Chinese Private International Law

Xiaohong Liu, Zhengyi Zhang, Xiaohong Liu, Zhengyi Zhang

• Publisher: Hart Publishing
• Year: 2021
• ISBN:
  9781509924394
• Edition: 1
• Topic: Law
• Subtopic: Conflict of Laws
• Index: Law

Written with the assistance of a team of lecturers at the Shanghai University of Political Science and Law, this book is the leading reference on Chinese private international law in English. The chapters systematically cover the whole of Chinese private international law, not just questions likely to arise in commercial matters, but also in family, succession, cross-border insolvency, intellectual property, competition (antitrust), and environmental disputes. The chapters do not merely cover the traditional conflict of law areas of jurisdiction, applicable law (choice of law), and enforcement. They also look into conflict of law questions arising in arbitration and assess China's involvement in the harmonisation of private international law globally and regionally within the Belt and Road Initiative. Similarly to the Japanese and Indonesian volumes in the Series, this book presents Chinese conflict of laws through a combination of common and civil law analytical techniques and perspectives, providing readers worldwide with a more profound and comprehensive understanding of Chinese private international law.

1

Subject Matter of Private International Law

XIAOHONG LIU, XIN CAI

Private international law deals with legal issues that cross national lines. The subject matter of private international law is civil and commercial legal relationships containing foreign-related factors. These are also known as the ‘international civil and commercial legal relationship[s]’, ‘transnational civil and commercial legal relationship[s]’, ‘civil and commercial legal relationship[s] with international factors’, or ‘private international law relationship[s]’.¹ Traditional Chinese private international law theories and judicial practice determine whether a case is subject to private international law mainly based on two factors: first, whether the legal relationship is civil and commercial; second, whether there is a ‘foreign-related’ or ‘international’ factor in the case.

I.Definition of the Civil and Commercial Legal Relationships

Civil and commercial legal relationships recognised by private international law refer to the personal property and non-property relations that occur between equal parties.² Chinese scholars and practitioners generally adopt an enlarged understanding of civil and commercial relationships. This understanding includes foreign-related property relationships, debt relationships, intellectual property relationships, marriage and family relationships, and inheritance relationships, as well as company legal relationships, instrument legal relationships, maritime legal relationships, insurance legal relationships, and bankruptcy legal relationships.³

II.Definition of the Foreign-Related or International Factors

Chinese private international law scholars typically define ‘foreign-related’ or ‘international’ factors as being composed of three elements, which together constitute the ‘three elements test’. These are: (i) the parties; (ii) the subject matter; and (iii) the juristic fact. As long as there is a foreign-related factor in any one of the three elements, the legal relationship is determined to be foreign-related.⁴ The ‘three-element-test’ is generally endorsed by legislation. Article 178 of the Opinions on Several Issues Concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China for Trial Implementation (hereinafter referred to as the ‘Opinions on the Implementation’) provides that:

Where either party or both parties in a civil legal relationship is an alien, a stateless person, or a foreign legal person, and the object of the civil legal relationship is within the territory of a foreign country, and the legal facts that produce, alter, or annihilate the civil relations of rights and obligations occur in a foreign country, such relationship shall be called foreign-related civil relations.⁵

In 1992, the Supreme People’s Court issued Some Issues Concerning the Application of the Civil Procedure Law of the People’s Republic of China. In Article 304, it clarifies the identification of ‘foreign-related civil cases’ from the perspective of procedural law. It provides that:

Civil cases in which one party or both parties are foreigners, stateless persons, foreign enterprises or organizations, or the legal facts for establishment, alteration, or termination of a civil legal relationship between the parties concerned takes place abroad, or the subject matter of an action is located abroad, are civil cases involving foreign elements.⁶

The two judicial interpretations are consistent with the criteria for foreign-related factors, and all adopt the ‘three-element-test’. In judicial practice, most judges also use the three-element-test to determine whether a case should be included in the scope of private international law, especially when the parties have foreign-related factors. According to an empirical study on Chinese foreign-related commercial cases, in 1,000 foreign-related civil and commercial cases concluded by Chinese courts, there were 483 cases involving foreign parties, accounting for 48.3 per cent of all foreign-related cases. There were 463 cases involving Hong Kong, Macao, and Taiwan, accounting for 46.3 per cent of all foreign-related cases. However, the traditional ‘three-element-test’ and related judicial interpretations have gradually exposed some problems in practice. According to this test, the determination of whether a case has foreign-related factors can only be made on the basis of the parties, the subject matter, or the juristic facts. At the same time, there were irrationalities in early judicial interpretations. Those opinions only considered the element of nationality when determining whether the parties were foreign-related. Whereas for determining the foreign-related nature of the subject matter and juristic facts, they adopted expressions that were not very accurate, such as the ‘foreign field’ or ‘in the foreign country’. These have been criticised by scholars and it is generally believed that the understanding of the ‘foreign-related factors’ standard should be broader. It cannot be limited to the three traditional situations: parties, subject matter, and juristic facts.⁷ Some scholars have pointed out the complexity of foreign-related factors step-by-step and believe that it is necessary to consider ‘hidden foreign-related cases’, ‘false foreign-related cases’, and ‘special types of foreign-related cases’ under special circumstances.⁸

Subsequently, in 2011, The Law of the People’s Republic of China on Choice of Law for Foreign-related Civil Relationships (the ‘Application Law’) was promulgated. It serves as the current legislation. Article 1 states that the object of adjustment of the law is ‘foreign-related civil relations’, but it does not directly stipulate how to determine the ‘foreign-related’ factor.⁹ In 2012, the Supreme People’s Court of the People’s Republic of China (SPC) issued the Interpretations of the Supreme People’s Court on Several Issues Concerning Application of the Law of the People’s Republic of China on Choice of Law for Foreign-Related Civil Relationships I (the ‘Application Law Interpretation (I)’). It clearly defines how to determine a ‘foreign-related’ factor. Article 1 of the Application Law Interpretation (I) stipulates that:

Where a civil relationship falls under any of the following circumstances, the people’s court may determine it as foreign-related civil relationship: 1. where either party or both parties are foreign citizens, foreign legal persons, or other organizations or stateless persons; 2. where the habitual residence of either party or both parties is located outside the territory of the People’s Republic of China; 3. where the subject matter is outside the territory of the People’s Republic of China; 4. where the legal fact that leads to the establishment, change, or termination of civil relationship happens outside the territory of the People’s Republic of China; and 5. other circumstances under which the civil relationship may be determined to be a foreign-related civil relationship.¹⁰

The provisions of the Application Law Interpretation (I) are more comprehensive and complete than previous judicial interpretations. On the one hand, the traditional three-element system has been followed, but it has been expanded and partially improved. For example, in addition to the previous nationality standard, the place of habitual residence is now also used as a criterion for judgment. At the same time, the expression ‘foreign’ has been changed to ‘outside the realm of the People’s Republic of China’, which is more rigorous and thorough. On the other hand, the miscellaneous provisions have been added. Application Law Interpretation (I) provides a more flexible space for judging foreign-related issues in judicial practice.

III.Case Studies

A.Foreign-Related Factor According to the Nationality of the Parties¹¹

In the Xiao 1 and Xiao 2 inheritance dispute appeal case, one of the parties, Xiao 3, was a Canadian citizen. The court held that Article 1(1) of the Application Law Interpretation (I) required that Xiao 3 be considered a foreign citizen, so the civil legal relationship in this case was a foreign-related civil legal relationship.

B.Foreign-Related Factor According to the Residence of the Parties¹²

In the Wu Yubin and Xiong Wanyi contract dispute case, Xiong Wanyi and Li were husband and wife. The two registered their marriage on 30 April 2002. Wu Yubin’s investment dispute with Li, Wei, and Huang occurred during the marriage between Xiong Wanyi and Li. The court held that Xiong Wanyi should pay the debt arising from Li’s obligation to return of Wu Yubin’s investment of 1 million yuan and interest of 24,464 yuan. The court found that, because Xiong Wanyi had worked and lived in the US for a long time, the provisions of Article 1(2) of the Application Law Interpretation (I) required that the case be considered as a foreign-related civil case.

C.Foreign-Related Factor According to the Nationality of a Legal Person¹³

In the Paul Frank Industries LLC and Beijing Yichengshun Trading Co Ltd copyright infringement dispute case, Paul Frank was the copyright owner of two works of art, ‘Julius’ and ‘Paul Frank Official Logo’, and enjoyed the copyright of the two works of art. In 2017, Paul Frank found that unauthorised sales by Beijing Yichengshun Trading Co Ltd consistently utilised the overall image and visual effects of the ‘Julius’ and ‘Paul Frank Official Logo’ art works. Paul Frank sued Beijing Yichengshun to stop the infringement and seek compensation for its losses. The court held that Paul Frank LLC was registered at 10100 Santa Monica Boulevard, Los Angeles, California, so there were foreign-related factors and the case was subject to the Application Law Interpretation (I).

D.Foreign-Related Factor According to the Nationality of a Legal Person¹⁴

In the Château Lafite Rothschild and Shanghai Mellowines Development Co Ltd trademark infringement case, the plaintiff alleged that the two defendants had imported and sold a large number of wines with the ‘Lafitte Manor’ and ‘Chateau Moron Lafitte’ logos through their official website and promoted, displayed, and sold the alleged infringing goods on the Tmall website. The plaintiff asked the court to order the defendant to stop the infringement and compensate the plaintiff for its loss. The court held that, as the plaintiff was an enterprise established in France, the case involved a foreign-related civil relationship under the first paragraph of Article 1 of the Application Law Interpretation (I).

E.Foreign-Related Factor According to Juristic Facts¹⁵

In the Hu Chao and Li Gen private pending dispute case, the two parties were friends. From 7–13 May 2016, they went to Macau to gamble with Peng and Luo. After shopping, they went to the casino to gamble. Capital chips were borrowed. On 11 May, Li Gen wanted to go to the casino to gamble again and asked Hu Chao to lend him 100,000 yuan. Hu Chao did not agree at first, but Li Gen persisted, so Hu withdrew RMB 100,000 from his bank at Macao. Li Gen promised to repay in instalments but failed to do so. He instead asked Hu to delay the repayment period. Hu did not agree and took the case to court. The court held that, even though both parties were Chinese, the loan between them had been made in the Macau Special Administrative Region of the People’s Republic of China. Accordingly, under Article 1, Paragraph 4 of the Application Law Interpretation (I), which states that ‘where the legal fact that leads to the establishment, change, or termination of a civil relationship happens outside the territory of the People’s Republic of China’, the case must be treated as involving foreign-related civil relations.

F.Foreign-Related Factors Based on the Location of the Subject Matter¹⁶

In the Jiangsu Hongyu Solar Energy Industry Co Ltd, Shen Zhui and Fan Jinmei property disputes case, Jiangsu Hongyu alleged that the company had sent a solar water heater worth US$25,683.68 to Shen Zhui in September 2009. The water heater had been transported to and stored in Romania and then sold with Shen Zui’s assistance. After Shen Zhui received the goods in Romania, he stored the goods in a warehouse leased under his name. On 29 December 2009, after Shen Zhui returned to China, Hongyu Company asked Shen Zhui to disclose the whereabout of the goods and to provide storage information about them. But Shen Zhui refused. Fan Jinmei was the wife of Shen Zhui, which meant that Fan was jointly responsible for Shen’s debts during the marriage. Shen Zhui and Fan Jinmei jointly argued that Shen Zhui had no relationship with Hongyu Company, nor did he conduct any transactions, nor did he receive, store or transfer any goods in Romania. They submitted that Hon...