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PRC Civil Proceedings Involving Foreign Parties

2019-02-26/ARTICLES/ Chelsea Li李乔姗

The Civil Procedure Law of the People’s Republic of China (the “PRC Civil Procedure Law”) includes a specific section which regulates civil actions in the People’s Republic of China[1]  (the “PRC” or “China”) involving foreign parties. For any civil litigation matter with foreign party involvement, this special section will firstly apply. Other parts of the PRC Civil Procedure Law will be applicable to such actions only when there are no governing provisions included in this specialized section.

Based on our experience, the issues identified below are frequently encountered in legal proceedings in the PRC involving foreign parties.

Which court?

In order to initiate a PRC-related civil case, the first issue one needs to consider is at which court the lawsuit could be filed. Normally, for a contractual dispute, the permissible bases for the choice of a court to hear the case are quite broad, including: (i) the defendant’s domicile; (ii) plaintiff’s domicile; (iii) the place where the contract was performed; (iv) the place where the contract was signed, (v) the place where the subject matter is located; and (vi) any foreign venue which has actual connection with the dispute. However, we should bear in mind that cases regarding the performance of following contracts in China can only be heard by Chinese courts: (i) Sino-foreign equity joint venture contracts; (ii) Sino-foreign cooperative joint venture contracts; and (iii) contracts for Sino-foreign cooperative exploration and development of natural resources. 

In contrast, cases which involve a Wholly Foreign Owned Enterprise (“WFOE”), which is a common form of foreign investment in China, different considerations will apply. A WFOE, just as any other Chinese company, is a Chinese entity. Therefore, if no foreign party or foreign factors are involved in the dispute, the general provisions of jurisdiction in the PRC Civil Procedure Law will apply. As a practical matter, a WFOE oftentimes, will choose the forum of dispute resolution in its contracts with foreign parties, as a means of obtaining a stronger legal position. But one factor which needs to be noted is that, when the parties choose the forum by agreement, they should pay close attention to whether a judgment made by the chosen forum can be enforced in the jurisdiction where the main assets of the defendant are located. If not, the prevailing party may find itself unable to enforce the judgment, and the victory would be meaningless.

What law to apply?

With regard to a commercial contract, the parties can choose the applicable law by agreement. If the parties do not specify the governing law, the law of the habitual residence of the party whose performance of contractual obligations can mostly reflect the characteristics of the contract, or another law which is most closely connected with the contract, shall apply. 

Notarization and Legalization

The PRC is not a member country to the 1961 Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents (the “Hague Convention”), which provides for the authentication of “public documents” by the attachment of an internationally recognized form of authentication known as an “apostille.” Accordingly, apostilles (*) are not applicable in PRC cases where the documents such as evidence or powers of attorney are required by a court in litigation proceedings. Documents which were originated and produced and provided outside China must be notarized by a public notary in the parties’ own home country, as well as being authenticated and legalized by the PRC Embassy or Consulate located in that country; provided, however, that when treaties entered into by and between two countries establish certification procedures, then such documents shall be handled in accordance with such specified procedures. 

Case study

Without the above process of notarization and legalization, the documents produced by the foreign country cannot be deemed as a proper legal document nor admissible in PRC courts. We have previously dealt with a litigation matter where we acted for a Scottish client, and a UK lawyer mistakenly thought that PRC is one of member countries to the Hague Convention, just like Hong Kong, and did not arrange to get the documents authenticated and legalized by the Chinese Embassy or Consulate in the UK prior to having them couriered to China. As a result, those documents were not admissible and they were required to re-prepare those documents.  

Comments

Among others, I am sure it is a good lesson and something important for all of us to be aware of when preparing documents for submission to a PRC court. 

Apostille: A standard certification provided under the Hague Convention for authenticating documents used in foreign countries. Also termed “certificate of authority”, meaning a document authenticating a notarized document that is being sent to another jurisdiction. The certificate assures the out-of-state or foreign recipient that the notary public has a valid commission. [2]


[1] For the purpose of this summary, the term “PRC” refers to the mainland of China, and excludes the Hong Kong Special Administrative Region of the PRC, the Macau Special Administrative Region of the PRC, and Taiwan.

[2] See Black's Law Dictionary (10th ed. 2014), pp 117 and 271.

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