The conflict of laws is a critical subject in foreign-related civil and commercial litigation. If not appropriately resolved, jurisdictional conflicts may give rise to parallel and duplicative litigation across borders, directly affecting the litigants’ core interests. One of the highlights in the amendment to the Civil Procedure Law (the “2023 amendment”) is to advance the rule of law in domestic and foreign-related affairs in an integrated manner. The 2023 amendment helps to clarify the rules on jurisdictional conflicts in cross-border litigation.
Rules on the conflict of laws
Before the 2023 amendment, the rules on the conflict of laws in foreign-related litigation were scattered in various judicial interpretations and documents. The 2023 amendment consolidates the previous provisions and provides clearer guidelines on jurisdictional conflicts.
Right to initiate parallel proceedings. The decision to initiate parallel proceedings is a choice made by the parties themselves based on their specific circumstances and should be respected. The 2023 amendment clarifies that if one party files a lawsuit before a foreign court while the other party files a lawsuit before a Chinese court for the same dispute, or if a party files a lawsuit before both a foreign court and a Chinese court, the Chinese court with jurisdiction (as determined under the Chinese Civil Procedure Law) may accept jurisdiction over the dispute.
Validity of exclusive jurisdiction agreements. Under an exclusive jurisdiction agreement, the parties agree that a particular court is to have jurisdiction over the case, while simultaneously excluding the jurisdiction of other courts. Such agreements serve to minimize the risk of parallel litigation, and can improve the efficiency of dispute resolution. The 2023 amendment specifically accepts exclusive jurisdiction agreements that do not involve the sovereignty, security or public interests of China as a reason for Chinese courts to decline jurisdiction over a dispute. In judicial practice, China has not only stipulated that the presumptive principle will apply to exclusive jurisdiction agreements, but has also determined the validity of asymmetric jurisdiction agreements. This is evident from the Minutes of the National Symposium on the Foreign-related Commercial and Maritime Trial Work of Courts.
Basic Principles for the Resolution of Jurisdictional Conflicts. The harmonisation of domestic and foreign proceedings in cross-border parallel litigation is a common challenge faced by most countries. The 2023 amendment deals with cases relatively distinctively, according to the acceptance time. For cases that a Chinese court has accept jurisdiction over in advance, the Chinese court will exercise its jurisdiction. On the other hand, where a litigant applies to the Chinese court in writing for a stay of proceedings on the ground that a foreign court has accepted jurisdiction over the case, the Chinese court may grant a stay, depending on the specific facts.
Exceptions to the Basic Principles. As an exception to the above-mentioned principle, if the litigants have agreed to have their dispute heard by a Chinese court, or the dispute falls under the exclusive jurisdiction of a Chinese court, or it is evidently more convenient for a Chinese court to try the case, then a Chinese court may decline to grant a stay of the Chinese proceedings, notwithstanding the existence of competing foreign proceedings. Moreover, given that a stay will undoubtedly affect domestic proceedings, if a foreign court does not adopt the requisite measures to determine the case within a reasonable period, the Chinese court is empowered to lift a stay on (domestic) litigation upon a written application by a litigant.
In addition, where a litigant applies to a Chinese court for recognition and enforcement of a judgment or ruling made by a foreign court, and the subject matter of the dispute addressed in the said judgment or ruling is the same as that which is disputed in proceedings before a Chinese court, the Chinese court may stay the domestic proceedings. If the said judgment or ruling made by a foreign court is recognised by the Chinese court, the Chinese court will dismiss any domestic proceedings on the identical subject matter. If the Chinese court declines to grant recognition of a foreign judgment, any stays over related domestic proceedings will be lifted.
The Doctrine of forum non conveniens and Remedies. The 2023 amendment elevates the doctrine of forum non conveniens in previous judicial interpretations to an express legal provision. For cases that comply with statutory circumstances and are clearly inappropriate / inconvenient for a Chinese court to try, a Chinese court should exercise judicial comity towards foreign courts. If a Chinese court finds it inappropriate / inconvenient to try the case, it decline to exercise jurisdiction over the proceedings and notify the plaintiff to file a lawsuit before the courts of the forum conveniens. Meanwhile, for the comprehensive protection of the litigants’ interests, the 2023 amendment also adds remedies for forum non conveniens. Where, despite being the forum conveniens, a foreign court refuses to exercise jurisdiction over a dispute, or does not adopt the requisite measures to try the case within a reasonable period, the Chinese courts may accept jurisdiction over the matter.
Views and Advice on Cross-Border Disputes
Be Fully Aware of the “Toolbox” and Rules on Jurisdiction. The 2023 amendment sets out clear jurisdictional rules for foreign-related civil and commercial litigation. It provides for, inter alia , rules governing jurisdiction agreement clauses, and two new categories of situations for exclusive jurisdiction. Therefore, to effectively safeguard their legitimate rights and interests, corporations are advised to be fully aware of the “toolbox” provided for in the 2023 amendment, as well as rules of jurisdiction in foreign-related litigation.
Agree the Governing Jurisdiction for Cross-Border Disputes. It is widely acknowledged among the international community that parties can make arrangements for agreement on jurisdiction. Corporations are encouraged to fully utilise this ability and pre-emptively arrange for exclusive and / or asymmetric jurisdiction agreements in cross-border disputes.
Seize the Initiative in Jurisdictional Issues. In dealing with specific cross-border disputes, it is often necessary to leverage the relevant conflict of laws rules and carefully strategise for the overall situation. Corporations should actively seek to expand and protect advantageous positions, while using strategies like parallel proceedings in disadvantageous situations to try and turn the tables.