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China’s Next Step in the Belt and Road Initiative: Establishment of the International Commercial Courts

Winston & Strawn LLP

China August 6 2018

On 1 July 2018, the Supreme People’s Court of The People’s Republic of China (the SPC) enacted the Provisions of the SPC on several issues regarding the Establishment of the International Commercial Courts (Fa Shi [2018] 11) (the Provisions). The Provisions set forth detailed rules governing the two International Commercial Courts (the IC Courts) to be established in Shenzhen and Xi’an.

According to the Provisions, the IC Courts are established to serve and safeguard, inter alia, the construction of the Belt and Road Initiative.

As outlined below, the Provisions contain innovative ideas that may bring international experience to the operation and adjudication practice of the IC Courts. However, it remains to be seen how widely the parties to the Belt and Road Initiative will use the IC Courts.

The full text of the Provisions in Chinese is available here.

Level and Jurisdiction

According to Article 1 of the Provisions, the IC Courts are permanent adjudication mechanisms of the SPC, which indicates that judgments issued by the IC Courts have the same force of judgments issued by the SPC (i.e., judgments not subject to appeal).

Further, according to Article 2 of the Provisions, the IC Courts shall have jurisdiction on five categories of cases:

First-instance international commercial cases with a total amount in dispute of more than RMB 300 million, whereby the parties choose to submit the case to the SPC by agreement according to Article 34 of the PRC Civil Procedure Law;First-instance international commercial cases under the jurisdiction of Higher People’s Court, whereby the Higher People’s Court deems necessary that the case should be heard by the SPC and the SPC approves;First-instance international commercial cases that have major impacts nationwide;Application for preservation measures assisting in arbitration, setting aside or enforcement of arbitration award; andOther cases where the SPC considers appropriate to be tried by the IC Courts.

In light of the above, the IC Courts may not have jurisdiction on inter-state or investor-state disputes. In addition, it will be interesting to see whether foreign parties, especially those in the Belt and Road countries, choose the IC Courts in their dispute resolution agreements with Chinese parties (rather than major international arbitration institutions), taking into account that judgments issued by the IC Courts may only be enforced in a limited number of foreign jurisdictions through international treaties or the principle of mutual reciprocity.

Judges

According to Article 4 of the Provisions, the judges of the IC Courts shall be appointed by the SPC and be familiar with international treaties, customs, and the practice of international trade and investment. The judges shall also be able to work in both Chinese and English. According to the SPC, the newly appointed judges of the IC Courts are all Chinese nationals and most have foreign education backgrounds.

The ability to work in both Chinese and English will be useful, especially given that, pursuant to Article 9 of the Provisions, evidence in English could be submitted to the IC Courts without attaching Chinese translation, if the opposing party agrees. However, the Provisions do not stipulate whether hearings before the IC Courts can be conducted in English (in whole or in part).

Support to Arbitration and Mediation

Article 11 of the Provisions states that the SPC shall establish an international commercial expert commission, and select qualified international commercial mediation institutions as well as international commercial arbitration institutions, to establish a one-stop-shop for international commercial dispute resolution. In addition:

Article 12 and 13 of the Provisions provide that the IC Courts may entrust the international commercial expert commission or international commercial mediation institutions for mediation if the parties agree, and that the agreement reached during the mediation may be issued as a consent judgment or judgment that shall be binding on the parties.Article 14 of the Provisions provides that parties in an arbitration conducted in an international arbitration institution selected under Article 11 of the Provisions may apply for preservation measures on evidence, property or conduct (证据、财产、或者行为) in the IC Courts before or after commencement of the arbitration proceedings.

Establishment of the international commercial expert commission is an innovative idea and may bring international experience to the operation and adjudication practice of the Courts. It is yet to be determined who will serve as experts in this commission and how they will work with Chinese judges.

Nonetheless, the Provisions do not specify which international arbitration institutions may be selected under Article 11 of the Provisions. Accordingly, it remains to be seen whether non-Chinese arbitration institutions1 may be selected.



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