For disputes arising from an administrative agreement, you are allowed to choose any Chinese court, as long as the court has actual connections therewith.
In my previous post, I have introduced what administrative agreements are and who can file a lawsuit against the Chinese government. In this post, I will continue to introduce the content of the “Provisions on Several Issues Concerning the Trial of Cases about Administrative Agreements” (关于审理行政协议案件若干问题的规定, hereinafter referred to as the “Judicial Interpretation”), issued by the Supreme People's Court (SPC).
1. Consensual jurisdiction
According to Art. 7 of the Judicial Interpretation, you and the administrative organ may reach written agreements to select any of the following courts as the competent court: the court where the defendant is domiciled, the court where the plaintiff is domiciled, the court where the agreement is entered into or performed, or the court where the subject matter is located, or at other places which have actual connections with the dispute.
The aforesaid article on consensual jurisdiction allows the parties to choose any court, as long as the court has “actual connections” with the dispute. In other words, it is possible for the parties to choose a court other than the one at the place where the administrative organ is located, so as to avoid any possible impacts that the administrative organ may exercise on the local court. In fact, it is exactly what the SPC desires to achieve.
2. Who will bear the burden of proof?
If you or the administrative organ think that the other party has not fulfilled the contractual obligations, the obligor should prove that it has indeed fulfilled the obligation.
If the court needs to ascertain whether the administrative organ has lawful competence, whether it goes through legal procedures, or whether it performs relevant legal duties, the burden of proof should lie on the said administrative organ. The administrative organ shall also prove that its acts of concluding, performing, changing, or terminating such administrative agreements are lawful.
If you want to revoke or cancel the administrative agreement, you should prove that there are justifications for revoking or canceling the administrative agreement.
3. How will the court handle the case?
If the court regards the administrative agreement as void or ineffective, or the administrative agreement is revoked at the request of the plaintiff, the property acquired by either party as a result of the administrative agreement shall be restituted to the other party; if the property restitution is impossible, compensation shall be made at an estimated price. If it is the administrative organ that causes such consequences, the administrative organ shall take appropriate remedies or compensate you for your losses.
If you think that the administrative organ’s changing or revoking the administrative agreement constitutes a breach of contract, but the court thinks that such conduct is for the public interest, and accordingly considers that the conduct is legal, the court may dismiss your claim eventually.
If you believe that the administrative organ fails to perform its obligations in accordance with the law and administrative agreement, the court may require the administrative organ to continue to perform such obligations, or to compensate you for the losses, pay you liquidated damages, and the deposit.
If the administrative organ exercises its powers for the public interest, resulting in your obstacles, increased costs, and losses in your performance of the administrative agreement, the court may demand the administrative organ to make compensation for you.
4. Our comments
The SPC states that it formulates the Judicial Interpretation to achieve the following goals:
(1) If the government enters into an agreement with the investor when it solicits investment or when it cooperates with the investor, it must perform the agreement;
(2) If the incoming leader(s) of the government breaches the agreement concluded before taking office, they must assume the liability;
(3) If the government has to break its promises in the administrative agreement for the public interest, it must compensate the enterprises and investors for the losses incurred.
The SPC’s efforts indicate that the actual situation before the Judicial Interpretation was far from satisfactory, and the SPC hopes to improve such situation. The Judicial Interpretation is one of China's efforts to optimize its business environment in recent years.
Contributors: Guodong Du 杜国栋