Jurisdiction of Chinese Courts in International ...
The civil jurisdiction of the People’s Courts stems from the Chinese Constitution,the Law on the Organization of People’s Courts and the Civil Procedure Law (CPL).These documents empower the People’s Courts to adjudicate cases arising from disputes concerning property and personal relations between or among citizens,legal persons,or other organizations.With regard to civil litigation involving foreign elements,the jurisdiction of the People’s Courts is governed by both general and special provisions of the CPL between which specific provisions prevail.In addition,the Supreme People’s Court plays an important role in determining the lower courts’ jurisdiction pertaining to a particular type of case.
Under the provisions of the CPL,the jurisdiction of the Chinese People’s Courts is divided generally into four categories: tier jurisdiction,territorial jurisdiction,transferred jurisdiction and designated jurisdiction.6 In addition to proper subject matter jurisdiction,the People’s Courts must also meet both the tier and territorial requirements.7
Tier jurisdiction refers to the jurisdiction of the People’s Courts at each level,and dictates the level at which a particular case shall be filed in the first instance.8 Since in any given case there is only one appeal available under the “two-instance trials format,” it is important that the case starts at the correct level.For a case involving foreign elements,commencing it at a higher level court is probably desirable insofar as many basic courts are inexperienced in handling international civil litigation,especially those in backward regions.[8]
On December 7,2017,the Supreme People’s Court issued a “Notification on Clarifying the Standards of Tier Jurisdiction over First Instance Foreign-related Civil and Commercial Cases.” According to this Notice,the rules of tier jurisdiction over international civil and commercial cases allocate first instance cases,based on the amount in dispute,to the Basic People’s Courts,Intermediate People’s Courts and Higher People’s Courts accordingly.An approval must be obtained from the Supreme People’s Court if a higher court wants to take a first instance case on the ground of “significant impacts” when the case lacks the required jurisdictional amount,or the total number of cases taken exceeds the ceiling.9
Transferred jurisdiction deals with the transfer of a case from a non-competent court to a competent court.Under Article 36 of the CPL,if a People’s Court finds that it has taken a case without proper jurisdiction,it shall transfer the case to the People’s Court that has jurisdiction.If the court to which the case is transferred believes that it also lacks jurisdiction,it shall refer the case to a higher court for designation of jurisdiction.10 Therefore,under the CPL,for transferred jurisdiction to be valid three conditions must be met: first,the case must have been taken; second,the transferring court must lack jurisdiction; and third,the case must be transferred to a competent court.
Designated jurisdiction occurs when a higher court orders a lower court to exercise jurisdiction that it would otherwise lack.Pursuant to the CPL,jurisdiction may be designated to a lower court under the following three conditions: first,the case is transferred to a court that lacks jurisdiction; second,the court that is competent could not exercise its jurisdiction due to some special reasons,such as natural disaster or on the legal grounds of recusal; or third,more than two competent courts are in dispute over their jurisdiction on the case and the dispute cannot be solved by an agreement between the disputing courts.11
The most important feature of the People’s Courts’ jurisdiction is territorial jurisdiction.Questions of territorial jurisdiction in the People’s Courts are typically determined by reference to the relations between the forum and the parties,disputes,or factum jurisdicum (juristic facts).12 The factors determining territorial jurisdiction are domicile,place of business,conduct,location of property,and party consent.Based on the difference of these factors,territorial jurisdiction can be further divided into general territorial jurisdiction,specific jurisdiction,consensual jurisdiction,and exclusive jurisdiction.It should be noted that Chinese law generally follows the German law in civil jurisdiction which espouses the doctrine of “actor forum rei sequitur”; thus,unlike French law,nationality usually does not serve as an important basis for a Chinese court to assert its jurisdiction.
2.1 General Territorial Jurisdiction—Defendant’s Domicile
Subject to the various exceptions outlined below,the general rule of territorial jurisdiction is that a civil or commercial action shall be brought in the People’s Court of the place in which the defendant is domiciled.13 The People’s Courts may exercise jurisdiction over a given defendant who is domiciled,resides,or conducts business within the territorial boundary of the court,regardless of the defendant’s nationality.
According to the CPL,a civil lawsuit generally shall be brought in the People’s Court at the place of the defendant’s domicile.In China,the domicile of a person shall be the place where his household is registered (“Huji”).However,if a person’s habitual residence is different from his domicile,the former shall be regarded as his domicile.This is presumed both in Article 15 of the GPCL and Article 21 of the CPL,which gives priority to the place of habitual residence.When there are several defendants who are domiciled or reside in two or more jurisdictional territories,the courts in those territories shall all have jurisdiction.14 In this circumstance,the CPL allows a plaintiff to choose one of the competent courts.If the plaintiff files a lawsuit with two or more competent courts,the court with which the lawsuit was first filed shall exercise jurisdiction.15
The defendant’s domicile-based jurisdiction rests with the jurisdiction doctrine commonly characterized as “actor forum rei sequitur.” This doctrine makes sense for most part.One justification relies on the considerations of fairness.A defendant would find it difficult to argue that he is somehow denied “fair play and substantial justice” by being sued conveniently in place where he is domiciled.16 Moreover,jurisdiction based on defendant’s domicile has a justification based on necessity and efficiency: after all it is more efficient for a court to carry out service of process,and to enforce the judgment that it renders.Absent such a jurisdictional basis,a defendant might ignore the jurisdiction exercised by a court which is far-away from him,and thus leave plaintiff in a difficult and helpless situation.
It should be noted that not only does the general rule apply to domestic disputes,but also to disputes involving foreign elements,which has been proved by a large number of cases.For instance,in Kaiwei (USA) Co v.Changchun City Construction and Development Company,17 Standard Chartered (Asia) Ltd v.Guangxi Zhuang Autonomous Region Huajian Company,and Zhang Xuefen v.He Anting (for divorce),18 the People’s Courts concerned exercised jurisdiction on the common ground that the defendant’s domicile was within the territory of China.19 As a general rule,defendant’s domicile-based jurisdiction applies to actions in contract,tort and in personam: as long as defendants are domiciled in China,notwithstanding their nationality,Chinese People’s Courts may hear cases.
2.2 Special Jurisdiction
However,Article 21 of the CPL only lays down the rule of “general territorial jurisdiction.” Articles 22 to 32 and Article 265 mention various situations of “special jurisdictions,” namely,the action in personam,actions on contractual disputes,on infringements of rights,land and sea transportation disputes,air transportation disputes,air accident compensation cases,maritime accident compensations cases,maritime rescue fee suits and general average suits.20 Although these articles are not couched in exclusive language,their wording and the contextual reading imply that they have priority over the rule of “general territorial jurisdiction” as provided in Article 21.The following is a discussion on several categories of “special jurisdictions” that involve foreign elements.
2.2.1 Jurisdiction of the People’s Court of the Place Where the Plaintiff is Domiciled
In special circumstances,for the convenience of the plaintiff,the People’s Court of the place in which the plaintiff is domiciled will hear actions.However,such jurisdiction is limited to occasions where the action in personam is brought against persons not residing within the territory of China,or against persons whose whereabouts are unknown or who have been declared missing.Article 22 of the CPL states that:
The following civil actions shall be under the jurisdiction of the people's court at the place of domicile of the plaintiff; or if the plaintiff's place of domicile is different from his or her place of habitual residence,the civil actions shall be under the jurisdiction of the people's court at the place of habitual residence of the plaintiff:
(1) An action regarding a personal relationship instituted against a person who does not reside within the territory of the People's Republic of China.
(2) An action regarding a personal relationship instituted against a person whose whereabouts is unknown or against a person who has been declared missing.
(3) An action instituted against a person who is subject to any compulsory correctional measure.
(4) An action instituted against a person who is incarcerated.
The proceeding for divorce that Zhang Yumou brought before the Zhengdong District People’s Court,Haikou,against You Shi’an in 1991 is illustrative.21 The plaintiff,Zhang Yumou,was a Chinese citizen who,with an American national,You Shi’an,registered for marriage with the Bureau of Civil Affairs of Haikou City in July 1991.In August,Zhang Yumou filed a divorce proceeding with the People’s Court of zhengdong District,Haikou.The People’s Court of Zhengdong District accepted the case under Article 22 of the CPL and rendered a judgment in due course.
2.2.2 Jurisdiction over Actions Concerning Contractual Disputes or Other Disputes over Property Rights and Interests
In international civil litigation,many cases involve a foreign defendant not domiciled or residing within China.Given the importance of some of such cases,the CPL empowers People’s Courts the jurisdiction over actions involving contract disputes or other disputes over property rights against a non-resident defendant if certain conditions are satisfied.Article 265 prescribes the following:
In the case of an action concerning a contract dispute or other disputes over property rights and interests,brought against a defendant who has no domicile within the territory of the People’s Republic of China,if the contract is signed or performed within the territory of the People’s Republic of China,or if the object of the action is located within the territory of the People’s Republic of China,or if the defendant has distrainable property within the territory of the People’s Republic of China,or if the defendant has its representative office within the territory of the People’s Republic of China,the People’s Court of the place where the contract is signed or performed,or where the object of the action is,or where the defendant’s distrainable property is located,or where the torts are committed,or where the defendant’s representative office is located,shall have jurisdiction.
Therefore,for actions concerning a contractual dispute or other disputes over proprietary rights brought against a defendant who has no domicile within the territory of China,the People’s Court may exercise jurisdiction if: the contract is concluded or performed within the territory of China; the object of the action is located within the territory of China; the defendant has distrainable property within the territory of China; or the defendant has its representative office within the territory of China.
An example is Chamber of Japan in Shanghai v.Huida Co.(Hong Kong),22 where the plaintiff was a firm registered in Osaka,Japan,and the defendant is a Hong Kong-based company.Neither the parties had an office in China.The two parties reached an agreement on the joint investment of US$ 350,000 in a project in Yuyao City of Zhejiang Province.Thereafter,a dispute arose as to the defendant’s alleged breach of the agreement.The Intermediate People’s Court of Ningbo City entertained the action in the name of the People’s Court of the place where the contract was performed.Similarly,the Intermediate People’s Court of Tianjin Municipality exercised jurisdiction over a contractual dispute between Tianjin Native Products Import & Export Company and a Belgian company on the ground that the place where the contract was performed was within the territory of China.
Obviously,the jurisdiction of People’s Courts is greatly expanded as a result of this exception.As a matter of fact,Article 265 of the CPL does not impose restrictions on the jurisdiction of the People’s Court of the place where the contract is concluded,where there is distrainable property of the defendant,or where the representative office of the defendant is situated.Such arrangement is believed to serve the purpose of protecting the interests of Chinese parties; however,it may go too far in certain cases.For instance,if it is only by accident that the contract is concluded in the place where the People’s Court is located,or if there is no substantial connection between the disputed contract and the place where there is distrainable property or a representative office of the defendant,it is submitted that it is unreasonable for the People’s Court to seize jurisdiction.
For example,in the case of Hong Kong Baiyue Financial Services Co v.Hong Kong Hungli Gourmet Co.,23 both parties were incorporated in Hong Kong,and the loan agreement between them was reached and performed in Hong Kong.Furthermore,the contract between the parties did not have a provision for choice of forum.Nevertheless,the People’s Court concerned accepted the proceeding at the request of the plaintiff,merely on the basis that the defendant had used the money it had borrowed from the plaintiff to invest in a contractual joint venture in Chinese mainland and thus had distrainable property within the territory of China.The defendant did not challenge the jurisdiction of the People’s Court.However,even if the defendant had raised a challenge,the People’s Court—as the court of the place where the defendant had distrainable property—would have jurisdiction under the CPL.24
Actually,it is interesting to note that in a typical Chinese civil action,the jurisdictional matter is normally not addressed in either the plaintiff’s complaint or the defendant’s answer.This phenomenon,in part,reflects the Chinese judicial tradition.In contrast to the adversarial model of the Anglo-American judicial system,the Chinese judicial system is premised on the inquisitorial model.Under the inquisitorial system,the court controls and shapes the litigation by conducting active and independent inquiry into the merits of the case.In the eyes of many parties,jurisdiction is often overlooked.25 In recent years,a number of Chinese scholars have strongly advocated introducing the adversarial model into the Chinese courts,and some of their suggestions seem to have been accepted,as the Supreme People’s Court has initiated some reforms for the purpose to enhance the adversarial element in the trial process.
2.2.3 Jurisdiction over Actions in Torts
As far as a tort action is concerned,jurisdiction shall be asserted by the People’s Court of the place of tort or the place of defendant’s domicile.26 Under this provision,when dealing with a tort dispute involving foreign elements,the People’s Courts may have jurisdiction where the place of tort is within the territory of China even the defendant is not domiciled in China.The place of tort is interpreted by the Supreme People’s Court to include both locus delicti commissi (place where a tort is committed) and the place where harms have occurred.If these jurisdictions are different,the plaintiff may choose either one of these courts for litigation.27
In Chongqing Foreign Trade Import & Export Company v.A Turkish Shipping Company,China Guang’ao Development General Company v.A Singaporean Shipping and an Indonesian Company,Hong Kong Meridian Success International Ltd v.Aslan Transmarin Shipping Trading & Industry Co Ltd,and China Technology Import & Export Company v.Industrial Resources Company Inc (Switzerland),none of the defendants were domiciled within the territory of China.Nevertheless,the People’s Courts concerned seized jurisdiction on the grounds that the tort was either committed,or caused harmful effects,within the territory of China.28
It should be noted that with the expansion of the internet,infringements via internet are on the rapid increase,the Supreme People’s Court,therefore,issued an “Provisions on Several Issues Concerning the Application of Law in Hearing Civil Dispute Cases Involving Infringement of the Right of Dissemination on Information Networks” in 2012.In this Interpretation,the Supreme People’s Court expanded the place of tort to include the location of the computer equipment,such as the server or network terminal,where the tortious act is committed.The Supreme People’s Court was also of the opinion that in a tort action concerning computer network copyright where both the place of the tort and the place of defendant’s domicile could not be determined or were in foreign jurisdiction,the place of the network terminal equipment where the tortious contents were found by the plaintiff may be deemed as the place of tort.
2.3 Consensual Jurisdiction—Parties’ Choice or Consent
Pursuant to modern doctrines of private international law,the principle of party autonomy gives parties the right to choose which court exercises jurisdiction over disputes between them.Both Chinese law and judicial practice acknowledge this autonomy as a general rule.However,an examination of the attitude of People’s Courts toward choice of forum agreements reveals that the practice before the promulgation of the CPL in 1991 differed from the practice thereafter.
Before 1991,a choice of forum agreement,even explicitly evidenced,was not strictly recognized.In September 1988,Zhejiang Provincial Arts & Crafts Import & Export Industrial and Trade Group entrusted Golden Fortune Shipping Co.Ltd,a Hong Kong carrier,to deliver skiing gloves to Pittsburgh in the United States.The goods were lost in transit due to the negligence of Golden Fortune Shipping.Zhejiang Provincial Arts and Craft brought a lawsuit before the Shanghai Maritime Court,claiming damages from Golden Fortune Shipping.29 The defendant raised an objection to the jurisdiction of the Maritime Court,arguing that since Article 3(2) of the bill of lading provided that “any disputes in relation to this bill of lading shall be handled by Hong Kong courts in accordance with Hong Kong law,” the case should be heard in Hong Kong.The Shanghai Maritime Court ruled that a choice of forum that has a real connection with the carriage contract will generally be recognized.However,the Maritime Court noticed that: the carriage agencies of both the plaintiff and defendant,the place of issuance of the bill of lading,the port for loading,and the first carrier were all in Chinese mainland; the second carrier and the port of destination were in the US; and only the issuer of the bill of lading (the defendant) was in Hong Kong.Based on these factors,the Maritime Court held that staying the proceeding and handing it over to a Hong Kong court would cause inconvenience to the plaintiff and adversely affect its interests.It consequently ruled against the defendant’s challenge.
The reasons for ignoring the choice of forum clause in this case were twofold.30 First,the Consensual Jurisdiction was not recognized by law at that time.Second was the issue of reciprocity.A Hong Kong court had previously ignored a jurisdictional provision in a bill of lading of a mainland shipping company.The decision of the Shanghai Maritime Court appeared to be revenge for the previous act of the Hong Kong judiciary.
The CPL,promulgated in 1991,revised in 2007,2012 and 2017,allows litigants to choose a court through mutual agreement.31 Therefore,the People’s Courts’ jurisdiction could also be established by consent of the parties.However,under Article 34 of the CPL revised in 2012,such choice is subject to the following four conditions: first,the agreement must be made in writing; second,the court chosen by the parties must have an actual connection with the dispute which includes the court at the place of defendant’s domicile,the court at the place where the contract was performed,the court at the place where the contract was signed,the court at the place of plaintiff’s domicile,and the court at the place where the subject matter of the claim is located; third,the dispute must involve contracts or property rights; and fourth,the parties’ choice of court be made without violating the provisions of the CPL concerning tier and exclusive jurisdiction if a Chinese People’s Court is chosen.32
Nevertheless,Article 34 of the CPL revised in 2012 seems to have a problem,as it requires the parties to choose a “people’s court”,instead of a “court” in general.[9]A literal interpretation of the above article would lead to the absurd conclusion that the parties are entitled to choose only a “people’s court” in Chinese mainland!
In this light,the Interpretation on CPL contains an article particularly targeted against this problem,which provides in Article 531(1) as follows:
The parties to a dispute over a foreign-related contract or any other right or interest in property may,by a written agreement,choose the “foreign” court (emphasis added) at the place of domicile of the defendant,at the place where the contract is performed or signed,at the place of domicile of the plaintiff,at the place where the subject matter is located,at the place where the infringement is conducted or at any other place actually connected to the dispute to have jurisdiction over the dispute.
After the promulgation of the CPL in 1991,People’s Courts accordingly uphold the force of jurisdictional agreements.In December 1993,Hong Kong based Yin Sen Shipping Company and Xiamen based Shengli Economic and Trade Development Company signed a Charter Party,in which both parties agreed either to settle (through amicable consultation) the disputes that may arise from the performance of the contract,or to arbitrate them in Hong Kong in accordance with Chinese law.33 On the same date,the parties signed an Agreement on Payment of Freight (“Freight Agreement”),which provided that “the Hong Kong High Court has exclusive jurisdiction over all the disputes arising under this agreement.” Subsequently,then Overseas Chinese Bank,Xiamen Branch,issued a Letter of Guarantee against Payment of Freight in favor of Yin Sen Company,providing a guarantee for the obligations of Xiamen Shengli to pay freight under the Charter Party and the Freight Agreement.Thereafter a dispute arose concerning payment of freight.Yin Sen brought an action before the Xiamen Maritime Court against the Overseas Chinese Bank,Xiamen Branch,after failing to procure the payment.The Overseas Chinese Bank challenged the jurisdiction of the Maritime Court,arguing that the Hong Kong High Court had exclusive jurisdiction over disputes regarding payment of freight.Xiamen Maritime Court ruled against the validity of the choice of forum provisions on the ground that the Charter Party and the Freight Agreement provided two different and contradictory ways of resolving disputes,and rejected the challenge.The Overseas Chinese Bank appealed.The Higher People’s Court of Fujian Province ruled that the choice of forum provisions had the effect of excluding jurisdiction of any courts other than the agreed upon court and,therefore,it was the Hong Kong Higher Court rather than the Xiamen Maritime Court that could exercise jurisdiction.The civil award of the Xiamen Maritime Court was repealed and the parties were able to submit the dispute to the Hong Kong Higher Court.34
2.4 Prorogation of Jurisdiction
Prorogation of jurisdiction refers to situations where a party institutes proceedings in a court,and the other party implicitly acquiesces to the jurisdiction of that court by responding to the action and not raising an objection to the jurisdiction.That is to say,the defendant’s failure to object is essential in defendant’s consent to the People’s Court’s jurisdiction.Article 127 of the CPL provides as follows:35
Where a party raises any objection to jurisdiction after a case is accepted by a people’s court,the party shall file the objection with the people’s court during the period of submitting a written statement of defense.The people’s court shall examine the objection.If the objection is supported,the people’s court shall issue a ruling to transfer the case to the people’s court having jurisdiction; or if the objection is not supported,the people's court shall issue a ruling to dismiss the objection.Where a party raises no objection to jurisdiction and responds to the action by submitting a written statement of defense,the people’s court accepting the action shall be deemed to have jurisdiction,unless the provisions regarding tier jurisdiction and exclusive jurisdiction are violated.
It should be noted that prorogation of jurisdiction under Article 127 has aroused criticism both at home and abroad,because this category of jurisdiction may put an innocent defendant in a disadvantageous position,which is obviously unjust for him.Many scholars argue that there should be a precondition for the application of prorogation of jurisdiction,i.e,the defendant has been informed that his failure to object will constitute his consent to the People’s Court’s jurisdiction; otherwise,prorogation of jurisdiction is the unilateral choice of forum by the plaintiff which is the very thing that private international law is devoted to preventing.
Judicial practice shows that People’s Courts sometimes take full advantage of this provision.An example is Xiamen Special Economic Zone Material Supply and Sale Company v.Europe-Overseas Steamship Lines NV (Belgium),36 where the jurisdiction clause in the bill of lading provided that “all the claims and disputes shall be submitted to the court of a country chosen by the shipping company at its will.” When the plaintiff lodged a claim against the defendant,the latter did not exercise the right under the jurisdiction clause to choose a court.Thereinafter,the plaintiff commenced proceedings before the Shanghai Maritime Court,which subsequently served formal summons on the defendant on three consecutive occasions.The defendant did not raise objection to the jurisdiction of the Maritime Court and,in view of this,the Shanghai Maritime Court exercised jurisdiction.In Pan Pacific Shipping & Trading SA v.Shenzhen Shekou Wanshida Enterprise Co.,37 the plaintiff and the defendant agreed to resolve disputes through arbitration.However,after the plaintiff brought an action before the Maritime Court,the defendant did not challenge that court’s jurisdiction.In view of this,the Maritime Court ruled that both parties had agreed to accept its jurisdiction over the dispute.
Villagers’ Committee of Yangchun v.Oscar van Overeem,where the Chinese plaintiff sued the Dutch defendant to retrieve a stolen 1,000-year-old Buddhist mummy,known as the statue of Zhanggong-zushi is a latest case in point.Though the specific ground on which Intermediate People’s Court of Sanming City,Fujian Province decided to entertain the lawsuit filed by the local villagers was unclear,its jurisdiction has been entrenched by the fact that Oscar van Overeem,the Dutch defendant,has raised no objection to its jurisdiction and has responded to the action by submitting a written statement of defense.This kind of jurisdiction is “prorogation of jurisdiction” under Article 127 of the Civil Procedure Law mentioned herein.
Since the defendant’s failure to object constitutes consent to jurisdiction,it is imperative that defendants,foreign defendants in particular,raise a timely jurisdictional objection.Under Article 127 of the CPL,if a party to a civil action objects to the jurisdiction of a People’s Court,the objection must be raised within the time period prescribed for the filing of answers.According to Articles 125 and 268,defendant shall have fifteen days,or thirty days if residing outside the territory of China,to file his answer upon receipt of plaintiff’s complaint.38 Thus,if a defendant wants to challenge the People’s Court’s jurisdiction,he must do so within this statutory fifteen-day or thirty-day period.
2.5 Exclusive Jurisdiction
Exclusive jurisdiction indicates a court’s power to adjudicate an action or class actions to the exclusion of all other courts.It is the opposite situation from concurrent jurisdiction,in which more than one court may take jurisdiction over the case.In international civil litigation,exclusive jurisdiction means the power of a court of a particular state to hear and adjudicate a certain category of actions to the exclusion of the courts of all other countries.Exclusive jurisdiction is typically confined to the subject matters which have overwhelmingly strong interests with the forum.
The CPL expressly excludes foreign courts from exercising jurisdiction over certain civil actions over which the Chinese People’s Courts shall have exclusive jurisdiction.The most prominent civil actions subject to the exclusive jurisdiction of the People’s Courts are disputes arising from contracts of foreign investment enterprises (FIEs),as Article 266 of the CPL explicitly provides as follows:39(https://www.daowen.com)
Actions brought on disputes arising from the performance of contracts for Chinese-foreign equity joint ventures,or Chinese-foreign contractual joint ventures,or Chinese-foreign cooperative exploration and development of the natural resources in the People’s Republic of China shall fall under the jurisdiction of the People’s Courts of the People’s Republic of China.
In addition,certain actions shall be under the exclusive jurisdiction of a particular Chinese People’s Court.Article 33 of the CPL provides that:
The following cases shall be under the exclusive jurisdiction of the People’s Courts herein specified:
(1) A lawsuit brought on a dispute over real estate shall be under the jurisdiction of the People’s Court of the place where the estate is located;
(2) A lawsuit brought on a dispute over harbor operations shall be under the jurisdiction of the People’s Court of the place where the harbor is located; and
(3) A lawsuit brought on a dispute over succession shall be under the jurisdiction of the People’s Court of the place where the decedent had his domicile upon his death,or where the principal part of his estate is located.
It merits mentioning that Article 531 of Interpretation on CPL goes on to provide that for the cases under the exclusive jurisdiction of courts of the PRC in accordance with the provisions of Articles 33 and 266 of the Civil Procedure Law,the parties shall not select a foreign court for jurisdiction by an agreement; unless they stipulate to settle the dispute through arbitration.In other words,for the foreign-relevant civil cases under the exclusive jurisdiction of courts of the PRC,though the parties are not entitled to choose a foreign court,they can circumvent the jurisdiction of Chinese courts by submitting the dispute to arbitration.
2.6 Jurisdiction of the International Commercial Courts of China
On 29 June 2018,the SPC established two international commercial courts designed to hear international commercial disputes,in particular those arising in connection with the Belt and Road Initiative (“BRI”).Their creation was the means through which the SPC implemented the political decision of the Communist Party of China (“CPC”) to provide a judicial safeguard for the BRI,which China is driving forward ambitiously.Two days before the inauguration of the First International Commercial Court in Shenzhen and the Second International Commercial Court in Xi’an,the SPC issued a judicial interpretation document to legitimise the creation of the Chinese International Commercial Court (“CICC”).Under the title ‘Provisions of the Supreme People’s Court on Several Issues Regarding the Establishment of the International Commercial Court’ (the “Judicial Interpretation on CICC”),this document contains a one-sentence preamble and 18 articles,setting out the framework,jurisdiction,judicial panel and numerous procedural rules of the CICC.40
The Judicial Interpretation on CICC established it as a permanent adjudication organ of the SPC.The CICC has jurisdiction over five types of cases:
(i) First instance international commercial cases in which the parties have chosen the jurisdiction of the SPC pursuant to Article 34 of the Civil Procedure Law,and in which the amount in dispute exceeds RMB300 million;
(ii) First instance international commercial cases which,although subject to the jurisdiction of the Higher People’s Courts,the Higher People’s Courts consider more appropriate to be tried by the CICC,and for which permission for transfer has been obtained from the SPC;
(iii) First instance international commercial cases that have a significant nationwide impact in China;
(iv) Cases involving applications for preservation measures in arbitration and for the setting aside or enforcement of international commercial arbitration awards within the CICC one-stop shop; and
(v) Any other international commercial cases that the SPC considers appropriate to be tried by the CICC.
Thus,the CICC’s in personam jurisdiction can be established on the consensual and non-consensual bases.Subject to the fulfilment of other requirements,parties may by written agreement submit an international commercial dispute to the CICC.Insofar as the CICC is a constituent part of the SPC,parties are now permitted to choose the SPC to hear their international commercial disputes.This is a significant development in Chinese law and judicial practice.
Before the creation of the CICC,although the CPL allowed litigants to choose a Chinese court by agreement,their choice was subject to various limitations.One such limitation is that party choice of a Chinese court must be consistent with the CPL provisions on tier jurisdiction.Under these tier jurisdictional rules,first instance commercial cases,including international ones,are usually heard by the Basic People’s Courts.‘Important’ first instance international cases fall within the jurisdiction of the Intermediate People’s Courts.In exceptional cases,Higher People’s Courts may hear first instance international cases,provided that these cases would have significant impact in the jurisdiction where they arose.As a matter of law,the SPC may exercise its trial jurisdiction in two situations: (1) if the dispute has significant nationwide impact in China; and (2) if the SPC deems that the dispute falls within its jurisdiction.
In practice,however,since its establishment in 1949,the SPC has never heard a first instance commercial case,let alone an international one.In fact,the SPC has on numerous occasions affirmed the principle that first instance international commercial cases should be heard by the lower People’s Courts.According to an official document issued by the SPC in 2017,the rules of tier jurisdiction over international commercial cases allocate first instance cases,based on the amount in dispute,to the Basic People’s Courts,Intermediate People’s Courts or Higher People’s Courts.These rules do not provide for the allocation of a first instance international commercial case to the SPC.Hence,before the creation of the CICC,parties were not allowed to choose the SPC to hear their international commercial disputes.
The Judicial Interpretation on CICC has therefore changed the practice by permitting parties to choose the SPC (specifically,the CICC) to hear their international commercial disputes pursuant to Article 34 of the CPL without being bound by the rules of tier jurisdiction,provided that the amount in dispute exceeds RMB300 million.Given that SPC judges are perceived to be more qualified than those in lower People’s Courts,and fifteen SPC judges have been appointed to the CICC to date,resolving international commercial cases before the CICC is not without its attractions,especially if the parties are inclined to have their claims heard in a Chinese court.
However,a written jurisdiction agreement in favour of the CICC is not by itself sufficient to confer jurisdiction on the CICC.The CICC does not have jurisdiction over cases with no actual connection to China.Under the Judicial Interpretation on CICC,the CICC can hear first instance international commercial cases in which the parties have submitted to the jurisdiction of the SPC pursuant to Article 34 of the CPL.Article 34 requires,inter alia,that the court chosen by the parties has an actual connection with the dispute,that is: (a) it is the court at the place of the defendant’s domicile; (b) it is the court at the place where the contract was performed; (c) it is the court at the place where the contract was signed; (d) it is the court at the place of the plaintiff’s domicile; or (e) it is the court at the place where the subject matter of the claim is located.[10]
A bit more needs to be said about the requirement that the quantum in dispute must exceed RMB300 million.Clearly,this serves as a filter mechanism: only major disputes will be resolved by the CICC.From a purely pragmatic view,it may be said that CICC’s resources should not be spent on resolving minor disputes that can be effectively resolved in lower Chinese courts,by national courts in other jurisdictions,by arbitration or even by mediation.After all,the CICC is a constituent part of the SPC that does not in practice hear first instance claims.In line with the practice of the SPC,CICC is designed to hear cases of some (economic) significance.
In addition to consensual jurisdiction,the CICC may hear a first instance international commercial case in three other situations in which parties’ consent is irrelevant.The first is when it is a dispute that would have been heard by a Higher People’s Court at the provincial level,but which has been referred to the CICC by that Higher People’s Court with the approval of the SPC.This involves the exercise of the power to internally allocate jurisdiction between two Chinese courts.
The second is when the case is an international commercial matter that has a significant nationwide impact in China.Such cases may be filed with the CICC directly without the need for a written jurisdiction agreement or satisfying the requirement that the quantum in dispute exceeds RMB300 million.If such cases are first filed with other Chinese courts,they would presumably have to be transferred to the CICC upon the SPC’s determination that they have significant nationwide impact in China.However,it is unclear at this stage what kind and degree of impact would constitute such “significant nationwide impact”.
The third situation involves any other international commercial cases that the SPC deems fit for the CICC to hear.Currently,no rules or criteria have been prescribed to guide the SPC’s exercise of this discretion.In the CICC’s initial years,a crucial source of its caseload is likely to come from the exercise of its non-consensual jurisdiction,and therefore the rules should be clear and certain.At the very least,without forfeiting flexibility entirely,the SPC should issue official guidelines setting out the relevant criteria for or illustrations of what are considered cases with “significant nationwide impact” in China and what cases the SPC might consider appropriate for the CICC to hear.
Nevertheless,from the perspective of forum control,the wide ambit of discretion that is entailed in the jurisdictional rules enables the SPC to fully control the caseload of the CICC.This is likely to be welcomed by the Higher People’s Courts,which may prefer to let the CICC handle complex,difficult or sensitive international commercial cases,to avoid having to come to a mistaken or controversial decision in a case with wide-ranging ramifications.
2.7 Lis Alibi Pendens
The principle of lis alibi pendens (literally,“dispute elsewhere pending”) applies both in municipal,public international law,and private international law to address the problem of potentially contradictory judgments.
If two courts were to hear the same dispute,it is possible that they might reach inconsistent decisions.To avoid the problem,there are two rules.Res judicata provides that once a case has been determined,neither party can recommence proceedings on the same set of facts in another court.If this rule were not in place,litigation might never come to an end.The second rule is that proceedings on the same facts cannot be commenced in a second court if the lis i.e.action,is already pendens,i.e.pending,in another court.Lis alibi pendens arises from international comity and it permits a court to refuse to exercise jurisdiction when there is parallel litigation pending in another state.
Chinese law does not address lis alibi pendens.The relevant interpretation of the Supreme People’s Court seems to ignore the doctrine,at least in international civil litigation,as Article 533 (1) of Interpretation on CPL provides that:
For a case over which both a people’s court of the People’s Republic of China and a foreign court have jurisdiction,if one party institutes an action in the foreign court whereas the other party institutes an action in the people's court of the People's Republic of China,the people's court may accept the case.If,after a judgment is rendered,the foreign court or a party requests the people's court's recognition and enforcement of the judgment or ruling rendered by the foreign court concerning this case,the people's court shall not consent to the request,unless it is otherwise prescribed by an international treaty concluded or acceded to by both countries.
This provision and its predecessor,i.e.,Article 306 of the previous judicial interpretation of the CPL are usually followed by Chinese People’s Courts.For example,in Tianjin Native Products Import & Export Company v.A Belgian Company,41 the defendant had applied to a Belgian court for an order for the payment of goods by the plaintiff.In spite of this,the People’s Court concerned accepted the action in the name of the People’s Court of the place where the contract was performed and subsequently delivered judgment.Seemingly,in accepting jurisdiction,the People’s Court overlooked both the difficulties in enforcing its judgment in China (since the defendant had no domicile and no distrainable property in China),and the difficulties in enforcing the judgment in Belgium,for the defendant had brought the same action in a Belgian court which itself had exercised jurisdiction.
In the divorce case Zhang Xuefen (domiciled in the United States) v.You Anting (domiciled in Shanghai,China),42 the plaintiff sued before an Intermediate People’s Court while the same action was pending in an American court.Nevertheless,the People’s Court entertained the action and delivered judgment.
It is argued that the ignorance of lis alibi pendens in international civil litigation by the People’s Courts is favorable to protect the interests of the Chinese parties; however,given the wide recognition of this doctrine in the whole world,the author believes that the ignorance will inevitably produce a series of inconvenience and difficulties,including the refusal of recognition and enforcement of the judgments rendered by the Chinese People’s Courts in foreign jurisdictions.Therefore,it may not achieve its alleged purpose in the long run.
Nevertheless,it should be noted that Article 533 (1) of Interpretation on CPL and its predecessor actually empower Chinese Courts considerable discretion when they deal with such issues,since this article uses the wording of “may”,instead of “shall”,that is to say,when proceedings on the same facts is already pending,in a foreign court,the People’s Courts may either entertain the action or refuse to do so depending on its discretion.
As a matter of fact,there are cases in which People’s Courts have refused to entertain actions on the basis of lis alibi pendens.In Zhong Gao Express Corporation (Taiwan) v.Nei Tian Electronic Ltd,43 the Higher People’s Court of Fujian Province dismissed an action on the ground that since the plaintiff had applied for a writ of payment in a Taiwan court and procured partial payment,it was inappropriate to bring a new action for the same cause in a People’s Court of first instance.
It is not difficult to observe that People’s Courts choose to accept or reject the doctrine of lis alibi pendens depending on whether the treatment would be favorable to the Chinese parties.However,it is submitted that this self-interested tendency is too elusive to follow,which is unhelpful to accomplish the purpose that private international law pursues,and which is not beneficial for the protection of the interests of Chinese parties in the long run.
2.8 Forum non conveniens
As noted in the previously chapter,the doctrine of forum non conveniens refers to the discretionary power exercised by courts in the common law world to decline jurisdiction over a matter,despite having jurisdiction simpliciter,where the court is of the opinion that the matter may be more appropriately tried elsewhere.Now,it has been accepted by more and more civil countries,including China.
Nevertheless,none of the Chinese formal legislation has expressly or impliedly permitted a court the power to decline taking jurisdiction granted to it by law.Development in this area is contributed by judicial practice.In Disputes in Property of Zhao Biyan,submitted in 2007 which is believed to be the first case where a Chinese People’s Court declined jurisdiction in favour of Japan based on the “convenience” of the trial.The plaintiff claimed ownership of property located in Japan.Although the plaintiff had her domicile and habitual residence in China,and some important evidence and witnesses were located in China,Japan was the more appropriate and convenient forum to hear the case given the fact it was the place where the property in disputes and other respondents were located.44
In 1993,the Supreme People’s Court instructed the Shenzhen Intermediate People’s Court to refuse jurisdiction to a cross-border letter-of-credit dispute,because none of the parties were Mainland companies and the dispute had no substantive connection with Mainland China.45
In 1995,the Supreme People’s Court applied the concept of forum non conveniens again in Sumitomo Bank v.Xinhua.Jurisdiction was declined because neither parties had domicile in Mainland China,the contract was performed in Hong Kong,HK law was chosen,and there was a non-exclusion clause choosing HK courts.It shows that since the early 1990s,the Supreme People’s Court started to use forum non conveniens to decline jurisdiction in exceptional cases where both parties were not Chinese citizens or Chinese companies and the dispute had no connection with Mainland China.46
The early recognition of forum non conveniens,therefore,existed in Chinese judicial practice.Such practice is later recorded in a number of official documents of the SPC during the 2000s which is ultimately reflected in the Interpretation on CPL in a systematic fashion.Article 532 of this judicial interpretation provides as follows:
Where a foreign-related civil case falls under all the following circumstances,the people's court may render a ruling to dismiss the plaintiff's action,and inform the plaintiff to institute an action in a more convenient foreign court.
(1) The defendant raises a claim that the case shall be subject to the jurisdiction of a more convenient foreign court,or raises an objection to jurisdiction.
(2) The parties do not have an agreement specifying the jurisdiction of a court of the People’s Republic of China.
(3) The case does not fall under the exclusive jurisdiction of a court of the People's Republic of China.
(4) The case does not involve the national interest,or the interest of any citizen,legal person or any other organization of the People’s Republic of China.
(5)The people’s court has great difficulties in the determination of facts and the application of laws since major facts of disputes in a case do not occur within the territory of the People's Republic of China,and the laws of the People's Republic of China do not apply to the case.
(6) The foreign court has jurisdiction over the case and it is more convenient for it to try the case.
The incorporation of forum non conveniens into the Interpretation on CPL is,obviously,an effort made by the SPC to improve the quality of international civil justice by transplanting an advanced legal doctrine from developed countries whose significance cannot be overemphasized.However,the reflection of this doctrine under the Chinese legal context has its distinct characteristics which are worthy of discussion.
First,the People’s Court can exercise discretion to decline jurisdiction under forum non conveniens only if all the conditions enumerated by the above article are satisfied; in other words,Chinese judges are granted relatively limited power to exercise discretion compared with their counterparts in common law jurisdictions.
Second,judging from the above-listed six conditions,it follows that the major purpose of the introduction of forum non conveniens is to prevent the excessive and inappropriate exercise of jurisdiction of a Chinese court; private interest factors,however,is not a weighty consideration.In comparison,in common law countries,such as the United States,private interest factors affecting the convenience of the parties is an important test.These factors include the relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling witnesses; the cost of obtaining the attendance of willing witnesses; the possibility of viewing the premises at issue in the litigation where appropriate; questions as to the enforceability of a judgment if one is obtained; and the relative advantages and disadvantages of the available fora,including practical matters relating to expediting the proceeding and the expense and ease thereof,and whether the expense and difficulties associated with the plaintiff’s chosen forum are necessary to ensure that the plaintiff’s right to pursue a remedy are respected.47
Last,but not least,given the fact that the People’s Courts in Chinese mainland seldom hear the actions that do not involve the national interest,or the interest of any citizen,legal person or any other organization of the PRC,the author believes that the standards spelled out by Article 532 of the Interpretation on CPL to trigger the application of forum non conveniens may be too high.