Recent Development Of The Forum Non Conveniens Principle In China

Abstract

Last year, China amended its Civil Procedure Law. On 1 January 2024, the amended Civil Procedure Law was implemented. The amended Civil Procedure Law elevated the principle of forum non conveniens to a legal provision for the first time, and further refined the rules for handling cases under that principle.

Over the past decade, Chinese courts have rarely applied the principle of forum non conveniens due to the strict criteria for its application. Judges have also tended to adopt a more cautious approach when deciding whether a case is of interest to Chinese citizens, enterprises, and other organizations. This article will discuss the development and future trend of the doctrine of forum non conveniens in China in light of this historical backdrop, both in terms of its evolution and application.

Origins of the principle of forum non conveniens in China

Historically, China's Civil Procedure Law and related judicial interpretations did not recognize the principle of forum non conveniens. In the 1980s, Chinese courts began to encounter more foreign cases, though the judicial approach to these cases largely adhered to the “principle of long-arm jurisdiction”, which does not recognize the principle of forum non conveniens. The overall attitude of the Supreme People's Court in 1989 was that:

“For economic disputes occurring outside of China over which the courts of China do not have jurisdiction, except for disputes involving real property rights, as long as both parties have agreed in writing to litigate in Chinese courts, the people's courts of China shall acquire jurisdiction over such litigation on the basis of the written agreement submitted by the parties. In the absence of such an agreement, if one party files a lawsuit with the people's court of China and the other party responds to the lawsuit and defends itself on the substantive issues, the parties are deemed to have recognized the jurisdiction of the people's court of China over the lawsuit.”

This approach to jurisdiction gave rise to a number of complications. In particular, where parties insisted on filing suit in Chinese courts despite fairly tenuous links to the jurisdiction, the Chinese courts often did not have sufficient legal grounds to dismiss for lack of jurisdiction. As a result, courts faced several challenges in hearing such cases, notably the inability to serve legal documents, difficulties in investigating and obtaining evidence, the inability to hold court hearings, problems in ascertaining foreign law, and problems in recognizing and enforcing judgements overseas.

In 1993, the Shenzhen Intermediate People's Court accepted the Dongpeng Trading Company v. Bank of East Asia case, which concerned a dispute arising from a letter of credit. In that case, both parties were registered in Hong Kong, China. After the court had accepted jurisdiction over the case, the defendant filed a jurisdictional appeal, and the case was accordingly submitted to the Supreme

People's Court. Before the Supreme People's Court, the principle of forum non conveniens was applied. In particular, given that both parties were Hong Kong companies, the dispute had no real connection with mainland China. Accordingly, for the purpose of facilitating the litigation, the Supreme People's Court ruled that the plaintiff's lawsuit should be dismissed. This case became the earliest application of the principle of forum non conveniens in China's foreign-related civil and commercial practice. Subsequently, there have been a number of cases in which jurisdiction was declined on forum non conveniens grounds.

Development and in relation to forum non conveniens in China

In 2004, the Fourth Civil Division of the Supreme People's Court stated in its “Answers to Practical Questions on Maritime Trial in Foreign-related Commercial Matters (I)” that despite the absence of specific legal provisions, the people's courts may apply the principle of forum non conveniens to decline jurisdiction. This marked the first time such a position was adopted. However, forum non conveniens was still said to be subject to the court's discretion in determining whether or not to apply the principle would be applied.

In 2005, the Supreme People's Court's Proceedings of the Second National Working Conference on Maritime Trial of Case-Related Commercial Matters identified for the first time the seven elements under which the doctrine of forum non conveniens would be applied by the Chinese courts: (1) the defendant requests the application of the principle of forum non conveniens or raises a jurisdictional challenge, and the court which is hearing the case in question considers that the principle of forum non conveniens may be applied; (2) the court where the case is heard otherwise has jurisdiction over the case; (3) there is no agreement between the parties to choose the jurisdiction of Chinese courts; (4) the case does not fall within the exclusive jurisdiction of the Chinese courts; (5) the case does not involve the interests of citizens, legal persons or other organizations in China; (6) the major facts in dispute in the case did not occur within the territory of mainland China and the laws of the PRC are not applicable, such that the Chinese court hearing the case would face major difficulties in determining the facts of the case and in applying the relevant law; and (7) the foreign court is the more convenient forum.

In 2014, the principle of forum non conveniens was formalised in article 532 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China. The 2022 of the said law shifted the principle to article 530, albeit without any change in its content. From 2014 to 2024, invoking the principle of forum non conveniens thus entailed six requirements: (1) the defendant filed a jurisdictional challenge or a request that the case be heard by a more appropriate foreign forum; (2) there was no agreement between the parties to choose the jurisdiction of the courts of the PRC; (3) the case did not fall within the exclusive jurisdiction of the courts of the PRC; (4) the case did not involve the interests of the Chinese State, citizens, legal persons or other organizations of the PRC; (5) the main facts in dispute in the case did not occur in the territory of the PRC, and the case does not apply the laws of the PRC, such that the Chinese court hearing the case would face significant difficulties in determining the facts and applying the law; and (6) the foreign court is the more appropriate forum.

In practice, however, the six elements set out above have not been accorded equal weight. In practice, cases “involving the interests of the Chinese state, citizens, legal persons or other organizations”

pre-dominate. For example, in TCL v. Ericsson, which concerned an alleged abuse of a dominant market position the Supreme People's Court was heavily influenced by the fact that the plaintiff TCL's registered address and principal place of business were all located in China. Moreover, the effects of the alleged market abuse occurred in China. Accordingly, the Court considered that the case involved the interests of Chinese legal persons, and found that Ericsson was unable to show that there would be serious difficulties for the Chinese courts to determine the facts and apply the law. Ericsson's attempt to rely on the doctrine of forum non conveniens was accordingly dismissed.  

In the case of Beijing Shentong Culture Club Co., Ltd. v. Zhou Songjian, the court stated that Beijing Shentong Culture Club Co., Ltd. was a legal person incorporated in Mainland China, and that the outcome of the case thus involved the interests of Mainland Chinese legal person such that the doctrine of forum non conveniens did not apply. Similarly, in Chang An Ship Holdings Corporation v. Qingdao Huiquan Shipping Company, the court found that the defendant company was a Chinese legal person and had a direct interest in the outcome of the case. Therefore the doctrine of forum non conveniens was again not applied.

In addition, even if the Chinese persons or entities are not themselves parties to the dispute, but merely third parties, the doctrine of forum non conveniens may nonetheless not be applied. As an example, in Australia Duro-Felgra Pty Ltd v. Dalian Huarui Heavy Industry International Trading Co, the fact that one of the third parties which was not directly involved in the trial was a Chinese entity was one of the reasons why the court considered that the case involved “the interests of Chinese parties”. This case demonstrates that judges had a great deal of discretion in applying the six elements of forum non conveniens as it previously operated.

Further development of the principle of forum non conveniens in China

The Civil Procedure Law of the People's Republic of China (Amended 2023) set out the principle of forum non conveniens in statutory form for the first time. Importantly, significant amendments to the principle's application were made:

As can be seen from the table above, the new rules have deleted “the interests of citizens, legal persons or other organizations” in the fourth element, and instead emphasize the protection of national sovereignty, security and social public interests. The new rules have also deleted the fifth element, i.e., the non-application of Chinese law as a factor giving rise to a major difficulty in the application of the law. With the continuing improvement in the expertise of Chinese lawyers involved in foreign disputes and the greater adoption of foreign law in disputes involving Chinese parties, the obstacles to determinations as to foreign law have largely been ameliorated. Certain courts have also set up tribunals specifically for cases involving foreign legal systems, such that the non-application of Chinese law to a case is no longer an “inconvenient” circumstance which might engender a finding of forum non conveniens. In addition, article 282(2) improves the avenues for subsequent relief from the application of the principle of forum non conveniens. If a foreign court refuses to exercise its jurisdiction, the Chinese court will exercise jurisdiction over the case.

China has, by legislation, appropriately extended the conditions under which a finding of forum non conveniens will apply. However, it will take the time to find out exactly how the courts will apply this legislation moving forward.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.