Amendments to the Chinese Civil Procedure Law: Impact on German companies

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published on 9 November 2023 approx. reading time 3 minutes


With effect from 1 January 2024, amendments to the Chinese Civil Procedure Law (CPL) will come into force, which will particularly affect civil proceedings with a foreign connection. The amendment to the law may therefore have an impact on German companies operating in China as well as on subsidiaries in China. The amendments mainly concern the regulations on the jurisdiction of Chinese courts, the service of legal and court documents, methods of collecting evidence and provisions on the recognition and enforcement of foreign judgments. We summarize the most important changes below.



Jurisdiction

The jurisdiction of Chinese courts is now regulated in Article 276 CPL (previously Article 272 CPL). Accordingly, in cases involving a respondent not domiciled in China, the People's Court (i.e. the court of the lowest instance) at the following locations has jurisdiction:
  • Place of signing or performance of the contract;
  • Place of the subject matter of the dispute;
  • Place where seizable property is located;
  • Place where the infringement was committed;
  • Seat of a representative office of the foreign company.
  
A catch-all provision has been added, according to which Chinese courts have jurisdiction if the legal dispute with a foreign connection has a "relevant connection" to the People's Republic of China in another way. The law does not define what constitutes a "relevant connection" to the People's Republic of China, so that rules of interpretation and initial court decisions must be awaited. The provision appears to make it easier, particularly for Chinese companies operating abroad, to establish a Chinese place of jurisdiction.
  
The newly inserted Art. 277 CPL allows contracting parties to reach an agreement on the jurisdiction of a Chinese People's Court in the event of a dispute with a foreign connection.
  
The jurisdiction of a Chinese People's Court may also arise from failure of a respondent to object to the lack of jurisdiction of the People's Court seized and instead responding to a claim or filing a counterclaim (Article 278 CPL, comparable to Section 39 of the German Code of Civil Procedure).
  
Finally, the list of exclusive jurisdiction of Chinese courts has been expanded in Article 279 CPL (previously Article 273 CPL). While Chinese courts previously had exclusive jurisdiction over proceedings relating to joint venture contracts and contracts relating to the exploitation of natural resources, from the date of entry into force Chinese courts will also have exclusive jurisdiction over proceedings relating to the establishment or dissolution of legal entities domiciled in China, proceedings relating to the validity of resolutions of such legal entities and disputes relating to the validity of intellectual property rights granted in China.
  
The newly inserted Articles 280 to 282 of the CPL govern cases in which an action has been brought before both a Chinese and a foreign court in the same legal dispute, as well as cases in which a Chinese court must dismiss an action due to lack of jurisdiction.
  

Service of judicial documents

The catalog of possible methods of service has been expanded by the amended Article 283 CPL (previously Article 274 CPL). Possible methods include service by post, by electronic means, to Chinese subsidiaries or representative offices of the foreign respondent as well as to the legal representative or " main representative" of a foreign respondent who is in China. However, when choosing the method of service, the Chinese courts must consider whether the chosen method of service is permissible in the country in which the defendant is domiciled.
  
If service cannot be effected in any of the ways specified in Article 283 ZVG, service can also be effected by public announcement. Service is then deemed to have been effected after 60 days (previously three months).
  

Collection of evidence

The new Article 284 CPL regulates the collection of evidence by a Chinese court if the evidence is located abroad. The most important scenario in this context is likely to be the examination of witnesses by the court abroad. This can be done through the involvement of diplomatic missions if the witnesses are Chinese nationals. In addition, the court can also collect evidence using methods that the parties have previously agreed upon, e.g. using instant messaging tools. However, a prerequisite for these methods is that they are not prohibited in the country where the evidence is located.
  

Recognition and enforcement of foreign judgments

The provisions on the recognition and enforcement of foreign judgments (judgments of ordinary courts, arbitration awards) have also been amended. This applies in particular to the recognition of foreign judgments by ordinary courts. The list of grounds that may prevent recognition in China has been expanded and amended. Reasons for refusing to recognize a judgment may include lack of jurisdiction of the foreign court, failure to properly summon the respondent, the exclusive jurisdiction of Chinese courts under the CPL, obtaining the judgment by unfair means (e.g. falsification of evidence), the existence of a final judgment in the same case or a violation of China's Ordre Public (Public Order, i.e. incompatibility with the fundamental principles of the Chinese legal system) or a violation of China's national interests. In principle, recognition of a judgment may also be refused if there has been a breach of the parties' agreement on the choice of a court with exclusive jurisdiction.
  

Implications for German companies and Chinese subsidiaries

The amendment to the law has extended the jurisdiction of Chinese courts, potentially making it easier for Chinese companies to sue a foreign company in China. When concluding contracts with Chinese partners, the aspect of dispute resolution should therefore be given sufficient consideration and the contract should contain a solid dispute resolution clause.
  
With regard to the recognition and enforcement of German judgments in China and Chinese judgments in Germany, there is no corresponding bilateral agreement between Germany and China. The reciprocity of the recognition of judgments by corresponding decisions of courts in both countries is also not guaranteed, i.e. judgments of the ordinary courts are currently not mutually recognized and declared enforceable. Thus, alternative dispute resolution methods such as arbitration should also be considered, as arbitration awards are generally recognized and enforced in both China and Germany. 
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