Opinions of the Supreme People’s Court on Providing Judicial Safeguard to the Construction of Free Trade Zones

FF [2016] No. 34

With a view to fully exerting the judicial functions and roles of the people's courts and safeguarding the construction of free trade zones in China (hereinafter referred to as the "FTZs"), according to relevant decisions made by the Standing Committee of the National People's Congress and in light of the trial practice, the following opinions on the trial of cases involving FTZs by the people's courts are hereby given:

I.    Deepening the understanding, and effectively strengthening the sense of responsibility and mission for providing judicial safeguard to the construction of FTZs.

1.   Fully understand the significance of FTZ construction. A FTZ is an experimental field of China's reform and opening up, and is an important window for China to build a new and open economic system. The construction of FTZs is a driving force for refining the systems and mechanisms of China's economy, and has a great impact on law enforcement.  People's courts at all levels shall proactively strengthen judicial countermeasures, develop overall consciousness of promoting the governance of the country by law in an all-round way, act in strict compliance with law, hear various cases involving FTZs in a just and effective way, fairly protect the legitimate rights and interests of the parties concerned at home and abroad, and provide proper and effective judicial safeguard to the construction of FTZs.

2.   Guarantee the systematic innovation in the construction of FTZs by law. The construction of FTZs undertakes the historic mission of exploring new ways and gaining new experience in China's comprehensively deepened reform and opening up, and is a positive try in making central decisions based on the lawfully recognized evidence in any major reform. People's courts at all levels shall explore reform measures to provide judicial safeguard for FTZs, which are required to be taken within the framework of the law. Timely adjust the judging criteria, actively support the transformation in government functions, respect contracting parties' autonomy of will, and guarantee the transaction security based on the accurate application of law.

Enthusiastically participate in the modernization construction of the governing system and governing capacity within the FTZs. In such works as transformation in government functions, opening up of investment, transformation in trade development, opening up and innovation in finance, and improvement on the rule of law, people's courts at all levels shall, in light of their own judicial practice, proactively coordinate the implementation of all reform measures, actively refine the working mechanism, innovate working methods, fully contribute to the fostering of a fair, open and transparent environment for the rule of law, and of an international and convenient business environment rule by law.

II.  Fully exerting the judicial functions and roles to provide judicial safeguard for the healthy development of FTZs.

3.   Well perform the criminal trial functions, and fight against criminal offences within the FTZs by law. Fight against crimes such as destruction to construction of FTZs and misuse of special supervision conditions in FTZs, and safeguard social society and market order of FTZs. Focus on dealing with intellectual property infringement and cross-border crimes. Impose punishment against smuggling, illegal financing, evasion of foreign currency, money laundering and other crime behaviors in FTZs according to laws. Distinguish the boundaries between crime of misstating registered capital, crime of false funding, crime of flight of capital contribution, crime of illegal business operation and non-crimes.

4.   Strengthen civil trials in FATs, and legally protect the civil rights of the parties involved. Strengthen labor protection, correctly handle labor disputes between the employers and employees, and promote health development of the enterprise employment system in FTZs. Protect the consumers’ rights, safeguard the safety of the consumers’ personal information, strictly review the clauses of the service contract forms, and impose punishment against encroachment of the consumers’ rights due to false advertising. Protect ecological environment, and actively hear lawsuits filed by relevant authorities and organizations against damage to social public interests, environment pollution with severe risks and ecological destruction.

Properly deal with such issues as “putting the residences into commercial use” and “allowing two or more companies to register at the same address” which commonly occur in FTZs. Correctly understand and use the restrictions on transforming the residences into commercial houses in Article 77 of the Property Law of the People's Republic of China, and safeguard the normal routines of the masses. If more than one company is registered at the same address, pay attention to confusion of property and personality when dealing with relevant cases and legally safeguard the creditor’s interests.

Strengthen juridical protection on intellectual property in FTZs. Encourage self-innovation, and increase the infringement cost. Improve juridical policies concerning processing trade, and promote transformation and upgrading of processing trade. Accurately distinguish normal OEM processing, unauthorized processing, out-of-scope and over-quantity product processing and sales. Properly parallel import issues of trademark products, and reasonably balance the consumers’ rights, trademark owner’s benefits and national trade policies. Encourage intellectual property subjected investment, promote the innovation of the business modes, simplify right protection procedures, and improve quality and effectiveness of right protection. Encourage financing activities by intellectual property mortgage, and promote the transfer of intellectual property.

Strengthen maritime trial. Standardize the construction of the shipping market, support the opening of the service sector in FTZs, promote the international shipping service level, enhance the international shipping service functions 9, focus the on ship registration system reform and other new type cases new cases associated with shipping, and study law applicability and specific jurisdiction concerning new relations of maritime laws. Immediately confirm relevant rules by trial of typical cases, guide industrial behaviors and promote industry development.

5.   Actively execute administrative trial functions, and support and supervise legal administration in FTZs. Support and supervise the innovative service pattern of the market supervision department, and perform administration according to laws. Promote government information disclosure depending on trial activities. If the contract signed by enterprises registered through foreign investment projects violates industry access requirements of FTZs which leads to impossible performance in fact or according to laws, but the party involved asks to continue its performance, the people’s court shall reject it.

If system defects and unstandardized administrative behaviors in association with the market rules of FTZs are discovered during case trial, the people’s court shall provide feedback to the administrative management department or propose juridical suggestions so as to improve the legal construction in FTZs.

III. Legally support innovations of enterprises in FTZs, and encourage to explore a new business pattern.

6.   Encourage innovative development of the financial lease industry in FTZs. Actively ensure the financial lease enterprises in FTZs to perform financing businesses according to laws within the approved business scope. Fully respect the agreement of jurisdiction and law applicability on financial lease contract disputes by Chinese and foreign parties involved. Correctly determine the force of the financial lease contract, and do not determine the financial lease contract as ineffective only due to non-performance of relevant procedures and other reasons.

7.   Support cross-border e-commerce services in FTZs. Reasonably determine the nature of the contract between the consumers and cross-border e-commerce enterprises. If the contract specifies that the consumer shall assume customs duty and post risks, it is deemed that the entrust contract relationship exists between the consumers and cross-border e-commerce enterprises. If the e-commerce enterprise is subject to batch import but partial sales and the consumer claims to establish a purchase and sale contract relationship with the e-commerce enterprise, the people's court shall support this claim. If the e-commerce enterprise concludes arbitration clauses with the consumer on the basis of the contract and it is specially indicated that the consent is obtained from the consumer, it is deemed that the parties hereto have reached an arbitration agreement.

IV. Attach important to characteristics of FTZs, and explore reform and innovation of trial procedures.

8.   Improve judicial trial and judicial confirmation system, and support diversified dispute resolution mechanism of FTZs. Encourage to resolve civil and commercial disputes in FTZs through arbitration, mediation and other diversified mechanisms, and further explore and improve lawsuit and non-lawsuit based conflict and dispute resolution mechanism. Support innovative development of the arbitration organization, people's mediation committee, business and industry mediation organization, and provide judicial convenience for diversified civil and commercial dispute resolution in FTZs.

Strengthen construction of the courts and judicial organizations in FTZs. The local people’s court in FTZs may set up a special courts or collegiate panel according to the number, type, nature and actual conditions of accepted cases, hear cases of the FTZs, accumulate trial experience, and unify the ruling standards. Encourage people’s courts at all levels to form a judicial mechanism conforming to geographical characteristics on the basis of trial experience.

9.   Correctly determine the force of the arbitration agreement, and standardize judicial review of arbitration cases. Exclusively foreign-funded enterprises registered in FTZs reach an agreement that commercial disputes are filed to the overseas arbitration organization, it is not deemed to determine relevant arbitration agreements as ineffective due to that the dispute is irrelevant to foreign elements.

One party or both parties is/are exclusively foreign-funded enterprise(s) in FTZs and reach(s) an agreement on filing the commercial dispute to the overseas arbitration organization. In case of any disputes, if the parties involved file the disputes to the overseas arbitration organization but make a claim that they refuse to recognize, accept or execute the arbitration for the reason that the arbitration agreement is invalid after relevant arbitration is concluded, the people’s court shall support this claim. If another party involved fails to raise any objection on the force of the arbitration agreement in the arbitration procedures but make a claim that they refuse to recognize, accept or execute the arbitration for the reason that relevant disputes are irrelevant to foreign elements after relevant arbitration is concluded, the people’s court shall reject it.

If specific persons arbitrate relevant disputes according to specific arbitration rules at locations specified in the agreement between enterprises registered in FTZs, it is deemed that the arbitration agreement is valid. If the people’s court deems the he arbitration agreement as invalid, apply to the superior court for review. If the superior court disagrees the opinion of the inferior court, and submit the review opinions to the Supreme People's Court level by level, and give a ruling after the Supreme People's Court gives a response.

10. Explore innovation of trial procedures, and fairly and effectively hear cases of FTZs. When the people’s court in charge of first trial civil and commercial cases in FTZs hears the cases of FTZs, if one party or both parties involved is/are civil subject(s) from Hong Kong, Macao and Taiwan, we can select the citizens from Hong Kong, Macao and Taiwan as people's assessors to participate in the collegiate panel.

If the people’s court hears first trial civil and commercial cases related to foreign countries, Hong Kong, Macao and Taiwan in FTZs where the fact is simple and legal relations are clear, we can explore applicable simple procedures.

Appropriately handle the service issues in cases with the enterprise which is registered in the area and operated outside the area. For legal persons and other organizations registered in FTZs, the registration address is deemed as the service address of litigation documents of the people’s court, the documents can be served by post. If the overseas civil subject establishes an enterprise or office in FTZs as the business agent, the document can be served to the business agent. If the overseas civil subject designates the work personnel of its branch or the lawyer of the domestic law firms as the agent ad litem for particular business within certain time in specific areas, the document can be served to the agent ad litem.

11. Establish a reasonable foreign law ascertainment mechanism. When the people’s court hears the overseas civil and commercial cases related to FTZs, of the parties involved reach an agreement on applicable foreign laws but fails to provide laws of the country without just reasons within the reasonable period specified by the people’s court or the laws of the country do not specify it, the laws of the People’s Republic of china shall prevail. The people’s court can notify the parties involved if he knows. If the parties not only fails to provide laws but also do not ascertain foreign laws via the approaches agreed in international agreements signed by China, the experts jointly designated by the parties involved may provide the laws before first trial. If it is applicable to foreign laws according to the conflict rules, the people’s court shall ascertain the foreign laws within its power.

12. Well hear cases in FTZs, and summarize reproducible experience. The Supreme People’s Court shall attach full importance to case trial in FTZs, and strengthen prospective study. The local people’s courts shall promptly study and summarize on hot and difficult issues discovered during trial of relevant cases in FTZs and give a response, and immediately propose suggestions to the Supreme People’s Court.

The Supreme People’s Court

December 30, 2016