Litigation and enforcement in China: overview

A Q&A guide to dispute resolution law in China.

The country-specific Q&A gives a structured overview of the key practical issues concerning dispute resolution in this jurisdiction, including court procedures; fees and funding; interim remedies (including attachment orders); disclosure; expert evidence; appeals; class actions; enforcement; cross-border issues; the use of ADR; and any reform proposals.

To compare answers across multiple jurisdictions visit the Litigation and enforcement Country Q&A tool.

This Q&A is part of the global guide to dispute resolution. For a full list of jurisdictional Q&As visit www.practicallaw.com/dispute-guide.

Zhang Shouzhi, King & Wood Mallesons
Contents

Main dispute resolution methods

1. What are the main dispute resolution methods used in your jurisdiction to resolve large commercial disputes?

The main dispute resolution methods used in China are:

  • Settlement by negotiation.

  • Litigation.

  • Arbitration.

  • Court-or-arbitrator-administered mediation.

Many commercial disputes are resolved through negotiation, but a large number of disputes proceed to litigation or arbitration. The quantity of litigation and arbitration cases has increased rapidly in the past few years.

Traditionally, the system was inquisitorial, but the recent trend is to a more adversarial system.

The court has broad powers to control and manage litigation. For example,

  • The court controls the schedule of the proceedings.

  • The court must investigate and collect the evidence if a party is unable to collect evidence on its own for reasons beyond its control, or if the court deems that the evidence is necessary for the trial of the case.

The standard of proof in most civil cases is high probability. But in limited civil cases, the standard of proof is higher than high probability, such as for evidence provided to prove the facts of fraud, duress or malicious collusion, or to prove the facts of a verbal will or gift. Where a court concludes that the facts can be proved beyond reasonable doubt, it must deem that the facts exist.

 

Court litigation

Limitation periods

2. What limitation periods apply to bringing a claim and what triggers a limitation period?

Generally, the limitation period for civil claims is two years (General Principle of Civil Law). However, a one-year limitation period applies to the following causes of action:

  • Demand for compensation for bodily harm.

  • Sale of a substandard item without proper notice.

  • Delay in or refusal of payment of rent.

  • Loss of or damage to property left in the care of another person.

In addition, other laws set out the limitation periods for some specific types of cases as follows:

  • Compensation for environmental damages: three years.

  • Claims for oil pollution damage caused by a vessel: three years.

  • Claims for disputes arising from an international contract for the sale of goods or a contract for the import and export of technology: four years.

  • Claims against the carrier with regard to the carriage of goods by sea: one year.

The limitation period starts running from when the claimant knows or should have known of the facts giving rise to its claim. The limitation period can be suspended by circumstances that are essentially out of the parties' control, such as force majeure, but only if such circumstances occur during the last six months of the limitation period. The limitation period resumes after the causes of the suspension no longer exists.

A party's petition or request concerning a dispute interrupts the limitation period. A new limitation period starts running on the petition/request in question.

In addition, regardless of whether the claimant knows the facts giving rise to the claim, his rights will no longer be protected if a lengthy period has passed since the occurrence of the facts giving rise to the cause of action:

  • In general, 20 years from the date of occurrence.

  • In product liability cases, ten years from the date on which the defective product causing the damage is delivered to the consumer, unless the product's expressly stated warranty period is longer.

Court structure

3. What is the structure of the court where large commercial disputes are usually brought? Are certain types of dispute allocated to particular divisions of this court?

In China, there are four levels of courts:

  • Highest level: the Supreme People's Court.

  • Provincial level: the high people's courts.

  • Intermediate people's court.

  • Basic people's courts.

In addition, China has railway transportation courts, maritime courts, and IP courts at the intermediate people's court level.

Generally, most civil lawsuits of first instance must be brought to the basic people's courts and appealed to the intermediate people's court. However, intermediate people's courts and high people's courts all have original jurisdictions in respect of certain types of disputes, such as when the amount of money in dispute exceeds certain thresholds, or the case has significant political or social effects.

Rights of audience

4. Which types of lawyers have rights of audience to conduct cases in courts where large commercial disputes are usually brought? What requirements must they meet? Can foreign lawyers conduct cases in these courts?

Rights of audience/requirements

There is no distinction regarding the rights of audience between lawyers to appear in courts in China. The following persons can be entrusted as a litigation agent:

  • Lawyers.

  • Close relatives or employees of a litigant.

  • Citizens recommended by the local community, the employer of a litigant and certain social bodies.

Litigants involved in large commercial disputes are usually represented by lawyers.

Foreign lawyers

Foreign law firms can open offices in China. However foreign lawyers are prohibited from representing clients in relation to Chinese law issues, including attending court hearings.

 

Fees and funding

5. What legal fee structures can be used? Are fees fixed by law?

Generally, there are four different fee structures:

  • A fixed fee.

  • A fee proportional to the amount in dispute.

  • An hourly rate.

  • A contingency fee.

In practice, the fee structure may be a mixture of the above, such as an up-front fixed fee plus a contingency fee.

There are no laws or regulations that fix legal fees in large commercial disputes.

 
6. How is litigation usually funded? Can third parties fund it? Is insurance available for litigation costs?

Funding

Usually litigations are funded by the parties themselves. There is no restriction on funding litigation by third parties in China.

Insurance

Few domestic insurers offer policies covering litigation costs. Parties can purchase this insurance from overseas insurers. Some domestic insurance companies have begun to experiment in offering policies to natural persons covering litigation costs in very limited cities. This kind of insurance is still in early stages in China.

 

Court proceedings

Confidentiality

7. Are court proceedings confidential or public? If public, are the proceedings or any information kept confidential in certain circumstances?

In principle, court proceedings are public, except for the cases involving state secrets, personal privacy or otherwise stipulated by the law. Cases involving trade secrets can be heard in private, if a party so requests.

Since 2014, the Supreme Court issued new regulations on publishing judgments on the internet as part of the courts' transparency reform. According to the new regulation, all effective judgments must be published on the website of China Judgement Online (http://wenshu.court.gov.cn/Index), except for cases involving state secrets, personal privacy, juvenile delinquency, cases that are closed by mediation and any other cases unsuitable for publishing at the court's discretion.

Before publishing the judgments, certain information must be deleted or redacted, such as personal information, information concerning minors, bank account of legal persons or other organisations, trade secrets and other information unsuitable for publishing.

Pre-action conduct

8. Does the court impose any rules on the parties in relation to pre-action conduct? If yes, are there penalties for failing to comply?

Generally there are no pre-action requirements, except in the following cases:

  • Labour disputes. The parties cannot go to court unless they have already gone before a labour tribunal and the employee is dissatisfied with the outcome.

  • Shareholder derivative lawsuit. Except in cases of emergency, shareholders must first ask the board of directors or the board of supervisors to bring the lawsuit.

Main stages

9. What are the main stages of typical court proceedings?

Starting proceedings

A claim is started by filing a writ. Since 2015, courts have adopted a new register-based case acceptance regime, in which courts have seven days to review the filing and decide whether or not to accept the case.

If the court rejects the writ, the claimant can appeal against the rejection within ten days. If a court neither accepts the case nor replies in writing explaining the reason for the rejection, the parties can make a complaint to the court or the higher-level court.

Notice to the defendant and defence

The defendant is given notice of the claim by the court within five days from the acceptance of the case. The court can serve a defendant without a domicile within the territory of China by one of the following methods:

  • By the methods specified in an international treaty concluded between or acceded to by the state of the person to be served and China.

  • Through diplomatic channels.

  • By entrusting the embassy or a consulate of China in the state where such person is located with service, if the person to be served is a national of China.

  • By serving on the agent ad litem appointed by the person to be served and authorised to accept service on its behalf.

  • By serving on the representative office, or the branch or business agent authorised to accept service, established within the territory of China by the person to be served.

  • By post, if it is permitted by the law of the state of the person to be served.

  • By facsimile, e-mail and any other means through which the receipt of the legal document may be acknowledged.

  • By public announcement if a document cannot be served by any of the above means.

The defendant must file a statement of defence with the court within 15 days from receipt of notice of the claim, or within 30 days if the defendant has no domicile in China. The court can grant an extension of the filing period at the defendant's request.

Subsequent stages

Generally, the subsequent stages are as follows:

  • Evidence submission. The period of evidence submission can either be:

    • decided by the parties, subject to court approval; or

    • determined by the court (30 days minimum)

  • Counterclaims (if any). The defendant can file its own counterclaims (if any) before the end of evidence submission period.

  • Procedural objections. For example:

    • a request for a judicial officer to withdraw from the case. When requesting for the withdrawal of a judicial officer, a party must state the reasons and raise the request at the beginning of the hearing. If the reason for the request becomes known after the hearing has commenced, the request can also be raised prior to the conclusion of the presentation of the arguments; and

    • a challenge to the jurisdiction. The party must raise the objection within the same period for submitting defence.

  • Hearing. The parties must be notified of the members of the panel within three days from when a judicial panel is established. If there is a third party who is required to participate in the proceedings, the court will notify the third party to join the proceeding. The hearing is split into two parts: the investigation of the facts; and the presentation of arguments. During the investigation of the facts, the parties state their own case and adduce evidence, and witness statements are given. The evidence is cross-examined by the other side and examined by the judge. The judge will then summarise the contentious issues and the parties will debate about the disputed issues.

  • Issuing judgment. If possible, mediation can be conducted before issuing a judgment. If mediation is unsuccessful, a judgment must promptly be made. Generally, a civil lawsuit must be completed within six months from the acceptance of the case. The approval of the court is required for an extension and a six-month extension can be granted. For further extensions of time, the approval of the higher level court is required. These time limitations do not apply to foreign-related cases.

  • Enforcement of judgment. If a party refuses to perform an effective judgment, the other party can apply for enforcement.

 

Interim remedies

10. What actions can a party bring for a case to be dismissed before a full trial? On what grounds must such a claim be brought? What is the applicable procedure?

A party can apply to the court to dismiss a case before a full trial in the following circumstances:

  • The claimant is not a natural person, a legal person or an organisation that has a direct stake in the case.

  • There are no specific defendants.

  • There are no specific claims or facts or reasons.

  • The lawsuit does not fall under the scope of acceptance of civil lawsuits (for example, the action falls within the scope of administrative actions, or the law provides that the dispute must be handled by another competent authority) or the jurisdiction of the court (for example, where there is a valid arbitration agreement between the parties, or the action does not come under the jurisdiction of the court with which it is filed but should be submitted to another court).

  • A party to a case in which the judgment or ruling has become legally effective files a new action for the same case.

  • The law provides that no action can be filed within a specified period and the action is filed within that period.

  • In divorce cases, a judgment has been made denying divorce or the parties have reached reconciliation after mediation; and in cases where a judgment has been made to maintain an adoptive relationship or an adoptive relationship is maintained on mediation, a new action is filed for the same case by the claimant within six months without new developments or grounds

If the court has accepted the case despite the existence of one or more of the above situations, a party can apply to the court to dismiss the claims before a full trial. The ruling to dismiss the case is not a decision on the substance of the case, and an application for dismissal is generally filed and considered by the court before the case proceeds into the substantive claims.

 
11. Can a defendant apply for an order for the claimant to provide security for its costs? If yes, on what grounds?

A defendant cannot apply for an order for the claimant to provide security for its costs.

 
12. What are the rules concerning interim injunctions granted before a full trial?

Availability and grounds

On a party's application, the court can order the other party to undertake certain acts or prohibit the counterparty from undertaking certain acts when either:

  • The counterparty's action makes the judgment difficult to enforce.

  • The counterparty's action causes harm.

The court can also order an injunction on its own initiative when it thinks necessary.

The following factors can be considered when the court orders an injunction:

  • Whether a party's legitimate right or interest is being infringed.

  • Whether it is so urgent that irreparable damage will be done if the injunction is not granted.

  • Whether the harm caused to the applicant by not granting the injunction is greater than the harm caused to the respondent by granting the injunction.

Prior notice/same-day

The order can be obtained without prior notice to the defendant.

There is no law requiring an injunction to be issued on the same day. However, under urgent circumstances, on acceptance of an application, the court must make a ruling within 48hours. For patent cases, under special circumstances, the time can be extended by a further 48 hours.

Mandatory injunctions

Mandatory injunctions and prohibitory injunctions are both available.

Right to vary or discharge order and appeals

A respondent who disagrees with the ruling can apply for a review. Enforcement of the ruling will not be suspended during the review period.

 
13. What are the rules relating to interim attachment orders to preserve assets pending judgment or a final order (or equivalent)?

Availability and grounds

The method of interim attachment orders to preserve assets includes sealing, seizure, freezing or any other method stipulated by the law.

An interim attachment order can be issued on a party's application during or before litigation if eithe:

  • The counterparty's action makes the judgment difficult to enforce.

  • The counterparty's action causes harm.

The court can issue an interim attachment order on its own initiative if it thinks necessary.

To apply for interim measures during litigation, a party must prove either that:

  • The case may become impossible to enforce.

  • The judgment may cause damage to a party because of the conduct of the other party to the case or because of any other reason.

To apply for interim measures before the litigation, it must be proved that, due to an emergency, the party would suffer irreparable damage if the party fails to apply for property preservation promptly. Accordingly, the probability of the damages the party has to prove depends on whether the application is made during or before the litigation.

Prior notice/same-day

The attachment orders can be obtained without prior notice to the defendant. There is no law requiring an interim attachment to be issued on the same day. However, in the event of urgent circumstances where a party's interests are subject to irreparable harm, on acceptance of an application, the court must make a decision within 48 hours.

Main proceedings

The application must be submitted to the same court of the litigation. If the application is made before filing the litigation, it must be submitted to any of the following:

  • The courts at the location of the properties to be attached.

  • The court where the respondent is domiciled.

  • A court that has jurisdiction over the case.

Generally, an interim attachment order cannot be granted in support of substantive proceedings that are taking place in the courts in another country except in maritime courts.

Preferential right or lien

Attachment does not create any preferential right or lien in favour of the applicant over the seized assets. If the court issues an attachment order on properties, which have already been pledged or mortgaged to a third party, the third party still enjoys priority rights over the applicant.

Damages as a result

If there is an error in an application, the applicant must compensate the respondent for losses suffered as a result of the attachment.

Security

Generally, the applicant must provide security along with its application. Otherwise the court will deny the application.

 
14. Are any other interim remedies commonly available and obtained?

A fine or detention or even criminal liability can be imposed by the court if a party:

  • Does not comply with court rules.

  • Conspires to attempt to harm the legitimate rights and interests of others through litigation.

  • Forges or destroys evidences.

  • Tampers witnesses.

  • Insults, defames, frames, assaults or retaliates against judicial staff or other participants in proceedings.

  • Conceals, transfers, sells or destroys seized or frozen properties.

A court can issue a warrant for a defendant who must be present in court but refuses to be present in court without a proper reason after being served a summons twice.

A party can also apply for a preservation order to preserve the evidence when the evidence may be lost or may be difficult to obtain in future.

 

Final remedies

15. What remedies are available at the full trial stage? Are damages just compensatory or can they also be punitive?

The remedies available at the full trial stage are as follows:

  • Damages.

  • Declarations.

  • Injunctions.

  • Specific performance.

Generally, damages are compensatory under Chinese law. However, punitive damages can apply in the following circumstances:

  • Business operators that commit fraud in providing goods or services to consumers.

  • Manufacturers of foodstuffs who do not comply with food safety standards or business operators who trade in foodstuffs and they are aware that have not complied with food safety standards.

 

Evidence

Disclosure

16. What documents must the parties disclose to the other parties and/or the court? Are there any detailed rules governing this procedure?

There is no discovery process or similar mechanism under Chinese law. A party is responsible for providing evidence in support of its allegations. When a party is unable to collect evidence due to objective reasons, or if the court thinks the evidence is necessary for trial of the case, the court can investigate and collect the evidence. In practice, it is not easy to convince the court to collect evidence.

The court will verify the authenticity of audio-visual materials (taking into account other evidence of the case) to examine and determine whether the audio-visual materials can be used as the basis for ascertainment of facts.

The period of evidence submission can either be decided by the parties, subject to court approval or determined by the court.

Usually, at first instance, the period is no less than 30 days. If it is genuinely difficult for the party to provide evidence by the deadline, the party can apply to the court for an extension of time.

If the party provides evidence after the deadline, the court can order the litigant to state the reason. If the party refuses to state the reason or the reason is groundless, the court can reject the admission of the evidence, or admit the evidence but impose a warning or fine.

Privileged documents

17. Are any documents privileged? If privilege is not recognised, are there any other rules allowing a party not to disclose a document?

Privileged documents

There is no concept of legal privilege under Chinese law.

Statements made in a genuine attempt to settle an existing dispute during the mediation procedure administered by the court cannot be used as evidence of admissions against the interests of the party that made them.

Other non-disclosure situations

There is no comparable non-disclosure mechanism in China. Each piece of evidence the parties relies on must be presented and cross-examined. Evidence containing information (concerning, state secrets, personal privacy or business secrets) must not be publicly presented during a public open hearing.

Examination of witnesses

18. Do witnesses of fact give oral evidence or do they just submit written evidence? Is there a right to cross-examine witnesses of fact?

Oral evidence

Oral evidence is admissible. Organisations and individuals that are aware of the facts of a case are required to testify in court. If a witness has difficulty in attending the hearing, with the court's approval, a written witness statement can be submitted or the witness can testify by video conference.

In practice, documentary evidence is considered more reliable than oral evidence and a lot of witnesses choose to submit witness statements instead of testifying in court.

Right to cross-examine

Witnesses or witness statements can be cross-examined at trial. Both parties and the judge can ask the witnesses questions. If a witness or witness statement is not cross-examined, the testimony cannot be admitted as evidence.

Third party experts

19. What are the rules in relation to third party experts?

Appointment procedure

A party can retain its own expert witness and submit its own witness report. However, this unilateral report can be challenged by the opposing party, which makes the report difficult to be admitted by the court.

A more commonly used practice is applying to the court to retain an expert. Both parties must discuss and jointly appoint a qualified expert. If the parties cannot agree on a qualified expert, the court will appoint an expert.

If the court deems that examination of specialised issues is necessary, it can entrust a qualified expert to carry out an examination at its own discretion.

Role of experts

The expert's role is to give his specialised knowledge or opinion within the scope of his expertise. To be admitted as evidence by the court, an expert's report must be independent.

Right of reply

If a party disagrees with the expert's opinion or the court thinks it is necessary for the expert to be present at the trial, the expert must testify. If the expert refuses to testify, his opinion will not be admitted as evidence.

Fees

The party appointing the expert pays the expert's fees. If the expert is court-appointed, the expert's fee will be firstly paid by the applicant generally, then the court will allocate the fee proportionally in the judgment in accordance with each party's liability.

 

Appeals

20. What are the rules concerning appeals of first instance judgments in large commercial disputes?

Which courts

An appeal must be made to the higher level court of the court of first instance.

Grounds for appeal

The grounds for appeal are errors of fact-finding or errors in the application of law or procedure.

Time limit

The time limit to appeal against a judgment is within 15 days of being served. The time limit to appeal against a ruling is within ten days of being served.

If a party is not domiciled in China, the time limit for appeal is 30 days from being served.

 

Class actions

21. Are there any mechanisms available for collective redress or class actions?

There are two different mechanisms for class actions:

  • If a party is comprised of multiple persons in a joint action, these persons can elect a representative to participate in the proceedings. The litigation actions of the representative are binding on the litigants he represents.

  • If there are multiple persons comprising one party but the number of persons is not confirmed at the time of filing the case, the court can issue a public announcement (stating the facts of the case and the claims) and notify the rights holders to register with the court within a period.

This is an ''opt-in'' mechanism, which requires claimants to opt-in to the action.

Similar to individual lawsuits, class actions are also funded by the parties themselves.

 

Costs

22. Does the unsuccessful party have to pay the successful party's costs and how does the court usually calculate any costs award? What factors does the court consider when awarding costs?

Generally, the losing party must pay the court fees. If each party wins partially, the court must allocate the court fees between the parties proportionately, in accordance with each party's liability.

Usually the parties pay their own attorney's fees. However, there are several occasions where the losing party must also pay the winning party reasonable attorney's fees, such as:

  • Personal injury claims.

  • Defamation claims.

  • Infringement of copyright, trade mark or patent claims.

  • Unfair competition.

The court can award attorneys' fees, but usually it will follow the recommended fee scale issued by the government. In large commercial disputes, the recoverable legal fees amount to a very small portion of actual expenses.

When awarding costs, the courts rarely consider any pre-trial offers to settle.

 
23. Is interest awarded on costs? If yes, how is it calculated?

There is no rule prohibiting interest from being awarded on costs, but in practice it is rare.

 

Enforcement of a local judgment

24. What are the procedures to enforce a local judgment in the local courts?

If a party fails to voluntarily perform a judgment, the other party can apply to the court for enforcement. The time limit applicable to an application for enforcing a judgment is two years starting from one of the following:

  • The last day of the time limit for satisfaction of the judgment specified in the judgment.

  • The last day of the period for satisfaction of the judgment at each stage, if the judgement provides for satisfaction of the judgment in stages.

  • The effective date of the judgment, if the judgment does not provide a time limit for satisfaction of the judgment.

To enforce a judgment, the applicant must submit an application to the court of first instance, or to the same level court where the property to be enforced is located. On receipt of an application by a party for enforcement, the enforcement judge issues an enforcement notice to the non-complying party, requesting it to perform the judgment within a designated period. If the party fails to perform the judgment within the designated period, the enforcement officer will take compulsory measures to enforce it, for example:

  • Requiring the non-performing party to report its asset status.

  • Checking the non-performing party's bank accounts.

  • Freezing and transferring the deposits of the non-performing party.

  • Sealing, freezing, auctioning and selling the assets of the non-performing party.

  • Searching the residence of the non-performing party's residence or the place where the assets are hidden.

  • Prohibiting the legal representative of the non-performing party from leaving China.

  • Recording the non-performance in a credit-ranking system and disclosing this information to the public.

 

Cross-border litigation

25. Do local courts respect the choice of governing law in a contract? If yes, are there any areas of law in your jurisdiction that apply to the contract despite the choice of law?

Generally, parties can choose the governing law in a contract if it is foreign-related transaction.

A transaction is foreign-related if one or more of the following elements is present:

  • At least one of the parties is foreign.

  • At least one of the parties habitually resides outside of China.

  • The subject matter of the transaction is located outside of China.

  • The legal fact that leads to the establishment, change, or termination of the transaction occurs outside of China (for example, the delivery of goods outside of China in satisfaction of a sales agreement).

  • Other circumstances under which the transaction may be deemed foreign-related.

The laws of China will apply to contracts in relation to Sino-foreign equity joint ventures, Sino-foreign contractual joint ventures and Sino-foreign cooperative exploration and development of natural resources to be performed within the territory of China.

The provisions of laws and administrative regulations in connection with the public social interests of China, can be determined by the courts as mandatory provisions that must directly apply, if they relate to one of the following:

  • The protection of the rights and interests of the workers.

  • Food or public health safety.

  • Environmental safety.

  • Foreign exchange control and other financial safety.

  • Anti-monopoly and anti-dumping.

  • Other circumstances under which they must be determined as mandatory provisions.

 
26. Do local courts respect the choice of jurisdiction in a contract? Do local courts claim jurisdiction over a dispute in some circumstances, despite the choice of jurisdiction?

Generally, local courts respect the choice of jurisdiction in a contract if either:

  • The contract is foreign-related.

  • Parties choose courts located at the place related to the contract

The following cases are under the exclusive jurisdiction of Chinese courts as specified below:

  • A lawsuit for a real estate dispute must be subject to the jurisdiction of the Chinese court at the place where the real estate is located.

  • A lawsuit for a dispute arising from harbour operations must be under the jurisdiction of the Chinese court at the place where the harbour is located.

  • A lawsuit for an inheritance dispute must be subject to the jurisdiction of the Chinese court at the place of domicile of the deceased on death or at the place where the major part of the estate is located.

In addition, litigation proceedings arising from disputes involving the performance of contracts for Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures or Chinese-foreign co-operative exploration and exploitation of natural resources in China will be subject to the jurisdiction of the Chinese courts.

 
27. If a foreign party obtains permission from its local courts to serve proceedings on a party in your jurisdiction, what is the procedure to effect service in your jurisdiction? Is your jurisdiction a party to any international agreements affecting this process?

China is a member of the HCCH Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 1965 (Hague Service Convention) and also a party to a few bilateral judicial assistance treaties.

The service of foreign proceedings on a party in China must be conducted:

  • Under the relevant bilateral treaty or arrangement.

  • Under the Hague Service Convention subject to the declaration made by China.

  • Through direct service by the serving country's diplomatic or consular agent only if the party receiving service is a citizen of the serving country.

  • Through diplomatic channels under the reciprocity principle, if no convention or treaty applies.

Direct service by mail and personal service are not allowed in China. The content of the legal document to be served must not violate China's sovereignty.

 
28. What is the procedure to take evidence from a witness in your jurisdiction for use in proceedings in another jurisdiction? Is your jurisdiction party to an international convention on this issue?

There is no specific rule for taking evidence from a witness in China for use in proceedings in another jurisdiction. This is mostly regulated by international or bilateral treaties.

China is a member of the HCCH Convention on the Taking of Evidence Abroad in Civil and Commercial Matters 1970Hague and made declarations under Articles 23 and 33. Therefore, the pre-trial discovery of documents is not possible in China. A diplomatic officer or consular agent can only collect evidence in relation to its own citizens (provided that the action is not against Chinese law and no compulsory measures are taken) but not Chinese citizens or citizens of a third country.

In addition, the taking of evidence by a commissioner is not allowed in China.

Enforcement of a foreign judgment

 
29. What are the procedures to enforce a foreign judgment in the local courts?

The recognition and enforcement of a foreign judgment in Chinese courts is conducted in accordance with applicable international treaties or conventions. A party can submit an application directly to an intermediate people's court, which has jurisdiction for recognition and enforcement.

Generally the law does not forbid any specific type of judgments from being applied for enforcement. The court will examine:

  • Whether there is an international treaty applicable to the case.

  • Whether the principle of reciprocity is applicable to the case.

  • Whether the basic principle of the laws or public interest of China is violated.

As there are no bilateral treaties between China and the UK or the US on recognition and the enforcement of judgments, UK and US judgments will be enforced in accordance with the principle of reciprocity.

 

Alternative dispute resolution

30. What are the main alternative dispute resolution (ADR) methods used in your jurisdiction to settle large commercial disputes? Is ADR used more in certain industries? What proportion of large commercial disputes is settled through ADR?

The most commonly used form of ADR is settlement negotiation among the parties themselves. There is no specific rule applicable to this negotiation. The negotiation usually does not involve a third-party and the settlement agreement is usually in writing in the form of a contract.

Judge-or-arbitrator-administered mediation is also commonly used. In such cases, the court or arbitration tribunal will draw up a mediation statement, which is legally binding.

ADR is widely used for certain types of disputes. For example, labour disputes must go through labour arbitration before being litigated in court and there is a mediation centre for domain name disputes.

In 2014, there were more than 110,000 cases accepted by various arbitration commissions.

 
31. Does ADR form part of court procedures or does it only apply if the parties agree? Can courts compel the use of ADR?

Mediation forms not only part of court procedures, but also part of arbitration procedures. After the hearing, the judges or the arbitration tribunal can ask the parties' willingness to take part in mediation. If the parties are not willing to participate in the mediation or conciliation, the court and the tribunal cannot compel it.

 
32. How is evidence given in ADR? Can documents produced or admissions made during (or for the purposes of) the ADR later be protected from disclosure by privilege? Is ADR confidential?

There is no specific law of evidence in ADR. Usually ADR is confidential.

Normally, evidence and correspondence gathered during mediation cannot be used as evidence at a later stage if mediation fails. However, evidence or correspondence accumulated during a settlement negotiation or reconciliation between the parties themselves without the involvement of the judges or arbitrators can be admitted as evidence.

 
33. How are costs dealt with in ADR?

In settlement negotiation or mediation, the costs are usually allocated according to the parties' mutual agreement. In arbitration, the costs can be borne by the losing party subject to the tribunal's discretion.

 
34. What are the main bodies that offer ADR services in your jurisdiction?

Mediation services are usually provided by the court or the tribunal of the arbitration. Many arbitration institutions now have their own mediation centres. The main organisations that provide mediation services are the:

  • Labour disputes arbitration commissions. Labour disputes must go through labour arbitration before being litigated in court. Local labour dispute arbitration commissions are in charge of all the labour disputes arising in their region.

  • Beijing Arbitration Commission (www.bjac.org.cn/en). In 2007, it adopted stand-alone mediation rules to provide mediation services independent of and in connection with arbitration.

  • China International Economic and Trade Arbitration Commission (www.cietac.org). It has its own arbitration rules, one feature of which is combining mediation with arbitration.

  • Shanghai International Economic and Trade Arbitration Commission/Shanghai International Arbitration Centre (www.cietac-sh.org/SHIAC/index.aspx).

  • Shenzhen Court of International Arbitration/South China International Economic and Trade Arbitration Commission (www.sccietac.org).

  • Other local arbitration institutes.

 

Proposals for reform

35. Are there any proposals for dispute resolution reform? If yes, when are they likely to come into force?

China launched an ambitious judicial reform in 2012-2013 and the reform is still underway. In the past five years, the courts have reformed the case acceptance system and built a judicial document publishing mechanism to improve transparency.

Another ongoing reform relates to internal judge quotas, which aims to strengthen the responsibility of judges and to promote fairness in litigation by limiting the number of judges.

 

Online resources

Legislative Affairs Office

W www.chinalaw.gov.cn/article/fgkd/xfg/

Court judgments and rulings

Description. This is the website of the Legislative Affairs Office of the State Council, which contains the official and original language text of the legislation and administrative regulations.

W http://wenshu.court.gov.cn/

Description. This is the official website for the publication of court judgments and rulings.



Contributor profile

Zhang Shouzhi, Partner, Dispute Resolution

King & Wood Mallesons

T +86 10 5878 5009
F +86 10 5878 5522
E zhangshouzhi@cn.kwm.com
W www.kwm.com

Professional qualifications. China, Solicitor, 1990

Areas of practice. Arbitration litigation and ADR in respect of disputes relating to cross-border trade and investment; banking and finance; energy; infrastructure; IP and product liability.

Recent transactions

  • Represented a Chinese infrastructure construction company in an arbitration against the local government involving RMB1.3 billion.

  • Represented an Australian company in applying for recognition and enforcement of a foreign award arising from a trade dispute against a Chinese company involving US$114 million.

  • Represented a Chinese company in the arbitration before the Supreme Court of China arising from confidentiality agreement dispute involving US$28 million.

  • Represented a chemical industry design company in its US$225 million international arbitration before the Shenzhen Court of International Arbitration.

  • Represented a Chinese oil company in the litigation arising from sales contract disputes involving RMB2.3 billion.

  • Represented a foreign client in an arbitration before the China International Economic and Trade Arbitration Commission (CIETAC) in relation to share transfer agreement and asset transfer agreement disputes.

  • Represented a Japanese automobile company in a design patent dispute litigation against a Chinese motor company involving RMB 750 million.

  • Represented a foreign-invested company in the BOT dispute arbitration before CIETAC involving RMB650 million.

  • Represented a Chinese company in an ICC arbitration arising from trade contract disputes involving US$14 million.

Languages. Mandarin, English

Professional associations/memberships. Chartered Institute of Arbitrators; Arbitrators of China International Economic and Trade Arbitration Commission (CIETAC); Shanghai International Arbitration Center (SHIAC); Shenzhen Court of International Arbitration (SCIA).

Publications

  • Zhang Shouzhi et al., CIETAC issued the 2015 Arbitration Rules, China Law Insight (8 April 2015).

  • Zhang Shouzhi et al., China's Pilot Carbon Markets at a Glance, China Law Insight (2 September 2014).

  • Zhang Shouzhi et al., Onshore Arbitration by Offshore Institutions Recognized by China's Highest Court, China Law Insight (11 August 2014).

  • Zhang Shouzhi & Monique Carroll, Chinese Investors – How to protect your Indonesian mining investment, China Law Insight ( 16 May 2014).

  • Zhang Shouzhi et al., Trade or Financing – How to Solve the False Trade Disputes, China Law Insight ( 4 September 2013).

  • Zhang Shouzhi & Gu Jia, Confidentiality Agreement Dispute in Offshore Arbitration Strategies for Chinese Entities, China Law Insight (29 May 2013).

  • Zhang Shouzhi et al., Forum Shopping in Dispute Resolution: Hurdles and Solutions, China Law Insight ( 7 May 2012).

  • Zhang Shouzhi et al., Post-Award Settlement for International Arbitration, China Law Insight (16 April 2012).

  • Zhang Shouzhi, Li et al, Legal Issues in Contracts for Sale of Large-sized Complete Set Equipment, China Law Insight (12 October 2011).

  • Zhang Shouzhi et al., Battle for the Company Seal, China Law Insight (25 September 2009).

  • Daniel R. Fung et al., Arbitration in China: a Practical Guide, published by Sweet and Maxwell Asia (2004).


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