Changes to foreign-related sections of Civil Procedure Law

The Civil Procedure Law was promulgated in 1991 and underwent revisions in 2007, 2012, 2017 and 2021. However, the revisions did not bring substantive modifications to the sections related to foreign affairs. As China continues to open up to the world, the number of foreign-related cases has been rising, resulting in increasingly complex disputes regarding scope of jurisdiction, service of documents, and recognition and enforcement of judgments and awards.

To address these challenges, the Standing Committee of the National People’s Congress passed a decision on 1 September 2023 to amend the Civil Procedure Law. This decision represents substantial revisions and updates to the foreign-related sections.

Jurisdiction in foreign cases

The objective of these revisions is to “expand the scope of foreign-related cases falling under the jurisdiction of Chinese courts, while also broadening the jurisdictional basis”.

The types of cases under jurisdiction of Chinese courts have expanded from contract disputes or other property rights disputes to all foreign-related civil litigation, except for cases related to personal status.

Two new types of exclusive jurisdiction matters have been introduced: disputes involving the establishment, dissolution, liquidation, or effectiveness of resolutions of domestic legal entities or other organisations; and disputes over the validity of IP rights granted through domestic review.

An additional clause was introduced incorporating “the place where the infringement occurred”, and “the place that has appropriate connections with the dispute”, as jurisdictional bases. In particular, the introduction of the latter changes the previous “enumerated type” to an “enumerated type + generalised type” approach, effectively expanding the court’s jurisdiction over foreign-related cases.

An important clause known as the “forum prorogatum” has been introduced, addressing the situation where parties involved in a case fail to raise jurisdictional objections, respond to the lawsuit, or file counterclaims.

In such cases, the silence or inaction is interpreted as an implicit agreement that the Chinese courts have jurisdiction over the matter. Additionally, an agreement-based jurisdiction has been added.

However, the official draft has removed the expression stating that “parties can agree on the jurisdiction of Chinese courts, even if the place connected with the dispute is outside of China”. This modification indicates that the premise for agreeing on jurisdiction over foreign-related cases by agreement is that the place with actual connection to the dispute should be within China.

Parallel litigation

Parallel litigation can be categorised into two distinct types: narrow parallel litigation (where the same party sues in both domestic and foreign courts simultaneously); and adversarial litigation (where the parties bring separate lawsuits in domestic and foreign courts).

Before this revision, article 531 of the Interpretation of the Civil Procedure Law only stipulated that adversarial litigation would not affect the exercise of jurisdiction by Chinese courts, but did not mention whether narrow parallel litigation was applicable.

The revision aligns with the international legislative trend of “pre-recognition” by stipulating that both narrow parallel litigation and adversarial litigation do not affect China’s exercise of jurisdiction. However, if a foreign judgment has been fully or partially recognised by a Chinese court, indicating that the foreign judgment has been transformed into a domestic judgment through the recognition and enforcement process, Chinese courts will no longer accept the case.

Forum non conveniens

The doctrine of forum non conveniens means a domestic court with jurisdiction should exercise judicial comity towards foreign courts when it’s more convenient and doesn’t undermine the home country’s fundamental interests during the foreign court’s case proceedings.

Article 530 of the Interpretation of the Civil Procedure Law specified six conditions for applying this doctrine, with the most contentious being that it “should not involve the interests of the Chinese state, citizens, legal entities or other organisations”.

In practice, many courts consider all cases related to Chinese entities inherently involve the interests of the Chinese party, thereby excluding the application of the forum non conveniens doctrine. This revision allows the doctrine of forum non conveniens to be genuinely applicable.

Service of documents

The recent revision has brought about substantial changes to the service provisions, not only introducing new categories of recipients in foreign-related civil litigation but also eliminating restrictions on the existing ones.

The previous Civil Procedure Law imposed a restriction on “agents ad litem” and “branch offices”, regarding their rights to accept service of documents. In practice, these parties often used the excuse of lacking service acceptance authority to refuse service, intentionally increasing the difficulty of the service process. The recent revision has directly removed this restriction, preventing these parties from using it as a reason to decline service.

Previously, the Civil Procedure Law only specified representative offices, branch offices and business agents as potential recipients. Some foreign companies in China have subsidiaries instead of these entities and have previously refused service on the grounds of separate legal personality.

The revision effectively pierces the corporate veil of legal and non-legal entities, and introduces alternative methods of service between relevant natural persons and legal and non-legal entities, thus increasing the likelihood of successful document service.

Overall, this revision elevates mature regulations from judicial interpretations, meeting minutes, and other documents into law, providing a more robust and solid legal foundation for the court’s jurisdiction over foreign-related cases and the service of documents.

In addition, this revision takes a positive approach towards addressing conflicts and diverging interpretations in judicial practice, reducing various obstacles that may hinder courts from exercising jurisdiction over foreign-related cases, and aligning with the trend of international treaties and practices, while clarifying the specific scope of application of various rules.

Ye Zhihao is a partner at Han Kun Law Offices. He can be contacted at +86 21 6080 0568 or by e-mail at zhihao.ye@hankunlaw.com.
Liu Long is a partner at Han Kun Law Offices. He can be contacted at +86 10 85166 4212 or by e-mail at long.liu@hankunlaw.com.
Xu Jialiang, an associate at the firm, also contributed to the article