Addressing deadlocks with intersecting criminal and civil cases

Intersecting criminal and civil cases are civil and commercial cases that involve suspected crimes, and where the civil and criminal liabilities are concurrent and interconnected. Applicable judicial interpretations provide that, in an intersecting criminal and civil case, the loss caused to the victim should first be recovered through criminal procedures.

If the criminal relief is insufficient, the victim may file a civil lawsuit. In practice, however, the victim is generally under-compensated due to the imperfect criminal relief procedures, and has to consider bringing a civil case before the court. If a civil case is filed, uncertainties in civil trial procedures and judgments may result in a waste of litigation costs and time. These problems render a victim in dilemma when he or she attempts to seek judicial relief.

Definition difficulty

When it is difficult to discriminate between criminal offence and civil dispute, the police and the court may be evasive. Before the promulgation of the Minutes of the National Working Conference on the Trial of Civil and Commercial Cases by Courts, the basic principle for handling an intersecting criminal and civil case as provided in the laws of China can be summarised as follows: If the criminal liability and civil liability are based on the same facts, “criminal procedures precede civil procedures”; and if the criminal liability and civil liability are based on different facts, criminal procedures and civil procedures will proceed separately.

In practice, however, this principle fails to play its due role, mainly because of the blurry boundary between civil wrongs and criminal offences in many cases. It is difficult for the court and the police to make a clear and unified interpretation of “same facts”, and so they are evasive in handling these cases.

The authors lately represented a victim to recover the payment for goods due to the victim being in a dispute over a sales and purchase contract that was suspected of contract fraud. When the fraud was reported, the police learned about the facts, decided that this case was a civil dispute, and suggested that the victim recover the payment by civil litigation.

The authors filed civil litigation before the court. The court did not try the case on merit, and rejected it on the ground that it was suspected to be an economic offence. The case was transferred to the police. This shuffle is a waste of both litigation costs and the precious time of the victim.

Effective relief

In practice, it is sometimes difficult for a victim to access effective relief due to imperfect criminal relief procedures. Influenced by Chinese traditional consciousness of the supremacy of the national interest, the police, the prosecutor and the court generally focus more on imposing criminal punishment and vengeance on offenders than on remedies and relief to victims for their economic losses. As a result, recovery of loss by criminal procedures is less effective in practice.

In the above-mentioned contract fraud case, although the authors and the victim submitted sufficient clues on property, the police refused to seize the assets of the suspect. The authors note that, in comparison to property preservation provided in civil procedures, the police have a stricter standard for investigation and seizure of a suspect’s assets. The police will investigate and seize the assets only when they are proceeds of crime. In this case, as the victim company was unable to prove to the police that the property was the proceeds of crime, the police were reluctant to investigate and seize the assets of the suspect.

Undesirable results

Uncertainties in civil trial procedures and judgments may waste litigation costs and the victim’s time. If the victim directly initiates a civil lawsuit, it may not obtain timely and effective relief. As the criminal liability involved in the case are yet to be determined, civil litigation procedures may be halted at any time, and the civil judgment may be overthrown. As a result, the victim not only will receive no remedy, but will also have to pay more for, and spend his or her precious time on, the litigation.

On the other hand, once the civil case initiated by the victim is rejected by the court, the court will rule to lift the property preservation that the victim applied for. At this time, if the police do not seize the suspect’s property, the suspect will have the opportunity to transfer its property. In this case, even though the court may rule in favour of the victim, the victim may end up with no remedy at all.

Some suggestions

In recent years, more and more legal professionals call for “separation of criminal and civil procedures”. Judge Liu Guixiang, of the Supreme People’s Court, proposed a basic principle for “separate trials for criminal and civil liabilities” at the national working conference on the trial of civil and commercial cases of courts in July 2019.

The minutes issued by the Supreme People’s Court also impose limitations on the applicability of “criminal procedures preceding civil procedures” in civil litigation. In practice, however, application of “criminal procedures preceding civil procedures” is still subject to the discretion of judges and the police. Uncertainties of civil litigation procedures remain.

After years of representation in foreign-related cases, the authors observe that many countries have proper institutional solutions in place to solve the difficult problems of intersecting criminal and civil cases. For example, in countries with common law systems, the criminal procedures and civil procedures of intersecting criminal and civil cases generally proceed in parallel. They are independent from each other, and no one precedes the other. The separation effectively prevents evasiveness of the court and the police, and difficulty in placing the cases on docket.

In addition, China is in urgent need of a highly effective recovery system for criminal cases to restore the confidence of victims in criminal relief. In this aspect, the authors refer to the federal criminal restitution order system of the US. A federal court may issue a restitution order to the defendant in certain criminal cases, requesting the defendant to pay the damages to the victim within a specified period time.

In exchange, the court may decide to shorten the prison time of the defendant. Although this system may weaken the personal punishment on the defendant to some extent, it effectively helps victims receive economic compensation.

Henry Xiao is a senior partner and Jerry Zhang is an associate at Dentons