Highlights:

The Draft Amendment contains substantial changes to the Civil Procedural Law, with an aim to solve many practical problems in civil trials from small claims to enforcement. One of the fundamental legislative purposes of the current amendment is to provide more rights to Chinese citizens in civil trials, and to make the country’s civil trial system more transparent.  It is also observed that the proposed amendment published for public comments has drawn heated public debates on many issues from both the general public and legal professionals. 

Main Article

In recent years, China has continuously reformed its legal system, and has gained significant experience in judicial practices.  However, China continues to meet new challenges to be addressed by new or amended laws.  Against this background, the Draft Amendment to the Civil Procedural Law of the PRC (the “Draft Amendment”) was published for public comments on October 29, 2011.  When the final amendment is promulgated, it will be the first time that the PRC Civil Procedural Law is substantively amended since its enactment in 1991, and it will have a major impact on how civil disputes will be handled in China.  We list below some of the most important changes and supplements introduced by the Draft Amendment.

Pre-trial Mediation in Civil Procedure

Mediation is an important form of judicial practice in China.  A Court will often attempt to mediate during the trial of a civil case, because it is a traditional and efficient way to resolve disputes between the parties while maintaining their future relationships.  If a settlement is reached, the court can render a judgment based upon the settlement agreement (a consent judgment), which is directly enforceable.

China has a long-established system of “the People’s Conciliation Committee,” whose main function is to receive requests from parties to mediate a dispute before trial.  A settlement reached under the guidance of a conciliation committee is not directly enforceable.  In recent years, as China’s economy is continuing to grow, caseloads in court are becoming increasingly heavy.  The Draft Amendment attempts to resolve this problem by creating a new mechanism for formal pre-trial mediation.  Before the trial begins, the court may try to settle disputes that have not been handled or resolved by the People’s Conciliation Committee.  If successful, the court can directly issue a settlement agreement that is enforceable. A trial is no longer necessary, thereby saving judicial resources.

Public Interest Litigation

The PRC Tort Liability Law enacted in 2010 grants Chinese citizens the statutory right to sue companies for tort damages.  However, for most claims that involve environmental pollution and food safety, individuals who act as the plaintiffs are in a weak position against large corporate defendants. To better protect the interests of individual victims and to prevent further injury to the general public, the Draft Amendment proposes to grant relevant institutions and social organizations a legal standing to file lawsuits where public interests are at stake.  The Draft Amendment limits public interest litigation to cases involving environmental pollution and consumer rights.

Access to Court Records

China is primarily a “civil law” jurisdiction, with a system that uses statutes as the major source of law and does not officially recognize the authority of precedents as in the common law system.  Nonetheless, the capability to make a reference to decided cases similar in facts and legal principles can provide significant guidance for winning an argument before a court in practice.  Thus far a problem has been that court records are not open to the public but are only available to the parties for their own cases. To solve this problem, the Draft Amendment proposes that all the final judgments and rulings be made accessible to the public. Understandably, more transparency will improve the quality of trials, and judgments and will provide parties with more opportunities to cite cases as a reference when arguing in court.

Enforcement

One of the most-cited challenges to the civil litigation system in China is the difficulty to enforce a judgment.  In practice, judgment creditors will gather and provide to the court relevant information on the locations of judgment debtors’ properties, while on the other hand it is relatively easy for a debtor to evade enforcement measures. To better protect judgment creditors, the Draft Amendment increases the maximum financial penalty for bad-faith evasion of enforcement up to RMB 100,000 for an individual and up to RMB 1 million for an entity.  The Draft Amendment also proposes to introduce detention measures as a form of penalty and suggests that a party that intentionally evades the enforcement of an effective judgment or arbitration award could face criminal liability.

In addition, the Draft Amendment proposes to introduce a new procedure of “pre-judgment enforcement” by plaintiffs. Besides property preservation, a plaintiff can also apply for a pre-judgment injunction to require a defendant to do or refrain from doing specific acts.

Conclusions

The above features are only some of the highlights of the Draft Amendment. Other interesting amendments are also important, including new rules on evidence production, on making small-claim judgments final at the trial court level, and on requiring courts to provide written reasons for refusal to hear a case.  It remains to be seen which parts of the Draft Amendment will eventually become law, but this initiative has already drawn much publicity and heated public discussions on some topics.