ClCC: New approach to resolving cross-border disputes

By Craig Zhou, Chris Wang, MHP Law Firm
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The Provisions of the Supreme People’s Court on Several Issues Concerning the Establishment of International Commercial Courts, which the Supreme People’s Court released on 27 June and enacted from 1 July, provides the legal basis and support for the operation of China International Commercial Courts (CICC). On 29 June 2018, the First International Commercial Court and the Second International Commercial Court of the Supreme People’s Court formally started operations in Shenzhen and Xi’an, respectively.

CRAIG ZHOU Associate MHP Law Firm
CRAIG ZHOU
Associate
MHP Law Firm

JURISDICTION

Pursuant to the Provisions, the CICC shall have jurisdiction over: (1) international commercial disputes with a subject matter valued at RMB300 million (US$43.6 million) or more, in connection with which the parties have elected and agreed to submit to the jurisdiction of the Supreme People’s Court; (2) international commercial cases over which higher courts have jurisdiction in the first instance, but which are escalated, as higher courts deem fit, with approval of the Supreme People’s Court; (3) international commercial disputes with significant nationwide impact; and (4) cases that, as agreed between the parties, are to be resolved through arbitration by international commercial arbitration bodies prescribed in article 11 of the provisions and in connection with which the parties have applied with the CICC for preservation relating to arbitration proceedings, or revocation or enforcement of international commercial arbitration awards.

A case is considered an international commercial dispute if it meets any one of the following conditions: (1) one or both parties in the case are foreigners, stateless persons, or foreign enterprises or organizations; (2) one or both parties in the case have a usual place of residence outside the People’s Republic of China; (3) the subject matter is situated outside the PRC; and (4) the legal facts that give rise to, change or lead to extinction of commercial relations take place outside the PRC.

It is worth noting that, according to the Civil Procedure Law, the parties to a contract dispute, or any other dispute involving property interest, may agree in writing to submit to the jurisdiction of courts in the place of domicile of the respondent, place of performance or execution of the contract, place of domicile of the claimant, place of the subject matter or any other place that is substantially relevant to the dispute, provided that the agreement shall not contravene provisions of the Civil Procedure Law regarding level of jurisdiction and exclusive jurisdiction. By explicitly allowing the parties to submit any case with a subject matter valued at RMB300 million or more directly to the Supreme People’s Court, the provisions marks a significant breakthrough in the existing rules of jurisdiction.

INNOVATIONS IN TRIAL

According to article 5 of the provisions, “for any case before the CICC, a collegiate bench comprising three or more judges shall be formed. The collegiate bench shall consider the case after the majority rule, although opinions of the minority may be stated in the rulings.” In view of the complexity of international commercial disputes, this article 5 excludes people’s jurors from the collegiate bench. By allowing inclusion of the minority’s opinions into the rulings, it improves judicial transparency and reflects the impartiality of the CICC.

As required by the Several Provisions on Evidences in Civil Proceedings in effect, pieces of evidence arising outside the PRC must have been notarized or certified. In judicial practice, some judges may either refuse to recognize or reject cross-examination of evidences arising outside the PRC. However, helping to avoid lengthy litigation and saving costs for the parties, article 9 of the provisions stipulates that evidence arising outside the PRC, whether or not notarized, certified or otherwise testified, must be cross-examined in courts. It is also stipulated in the provisions that, if the parties agree, they do not have to submit Chinese translations of their evidence in English. Besides, CICC can use audio/visual technologies and any other approaches, based on information networks when investigating into or collecting evidence or organizing cross-examination of evidence.

In general, the aforementioned provisions represent innovation and exploration into the trial proceedings for international commercial disputes.

CHRIS WANG Associate MHP Law Firm
CHRIS WANG
Associate
MHP Law Firm

DIVERSIFIED APPROACHES

To meet the needs of Chinese and foreign parties for diversified dispute resolution, the Supreme People’s Court has caused the formation of a dispute resolution platform comprising the CICC and qualified international commercial mediation and arbitration bodies that organically connects mediation and arbitration with litigation, so as establish an international commercial dispute resolution mechanism able to provide “one-stop” solutions.

Where the parties to a case have elected to resolve the dispute through mediation, within seven days after the CICC accepts the case, it may be referred to mediation by members of the International Committee of Commercial Experts or by an international commercial mediation body.

Where the parties have decided to refer the case to an eligible international arbitration body, they may apply for preservation of evidence, properties or conduct to the CICC either before submission of the arbitration application or after commencement of the arbitration proceedings.

After the international arbitration body issues an award, the parties may file a petition to the CICC asking to revoke or enforce the award.

The diversified dispute resolution mechanism, which combines mediation and arbitration with litigation, provides great convenience for the parties to cases, although it is certain the mechanism will operate amid lots of new problems and challenges. Further official documents will be necessary to clarify and provide guidelines on implementation of specific solutions.

To sum up, the establishment of the CICC and the introduction of the provisions represent breakthroughs and innovations in the existing international commercial dispute resolution mechanism. To date, however, there are uncertainties surrounding many issues relating to the CICC and the alleged “trinity” dispute resolution mechanism. The practical significance of the judicial reforms beneath the CICC and the Provisions will not be achieved until supporting systems are effectively implemented.

Craig Zhou and Chris Wang are associates at MHP Law Firm

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