How will the new PRC Civil Procedure Law affect the foreign-related litigation process?

The Meeting of the 14th National Congress Standing Committee has approved the Decision on Amending the Civil Procedure Law of the People's Republic of China. The new PRC Civil Procedure Law will be effective from 1 January 2024.

This amendment to the PRC Civil Procedure Law has consequences for the foreign-related litigation process as it expands the jurisdiction of Chinese courts over foreign-related civil cases.

Firstly, two types of exclusive jurisdiction situations are added: 1) litigation arising from disputes over the establishment, dissolution and liquidation of legal persons or other organizations established in China and the validity of its resolutions; 2) litigation arising from disputes over the validity of intellectual property rights granted in China.

Secondly, also foreign-related civil disputes can be governed by Chinese courts as long as there are other "appropriate connections" with China. Although the "appropriate connections" needs to be further explained and defined, this change will significantly broaden the Chinese court’s jurisdiction over foreign-related civil cases. However, parties also always have the right to appoint the Chinese court by agreement (express consent) even if there is no actual connection to China. Furthermore, if the parties do not raise objections to jurisdiction, and respond to or counterclaim, the Chinese Court shall be deemed to have jurisdiction (implied consent).

Nevertheless, courts should fully respect the autonomy of the parties so if the parties enter into an exclusive jurisdiction agreement and appoint a foreign court, which does not violate the provisions of the Civil Procedure Law of China on exclusive jurisdiction nor involves China's sovereignty, security or social public interests, the Chinese court may rule not to accept the case (or dismiss after acceptance of the case).

In addition, the new Civil Procedure Law adapts the principle of “inconvenient jurisdiction”. In a foreign-related civil case accepted by a Chinese court, if the defendant objects to jurisdiction, and the following circumstances occur at the same time, it may rule to reject the lawsuit and inform the plaintiff to file a lawsuit in a more “convenient” foreign court:

(1) The basic facts of the dispute in the case do not occur in China, and it is obviously inconvenient for the Chinese court to hear the case and the parties to participate in the lawsuit;

(2) There is no agreement between the parties to choose the jurisdiction of the Chinese courts;

(3) The case does not belong to the exclusive jurisdiction of the Chinese courts;

(4) The case does not involve China's sovereignty, security or social public interests;

(5) It is more convenient for foreign courts to hear the case.

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