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Gard News has a look at legal proceedings in the People’s Republic of China.

General
The law of the People’s Republic of China (PRC) is based on statutes as it is in the civil law tradition. The statutes are written in ordinary language and are understandable and accessible to the general public. Unlike a common law jurisdiction, although the PRC courts can refer to previous judgments, court judgments in the PRC are not binding precedents. Each case is decided on its own merits and on the applicable statutes. The PRC judges, however, do have some leeway to interpret the applicable statutes in reaching their decision on cases.

Judicial guidelines
From time to time, the Supreme People’s Court, the highest court in the PRC, issues judicial guidelines and interpretations of statues which are circulated to the lower courts. These guidelines are not statutes but are opinions of the Supreme People’s Court and are often followed by the judges in the lower courts. The Supreme People’s Court recently published the “Notice of Supreme People’s Court on circulating the ‘Summary of the Second National Working Conference on Foreign-related Commercial and Maritime Trials’” (the Supreme Court’s Notice). This is a useful guideline from the court and covers a wide range of general litigation issues and maritime disputes concerning, for example, release of cargo without an original bill of lading, marine insurance contracts, ship collision, oil pollution, etc.1

Maritime courts
The PRC has established specialised courts to deal with maritime matters. Currently the PRC has ten maritime courts: Guangzhou, Dalian, Beihai, Ningbo, Qingdao, Haikou, Shanghai, Wuhan, Tianjin and Xiamen. Some of these maritime courts have branches in other locations which hear cases for the convenience of parties not in the maritime court cities.

Any party not satisfied with the judgment of the maritime courts can apply to appeal to the Higher People’s Court in the provinces or the municipal cities where the maritime courts are situated. In some circumstances, a party may even apply for a retrial to the Supreme People’s Court in Beijing.

Power of attorney
A party to legal proceedings is required to execute and file a power of attorney (POA) authorising a lawyer to act as its agent ad litem and also a “certificate of legal representative”. Normally, the POA will entrust the lawyer with wide powers to, for example, represent the party to appear in court, acknowledge and waive any litigation requests, apply for evidence preservation, file and sign any court documents and make any court applications, accept service of documents, etc. Those acts which need special authorisation are generally set out in detail in the POA.

For parties residing outside China, the POA and the certificate of legal representative are generally required to be notarised and legalised by the PRC embassy or consulate in the particular country where the party is situated and where the POA and the certificate of legal representative are executed. As regards evidence, the Supreme Court’s Notice states that the litigants can decide whether or not to notarise and legalise the evidence originating from a foreign country. Nevertheless, it is advisable to notarise and legalise all evidence, if possible.

Legal proceedings
Legal proceedings are commenced by the claimant by filing a statement of claim. The statement of claim identifies the defendant(s) and sets out the details and amount of the claim. If satisfied that the statement of claim meets jurisdictional and other requirements, then the court issues a notice of acceptance to the claimant and a notice of response (attaching the statement of claim) to the defendant. The defendant, if not residing in China, has 30 days after receipt of the notice of response to file the defence. The court will send a copy of the defence to the claimant.

A hearing is then scheduled. At the court hearing three judges (with one presiding) decide the matter. The claimant makes a short statement of its claim after which the defendant makes a short statement of its defence. A so-called “investigation stage” commences during which the documents or evidence will be produced and examined by the court. The parties then enter into the “debate stage”. The parties advance their arguments both on facts and law. Finally, the parties have a chance to present closing submissions. The judges then render the judgment.

Judge’s mediation and MSA
The PRC has a procedure known as “the judge’s mediation”. This procedure is at the option of the parties. The judge participates in a mediation within the legal proceedings after the first hearing. The judge assists the parties in reaching a settlement and incorporates the settlement terms into the judgment. The judgment/settlement can then be enforced by the parties. A judge-mediated judgment/settlement which is acknowledged and signed by the parties can not be appealed. Judge’s mediation is a popular procedure in China.

Shipping companies which trade in China will also be familiar with the MSA (Maritime Safety Administration). The head office of the MSA is in Beijing. An MSA office is designated to be responsible for every port in China. The MSA is in charge of port state control and investigates accidents which happen at sea, e.g., ship collisions, groundings, fires/explosions, pollution, etc. The MSA issues investigation reports and, in some cases, on the parties’ request, may give rulings as to which party is responsible for the incident.

Arbitration
In contracts parties can agree to refer any of their disputes to arbitration. But although the PRC has adopted the institution of arbitration, it has not adopted ad hoc arbitration. Ad hoc arbitration is a proceeding that is not administered by others and requires the parties to make their own arrangements for selection of arbitrators and for designation of rules, applicable law, procedures and administrative support. For example, a contract clause stating that the parties agree that all disputes should be referred to arbitration in Hong Kong with Hong Kong law to govern is an ad hoc arbitration clause. In order to be enforced, clauses should provide for institutional arbitration by designating an institution as the arbitration administrator, e.g., the LMAA. In the PRC, the commonly used systems for international arbitration are those administered by the Chinese International Economic Trade Arbitration Commission (CIETAC) and the Chinese Maritime Arbitration Commission (CMAC).

Footnote
1 Anyone interested in receiving a copy of these guidelines (please specify English or Chinese) should contact Gard.

Gard News 185, February/April 2007

Any comments to this article can be e-mailed to the Gard News Editor.

Gard News is published quarterly by Gard AS, Arendal, Norway.