On the 31st August 2012, the Standing Committee of the National People’s Congress of PRC approved amendments to PRC’s Civil Procedure Law (hereinafter referred to as “CPL”) which will come into force from 1st January 2013. In addition to significant revisions, the amended CPL introduces some important amendments to the arbitration regimes in China. Detailed herein are some of the key changes that may strongly influence foreign related enterprises.
Main changes to arbitration regime
Under the new Article 81, an interested party may, prior to instigating a lawsuit or arbitration application, apply to the people’s court at the place where evidence is located, where is located the domicile of the party against which the application is made or the competent people’s court with jurisdiction over the case to preserve evidence should there be an emergency likely to destroy evidence or render it difficult to obtain.
Moreover, pursuant to the new Article 101, an interested party may apply to the people’s court at the localities set out above, for property preservation measures if the legitimate rights and interests of parties, due to an emergency, would suffer irreparable damage in the event a party fails to petition for property preservation promptly.
Whether the new amendments would be applied to foreign related arbitrations still need to be further clarified by the Chinese courts in the long term.
In addition, the new Article 237 has narrowed courts discretion in refusals to enforce domestic awards. According to new CPL, Chinese courts will only be able refuse to enforce domestic arbitration awards if (1) the evidence used as a basis for ascertaining facts in the original ruling is fabricated or (2) the other party conceals important evidence which is substantial enough to affect the impartial ruling by the arbitration institution. This represents a significant change to the existing Article 213 of the CPL.
Jurisdiction related issues
The new Article 26 provides that for any disputes arising out of company formation, confirmation of shareholder eligibility, dividend distribution or dissolution, the competent people’s court in the place where the company is domiciled shall have jurisdiction. Furthermore, the new Article 34 will replace existing Article 25 to expand the rule to allow parties to choose to have their disputes to be heard in the court in a place which has an actual connection with the disputes in addition to the court in a place where the defendant or plaintiff is domiciled, where the contract was signed or executed or where the subject matter of the contract is located.
Evidence filing and judgment access
The new Article 65 adopts a more flexible approach which gives courts great discretion to deal with evidence filed after the cut-off date. Under the new CPL, courts have the option to decide whether to admit or exclude admissible but late-filed evidence by taking into account the reason for late filing. Furthermore, a new Article 156 has been inserted to allow the general public to refer to valid judgments and rulings except those relating to state secrets, trade secrets, or personal privacy.
These significant changes reflect efforts that the Chinese legislator has made in order to bring the law in line with the current international practice. While the National People’s Congress has make commendable progress in striving for judicial transparency, there nevertheless are still various ambiguities that exist under the new CPL which will be expected to be clarified by the people’s courts in the long term.
This article is intended solely for informational purposes and does not constitute legal advice. Although the information in this article was obtained from reliable official sources, no guarantee is made with regard to its accuracy and completeness. For more information please visit dandreapartners.com or WeChat: dandreapartners.
