China Justice Observer

中国司法观察

Forum Non Conveniens Applied for the First Time in SPC's Recent Case

Tue, 28 Jul 2020
Categories: Insights
Contributors: Zilin Hao 郝梓林

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The Supreme People’s Court (SPC) applied the doctrine of forum non conveniens (FNC) for the first time in Aug. 2019, taking a momentous step forward in this brand new practice, which was unfamiliar for most Chinese courts.

The case WONG ChungShing v. Wong Chunho (黄松盛、黄振豪侵权责任纠纷案)([2019] Zui Gao Fa Min Zhong No. 592)([2019]最高法民终592号) (hereinafter “the Wong Case”) is the first and by far the only case where the SPC has dismissed on the grounds of the FNC doctrine.

I. Introduction

The SPC has stipulated the conditions for the application of the FNC doctrine in relevant judicial interpretations. [1] However, these conditions are generally hard to meet, so the FNC doctrine is rarely used to dismiss a case in China’s judicial practice. Up to now, as far as I know, there are only three cases like this in China, including the aforementioned Wong Case. (For the other two cases, see Think Twice Before Filing a Motion to Dismiss on Forum Non Conveniens Grounds in China and Forum Non Conveniens in China: The Most Stringent Standards Ever).

As a second-instance case accepted by the SPC, whose first-instance judgment was rendered by Guangdong High People’s Court [(2018) Yue Min Chu No. 24] [(2018)粤民初24号], the final judgment of Wong Case has come into effect.

II. Case brief

1. Facts of the case

The parties involved in the case: the plaintiff Wong ChungShing (hereinafter “Wong A”); four defendants Wong Chunho (hereinafter “Wong B”), Canada Transmarine Investment Management Ltd. (hereinafter “Canada Company”), Everrise Hongkong Group Limited (hereinafter “Hong Kong Company”) and Zhuhai Free Trade Zone Jiahua Container Terminal Co., Ltd. (hereinafter “Zhuhai Company”).

On 24 Feb. 2012, Wong A and Wong B signed an agreement on the transfer of equity of Canada Company (hereinafter “the Equity Transfer Agreement of Canada Company”), agreeing that Wong A would transfer his equity in Canada company to Wong B. However, the agreement did not stipulate the competent court and the governing law.

On 28 May 2012, Wong A filed a lawsuit against Wong B with the relevant Canadian court due to the dispute over the Equity Transfer Agreement of Canada Company. The court issued a court order based on Wong A’s application, ordering that Wong B should not, directly or indirectly, transfer, dispose of or mortgage all the equities of Canada Company.

On 20 Nov. 2014, Canada Company and Hong Kong Company signed an agreement on the transfer of equity of Zhuhai Company (hereinafter “the Equity Transfer Agreement of Zhuhai Company”), agreeing that Canada Company would transfer its equity in Zhuhai Company to Hong Kong Company.

Later, Wong A filed a lawsuit with Guangdong High People’s Court, requesting the court to confirm that both the Equity Transfer Agreement of Canada Company and the Equity Transfer Agreement of Zhuhai Company were invalid. Guangdong High People’s Court dismissed Wong A’s case on the grounds of the FNC doctrine, but Wong A was not satisfied and appealed to the SPC.

2. Views of the SPC

The SPC held that the validity of the two equity transfer agreements should be subject to the FNC doctrine and the case should be dismissed accordingly.

Firstly, both Wong A and Wong B were foreign parties, the equity transfer agreements involved were also related to a company registered in Canada; Wong A had filed a lawsuit with the Canadian court as to the effectiveness and indemnification disputes of the agreement, and the Canadian court had issued a relevant court order. Therefore, although the Chinese court had jurisdiction over the disputes due to the signing location of the Equity Transfer Agreement of Canada Company, once Wong B challenged the jurisdiction, the Chinese court should also examine whether the case fell under the FNC circumstances (See Article 532 of the Interpretation of Civil Procedure Law (民诉法解释)).

Secondly, this case fell under the FNC circumstances stipulated by the Chinese law, specifically: (1) there was no agreement between Wong A and Wong B to select a Chinese court as the competent court; (2) the case did not fall under the exclusive jurisdiction of Chinese courts; (3) given that both the parties and the subject matter were not in China, the case did not involve China’s state interests, the interests of Chinese citizens, legal persons or other organizations; (4) the main disputed fact did not occur in China, and the dispute was not governed by the Chinese law. Therefore, it was inconvenient for Chinese courts to find the facts and apply the law if they try this case; (5) Wong A’s first choice was to sue in Canada. The Canadian court had accepted the case and issued a court order based on Wong A’s application, which showed that the Canadian court had jurisdiction over the case and it was more convenient for the Canadian court to hear the case.

Consequently, the SPC agreed with the first-instance judgment that Wong A’s case as to the validity of the equity transfer agreement shall be dismissed.

III. Comments

The application of the FNC doctrine is of great significance to international civil judicial assistance. Chinese courts are proactively trying to apply the FNC doctrine so as to solve problems brought by the parallel litigation. As stated in a judgment of a Chinese intermediate people’s court: “under the premise of fully safeguarding judicial sovereignty and not violating national interests, public interests, and public order and good customs, the attitude of respecting and legally applying the FNC doctrine to extraterritorial judicial decisions (orders) or parallel litigation in the field of private law is essential to establish a judicial system featured by rationality, good faith, reciprocity, equality and openness.”[2]

 

[1] 参见:最高人民法院关于适用《中华人民共和国民事诉讼法》的解释(法释[2015]5号)。
[2] 参见:江苏省镇江市中级人民法院(2013)镇商外初字第13号民事判决书。

 

Photo by Zetong Li (https://unsplash.com/@zetong) on Unsplash

Contributors: Zilin Hao 郝梓林

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