Guideline clarifies conflicts of jurisdiction in cross-border litigation

Conflict of jurisdiction is a critical subject in foreign-related civil and commercial litigation, which can bring about parallel and repeated litigation across borders and directly affect the vital interests of litigants.

One of the highlights in the 2023 amendment to the Civil Procedure Law (the 2023 amendment) is implementation of the Party Central Committee’s deployment on advancing the rule of law in domestic and foreign-related affairs in an integrated manner.

It is of great significance, further clarifying the rules on conflict of jurisdiction in cross-border litigation.

Rules

Before the 2023 amendment, the rules on conflict of jurisdiction in foreign-related litigation were scattered in various judicial interpretations and documents. The 2023 amendment consolidates the previous provisions and provides clearer guidelines on conflict of jurisdiction.

Rights to initiate parallel proceedings

The decision to initiate parallel proceedings is a choice made by the parties themselves based on specific circumstances, and should be respected. The 2023 amendment clarifies that if one party files a lawsuit before a foreign court, while the other party files a lawsuit before a Chinese court for the same dispute – or if a party files a lawsuit before both a foreign court and a Chinese court – the Chinese court with jurisdiction, as per the Civil Procedure Law, may accept the dispute.

Validity of exclusive jurisdiction agreement
Under an exclusive jurisdiction agreement, the parties agree that a particular court is to have jurisdiction over the case, while excluding the jurisdiction of other courts. The agreement could resolve international parallel litigation effectively and improve the efficiency of dispute resolution. The 2023 amendment treats exclusive jurisdiction agreements that do not involve the sovereignty, security or public interests of China as the reason for non-acceptance of the dispute.

In judicial practice, China has not only stipulated the presumptive principle of exclusive jurisdiction agreements but also determined the validity of asymmetric jurisdiction agreements, as can be seen in the Minutes of the National Symposium on the Foreign-related Commercial and Maritime Trial Work of Courts.

Basic principles to resolve conflict of jurisdiction

The harmonisation of domestic and foreign proceedings in cross-border parallel litigation is a common challenge faced by most countries. The 2023 amendment deals with cases distinctively according to the acceptance time.

For cases that a Chinese court accepts in advance, the Chinese court would take the lead. For those where a litigant applies to the Chinese court in writing for suspension of the lawsuit on the ground that the foreign court has accepted the case in advance, the Chinese court may rule on suspension of the lawsuit, depending on the situation.

Dealing rules under special circumstances

An exception to the above-mentioned principle is if the litigants agreed on the selection of a Chinese court with jurisdiction – or the dispute falls under the exclusive jurisdiction of a Chinese court, or it is evidently more convenient for a Chinese court to try the case – then the Chinese court may not rule on suspension of the lawsuit.

Considering the fact that suspension of a lawsuit would undoubtedly affect domestic proceedings, if the foreign court does not adopt requisite measures to try the case, or does not conclude the case within a reasonable period, the Chinese court shall resume litigation upon a written application by a litigant.

In addition, where a litigant applies to a Chinese court for recognition and enforcement of a judgment or ruling made by a foreign court that has come into legal effect, and the dispute involved in the said judgment or ruling is the same as the dispute under trial by the Chinese court, the Chinese court may rule on suspension of the lawsuit.

If the said judgment or ruling made by a foreign court is recognised by the Chinese court, the Chinese court shall rule to dismiss the same domestic lawsuit. If not, the domestic suspended lawsuit shall be resumed.

The doctrine of forum non conveniens and remedies

The 2023 amendment elevates the doctrine of forum non conveniens in previous judicial interpretations to a legal provision. For cases that comply with statutory circumstances and are obviously inconvenient for a Chinese court to try and the litigants to participate, a Chinese court should exercise judicial comity towards foreign courts.

If a Chinese court finds it inconvenient to try the case, it may rule on rejection of the lawsuit and notify the plaintiff to file a lawsuit before a more convenient foreign court.

Meanwhile, for comprehensive protection of the litigants’ interests, the 2023 amendment also adds remedies for inconvenient jurisdiction. Upon ruling on rejection of the lawsuit, where the foreign court refuses to exercise jurisdiction over the dispute, or does not adopt the requisite measures to try the case, or does not conclude the case within a reasonable period, and the litigant files a lawsuit before the Chinese court again, it shall accept the case.

Suggestions

Be fully aware of the “toolbox” and rules of jurisdiction

The 2023 amendment consummates jurisdiction rules for foreign-related civil and commercial litigation, including the expansion of foreign-related jurisdiction, the newly-added jurisdiction agreement clauses, and two new categories of situations for exclusive jurisdiction. Therefore, to effectively safeguard their legitimate rights and interests, corporations are advised to be fully aware of the “toolbox” inherent in the 2023 amendment, as well as rules of jurisdiction in foreign-related litigation.

Prearrange jurisdiction agreements for cross-border disputes

It is widely acknowledged among the international community that parties could make arrangements for agreement on jurisdiction. Corporations are encouraged to fully utilise their capability and take preemptive advantage to prepare for exclusive and asymmetric jurisdiction agreements in cross-border disputes.

Take the initiative and fully utilise the rules

In dealing with specific cross-border disputes, it is necessary to leverage conflict of jurisdiction rules and carefully strategise for the overall situation. Corporations should actively seek to expand their dominant position, while in passive situations utilise parallel proceedings to combine strategies and turn the tables.

Guo Shuai is a counsel at Jincheng Tongda & Neal. He can be contacted at +86 10 5706 8293 or by e-mail at guoshuai@jtn.com
Xing Jingyu is an associate at Jincheng Tongda & Neal. She can be contacted at +86 10 5706 8390 or by e-mail at xingjingyu@jtn.com