For ex-pats doing business in China, if they have any civil or commercial disputes with their counterparty, what can they do?
The most cost-effective or best way, of course, is a negotiation. If negotiation doesn’t work, the next option people can consider is filing a lawsuit.
So, how does one file a lawsuit in a Chinese court? What is going on behind the mysterious dark red door of the courtroom? Is there a chance for a foreigner to win a case against local people?
1. How to decide the jurisdiction?
Jurisdiction means which court has the authority to hear your case. There are two kinds of jurisdictions which will be discussed below, namely, 1) grade jurisdiction and 2) territorial jurisdiction.
1 Grade jurisdiction
Courts in China are divided into three levels, the Primary Court, the Intermediate Court and the Supreme Court. For example, in Guangdong province, Guangdong provincial court is the Supreme Court, Guangzhou municipal court is the Intermediate Court and the courts in each area of Guangzhou are the Primary Courts.
Generally speaking, the Primary Courts have jurisdiction for a trial of the first instance for civil (including commercial) cases, unless the case is major and foreign-related or the case has a significant impact. The significance of a case usually depends on the amount in dispute (the quantum), among other factors.
2 Territorial Jurisdiction
A principal for territorial jurisdiction is that: The Court at the location of the Defendant’s domicile shall have jurisdiction. Domicile means the location where the defendant’s identity certificate is granted, for an individual, this refers to his Identity card; for an entity, this refers to its business license. However, for an individual that has moved away from his domicile, the plaintiff can file the lawsuit in the court where the defendant has habitually been living.
However, there are some exceptions. For example, in the case of a contract dispute, the court at the location of the Defendant’s domicile or the place of performance of the contract shall have jurisdiction.
Furthermore, the litigants of a contract dispute or other property rights dispute may agree in writing on selection of the court at the location of the Defendant’s domicile, place of performance of contract, place of execution of contract, address of the Plaintiff, location of the subject matter, etc or a venue which has actual connection with the dispute to be the People’s Court which has jurisdiction, but shall not violate the provisions of this Law regarding to grade jurisdiction and exclusive jurisdiction.
If you want to file a lawsuit in China, the first thing you have to do is to choose the jurisdiction, namely, decide which court you are going to choose?
In the case of a lawsuit regarding a dispute over the incorporation of a company, confirmation of shareholder qualification, profit distribution, dissolution, etc, the court at the company’s domicile shall have jurisdiction.
In the case of a real estate dispute lawsuit, the court at the location of the real estate shall have jurisdiction.
In the case of a tort lawsuit, the court at the place of occurrence of the tortious act or the Defendant’s domicile shall have jurisdiction. So, in an IPR infringement case, where the infringing company is incorporated in an inland or underdeveloped city and sells the infringing product nationwide, we would suggest that our client files a lawsuit against the infringer in a more developed city because we believe that the judges in developed cities have a stronger sense of IPR protection and have more experience. To do this, the infringing product must be located in a developed city to finding jurisdiction. We feel that having the lawsuit in a more developed city will give us a better chance of getting a favourable result for our client as the judges in the infringer’s city may be influenced by “regional protectionism”
It’s important to know the identity of the people who you are making a deal with. If the dispute happens and a lawsuit needs to be filed, the first thing you have to do is to decide which court you are going to file a lawsuit with. Furthermore, you have to prove to the court you choose that they have the jurisdiction over your case—meaning you have to provide the defendant’s identity information and prove one of the above-mentioned grounds to found jurisdiction.
Source: Sophie Mao from ChinaLawHelp.com