2024 Annual Review of Dispute Resolution in China

Summary:

• In 2024, China’s legislation responded to various social hotspots and addressed some typical issues in judicial practices.
• The implementation of the New Company Law further enhanced shareholder protections and corporate governance and refined the rules for corporate disputes.
• For foreign-related dispute resolution, significant progress was made in the ascertainment and application of foreign laws, as well as the mutual recognition and enforcement of Hong Kong and Taiwan judgments, facilitating smoother legal cooperation.
• The operation of the People’s Court Case Database and the Law Answer Platform by the Supreme People’s Court has promoted judicial transparency and offered further guidance for law practitioners.

“In 2024, a number of significant legislative and judicial reforms shaped civil and commercial dispute resolution in China”

In 2024, a number of significant legislative and judicial reforms shaped civil and commercial dispute resolution in China. Key developments include the revision of the Company Law, judicial interpretations concerning contract and tort law, advancements in foreign-related dispute resolution, and efforts toward judicial transparency and uniformity in the application of law.

The implementation of the New Company Law has enhanced shareholder protections and corporate governance, and changed the corporate dispute landscape

On July 1, 2024, the PRC Company Law(Revised in 2023) (中华人民共和国公司法（2023修订）, the “New Company Law”) came into effect. To ensure the smooth implementation of the New Company Law, the State Council issued the Provisions for Implementation of the System for the Administration of the Registration of Registered Capital under the (国务院关于实施《中华人民共和国公司法》注册资本登记管理制度的规定), and the Supreme People’s Court (the “SPC”) issued the Several Provisions on the Temporal Applicability of the PRC Company Law (最高人民法院关于适用《中华人民共和国公司法》时间效力的若干规定), both of which came into effect on the same day.

Furthermore, in response to the pressing issue of the application of Article 88 (1) of the New Company Law that arose from judicial practice, the Legislative Affairs Commission of the Standing Committee of the PRC National People’s Congress and the SPC explicitly confirmed on December 22 and 24, 2024, respectively, that Article 88 (1) has no retroactive effect.

The New Company Law has made comprehensive and major revisions to the Company Law, as revised in 2018 (the “2018 Company Law”), including the deletion of 16 articles and the modification or addition of 228 articles. Particularly significant revisions of the New Company Law include:

1. improving the registration system for subscribed registered capital, and providing that the capital contribution term by a shareholder of a limited liability company must not exceed five years;
2. optimizing the governance structure of a company;
3. strengthening the protection of shareholders’ rights, notably by expanding the scope of shareholders’ right to information and allowing shareholders to sue directors, supervisors, and senior executives of wholly-owned subsidiaries; and
4. emphasizing the responsibilities of controlling shareholders, actual controllers, directors, supervisors and senior executives, etc., with a focus on enhancing corporate accountability.

“The New Company Law has added a number of key provisions and strengthened the protection of the interests of shareholders and creditors”

Since its enactment, courts across China have increasingly applied the provisions of the New Company Law in various corporate disputes, including cases concerning shareholder capital contributions, shareholders’ right to information, equity transfers, and company resolutions. The New Company Law has added a number of key provisions and strengthened the protection of the interests of shareholders and creditors. As a result, corporate disputes in 2024 have garnered particular attention in the realm of dispute resolution in China. In this context, transitional issues regarding the application of the New Company Law and the 2018 Company Law remain a critical point for legal practitioners to address.

The enactment of the judicial interpretations for the contract and tort parts of the PRC Civil Code has provided significant guidance for judicial practice

The SPC Interpretation on Several Issues Concerning the Application of the General Provisions of the Book on Contracts of the (最高人民法院关于适用《中华人民共和国民法典》合同编通则若干问题的解释, the “Judicial Interpretation for the Contract Part”) and the SPC Interpretation on the Application of the Book on Tort Liability of the (1) (最高人民法院关于适用《中华人民共和国民法典》侵权责任编的解释（一）, the “Judicial Interpretations for the Tort Part”) came into effect on December 5, 2023 and September 27, 2024, respectively. The implementation of these two judicial interpretations has great significance with respect to civil and commercial judicial practice in China.

Under the framework of the PRC Civil Code (the “Civil Code”) (中华人民共和国民法典), the Judicial Interpretations for the Contract Part addresses a wide range of common contractual issues encountered in judicial practice, covering various aspects such as the formation, validity, performance, preservation, modification and transfer, termination, liability for breach of contract. Some of the latest rules set out in the Judicial Interpretations for the Contract Part are substantially different from the SPC Interpretations on Several Issues Concerning the Application of the (I) and (II) (最高人民法院关于适用《中华人民共和国合同法》若干问题的解释（一）（二）) which had been applied for many years. Therefore, it is advisable for legal practitioners to pay close attention to the latest rules set forth in the Judicial Interpretations for the Contract Part when dealing with contractual disputes involving PRC laws.

The Judicial Interpretations for the Tort Part refine the rules as to who and how tort liability is borne as well as the sequence for bearing tort liability under some common infringement scenarios, which include infringements caused by abduction and trafficking of children, educational institutions or out-of-school infringers, infringements occurred in the course of performance of work tasks by employees, infringements caused by motor vehicle traffic accidents, defective products, dangerous dogs or other animals, throwing or falling objects from high places, etc. The detailed provisions of the Judicial Interpretations for the Tort Part have provided clearer rules for regulating infringement and protecting the lawful interests of the infringed.

Procedural, substantive, and enforcement rules for foreign-related civil and commercial disputes have seen significant and positive developments

“This Interpretation provides a clear legal foundation for Chinese courts to make consistent rulings in foreign-related civil and commercial cases, contributing to the standardization of legal application”

In the area of foreign-related civil and commercial dispute resolution, significant progress was made with the implementation of key judicial interpretations on January 1, 2024. The SPC Interpretation on Several Issues Concerning the Application of International Treaties and International Practices in the Trial of Foreign-Related Civil and Commercial Cases (最高人民法院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) filled important gaps in the Civil Code regarding the application of international treaties and practices. This Interpretation provides a clear legal foundation for Chinese courts to make consistent rulings in foreign-related civil and commercial cases, contributing to the standardization of legal application.

Regarding the ascertainment of foreign laws, the SPC Interpretation II on Several Issues Concerning the Application of the PRC Law on the Application of Laws to Foreign-Related Civil Relationships (关于适用〈中华人民共和国涉外民事关系法律适用法〉若干问题的解释（二）) also came into force on January 1, 2024. On July 10, 2024, the SPC published its First Batch of Typical Cases for Ascertaining and Applying Foreign Laws (首批查明和适用域外法的典型案例). These judicial interpretations and cases are instrumental in enhancing the consistency and clarity of the ascertainment of foreign law in foreign-related disputes.

Regarding the mutual recognition and enforcement of judgments in civil and commercial cases, the Arrangement of the SPC on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Cases by the Courts of the Mainland and the Hong Kong Special Administrative Region (最高人民法院关于内地与香港特别行政区法院相互认可和执行民商事案件判决的安排) came into effect on January 29, 2024. This arrangement broadens the scope of reciprocal recognition and enforcement, establishing a more comprehensive enforcement mechanism for civil and commercial cases between Mainland China and Hong Kong. Furthermore, on December 17, 2024, the SPC issued the Provisions on the Recognition and Enforcement of Civil Judgments Rendered by Courts in Taiwan (最高人民法院关于认可和执行台湾地区法院民事判决的规定), which took effect on January 1, 2025. These provisions improve the procedures for applying for recognition and enforcement of Taiwanese court judgments. Notably, they clarify the circumstances under which a judgment may be denied recognition, introduce the concept of “partial recognition”, and streamline the cross-border recognition and enforcement process. These changes provide clearer guidelines for the recognition and enforcement of judgments from Taiwanese courts, further optimizing judicial cooperation between Mainland China and Taiwan.

The Chinese courts have utilized the People's Court Case Database, Law Answer Platform and typical cases to improve judicial transparency and uniform application of the law

To promote judicial transparency and uniformity in the application of the law , the People’s Court Case Database (人民法院案例库) was officially launched and made publicly accessible on February 27, 2024. In accordance with the Working Procedures for the Construction and Operation of the People's Court Case Database (人民法院案例库建设运行工作规程), the database includes both “guiding cases” issued by the SPC and “reference cases” reviewed and approved by the SPC. Chinese courts at all levels are now required to consult the database when adjudicating cases, using relevant precedents as guidance. If parties or their representatives cite cases from the database as part of their defense, the court is obliged to address these in its reasoning.

“By the end of 2024, the Platform had posted over 730,000 questions and provided more than 660,000 answers”

In 2023, the SPC introduced the Law Answer Platform (法答网) to assist court officials nationwide with questions related to the application of laws. By the end of 2024, the Platform had posted over 730,000 questions and provided more than 660,000 answers. Additionally, 14 batches of Selected Q&A were released to the public.

In 2024, the SPC also published several batches of typical cases covering a broad spectrum of legal topics, including judicial review of arbitration, civil disputes related to agriculture, unpaid wage claims, liability for animal-related damages, intellectual property cases, the protection of intellectual property rights in the seed industry, labor disputes, elevated jurisdiction, maritime adjudication, anti-monopoly and anti-unfair competition, and cross-jurisdictional enforcement.

Together, the launching of the People’s Court Case Database, the ongoing publication of Selected Q&A on the Law Answer Platform, and the release of typical cases have met the growing demand for judicial transparency and law application uniformity. These initiatives provide valuable resources for legal scholars, practitioners and parties involved in litigation, offering clearer guidance on legal principles, and fostering a more predictable judicial environment.

The Draft Arbitration Law has attracted great attention and sparked heated discussions

On November 8, 2024, the Standing Committee of the PRC National People’s Congress issued the Arbitration Law (Revised Draft) (仲裁法（修订草案）, the “2024 Draft”) and solicited public comments. Compared with the PRC Arbitration Law (Draft for Comments) (中华人民共和国仲裁法（修订）（征求意见稿）, the “2021 Draft”) that was released in 2021, the 2024 Draft is relatively more conservative. It deletes some innovative provisions regarding the arbitration system and rules that were created in the 2021 Draft, such as the rules regarding competence-competence, interim measures, ad hoc arbitration, etc.

The highlights of the 2024 Draft mainly include:

1. expanding the scope of foreign-related arbitration cases to maintain consistency with the determination criteria prescribed in the PRC Law on the Application of Laws to Foreign-related Civil Relations (中华人民共和国涉外民事关系法律适用法);
2. adding the rules for limited “ad hoc arbitration” to allow the parties in two types of cases to appoint their own arbitrators outside the arbitration institutions;
3. clarifying the concept of the “seat of arbitration” to solve some issues in arbitration practice caused by the uncertainty of the seat of arbitration; and
4. shortening the time limit for filing an application for setting aside an arbitral award to enhance the efficiency of arbitration.

Developments in specific sectors

The year of 2024 also saw substantial developments in legislative and judicial practices in specific sectors. Highlights included:

1. antitrust rules and related disputes: with the release of the SPC Interpretation on Several Issues Concerning the Application of Law in the Trial of Civil Cases Involving Disputes over Monopolistic Acts (最高人民法院关于审理垄断民事纠纷案件适用法律若干问题的解释), the number of antitrust civil disputes increased significantly in 2024, and more attention are to be paid to the change of rules for this type of cases;
2. labor disputes: the number of labor disputes in 2024 remained high due to the economic situation, and the SPC issued the first batch of guiding cases on labor disputes in new forms of employment to address emerging issues in the field of labor disputes; and
3. rules against online unfair competition and related disputes: The Tentative Provisions Against Online Unfair Competition (网络反不正当竞争暂行规定) which took effect on September 1, 2024 has responded to the increasingly serious issues arising from the online unfair competition, and serves as important guidance for unfair competition disputes.