CHINA (PRC FIRMS): An Introduction to Dispute Resolution

The rule of law creates the best business environment. The World Bank’s Doing Business 2020 report shows that China's environment for doing business has jumped significantly. Indicators closely related to the administration of justice, such as “enforcing contracts”, “resolving insolvencies” and “protecting minority investors”, have improved significantly. Among these, China takes the lead in the “quality of judicial processes” and is appraised as the “global best performer” in this field. In the area of dispute resolution, China's new developments in the following four areas deserve attention.

Legislative Development 

The Third Session of the Thirteenth National People's Congress of the People's Republic of China adopted the Civil Code of the People's Republic of China (hereinafter referred to as “the Civil Code”). The Civil Code has seven parts and 1,260 articles. The seven parts, in turn, are General Provisions, Property Rights, Contracts, Personality Rights, Marriage and Family, Right of Inheritance, and Tort Liability and Supplemental Provision. Compiling the Civil Code was a comprehensive and systematic revision of China's civil laws and regulations formulated in different periods. The Civil Code will come into force on January 1, 2021, and the current General Principles of the Civil Law, the Contract Law, the Property Law, the Tort Law, the Guarantee Law, the Marriage Law, the Law of Succession and the Adoption Law shall be repealed simultaneously. Subsequently, the Supreme People's Court will compile and clarify relevant judicial interpretations based on the Civil Code.

Additionally, the Supreme People's Court has successively released judicial interpretations on the Company Law and the Bankruptcy Law, and the Minutes of the National Courts' Civil and Commercial Trial Work Conference, aiming to unify law application and judgment criteria, and enhance judicial transparency and predictability.

The Opening-up 

China protects the legitimate rights and interests of Chinese and foreign parties equally and is trying to create a fairer, more transparent and predictable business environment under the rule of law. The Supreme People's Court has formulated judicial interpretations on the Foreign Investment Law, established the China International Commercial Court, issued Opinions on Serving the Belt and Road Initiative and Opinions on Serving the construction of New Lingang Area of China (Shanghai) Pilot Free Trade Zone. Courts in Shanghai, Beijing, Tianjin, Hubei, Guangxi, Chongqing and Sichuan have actively improved the judicial safeguard measures for the free trade zone. Hainan Court has established the judicial service platform of the free trade port. The construction and development of the judicial system of China shows a higher level of opening-up.

Diversified Dispute Resolution Mechanism 

China has continued to strengthen the rule of law and cooperation in the field of international rule of law, actively promoted the conclusion of a Multi-party Interim Appeal Arbitration Arrangement of the World Trade Organization (WTO), and actively promoted the reform of the international investment dispute settlement mechanism, and the signing and entry into force of the Singapore Convention on Mediation. China's arbitration has followed economic globalisation, the Belt and Road Initiative and China's higher level of opening-up, and gradually formed an institutional system linked with international advanced rules. The Supreme People's Court is gradually establishing a more systematic and complete arbitration judicial review system to further create a law-based environment friendly to arbitration. Of late, the civil rulings of courts in Shanghai and Guangzhou have further confirmed the legality of arbitration procedures in Mainland China managed by foreign international arbitration institutions and clarified the legal basis under PRC law for the enforcement of arbitral awards rendered by those foreign international arbitration institutions.

Optimisation of Proceedings 

The Chinese courts have established a “one-stop” diversified settlement mechanism and separated the complex cases from the simple ones by establishing a dispute resolution mechanism consisting of mediation, quick adjudication procedures and expedited trials at the litigation service centre. In the past year, the average trial cycle of cases subject to quick adjudication and expedited trials has been shortened by 49.2% compared with that of civil and commercial cases at first instance. Meanwhile, Chinese courts promote cross-regional case filing services in which the parties concerned may choose a nearby court to file an application for case filing so as to avoid travelling. The Beijing-Tianjin-Hebei Region, Yangtze River Delta Region and Pearl River Delta Region have taken the lead to realise the full coverage of trans-regional case filing services. It is remarkable that since the outbreak of COVID-19, Chinese courts at all levels have applied remote filing and online trial so that cases can be resolved in a timely manner. By using these technological measures, the efficiency of the administration of courts has been ensured. There have been 1.36 million case filings, 250,000 trial hearings and 590,000 mediations held online during the COVID-19 epidemic.