- The 2021 Conference Summary issued by the SPC represents the consensus of Chinese courts on cross-border commercial and maritime litigation.
- Though not a legally binding normative document, a conference summary represents the consensus among the majority of Chinese judges. In the view of the Supreme People’s Court (SPC), a conference summary cannot be invoked by Chinese courts as the legal basis, but can be used for court reasoning on legal matters.
- The 2021 Conference Summary addresses a wide variety of subjects, including jurisdiction clauses, cross-border electronic service, application of CISG, dormant investment by foreign investors in Chinese enterprises, and recognition and enforcement of foreign judgments.
On 31 Dec. 2021, the Supreme People's Court (SPC) issued the “Conference Summary of the Symposium on Foreign-related Commercial and Maritime Trials of Courts Nationwide” (hereinafter referred to as the “2021 Conference Summary”, 全国法院涉外商事海事审判工作座谈会会议纪要).
As introduced in our earlier post, the Chinese courts issue conference summaries from time to time, which can serve as guidance to the judges in their trials. However, the conference summary is not a legally binding normative document as the judicial interpretation, but only represents the consensus among the majority of judges, which is similar to the prevailing opinion. For more information about the Conference Summary, please read “How China's Court Conference Summary Affects the Trial?”.
According to the previous explanation of the Second Civil Division of the SPC on the nature of the 2019 Conference Summary of Civil and Commercial Trial of Courts Nationwide (全国法院民商事审判工作会议纪要), a conference summary is not a judicial interpretation, and therefore the court, on the one hand, cannot invoke it as the legal basis for judgment, but on the other hand, can make the reasoning on the application of law according to the conference summary in the "Court Opinion" part.
The 2021 Conference Summary is based on the symposium on foreign-related commercial and maritime trials of courts nationwide held by the SPC on 10 June 2021, and is prepared by the SPC after considering the opinions of all parties.
The 2021 Conference Summary represents the consensus of Chinese courts on cross-border commercial and maritime litigation. If you have been or may be involved in cross-border litigation in China, you must pay attention to the Conference Summary.
There are 111 articles and three parts in the 2021 Conference Summary: a). foreign-related commercial matters (Articles 1-50); b) foreign-related maritime matters (Articles 51-89); and c) judicial review of arbitration (Articles 90-111).
The following points are noteworthy in the 2021 Conference Summary.
I. Jurisdiction agreement of cross-border consumer online shopping contracts
Where the e-commerce platform uses standard terms to conclude cross-border online shopping contracts with consumers but fails to reasonably remind consumers of the jurisdiction clause contained therein, consumers can claim that the jurisdiction clause should be excluded from the contract.
In addition, even when the e-commerce platform has fulfilled the obligation of reasonable notification, if the jurisdiction clause stipulates that the competent court is in a foreign country other than that of the consumer's residence, which unreasonably increases the cost for consumers to seek relief, consumers can claim to invalidate the jurisdiction clause as well.
This means that Chinese consumers can sue overseas e-commerce platforms, such as Amazon (e.g. Amazon Global Store), in China, without being bound by the jurisdiction agreement formulated by Amazon.
II. Exclusive jurisdiction agreement
In terms of jurisdiction, the presumption of exclusive jurisdiction agreement is to be clarified. If a jurisdiction agreement signed by the parties to a foreign-related contract or other property disputes explicitly stipulates the competent court of a certain country, but fails to stipulate its nature as a non-exclusive jurisdiction agreement, it shall be construed as an exclusive jurisdiction agreement.
- Jurisdiction by Agreement in China: Exclusive or Non-exclusive?
- When Will China Ratify the Hague Convention on Choice of Court Agreements?
III. Litigation evasion and being barred from leaving the country
In the trial of foreign-related commercial disputes, relevant personnel falling under all the following conditions may be barred from leaving China by the court: a). he who is involved in pending foreign-related commercial cases in China; b) he who being barred from leaving China is a party to the pending case or the legal representative/person in charge of the said party; c) he who may evade litigation/performance of legal obligations; d) he who is critical to the integrity of the legal proceedings or may render the judgment unenforceable if he leaves China.
"[H]e who may evade litigation/performance of legal obligations" refers to the circumstance where the applicant is very likely to win the civil lawsuit, so the respondent may evade litigation/performance of legal obligations by means of leaving China.
However, if the respondent has sufficient property available for seizure within the territory of China, he/she shall not be barred from leaving China.
IV. Cross-border electronic service
If a Chinese court needs to serve the process on the person to be served without domicile in China, and electronic service is not prohibited by the national law of the country of the person to be served, the Chinese court may serve the process by electronic service according to law, unless otherwise prohibited by the international treaties concluded or acceded to by China.
If the country of the person to be served is a Contracting State of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the “Hague Service Convention”) and objects service by mail under the Hague Service Convention, it shall be construed that it does not allow electronic service, and the Chinese court cannot serve the process by electronic service.
V. Application of CISG
Contracts for the international sale of goods concluded by parties whose places of business are in different Contracting States of CISG shall be tacitly governed by CISG, unless otherwise explicitly agreed by the parties.
VI. Dormant investment by foreign investors in Chinese enterprises
If a foreign investor makes a dormant investment in a Chinese enterprise and now requests to confirm or change his/her shareholder status, the Chinese court shall deal with the request in the following ways:
1. If the Chinese enterprise falls under fields prohibited by the negative list of foreign investment, the request will be denied;
2. If the Chinese enterprise does not fall under fields prohibited by the negative list of foreign investment, the court shall make a judgment that the nominal shareholder shall transfer the equity under its name to the de facto investor;
3. If the Chinese enterprise falls under fields restricted by the negative list of foreign investment, the court shall make a judgment that the nominal shareholder shall transfer the equity under its name to the de facto investor, and assist the foreign-invested enterprise in going through the examination and approval procedures.
It is worth noting that in the past, many foreign investors entrusted Chinese parties as nominal shareholders to hold shares on their behalf to avoid China's regulation on foreign investment. Now, after the relaxation of China's regulation on foreign investment, foreign investors require holding shares in their own names. These foreign investors should take note of the above rules.
VII. Recognition and enforcement of foreign judgments
Chinese courts will first examine whether the country where the judgment is rendered and China have concluded or acceded to international treaties. If yes, the pertinent international treaty shall prevail; if no, or if yes but in the absence of relevant provisions in the international treaty, Chinese courts shall examine the existence of reciprocity between the said country and China.
Specifically, Chinese courts will recognize the existence of reciprocity in case of any of the following circumstances:
1. where the civil and commercial judgments made by Chinese courts can be recognized and enforced by the courts of that country according to the law of that country;
2. where China has reached an understanding or consensus on reciprocity with the country where the judgment-making court is located; or
3. where the country where the court is located has made reciprocal commitments to China through diplomatic channels or China has done so to that country, and there is no evidence to suggest that that country has refused, on the ground of reciprocity, to recognize and enforce the judgments/rulings made by Chinese courts.