The Development of Chinese Law and Its Impact on International Trade

Legal System

Legal System refers in general to the legislative, the executive and the judicial system of a country. This paper attempts to discuss some significant aspects of the Chinese legal system such as the law making process, interpretation of law and the judiciary.

1. Law Making

The National People’s Congress (NPC) together with its permanent body – the Standing Committee, is the highest organ of state power in making laws for the country.

NPC deputies elected from the provinces, autonomous regions and municipalities and from the armed forces

3000 members and met once each year for about 2 weeks

A session of NPC may also be convened at any time if the Standing Committee deems it necessary or if 1/5 of the
deputies so decide

In principle, NPC has power to enact and to amend basic laws but in reality, it has neither the skill nor adequate time to consider draft bills for enactment

On the other hand, the Standing Committee is much smaller in size and meets every two months and many of its members are full time with the Standing Committee.

The Standing Committee cannot however amend the Constitution but can interpret the Constitution and supervise its enforcement

Chairman of provincial people congresses are invited to attend the standing committee meeting but with no voting rights.

In addition, State Council (Central People’s Govt of PRC) and local governments of provinces, autonomous regions and municipalities directly under the Central Government can also have legislative power like the NPC and its Standing Committee provided it is for local regulations and must not contravene with the provisions of the Constitution, the law and administrative rules and regulations.

In effect, Chinese law can be divided into 4 levels, namely : the Constitution, laws adopted by the NPC and its Standing Committee, administrative regulations adopted by the State Council and local regulations by the people’s congresses of provinces, autonomous regions and cities.

2. Interpretation of Law

In China, the Court has the power to implement the law but not to interpret the law. The Constitution entrusts the NPC Standing Committee with the power to interpret the Constitution and Laws. As mentioned earlier, the State Council and people’s congresses at various levels may enact administrative and local regulations respectively. The basis of legislative interpretation is that those who make the law are in the best position to interpret the law. It therefore follows that in addition to NPC and its standing committee, the State Council and the standing committees of the various local people’s congresses can also interpret the law.

3. Judicial Interpretation

A resolution adopted by the NPC Standing Committee dated 10 June 1981 allowed the Supreme People’s Court to interpret all questions arising from court trials concerning specific application of laws and decrees. The lack of action on the part of the NPC Standing Committee to interpret various laws have left much room to the court to fill in the void. Since the 1981 decision, the Supreme Court has issued thousands of judicial interpretation to guide the lower courts

Such judicial interpretations have binding force on all the courts in China and covers almost every aspect of the legal system.

The Judiciary

The people’s courts of the PRC are the judicial organs of the State and it is tasked to try criminal, civil, economic, administrative, maritime and other cases prescribed by law

Judicial power is exercised by the courts at four levels namely :basic people’s court, intermediate people’s court and special court, high people’s court and the Supreme People’s Court. Except for the Supreme People’s Court, all other courts are referred to as local courts. There is only one Supreme People’s Court which is located in Beijing.

The Supreme People’s Court handles cases of first instance assigned by law such as major criminal cases of national importance, economic, administrative, communications and transportation matters affecting whole nation. It also handles appeals and protests lodged against judgements handed down by local people’s high courts and special courts.

The high people’s courts include all the high people’s courts of the provinces, autonomous regions and municipalities under the Central government. A high people’s court handles cases of first instance assigned by law as well as appeals and protests lodged against judgements made by intermediate or special courts. It also supervises the administration of justice by people’s courts at lower levels.

The intermediate people’s courts include those established in the prefectures of a province or autonomous region or municipalities under the jurisdiction of a province and those established in the municipalities under the Central Government. It handles cases of first instance assigned by law as well as appeals and protest against judgements of the basic people’s courts. It also supervises the administration of justice of the basic people’s courts.

The basic people’s courts include the people’s courts of counties, autonomous counties, cities (at county level) and municipal districts. It handles all criminal, civil, economic and administrative cases of first instance. It also directs the work of people’s mediation committees A basic people’s court may also set up a number of people’s tribunals as agencies within its jurisdictions. A people’s tribunal is part of the people’s basic court and its judgements and orders are judgements and orders of basic people’s court.

The special people’s courts are set up for specific designated cases and these are military courts, railway transport courts and maritime courts. These special courts are deemed at the same level as intermediate courts.

According to the Constitution, each people’s court is composed of one president, vice-presidents, chief judges and associate chief judges of divisions and judges.

Only the people’s courts can exercise judicial power. No other government agencies, department has the right to exercise this power.

In principle, a people’s court is independent and not subject to interference by any administrative organ or public organization.

Jurisdiction by Level

1. Hierarchy Jurisdiction

Jurisdiction of court is sub-divided into hierarchically and geographically.

Under the Civil Procedure Law, a basic people’s court could hear all civil cases as courts of first instance

Intermediate courts have jurisdiction as courts of first instance over major cases involving foreign interests and cases that have substantial impact on the community within their geographical jurisdiction’s well as cases which are assigned by the Supreme People’s Court

The maritime people’s court has jurisdiction as courts of first instance over maritime cases and related commercial cases

High people’s court has jurisdiction as courts of first instance which have substantial impact on the community within their geographical jurisdiction

The Supreme People’s Court has jurisdiction as the court of first instance to hear cases which have substantial impact on the whole country

Prior to the adoption of the Civil Procedure Law, all cases involving foreign interests must be heard by an intermediate court but now it could also be heard before a basic people’s court. This is a reflection of the gradual maturity of the system and the fact that there is a need to share the case load of the intermediate courts.

2. Jurisdiction by Geographical Locality

A civil lawsuit brought against a citizen, a legal person or any other organization shall be under the jurisdiction of eh court in the place where the defendant is domiciled If the defendant’s domicle is different from his habitual residence, the lawsuit shall be under the jurisdiction of the court of the place of his habitual residence

Actions from contractual disputes come under the jurisdiction of the people’s court where the defendant is domiciled or the place of implementation of the contract. However parties may specify in writing to choose the jurisdiction of the people’s court with regard to the defendant’s place of domicle, or the place for honoring the contract, or the place where the contract is signed, or the plaintiff’s domicle and the place of the subject matter but they must never violate the rule of jurisdiction by level or exclusive jurisdiction like the maritime courts or the railway courts

Actions arising from disputes over insurance contracts come under the jurisdiction of the people’s court at the place of the defendant’s domicle or at the place of the insured subject matter

Actions arising from disputes over negotiable instruments come under the jurisdiction of the people’s court at the place where payment is to be made or at the place where the defendant is domiciled.

Actions arising from disputes over contracts on carriage by rail, road, water, air or combined transportation come under the jurisdiction of people’s court at the place of departure, destination or the place where the defendant is domiciled.

Actions against acts of infringement come under the jurisdiction of the people’s court at the place where such acts are committed or at the place where the defendant is domiciled.

Actions claiming compensation for damage arising from rail, road, water and air accidents come under the jurisdiction of the people’s court at the place where such accidents occurred, or at the place where the vehicles or ships first arrived, or at the place where the aircraft first landed, or at the place where the defendant is domiciled.

Actions claiming compensation for damage from ship collisions or other maritime accidents come under the jurisdiction of the people’s court where such collision took place, or at the port where the collided ship first arrived, or at the port where the ship responsible for the damage is detained or at the place where the defendant is domiciled.

Actions claiming salvage come under the jurisdiction of the people’s court at the place of the rescue or at the prot where the rescued ship first arrived.

Actions arising from general average come under the jurisdiction of the people’s court at the port where the ship first arrived, or at the place where the general average is adjusted, or at the port where the voyage terminates.

If more than one court has jurisdiction over the same dispute, the court that first accepts the case should exercise jurisdictions.

Systems of Adjudication

The people’s courts try cases in public, except for those involving state secrets, individual privacy and the commission of crimes by minors. For public hearing, announcements will be made in advance and citizens are allowed to attend.

Cases of first instance are tried by a collegial panel of judges except for very simple civil cases and minor criminal cases where a single judge by adjudicate. Appeals and protests are heard by a collegial panel of judges. The presiding judge of the panel is appointed by the president of the court or the chief judge of a division. Majority view will prevail but dissenting view is also entered into minutes.

The parties and their legal representatives have the right to demand the withdrawal of members of the judicial panel, clerks, public prosecutors, expert witnesses or interpreters, who they think have an interest in the case or related to a party in the case. Such persons may also withdraw on their own accord.

China practises a two instances final adjudication system

In China, there is a system known as supervision of adjudication system. If errors are discovered concerning the finding of facts or application of the law in the judgements or orders that have already become legally effective, they can still be corrected through the procedure of trial supervision or what we may call judicial review.

Special Provisions for Procedure of Civil Action Involving Foreign Interests.

In the event that the provisions of any Internationa Treaty which China had acceded to but such provisions are in conflict with the Chinese local law, the provisions of international treaty shall apply.

If foreigners or foreign enterprises and organizations are going to have agent ad litem in taking or responding to actions in PRC on their behalf, they must appoint an attorney-at-law of the PRC

Parties involved in disputes over contractual or property rights may specify in writing to choose the jurisdiction of the people’s court at the place having actual relation with the dispute. But actions over disputes arising from contracts for Sino-foreign equity joint ventures etc shall be under the jurisdiction of the people’s court

Judgement made by foreign court or award rendered by a foreign arbitration organization have to apply for recognition and enforcement of the people’s court, if the parties to such judgement or award wanted to have it enforced in PRC

Special Maritime Procedure

China has adopted the Special Maritime Procedure Law (SMP) on 25 Dec 1999. SMP is a special law. When the people’s court tries any maritime cases, the SMP takes precedent over the Civil Procedure Law. It means that Civil Procedure Law will only apply if there is no relevant provision under the SMP.

Maritime tortuous actions also come under the jurisdiction of the maritime court of the place where the ship’s port of registry is located.

Actions arising from a charter party dispute of a seagoing ship shall be under the jurisdiction of the maritime court of the place of the port of delivery, the port of re-delivery, the ship’s port of registry and the defendant’s place of domicle

Actions arising from a dispute over a protection and indemnity contract shall be under the jurisdiction of the maritime court where the subject matter of insurance is located, where the accident occurred or where the defendant is domiciled.

Actions arising from the service contract of crew, shall be under the jurisdiction of the maritime court of the place where the plaintiff is located.or where the contract is signed, where the port of embarkation and disembarkation of the crews is located or where the defendant is domiciled.

Actions arising from a dispute over maritime security shall be under the jurisdiction of the maritime court of the place where the collateral is located or where the domicle of the defendant is located, actions arising from a dispute over a ship mortgage may also be under the jurisdiction of the maritime court where the ship’s port of registry is located.

Actions arising from a dispute over the ownership, possession, employment and maritime lien of a sea going ship shall be under the jurisdiction of the maritime court of the place where the ship is located, where the ship’s port of registry is located or where the defendant’s domicle is located.

Where all the parties to a maritime dispute are foreigners, foreign enterprises have agreed in writing to be subject to the jurisdiction of a maritime court of PRC though the place actually related to the casualty is not within the territory of PRC, the said maritime court shall have jurisdiction over the dispute.

The Chinese maritime court also allowed the application by the claimants for the preservation of evidence. Some conditions must be met before such an application is approved. First the claimants must be a party to the dispute, second the evidence to be preserved must substantiates the maritime claims, thirdly, the party against whom an application is made, is a party to the dispute and lastly, there must be fear that the respondents may disperse off the evidence which are hard to obtain.

Arbitration in China

China has been advocating the use of arbitration to resolve commercial disputes. Arbitration has made 4 decades of progress in PRC.

China’s first Arbitration Law was propagated on 31 Oct 1994 and came into effect on 1 Sept 1995

An arbitration agreement means an arb clause stipulated by their parties in the contract or a written agreement to refer their dispute to arbitration. Chinese law requires a valid arb agreement to name the Arb Commission so choose, parties must have capacities to sign the arbitration agreement

A party may object to the jurisdiction of an arbitration commission if he has justifiable reasons and such objection must be raised before the first hearing or in the case of documents only arbitration, before the service of the first defense.

Preservation of Property and Preservation of Evidence can be effected by application to the intermediate people’s courts. Such application is made by the arbitration commission.

Enforcement of arbitration award by a Domestic Arbitration Institution must be lodged with the Intermediate People’s Court. The competent court will only review the arbitration procedures adopted. But it will not require the evidence to be verified, or investigate whether the law is properly applied and neither would the court examine the actual compensation to be paid.

If the party is domiciled outside China, the applicant shall directly request a competent foreign court to recognize its validity and enforce the award

Enforcement of an Award issued by a Foreign Arbitration Commission shall apply directly to the local Maritime Court in China and if there is no maritime court, then to the Intermediate People’s Court for enforcement action. The intermediate People’s Court shall act in accordance to international treaties which China has concluded or to which China is a party on the basis of the principle of reciprocity.

CIETAC, also named as the Court of Arbitration of China Chamber of International Commerce from 1 October 2000. It is headquarted in Beijing with sub branches at Shenzhen and Shangai

CMAC, China Maritime Arbitration Commission, headquartered in Beijing with sub-commission in Shanghai (established Jan 2003). A Fishery Dispute Resolution Center was also established in Jan 2003 within Shanghai CMAC

Capt Lee Fook Choon
Maritime Law Seminar
Jakarta, December 2006