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Several Opinions of Shanghai Courts on Services and Guarantees for Further Opening-up of Financial Sector (2020)


Type of laws Judicial policy

Issuing body Shanghai Higher People's Court

Promulgating date Nov 23, 2020

Effective date Nov 23, 2020

Validity status Valid

Scope of application Shanghai

Topic(s) Banking and Finance

Editor(s) C. J. Observer

Several Opinions of Shanghai Courts on Services and Guarantees for Further Opening-up of Financial Sector
Aiming to fully implement the spirit of General Secretary Xi Jinping’s important instructions on expanding the opening up of the financial sector and the Central Committee's decisions on further opening the gate of the financial sector to the outside world, and to establish a sound legal environment for the high-quality development of Shanghai International Financial Center, this opinion is formulated in accordance with the Framework Plan for the Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, Opinions for Further Accelerating the construction of the Shanghai as an International Financial Center and Providing Financial Support for the Integrated Development of the Yangtze River Delta Region, Opinions of the Supreme People's Court on Provision Regarding the Judicial Services and Guarantees Provided by the People's Courts for the Construction of China (Shanghai) Pilot Free Trade Zone Lin-Gang Special Area, Guidelines of the Supreme People's Court on on the Services and Guarantee of the People's Courts for Further Expanding Opening-up, and the relevant framework plans of the Shanghai Municipal Party Committee in the light of the trial practice of courts in Shanghai.
I. General requirements of judicial service and guarantees for further opening-up of the financial sector
1.We shall deeply understand the significance of further opening up of the financial sector
As a China's basic national policy, opening-up is the only way for national prosperity and development. Further opening-up of the financial sector stands for a major decision made by the CPC Central Committee with Comrade Xi Jinping at its core, and a necessary requirement on constructing a new development paradigm with domestic circulation being the mainstay and the two circulations reinforcing each other. Moreover, the promotion is also the internal need for further deepening the reform and high-quality development of China's financial industry. Widening the opening-up of of the financial sector will help to promote China's financial reform and innovation, further improve the financial market system in Shanghai, and enhance the attractiveness and influence of Shanghai’s role as the International Financial Center, so that we can enhance China's voice in making rules in the international financial market and better serve the economic and social development and reform and opening-up process in China. On the basis of the overall situation stated by the Party and the State, all courts in Shanghai shall deepen the understanding on the significance of further opening-up of the financial sector, and resolutely implement the spirit of General Secretary Xi Jinping's important instructions, so as to provide high-quality legal services and forceful judicial guarantees for the opening-up of the financial sector.
2.We shall make clear the goal of judicial services and guarantees for further opening-up of the financial sector shall be
All courts in Shanghai shall adhere to Xi Jinping Thought on socialism with Chinese characteristics for a new era, and generally implement the spirit of the 19th National Congress and the Second, Third, Fourth and Fifth plenums of the 19th CPC Central Committee and the spirit of General Secretary Xi Jinping's important speeches on on expanding opening-up. All courts shall firmly establish political awareness, overall situation awareness and responsibility awareness, and perform judicial duties in accordance with the law, establish and improve a professional financial judicial mechanisms, so as to fairly and efficiently resolve foreign-related financial disputes, standardize and regulate financial innovation, effectively prevent financial risks, benchmark the highest international standards, thus strengthening the international influence of financial justice and creating a sound law-based environment for the healthy and stable development of the financial industry.
3.We shall stick to the basic principles of judicial services and guarantees for widening opening-up of financial industry
We shall adhere to the correct political direction, honor the absolute leadership of the Party over all works of the People's Court, firmly work for the national strategy and the overall work situation. We shall upholds the principle of equal protection, safeguarding both Chinese and foreign entities and individuals in accordance with international rules, so as to create a fair and equitable environment for financial markets participation. We will fully respect the autonomy of will of the parties concerned, and guarantee their rights in choosing the dispute resolution methods, jurisdictions as well as applicable laws and regulations in accordance with the law. We shall stick to the path of professional development, establish and improve financial trial system and mechanism that meet the needs of widening opening-up of financial sector. Moreover, We shall follow the trend of internationalization, adopt international rules and practices in view of the reality, so as to strengthen the connection between the rules in China and those of the international financial market, and support the globalization development of our financial market and the promotion of the status of the RMB in the global market. In order to provide adequate space for the development of the financial market in China and guarantee the innovation of financial supervision mechanism, we will continually encourage financial innovation. Furthermore, we will adhere to the bottom line of financial risk management, attach great importance to risk transmission in international financial markets, exercise judicial jurisdiction in accordance with the law, so as to ensure national financial security.
II. Judicial system and mechanism shall be established and facilitated to commensurate with expanding opening-up of financial industry
4.Jurisdiction mechanism of foreign-related financial cases shall be improved
We shall respect the rights of parties concerned in choosing the dispute resolution methods as well as applicable laws and regulations, reasonably determine the basis of jurisdiction, and exercise judicial jurisdiction over foreign-related financial disputes in accordance with the law. As to financial dispute cases involving cross-border and offshore financial transactions, if the parties concerned choose certain court in Shanghai to hear the case by agreement, support shall be provided in accordance with the law. Except for the violation of jurisdiction by level and exclusive jurisdiction, the courts shall not actively reviewed ex officio whether there is any substantial connection between the dispute and the competent court chosen by parties at the stages of case filing and hearing. Judicial jurisdiction shall be exercised in accordance with the law for disputes arising from offshore financial activities that disturb the domestic financial order and cause damage to legitimate rights and interests of domestic financial consumers and investors. In addition, We shall explore and improve the settlement mechanism for international conflicts of judicial jurisdiction over foreign-related financial cases and international parallel proceeding issues.
5.Professional trial mechanism for foreign-related financial cases shall be established and facilitated
We will fully leverage the edge of Shanghai courts of our specialized trial system for financial cases and organize teams of sufficient and capable judges so that foreign-related financial disputes can be properly handled and that the trial quality of cases can be ensured. Foreign-related financial dispute cases shall be properly settled by actively using such new litigation systems as litigation support, exemplary trial, and representative litigation. In addition, We shall explore mechanisms to involve experts and scholars with international financial legal knowledge background to participate in the trial of cases as assessors to improve the professionalism of trial. We shall also promote the establishment of committee of experts on financial trial, improve conditions of personnel selection and appointment, applicable standards for cases, procedures of expert participation and other mechanisms, in order to acquire professional advice or argumentation opinions in the trial of foreign-related financial disputes with significance of rule creating.
6.The litigation system for foreign-related financial cases shall be optimized and improved
We shall develop guidelines on foreign-related financial cases, improve such mechanisms as extraterriter service, remote evidence justification, investigations and evidence collection, court trial, foreign law ascertainment, improve the information feedback mechanism for process of extraterriter service, and promote the convenience for foreign-related financial dispute settlement. We shall also deeply apply judicial technology, give priority to facilitate the whole process of online settlement of foreign-related financial cases, improve rules for electronic litigation, expand the application of electronic service, and explore the mechanism of assistance service to further increase the efficiency of litigation. In addition, the scope of materials necessary for notarization and certification shall be clarified in accordance with the law to reduce the burden of proof of the parties. And We shall further strengthen cooperation with colleges, universities, and relevant research institutions in the study of foreign law ascertainment, and innovate mechanisms for foreign law ascertainment and application so that foreign law can be ascertained and applied more efficiently, accurately and conveniently.
7.Diversified settlement mechanism for foreign-related financial disputes shall be established and facilitated
We shall actively adapt to features and demands of foreign-related financial disputes, and strengthen cooperation with financial supervision institutions, arbitration institutions, industry associations, and mediation organizations to jointly create a new pattern of diversified dispute settlement with an organic link among litigation, arbitration, and mediation. Based on respecting for the parties’ right to choose way of dispute resolution, parties concerned shall be led to give preference to direct application for mediation through one-stop diversified dispute settlement platform of Shanghai court. We shall support eligible mediation institutions and arbitration institutions to access the one-stop diversified resolution settlement platform of Shanghai court, add eligible mediation organizations and mediators to the roster of specially invited mediation, and actively bring professional lawyers in to full play of the diversified resolution of financial disputes. To increase the efficiency of cooperation between litigation and mediation, online mediation and online judicial confirmation shall be actively used. In addition, We shall actively participate in international judicial cooperation and the mechanism construction of international financial dispute resolution to promote China’s power of discourse and influence on the global judicial system.
8.Cohesive mechanism of international financial rules shall be constructed
In cross-broader financial dispute cases, We shall correctly apply rules of international market transaction, liquidation, and self-regulation, as well as customary practice, and used international judicial achievements for reference to actively promote the construction of system commensurate with international financial rules. We shall give full play to the exemplary function of financial cases actively perform , release exemplary cases to domestic and foreign countries and form a systematic database, guide subjects of financial market to establish reasonable expectation, promote the understanding and confidence of international market towards China’s financial legal system and financial judicial system, and finally propel Shanghai to play a significant part in construction of system of international financial rules as the important center of international financial dispute resolution.
9.China (Shanghai) Pilot Free Trade Zone and Financial Trial Innovation Pilot in Lin-gang Special Area shall be built
Based on the construction of the China (Shanghai) Pilot Free Trade Zone and Financial Trial Innovation Pilot in Lin-gang Special Area, We shall establish and facilitate trial system commensurate with further deployment of opening-up policy in financial industry, make good and sufficient use of supportive policies, support the development of financial clusters, and guarantee smooth implementation of various innovative financial policies. In addition, we shall support Shanghai Financial Court by bringing its advantage of concentrated jurisdiction into play and carrying out its work in the special program of trial of financial dispute cases. Supporting mechanisms such as professional translation and interpretation mechanisms shall be established and facilitated so that foreign parties may participate in litigation in English in pilot projects, and mechanisms such as participation of experts from home and abroad in diversified resolution for foreign-related financial disputes, and introduction of world-renowned financial accreditation agencies can be explored. The financial regulatory department shall be supported to develop its innovative regulatory pattern, such as “Regulatory Sandbox” to boost the financial innovative competitiveness within the area. We shall also actively participate in construction of legal service center within the area, establish and facilitate mechanism of cooperation with types of dispute resolution institutions within the area, support registered cross-broader arbitration institutions to work in accordance with the laws and regulations, enhance the preservation and enforcement of foreign arbitration cases, provide services and guarantees to construction of a global-oriented Asia Pacific arbitration center, and jointly build the financial dispute settlement center with international influence and attractiveness.
III. We shall strengthen the trial and enforcement of related disputes
10.The trial of foreign-related financial criminal cases shall be strengthened
In accordance with the law, We shall strictly punish the crimes of money laundering, illegal fund-raising, financial fraud of listed companies, insider trading, manipulation of securities and futures markets, strictly control the application of probation, increase economic sanctions such as fines, and apply the criminal "occupation prohibition" system in accordance with the law to maintain the order of the financial market. We shall also strengthen the crackdown on the criminal activities of "underground banks" and other financial institutions illegally engaged in cross-border banking, insurance and other businesses, and guard against all kinds of financial risks aroused in the process of opening-up. The communication and liaison mechanism between financial civil and commercial trials and financial criminal trials shall be further improved to strengthen our efforts to combat illegal and criminal activities in finance, and jointly safeguard the security of the financial market. In case of suspected criminal clues found in the trial of financial civil and commercial cases, relevant materials shall be timely reported and transferred to relevant departments.
11.The trial of cases involving cross-border securities and financial derivatives shall be strengthened
According to the special institutional arrangements of cross-border securities and financial derivatives in terms of information disclosure, issuance, transaction, registration, custody and settlement, and drawing on the experience of international financial justice, the power and responsibility boundaries of trading subjects are reasonably defined. We will handle disputes involving the Shanghai-Hong Kong Stock Connect, Shanghai-London Stock Connect and Bond Connect in accordance with the law, and properly handle issues related to jurisdiction, application of law and judicial enforcement related to red chip companies, depository receipts, "Panda Bonds", cross-border ETF(Exchange Traded Funds), and international index authorization. We shall actively explore and use the class action mechanism of securities disputes with Chinese characteristics, and improve the efficiency of resolving securities disputes involving stakeholders. We shall respect the business rules of stock exchanges and clearing houses, as well as the principle of relative immunity of civil liability caused by self-regulation. For the disputes caused by self-regulation, the parties shall be guided to make every efforts to follow the internal review procedures and the direct judicial intervention shall be reduced. We shall support the construction of a modern commodity trading mechanism combining spot and financial derivatives, and promote the function of the commodity futures market. We shall also try the OTC financial derivatives disputes in accordance with the law, correctly identify the validity of financial derivatives contracts, explore and improve the special systems such as central counterparties, termination of netting, cross default, defective assets and other special systems, as well as the applicable legal rules related to ISDA master agreement, NAFMII master agreement, and master agreement on derivatives trading in China's securities and futures market.
12.The trial of cross-border investment and financing cases shall be strengthened
We shall properly handle all kinds of cross-border investment and financing disputes, and support foreign-invested enterprises to reinvest in China in accordance with the law. We shall also handle investment and financing cases involving new technologies, new industries, new forms of industries and new business models in accordance with the law, respect the financing arrangements between investment institutions, enterprises and their shareholders, support scientific and technological innovation enterprises to implement corporate governance structure and equity incentive plans that are compatible with their characteristics, and promote the creation of a good atmosphere to encourage enterprises to innovate and start their own businesses.
13.The trial of cases involving cross-border asset management products shall be strengthened
We shall properly handle cases involving cross-border asset management products, adhere to the principle of "the seller shall perform his due diligence, and caveat emptor". We shall also distinguish between standardized products and non-standard products, and reasonably determine the appropriate management obligations, information disclosure obligations and corresponding legal responsibilities of issuers and sellers of asset management products. For the asset management innovation products that do not violate the mandatory provisions of laws and regulations, the legal effect shall be confirmed in accordance with the law. In order to ensure the normal development of asset management business, it is necessary to clarify the fiduciary duty standards of asset management product managers in accordance with the law, respect the professional judgment of managers in investment operation, reasonably identify the duty boundary of the trustee, and effectively guarantee the normal development of asset management business.
14.The trial of disputes over letters of credit and demand guarantee shall be strengthened
We shall respect the Uniform Customs and Practice for Documentary Credits(UCP600) and the Uniform Rules for Demand Guarantees (urdg758), follow the principle of independence of letters of credit and demand guarantees, accurately grasp the strict and consistent document review standards, adhere to the principle of necessity and limitation in the examination of basic transactions under independent guarantees, and identify the status and responsibilities of parties involved in the transaction , such as the applicant, beneficiary, issuing bank, advising bank and guarantor, etc., in accordance with the law. We shall carefully handle the cases of stop payment cases related with L/C and demand guarantee frauds, and strictly grasp the stop payment conditions. Properly handle disputes arising from financing and guarantee under L/C and demand guarantee. We shall pay attention to the illegal behaviors such as taking bank funds by fictitious basic transactions found in the trial, and take appropriate measures to promote the healthy development of finance and trade.
15.The trial of cross-border payment and settlement cases shall be strengthened
We shall identify the rights and obligations of all parties involved in cross-border payment in accordance with the law, strengthen the verification obligation of the authenticity and consistency of trade documents, and promote financial institutions to improve the ability to identify and prevent payment risks. We shall also clarify the time point of key financial risk transfer, coordinate the conflict between settlement finality and bankruptcy law, and reduce the liquidity risk, credit risk and systemic risk. In addition, We shall review and confirm the electronic evidence of cross-border payment and settlement in accordance with the law, actively respond to the judicial needs of electronic payment application of big data, Block Chain, biometric identification, artificial intelligence and other modern information technologies, and improve the settlement efficiency.
16.The trial of cross-border insurance cases shall be strengthened
We shall support the development of cross-border commercial insurance in tourism, medical care, logistics and other fields. Based on the fact that cross-border insurance products are obviously different from conventional insurance products in actuarial development and risk assessment, we fully respect the characteristics and limitations of cross-border insurance products in terms of insurance threshold, applicable population, premium determination, insurance cycle, underwriting risk, etc. We will strengthen the examination of formatted exemption clauses and special provisions in cross-border insurance policies, and pay attention to the compliance of the insurer's underwriting process and the performance of prompt and explanation obligations. We shall strengthen the litigation guidance for the parties, guide the parties to fix, translate, notarize and apply for claims in time for the evidence of accident report and actual loss formed abroad, so as to avoid the deadlock of claim settlement due to unfavorable evidence. We shall also provide support to expand the coverage of policy insurance such as export credit insurance, further straighten out the connection and interpretation logic between the agreement of export credit insurance contract and the application of the insurance law, carefully distinguish the appearance of trade disputes and the causes of disputes, and accurately grasp the disputes between both sides of trade and whether they belong to the scope of policy liability. The validity of the "dispute precondition clause" of the insurance policy shall be reasonably determined in combination with the extent of the insurer's performance of the duty of presentation and whether the rights and obligations of both parties are significantly unbalanced. We will handle cases involving the transaction of insurance products in accordance with the law, and support the development of the insurance trading market.
17.The trial of cross-border financial leasing and factoring disputes shall be strengthened
We shall accurately grasp the transaction characteristics of financial leasing and factoring, correctly understand and apply the relevant provisions on financial leasing and factoring in the Civil Code, and support the standardized development of cross-border non-bank financing. We shall also respect the agreement of the parties, and apply UNIDROIT Convention on International Financial Leasing, International Factoring Convention, United Nations Convention on the Assignment of Receivables in International Trade and other relevant international treaties in accordance with the contract. We shall review transactions that engage in substantive lending in the name of financial leasing and factoring, such as fictitious financial leases, fictitious accounts receivable, etc., and apply laws based on their true transaction relationships to severely punish fraud.
18.The trial of shipping financial disputes shall be strengthened
We will continue to carefully handle cases of ship financing lease, ship mortgage and shipping financing cases with goods on board, shipping documents and bonded warehouse receipts as collateral, prudently handle real transaction disputes with shipping financial derivative index as reference, and vigorously support shipping financial innovation and prosperity and stability of shipping financial market. We will try shipping insurance disputes in accordance with the law, strengthen the research on the legal application of shipping insurance clauses and insurance innovative products, support the reform of shipping insurance registration system, properly solve new types of disputes such as shipping reinsurance, shipping offshore insurance and ship owner mutual insurance, and help build an international shipping insurance center with global influence.
19.The trial of cross-border financial administrative cases shall be strengthened
We shall, in accordance with the law, fairly and efficiently handle all kinds of cross-border financial administrative cases, such as administrative penalties, administrative licensing, and the performance of legal duties, supervise and promote foreign-related financial regulatory institutions to perform their duties in accordance with the law, and enhance the authority and effectiveness of financial supervision. We will give full play to the role of the Diversified Administrative Disputes Resolution Centers in all Shanghai courts, vigorously promote the substantive resolution of cross-border financial administrative disputes, support financial regulators to carry out administrative reconciliation in accordance with the law, and fully protect the legitimate rights and interests of various market entities. We shall strengthen the positive interaction and effective connection between judicial trial and administrative supervision, safeguard financial supervision in accordance with the law, help optimize the business environment, and jointly promote administration in accordance with the law.
20.The relevant enforcement shall be strengthened
We shall improve the enforcement mechanism that fits the modern financial capital market, increase the intensity and improve the efficiency of enforcement. We shall further strengthen the concept of good faith and stress the proper behavior in the enforcement, strictly prohibit over standard and arbitrary seizure, handle cross seizure in accordance with the law, prudently apply compulsory measures in accordance with the law. We shall reasonably determine the scope of property investigation and control according to the characteristics of financial cases, and leverage the function of property financing. We shall also further standardize the rules for judicial disposal of financial assets, regulate the freezing and judicial disposal of listed companies' stocks, various bonds, negotiable certificate of deposit, financial products and other financial products, expand the scope of application of the implementation mechanism for bulk stocks, and explore cross-border property investigation and enforcement mechanisms. We shall strengthen judicial assistance in international finance and handle requests for judicial assistance such as recognition and enforcement of judgments and arbitral awards of foreign civil and commercial courts in strict accordance with relevant international treaties and the principle of reciprocity. We shall improve the effectiveness of preservation and enforcement of non-litigation financial disputes related to arbitration, support and protect the application and implementation of interim measures such as property preservation and evidence preservation of Chinese and foreign parties before and during arbitration. Online judicial assistance mechanism with securities registration and settlement institutions shall be established for online inquiry and freezing of property to facilitate the judicial enforcement.
IV. The role of judicial cooperation in the further opening-up of the financial sector shall be made fully use of
21.We shall prevent and resolve cross-border financial risks
We shall pay close attention to the effect of foreign financial market to financial market in China, intensify the source regulation of financial risk management, and prevent the intrusion of cross-border financial risk. We shall respect the professional supervision of financial regulators and ban the legal effect of financial products and transaction models in the name of financial innovation that cover up financial risks, evade financial supervision and take advantage of the institution in accordance with the law. China will support the establishment and improvement of cross-border financial risk management mechanisms of financial infrastructure in Shanghai, and ensure the security of such trading or clearing systems as cross-border RMB clearing system. With respect to the reputation of financial institutions, as well as rights and interests of financial consumers, we will crack down on counterfeit financial institutions engaging in illegal financial activities. We will make full use of the big data system in Shanghai courts for financial trial to strengthen the function of data collection and analysis, promote the interconnection of judicial data and supervisory data, and help accurately predict the consequence of cross-border financial disputes, thus providing information back-up for forewarning financial risks concerning foreign affairs. With the aim of ensuring financial security, we shall improve the management of mechanisms linking people, banks and criminals, put forward timely suggestions and countermeasures to the financial supervision departments, and finally establish a long-term coordination mechanism.
22.China will support openness and innovation of Fintech
We will support supervision departments to carry out the pilot project of supervision on Fintech innovation, and handle financial disputes arising from the pilot project in accordance with the law. Meanwhile, innovation encouragement, risk management and protection of rights and interests of parties concerned shall be taken into account, so as to reinforce the regulation on Fintech innovation. Also, China will strengthen the protection of intellectual property rights in the field of Fintech, and promote the research and development of such key emerging technologies as big data, artificial intelligence, blockchain and 5G, so as to ensure fair competition in Fintech market and propel the integration of technological innovation and financial innovation. In this approach, we can strengthen the security and protection of financial data, consolidate professional support and coordination of works, and promote the improvement of the security management mechanism for cross-border flow of financial data.
23.The construction of judicial personnel in the field of finance shall be constructed
Integration of trial resources, enhancement of the professionalism of financial trial teams and cultivation of competent professionals shall be strengthened to ensure the justice of financial trials, and encourage more professionals to join the team. Financial law training shall be carried out by both universities and finance research institutions, and more competent judges will be selected to study abroad and broad their international horizons. We shall also promote such exchanges of talents as recommending judges who are professional in financial trials to conduct practices in financial supervision departments or financial institutions. Research on financial trial theory shall be positively performed by giving full play to the role of the Financial Trial Theory Committee of the China Trial Theory Research Association and the Financial Research Branch of the Shanghai Institute of judicial think tanks. Benchmarking against the first-class International judicial standard in financial field, we shall strive to build a team of professionals who are familiar with the knowledge of law, finance and foreign language for the trial of financial disputes.
24.Judicial exchanges and cooperation of international finance shall be carried out actively
As China's International Exchange Base for Financial Trials in Shanghai, we shall strengthen communications and exchanges with the judicial institutions, supervision departments of well-known international financial centers, and international financial organizations. Also, we shall establish a research center concerning the rule of financial law in cooperation with financial supervision departments and universities in Shanghai, aiming to carry out researches in the cross-fields of law, economics and finance, so as to better share information and achievements on ruling of financial law and relevant cases in a global view. Moreover, we shall strengthen communications with the financial sector, put forward advanced research on legal issues with respect to finance, and intensify cooperation in such fields as anti-money laundering, so as to prevent financial disputes and risks at source.

This English translation comes from the Shanghai Higher People’s Court Website. In the near future, a more accurate English version translated by us will be available on China Laws Portal.