By Li Yongmei of King & Wood’s Dispute Resoluton Group

The PRC Civil Procedure Law ("Old Law"), which was promulgated by the seventh National People’s Congress of People’s Republic of China ("NPC") and became effective on April 9, 1991, was amended for the first time on October 28, 2007 on the 13th session of the Standing Committee of the 10th NPC. The amendments to the Old Law ("New Law") came into effect on April 1, 2008. The New Law will reconcile the conflicts of the retrial system and civil enforcement system during the implementation of the Old Law. Also, the amendment have been coordinated with the PRC Enterprise Bankruptcy Law effective as of June 1, 2007, by deleting the chapter titled "Bankrupt Procedures of Enterprise Legal Person".

I. Improving the Retrial System

Through a retrial, a competent people’s court may re-try a case if a lower court’s decision is incorrect. After retrial, the retrial court may revoke or revise the original decision according to law. Therefore, the retrial procedures are important to the parties as they are the last opportunity to justify their legal rights and interests. The New Law addresses potential logjams in the retrial process, such as problems with retrial petition acceptance, and improves the existing civil retrial system in substance and in procedure by integrating Chinese courts’ practical experiences in trials in recent years.

    A. Retrial Petition and Trial Procedures Standardization

    The New Law has standardized the retrial petition process and trial procedures by implementing a few changes.

    First, the New Law empowers higher courts to accept retrial petitions for decisions rendered by lower courts. The New Law revised the relevant provisions in the Old Law and Opinions of the Supreme People’s Court on Regularizing the Acceptance of Retrial Petition by the People’s Courts and clarifies that the parties may directly submit the retrial petition to the people’s court at the next higher level.(1) This change solves problems related to previous procedures which did not clarify which court may accept retrial petitions. Such lack of clarity often led to courts of the same level performing retrials, or, in some instances, the original court retrying its own case by error! The New Law improves impartiality, public creditability, and authoritativeness of a retrial ruling.

    Second, the New Law balances the rights of the claimant and respondent during the retrial. Article 180(2) of the New Law makes it clear that the respondent has the right to submit its opinion on the retrial application in writing. Such provision provides the respondent with an opportunity of defense, helps the retrial court gain a comprehensive understanding of both parties’ arguments and evidences, and enhances the fairness and accuracy of retrial. This amendment is consistent with the impartial policy of the people’s courts.

    Third, the New Law extends the statute of limitations to file retrial petition, to make it consistent with the statute of limitation provided by the General Principles of Civil Law(3) . Article 184 of the New Law provides that

    "where a party wishes to petition for retrial, such petition shall be filed within two years from the date when the court decision became effective; such petition shall be filed within three months from the date such party is aware of or should be aware of the fact that the writ or order on which the original court decision had been revoked or modified or that the personnel involved in the original trial had committed embezzlement, accepted bribery, sought for personal interests or bent the law during the original trial after two years from the date when the court decision became effective."

Compared with the Old Law which merely provides the two year span of the statute of limitation, the New Law has added two special situations in which the statue limitation for retrial petition may be recalculated beyond the two-year limit.

Fourth, the New Law has added provisions to discipline the courts’ practice during the retrial application review and trial procedures. For example, Article 181 of the New Law provides that

    "the people’s court shall review and examine the case within three months from the date of receiving the retrial application and accept the retrial application where the application meet any of the circumstances specified in Article 179 of this Law; the court shall reject the retrial application where the application does not satisfy any of the circumstances specified in Article 179 of this Law. Where special circumstances in which the review period needs to be extended arise, such extension shall be subject to the approval of the president of the competent court. A case that a party petitions for retrial shall be retried by a people’s court at a level higher than an intermediate people’s court. A case that the Supreme People’s Court or a high people’s court rules for retrial shall be retried by the court that rules for retrial or another people’s court, or the people’s court that initially tried the case."

This provision sets the time limit for reviewing and examining the retrial application, which is helpful to protect the parties’ rights and improves litigation efficiency; this provision also clarifies which court shall retry the case, which increases the authoritativeness of retrial.

B. Defining Substantive Conditions to Initiate Retrial

A case must satisfy the substantive conditions as provided in the New Law before it qualifies for a retrial. The New Law refines the three grounds for retrial under the Old Law and makes these grounds more operable. In general, the New Law has inserted 10 new grounds on which the parties may petition for retrial and the procuratorate may make defense.

First, Article 179 of the New Law retains the three substantive conditions to initiate retrial provided in the Old Law. These conditions are

    a. where sufficient new evidence is found to overturn the original court decision;  

    b. where the application of law in the original court decision is erroneous;

    c. where breaches of statutory litigation procedures that affect the accuracy of the original court decision exist or the judiciary have committed embezzlement, accepted bribes, sought personal benefits or bent the law during the trial of the case.

Second, the New Law refines the existing substantive conditions in the Old Law and adds new conditions. One of the new substantive conditions provided in the New Law is "where the basic facts affirmed by the original court decision lack the support of substantial evidence", which is an improved version of "the primary evidence on which the original court decision affirmed the facts were insufficient" as provided in the Old Law. Although this amendment abandons the obscure expression that the "primary evidence was insufficient" under the Old Law and explains that the "primary evidence" as the evidence used to prove the basic facts, the amendment is silent on what "basic facts" means and such silence could easily result in controversy in practice. Therefore, the amendment needs to be further improved.

Third, the New Law specifies another 11 situations under which a case shall be retried based on the past trial experience. These provisions covering procedural and substantive issues in retrial aim to ensure the legality of trial procedures and the accuracy of court decisions.

Under the New Law, a case shall be subject to retrial if the following procedural flaws are found:

    a. the court of original trial failed to cross-examine the primary evidences upon which the original court decision was based;

    b. the application of jurisdiction was wrong;

    c. the trial(4) proceeded in a form that was illegal;

    d. a disabled person or one who is not sui juris participated in the trial without his next friend or any party who shall be present at the trial did not do so because of an incident not arising from the fault of such party or its next friend;

    e. the right of a party to argue was deprived during the original trial in breach of law; or

    f. the court rendered the original decision where either party had not been served with a summons and therefore had failed to be present at the court.

The said provisions regarding cross-examination, jurisdiction, judiciary and the parties’ participation ensure the legitimacy of trial procedures.

The New Law also provides that a case shall be retried if the following substantive defects are found:

    a. the primary evidence based on which the court affirmed the facts was forged;

    b. the facts which the original trial court affirmed lack the support of evidences;

    c. the parties, which were unable to collect evidences by themselves needed for the original trial because of an external cause, had applied to the people’s court for assistance in investigation and evidence collection in writing but the court failed to provide such assistance;

    d. some claims of the parties were overlooked in the original court decision or the original court decision went beyond the scope of the parties’ claims; or

    e. the writ or order on which the original court decision was made has been revoked or revised.

The said provisions regarding the authenticity of evidence, evidence collection, and legal basis for court ruling guarantee the accuracy of the "basic facts".

C. Consolidating the Supervision by the People’s Procuratorates

The New Law further strengthens the supervision by the people’s procuratorates and expressly specifies the 14 situations in which the people’s procuratorates may file an objection to a retrial. The New Law also sets forth that the people’s court must rule on retrial within 30 days upon receiving the protest of the people’s procuratorate. Such amendments not only expand the conditions under which a procuratorate may file a protest, but also avoid the delay in the initiation of retrial due to the law’s silence on the time limit for the court to rule on retrial upon receiving the procuratorate’s protest.

II. Reinforcing Civil Enforcement

The New Law establishes a series of new systems based on practical experiences to strengthen civil enforcement in various aspects and clear the roadblocks of enforcement in practice. The New Law improves civil enforcement in the following aspects:

    A. Reinforcing Civil Enforcement by Implementing Immediate Enforcement, Property Filing, Severe Penalty and A System to Deter Non-Enforcement

    a. Immediate Enforcement

    Under to the Old Law, the enforcement measures could only be taken if the notice of enforcement is delivered to the enforcee. This defective provision fails to stop some enforcees from transferring their property to another place or concealing their property immediately upon receiving the notice and is likely to impair the creditors’ rights and invade the sanctity of law. To correct such deficiency in the Old Law, Article 216 of the New Law provides that if the enforcee fails to fulfill its obligations specified in a writ or order and is suspected of concealing its property or transferring its property to another place, the enforcement officers may take enforcement actions immediately.

    b. Property Reporting System

    In practice, although certain local courts send a Property Filing Notice to the enforcee, such practice lacks legal grounds and therefore often encounters practical obstacles. Article 217(5) of the New Law establishes a property reporting system and the legal liabilities for failure of performing such obligations. This system is conducive to force the enforcee to cooperate in enforcement and makes it possible to conduct enforcement where the party applies for enforcement are unaware of the enforcee’s property’s status.

    c. Deterring Non-enforcement

    The New Law establishes a coordinated system to reduce non-enforcement. If the enforcee fails to fulfill the obligations specified in a writ or order, the people’s court may notify relevant agencies to restrict the enforcee from leaving the country, instruct the enforcee’s credit records to include non-enforcement records or provide public notice through the media of the non-enforcement. The said measures form a coordinated supervision force, which ensures that the enforcee performs its obligations. Such measures also help to maintain the equity and authority of law by preventing the enforcee who refuses to perform while maintaining a luxurious lifestyle or continuing its regular investment and borrowing activities.

    d. Severe Penalties

    Merciful penalties are likely to cause a delay or rejection of enforcement by the enforcee or the agency which is obliged to provide assistance during enforcement (the "Assisting Entity"). The highest fine for the Assisting Agency provided by the Old Law was only RMB30,000, which is too small to deter Assisting Entitles with substantial financial strength. For various reasons, some Assisting Entitles would rather pay the fine than assist in the enforcement. The New Law increases the fines for non-enforcement up to RMB10,000 for individuals and up to RMB300,000 for entitles. The highest fine for non-enforcement under the New Law is 10 times as that under the Old Law.

    Also, the New Law expanded the scope of parties subject to detention to the person in charge and the person bearing primary liability for non-enforcement in the Assisting Entitles which refuses to assist during enforcement. Such amendment is a breakthrough, compared to the detention provision in the Old Law which only covers the person in charge and the person primarily liable for non-enforcement from the enforcee. The New Law, under which the enforcee and the Assisting Entitles must consider the risks of being detained and the legal costs of non-performance, helps to deter the parties from refusing to perform their obligations during enforcement.

B. Empowering the Parties to Choose the Enforcing Court

Targeting local protectionism in civil enforcement, the New Law entitles the parties to apply to the court at a higher level for enforcement. Where the local protectionism is found after the court at the higher level investigates, the higher court may order the court conducting the original trial to enforce the case within a given time limit or order another court to enforce. To clear the roadblocks of a higher level enforcement, the New Law provides that

    "Effective court decisions on civil cases and the paragraphs relating to property in court decisions in criminal cases shall be enforced by the people’s court of first instance or the people’s court at the same level at the domicile of the property to be enforced. Other writs or orders that shall be enforced by a people’s court according to law shall be enforced by the people’s court at the domicile of the enforcee or at the domicile of the property to be enforced."

C. Extending the Time Limit to File an Enforcement Application

The Old Law sets forth different time limits, which are up to one year, for different subjects of enforcement. The New Law no longer differentiates the subjects of enforcement and provides a unified two-year time limit for the submission of an application for enforcement. The New Law also clarifies the provisions on the suspension and interruption of the statute of limitation in other laws will apply to the suspension and interruption of the statute of limitation for the submission of an enforcement application. The said clarification ensures the applicants can exercise their rights while applying for enforcement, and their rights of enforcement application are protected at the same time.

In addition, the New Law specifies the method of calculating the time limit for enforcement application:

    a. The time limit shall start from the last day of the enforcement period specified in the court order;

    b. Where the court order requires bifurcated enforcement, the time limit shall start from the last day of the specified period for each stage;

    c. Where the court order is silent on the period of enforcement, the time limit shall commence from the day when the court order comes into effect. Such provision reduces the uncertainty arising from a different understanding of the calculation of such period.

D. An Enhanced Enforcement System

Certain practical barriers to enforcement are simply illegal behavior. For this reason, the New Law upgrades the system under which an enforcement can be challenged. Such change provides the parties and the interested parties with additional procedural remedies for illegal enforcement. This enhanced system — which also empowers the parties and the interested parties to petition for reconsideration at a higher court against a court decision with which they disagree and specifies the time limit of reviewing the challenge/disagreement against the original court decision. It helps to discipline the courts’ enforcement practice and guard the parties’ legitimate rights and interests.

E. Redefining Enforcement Agencies

The enforcement agencies under the Old Law shall be the primary people’s courts and the intermediate people’s courts. But in practice, the high people’s courts and the Supreme People’s Court, which supervise the people’s courts at lower levels, also share the enforcement responsibilities. As no law empowers the Supreme People’s Court to participate in civil enforcement, the enforcement agency of the Supreme People’s Court has engaged in civil enforcement through an expanded practical interpretation of the Old Law. The New Law clarifies that the people’s court in any level may establishes it own enforcement agency, as needed, which provides the legal ground for the Supreme People’s Court and the high people’s courts to establish their own enforcement agency. This revision is consistent with the current situation of and the practical needs for civil enforcement.

III. Removing Provisions on Bankruptcy Procedure of Enterprise Legal Person

The Enterprise Bankruptcy Law, which was promulgated in 2006, sets forth provisions regarding the bankruptcy procedure of legal person enterprise which apply to all types of enterprises in the PRC. Therefore, it is unnecessary to retain in the New Law the provisions on the bankruptcy procedure of enterprise legal person which were in the Old Law that overlap with the corresponding provisions in the Enterprise Bankruptcy Law. The foregoing provisions have been deleted in the New Law for purpose of the consistency of law.

Based on the existing provisions in the Law as well as past experiences and practical needs, the New Law improves the retrial system and the enforcement system. The New Law is far from perfect; however, its positive effect upon promulgation is undeniable. It is believed that China’s civil procedure system will be further refined with the government’s continuing legislative efforts.

The article was originally written in Chinese, the English version is a translation. This article was first published in the firm’s periodical China Bulletin April Issue, 2008, Vol.32)

Notes:

(1) Article 178 of the New Law provides that if the parties believe that an effective court judgment is erroneous, then they may petition at a people’s court at the next higher level for retrial; however, the enforcement of the effective court decision shall not be suspended or terminated due to the initiation of such petition.

(2) Article 180 of the New Law provides that

    "A party that petitions for retrial shall submit a retrial petition and other required materials. The people’s court shall, within five days upon receiving the retrial application, deliver the copy of the retrial application to the counterparty. The counterparty shall submit its opinions in writing within 15 days upon receiving the copy of the retrial application; if the counterparty fails to submit it opinions in writing, it will not affect the review by the people’s court. The people’s court may require the claimant and the respondent to provide additional materials and inquire on relevant matters."  

(3) Article 135 of the General Principles of Civil Law provides that the statue of limit for filing a petition at a people’s court for protection of civil rights shall be two years, unless otherwise provided by other laws or regulations.

(4) In China, a civil case may be tried by a single judge or a collegiate bench consisting of three judges or more judges in an odd number larger than three.

(5) Article 217 of the New Law provides that

 "If the enforcee fails to fulfill the obligations specified in a writ or order as instructed in the enforcement notice, the enforcee shall provide a list of its existing property and its property within one year before receiving the enforcement notice. Where the enforcee refuses to provide the said property list or provides false information in the said list, the people’s court may, based on the circumstances, impose a fine on or detain on the enforcee, its next friend or the person in charge in the related organization or the person bear primary liability in such organization."