Key Amendments to the Civil Procedure Law: With a Focus on Expansion of Jurisdiction, Parallel Litigation and Forum Non Conveniens in foreign-related Disputes.
Earlier this year, the amended Civil Procedure Law of the People’s Republic of China (CPL) took effect on January 1, 2024, introducing substantial changes, particularly with regard to foreign-related civil litigation procedures. These amendments come against the backdrop of a notable increase in foreign-related disputes in recent years, which highlighted challenges and inefficiencies in the application of the previous Civil Procedure Law. Many of these difficulties revolved around the complexities of jurisdiction, the handling of parallel litigation, service of process, and ensuring fairness in cross-border cases.
The revisions are especially significant for foreign-invested enterprises and Chinese enterprises engaged in cross-border transactions, as they address long-standing procedural hurdles and aim to streamline dispute resolution. In light of these developments, this article provides a concise overview of some of the key amendments, including the expansion of jurisdiction, the introduction of rules on parallel litigation, and the application of the doctrine of forum non-conveniens in foreign-related disputes.
1. Expansion of jurisdiction;
The amendment expands the jurisdiction of Chinese courts over foreign-related civil and commercial disputes. It builds on the conditions outlined in Article 276, which primarily set the criteria for Chinese courts to assert jurisdiction in cases where the defendant is not based in China. These criteria include the following events occurring within Chinese territory: the place where the contract was signed, the place where the contract was performed, the location of the subject matter of the lawsuit, the place where property subject to seizure is located, the place of the tortious act.
Under the amendment, Chinese enterprises can now file lawsuits in disputes that have “appropriate connections” with China. While the term “appropriate connections” is not explicitly defined, this addition grants Chinese courts broader discretion to determine whether foreign-related civil and commercial cases have sufficient links to China, thereby expanding their jurisdiction over such disputes.
1.2 Jurisdiction Agreements;
The amendment also addresses jurisdiction agreements, as outlined in Article 277. It allows parties in foreign-related civil cases to mutually agree in writing to submit their disputes to the jurisdiction of Chinese courts. Through this provision, parties can create exclusive agreements designating China as the forum for resolving any foreign-related disputes, with such agreements being enforceable.
1.3 Exclusive Jurisdiction
The amended Article 279 broadens the scope of cases under the "exclusive jurisdiction of the People’s Court" from one type of relationship to three. The newly added categories include disputes involving the establishment, dissolution, or liquidation of legal entities or organizations within the People’s Republic of China, as well as the validity of their resolutions. Another new category covers disputes related to the review of the validity of intellectual property rights granted in China. Additionally, the article retains the provision for disputes over the performance of contracts involving Sino-foreign joint ventures, cooperative joint ventures, and natural resource exploration agreements within China’s territory. This expansion allows Chinese companies, whether operating domestically or internationally, to bring cases involving foreign entities to Chinese courts in more situations.
2. Parallel Litigation and Forum Non Conveniens
2.1 Parallel Litigation
The Amendment allows parallel litigation, enabling a Chinese court to hear a case even if one party is pursuing proceedings in a foreign court, as long as the Chinese court has jurisdiction under the PRC Civil Procedure Law. If the case advances beyond the filing stage, Chinese courts may still dismiss it or suspend proceedings at the request of the parties unless there is: (1) an explicit written agreement designating a Chinese court to hear the case, (2) the case falls under the exclusive jurisdiction of PRC courts, or (3) the PRC courts are deemed more convenient for hearing the case.
2.2 Forum Non Conveniens
Under Article 282, the amendment formally adopts the doctrine of forum non conveniens. Widely applied in many jurisdictions, this doctrine allows courts to decline jurisdiction over a case if it would be more appropriate for another court to hear it. In China, a party may challenge a court's jurisdiction based on this doctrine if several conditions are met. These include: the primary disputed facts occurred outside China, making it clearly inconvenient for Chinese courts and parties to handle the case; there is no agreement designating a Chinese court's jurisdiction; the case does not fall under the exclusive jurisdiction of Chinese courts; it does not involve issues of China’s sovereignty, security, or public interest; and a foreign court would be better suited to hear the case.
Conclusion
The broader jurisdictional reach under the amended Civil Procedure Law increases the likelihood that foreign-related disputes will be adjudicated in Chinese courts, which could significantly impact both foreign-invested enterprises and domestic companies, engaged in international trade. Businesses will need to carefully consider and draft jurisdiction clauses in contracts to address the potential for litigation in China, as the law now allows for exclusive jurisdiction agreements favoring Chinese courts. Additionally, the introduction of the forum non conveniens doctrine provides a mechanism for parties to challenge jurisdiction if it is deemed inconvenient, aligning China with international legal practices. As a result, companies engaged in cross-border transactions must assess the risks of Chinese courts assuming jurisdiction over their disputes and ensure that their contracts and dispute resolution strategies are adapted accordingly.
Franco Fornari
Senior Head of Department
Foreign Legal Affairs
Email: Fornari@wjngh.cn
Karen Chipita
Foreign Legal Affairs Department
Email: Chipita@wjngh.cn
