Domestic commercial courts

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LEXICON has previously examined the establishment and operation of international commercial courts (China Business Law Journal, volume 8, issue 10: International Commercial Courts; and volume 10, issue 6: BRI and China’s international commercial courts). This column examines commercial courts in a domestic context. It outlines the features of efficient and effective commercial dispute resolution, as recognised by international practice. It then examines certain factors that are relevant to the design of domestic commercial courts and outlines the experience in mainland China, including under revisions to the Civil Procedure Law that came into effect on 1 January 2022.

WHAT ARE THE FEATURES?

It is widely recognised that an effective and efficient commercial dispute resolution system, which includes court litigation and other forms of dispute resolution, is essential for economic growth and stability. In terms of commercial dispute resolution by the courts, the features of an effective and efficient justice system include the following:

    1. Certainty, predictability,transparency and fairness of law and legal procedures. In the context of commercial disputes, the requirement of certainty relates to the application of widely understood legal principles to the underlying contractual or other dispute. The requirement of predictability relates to the application of known procedures by the court. The requirement of transparency exists where the parties are aware of the process and how it impacts on them. The requirement of fairness refers both to the way in which a case is dealt with, and also to the content of the law and legal procedures more generally, including the protection of rights.
    2. Timeliness of decision-making. The need for commercial disputes to be resolved quickly is widely recognised. Courts should endeavour to make decisions, in respect of both interlocutory matters and the judgment, within a reasonable time and without undue delay.
    3. Affordability and accessibility. Affordability is an important feature for commercial dispute resolution. This is particularly relevant in the context of small claims in view of the involvement of small businesses that have limited funds. Accessibility refers to the ease with which parties can bring or defend claims. Affordability is an important component of accessibility, particularly in relation to small business claims where courts often adopt simplified procedures.
    4. Active and efficient case management. As noted above, the concept of fairness includes the way in which a case is dealt with. It is generally accepted that commercial courts need to engage in active and efficient case management to ensure the proper handling of the proceedings and the proper and efficient use of public resources.
    5. An environment that encourages resolution by means other than trial. To operate effectively, court proceedings need to operate alongside and encourage resolution by other means such as mediation (for a discussion about judicial mediation, see China Business Law Journal, volume 9, issue 8: Judicial mediation). In addition to facilitating private settlement of disputes, mediation also provides a means to minimise the consumption of publicly funded court resources.
    6. Effective outcomes. The need for effective outcomes, including enforcement of judgments (where necessary) is also of critical importance.
    7. Experience and expertise of judges in commercial disputes. One of the expectations of the business community is that courts that hear commercial disputes will have judges with experience and expertise of commerce and commercial issues.
    8. Independence. Finally, the independence of the judiciary, both in respect of courts and in respect of individual judges, is recognised as a feature of an effective and efficient commercial dispute resolution system in all jurisdictions.

DESIGN OF DOMESTIC COMMERCIAL COURTS

Many factors need to be considered in the design of commercial courts. One factor is whether they should take the form of a separate court or, instead, a division or tribunal within the existing courts. The World Bank (see here) has noted the benefits of having specialised commercial courts or divisions as follows:

Dedicated systems for commercial cases can make a big difference in the effectiveness of a judiciary. Having specialised commercial courts or divisions reduces the number of cases pending before the main first-instance court and thus can lead to shorter resolution times within the main trial court one reason why economies have introduced specialised courts as a case management tool. But the benefits do not end there. Commercial courts and divisions tend to promote consistency in the application of the law, increasing predictability for court users. And judges in such courts develop expertise in their field, which may support faster and more qualitative dispute resolution.

An analysis undertaken by the World Bank based on data collected in May 2019 indicates that “104 of 190 economies… have a specialised commercial jurisdiction ‒ established by setting up a dedicated standalone court, a specialised commercial section within an existing court or specialised judges within a general civil court.”

Mainland China is an example of a jurisdiction where commercial divisions (or tribunals) have been established within the general courts. Article 26 of the Organic Law of the People’s Courts makes provisions for divisions within basic level people’s courts as follows:

Article 26

Basic level peoples courts may set up a number of people’s court divisions [tribunals] on the basis of regional, population or case conditions.

Peoples court divisions are component parts of basic level peoples courts. Judgments, rulings and decisions made by peoples court divisions are judgments, rulings and decisions of the basiclevel peoples courts.

Experience suggests that the allocation of commercial-related disputes between divisions within Chinese courts is typically as follows: (1) contracts, corporations, securities, insurance and financial instruments; (2) intellectual property rights and unfair competition; (3) foreign-related commercial cases and maritime cases; and (4) resources disputes.

Another factor that is relevant to the design of commercial courts or divisions is the way in which they support mediation. In mainland China, revisions to the Civil Procedure Law came into effect on 1 January 2022. Included in the revisions was the insertion of article 201, which makes provision for courts to confirm the effectiveness of mediation agreements and for confirmed mediation agreements to be enforced by the courts under article 202.

A third factor is the existence of specific provisions in respect of time standards and adjournments. As noted above, courts should endeavour to make decisions, in respect of both interlocutory matters and the judgment, within a reasonable time and without undue delay. Article 149 of the Civil Procedure Law specifies various circumstances in which a hearing can be adjourned, e.g., a party has a “valid reason” for not attending a hearing, new evidence needs to be tendered, or there are “other circumstances requiring an adjournment”.

It is useful to specify specific criteria or circumstances so that judges do not grant adjournments too freely. For the same reason, it is useful to specify general time limits for adjournments, even if exceptions might exist, so that judges are encouraged to consider what would be appropriate in the circumstances.

A fourth factor is how to determine when a case may be heard by a single judge and not a collegiate bench. Article 42 of the Civil Procedure Law, which was introduced by the revisions to the Civil Procedure Law that came into effect on 1 January 2022, does this in the negative by listing the following cases that a sole judge should not hear:

  1. Cases involving national interests, or social and public interests;
  2. Cases involving group disputes that may affect social stability;
  3. Cases of wide public interest, or with great social influence;
  4. New types of, or difficult and complex, cases;
  5. Cases that should be heard by a collegiate bench as required by law; and
  6. Other cases that are not suitable to be heard by a sole judge.

Finally, it is important to note that in addition to the need for written law, as contained in civil procedure laws, there is a need for courts to develop guidelines for commercial dispute resolution and to provide training programmes to commercial court judges and other commercial court functionaries.

Andrew Godwin 2015
Andrew Godwin

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.

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