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Thus Spoke Chinese Judges on International Civil Jurisdiction: Insights from Chinese Supreme Court Justices on 2023 Civil Procedure Law Amendment (1)

Fri, 15 Mar 2024
Categories: Insights
Contributors: Meng Yu 余萌

Key Takeaways:

  • The insights from Chinese Supreme Court Justices on the 2023 Civil Procedure Law Amendment highlight significant modifications to international civil procedure rules, including expanded jurisdiction of Chinese courts, enhancements in consensual jurisdiction, and coordination of international jurisdictional conflicts.
  • The 2023 CPL expands Chinese courts' jurisdiction over foreign-related civil and commercial cases to better safeguard China's sovereignty, security, and development interests. This includes modifications in rules regarding Special Jurisdiction, Consensual Jurisdiction, and Exclusive Jurisdiction, and rules addressing the growing complexity of international jurisdictional conflicts.
  • The removal of the requirement for "actual connection" in consensual jurisdiction reflects the trend toward respecting the party autonomy in the choice of court agreements.
  • The amendments provide clarity and predictability in the application of legal principles such as forum non conveniens, ensuring that the interests of both Chinese and foreign parties are taken into account and that they do not suffer from a lack of remedies.

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.

We have provided a Pocket Guide to acquaint CJO readers with these salient developments in the 2023 CPL.

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In December 2023, Judge Shen Hongyu and Judge Guo Zaiyu from the Fourth Civil Division of China’s Supreme People’s Court(SPC) published an article “Commentary and Interpretation of the Revised Provisions of the Foreign-Related Part of the Civil Procedure Law” (《民事诉讼法》涉外编修改条款之述评与解读) in “China Law Review”(中国法律评论)(No. 6, 2023), sharing their insights on the developments in the 2023 CPL.

The purpose of this series is to present the views of the SPC Judges, Judge Shen and Judge Guo, on certain key aspects, including rules on international civil jurisdiction, rules on cross-border service of process and taking evidence, and rules on recognition and enforcement of foreign judgments.

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I. The Drafting of the Fifth CPL Amendment (2023)

Prior to the Fifth Amendment, the CPL, which was enacted in 1991, was amended four times, in 2007, 2012, 2017, and 2021. However, each amendment did not make any substantial adjustments to the relevant content of foreign-related civil litigation procedures.

In recent years, with the continuous advancement of high-level opening-up, the number of foreign-related civil and commercial cases heard by the people’s courts has rapidly increased, covering more than a hundred countries and regions. The number of cases where foreign parties actively choose Chinese courts for jurisdiction has also grown. Chinese civil and commercial judgments are also increasingly recognized and enforced by more countries. This has enhanced the international credibility and influence of China’s judiciary. At the same time, the problems of international jurisdiction conflicts in judicial practice are becoming more complex. The current functional positioning and system design of foreign-related civil litigation procedures are no longer able to meet the needs of just, efficient, and convenient resolution of foreign-related civil and commercial disputes and the protection of national sovereignty, security, and development interests. Therefore, it is necessary to make corresponding improvements.

In response, the SPC cooperated with the legislature to promote the amendment. In April 2021, the SPC initiated the drafting of the CPL draft amendment, which resulted in the proposed amendment to the foreign-related civil litigation part of the CPL. During the drafting process, the SPC solicited opinions and suggestions from various sectors of society, including state organs, high courts, academic and business associations, deputies of the National People’s Congress (NPC), members of the Chinese People’s Political Consultative Conference, experts, scholars, and enterprise representatives.

In December 2022, the draft amendment to the CPL was submitted by the SPC for review at the 38th session of the 13th NPC Standing Committee. In the same month, the draft amendment was posted on the NPC's official website for public opinion.

On 1 Sept. 2023, the “Decision on the Fifth Amendment to the Civil Procedure Law of the People’s Republic of China” was adopted by the fifth Session of the 14th NPC Standing Committee.

II. Rules on jurisdictional grounds

Further expanding the jurisdiction of Chinese courts over foreign-related civil and commercial cases is a major highlight of the 2023 CPL.

The SPC Judges pointed out that in the more than thirty years of the CPL’s implementation, Chinese enterprises’ international trade and investment have increasingly globalized, international interactions have become more frequent, and China’s overseas interests have continued to expand. However, the current rules on jurisdiction for foreign-related civil and commercial cases are relatively conservative. This is not conducive to safeguarding China’s sovereignty, security, and development interests, nor does it support the protection of the overseas interests of Chinese enterprises and citizens. There is a need to appropriately expand the jurisdiction of Chinese courts over foreign-related civil and commercial cases. Additionally, in recent years, China has enacted a number of important new foreign-related laws and regulations, and the CPL also needs to have corresponding jurisdiction rules to ensure the interface between these legal norms.

In terms of direct jurisdiction rules, the 2023 CPL has mainly made three modifications concerning Special Jurisdiction, Consensual Jurisdiction, and Exclusive Jurisdiction.

2.1 Special Jurisdiction (Art. 276)

2.1.1 Changes

The highlights of Art. 276 of the 2023 CPL lie in two major changes.

One is the expansion of dispute types subject to jurisdiction. Para. 1 specifies that this Article applies to “(foreign-related civil) disputes brought against a defendant who has no domicile within the territory of the People’s Republic of China, other than those involving identity relationships”. This means that the Article applies not only to “contractual disputes or other property disputes” but also to other disputes beyond these two categories. Since Art. 23, para. 1 of Chapter II Jurisdiction has already established the rules of jurisdiction based on the plaintiff’s domicile for “disputes concerning identity relationships brought against individuals not residing within the territory of the People’s Republic of China”, an exception provision has been made to exclude lawsuits involving identity relationships lawsuits to ensure consistency between the legal provisions.

The other is the addition of the “other proper connections” jurisdiction ground. Para.2 stipulates that “except as provided in the preceding paragraph, foreign-related civil disputes that otherwise have a proper connection with the People’s Republic of China may fall under the jurisdiction of the people’s courts”. This gives the people’s courts a certain degree of judicial discretion in determining foreign-related jurisdiction. Adopting the model of “specific grounds + miscellaneous clause”, the “proper connection” principle is a restrained protective jurisdiction that emphasizes the necessity, moderation, and reasonableness of exercising jurisdiction.

2.1.2 What is ‘Proper Connection’?

During the discussion of this paragraph, alternative terms such as “reasonable connection” and “actual connection” were considered. Ultimately, it was concluded that the “proper connection” principle is not only fundamentally different from the “long-arm jurisdiction” principle based on the “minimum connection” but also more open and expansive than terms such as “reasonable connection” or “actual connection”. It can cover multiple elements for both subjective and objective assessments of “proper”. Para. 2 stipulates that “other proper connections” includes not only connections of the dispute to China as well as the protection of China’s sovereignty, security, and development interests. In addition, relevant cases in judicial practice have already applied this concept. Therefore, the term “proper connection” was finally adopted.

This also means that, if the connections between a foreign-related case and the Chinese courts are too weak to meet the standard of “proper connection”, Chinese courts should not exercise jurisdiction, so as to avoid the excessive jurisdiction by expanding the “proper connection” principle in a disguised form into arbitrary “long-arm jurisdiction”.

2.2 Consensual Jurisdiction (Arts. 277-278)

2.2.1 Changes

Consensual jurisdiction includes jurisdiction by agreement (Art. 277) and jurisdiction by submission (Art. 288).

The most significant change in this amendment is the removal of the requirement for “actual connection” in the case of jurisdiction by agreement.

2.2.2 Why ‘Actual connection’ is no longer required?

In the view of the SPC judges, with the development of foreign-related civil and commercial litigation practices, an increasing number of foreign parties are choosing to bring lawsuits to Chinese courts. The requirement of “actual connection” in jurisdiction by agreement not only lags behind practical needs but also contradicts the international trend in civil litigation development, which emphasizes respecting the party autonomy in choice of court agreements.

For the sake of brevity, the term “people’s courts” is used directly to refer to the “people’s courts of the People’s Republic of China”.

2.3 Exclusive Jurisdiction (Art. 279)

The 2023 CPL introduces two additional grounds for exclusive jurisdiction in Art. 279. Among them, subparagraph 2 adds “actions initiated due to disputes relating to the examination of the validity of intellectual property rights granted within the territory of the People’s Republic of China” as matters under exclusive jurisdiction. Given the territorial nature of intellectual property, the explicit provision of exclusive jurisdiction over such disputes better adapts to the new circumstances in the field of intellectual property.

It should be noted that this Article does not cover administrative decisions made by relevant Chinese administrative authorities on the validity of “intellectual property rights granted upon examination” in accordance with the law. It also does not cover remedies available against relevant administrative decisions through administrative litigation relating to intellectual property.

III. Rules on conflicts of jurisdiction

The 2023 CPL establishes general rules for international jurisdictional conflicts, aiming to coordinate such conflicts and reduce parallel proceedings.

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3.1 Parallel proceedings (Art. 280)

Art. 280 clarifies China’s basic position on parallel proceedings.

With respect to the same dispute between the parties concerned, regardless of repetitive or adversary actions, a people’s court that has jurisdiction may accept the case in accordance with the CPL and this shall not be affected by whether a party concerned has filed a lawsuit with a foreign court.

In the meantime, the 2023 CPL introduces restrictive conditions for the people’s courts to exercise jurisdiction. Specifically, if the parties enter into an exclusive jurisdiction agreement, and such agreement is valid without violating the provisions on the exclusive jurisdiction of Chinese courts or Chinese public policy, the people’s courts should respect the exclusive jurisdiction agreement and refrain from exercising jurisdiction. This aligns with the approach of respecting the system of consensual jurisdiction. Recognizing the validity of exclusive jurisdiction agreements and self-limiting jurisdiction can ensure the certainty and predictability of the parties’ choice of court.

3.2 Lis Alibi Pendens (Art. 281)

Art. 281 provides for the first time for the suspension of actions in parallel proceedings.

On the one hand, after the people’s court exercises jurisdiction, it may consider factors such as

the first-seized foreign court and may rule to stay the action. This fully reflects the principle of judicial comity. On the other hand, if the parties have agreed to resolve disputes before a Chinese court, the dispute falls within the exclusive jurisdiction of a Chinese court, or the dispute is closely related to China, making it more convenient for a Chinese court to hear the case, the people’s court should not rule to stay the action.

3.3 Forum Non Conveniens (Art. 282)

Art. 282 elevates the provisions on forum non conveniens from Art. 530 of the CPL Judicial Interpretation (hereinafter the “Judicial Interpretation”) to the level of law, and further optimizes the conditions for the application of the principle in the following aspects.

First, it removes the requirement that“the defendant raises that it will be more convenient to lodge the lawsuit to a foreign court” from the Judicial Interpretation. It stipulates that the application of forum non conveniens must be initiated by the defendant raising a jurisdictional objection. If the defendant does not raise the application of forum non conveniens during the jurisdiction objection period and raises it later in the course of the proceedings, the people’s court shall not support it. Furthermore, the people’s court cannot actively apply this principle to refuse to exercise jurisdiction.

Second, it eliminates the requirement in the Judicial Interpretation that “cases do not involve the interests of Chinese citizens, legal persons, or other organizations”. It now only specifies that the case should not involve the social public interests of the People’s Republic of China. This is because in foreign-related civil and commercial cases handled by Chinese courts, a significant proportion of cases involve at least one party related to Chinese individuals, legal persons, or other organizations. Maintaining the restriction in the Judicial Interpretation would significantly limit the function of forum non conveniens to coordinate the competition and conflicts of parallel proceedings.

Third, it revises the requirement in the Judicial Interpretation that “cases that are not governed by Chinese law or cases where the people’s court faces significant difficulties in applying the law” to “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 trial”.

Fourth, para. 2 of this Article further clarifies the application procedure of forum non conveniens principle. After the people’s court rules 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. This prevents Chinese and foreign parties from suffering from the lack of remedies.

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Photo by Robynne Hu on Unsplash

Contributors: Meng Yu 余萌

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