[*PG59]INTERNATIONAL CIVIL LITIGATION IN CHINA:A PRACTICAL ANALYSIS OF THE CHINESE JUDICIAL SYSTEM
Abstract: In recent years, international civil litigation in China has been on the rise. This trend will inevitably continue with Chinas entry into the World Trade Organization. Given the increase of foreign businesses in China, a better understanding of the Chinese judicial system becomes essential to protect foreign business interests. Jurisdiction, choice of law, and enforcement of judgments are three primary concerns of foreign parties seeking judicial relief and remedies in China. Questions commonly asked include: what are the bases for a Chinese Peoples Court to assert jurisdiction over foreign parties; what are the standards to determine judicial competence; how does a Chinese Peoples Court decide which law will be applied in each particular case involving foreign elements; and whether a judgment could be effectively enforced and by what means. Fear that China lacks the rule of law and an independent judicial system gives rise to hesitancy to conduct business in China and pursue legal rights. Creating public confidence in the judiciary is one of Chinas most important tasks, as it seeks to attract international business.
Foreign companies doing business in China are commonly concerned about the ability of the Chinese judicial system to protect their legitimate business interests. To many foreigners, the Chinese Peoples Courts are mysterious, particularly when dealing with international civil litigation, despite the fact that China has been opening up to the outside world for more than twenty years.1
[*PG60] International civil litigation is known in China as the civil case involving foreign elements.2 In general, a civil case involving foreign elements refers to a civil action in which: (1) at least one of the parties is a foreigner, stateless person, foreign enterprise, or organization;3 (2) the legal facts creating, changing, or terminating the civil legal relations between parties occur in a foreign country; 4 or (3) the subject matter of the dispute is located in a foreign country.5
There is no single law or regulation that specifically governs international civil litigation in China. The major piece of legislation governing international civil litigation is Part Four of the Civil Procedure Law of the Peoples Republic of China (CPL).6 Promulgated on April 4, 1991, Part Four of the CPL is entitled Special Provisions of Civil Procedures for Cases Involving Foreign Elements.7 In addition, on July 14, 1992, the Supreme Peoples Court issued the Opinions on Application of the Civil Procedure Law of the Peoples Republic of China (Opinions on CPL).8 The Opinions on CPL provide important judicial guidance for all lower courts to follow. 9
Structurally, the Chinese Peoples Courts operate at four different tiers: trial courts (basic level); intermediate courts; higher courts; and the Supreme Peoples Court, representing county, prefecture, province, and national levels, respectively.10 Special courts, such as maritime courts, railway courts, and military courts, also exist. Cur[*PG61]rently, the total number of peoples courts in China is 3568, including 32 higher courts, 403 intermediate courts, and 3132 trial courts. Among these courts, 10 are maritime courts, 60 are railway courts, and 88 are military courts.11
Under the CPL, judicial proceedings occur in two instances, namely, trial and appeal.12 A decision made by an appellate court is final, and no appeal therefrom is allowed.13 If, however, the appellate decision was in error, a retrial may be requested through the trial supervision proceeding.14 Typically, these proceedings begin in the trial courts, which exercise general trial competence.15 But, under the CPL, a higher court, including an intermediate court, higher court, or the Supreme Peoples Court, may hear a case in the first instance if the case has a potential significant impact in the areas of their respective jurisdiction.16 International civil litigation in particular normally begins at the intermediate level, though it may commence at the trial level.17 This is because most, if not all, cases involving foreign elements are regarded as major cases having significant impact.18 Therefore, the trial of such cases in the first instance rests with the competent intermediate court.19 In the Opinions on CPL, the Supreme Peoples Court defines a major case involving foreign elements as a case in which the dispute involves a large amount in controversy, complicated facts, or in which a large number of parties reside abroad.20
Within the peoples courts at the intermediate or higher level, there are special divisions, such as the foreign division or economic division, that deal with international civil litigation.21 When hearing a [*PG62]case in accordance with the CPL, the peoples court shall form either a collegial panel consisting of an odd number of both judges and judicial assessors (jurors) or judges alone, except for hearings under summary procedures in which a single judge presides.22 During a trial involving foreign elements, the foreign party may represent itself, be represented by a foreign agent ad litem, or a foreign lawyer present at the trial as a non-lawyer.23 The CPL requires that if a foreigner, stateless person, foreign enterprise, or organization needs a lawyer when litigating in a peoples court, the lawyer must be Chinese.24
During the past several years, the Chinese Peoples Courts have taken greater number of cases involving foreign elements, and this trend seemingly will continue. For example, from 1994 to 1998, the total number of cases involving foreign elements tried by the peoples courts in the first instance was 17,368, with an average 3473 per year.25 During 19982000, the average number of such cases increased to over 4500 per year (13,527 in total for the three years).26 This increase is attributed to at least two aspects. First, Chinas fast-growing economy has dramatically enhanced Chinas presence in the world market and thus significantly generated more transnational business transactions and foreign investment.27 As a result, the number of civil disputes inevitably increased.28 Second, the Chinese Peoples Courts positioned themselves to deal with litigation involving foreign parties. One particular issue arising is whether to treat both Chinese and foreign parties equally in litigation.29 The public image desired by the peoples courts is one of competence in handling cases involving foreign elements fairly and justly. To that end, the Supreme Peoples [*PG63]Court repeatedly asked all courts to exercise jurisdiction over cases involving foreign elements in strict accordance with existing law, treaty, and private agreement.30
Despite the efforts of the Supreme Peoples Court to improve the Chinese judicial system and the success of foreign parties in the peoples courts,31 many foreigners and foreign companies are still skeptical about litigating in Chinese courts. This reluctance is rooted in the fear that China is short of the rule of law in general and is lacking an independent judicial system. Nevertheless, foreigners and foreign companies doing businesses in China are subject to the jurisdiction of the Chinese courts.32 Therefore, a better understanding of the Chinese judicial system and Chinese court proceedings in international civil litigation is essential to effectively protect foreign business interests.
This Article is intended to address the Chinese judicial system pertaining to international civil litigation, focusing on practical matters that may affect foreign parties who sue or are sued in the Chinese Peoples Courts. Part I of this Article discusses the jurisdiction of the Chinese Peoples Courts in international civil litigation and the extent to which the courts strive to exercise jurisdiction. Part II analyzes the choice of law issues presented by cases involving foreign elements in the Chinese Peoples Courts. Part III deals with the enforcement of judgments by the Chinese Peoples Courts. Part IV identifies flaws in the Chinese judicial system that may affect judicial independence and justice. Part V concludes that international civil litigation in the Chinese Peoples Court requires further improvement of judicial independence in order to protect legitimate foreign interests and promote confidence in the Chinese judicial system.
The peoples courts civil jurisdiction stems from both the Chinese Constitution (as amended 1999) and the CPL.33 These documents empower the courts to adjudicate cases arising from disputes concerning property and personal relations between or among citizens, legal persons, or other organizations.34 With regard to civil litigation involving foreign elements, the jurisdiction of the peoples courts is governed by both general and special provisions of the CPL.35 In addition, the Supreme Peoples Court plays an important role in determining the lower courts jurisdiction pertaining to a particular type of case.36 For example, the Supreme Peoples Court requires that first instance cases involving patent disputes be adjudicated by an intermediate peoples court designated by the Supreme Peoples Court.37
Under the provisions of the CPL, the jurisdiction of the Chinese Peoples Courts is divided generally into four categories tier jurisdiction, transferred jurisdiction, designated jurisdiction, and territorial jurisdiction.38 In addition to proper subject matter jurisdiction, the peoples court must also meet both the tier and territorial requirements.39
Tier jurisdiction refers to the jurisdiction of the peoples courts at each level, and dictates the level at which a particular case shall be filed in the first instance.40 Since in any given case there is only one appeal available under the two-instance trials format, it is important that the case start at the correct level.41 For a case involving foreign elements, commencing it at a higher level court is desirable given that most lower courts are inexperienced in handling international civil litigation.42
[*PG65] On April 9, 1999, the Supreme Peoples Court issued a Notice on Taking of Cases Concerning Civil and Commercial Disputes at Higher Court of Provinces for the Trial of First Instance.43 According to this Notice, a first instance case involving foreign elements may commence at a higher court if the amount in controversy meets minimum requirements.44 This jurisdictional amount requirement varies depending on the location and the cause of action, as well as whether a property-related or business dispute is at stake.45 In Beijing, Shanghai, and Guangzhou, for example, the amount in controversy requirement in a business dispute case is RMB 80 million (about U.S. $9.76 million).46 In provinces such as Gansu, Guizhou, Xing Jiang, Inner Mongolia, Qinghai, Ningxia, Yun Nan, and Tibet, the amount is reduced to RMB 8 million (about U.S. $976,000) for a similar case. 47 In property-related cases, the Supreme Peoples Court set a ceiling for the number of cases per year that the higher courts may take in the first instance in addition to the amount in controversy requirement.48 An approval must be obtained from the Supreme Peoples Court if a higher court wants to take a first instance case on the ground of significant impacts when the case lacks the required jurisdictional amount, or the total number of cases taken exceeds the ceiling.49
Transferred jurisdiction is analogous to a venue transfer and deals with the transfer of a case from a non-competent court to a competent court.50 Under Article 36 of the CPL, if a peoples court finds that it has taken a case without proper jurisdiction, it shall transfer the case to the peoples court that has jurisdiction.51 If the court to which the case is transferred believes that it also lacks jurisdiction, it shall refer the case to a higher court for designation of jurisdiction.52 [*PG66]In accordance with the CPL, for transferred jurisdiction to be valid three conditions must be met: (1) the case must have been taken; (2) the transferring court must lack jurisdiction; and (3) the case must be transferred to a competent court.53 The jurisdiction of the transferring court shall be determined from the record as of the time the transferring court accepts the case.54
Designated jurisdiction occurs when a higher court orders a lower court to exercise jurisdiction that it would otherwise lack.55 Pursuant to the CPL, jurisdiction may be designated to a lower court if: (1) the case is transferred to a court that lacks jurisdiction; (2) the court that is competent could not exercise its jurisdiction due to some special reasons, such as natural disaster or on the legal grounds of recusal; or (3) more than two competent courts are in dispute over their jurisdiction on the case and the dispute cannot be solved by an agreement between the disputing courts.56
Perhaps the most important feature of the peoples courts jurisdiction is territorial jurisdiction.57 Questions of territorial jurisdiction in the peoples courts are typically determined by reference to the relations between the forum and the parties, disputes, or factum jurisdicum (legal facts).58 To be precise, territorial jurisdiction determines venue, personal jurisdiction, and jurisdiction over property.59 As noted, with regard to cases involving foreign elements, the CPL contains both general and special rules determining the peoples courts jurisdictional competence.60 The factors determining territorial jurisdiction are domicile, place of business, conduct, location of property, and party consent.61 Based on the difference of these factors, territorial jurisdiction can be further divided into general territorial jurisdiction, specific jurisdiction, consensual jurisdiction, and exclusive jurisdiction. Note that China does not follow the practice of some civil law countries, such as France, in which nationality serves as an important basis for a court to assert its jurisdiction.
General territorial jurisdiction is determined by the defendants domicile.62 The peoples courts may exercise jurisdiction over a given defendant who is domiciled, resides, or conducts business within the territorial boundary of the court, regardless of the defendants nationality.63 According to the CPL, a civil lawsuit generally shall be brought in the peoples court at the place of the defendants domicile.64 If a defendant has both a domicile and a habitual residence, jurisdiction is proper in the venue of the defendants habitual residence.65 When there are several defendants who are domiciled or reside in two or more jurisdictional territories, the courts in those territories shall all have jurisdiction.66 In this circumstance, the CPL allows a plaintiff to choose one of the competent courts. If the plaintiff files a lawsuit with two or more competent courts, the court with which the lawsuit was first filed shall exercise jurisdiction.67
The defendants domicile-based jurisdiction rests with the jurisdiction doctrine commonly characterized as plaintiffs accommodating defendant.68 An exception to this doctrine applies, however, when the personal status of the parties is involved. Under the CPL, if a civil lawsuit concerning personal status is brought against a person not residing in China, the court of plaintiffs domicile or habitual residence shall have jurisdiction.69 According to the Supreme Peoples Court, a Chinese plaintiff may sue his or her spouse in a peoples court of his or her domicile for divorce if the spouse resides in a foreign country.70
In international civil litigation, many cases involve a foreign defendant not domiciled or residing within China. In such a case, the [*PG68]peoples court has jurisdiction if the defendant has established certain connections with China.71 It is, however, important to note that mere presence in China does not constitute a basis on which a peoples court may exercise jurisdiction.72 Therefore, for jurisdiction purposes, the connection must be meaningful, providing a sufficient ground warranting the exercise of the peoples courts judicial power.
Thus, the CPL specifically grants the peoples courts jurisdiction over international civil actions founded upon claims arising out of a foreign defendants conduct or property.73 Under Article 243 of the CPL, certain specific jurisdiction rules shall apply to actions involving contract disputes or other disputes over property rights against a non-resident defendant.74 According to these rules, if the contract is concluded or performed in China, a peoples court at the place of contract or the place of performance shall have jurisdiction.75 If the subject matter of the claim is located in China, the jurisdiction shall rest with the peoples court where the subject matter of the claim is located.76 If the defendant has attachable property in China or has a representative office in China, the defendant shall be subject to the jurisdiction of the peoples court at the place of such property, or the place of the representative office.77 In a tort action, the place of tort shall be the determinative factor for jurisdiction.78
A contract or tort action requires further attention. In a contract dispute, parallel jurisdiction would exist between the court of locus contractus (the place of a contract) and the court of locus solutionis (the place of a contract performance), if these jurisdictions are different.79 In this situation, the plaintiff may choose either one of these courts for litigation.80 In a business contract, if the name of the contract does not match the substance of contractual obligations contained therein, the place of contract performance shall be determined with reference [*PG69]to the substance.81 If it is difficult to tell the nature of a contract on the basis of its substance and if the name of the contract matches part of the substance, the name of the contract shall be used to determine the place of contract performance.82 As far as a tort action is concerned, jurisdiction shall be asserted by the peoples court where the cause of action arose or the place of defendants domicile.83 The place of tort is interpreted by the Supreme Peoples Court to include both locus delicti commissi (place where a tort is committed) and the place where harms have occurred.84 Once again, the plaintiff may choose among these venues.
On November 22, 2000, the Supreme Peoples Court issued an Interpretation on Matters Concerning Application of Law in the Trial of Cases Involving Computer Network Copyright.85 In this Interpretation, the Supreme Peoples Court expanded the place of tort to include the location of the computer equipment, such as the server or network terminal, where the tortious act is committed. The Supreme Peoples Court was also of the opinion that in a tort action concerning computer network copyright where both the place of the tort and the place of defendants domicile could not be determined, the place of the network terminal equipment where the tortious contents were found may be deemed as the place of the tort.86
For cases arising from other causes of action, jurisdiction is determined with reference to other provisions of the CPL.87 For example, under Article 26 of the CPL, a case involving insurance contracts shall be adjudicated by the peoples court at the place of defendants domicile or the place where the insured object is located.88 According to Article 27, jurisdiction over disputes concerning negotiable instruments is proper at the place where payment was due.89
The CPL allows litigants to choose a court through mutual agreement.90 Therefore, the peoples courts jurisdiction could also be established by consent of the parties.91 However, under Article 244 of the CPL, such choice is subject to three conditions: (1) the agreement must be made in writing; (2) the court chosen must have an actual connections with the dispute; and (3) the dispute must involve foreign contracts or foreign property rights.92 Article 244 further requires that the parties choice of court be made without violating the provisions of the CPL concerning tier and exclusive jurisdiction if a Chinese Peoples Court is chosen.93 A similar provision is found in Article 25 of the CPL, which applies to domestic civil cases.94 It provides that parties to a contract may choose, in their written contract, to be subject to the jurisdiction of the peoples court at the place of defendants domicile or residence, contract performance, contract conclusion, or subject matter of the claim.95 Again, the choice of jurisdiction shall not violate the provisions of the peoples courts tier and exclusive jurisdiction.96
In cases involving foreign elements, a non-resident defendant may stipulate to the jurisdiction of a peoples court by consent.97 The consent need not be specifically made in writing, but may be assumed by the court through the defendants filing of an answer to the complaint.98 The defendants failure to object is essential in defendants consent to the peoples courts jurisdiction.99 Article 245 of the CPL provides that if the defendant raises no objection to the jurisdiction of a peoples court and files its answer to the complaint in a civil action involving foreign elements, the defendant shall be deemed to have accepted the peoples courts jurisdictional competence.100
The CPL expressly excludes foreign courts from exercising jurisdiction over certain civil actions over which the Chinese Peoples Courts shall have exclusive jurisdiction.101 The most prominent civil actions subject to the exclusive jurisdiction of the peoples courts are disputes arising from contracts of foreign investment enterprises (FIEs).102 Article 246 of the CPL explicitly provides that the peoples courts of China shall have exclusive jurisdiction over disputes concerning the performance within China of contracts of Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, or Chinese-foreign cooperative exploration and development of natural resources.103
In addition, certain actions shall be under the exclusive jurisdiction of a particular Chinese Peoples Court.104 In accordance with Article 34 of the CPL, if: (1) a lawsuit involves a dispute over real estate, the peoples court of the place where the real estate is located shall have jurisdiction; (2) a lawsuit involves a dispute over harbor operations, the jurisdiction shall rest with the peoples court of the place where the harbor is situated; and (3) a lawsuit arises out of the dispute over succession, jurisdiction is proper where the decedent was domiciled upon his death, or where the major estate is located.105
It is interesting to note that in a typical Chinese civil action, the jurisdictional matter is normally not addressed in either the plaintiffs complaint or the defendants answer.106 This phenomenon, in part, reflects the Chinese judicial tradition. In contrast to the adversarial model of the Anglo-American judicial system, the Chinese judicial system is premised on the inquisitorial model. Under the inquisitorial system, the court controls and shapes the litigation by conducting active and independent inquiry into the merits of the case. In the eyes of many parties, jurisdiction is often overlooked.
Since the defendants failure to object constitutes consent to jurisdiction, it is imperative that defendants, foreign defendants in particular, raise a timely jurisdictional objection.107 Under Article 38 of the CPL, if a party to a civil action objects to the jurisdiction of a peo[*PG72]ples court, the objection must be raised within the time period prescribed for the filing of answers.108 According to Articles 113 and 248, defendant shall have fifteen days, or thirty days if residing outside the territory of China, to file his answer upon receipt of plaintiffs complaint.109 Thus, if a defendant wants to challenge the peoples courts jurisdiction, he must do so within this statutory fifteen-day or thirty day period.110 According to the Supreme Peoples Court, a third party to the litigation may also challenge the jurisdiction of a peoples court if the third party has an independent claim.111 Once the jurisdiction is challenged, the court shall have fifteen days to review the challenge and make a decision in the form of a court order.112 A court order on jurisdictional matters is appealable.113
A number of Chinese scholars have strongly advocated introducing the doctrine of forum non-conveniens into the Chinese courts. In August, 2000, the China Society of Private International Law published the Model Law of Private International Law of the Peoples Republic of China (Model Law).114 Article 51 of the Model Law states that a Chinese Peoples Court may, at the request of a defendant, decline its jurisdiction over a civil action, which is lawfully under the jurisdiction of the court, if the court believes that the exercise of the jurisdiction will result in obvious inconvenience to the parties and another court would be more convenient.115
It seems in practice that the forum non-conveniens doctrine has gained some judicial recognition in the peoples courts.116 This rec[*PG73]ognition, however, is limited.117 On April 17, 2000, the Supreme Peoples Court issued a Notice on Several Questions in Adjudication and Enforcement Concerning Civil and Commercial Cases with Foreign Elements to urge the Chinese Peoples Courts not to give up jurisdiction without reasonable cause.118 According to the Notice, it is required that the peoples courts strictly follow the jurisdiction provisions of the CPL, and shall carefully review all jurisdictional matters in each case brought before them.119 It is further required that a peoples court shall neither delay nor decline exercising judicial power over the case under its jurisdiction as provided by law.120 But, if the parties to a civil litigation are all non-Chinese enterprises and the disputes have no practical connection with China, a peoples court may advise the parties to choose alternative courts in other countries.121 In this case, litigation in the peoples court would be deemed unrealistic in terms of the determination of evidence and enforcement of judgments.122
One important aspect concerning jurisdiction of the peoples courts is the arbitration clause or agreement. Under Article 257 of the CPL, the peoples courts jurisdiction is excluded in disputes arising from foreign economic, trade, transport, or maritime activities if there is an arbitration clause in such contract, or if the parties to the contract have subsequently reached an arbitration agreement for dispute settlement.123 Furthermore, pursuant to Article 259, a peoples court shall have no jurisdiction over a case in which an award has been made by a foreign arbitration body.124 However, these restrictions do not apply if the arbitration clause or agreement is found invalid or the arbitration award is set aside by court order.125
Another factor affecting the peoples courts jurisdiction over foreign defendants is service of process. It is critical to note that service of process in China is deemed judicial conduct, and therefore only [*PG74]the court may serve process.126 The CPL provides six methods of service, which include: (1) personal service upon defendant (also called direct service); (2) service left at the defendants residence; (3) entrusted service through the court of the place where defendant resides; (4) service by mail; (5) service forwarded to defendant by defendants work unit or authority; and (6) service by public notice.127Under the CPL, a receipt of service signed by the receiving person is required except for service made by pubic notice.128
If a defendant resides outside China, the extraterritorial service shall be made through either: (1) the means as provided for by international treaties to which both China and the foreign country are members;129 (2) the methods permitted by bilateral agreements for judicial assistance between China and the foreign country; or (3) diplomatic channels.130
The Chinese Peoples Courts jurisdiction can also be excluded by a statute of limitations. According to the Civil Code of 1986, except where otherwise provided by law, the limitations period for civil actions is two years from the date when plaintiff knows or should have known that his rights have been infringed.131 Under Article 136, the period is one year for actions involving: (1) personal injury; (2) sales of qualitatively substandard goods without proper notice; (3) delays in paying rent or refusal to pay rent; or (4) loss of or damage to property left in the custody of another person.132 Pursuant to the Contract Law of 1999, the time limit for actions concerning disputes over contracts for international sales of goods and import or export of technology is [*PG75]four years.133 In all others cases, the maximum time period is twenty years from the day on which the infringement occurs.134
For civil litigation in a Chinese Peoples Court involving a foreign party, a threshold issue is what law the peoples court should apply when rendering its decision. This question involves several different considerations, which include, inter alia: (1) whether the Chinese court could apply foreign law; (2) the factors considered in the determination of governing law; and (3) which law will govern if there is a conflict between the Chinese and foreign law.
Under the principle of judicial sovereignty, a court may only apply the law of the forum.135 However, the emergence and development of conflict of law principles (commonly called private international law in China) has provided situations where foreign law could be applied in a domestic court. Debates on the rational grounds for the application of foreign law aside, such application has become a common practice in almost every country in the world. China is no exception.
Nevertheless, there is no unified conflict of law legislation in China. The choice-of-law rules are scattered in several laws and regulations. The most important choice-of-law rules are the Civil Law of 1986 and the Contract Law of 1999.136 These two laws are the major pieces of legislation regulating civil and commercial matters in China and contain special provisions dealing with choice-of-laws in civil cases with foreign elements.137 The choice-of-law rules provided in these [*PG76]two laws are the combination of the rules previously used in judicial practice and theories advocated by legal scholars.138
The Supreme Peoples Courts Opinions on Several Questions Concerning Implementation of the General Principles of Civil Law (Provisional) in 1988 was another major resource of the choice-of-law rules applied by the peoples courts.139 In China, both the Civil Code and the Supreme Peoples Courts Opinions are regarded as landmarks in the development of Chinese choice-of-law rules. These sources not only offer legitimate grounds for the peoples courts to apply foreign law in a civil action involving foreign elements, but also provide the mechanisms for determining the applicable law.140
A number of choice-of-law rules adopted in China are featured with western-styled content as well as internationally accepted principles such as the principle of Party Autonomy. Some other rules clearly have their genesis in American conflict of law. The most notable example is the approach of the closest relationship. This choice-of-law approach is actually a copy of the doctrine of the most significant relationship that is the main theme of the Restatement (Second) of Conflict of Laws.141
The Chinese Peoples Courts have sought to solve the choice-of-law issue in accordance with commonly practiced standards.142 In Walt Disney Co. v. Beijing Press and Xinghua Bookstores,143 the defendants published nine fairytale books that contained the cartoon figure Mickey Mouse between 1991 and 1993. On January 31, 1994, plaintiff filed a lawsuit in Beijing No.1 Intermediate Court for copyright infringement. Defendants asked the court to dismiss the case and argued that plaintiffs did not have a valid copyright on Mickey Mouse in China under the Copyright Law of China 1990. The court rejected defendants argument and held that, although Mickey Mouse was not published in China, it should be protected under the 1992 China-U.S. [*PG77]Memorandum of Understanding on Protection of Intellectual Property Rights (1992 MOU). According to the Copyright Law of China, any work of a foreigner first published outside the territory shall be protected if the work is eligible for copyright protection under an agreement between China and the foreign country, or under an international treaty to which both countries are party. On that basis, the court applied the 1992 MOU. But in entering its judgment for plaintiff, the court further held that since the 1992 MOU was signed on March 13, 1992, it may only apply to the infringements that occurred after that date, and therefore plaintiff should not be entitled to copyright protection against defendants 1991 publication.144
Choice-of-law rules in China emphasize an actual connection or relationship between the applicable law and the nature of the case involved.145 A closer look at the choice-of-law provisions in the Civil Code of China and the 1988 Supreme Peoples Court Opinions clearly reveal that the closest relationship is the most determinative factor in the choice of law.146 This factor applies not only to restrict the parties freedom of choice of applicable law, but also to solve the choice of law puzzle posed by the factual complexity of certain cases.147 Moreover, the closest relationship test is also the identifier of applicable law when a foreign country, whose law should be applied, has plural legal systems.148
The choice-of-law rules in both the Civil Code of China and the 1988 Supreme Peoples Court Opinions are criticized for being incomplete.149 Unsatisfied with the scattered choice-of-law legislation, many call for a comprehensive conflict of law code.150 In 2000, the China Society of Private International Law published the Model Law,151 a remarkable attempt to codify the choice-of-law rules. Of the total 166 articles in the Model Law, ninety-four articles directly deal [*PG78]with the application of law.152 There is a wide-range of coverage of choice-of-law matters, including nationality and domicile, capacity, formality of conducts and agency, statute of limitations, personal rights, property rights, intellectual property rights, contract, torts, unjust enrichment and negotiorum gestio (abstract action), domestic relations, inheritance, bankruptcy, and arbitration.153
Of course, it is necessary to emphasize that China is a country with a typical civil law tradition. In this sense, the peoples courts may only apply the black letter rules. Therefore, the Model Law, however significant, may not become applicable unless and until it is adopted by the Chinese legislature. To be clear, the basic choice-of-law rules that the peoples courts currently apply can be summarized from the following perspectives.
Similar to most other countries, China adopts the Party Autonomy doctrine that allows parties to choose the governing law for their contract.154 Both the Civil Code of 1986 and the Contract Law of 1999 provide that the parties to a foreign contract may choose the law applicable to settlement of disputes arising from the contract, except as otherwise stipulated by law.155 In the absence of such a choice, the law of the country to which the contract is most closely related shall apply.156
The contractual parties freedom on choice of law is limited. First, the foreign law chosen by the parties shall be excluded if its application would harm the social and public interests of China.157 Second, the choice of law must be expressly made by the parties with mutual consent and may not be implied.158 Third, the choice shall not be made in violation of the rules mandating application of Chinese law.159 The mandatory application mainly deals with the contracts of foreign investment enterprises, such as Chinese-foreign joint ventures and contracts for Chinese-foreign cooperative exploration and development of natural resources. These contracts may only be governed [*PG79]by Chinese law. Also, under the Detailed Rules (as amended 2001) for Implementation of the Law of China on Wholly Foreign-Owned Enterprises (WFOE), a contract between a WFOE and another company, enterprise, other economic organization, or individual shall be exclusively governed by the Contract Law of China.160
With respect to the time for the parties to make a choice of applicable law, the Supreme Peoples Court took a flexible approach. According to the Supreme Peoples Court, the parties may choose the governing law through a choice-of-law clause in their contract or by agreement reached after the contract is made.161 The contract disputes for which the parties may choose the governing law include those concerning conclusion of contract, time for the conclusion, interpretation of contract terms, performance of contract, modification, suspension, assignment, dissolution, and termination of contract.162
If there is no expressed choice-of-law, the peoples courts will use the closest relationship standard to determine which law is to be applied.163 This standard focuses on the nature of contract and type of transaction.164 Though the term closest relationship is neither defined in the Civil Code of 1986 nor the Contract Law of 1999, in practice, the peoples courts normally follow the guidance set forth by the Supreme Peoples Court in 1987.165 This guidance provides a list of laws [*PG80]applicable to the different contracts pursuant to the closest relationship test.166 For example, under its guidance, absent parties choice of applicable law, a contract for the international sale of goods shall be governed by the law of the place of the sellers business office at the time of contract conclusion. If the contract was concluded at the place of the buyers business office, or the contract is made mainly according to the terms and conditions stipulated by the buyer or on the basis of the buyers bidding request, or the contract clearly provides that the seller shall deliver the goods at the place of the buyers business office, the law of the place of the buyers business office at the time of contract conclusion shall apply.167
Notwithstanding this guidance, a peoples court may apply the law of the place to which the contract was found to be the most closely related.168 If the law of a partys business place shall be applied and the party has more than one business office, the peoples courts shall apply the law of the place that is found to be more closely related to the contract.169 If there is no such business office, the law of the partys domicile or residence shall be applied.170 It is worthwhile to note that the applicable law, either chosen by the parties or determined by a peoples court, shall refer to the existing substantive law, not including the conflict of law rules nor the procedural law.171
The determination of law applicable to torts in the peoples courts is based on the doctrine of lex delictithe law of the place of tort.172 This doctrine is adopted in Article 146 of the Civil Code of 1986.173 This provision recites three general rules: (1) the law of the place where the tortious conduct is committed shall apply; (2) if both parties involved in the tort are citizens of the same country or are domiciled in the same country, the law of the parties own country or domicile may be applied; and (3) if the conduct committed outside the territory of China is not regarded as tortious conduct under the [*PG81]law of the Peoples Republic, such conduct shall not be treated as a tort.174
In its 1988 Opinions on the implementation of the Civil Code, the Supreme Peoples Court further illustrated that the law of the place of tort as provided in the Civil Code includes both the law of the place where the tortious conduct is committed and the law of the place where the resultant harm occurs.175 The Supreme Peoples Court also opined that if the place of conduct is different from the place of harm, the peoples courts may at its sole discretion determine the law to be applied.176
In a lawsuit involving real property, the peoples courts will apply the law of the place of the propertylex loci rei sitae.177 Article 144 of the Civil Code of 1986 provides that in disputes involving the ownership of real property, the law of the place where the property is situated shall apply.178 This doctrine also applies to real property in intestate succession.179
However, the Civil Code of 1986 does not make clear what shall be included in the ownership of real property for choice of law purposes, nor does the Civil Code offer a definition of the term real property. According to the 1988 Supreme Peoples Court Opinions, real property shall refer to land, construction affixed to land, other fixtures, as well as equipment fixed to the construction.180 The Supreme Peoples Court also extended the law of the place of real property to govern the civil relations concerning the ownership, sale, lease, mortgage, and use of the real property.181 In addition, as noted above, the law of the place of real property may also apply to a contract for lease, sale, or mortgage of real property.182
With regard to the question about characterization or classification of real property, there exists no provision in the Chinese [*PG82]laws.183 A common approach advocated by most Chinese private international law scholars is that the law of the place of property determines the issue of the property characterization.184
An exception to the doctrine of lex loci rei sitae is presented by property ownership over vessels.185 In accordance with the Maritime Law of China 1992, the matters concerning the acquisition, transfer, or termination of property ownership over a vessel shall be governed by the law of the vessels flag country.186
Lex Personalis, or the law of person, is a recognized choice-of-law principle governing the issues of civil capacity.187 It refers to both the law of domicile and the law of own country.188 In general, civil capacity is regarded as a prerequisite for taking civil actions because it is the matter directly affecting the establishment of the civil relations that are involved.189
In China, the most notable provision under which the peoples courts determine the law applicable to civil capacity is Article 143 of the Civil Code of 1986.190 Article 143 provides that if a citizen of China resides in a foreign country, the law of that country may apply to determine his capacity for civil conduct.191 This provision, however, has been criticized by many private international law scholars because of its inadequacy in handling civil capacity issues.192 On the one hand, Article 143 only deals with Chinese citizens and does not contain rules that could be generally applied to non-Chinese.193 Also, there is lacking a provision concerning the determination of civil capacity of a legal persons.194 Moreover, it is unclear whether the residing country actually means the country of domicile.195
[*PG83] In 1988, the Supreme Peoples Court attempted to overcome the shortcomings of Article 143 by offering more specific guidance in the determination of the law governing civil capacity and status.196 Indeed, the court afforded several rules that became heavily influential in the practice of the peoples courts. These rules are:
1.The capacity for civil conduct of a Chinese citizen residing in a foreign country shall be determined by Chinese law if such conduct occurs in China. The law of a foreign country in which the Chinese citizen resides may apply if the conduct occurs in such foreign country.
2.If a foreigner who conducts civil activities in China is deemed to have no capacity for civil conduct under the law of his own country but has such capacity under Chinese law, he shall be regarded as having capacity for civil conduct.
3.The capacity for civil conduct of a stateless person shall, in general, be governed by the law of the country where he resides, or the law of the country of his domicile if he does not reside in that country.197
4.A legal persons capacity for civil conduct shall be determined by the law of its own country, which is the country where the legal person is registered.198
Another provision concerning civil capacity is Article 97 of the Law of Negotiable Instruments of China 1995.199 It provides that the obligors capacity for civil conduct shall be determined by the law of his own country.200 If the obligor is regarded to have no capacity or have limited capacity under the law of his own country but has full capacity under the law of place of conduct, the law of place of conduct shall apply.201
There should be no question about application of foreign law in the peoples courts unless such application would violate the public [*PG84]interest of China202 or evade Chinese mandatory laws or prohibitive rules.203 Difficult issues arise, however, as to how the contents of the applicable foreign law will be determined. The complexity involved in this regard is how the foreign law should be treated; this would also affect who will have the burden to prove the foreign law.
Two contradictory approaches have governed the question concerning the determination of foreign law. One is a common law approach, under which foreign law is treated as a matter of fact pleadable as such by evidence supplied by the parties, their attorneys, or experts.204 The other is a continental law approach, in which foreign law is regarded as a matter of law and the court has the obligation to apply it.
The Chinese Peoples Courts seem to be positioned between these two extremes. The axiom, as provided in Article 7 of the CPL, is that in the adjudication of civil cases, the peoples courts must base itself on the facts and take the law as the criterion.205 Therefore, the peoples courts are required to look into both fact and law in any civil case.206 The underlying notion is that a court shall make every effort to ensure errorless ascertainment of facts and application of law.207
A peoples court may determine the foreign law through such means as: (1) the parties to litigation; (2) the central authority of contracting country under the agreement of judicial assistance between China and the foreign country; (3) the Chinese embassy or consulate in the foreign country; (4) the foreign countrys embassy or consulate in China; or (5) Chinese or foreign legal experts.208
If, however, the foreign law cannot be determined through the above means, Chinese law shall be applied.209 In addition, should ei[*PG85]ther party disagree with a trial-level peoples court determination on foreign law, the party may appeal to the appellate court for review.210
In a broad sense, enforcement of judgments in international civil litigation embraces two aspects. The first aspect is to enforce the judgment entered by a domestic court of a country, and the second involves recognition and enforcement of foreign judgments. In many cases, it also involves enforcement of foreign arbitral awards. More importantly, given the nature of judicial sovereignty, a judgment of one countrys courts does not automatically gain extraterritorial recognition and enforcement in another country. This matter may only be resolved through a special channel, which is commonly called international judicial assistance.
The CPL provides a number of devices by which a peoples court judgment may be satisfied. In general, the enforcement is divided into (a) enforcement against property, and (b) enforcement against required activities. Enforcing a judgment against property is called execution. Under the CPL, the available means for execution include inspection, freezing, and transfer of judgment debtors deposits,211 withholding and withdrawal of judgment debtors income;212 sequestration, seizure, freezing, public auction, and sale of judgment debtors property;213 and eviction and return of land.214 The enforcement against required activities involves forced delivery of specified value instruments or certificates,215 and forced performance of acts as specified in the judgment.216 Additionally, for purposes of enforcing judgments, the CPL also provides certain protective measures, which include search,217 issuance of certificates for the transfer of property rights,218 as well as monetary penalties for delayed payment.219
[*PG86] There are two ways to initiate the process of enforcement in the peoples courts. The first, and more common, one is the enforcement by petition made by the judgment creditor.220 If the judgment debtor refuses to satisfy the peoples court judgment, the judgment creditor may file a petition for enforcement of the judgment with a competent peoples court.221 The enforcement petition may be made in writing or orally if the petitioner has difficulty writing.222 When making the petition, the petitioner provides the peoples court with documents stating the reasons and items for enforcement, as well as a copy of the court judgment. The petitioner may also need to furnish information about the financial status and property of the judgment debtor.223 The time limit for the judgment enforcement petition is one year, if at least one party is citizen, or six months, if all parties are legal persons or other organizations.224
Enforcement may also be triggered by referral of the judge in the case, which is called judge-referred enforcement. The enforcement under the judges referral, however, is limited to legal documents such as judgments, orders, and mediation papers made by the peoples court only.225 In 1998, the Supreme Peoples Court adopted the Rules (Provisional) on Several Matters Concerning Enforcement Work in the Peoples Courts.226 Under these Rules, a judge may refer for enforcement: (1) judgments for child support, alimony, pension, medical expenses, and salaries; (2) legal documents made by the peoples courts in criminal proceedings containing property-related civil judgments, orders, and mediation papers; (3) court orders pertaining to attachment and advance execution; (4) court decisions on fines and detention; and (5) civil judgments and orders made by the peoples court concerning major interests of China.227
[*PG87] In the peoples courts, enforcement of a judgment is executed by an enforcement officer.228 Many peoples courts have formed an enforcement division in charge of judgment execution.229 Upon receipt of a petition or judge referral for enforcement, the enforcement officer or division sends the execution notice to the judgment debtor, instructing him or her to comply with the judgment within a specified period of time. If the judgment debtor fails to comply, the enforcement officer may explore other enforcement devices to compel the debtor to satisfy the judgment.230
However, if the judgment debtor or their property is not within the territory of China, the judgment creditor may directly apply to a competent foreign court for enforcement. If necessary, the peoples court may also send the enforcement request to a foreign court under the provisions of bilateral or international treaties to which both China and the foreign country are members. Absent these treaties, the request may be made on the basis of reciprocity.231 If required by a foreign court, the peoples court may issue a certificate of judgment to the judgment creditor.232
Articles 267 and 268 of the CPL provide the process to enforce foreign judgments by the peoples court.233 There are two alternatives to start the process: (1) the foreign judgment creditor may file a petition directly with the competent peoples court for recognition and enforcement of the judgment; or (2) the foreign judgment court may make a judgment recognition and enforcement request to the competent peoples court.234 Note that the foreign court request in this regard shall be directed to the competent peoples court through the means provided in the treaties to which both China and the forum country have joined, or on the basis of reciprocity. If neither treaty nor reciprocity exists, a diplomatic channel is usually employed. For purposes of the recognition and enforcement of a foreign judgment, [*PG88]the competent court shall be the intermediate peoples court of the place where the judgment debtor resides or his property is located.235
Upon receipt of the judgment recognition and enforcement petition or request, the intermediate peoples court shall examine and review the foreign judgment on the basis of international treaties to which China is a member, the principle of reciprocity, or relevant Chinese law.236 The examination and review, however, is limited to the formality of the foreign judgment without questioning the merits of the foreign courts determination of facts and application of law.237 After the examination and review, the peoples court may issue an order of recognition or a writ of enforcement provided the foreign judgment does not contradict basic principles of Chinese law nor violates Chinese sovereignty, public security, or social interests.238
The CPL does not dictate the conditions under which a peoples court may refuse to recognize and enforce a foreign judgment. In practice, however, the peoples courts may strike down a petition or request for recognition and enforcement if the foreign judgment is found to have one of the following defects:
(1)the foreign judgment was made by an incompetent foreign court according to relevant provisions of international treaties and Chinese laws,
(2)the foreign judgment has not taken effect or has no effect at all under the law of such foreign country,
(3)the defendant was not given adequate notice for the proceedings, or was not properly represented by a guardian if lacking legal capacity,
(4)an effective judgment has been made by a peoples court for the same cause of action between the same parties, or the case was in the middle of trial in a peoples court and the trial had begun before the proceedings in the foreign court started, or
[*PG89] (5)recognition and enforcement of the foreign judgment would cause harm to Chinese sovereignty, security, and public order.239
On December 1, 1992, the Supreme Peoples Court issued its Opinions on Relevant Questions Concerning Peoples Courts Handling Petition for Recognition of Divorce Judgment Made by a Foreign Court.240 These Opinions specifically address the recognition of foreign divorce judgments sought by Chinese citizens as well as foreigners. The Supreme Peoples Court emphasizes that a peoples court should not decline to take action on the recognition petition submitted by a Chinese citizen even though the marriage was concluded outside China.241 But, if the judgment was made in default, the petitioner shall provide the peoples court with evidence that the defendant was properly notified of the divorce action.242 According to the Supreme Peoples Court, a peoples court may deny a foreigners petition for recognition of their divorce judgment if their spouse is not a Chinese citizen.243
With respect to a foreign arbitral award, Article 269 of the CPL provides a similar procedure to that for the recognition and enforcement of foreign judgments.244 A major difference is that only the parties to the arbitration may initiate the process by submitting the petition directly to the intermediate peoples court of the place where the award debtor resides or property is located.245 In addition, since China is a member state to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention),246 in nearly all cases recognition and enforcement of foreign [*PG90]arbitral awards are subject to the conditions set forth in the Convention.247
The enforcement of court judgments in China is difficult. Each year a considerable number of court judgments or orders are not enforced. It is obvious that this sluggishness in enforcing judgments, including arbitral awards, in China has become a major concern for many foreign companies. Though the Supreme Peoples Court is under tremendous pressure to resolve this problem, the result still is far from optimal. Partly because of this reason, during the past two gen[*PG91]eral sessions of the National Peoples Congress, the Supreme Peoples Court barely survived approval of its working report to the Congress.248
It is unfair, however, to blame the Supreme Peoples Court alone on this matter, and many factors attribute to the problem of enforcement difficulty. Local protectionism is the main obstacle to enforcement. As noted, since China adopts a two-instance system of adjudication, a majority of cases conclude in intermediate courts situated at the level of prefecture between county and province. The enforcement of domestic judgments normally rests with the trial courts, county courts in many cases, unless an intermediate court conducts the first instance trial. When a civil case involves different counties or prefectures, the trial court encounters local government influence driven by local interests such as the desire or policy to protect local industries or businesses. The more local interests are involved, the more difficult it is to enforce a judgment against a local party. In case of enforcing foreign judgments against a local party, such protection could become more dominant.
A second factor hindering enforcement is government interference in favor of state-owned enterprises (SOE). If a SOE is a judgment debtor, the enforcement of a judgment may be halted if such SOE is financially unable to satisfy the judgment or the enforcement would threaten the survival of the SOE. The interesting phenomenon is that many SOEs in China are both creditors and debtors. More importantly, a SOE may not sell or be forced to sell its assets to satisfy a court judgment.
The third factor is a lack of credit-checking and asset-tracking systems. In many cases, it is very difficult, if not impossible, to obtain a judgment debtors financial and asset information, especially for a foreign judgment creditor. Under the CPL, a request for recognition and enforcement of a foreign judgment shall be submitted to the intermediate peoples court of the place where the judgment debtor resides or his property is located.249 Quite often, however, the judgment debtor disappears in order to evade the judgment, and his assets, including bank accounts, are all transferred to an undisclosed place.
[*PG92] The fourth factor is the lower courts abuse of discretion. For example, when recognition and enforcement of foreign arbitral awards are requested, lower Chinese courts often arbitrarily decide to set aside the awards. In order to curb this practice, the Supreme Peoples Court established a pre-reporting system under which a decision on whether an arbitral award is to be recognized and enforced shall be reported to the Supreme Peoples Court for review. No decision shall be made before the Supreme Peoples Court review is complete.250
The language barrier might be another factor. For a foreign judgment to be enforced in China, it is required that the judgment be translated to the Chinese language. Therefore, any mistranslation in the parties name or address may result in a failure of recognition and enforcement because it could constitute a ground on which the judgment debtor denies the judgment.
A fundamental issue that affects international civil litigation in China is the lack of judicial independence. This issue not only troubles foreign companies, investors, and businessmen, but also becomes a popular concern among Chinese citizenry. Despite the increasingly strong voice calling for an independent judicial system, the peoples courts still seems to face impassable hurdles to exercising their judicial power independently.
Indeed, it is fair to say that judicial independence is a recognized principle in the Chinese Constitution and laws. In 1954, when the first Constitution was adopted,251 it provided that the peoples courts shall adjudicate cases independently and abide by law.252 Article 126 of the current Constitution, adopted in 1982 (as amended 1999), further provides that the peoples courts shall exercise judicial power independently according to stipulation of law, free of any interference by administrative agencies, social organizations, or individuals.253 Similar [*PG93]provisions are also embodied in the 1979 Organic Law of the Peoples Courts (as amended 1983),254 the 1995 Law of Judges (as amended 2001),255 as well as the CPL.256
Therefore, literally speaking, the peoples courts are granted an independent judicial power under the Chinese Constitution and laws. The problem, however, is that the judicial power may not be exercised independently in practice. Even the Supreme Peoples Courts activities are not completely free from interference. The cause is the inherent defects existing in the current judicial system. China is a communist-party-dominated socialist country, and separation of powers is not a dominant theme. The Peoples Congress is the basic organization of the nations political power.257 According to the 1982 Constitution (as amended 1999), the National Peoples Congress (NPC) is the highest body of state power. But this body is required to be under the leadership of the communist party.258 The Supreme Peoples Court, though defined as the nations top judiciary body, is required to report to the NPC. Under the NPC, there are local peoples congresses at the province and county level to which the lower peoples courts at corresponding level are responsible.259
Additionally, there are several system defects. The first one is the current organizational structure of the judicial system, which makes judicial independence extremely difficult. As noted, China has a unitary judicial system with four levels, from the Supreme Peoples Court to the county trial courts. The Supreme Peoples Court, however, has no control over any of the lower courts except for work connections. [*PG94]All judges at the lower peoples court are selected and appointed by the local peoples congress, which is heavily influenced by the local communist party chief and government heads. More importantly, the operating expenses, including salaries of the judges, are provided from the local government budget. In addition, Chinese judges do not have a life term, and any of them could be replaced or removed at anytime by the local peoples congress.260 It is, therefore, quite common for local judges to follow instructions and opinions from the local government on particular cases, since government and judicial powers are usually intertwined.261
The second aspect that affects judicial independence is the lack of professional ethics and judicial corruption. In China, personal relationships or back-door connections play significant roles in every corner of society. This scenario is often seen in the adjudication of cases. Many Chinese lawyers spend much of their time trying to find easy access to the presiding judge in lieu of traditional legal analysis.
A third shortcoming involves the internal managerial system of the peoples courts. Within the peoples courts, the president of each court is both the chief judge and the chief executive. The president has the power to influence the promotion and demotion of any particular judge in the court, and to supervise all judges through a reporting system. In most cases, the local peoples court president is a political appointee by the local government.262 In addition, though cases are tried by a collegial panel, the panels decision is subject to review by the trial committee consisting of the president, vice presidents, and division directors. Thus, the ability of the judge or collegial panel to reach an independent decision on a case is considerably limited.
Furthermore, the professional quality of judges is often very poor. Among the presidents and vice-presidents of the peoples courts, only 19.1% received a bachelor degree or higher.263 This ratio is down to 15.4% among the judges in the lowest courts.264 For those [*PG95]who have received a college degree, many of them have not graduated from law school. For the few who have received a law degree, a substantial number did so through continuing education. Ironically, the reality is that in many local peoples courts there are no law school graduates, and most judges are military veterans.
It is true that the Law of Judges is expected to help improve the quality of judges in the peoples courts.265 There is, however, doubt that the Law of Judges may achieve its goal of improving the quality of judges to a highly professional standard.266 The primary concern is that the professional requirements for a judge, as set forth in the Law of Judges, are too low because a law degree is not a minimum requirement.267 Also, even though formal college education is required, this requirement does not apply to those who became judges before the Law of Judges took effect on July 1, 1995.268
International civil litigation in the Chinese Peoples Courts has increased in the past decade, a trend likely to continue, especially after China becomes a member of the World Trade Organization. It is without question that Chinas huge market potential and fast growing economy are both attractive to foreign companies and investors. Nevertheless, the deficiencies in the Chinese judicial system are cause for caution. Although in recent years many efforts have been made in [*PG96]China to improve judicial justice, progress is still quite behind general expectations.
Given Chinas strong desire to join the main stream of the world economy, it is certain that China will have to continue its on-going efforts to restore public confidence in the Chinese judiciary. Further improvement of judicial independence would result in the increased competence of the Chinese Peoples Courts to handle international civil litigation. However, it would seem unrealistic to anticipate China to fundamentally change its judicial system within a short period of time. Strategically speaking, it is important is ensure that China continues to make changes in the right direction. Further judicial reform will help attract international business in the years to come.