What is International Civil Litigation in China? We will discuss the approach to identifying a foreign-related case: the three-element test, and the case of Beijing Chaolai.
- Course: International Civil Litigation in China
- Lecturer: Meng Yu
- Producer: China Justice Observer
- Date: 08-11-2019
Or, View from Mainland China
Welcome to our course of ‘International Civil Litigation in China’. I am Meng YU. This is the series produced by China Justice Observer.
It is our first episode today, and we are going to deal with the very first question you may have: What is international civil litigation in China?
International civil litigation in China, which is also known as the “civil case involving foreign elements” or the “foreign-related civil case” under Chinese law? This is very important. Because once a case is identified as a foreign-related case, a set of rules designated for international civil litigation would apply, including international civil jurisdiction rules, application of law rules, and rules on recognition and enforcement of foreign judgments.
In China, the approach in identifying a foreign-related case is called the “three-element test”. That is, if one of the following elements, i.e., the parties, the subject matter, and the juristic facts, has contact with a foreign jurisdiction, the case in question will be classified as the one involving foreign element.
Here, the case of Beijing Chaolai is a good example of how Chinese courts apply the “three-element test”. In this case, the parties concerned are two companies, one incorporated in Beijing by a Chinese citizen, the other incorporated in Beijing by a South Korean citizen. The two companies signed a share transfer agreement in China and the dispute arises out of the contract.
Despite the litigants argue that it is a case involving foreign elements, the court drew a different conclusion, after applying the “three-element test”.
Let’s apply the test together. Element No. 1 -the parties, in this case, i.e., the two companies. In China, the nationality of companies is established by the criterion of the place of incorporation. Since both companies are incorporated in China, be it invested by a Chinese or a foreigner, the two companies, per se, are Chinese companies. Element No. 2 - the subject matter, in this case, i.e., the share to be transferred is that of a Golf Club Company incorporated in Beijing, hence, it has nothing to do with a foreign jurisdiction. Element No. 3 - the juristic fact, in this case, i.e., the signing and performance of the contract all occurred in China; so no foreign element is involved either. As a result, the court classified the case as a purely domestic case, in other words, a set rules of international civil litigation are irrelevant and not applicable in this case.
That's all for today's course. We'll continue updating this series on weekly basis. If you like our course and want to know more about cross border dispute resolution in China, please feel free to visit our website, it's www.chinajusticerobserver.com.
Case material: Reply to the Request for the Instructions Concerning the Application Made by Beijing Chaolai Xinsheng Sports Leisure Co., Ltd. to Recognize and Enforce the No. 12113-0011 and No. 12112-0012 Arbitral Awards of the Korean Commercial Arbitration Board (Supreme People’s Court, 18 Dec. 2013), 北京朝来新生体育休闲有限公司申请承认和执行外国仲裁裁决案, available at http://bjgy.chinacourt.gov.cn/article/detail/2015/03/id/1560588.shtml
Contributors: Meng Yu 余萌