When an administrative entity defaults on a land use rights transfer contract, the civil entity must choose to mount an administrative or civil lawsuit. This is not an easy decision, but one that requires careful study of local court structures and judicial tendencies.
When it comes to land use rights transfer contracts, the judicial and theoretical communities never quite agreed on whether they are civil or administrative in nature, or, in case of a dispute, whether the rights holder should launch a civil or administrative lawsuit.
According to current laws, regulations and legal practice, where the civil entity intends to mount a lawsuit over a land use rights transfer contract breached by an administrative counterparty, there is an applicable basis for a civil litigation. However, it is also possible for the court to accept an administrative litigation if the contract was to be deemed administrative in essence. Therefore, civil entities need to choose which routes of remedy are available to be pursued.
This is not a decision to be made rashly. Other than the potential effect of the case facts, the level of the hearing court, local judging tendencies and other possible factors should all be carefully considered.
In terms of applicable regulations, the Provisions on the Cause of Action of Civil Cases, enacted since 1 January 2021, retained “contractual dispute over transfer of construction land use rights” as a cause for action, while the amended Interpretations of the Supreme People’s Court on the Application of Laws to Trials over Contractual Disputes Involving State-owned Land Use Rights, which came into effect on the same day, stated that the interpretations were made “by incorporating the practice of civil trials”.
As civil litigation is considered the mainstream approach to defend legal rights in China, judges in the civil division are likely to be quite experienced in hearing contractual disputes over construction land use rights transfers, which will help clarify case facts and identify applicable laws, and in turn protect the rights of civil entities to the greatest extent. Furthermore, in civil lawsuits, administrative entities are less likely to be favoured, lessening the potential impact of their special status on the outcome of the case.
With the intermediary and higher courts given jurisdiction over higher dispute amounts in recent years, if the civil and administrative entities have signed multiple land use rights transfer contracts, it is advisable to ask the court to hear them concurrently, based on the fact that they concern the same signatory parties, are connected and of the same type of legal relationship, so as to boost the amount of the claim and increase the chance for the case to be heard by an intermediate or higher-level court.
Compared with grassroots people’s courts, intermediate and higher-level courts are less likely to favour the administrative entity. If the first-instance court is at the intermediate or higher level, it would be viable to take the second-instance hearing or retrial, if necessary, to the Supreme People’s Court, above and beyond the boundary of the local judicial system.
Even if the court rejected the civil lawsuit by reason of the subject matter being outside of the scope of civil litigation, the civil entity may, according to article 8 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Trial of Administrative Agreement Cases, and article 8 of the Measures for Paying Litigation Costs, initiate a separate administrative lawsuit without, in principle, incurring additional case acceptance fees.
In cases where the civil entity mounts an administrative lawsuit by deeming the land use rights transfer contract administrative in nature, or after the original civil lawsuit was rejected, the court should accept the separately brought suit according to article 8 of the above-mentioned SPC provisions and existing judicial practice.
Administrative lawsuits are usually heard at the grassroots people’s courts, but should be transferred to intermediary courts if a State Council department or a government above the county level is listed as one of the defendants with standing.
From the perspectives of civil proceedings and implementation, listing the government as a co-defendant may benefit the clarification of case facts, and the government may actively facilitate mediation and expedite the process of dispute resolution. Additionally, compared to when there is only a single defendant, a court order for the government to assume liability often facilitates the enforcement of proceeds payment.
However, as governments are in practice rarely signatories to such contracts due to the privity of contracts, this method risks the listed defendant being found without standing. If the court does not find the case “a significant and complicated case within its jurisdiction”, civil entities may also find it difficult to bring the case to a higher-level court.
As mentioned above, courts in administrative lawsuits sometimes show tendencies to protect the interests of administrative entities. Therefore, other than the usual preparation work involved in litigation planning, civil entities must also consider how best to level the playing field and minimise such disadvantages.
With regard to contractual disputes over the transfer of land use rights, the authors recommend that, before initiating a lawsuit, civil entities should first research the judgments of local courts at each level, and become familiar with their judging tendencies, so as to make the most informed decision.
Considering the possibility of raising the level of the court with a consolidated case, the rich experience of intermediate and higher courts with civil disputes after years of accumulation, and the likelihood of local tendencies to favour the administrative entities, the authors believe that unless there are other special considerations, a civil lawsuit is the optimal choice when a dispute occurs. However, the alternative is not a dead end, as regulations about administrative lawsuits as a means of backup remedy have also left the door open.
In the end, as the exact situation of disputes varies case by case, which inevitably affects or even complicates the choice of lawsuit, one must still make the practical decision by further analysing the facts of the case.
Chen Zhuo is a partner at Tian Yuan Law Firm. He can be contacted at +86 138 1041 7260 or by e-mail at email@example.com
Qin Zhuan is an associate at Tian Yuan Law Firm. He can be contacted at +86 137 5311 9630 or by e-mail at firstname.lastname@example.org
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