In April 2021, Shanghai High People’s Court issued the “Provisions on the Exemplary Mechanism of Handling Group Financial Disputes” (hereinafter referred to as the “Provisions”, 关于群体性金融纠纷示范判决机制的规定). The exemplary mechanism for handling of group financial disputes refers to a dispute resolution mechanism under which Shanghai courts select typical cases with common facts and legal issues to try first and render partial judgments when dealing with group financial disputes, and resolve parallel cases by giving play to the leading role of model cases (test cases). A parallel case refers to a case sharing common facts and legal issues with the model case in group financial disputes.
Pursuant to the Provisions, “common facts and legal issues” refers to the factual and legal issues that can be applied to every case in group disputes, such as the determination of the implementation date, disclosure date of misrepresentation, and loss calculation method in securities misrepresentation disputes, and the determination of contract validity and liability proportion in illegal futures trading. After the determination of common facts and legal disputes in the model case, evidence confirmation and specific calculation, etc will be handled in parallel cases.
In order to promote the unified application of laws in the settlement of group financial disputes, the Provisions requires: Firstly, it shall apply to group disputes accepted by the courts in Shanghai arising from the same financial institution or financial product, where it involves the same type of subject matter, and either party includes more than ten persons. The accepted cases are not limited to the cases with the same specific cause of action. Secondly, after the exemplary judgment comes into effect, the parties in parallel cases do not need to provide evidence for the common facts that have already been determined by the model case. Thirdly, if parallel cases are accepted by other courts that do not make exemplary judgments, the courts trying parallel cases may refer to the adjudication standards determined in the exemplary judgment and resolve disputes in accordance with the Provisions.
Shanghai courts take the lead in the exploration of group financial dispute resolution across the country. In May 2019, Shanghai Financial Court publicly concluded the case over the liability of securities misrepresentation of Founder Technology Group Corporation, and found that Founder Technology Group Corporation committed the act of misrepresentation and should bear civil liabilities. Plaintiffs, Pan and other investors received a maximum compensation of more than CNY 180,000. This is also the first model case of group disputes over securities in the country. After the judgment came into effect, it provided a great example in rapid resolution to the parallel cases for thousands of investors involved in this series of cases.
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Contributors: CJO Staff Contributors Team