Reforming the People's Courts

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In October 2005, the Supreme People's Court (SPC) issued the Outline of the Second Five Year Plan for Reforming the People's Courts (Court Reform Outline). The Court Reform Outline has implications for potential litigants who anticipate bringing an action in the people's courts, by highlighting key areas in which the SPC admits there are institutional and substantive weaknesses, and where improvements can be made. The following are principal topics of relevance to foreign investors that have been nominated for reform:

i. the current litigation system;

ii. the uniform application of law;

iii. the enforcement of judgements;

iv. the improvement of judicial quality, and

v. the structure of the judicial system.

Current litigation system

The principal areas in which the SPC intends to implement reform of the litigation system include: (i) jurisdiction in civil cases and (ii) improvements to pre-trial procedure. In relation to jurisdiction in civil cases, one concern of the SPC is pre-trial procedures related to evidence. In 2002, the SPC issued regulations concerning evidence. However, these regulations are poorly coordinated with existing pre-trial procedure. The SPC is also concerned about the inadequacy of pre-trial procedures in existing law. Thus, the SPC intends to set down clearer pre-trial procedures, including pre-trial meetings, the exchange of evidence and the technical evaluation of evidence. Clarification of such procedures will prove to be beneficial for litigants in Chinese courts.

Uniform application of law

Among the topics that the SPC has targeted under the rubric of "uniform application of law" is the practice of 'asking for instructions' and the greater use of precedent cases. These reflect the mixed heritage of the Chinese judiciary, which has a long-standing practice of asking for instructions or discussing with higher-level courts cases that have been considered difficult. Previously, the SPC laid down guidelines to restrict courts from seeking instructions in order to protect the litigants' right of appeal. The fact that it appears on the reform list indicates that there are still problems with the system.

An interesting development is the greater use of precedent cases. This topic has long been discussed amongst PRC academics, as well as foreign legal academics involved with China. The Court Reform Outline calls for the setting of standards for selecting and distributing such cases. However, this does not mean that China will move from its current code-based system to a common law system.

Enforcement of judgements

Difficulty in enforcing judgements has been a persistent problem in the PRC judicial system. The SPC is proposing to make certain procedural changes, such as designating a separate entity for the current enforcement division to conduct enforcement-related hearings and strengthening procedures, including reforms in the determination of jurisdiction in enforcement cases. It is unclear whether such reforms will solve the long-standing problems with enforcement that are related to the funding of the court system. Funding reform is included in the Court Reform Outline.

Improvement of judicial quality

The quality of the PRC judiciary is an enduring problem and affects all litigants in China, both domestic and foreign. The Court Reform Outline suggests improvements in training and selection of judges, as well as postponing the retirement age for highly-qualified judges. Most importantly, the SPC is seeking to improve the conditions of service for judges. Remuneration and benefits for judges are tied to those for civil servants in many areas. Therefore, many highly-qualified judges may leave the judiciary for private practice because of the enormous gap in remuneration.

Structure of the judicial system

The SPC has listed in the Court Reform Outline structural changes to the funding of the judicial system by suggesting that the judiciary be included within the government budget and in the central and provincial budgets. This issue has been vigorously debated amongst the judiciary and academic circles for many years. Under the current system, each level of court is funded by the corresponding level of government, which puts pressure on a court that is contemplating ruling against a major local tax-payer and also creates an undesirable environment where the strengthening of local protectionism may be encouraged. The level of funding will be a concern for the local courts, especially in the major cities, where much of the litigation involving foreign investors occurs.

A predictable court system?

The reforms in the Court Reform Outline are relatively focused and seem directed at important substantive areas related to an eventual overhaul of the civil and administrative procedure laws. If implemented, such reforms should make civil litigation in the Chinese courts more predictable. However, they are limited in scope because they cannot address issues that go to the core of the political system, such as party leadership of the courts and the principle of an independent judiciary.