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What’s New for China’s Rules on International Civil Jurisdiction? (B) - Pocket Guide to 2023 China’s Civil Procedure Law (3)

Sun, 03 Dec 2023
Categories: Insights
Contributors: Meng Yu 余萌

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Key takeaways:

  • In the Fifth Amendment (2023) to the PRC Civil Procedure Law, a total of seven new articles (Arts. 276-282) has opened a new chapter on international civil jurisdiction rules in China, covering four types of jurisdictional grounds, parallel proceedings, lis alibi pendens, and forum non conveniens.
  • The rule on parallel proceedings (Art. 280) not only reaffirms China’s basic position, but also expands the scenarios for parallel proceedings so as to better meet practical needs.
  • The rule on lis alibi pendens (Art. 281) introduces the “first-seized court approach” in China for the first time. To avoid possible disadvantages arising out of this rule (such as the triggering of “torpedo actions”), it also provides exceptions, and conditions for the resumption of litigation.
  • The rule on forum non conveniens (Art. 282) significantly lowers the threshold for its application compared to its predecessor, giving it more chances to be applied and play its due role in resolving conflicts of jurisdiction.

On 1 Sept. 2023, the Fifth Amendment to the PRC Civil Procedure Law (the ‘2023 CPL’) was adopted by China’s top legislature, the National People’s Congress’s Standing Committee. The 2023 CPL has made significant modifications to international civil procedures. Among others, major changes can be found in rules on international civil jurisdiction, recognition and enforcement of foreign judgments, and cross-border service of process.

The purpose of this Pocket Guide is to acquaint CJO readers with these salient developments in the 2023 CPL. As one of the brightest spots in the Fifth Amendment, a set of seven provisions -Arts. 276-282-has opened a new chapter on international civil jurisdiction rules in China, covering four types of jurisdictional grounds, parallel proceedings, lis alibi pendens, and forum non conveniens.

As the third article in the Pocket Guide, this post focuses on the rules of international civil jurisdiction, in particular how conflicts of jurisdiction are resolved through mechanisms such as lis alibi pendens, and forum non conveniens.

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I. Parallel Proceedings (Art. 280)

Art. 280 of the 2023 CPL, which addresses the situation of parallel proceedings, reads as follows:

“Article 280 Where a party to the same dispute between the parties concerned files a lawsuit with a foreign court and the other party files a lawsuit with a people’s court, or a party files a lawsuit with both a foreign court and a people’s court, the people’s court which has jurisdiction pursuant to this Law may accept the dispute. Where the parties enter into an exclusive jurisdiction agreement selecting foreign courts, and such agreement does not violate the provisions of this Law on exclusive jurisdiction and does not involve the sovereignty, security or public interest of the People’s Republic of China, the people’s court may decide not to accept the case; where the case has been accepted, the people’s court shall rule to dismiss the action.”

Arts. 280 to 282 are also the highlights of the jurisdiction rules in this Amendment. In order to comply with the international trend and focus on parallel proceedings, these articles establish general provisions (Art. 280), lis alibi pendens (Art. 281) and forum non conveniens (Art. 282).

Compared to its predecessor (Art. 531, para. 1 of the 2022 CPL Interpretation), Art. 280 not only reaffirms the basic position but also expands the scenarios for parallel proceedings so as to better meet practical needs. In addition to the traditional scenario where “one party files a lawsuit with a foreign court and the other party files a lawsuit with a people’s court”, it introduces a scenario where “one party files a lawsuit with both a foreign court and a people’s court”.

This newly introduced scenario may seem absurd, but it is quite common in practice. It is often related to the parties’ litigation strategy, such as their desire to initiate lawsuits simultaneously in different jurisdictions to achieve different legal outcomes. A typical example is the case of Americhip, Inc. v. Dean et al. (2018) Yue 03 Min Chu No. 420, as we have previously discussed. Undoubtedly, this gives rise to problems related to parallel proceedings and the subsequent problem of how to coordinate the procedure of foreign judgments recognition and enforcement in China with the ongoing proceedings in China. With respect to these problems, Art. 302 of the 2023 CPL provides an answer. For a detailed analysis, please read “What’s New for China’s Rules on Foreign Judgments Recognition and Enforcement? – Pocket Guide to 2023 China’s Civil Procedure Law (1).”

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In addition, it is important to note the legal effect of an exclusive choice of court agreement where foreign courts are chosen: if the conditions set forth in this Article are met, Chinese courts will decline to exercise jurisdiction and refuse to accept the case; if the court has accepted the case, it shall rule to dismiss the action.

With respect to the exclusivity of forum selection agreements, Chinese courts will make a presumption of exclusivity. “Without stating that the choice of court agreement is a non-exclusive choice of court agreement, such forum selection agreement shall be presumed to be exclusive” (Art. 1, Conference Summary of the Symposium on Foreign-related Commercial and Maritime Trials of Courts Nationwide” (全国法院涉外商事海事审判工作座谈会会议纪要)) .

II. Lis Alibi Pendens (Art. 281)

Art. 281 of the 2023 CPL, which provides lis alibi pendens, reads as follows:

“Article 281 After a people's court has accepted a case in accordance with the provisions of the preceding Article, where a party applies in writing to the people’s court for the suspension of the lawsuit, on the ground that the foreign court has accepted the case prior to the people’s court, the people’s court may rule to suspend the action, except under any of the following circumstances:

(1) the parties have agreed to resolve disputes before the people’s court, or the dispute falls under the exclusive jurisdiction of the people’s court; or

(2) it is evidently more convenient for the people’s court to hear the case.

Where the foreign court fails to take the necessary measures to hear the case or fails to conclude the case within a reasonable period of time, the people’s court shall resume the case upon the written request of any party.

Where all or part of a judgment or ruling made by a foreign court which has come into legal effect is recognized by the people’s court, and a party files a lawsuit with the people’s court again in respect of the recognized part, the people’s court shall decide not to accept the case; where the case has been accepted, the people’s court shall rule to dismiss the action.”

This Article is also a breakthrough as it introduces the “first-seized court approach” for the first time. According to this Article, if the same case has already been accepted by a foreign court, and the parties subsequently bring the case to a Chinese court, the Chinese court, as the later-seized court, may stay the case and allow the first-seized foreign court to hear the case on a priority basis.

To avoid possible disadvantages arising out of this rule (such as the triggering of “torpedo actions”), the Article provides exceptions and conditions for the resumption of litigation.

Para. 3 of this Article is derived from Art. 531, para.2 of the 2022 CPL interpretation and is intended to confirm the validity of foreign judgments that have been recognized (in whole or in part) by Chinese courts. These judgments are treated as equivalent to enforceable Chinese court judgments. According to the principle of res judicata, if a party files a lawsuit with a Chinese court regarding the part of the judgment that has been recognized, the Chinese court will not accept the case. If the case has been accepted, the Chinese court shall rule to dismiss the action.

III. Forum Non Conveniens (Art. 282)

Art. 282 of the 2023 CPL, which provides forum non conveniens, reads as follows:

“Article 282 For a foreign-related civil case accepted by a people’s court, where the defendant raises a jurisdictional objection, and the following circumstances are met concurrently, the people’s court may rule to dismiss the action and inform the plaintiff to file a lawsuit in a more convenient foreign court:

(1) the basic facts of the dispute involved in the case have not occurred in the People’s Republic of China, and it is evidently inconvenient for the people’s court to hear the case and for the parties to participate in the lawsuit;

(2) there is a choice of court agreement between the parties under which the dispute is to be determined in the people’s courts;

(3) the case does not fall under the exclusive jurisdiction of the people’s courts;

(4) the case does not involve the sovereignty, security or public interest of the People’s Republic of China; and

(5) it is more convenient for a foreign court to hear the case.

Upon ruling to dismiss the action, where the foreign court refuses to exercise jurisdiction over the dispute, fails to take the necessary measures to hear the case, or fails to conclude the case within a reasonable period of time, and a party files a lawsuit with the people’s court again, the people’s court shall accept the case.”

Since the Supreme People’s Court (SPC) formally established forum non conveniens in the form of judicial interpretation in 2015, this rule has been closely watched. Legal practitioners at home and abroad are keen to see whether and how this rule will work. In the past decade, the rule has seen limited application due to its high threshold, especially the requirement that the case does not involve the interests of Chinese citizens, legal persons, or other organizations.

This time, Art. 282 has undergone significant changes compared to its predecessor by removing requirements such as “the case does not involve the interests of Chinese citizens, legal persons, or other organizations”, “the case does not apply Chinese law”, and “the foreign court has jurisdiction over the case”. This significantly lowers the threshold for its application, giving it more chances to be applied and play its due role in resolving conflicts of jurisdiction.

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Photo by Fay Lee on Unsplash

 

Contributors: Meng Yu 余萌

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