SPC commercial litigation reform via judgments in similar cases

By Li Chen, Dentons
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The last two months of 2019 left a deep impression on everyone involved in the law. In November, the Supreme People’s Court (SPC) issued the Minutes of the 9th National Court Conference on Civil and Commercial Adjudication Work, bowling over the entire legal profession. In December, it issued the Minutes of the Conference on Bond Disputes (Draft for Comment), as well as revising the Several Provisions on Evidence in Civil Procedures. This article analyzes the major challenges and opportunities that the various recent SPC measures present in commercial litigation from the perspective of the “consistent judgments in similar cases” judicial reform.

Bombshell judicial measure

Mechanism for searching similar cases and associated cases. The Opinions on Improving the Work Mechanisms of the Adjudication Committees of People’s Courts, issued in August 2019, expressly require that “similar case and associated case search information” for cases submitted to the adjudication committee for discussion be specified. In November 2019, the anthology titled Rules of Chinese Courts for Similar Case Searches and Adjudication was published.

litigation
Li Chen
Senior partner
Dentons

Mechanism for resolving differences of opinion. The Implementing Measures for the Establishment of the Mechanism for Resolving Differences of Opinion on Application of the Law, issued in October 2019, propose the establishment of an entire suite of application, study and decision solutions to address differences of opinion on application of the law.

Uniform adjudication rules for comprehensive and detailed fields. The above-mentioned minutes issued in November 2019 focus on unifying the adjudication approaches in such fields as company disputes, contract disputes, security disputes, financial disputes, bankruptcy disputes, etc. The above-mentioned Minutes of the Conference on Bond Disputes (Draft for Comment), issued in December 2019, unifies the application of the law in bond default-related disputes. The Opinions on Further Strengthening the Idea of Benevolent and Civil Enforcement in Enforcement Work, issued in December 2019, make several adjustments to such hot issues as excessive sealing up, ensuring maximization of the interests of parties at the property realization stage, strict application of the delinquency list, and consumption restriction measures.

Challenges in commercial litigation

Through a series of “consistent judgments in similar cases” related measures, the SPC has devised uniform arrangements in terms of adjudication rules, thinking, reference method, etc. The uniform adjudication criteria additionally signify major changes, and these changes pose major challenges to existing litigation practice modes.The changes in adjudication rules make the issues in dispute in cases clearer and more accurate. In financial consumer rights protection cases, the Minutes of the 9th National Court Conference (in November 2019 ) change the adjudication rule from “contract freedom, buyer bears the risks” to “seller performs its obligations, buyer bears the risks”; and change the legal basis from “tort liability” to “liability for culpa in contrahendo”. Accordingly, the issue in dispute heard in a case materially changes from “fault” and “cause” to “pre-contract obligations” and “reliance interest”.

This change will necessarily cause a corresponding change in the focus of the trial preparations of financial institutions in similar cases, and whether the new adjudication rules are accurately grasped will become a major challenge in case success.

Change in adjudication thinking will cause greater attention to be placed on commercial factors in the elucidation of the facts. With the increasing uniformity of the adjudication rules, SPC justices have published articles that more clearly describe their adjudication thinking. Justice Jiang Bixin, in his article, Three Dimensions of Adjudication Thinking, published in China Trial, emphasizes that in commercial adjudication even the protection of profits constitutes pursuit of fairness.

This adjudication thinking demands that, in adjudication, it is necessary to understand the reason why the commercial entities devised a complex transaction arrangement, and the parties’ benefit arrangement that lies behind the documents, and to make clear what the commercial entities expect to put out and receive in the transaction activities. Only in this way can the conflicts of interest and root cause of the legal action be understood.

Under the impetus of the above-mentioned adjudication thinking, the focus of the plaintiffs’ and defendants’ litigation work will change, placing greater weight on the refinement of commercial factors such as the background to the execution of the contract or agreement, the transaction arrangements, and the objective of the transaction. Whether the new adjudication thinking can be fully and duly applied in practice will become a major challenge in securing the judges’ support for one’s position.

The change in the adjudication reference method will lead to greater professionalism and precision in pre-trial preparation work. In November 2019, the SPC assembled more than 20 dedicated research teams and, through the careful selection of similar outstanding cases and the refinement of adjudication rules with reference value, published an anthology titled Rules of Chinese Courts for Similar Case Searches and Adjudication.

With this, precedent search work in commercial litigation gave rise to a new form. In the past, a party spent a great deal of time in pre-trial preparation conducting a precedent search, but its accuracy, authority and technical specificity seldom gained the recognition of handling judges. Furthermore, there was little opportunity to directly explore the idea of “consistent judgments in similar cases” with the adjudicators in court. Accordingly, the practical effect was less than ideal.

With the continuous accumulation of, and improvement in, the fruits of the SPC research on “consistent judgments in similar cases”, the current precedent search work will gradually change. The search model that places primacy on SPC similar case searches, with self-search in a secondary role, will be applied, and whether the fruits of the SPC research can be skilfully applied in individual cases will become the major challenge in convincing the judges to render a consistent judgment in a similar case.

Major opportunities

With the continuous intensification of “consistent judgments in similar cases”, judicial reform and the increasing uniformity of criteria, the adjudication rules, thinking and reference methods will give rise to more varied and complex changes. The application of these changes in individual cases will provide a great deal of room for re-examining, even revising, original judgments at first instance and appeal, presenting major opportunities for more precisely protecting the lawful rights and interests of commercial entities.

Li Chen is a senior partner at Dentons.

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