PREVIOUS COLUMNS OF LEXICON have discussed the grounds on which an international commercial court will accept jurisdiction to hear a dispute (see China Business Law Journal, volume 8, issue 10: International commercial courts; and China Business Law Journal, volume 10, issue 6: BRI and China’s international commercial courts).
This column has also previously discussed the impact of the Hague Choice of Court Convention, which creates an international framework for the courts in a member state to recognise the jurisdiction of a court in another member state, and also to recognise and enforce the judgment of a court in the other member state and enforce the judgment of a court in the other member state (see China Business Law Journal, volume 9, issue 3: Choice of court).
This column considers the grounds on which Chinese courts generally can accept jurisdiction in foreign-related civil disputes. The column commences with an outline of the relevant issues. It then considers the position in common law jurisdictions. Finally, it examines recent amendments to the PRC Civil Procedure Law in 2023, and their significance.
The concept of jurisdiction
The English word “jurisdiction” has its roots in the Latin words for “law” (jus) and “speaking” or “talk” (dictio). The word therefore conveys the process of speaking to, or making decisions in respect of, the law.
The two characters in the Chinese term – guanxia [管辖] – mean “to rule” or “to govern”. When the character quan is added to make guanxiaquan [管辖权], the meaning is “power to rule or govern”.
When a dispute comes before a court in any jurisdiction, the court must determine whether it has jurisdiction (i.e. the power or legal authority) to accept the case and to decide the dispute. This will ordinarily be a straightforward process if both parties are located in the jurisdiction, although questions may arise as to which domestic court should have jurisdiction in respect of the dispute.
The process becomes more complicated when one of the parties is a foreign party that is not located in the jurisdiction or, in extreme circumstances, when both parties are located outside the jurisdiction.
In most jurisdictions, a specific ground must exist to allow a court to accept jurisdiction in respect of a foreign-related dispute. In some jurisdictions, there must be a connection between the dispute and the court that is chosen.
Common law jurisdictions
There are several grounds on which a court in a common law jurisdiction may accept jurisdiction over a foreign-related dispute. Three important grounds are as follows:
- Where the parties agree that the contract is governed by the laws of the jurisdiction;
- Where the defendant is located (or “domiciled”) in the jurisdiction; and
- In tort claims, where the jurisdiction is the place where the “harmful event” occurred, or may occur.
In common law jurisdictions such as England, a court will only accept jurisdiction where there has been valid service on the defendant (i.e. where the document that initiates the court process, such as the statement of claim, is validly delivered to the defendant). In circumstances that involve foreign defendants, it may be necessary for the plaintiff to obtain the permission of the court to serve documents outside England.
There are, however, a number of exceptions where permission of the court is not required. These include the situation where the parties to a contractual dispute have agreed in the contract that English law is the governing law of the contract, and have agreed to the jurisdictions of English courts to resolve any disputes. A similar approach is adopted in the Hong Kong Special Administrative Region.
It is, however, important to note that even where the parties to a contract have expressly submitted to the jurisdiction of the courts in a common law jurisdiction, a court may decline jurisdiction on the basis of the doctrine of forum non conveniens. Under this doctrine, the courts have a discretionary power to decline jurisdiction where the court is satisfied that the convenience of the parties and justice would be better achieved by resolving the dispute in another forum (e.g., in a court in another jurisdiction).
In considering a claim of forum non conveniens, the court will take into account a range of factors including the availability of evidence, the location of witnesses, the law governing the dispute, and the place where the parties reside or carry on business. Possible examples include the situation where there are multiple related contracts and each provides for a different forum to have jurisdiction, and also where the parties have submitted to the jurisdiction of the court on a non-exclusive basis and the other party has commenced proceedings in another jurisdiction.
In some contracts, the parties include the following provision in the dispute resolution clause:
The parties agree that the courts of England are the most appropriate and convenient courts to settle disputes and accordingly neither party will argue to the contrary.
However, the English courts have held that a non-exclusive jurisdiction clause that contains the above-mentioned provision does not preclude an English court from declining jurisdiction on the basis of the doctrine of forum non conveniens (for a discussion about one-sided jurisdiction clauses, see China Business Law Journal, volume 5, issue 9: One-sided jurisdiction clauses).
2023 amendments to PRC Civil Procedure Law
The PRC Civil Procedure Law was promulgated in April 1991. Prior to the latest amendments in 2023, it had been revised four times, in 2007, 2012, 2017 and 2021. However, the provisions concerning foreign-related civil litigation had not been the subject of substantial revision. The latest amendments were made in 2023 and came into effect on 1 January 2024, with 19 revisions concerning foreign-related civil litigation.
Prior to the latest amendments, the key provision concerning foreign-related civil litigation was article 272:
Article 272
Where an action is instituted against a defendant without a domicile within the territory of the People’s Republic of China concerning a dispute over a contract or rights and interests in property, if the contract was executed or performed within the territory of the People’s Republic of China, or the subject matter of the action is located within the territory of the People’s Republic of China, or the defendant has property available for seizure within the territory of the People’s Republic of China, or the defendant maintains a representative office within the territory of the People’s Republic of China, the people’s court at the place where the contract was executed, the place where the contract was performed, the place where the object of action is located, the place where the property available for seizure is located, the place where the tort was committed, or the place where the representative office is domiciled may have jurisdiction.
The new provision, article 276, provides as follows:
Article 276
Where an action for a foreign-related civil dispute, save that involving identity relationships, is instituted against a defendant that has no domicile within the territory of the People’s Republic of China, the people’s court at the place of execution of the contract, the place of performance of the contract, the location of the subject matter of litigation, the location of the properties available for seizure, the place of infringement act or the domicile of the representative office is located within the territory of the People’s Republic of China.
Except as provided in the preceding paragraph, foreign-related civil disputes that otherwise have a proper connection with the People’s Republic of China may fall under the jurisdiction of the people’s courts.
The second paragraph of article 276 introduces the concept of “proper connection”. Although the concept is not defined, it suggests that the grounds on which parties may bring proceedings in Chinese courts are broader than under the previous provisions.
In addition, article 277 provides that the parties may choose Chinese courts in writing even if Chinese courts do not have any proper connection with the dispute:
Article 277
Where the parties to a foreign-related civil dispute agree in writing to choose a people’s court for jurisdiction, the people’s court may have jurisdiction.
In its explanation of the amendments to the Civil Procedure Law, the Supreme People’s Court stated that the amendments would improve the rules concerning jurisdiction over foreign-related civil cases. Further, article 277 (jurisdiction by agreement) would “comply with the international development trend, fully respect the autonomy of the parties, and make it clear that the parties can agree to choose the jurisdiction of Chinese courts if the location that is actually related to the dispute is not within Chinese territory”.
It is likely that a key motivation behind the revisions is to facilitate the resolution of disputes under the Belt and Road Initiative, and strengthen Chinese courts as a forum for cross-border dispute resolution. For this purpose, corresponding amendments have been made to the rules governing China’s international commercial courts and the grounds on which they may accept jurisdiction.
Finally, the latest amendments to the Civil Procedure Law formally recognise the doctrine of forum non conveniens, which was previously only recognised by a judicial interpretation of the Civil Procedure Law. Under the new article 282, the courts must consider whether jurisdiction should be declined in the following circumstances:
(1) The underlying facts of the dispute did not occur within China’s territory, and it is significantly inconvenient for the Chinese court to hear the case and for the parties to participate in the proceedings;
(2) There is no agreement between the parties to submit to the jurisdiction of the Chinese court;
(3) The case does not fall under the exclusive jurisdiction of the Chinese court;
(4) The case does not involve China’s sovereignty, security or public interests; and
(5) It is more convenient for a foreign court to hear the case.
Article 282 expands the circumstances in which Chinese courts may decline jurisdiction beyond the previous circumstances as provided in the judicial interpretation of the Civil Procedure Law.
When read together, the above-mentioned revisions and the other revisions concerning foreign-related civil litigation are very significant, and bring China in line with the approach in other jurisdictions, including common law jurisdictions.
Andrew Godwin is currently a member of a World Bank team that is advising a central bank in Asia on potential reforms to its mandate. He previously practised as a foreign lawyer in Shanghai (1996-2006) before returning to his alma mater, Melbourne Law School in Australia, to teach and research law (2006-2021). Andrew is currently Principal Fellow (Honorary) at the Asian Law Centre, Melbourne Law School, and a consultant to various organisations, including Linklaters, the Australian Law Reform Commission and the World Bank.
