filed a lawsuit in a Hong Kong court and won a final judgment, it could not get paid off by the properties held by Runda and Luo Mingsheng in Hong Kong. In this case, in terms of the feasibility and effectiveness of the preservation and enforcement, it is realistic for the court of first instance to exercise jurisdiction over the case. Therefore, it is improper for the court of first instance to apply the principle of “forum non conveniens” to dismiss HSBC’s litigation and such act should be corrected. The grounds on which HSBC appealed the jurisdiction objection were tenable, and were supported by the Court. In (2022) Chuan 01 Min Zhong No. 12929: The court of first instance held that it is more convenient for a Hong Kong court to hear this case. However, in judging whether it is “more convenient”, various factors shall be considered based on the specific circumstances of the case and from the perspectives of protecting the legitimate rights and interests of the parties in a timely, effective and maximal manner. In this case, although both Focus Electric and REXSO are companies incorporated in Hong Kong, Focus Electric stated that it has an office address in the Chinese Mainland while REXSO also has an address for receiving documents in the Chinese Mainland. In other words, there is no “inconvenience” in the service of legal documents and evidence obtaining. In addition, “whether a judgment can be enforced” is an important factor in applying the principle of forum non conveniens. The court of first instance has ruled that the property under the names of Ji Jingui and Elephone may be sealed, distrained and frozen up to RMB 5257722.42. It is also conducive to the enforcement of the judgment.
Article 82 of the Interpretation on the Civil Procedure Law: in the proceedings of first instance, a third party without independent right of claim has no right to raise an objection to jurisdiction, waive or alter any claim, or apply for withdrawal of the action, but has the right to appeal where it is ordered to assume civil liability.
Reply of the Supreme People’s Court on Whether a Third Party May Object to Jurisdiction - Fa (Jing) Fu [1990] No. 9: I. If a third party with independent right of claim voluntarily participates in an action already initiated by others, it shall be deemed to have admitted and accepted the jurisdiction of the court accepting the case, and the issue about the objection to jurisdiction does not exist; if the court accepting the case informs, ex officio, the third party to participate in the action, the third party has the right to choose whether to participate in the action as a third party with independent right of claim, or file a separate lawsuit as a plaintiff to another court with jurisdiction. II. When a third party without independent right of claim participates in an action already initiated by others, it safeguards its own interests by supporting the claims of one party. Since the third party assists one party and supports such party’s claims all the time in the action, it has no right to challenge the jurisdiction of the court which has accepted the case.
