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Cross-border E-commerce Dispute Resolution in the Eyes of Chinese Courts

Sun, 25 Sep 2022
Categories: Insights
Contributors: Meng Yu 余萌

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Key takeaways:

  • The booming cross-border e-commerce in China has resulted in a concomitant rise in cross-border disputes among Chinese exporters, Chinese e-commerce platforms, overseas consumers and overseas e-commerce platforms.
  • In terms of types of cross-border e-commerce cases in China, network service contract disputes, which concern consumers suing operators of cross-border e-commerce platforms, are the most common cross-border e-commerce disputes and account for 45%.
  • Data from the Hangzhou Internet Court indicate that cross-border e-commerce platforms are being frequently sued, accounting for about 60%. However, they seldom lose the case, which shows that they are in an advantageous position in response to litigation.
  • For disputes such as fake goods, quality defects, return of defective products, and recovery of commodity price, it is both costly and difficult for consumers to make cross-border recovery.

After the outbreak of COVID-19, cross-border e-commerce is booming, and China is a major exporter in this fast-growing foreign-trade business.

Naturally, this has resulted in a concomitant rise in cross-border disputes among Chinese exporters, Chinese e-commerce platforms, overseas consumers, and overseas e-commerce platforms.

The article titled "Exploration and Reflection on the Trial of Cross-border E-commerce Cases" (审理跨境电商案件的探索与思考) by judges Hong Xuejun (洪学军), Wang Jiangqiao (王江桥), Xiao Neng (肖芄) and Lai Yuexu (赖粤旭) of Hangzhou Internet Court shows the attitude of Chinese courts towards such disputes.

The article was published in “People’s Judicature” (人民司法) (No. 34, 2021), a journal under the Supreme People’s Court of China.

Hangzhou Internet Court is the first Internet court in China. Hangzhou, where Alibaba is located, is the most prosperous city in China in terms of e-commerce. Therefore, the cases accepted by this court mainly concern e-commerce disputes. The authors of the said article serve in this court as well.

I. Background

The authors enumerate the background information on China’s cross-border e-commerce and Hangzhou Internet Court, which we summarize as below.

(1) In 2020, China’s cross-border e-commerce import and export value reached CNY 1.69 trillion.

(2) Supporting the compliance development of cross-border e-commerce has been written in the government work report of the State Council for seven consecutive years.

(3) In July 2020, Hangzhou Internet Court specially set up a cross-border trade tribunal to hear cross-border e-commerce disputes.

(4) Hangzhou Internet Court has accepted more than 200 cross-border e-commerce cases.

II. Types of cross-border e-commerce cases in China

Such cases can be classified as follows:

(1) Sales contract disputes. Such disputes are the second most common cross-border e-commerce disputes, accounting for 40%. Such cases mainly concern product quality disputes.

(2) Product liability disputes. Such cases concern product quality problems and personal/property damage to users.

(3) Agency service contract disputes. Such disputes mainly concern buyers entrusting others to purchase goods on overseas e-commerce platforms.

(4) Network service contract disputes. As the most common cross-border e-commerce disputes and accounting for 45%, such disputes concern consumers suing operators of cross-border e-commerce platforms. 

(5) Intellectual property disputes. Such disputes include infringement disputes in parallel imports, such as disputes arising from cross-border e-commerce platform notification and counter-notification.

III. Characteristics of cross-border e-commerce cases in China

1. Globalization of litigation parties

Litigation parties are mainly from Hong Kong S.A.R., Japan, South Korea, the United States, Europe, New Zealand, Australia, and other regions and countries.

These parties are Chinese cross-border e-commerce enterprises engaged in the import business, overseas cross-border e-commerce platform operators, and overseas consumers who purchase goods from Chinese cross-border e-commerce enterprises.

2. High lawsuit withdrawal rate of the plaintiff

Only 25% of the cases are settled by court judgments, 60% by withdrawal, and the remaining 15% by mediation/case dismissal.

Specifically, 60% of the withdrawn cases are caused by the plaintiff suing the wrong defendant, which shows that it is difficult to locate the exact defendant in cross-border e-commerce litigation.

3. Cross-border e-commerce platforms are being frequently sued but seldom lose the case

Cross-border e-commerce platforms are being frequently sued, accounting for about 60%. However, they seldom lose the case, which shows that they are in an advantageous position in response to litigation.

4. The number of consumer rights protection cases is low

This is because it is difficult for consumers to locate the qualified defendant in cross-border e-commerce litigation. For example:

(1) The identity information of cross-border e-commerce operators is either inaccurate or not disclosed;

(2) The consumer cannot find the registration certificate of the overseas defendant, so it is unable to determine the identity of the defendant;

(3) There are many service providers for the cross-border e-commerce platform, so it is difficult for consumers to determine the exact defendant;

(4) After clicking multiple links, it is difficult for consumers to determine the counterparty of the transaction.

5. Courts are troubled by cross-border e-commerce litigation

Courts have encountered the following difficulties in cross-border e-commerce litigation:

(1) China’s cross-border litigation requires overseas parties to notarize and authenticate their identity documents, which incurs additional time and expenses;

(2) China’s cross-border litigation requires notarization and authentication of some evidence formed abroad, but the judges’ ability to determine the authenticity of such evidence and foreign language fluency is insufficient, which also increases the cost and risk;

(3) Cross-border e-commerce cases adopt the traditional service of process, which is complex in procedures, time-consuming, and seldom successful;

(4) The application of law in cross-border e-commerce cases is complex.

The above difficulties have posed great challenges to the parties and the court, especially for cross-border retail e-commerce disputes with small disputed amounts.

6. Intellectual property disputes occur frequently, but it is difficult for respondents in China to protect their rights

On the ground of intellectual property infringement, overseas right holders request the platform to punish Chinese sellers and commodities in batches by taking advantage of the overseas e-commerce platform rules and the convenience of court proceedings. For example, the Amazon of the United States has punished many Chinese sellers.

Some of these complaints have gone far beyond the protection of normal rights and become a means of bad faith competition.

After being punished, China’s small and medium-sized cross-border e-commerce enterprises can only sue in Chinese courts, which, however, are often unable to deal with such cases.

7. Unqualified cross-border retail goods

The number of such product quality cases is on the rise, among which the cases involving the quality problems of food, infant products, and other FMCG commodities account for the largest proportion.

For disputes such as fake goods, quality defects, return of defective products, and recovery of commodity price, it is both costly and difficult for consumers to make cross-border recovery.

 

 

Photo by Feng Jiaxing on Unsplash

 

Contributors: Meng Yu 余萌

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