In the News: Extraterritorial Law Application in China; New EU AI Rules Add to Costs; and FDI in China are More Cautious

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China Releases Five Foreign Cases That Guide International Cases in Chinese Courts

On July 5, China's Supreme People's Court (SPC) issued the first batch of "typical cases" clarifying the application of extraterritorial laws. The aim of the cases is to create a market-oriented international business environment in China and to enhance the international influence of China's judiciary, Beijing said. The five cases involve common types of international civil and commercial matters related to company investment, sales contracts, guarantee contracts, multimodal transport contracts and engineering supervision contracts. The jurisdictions involved are the U.S., the UK, Mexico, Tajikistan and Hong Kong.

On December 1, 2023, the SPC issued the Interpretation on Several Issues Concerning the Application of International Treaties and International Practice in the Trial of Foreign-Related Civil and Commercial Cases (关于审理涉外民商事案件适用国际条约和国际惯例若干问题的解释). In order to improve and strive for a more accurate understanding of judicial interpretations, the SPC released these typical cases. They are expected to increase the confidence and evaluation of foreign investors in China's investment environment, trade environment and judicial environment.

In the sales contract dispute case, there were disputes on the content, understanding and application of extraterritorial laws. Through analysis and comparison, the relevant foreign law has been identified. These cases made clear that the Chinese courts are responsible for ascertaining foreign laws when needed. In other cases, for example, the People's Court entrusted an external research center to ascertain the legal issues in multiple jurisdictions involved in the case. The parties were also given the right to freely express themselves and debate foreign law provisions and cases in court. In order to improve the efficiency and accuracy, the court may determine prior to trial the scope of the foreign laws.