How new judicial interpretations impact foreign-related civil & commercial litigation

On 4 February, the Supreme People’s Court issued a revision of its Interpretations on Application of the Civil Procedure Law. The number of articles in the interpretations increased from the original 320 to 552, adding greater and more comprehensive clarity to the relevant procedures for important systems added and amended in the 2013 revision of the Civil Procedure Law. The interpretations revise provisions that resulted in inconsistent application of standards in civil and commercial trials, and provide judicial basis for the enforcement of the new Civil Procedure Law.

Q: What measures do the interpretations have to facilitate legal actions in foreign-related civil and commercial litigation?

A: In addition to the case filing system, the interpretations specify several systems exclusive to foreign-related litigation cases for concerned parties in foreign-related civil and commercial litigation.

First, the burden on parties to translate foreign language materials in foreign-related legal actions has been reduced.Previously, all translated documents provided by parties to foreign-related civil or commercial litigation had to be translations provided by agencies recognized by the courts.

Pursuant to article 527, a party may provide a Chinese translation of foreign language materials at its own initiative. A translation agency needs to be jointly engaged only when a party has an objection to a translation.

Second, a domestic court may exercise jurisdiction simultaneously with a foreign court, and the judgment or ruling of the domestic court can negate the recognition and enforcement of a foreign court’s judgment or ruling.

However, this must not violate the principle of double jeopardy. In other words, a domestic court can hear a case where one party institutes a legal action in a domestic court and the other party institutes a legal action in a foreign court, and both courts have jurisdiction.

If a foreign court renders a judgment or ruling on a case on which a domestic court has already judged or ruled, and the foreign court or the concerned party requests that the domestic court recognize and enforce the foreign court’s judgment, the domestic court should deny the request. Further, if a domestic court has already recognized a judgment or ruling of a foreign court on a case, and a party institutes a legal action in a domestic court in respect to the same dispute, the domestic court should refuse to accept the case.

Third, the interpretations reduce to two the number of situations in which parties are required to provide security in the course of a legal action. These are:

1. A party may be exempted from providing security when requesting a perpetuation of evidence if the court deems the security unnecessary.

2. The debtor will not be required to pay security when a foreign-related arbitral award is being enforced if they request suspension of enforcement in connection with their defence.

These two measures lighten the burden of parties in legal actions and safeguard parties’ right to win at trial and the debtors’ right of defence.

Q: What ground-breaking systems were introduced, if any?

A: The main ground-breaking structures introduced in the interpretations are set out below.

Firstly, the interpretations provide for the forum non conveniens, or inconvenient court, doctrine, setting out the legal basis for the refusal of jurisdiction by domestic courts in foreign-related trial practice. Pursuant to article 532, the court may in certain circumstances render a ruling to dismiss the plaintiff’s complaint and advise them to institute a legal action in the more convenient foreign court.

A domestic court will experience significant difficulty in determining the facts or governing law in cases where the dispute’s connection with China is minor. These judgments would require recognition and enforcement in a foreign country as well. In these cases, the defendant may request that the domestic court dismiss the plaintiff’s complaint, and the court may also rule to do so at its own initiative, thereby economizing Chinese justicial resources.

Article 532 elevates the forum non conveniens doctrine from judicial policy to the heights of judicial interpretation. It provides the foundation and criteria for practical implementation in the hearings of domestic courts at every level.

Secondly, the interpretations recognize the validity of foreign ad hoc arbitral awards. The interpretations specify the courts where parties should apply for award recognition and enforcement as well as how the awards should be handled.

However, the interpretations set out that domestic courts will only recognize and enforce ad hoc arbitral awards rendered by signatories of the New York Convention or countries with whom China has bilateral arrangements. Although neither the Arbitration Law nor the Civil Procedure Law provide for ad hoc arbitration at present, this provision will effectively bolster the creation and consummation of ad hoc arbitration in Chinese practice.

Q: Will the interpretations impact the recognition and enforcement of future foreign court judgments?

A: The interpretations address this issue in detail, discussing it in four aspects: a) application process, b) application timeline, c) basis for recognition and enforcement, and d) the sequential procedure for recognition and enforcement. Pursuant to relevant provisions, a foreign judgment or award must be recognized by a domestic court before it can be enforced.

The domestic court will assemble a collegiate bench of judges to review a request for recognition and enforcement in China. This review is not a retrial of the case – the substantive issues of the case are not reviewed – rather, it focuses solely on whether the foreign judgment or award satisfies the conditions for recognition and enforcement in China.

The interpretations’ provisions provide the judicial basis for the recognition and enforcement of foreign court judgments in China. It is probable that China will see an increasing number of these judgments recognized and enforced in the future.