How New Civil Procedure Law Will Transform Foreign Litigation

1. Extension of the jurisdiction of Chinese courts in foreign-related cases

Where the following circumstances exist, Chinese courts may have jurisdiction

(1)  Six selections of jurisdictions

Chinese courts can extend their jurisdiction to foreign-related cases under certain circumstances. If a civil litigation (except for identity relations litigation) involves a defendant (i.e., a foreign individual or company) without domicile in China, jurisdiction may be established in the following locations:

(i) where the contract was made;

(ii) where it was executed;

(iii) where the subject matter of the dispute is situated;

(iv) where property may be seized;

(v) where the wrongful act occurred;

(vi) where the representative organization is domiciled.

(2) The parties have mutually agreed in writing to select the jurisdiction of Chinese courts.

 For example, if two expats who were previously married in the U.S. and currently live in China encountered difficulties in seeking a divorce under the previous version of the Civil Procedure Law, they now have the opportunity to commence divorce proceedings at a Chinese court. This is possible by both parties agreeing to the jurisdiction of Chinese courts through a written agreement, as stipulated in the new Civil Procedure Law.

(3) Where there are other appropriate connections

 In a civil jurisdictional dispute involving Intellectual Property Bridge No. 1 LLC, a Japanese company, and Huawei Technologies Co., Ltd. among others, the Japanese company contested the jurisdiction of the lawsuit initiated by Huawei. They argued that the dispute, centered around a license for a standard-essential patent, was essentially contractual in nature. However, as the Japanese company did not have domicile in China, they maintained that the jurisdictional connections pertaining to the contractual dispute were not relevant to this case. Consequently, they urged the Chinese court to dismiss the lawsuit.

In response to the jurisdictional objections, the Supreme Court introduced the nuanced concept of the "principle of appropriate connection." It determined that Dongguan City had a relevant link to the dispute, justifying its role as the territorial jurisdictional hub. Furthermore, under relevant regulations, the First Instance Court is empowered to handle inter-regional jurisdiction in initial patent civil cases within Guangdong Province, excluding Shenzhen City. Therefore, the court's exercise of jurisdiction is considered appropriate and free from any wrongdoing.

(4)  The parties did not raise objections to jurisdiction and instead responded to the defense or lodged counterclaims.

 For instance, in a scenario where a Chinese company entered a sales agreement with a Canadian counterpart, specifying the jurisdiction of the People's Court in Shanghai, subsequent legal action was taken by the Chinese company against the Canadian entity in the People's Court of Beijing. Despite this, the Canadian company opted not to contest jurisdiction but rather filed a defense statement with the Beijing Municipal People's Court. In light of the recently amended law, this action by the Canadian party was construed as an implicit acknowledgment of the jurisdiction of the Beijing Municipal People's Court. Consequently, the court was deemed rightfully vested with jurisdiction over the case.

2. Additional provisions on parallel proceedings

(1) Parallel proceedings in general                            

In the same dispute between parties, if one party sues in a foreign court and the other party sues in a Chinese People's Court; or if one party sues in both a foreign court and a Chinese court, the Chinese court with jurisdiction may still accept the case.

For example, a Chinese company and a U.S. company signed a supply contract, the contract did not explicitly agree on the competent court. The Chinese company sues the American company in a Chinese court, and at the same time, the American company sues the Chinese company in a U.S. court. According to the newly amended law, if the Chinese court has jurisdiction under the Civil Procedure Law, it can still accept the Chinese company's lawsuit even if the American company has also filed a lawsuit in the American court.

(2) Parallel Litigation under Exclusive Jurisdiction Agreement                            

If the parties enter into an exclusive jurisdiction agreement to choose a foreign court jurisdiction, and the agreement does not violate the provisions of this law on exclusive jurisdiction, does not involve the People's Republic of China's sovereignty, security or social public interests, the Chinese court may rule that it is not admissible; if it has been admissible, the Chinese court may dismiss the lawsuit.

For example, a Chinese company signed a sales contract with a French company and concluded an exclusive jurisdiction agreement stipulating that only the French court had jurisdiction; if the agreement did not violate the exclusive jurisdiction and did not involve China's sovereignty, security or social public interests, then even if the parties filed a lawsuit against the Chinese court, the court could rule that the lawsuit was inadmissible or dismissed.

3. Revisions to Acceptance Subjects and Modes of Foreign-related Service                

The amendment introduces new subjects and methods of document acceptance for foreign service. Notably, the main acceptance subjects now encompass: 

(1) Litigation Representatives

Service of documents is allowed on litigation agents, such as lawyers, appointed by the parties. These agents are obligated to accept judicial documents regardless of whether they possess general or specific authorization.

(2) Branches

When the recipient is a foreign legal entity (company), documents can be served on its representative office, branch, or appointed business agent in China authorized to accept service. There is no requirement to demonstrate the branch's authorization to accept service.

(3) Sole Proprietorship

If a company has established a sole proprietorship in China, legal documents can be served directly to the sole proprietorship without a separate authorization from the foreign shareholder.

(4) Foreigners or Stateless Persons

Should a foreigner or stateless individual serve as the legal representative or key decision-maker of a company or organization in China and be a co-defendant in a commercial dispute, serving documents on the company or organization is permissible.

(5) Foreign Legal Entity or Other Organization

When dealing with a foreign legal entity or organization, if its legal representative or primary decision-maker is situated in China, serving documents upon them is authorized.

(6) Electronic Means

Electronic service now extends beyond conventional methods like fax or email. What matters is ensuring acknowledgment of receipt by the recipient, as long as it complies with the recipient's country's laws.

(7) Flexible Alternatives

Agreed-upon alternative methods of service are permissible, provided they adhere to the legal framework of the recipient's country. For instance, if a trusted friend or relative delivers the document on behalf of the recipient with their consent, and without violating local laws, it is deemed acceptable.

(8) Efficient Service through Public Announcement

In cases where traditional methods are impractical, service may be conducted through public notice. The duration for such service has been shortened to 60 days, after which service is considered effective from the date of publication.

(1) China’s Reach for Evidence in Foreign Territories under Revised Civil Procedure Law        

When evidence is located abroad, the Chinese court has the authority to obtain and collect it based on provisions outlined in international treaties between the People's Republic of China and the respective foreign State. This also applies to treaties where China is a signatory. Alternatively, evidence can be procured through diplomatic channels.

For instance, if an international treaty exists between China and the foreign state, such as the Hague Convention on Evidence, the people's court may seek assistance through China's foreign diplomatic service to request the State where the evidence is located to assist in the investigation and collection process.

(2) Three Varieties of Extraterritorial Evidence Gathering Methods (Subject to Legal Compliance in the Respective Jurisdiction)      

A. In cases where the party or witness holds Chinese nationality, the Chinese embassy or consulate in their residing country may be tasked with conducting depositions on their behalf.

Embassy or consulate personnel, acting under the authorization of the people's court, can coordinate with the involved parties or witnesses, schedule the deposition proceedings, and forward the collected evidence to the court.

B. Upon mutual agreement, the People's Court is empowered to gather evidence through instant messaging platforms.

For instance, if a critical witness resides abroad and is unable to attend court proceedings in person, both parties' consent allows for remote testimony via a court-arranged video conference. During this session, the witness can provide responses to queries from lawyers and the judge. Similarly, electronic evidence such as email exchanges or WeChat conversations can be shared and presented in court hearings through instant messaging tools, subject to the consent of both parties, to substantiate relevant case facts.

C. Upon mutual agreement of both parties, the People's Court is authorized to consider alternative approaches for gathering evidence.

The amendment to the Civil Procedure Law concerning foreign-related dispute resolution procedures not only marks a comprehensive overhaul of many foundational aspects of foreign-related legislation but also incorporates numerous subtle and ingenious system designs. This not only addresses the immediate needs of foreign-related judicial practice but also reflects the unparalleled wisdom and ingenuity of the legislators.

It stands as a significant response to the evolving landscape of the times and represents an essential requirement for the full realization of China's state governance strategy governed by the rule of law, the advancement of reforms, and the expansion of international engagement. This amendment embodies a profound adaptation to the evolving dynamics of our era and stands as an imperative for the comprehensive implementation of the rule of law strategy, the deepening of reforms, and the holistic expansion of international outreach.