Ik Wei Chong, Clyde + Co, Shanghai

China establishes International Commercial Courts to resolve International Commercial Disputes

China’s Belt & Road Initiative (BRI), launched in 2013, is well underway in increasing China’s regional connectivity and stimulating trade. The BRI includes multiple infrastructure projects as well as IT and finance initiatives.

Against this background, on 29 June 2018, the Supreme People’s Court of China (the SPC) officially launched its First and Second International Commercial Courts (the CICC) in Shenzhen and Xi’an respectively to handle a wide range of international commercial disputes. The CICC is intended particularly to deal with disputes arising out of projects under the BRI. The CICC has been established under the Regulations of the SPC on Several Issues Concerning the Establishment of International Commercial Courts (the Regulations)  which came into force on 1 July 2018.

Key features of the CICC

The key features of the CICC are:

  1. Jurisdiction

As a permanent judicial organ of the SPC, the CICC exercises jurisdiction over five categories of cases:

  • First-instance international commercial cases in which the parties have chosen the jurisdiction of the SPC according to Article 34 of the Civil Procedure Law, and with an amount in dispute of at least RMB300 million.
  • First-instance international commercial cases over which the Higher People’s Courts have jurisdiction but consider should be transferred to the SPC, and the SPC approves of the transfer.
  • First-instance international commercial cases that have a nationwide significant impact.
  • Cases involving applications for interim measures in aid of arbitration or for setting aside or enforcement of international commercial arbitration awards in accordance with Article 14 of the Regulations.
  • Any other international commercial cases that the SPC considers appropriate to be tried by the CICC.

‘International commercial cases’ are those with any of the following foreign elements:

  • one or both parties are foreign nationals;
  • one or both parties are resident outside of China;
  • the object in dispute is outside the territory of China; or
  • the legal facts that create, change or terminate the commercial relationship have taken place outside the territory of China.

For the avoidance of doubt, inter-state investment/trade disputes and investor-state investment disputes are not within the jurisdiction of the CICC.

  1. Judges proficient in the English language

The judges of the CICC will be selected by the SPC from those judges who have experience in international commerce and investment, and are proficient in both Chinese and English. Under the PRC law, as judges of Chinese courts must be Chinese nationals, foreign nationals are ineligible to be appointed as judges of the CICC. It has been reported that the first group of eight judges have already been appointed by the SPC in line with these requirements. Cases will be heard by a panel composed of three or more judges.

According to the Regulations, CICC Judges are required to be able to use English as a working language and there is flexibility in submitting evidentiary materials in English without producing a Chinese translation if the opposing party consents.  It is, however, unclear whether the court proceedings could be conducted in English.

  1. International Commercial Expert Committee

The Regulations provide that the SPC will set up an International Commercial Expert Committee (the Committee), which is expected to consist of experts and scholars from China and countries along the route of the Belt and Road. The main functions of the members of the Committee are to provide expert opinions and legal advice, to assist the judges of the CICC in ascertaining the content of foreign laws, and to accept authorisation from the CICC to mediate cases.

  1. One-stop dispute resolution mechanism

The CICC aims to integrate litigation, mediation and arbitration into a one-stop dispute resolution platform. This  platform provides parties a choice among the following three dispute resolution methods and the CICC will work alongside certain selected international commercial mediation and arbitration institutions and:

  • If a party has commenced a lawsuit in the CICC and the matter proceeds in litigation, the judgment will be final and binding on the parties and not subject to appeal. However, the parties may apply for a rehearing in accordance with the relevant provisions of the Civil Procedure Law.
  • If, however, the parties choose to resolve the dispute through mediation, the CICC may appoint members of the Committee or an international commercial mediation institution to conduct the mediation. If a settlement is concluded upon mediation, the CICC may issue a judgment in terms of the settlement agreement at the parties’ request.
  • If the parties choose to refer the dispute to an international commercial arbitration institution, the CICC affords assistance in hearing applications for interim measures (preservation of property/ evidence/conduct) prior to the commencement of or during the arbitration proceedings, and in hearing applications to set aside or enforce the arbitral award.

The Regulations are silent on which mediation and arbitration institutions will be selected to work with CICC. Some commentators believe that PRC domestic (for example CIETAC) rather than foreign institutions are likely to be selected to work alongside the CICC.

  1. An ambitious start

The establishment of the CICC marks the start of an ambitious project to enhance the accessibility and appeal of the Chinese courts to international businesses. The caseload of the CICC will be viewed with great interest and it remains to be seen how the key features of the CICC will effectively encourage the usage of CICC as a dispute resolution forum.

In the meantime, as with any new initiative, there are certain procedural and practical issues which will need to be further clarified in due course. We expect more detailed rules/guidelines concerning the CICC’s practices to be issued soon.