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The People’s Court: A Litigation Primer
date:2017-4-7   Views:552

 

Suppose China Co., a Chinese business, sold you some high performance wooden blocks that turned out to defective. China Co. then refused to fix them and now you are stuck with a pile of blocks you can’t use or sell. On top of that, China Co. wont refund your money either and has stopped taking your calls.

 

At this point, you have a choice. You can take the loss or you can take China Co. to the People’s Court. While it might make sense to continue to contact China Co. and try to resolve the situation yourself, you might also be giving China Co. time to get rid of evidence or to shift assets out of the way.  

 

If you decide to go to court, there are a few things you need to do.

 

First, it helps to know who China Co. is. If it is a registered business in China and has plenty of assets to pay you but just won’t, then you have some options. Believe it or not, finding out this information isn’t necessarily that hard. (And it’s something you should probably do before making major purchases for your business.)

 

流程图: 可选过程: Front loaded

 

 

 

 

 

 

 

The next thing you should do is gather evidence. In the People’s Court, evidence is almost always provided to the court in documents. For that reason, preparing the case – collecting evidence, researching the law, writing the petition – are the most important parts of the case. That’s what the court is going to base its decision on. For that reason, you should be talking to a lawyer at this point. Evidence collection in China is very technical and there are many ways to do it wrong and only one way to do it right.

Once your case is ready, you can then send out a lawyer’s letter to the other side. This gives China Co. another chance to talk about settlement. If China Co. has substantial assets and you have a good case, they are going to want to settle. Why?

 

Two reasons.

 

1)      China Co.’s assets can be frozen until the dispute is resolved in certain cases. This includes bank accounts. It’s very difficult to make payroll, pay suppliers, etc., if you can’t access your cash.

 

2)      We’ll say it again, People’s Court cases are front loaded. Unless China Co. has some incredible evidence that’s going to completely win the case, then they know they are going to lose and in doing so probably have to pay your attorney’s fees and court costs. On top of refunding your money if they lose the case, of course.

 

Although not every defendant responds to a lawyer’s letter with an offer to settle, a carefully prepared case and a correctly worded lawyer’s letter is oftentimes enough.

 

But suppose China Co. doesn’t care and it still wants to litigate despite the litigation risk and frozen assets. This happens and will always happen here in China, and in the US and in Europe. Some people are just like that.

 

The next stage is filing the case along with the litigation fee. By court rule, this fee is a percentage of the amount demanded of China Co. If you win, China Co. has to reimburse you for that fee.

After the case is filed, the court has seven days to decide if it’s going to accept the case or not.

 

In the past, the People’s Court was notorious for not accepting or rejecting cases. If the case was controversial or involved a locally prominent business as a defendant, the court would sometimes just sit on the case and never make a decision. That’s not allowed anymore. The rules were changed when the Civil Procedure Law was revised in 2012. While the court doesn’t have to accept every case, it does have to reject any case they aren’t going to take and explain their reasons for doing so in writing. And the new rules make it very hard to reject a case.

 

流程图: 可选过程: The process of litigation in PRC

 

 

 

 

 

 

 

Once the case is accepted, the court will ask the parties to try to settle. This is standard for any court anywhere but it does give you another chance to get to settlement. Things change once the case is filed and the defendant is now very publicly being accused of wrong doing. For most Chinese businesses, they will seek a quick exit if they can. By filing the case, you may have called their bluff and now they want out.

 

But suppose China Co. isn’t ready to give up yet.

 

In that case, the next stage is argument. The Court has your evidence in a neat stack of papers along with China Co.’s evidence and responses. That’s all the evidence that’s going to be presented.

Argument is done in person and usually through a lawyer. Once the court has heard the arguments and reviewed the evidence, it will make a decision. The total time a case takes from filing to decision depends on the court. Unlike previously, the People’s Courts are becoming more user friendly, especially here in Guangdong. The average time is about 9 months.

Supposing China Co. doesn’t like the court’s decision? It can appeal to the court of second instance in most cases. While the court of second instance is a whole new trial, you can present the case you prepared in the court of first instance plus that court’s decision.

 

Sometimes an improperly prepared case can be saved by taking an appeal to the court of second instance and preparing it correctly. But if China Co. really has no evidence to stand on, then there is nothing to appeal. China Co. will have successfully wasted your time but they will have to pay for that in attorney’s fees, court fees and in whatever they lost having their assets frozen for so long.

Things to remember:

 

1)      Using the People’s Court to resolve a disputes with Chinese business is a good option in many cases. However, avoiding disputes by setting up a mechanism to control for legal risks is usually the cheaper option in the long run.

 

2)      In some instances, a defendant’s assets can be frozen before the court decides the case. Doing so makes reasonable settlements much more likely.

 

3)      Collecting evidence to be used at trial should be done as soon as the dispute appears headed for litigation and it should be done by a competent lawyer.

 

The Authors

说明: 7Sam

Samuel Speed 山姆·斯毕德

American Lawyer

Senior Consultant of Foreign Affairs

Email: samuelspeed@yingkelawyer.com

Liang Xinran 梁欣然

Overseas Counsel

Email: liangxinran@yingkelawyer.com

 

 

 

 

 

 

 

 

Mu Jinjun Legal Team of Yingke Law Firm

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