China establishes International Commercial Courts

On 25 June 2018, the Supreme People’s Court (the “SPC”) issued the Provisions of the SPC on Several Issues Concerning the Establishment of International Commercial Courts (the “Provisions”) and on 29 June 2018, the China First and Second International Commercial Courts (the “CICC”) were established in Shenzhen City and Xi’an City respectively. We summarise the highlights below.

1. Scope of CICC’s jurisdiction

The CICC is a standing judicial organisation of the SPC, specialising in the resolution of international commercial disputes. The cases that the CICC has jurisdiction over are international commercial cases. First, this means that the cases shall be civil and commercial disputes between equal subjects. Thus, two categories of cases are explicitly excluded: disputes between countries on investment or trade and disputes between the host country and investors on investment. Second, the cases shall be foreign-related. For identifying foreign-related cases, the judgment standards are the same as the current provisions in the Interpretations of the SPC on Application of the PRC Civil Procedure Law. According to these standards, a case can be identified as foreign related when:

1. at least one party is a foreigner, stateless person, foreign enterprise or organisation;
2. at least one party’s habitual residence is outside of the territory of the PRC;
3. the dispute object is outside of the territory of the PRC; or
4. the legal facts that cause the establishment, change or termination of the commercial relationship take place outside of the territory of the PRC.

Furthermore, only international commercial cases that satisfy at least one of the below conditions can be submitted to the CICC:

1. the parties have reached agreement on choosing the SPC as the competent court for the dispute in accordance with Article 34 of the PRC Civil Procedure Law and the value of the matter exceeds RMB 300 million;
2. it is an international commercial case over which the High People’s Court has jurisdiction and the High People’s Court has decided to have it tried by the SPC and approval has been obtained from the SPC;
3. it is an international commercial case that has a great impact nationwide;
4. it is a case that is arbitrated in the frame of the international commercial dispute resolution system and a party has applied to the CICC for property preservation, the setting aside of an arbitration award or the enforcement of an arbitration award; or
5. it is another form of an international commercial case that the SPC considers needs to be tried by the CICC.

Concerning the above application scope, there are two main breakthroughs compared with the current jurisdiction system. First, before the effectiveness of the Provisions, in international commercial cases where the matter value exceeded RMB 300 million, the parties upon agreement could only choose a High People’s Court as the jurisdiction court, while now they may directly choose the SPC as the jurisdiction court. Second, before the issuance of the Provisions, property preservation, and the setting aside and enforcement of foreign-related arbitration cases were within the jurisdiction of the intermediate court, while now the parties may apply directly to the CICC for these.

2. One-stop dispute resolution system

Another change brought by the Provisions is that it integrates the three dispute resolution methods, mediation, arbitration and lawsuits, into one platform. Such a system provides more options for contractual parties.

• If a party chooses to file a lawsuit with the CICC, then the verdict shall be final and binding, i.e. it is not appealable. This could help parties save time and costs; however, on the other hand it shortens judicial protection which, prior to the Provisions, was granted by the option to appeal.
• If the parties choose to resolve disputes through mediation, then the International Commercial Experts Committee established by the CICC or an international commercial mediation institute delegated by the CICC will carry out the mediation. Once an agreement is reached after the mediation, the CICC may, according to the parties’ willingness, issue a settlement agreement or verdict. Once such a settlement agreement or verdict is delivered to the parties, it is a binding document of the SPC.
• If the parties choose to resolve disputes through arbitration, upon request the CICC will take corresponding measures of property and evidence preservation. After the arbitration award is issued, if a party thinks that the award violates laws and regulations that party can apply to set aside the arbitration award. Conversely, the parties can also make an application for the enforcement of the arbitration award by the CICC.

3. Document submission

Furthermore, in order to make it more convenient for contractual parties and ensure the effectiveness of the one stop dispute resolution system, an informative working platform has been established, through which the parties can=exchange evidence, etc.. The CICC even provides for the possibilities of opening a court session online and for the electronic delivery of legal documents. It appears that in cases before the CICC, the prevailing requirement to notarise and legalise foreign evidence in the relevant foreign country is lifted, and translations into Chinese are not required. This will be the release of a major burden for foreign parties.

4. Ascertainment of the foreign law

The Provisions have provided more possibilities for ascertaining the foreign law, including through the parties, Chinese and foreign legal experts, law ascertaining institutes, the International Commercial Experts Committee, the central government of a country that has entered into a judicial assistance treaty with China, and the Chinese embassy in that relevant country, as well as the related embassy or consulate in China.

5. Conclusion

The establishment of the CICC in Shenzhen and Xi’an is a further attempt at developing a modern and professional international dispute resolution system in China. As with many other initiatives, it has been ignited by the “One Belt One Road” project. Currently, commercial arbitration is by far the more popular dispute resolution method in Chinese-international projects, compared to litigation. It is worthwhile monitoring parties’ experiences with the CICC, in order to decide if it offers a viable option for resolving international disputes. Of major importance will be the stance that the CICC takes towards the enforcement of foreign arbitration awards. In this respect, general enforcement to date has been less of an issue than the court’s speed in dealing with them. Improvement by the CICC will be highly appreciated.