Amendments on Foreign-Related Civil Procedure Rules in China's Latest Revised Civil Procedure Law

On September 1, 2023, the Standing Committee of the National People's Congress of China announced revision of the Civil Procedure Law of the People's Republic of China (hereinafter referred to as "Civil Procedure Law"). The revised Civil Procedure Law will come into effect on January 1, 2024. This revision adds 15 new articles and modifies 13 articles. Among these articles, 20 are found in Part IV of the Civil Procedure Law entitled "Special Provisions on Civil Actions Involving Foreign Parties", showing that the focus of this revision lies in foreign-related civil litigation procedures. Specifically, amendments in this aspect mainly involve jurisdiction, service, evidence collection, and recognition and execution of extraterritorially effective judgments, rulings, and arbitral awards. The following provide an introduction to the changes in foreign-related civil litigation procedures in the Civil Procedure Law.

1. Jurisdiction

First, this revision expands the jurisdiction of Chinese courts over foreign-related civil and commercial litigation (Article 276 of the revised Civil Procedure Law). First of all, Chinese courts' jurisdiction of foreign-related cases is extended to include all civil disputes other than those concerning personal relationships, and no longer limited to disputes over contracts or other property rights. In addition, under the current Civil Procedure Law, only six connection bases for establishing jurisdiction of Chinese courts over foreign defendants are provided, namely, the place where the contract is executed, the place where the contract is performed, the place of the subject matter of the action, the place of the distrainable property, the place where the infringement is committed, and the place of domicile of the defendant's representative office. Where overseas interests of Chinese companies are damaged and none of the above six connection bases is within China, it would be difficult for the Chinese court to exercise jurisdiction. In light of this, on top of the above six connection bases, this revision adds a fallback provision of “foreign-related civil disputes having other appropriate connections with China”. With this addition, even if the above six connection bases do not apply to a foreign-related civil and commercial case, the Chinese court will still have jurisdiction as long as there is another appropriate connection between the case and China. This modification is conducive to allowing Chinese companies to sue and respond to lawsuits in Chinese courts in the case of foreign-related disputes, thereby more equally protecting the legitimate rights and interests of Chinese and foreign companies.

Second, this revision adds provisions on consensual jurisdiction and responding jurisdiction in foreign-related civil litigation (Articles 277 and 278 of the revised Civil Procedure Law). Consensual jurisdiction means that if the parties to a foreign-related civil dispute agree in writing to choose the jurisdiction of Chinese courts, a Chinese court may have jurisdiction. Responding jurisdiction means that if the parties respond to the lawsuit or file a counterclaim without raising any jurisdictional objection, the Chinese court will be deemed to have the jurisdiction. These additions facilitate the smooth progress of litigation, improve the efficiency of international civil and commercial dispute resolution, and protect the procedural rights and interests of the parties.

Third, this revision adds two categories of foreign-related civil and commercial cases that are under exclusive jurisdiction of the Chinese courts (Article 279 of the revised Civil Procedure Law). The foreign-related civil and commercial cases that are under the exclusive jurisdiction of Chinese courts according to the current Civil Procedure Law are lawsuits related to disputes over the performance of Sino-foreign joint venture contracts, Sino-foreign cooperative venture contracts, or Sino-foreign cooperative exploration and development of natural resource contracts within the territory of China. This revision further includes lawsuits related to disputes over the establishment, dissolution, and liquidation of legal persons or other organizations established within the territory of China, as well as disputes over the validity of resolutions made by such legal persons or other organizations, and lawsuits related to disputes over the validity of intellectual property rights examined and granted within the territory of China. These two categories of civil and commercial cases have close connection with China and concern its social and public order. Determining these two categories of cases to be under the exclusive jurisdiction of Chinese courts will help safeguard China's public interests.

Fourth, this revision adds provisions on parallel litigation and doctrine of Forum non Conveniens (Articles 280, 281 and 282 of the revised Civil Procedure Law). First of all, this revision clarifies Chinese courts' general principles of and coordination mechanism for dealing with jurisdictional conflicts of parallel litigation. Specifically, when one party files a lawsuit with a foreign court while the other party to the same dispute files a lawsuit with a Chinese court, or when one party files lawsuits with both a foreign court and a Chinese court for the same dispute, the Chinese court has discretion as to whether to accept the case. Where such case is within the jurisdiction of a Chinese court under the Civil Procedure Law, the Chinese court may accept the case. However, a special situation is that if the parties enter into an exclusive jurisdiction agreement choosing the jurisdiction of foreign courts and provided that this does not violate China's provisions on exclusive jurisdiction and does not involve China's sovereignty, security or public interests, the Chinese court may rule to not accept the case, and where the case has been accepted, the Chinese court may rule to dismiss it. Secondly, this revision provides for the mechanism of suspension and resumption of litigation involving civil and commercial dispute accepted by a Chinese court where a lawsuit concerning relevant dispute has previously been accepted by a foreign court. Specifically, after a Chinese court accepts a foreign-related civil and commercial case, if the party applies in writing to the Chinese court to suspend the litigation on the grounds that the foreign court has previously accepted the case, the Chinese court may rule to suspend the litigation. This stipulation helps avoid Chinese courts from duplicating efforts of adjudicating cases previously accepted by foreign courts. However, if the parties agree to choose the jurisdiction of a Chinese court, or the dispute falls under the exclusive jurisdiction of a Chinese court, or it is obviously more convenient to hear it in a Chinese court, the litigation will not be suspended. Where, after the Chinese court's suspension of the proceedings, the foreign court fails to take necessary measures to hear the case, or fails to conclude the case within a reasonable time period, the Chinese court shall resume the proceedings upon the written request of the party. This avoids the situation where full remedies for the rights and interests of the parties are impacted as a result of the ineffective handling of the foreign court and refusal of the Chinese court to handle the case. In addition, this revision also provides for a jurisdictional objection mechanism under the doctrine of Forum non Conveniens. Specifically, for a foreign-related civil case where the defendant raises jurisdictional objection and the following circumstances occur, the Chinese court may rule to dismiss the lawsuit and inform the plaintiff to file the lawsuit with a more convenient foreign court: (1) the basic fact of the dispute of the case does not occur within China, and it is obviously inconvenient for a Chinese court to hear the case and for the parties to attend the court proceedings; (2) there is no agreement between the parties to choose the jurisdiction of Chinese courts; (3) the case does not fall under the exclusive jurisdiction of Chinese courts; (4) the case does not concern China’s sovereignty, security or public interests; (5) it is more convenient for foreign courts to hear the case. If, upon the Chinese court's dismissal of the lawsuit, the foreign court refuses to exercise jurisdiction over the dispute, or fails to take necessary measures to hear the case, or fails to conclude the case within a reasonable time period, and the party files a lawsuit with a Chinese court again, the Chinese court shall accept the case. By formally stipulating the principle of parallel litigation and the doctrine of Forum non Conveniens, the revised Civil Procedure Law provides clearer norms and guidance for the coordinated handling of jurisdictional conflicts in foreign-related civil and commercial cases in future.

2. Service

The revised Civil Procedure Law expands the means of serving litigation documents to parties who have no domicile in China (Article 283 of the revised Civil Procedure Law).

First of all, this revision changes "served on the agent ad litem entrusted by the recipient with the authorization to accept service on his behalf" to "served on the agent ad litem entrusted by the recipient for the case", that is, the authorization is no longer a must for the agent ad litem to accept service on behalf of the recipient. Instead, as long as the recipient has entrusted an agent ad litem in a case, the agent ad litem should accept the service. This solves the problem in practice associated with some agents ad litem's evasion of service by stating in the power of attorney that "receiving judicial documents is not included".

Second, this revision also adds the provision that service can be made to a wholly-owned enterprise established by the recipient in China, and also deletes the requirement that branch offices must be authorized to accept service. Through this amendment, the recipient's wholly-owned enterprise, representative office, and branch office established in China, and business agent authorized to accept service can all accept service, thus expanding the scope of entities that can accept service on behalf of overseas recipients.

Third, this revision further stipulates that if the recipient is a foreigner or stateless person acting as the legal representative or principal person of a legal person or other organization established within the territory of China, the legal person or other organization may accept the service, provided that the recipient and the legal person or other organization are co-defendants. Furthermore, a foreign legal person or other organization whose legal representative or principal person is in China may accept service through its legal representative or principal person.

Fourth, "served by way of facsimile, electronic mail or any other means through which the receipt of the document may be acknowledged" in the current Civil Procedure Law is amended as "served by using electronic means through which the receipt by the recipient may be acknowledged", thereby broadening the scope of electronic service. In addition, "served by other means agreed by the recipient" has been added as a fallback provision. However, these means should not be prohibited by the laws of the country where the recipient is located.

It should also be noted that for foreign-related service by public announcement, the time period for the documents deemed to have been served has been shortened from "three months from the date of the public announcement" under the current Civil Procedure Law to "when 60 days have elapsed since the date of the issuance of the announcement." With this amendment, the starting point for foreign-related service by public announcement is more specific, and it is conducive to shortening the trial period.

The above amendments help overcome the difficulties related to service in foreign-related cases, improve the accuracy and effectiveness of service, increase the efficiency of China's foreign-related civil litigation, and effectively protect the legitimate rights and interests of the parties.

3. Evidence collection

This revision provides for the investigation and collection of evidence outside the territory of China (Article 284 of the revised Civil Procedure Law). The general principle is that evidence may be investigated and collected in accordance with the methods stipulated in the international treaties concluded or jointly acceded by China and the country where the evidence is located, or through diplomatic channels. In addition, the court may also use the following methods to investigate and collect evidence provided that they are not prohibited by the laws of the country where the evidence is located: (1) for parties and witnesses of Chinese nationality, the Chinese embassy or consulate in the country where the party or witness is located may be entrusted to collect evidence on behalf of the court; (2) collect evidence using instant communication tools with the consent of both parties; and (3) collect evidence by other methods agreed by both parties. By stipulating the methods of collecting evidence outside the territory of China, it can bring greater convenience to the work of collecting evidence in foreign-related litigation and facilitate fairer and more efficient handling of foreign-related cases. These provisions also reflect the spirit of respect for both parties.

4. Recognition and execution of extraterritorially effective judgments, rulings, and arbitral awards

The revised Civil Procedure Law adds specific provisions on the recognition and execution of effective judgments and rulings of foreign courts and effective arbitral awards issued outside the territory of China (Articles 299 to 304 of the revised Civil Procedure Law).

First, the general principle is still to review extraterritorially effective judgments, rulings, and arbitral awards in accordance with international treaties concluded or acceded by China, or in accordance with the principle of reciprocity. If the judgment, ruling or arbitral award does not violate the basic principles of Chinese laws and does not harm China's national sovereignty, security, and public interests, its validity will be recognized; and if execution is required, the court will issue an order of execution.

Second, this revision clarifies the reasons for non-recognition and non-execution of effective rulings and judgments of foreign courts, including (1) the foreign court has no jurisdiction over the case; (2) the respondent has not been legally summoned, or the respondent, although having been legally summoned, fails to obtain reasonable opportunities for statement or debate, or parties without litigation capacity have not been properly represented; (3) the judgment or ruling was obtained by fraud; (4) the Chinese court has made a judgment or ruling on the same dispute, or has recognized the judgment or ruling on the same dispute made by a court of a third country; (5) the ruling or judgment violates the basic principles of Chinese laws or damages national sovereignty, security, or public interests. It can be seen that for effective ruling or judgment of foreign courts that involves seriously illegal procedures or that seriously harms the interests of the parties or harm China's national interests, such ruling or judgment should not be recognized or executed by the Chinese courts. Regarding "the foreign court has no jurisdiction over the case" among the aforesaid reasons, the applicable circumstances include: (1) the foreign court has no jurisdiction over the case in accordance with the laws of its country, or although the foreign court has jurisdiction in accordance with the laws of its country, the country has no appropriate connection with the dispute involved in the case; (2) the foreign court's hearing of the case will violate China’s exclusive jurisdiction provisions under the Civil Procedure Law, i.e., the aforementioned three situations under which Chinese courts have exclusive jurisdiction; (3) the foreign court's hearing of the case will violate the parties’ agreement on exclusive choice of court.

Third, this revision provides for the litigation suspension and resumption mechanism where a dispute involved in a foreign judgment or ruling subject to application by a party for Chinese court's recognition and execution is the same as a dispute being heard by a Chinese court. Where the two disputes are the same dispute, the Chinese court may rule to suspend the litigation. After the litigation is suspended, if the conditions for recognition are met, the Chinese court will rule to recognize the validity of the foreign judgment or ruling, and dismiss the lawsuit for the suspended litigation. Where the foreign judgment or ruling does not meet the conditions for recognition, the Chinese court will rule not to recognize and execute the judgment or ruling and resume the suspended litigation.

Fourth, this revision expands the scope of applications eligible for Chinese court's recognition and execution of foreign arbitral awards. The provision of "the party shall directly apply to the Intermediate people's court of the place where the person subject to execution is domiciled or where his property is located" as stipulated in the current Civil Procedure Law has been amended as "the party may directly apply to the Intermediate people's court of the place where the person subject to execution is domiciled or where his property is located", and it is also added in this revision that "if the domicile of the person subject to execution or his property is not within the territory of the People's Republic of China, the party may apply to the Intermediate people's court of the applicant's domicile or of the place that is appropriately connected with the arbitrated dispute." This amendment provides convenience for applicants in China. Even if the domicile or property of the person subject to execution is not in China, the applicant within China can apply to the Chinese court that has appropriate connections with the dispute for the recognition and execution of an extraterritorially effective arbitral award, thus expanding the scope of courts to which the parties can apply for execution of arbitral awards, and assisting in the parties' realization of their arbitration rights to the maximum extent.

In recent years, there has been rapid increase in the number of foreign-related civil disputes filed with the Chinese courts. In this context, this revision of the Civil Procedure Law is expected to contribute to fairer, more efficient, and more convenient resolution of foreign-related civil disputes, as well as better protection of the litigation rights and legitimate rights and interests of the parties, thereby advancing the high-level opening up of China.