Win in Chinese Courts

Before we start to explore specific aspects and procedures of civil litigation in China, it is necessary to look through some basic concepts and systems under the Chinese law first. This chapter will cover such aspects as China’s 4-level court system, how many instances will a civil case go through, how cases are numbered and what information does the case number reveal, what is cause of action and its functions, how much court fee do the parties need to pay, and an overview of the whole process of civil litigation in China. At last, a brief introduction to Chinese lawyers’ role and function is presented as well. We hope this chapter could help readers build a framework of China’s civil litigation system and go through other sections of this book more efficiently.

Determining the competent court is the first step to bring a lawsuit. For such purpose, two questions are to be answered: the court of which level has jurisdiction (i.e., the hierarchical jurisdiction) and the court of which place has jurisdiction (i.e., territorial jurisdiction). In terms of hierarchical jurisdiction, Chinese courts determine the hierarchy of the competent court mainly according to the case type and the disputed amount, and have formulate specific standards for this purpose. However, these standards may be revised from time to time, and it is necessary for the parties to verify pertinent standards before filing a case. Generally, the parties cannot change the level of the competent court by agreement, that is, to agree on the trial of a case by a court of another level different from that stipulated by the law, unless the agreement selects China International Commercial Court under the SPC. In some circumstances, a higher court will take the initiative to exercise jurisdiction over the cases that have been accepted by lower courts, or transfer the cases that have been accepted by it to lower courts. In terms of territorial jurisdiction, it should be analyzed according to the case type. In respect of most disputes over contracts and property rights, Chinese courts allow the parties to choose the competent court by agreement. If there is no relevant agreement, generally, the court of the place where the defendant is located will have jurisdiction over the case, and different types of cases will have other different jurisdictional connecting factors. Even if a court that accepts the case does not have jurisdiction, the party's response to actions and defense may confer jurisdiction upon the court that would have been otherwise incompetent, which is referred to as “prorogated jurisdiction” under Chinese law context. However, in respect of some specific types of cases, Chinese law does not allow the parties to choose the competent court by agreement, and the prorogated jurisdiction rules do not apply to such cases as well; such jurisdiction rules are referred to as “exclusive jurisdiction”. In addition, Chinese courts will also designate specific courts to exercise cross-region jurisdiction over highly professional cases or cases with other special factors; such jurisdiction rules are referred to as “cross-region centralized jurisdiction”. At last, in respect of the contract and property right litigation in which the defendant is a foreign party without domicile in China, even if the connecting factors under the general jurisdiction rules are not in China, the plaintiff may still have the right to bring a lawsuit with the court of China. If the defendant considers that the court accepting the case has no jurisdiction, it may raise an objection. If the court finds that the objection is tenable, the case will be transferred to the court with jurisdiction. If a court finds that it has no jurisdiction over an accepted case after self-examination, the court may transfer the case ex officio even though the defendant raises no objection. The court receiving the transferred case shall not re-transfer the case to another court.

After determining the competent court, the plaintiff can bring the lawsuit by submitting the statement of claim, necessary evidence, and other formality documents to the court. However, it is noteworthy that foreign parties, especially foreign companies and other institutions, need to prepare a series of formality documents as required by the Chinese court to participate in litigation, which can sometimes be somewhat cumbersome. Therefore, it is necessary to spare sufficient time to get ready. Upon receipt of the plaintiff’s materials, the Chinese court shall examine them to limited extent, and file the case upon satisfaction of certain statutory conditions. To facilitate foreign parties to submit filing materials online, the SPC establishes an Internet platform for foreign parties and streamlines the case-filing procedures from several aspects. Due to some concerns, however, we would advise that foreign organizations prepare paper materials in the traditional way, and seek help from Chinese lawyers for case filing. After the case filing, Chinese courts generally determine the judge(s) for a case through the computer-based random allocation, but under special circumstances, Chinese courts will directly appoint the judge(s) for a case. There is no jury system in China, and the facts and legal issues involved in the case should be decided by the collegial panel or the sole judge. Nevertheless, Chinese citizens can participate in the trial by joining the collegial panel as people’s assessors. The power of people’s assessors is generally the same as that of judges, but in some cases, they only have the right to vote on the finding of facts.

The court documents will be served after the determination of adjudicatory personnel. In China, the service of court documents is effected by the court, with necessary assistance from the party if needed. Chinese courts may serve court documents by personal service, service by mail and the like. In practice, service by mail is the preferred method of service among most Chinese courts. However, to improve the efficiency of service, Chinese courts are now actively trying electronic service. If court documents cannot be served by the foregoing means, the court may also resort to service by publication. Due to fast and widespread population migration and intentional evasion of the service of court documents, Chinese courts are facing “difficulty in effecting service of court documents” to a certain extent, which in turn upsets the litigation efficiency. To solve this problem, Chinese courts have taken various measures, which significantly improve the efficiency of service. If the defendant is a foreign party without domicile in China, the Chinese court may serve court documents on its designated personnel or organization in China. In the absence of such personnel or organization, Chinese courts usually serve court documents in accordance with international treaties such as the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (hereinafter referred to as the “Hague Service Convention”). To the extent permitted by the internal law of the state of the person to be served, Chinese courts may also serve court documents by mail and electronic means. Anyway, service by publication still remains the last resort for service of court documents of Chinese courts. As a contracting state to the Hague Service Convention, China is obligated to assist foreign courts in service of court documents in accordance therewith. For this purpose, Chinese courts have also stipulated a clear process for assisting foreign courts in service of court documents. If there are bilateral treaties between China and other contracting states to the Hague Service Convention, there will be some flexibilities in the application of either the Hague Service Convention or bilateral treaties.

The pretrial preparation and trial will commence after appropriate service of the court documents on all parties. Ordinary procedure, summary procedure and special procedure are three concepts of parallel standing in the CPL. Except for cases under the summary procedure and the special procedure, all the other cases are tried under the ordinary procedure, which is the basis of all procedures and covers all necessary steps stipulated by the CPL. Our introduction will firstly be based on the ordinary procedure as well. (1) After serving court documents on all parties, the court needs to wait at least 30 days (or 45 days if the defendant is a foreign party without domicile in China) for the defendant to submit statement of defense and evidence. After that, the court can arrange a pretrial conference or a court hearing. There is no specific provision on the process and content of the pretrial conference, and in practice, the pretrial conference may proceed as an ordinary court hearing. Therefore, we advise that the parties try to figure out the process and content of the pretrial conference, and even make proper preparations with reference to the requirements of the ordinary court hearing. (2) In China, the steps of a court hearing generally include: court-conducted investigation, debates in court, closing argument and mediation. Among them, court-conducted investigation and debates in court are the core steps of court trial. To avoid unnecessary repetition and improve trial efficiency, Chinese courts sometimes combine these two steps together. During the Chinese court trial, we should pay attention to the following points: Firstly, judges are not passive listeners, but the leaders and controllers of all trial activities. Secondly, judges generally care more about the fact finding than the opinions of the parties on the law application. Thirdly, Chinese courts attach importance to the trial efficiency, and therefore the parties need to express their opinions as concisely as possible. Fourthly, the court trial may be made publicly available on the Internet; some court trials are also conducted online. (3) After finishing court hearing, the court will make the first-instance judgment and serve it on the parties through legal means to complete the rendering thereof. The parties may appeal within 15 days (or 30 days, if the appellant is a foreign party without domicile in China) and initiate the second-instance procedure. (4) Generally speaking, the trial process of second instance is not so different from that of first instance. The second-instance judgment is the effective final judgment. Under certain circumstances, the second-instance court may also remand the case to the first-instance court for retrial. (5) The trial time limit of first-instance cases under ordinary procedure is 6 months, and can be extended twice up to 15 months. The trial time limit of second-instance cases is 3 months, and can be extended once up to 6 months. But it is sometimes difficult for Chinese courts to close the case within the statutory trial time limit due to the litigation explosion. (6) In addition to the ordinary procedure, Chinese courts will try cases with little dispute and simple legal relations through the summary procedure. Cases under summary procedure are tried by one judge only, with shorter trial period and more flexible and simpler trial procedures. The summary procedure is applicable to most cases accepted by Chinese courts. However, the summary procedure is not frequently applied to foreign-related cases in China. (7) For money-judgment cases with a disputed amount below a certain standard, the trial procedure thereof will be further simplified and referred to as “Small Claims Procedure”. The first instance of such cases is final, and no appeal is allowed. However, the small claims procedure is not applicable to foreign-related cases. (8) At last, all civil cases in China can be divided into two categories: foreign-related cases and non-foreign-related cases. Foreign-related cases refer to cases with foreign elements, including cases where one of the litigants is a foreigner or a foreign organization, etc. There are special rules for the trial of foreign-related cases under the Chinese legal system, mainly to protect the litigious rights of foreign parties. However, it is worth noting that if the parties submit a non-foreign-related case to a foreign court or arbitration institution, it is highly likely that Chinese courts may refuse to recognize and enforce the judgment/award so rendered. This is one of the reasons why we have to distinguish foreign-related cases from non-foreign-related cases.

Evidence is a topic we would like to spend a large number of pages to introduce. China’s civil litigation evidence system is featured by highly distinctive characteristics from basic concepts to specific rules. For example, the Chinese law emphasizes the principle of “the burden of proof lies with the party asserting a proposition”; the parties should collect evidence on their own as far as possible, rather than relying on the other party to provide evidence. For another example, compared with the witness testimony, the Chinese law attaches more importance to the documentary evidence. On the basis of these characteristics, we strive to comb through and introduce China’s civil litigation evidence system as comprehensively as possible. First, we will introduce some basic systems, including standard of proof, burden of proof, time limit for presenting evidence, and self-admission system. Second, we will introduce some specific types of evidence that readers may be interested in, including witness testimony, secret recording, and evidence from the Internet and social media. Under the Chinese law, the admissibility, probative force, evidence collection and application methods of such evidence all have their own distinctive characteristics, and therefore will be introduced in more detail. Third, we will introduce, in addition to presentation of evidence by the parties, other evidence systems, including technical examination officer, expert opinions/appraisal and examination, evidence investigation and collection by the court, evidence preservation by the court, and evidence presentation order. The parties may, when encountering difficulties in presenting evidence on their own, consider using these systems to obtain evidence or shift the burden of proof. At last, how to keep evidence confidential in litigation is also a highly practical question frequently asked by our peers. We would like to share our thoughts on this issue in the last section of this chapter.

In China, representative litigation is a system in which some members represent all members of the plaintiff in litigation, but the court judgment will be legally binding on all members being represented. There are similarities between China’s representative litigation and the class action in some other countries. There were few representative litigation cases in China due to the lack of detailed legal provisions and other reasons. However, in 2020, China formulated more detailed legal provisions on the representative litigation system in the securities field. So far, China has established a set of complete and operable representative litigation rules for securities disputes. We expect to witness a gradual increase in the number of representative litigation cases in China, especially in the securities field.

In order to prevent and contain environmental pollution, protect consumers’ rights and interests and other public interests, China is now establishing a public interest litigation system step by step. Compared with the private interest litigation, the public interest to be protected by the public interest litigation is an aggregation of private interests. However, the public interest litigation does not exclude the private interest litigation. While the public interest litigation is going on, the parties concerned may also file a private interest litigation and take a “free ride” in such aspects as evidence on the public interest litigation. In China, it is mainly the various types of social organizations registered with the civil affairs department that have the right to initiate a public interest litigation. Besides, the procuratorates may also initiate a civil public interest litigation in addition to their function of initiating a public prosecution against a crime. Compared with the private interest litigation, the public interest litigation has some special features in terms of the litigation procedures. In addition, the Chinese law also requires the court to intervene in the litigation with a more proactive manner and give certain help and tips to the plaintiff if necessary, with an aim to maximize the protection of public interests.

In China, some defendants will, upon becoming aware of being sued, take various methods to transfer and/or hide their property or the subject matter in dispute. In such circumstances, even if the plaintiff wins the case, it may still find it difficult to be actually compensated. In order to solve this problem, the plaintiff can apply to the Chinese court for property preservation. Chinese courts will take such preservation measures as sequestering, seizing and/or freezing according to the type of property to be preserved, which are the same as those taken by the courts during the enforcement procedure. In order to avoid “winning the case but still losing money”, it’d be better for the plaintiff to consider applying for property preservation and collect property clues of the defendant before case filing. Act preservation is a temporary remedy to avoid the parties from suffering “irreparable damage” during the civil proceedings. The act preservation is highly similar to the “interlocutory injunction” in common law countries and the “provisional injunction” in civil law countries such as Germany and Japan. Chinese courts, when examining the application for act preservation, need to balance the interests between the parties and the public. In recent years, the number of cases, especially those related to intellectual property and unfair competition, subject to the act preservation measures has been on the rise. If the application for act preservation is erroneous, the applicant shall be liable for compensation to the respondent. In intellectual property and unfair competition cases, there are clear-cut standards for determining whether an application for act preservation is erroneous or not.

In China, if the losing party does not take the initiative to satisfy an effective court judgment, arbitral award and other legal documents, the winning party may apply to the court for enforcement. Then the court may deduct the deposit and/or auction the property of the losing party and use the money/proceeds obtained therefrom to repay the winning party. However, this enforcement power is exclusively vested in the court, and the winning party cannot seize and/or dispose of the property of the losing party on its own. Due to the large number of enforcement cases, the difficulty in tracking down enforceable property and the insufficient punishment against dishonest judgment debtors, China has been plagued by the “difficulty in enforcement” for a long time. In China, the main reason for the “difficulty in enforcement” is that it is difficult to track down the enforceable property of the party subject to enforcement. In order to resolve this problem, Chinese courts have vigorously promoted the information system interconnection between different government departments, which has greatly improved the efficiency of tracking down and/or freezing the property of the party subject to enforcement through the information network system. Another reason for the “difficulty in enforcement” is that it is difficult to sell off non-cash properties. Chinese courts have carried out judicial auctions through the Internet, which has greatly improved the deal closing rate and increased the transaction price of the property auctioned, and greatly improved the possibility of the applicant being compensated. Other than the above approaches, Chinese courts may also impose various restrictions and punishments on dishonest judgment debtors. There are various restrictions and punishments and the implementation thereof depends on the interconnection of different information network systems. If the circumstances in which the party subject to enforcement evades or resists enforcement are serious, the Chinese court may also hold it criminally responsible. In addition, being a contracting state to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter referred to as the “New York Convention”), China has been holding a quite friendly attitude towards the recognition and enforcement of foreign arbitral awards. In practice, most foreign arbitral awards can be recognized and enforced in China. Compared with the recognition and enforcement of foreign arbitral awards, there are more requirements and preconditions for the recognition and enforcement of foreign court judgments. Nevertheless, China is now relaxing these requirements and preconditions, and more and more foreign court judgments are being recognized and enforced. With continuous efforts of relevant departments, the enforcement conducted by Chinese courts is getting increasingly effective. We firmly believe that Chinese courts can further improve the enforcement effectiveness as day goes by.

Chinese courts, influenced by the concept “Harmony is the Top Priority” in Chinese culture, have always been encouraging the parties to resolve disputes by means of settlement and/or court-connected mediation. In order to prevent the other party from reneging after signing a settlement or mediation agreement, the parties need to obtain effective legal documents from the court so that they can apply with the court for enforcement where necessary. In the process of settlement and mediation, the concessions made by the parties that are unfavorable to themselves cannot be deemed as a self-admission of the parties. However, it is necessary for the parties to take certain measures to prove that these concessions are indeed made in the process of settlement and mediation. Generally, the information involved in settlement and mediation is confidential.