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Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones

From: 最高人民法院网         Updated: 2017-01-09   

Fafa [2016] No. 34, 

Supreme People’s Court 

Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones

With a view to fully exerting the judicial functions and roles of the people's courts and safeguarding the construction of free trade zones in China (“FTZs”),   according to the relevant decisions made by the Standing Committee of the National People's Congress and in light of the trial practice, the following opinions on the trial of cases involving FTZs by the people's courts are hereby given:

I. Deepen the understanding, and effectively strengthen the sense of responsibility and mission for providing judicial safeguard to the construction of FTZs.

1. Fully understand the significance of FTZ construction. A FTZ is an experimental field of China's reform and opening up, and is an important window for China to build a new and open economic system. The construction of FTZs is a driving force for refining the systems and mechanisms of China's economy, and has a great impact on law enforcement. People's courts at all levels shall proactively strengthen judicial countermeasures, develop overall consciousness of promoting the governance of the country by law in an all-round way, act in strict compliance with law, hear various cases involving FTZs in a just and effective way, fairly protect the legitimate rights and interests of the parties concerned at home and abroad, and provide proper and effective judicial safeguard to the construction of FTZs. 

2. Guarantee the systematic innovation in the construction of FTZs by law. The construction of FTZs undertakes the historic mission of exploring new ways and gaining new experience in China's comprehensively deepened reform and opening up, and is a positive try in making central decisions based on the lawfully recognized evidence in any major reform. People's courts at all levels shall explore reform measures to provide judicial safeguard for FTZs, which are required to be taken within the framework of the law. Timely adjust the judging criteria, actively support the transformation in government functions, respect contracting parties' autonomy of will, and guarantee the transaction security based on the accurate application of law.

Enthusiastically participate in the modernization construction of the governing system and governing capacity within the FTZs. In such works as transformation in government functions, opening up of investment, transformation in trade development, opening up and innovation in finance, and improvement on the rule of law, people's courts at all levels shall, in light of their own judicial practice, proactively coordinate the implementation of all reform measures, actively refine the working mechanism, innovate working methods, fully contribute to the fostering of a fair, open and transparent environment for the rule of law, and of an international and convenient business environment rule by law. 

II. Fully exert the judicial functions and roles to provide judicial safeguard for the healthy development of FTZs

3. Well perform the criminal trial functions, and fight against criminal offences within the FTZs by law. Combat the crimes of destructing the FTZ construction, and of abusing the FTZs' special market supervision to maintain the social stability and market order within the FTZs. Efforts shall be made to solve the problem arising out of trans-boundary crimes of infringing intellectual property rights. Criminal activities, such as smuggling involving FTZs, illegal fund-raising, evasion of foreign exchange, money-laundering shall be punished by law. At the same time, pay attention to distinguishing among the crime of false declaration of registered capital, crime of false capital contribution, crime of flight of capital contribution and crime of illegal business.

4. Strengthen the civil trial involving FTZs and protect the civil rights and interests of the parties concerned according to law. Strengthen labor protection, correctly handle labor disputes between employers and workers, and promote the healthy development of enterprise employment system within FTZs. Protect consumers' rights and interests as well as the safety of consumers' personal information, strictly review the forms and terms of the service contract, and punish the behavior of violating consumers' rights and interests by making use of false advertising. Protect the ecological environment by trying proceedings brought by the relevant organs and organizations against the behaviors of harming the public interests or of a significant risk of environment pollution and ecological damage.

Correctly deal with common issues in FTZs as “altering the purpose of premises from residence into business”, “registering many licenses on the same address”. Correctly understand and apply Article 77 of the Property Law of the People's Republic of China providing the restrictive conditions of altering premises from residence into business to protect the people's normal life order. Where many companies register the same address as their domicile, it is required to pay attention to whether there is any confusion of property or personality while trying related cases with a view to safeguarding the interests of creditors by law.

Strengthen the judicial protection of intellectual properties within the FTZs. Encourage independent innovation and increase the cost of infringement. Improve the judicial policy on processing trade, and promote its transformation and upgrading. Accurately distinguish the normal processing of original equipment manufacturer (“OEM”) from other acts, such as manufacturer's processing without authorization or processing and sales of products beyond scope and quantity. Properly deal with problems arising in parallel imports of branded products, and finely balance the interests of consumers, interests of trademark owners with national trade policies. Encourage investment with intellectual property rights as object, promote innovation in business model, simplify procedures for rights protection, and improve the quality and efficiency in rights protection. Encourage intellectual property pledge activities to promote the flow and use of intellectual properties.

Strengthen the maritime trial. Regulate the construction of the shipping market, support the liberalization of the shipping service in FTAs, and enhance the level of international shipping service and the function of the international shipping service. Pay attention to new types of cases relating to the reform in ship registration regime and to other new types of cases relating to shipping, and study the application of law and issues of specific jurisdiction in the new types of maritime-related relations. Confirm the relevant rules through the trial of typical cases in a timely manner to guide the industry behaviors and to promote the industry development.

5. Actively exercise the administrative trial function, support and supervise the administration of local governments in FTZs by law. Support and supervise the market supervision departments to innovate in service model and administrate according to the law. Promote and standardize disclosure of the government information through the trial activities. Where a contract signed by an enterprise which has registered its foreign-invested project cannot be performed de facto or by law for failing to satisfy the industry access requirements within a FTZ, the people's court shall not support the request for continuing the performance of the contract.

The people's courts shall promptly provide feedback to the administrative departments or put forward judicial suggestions to promote the construction of the rule of law within the FTZs, when finding any problem in the course of the trial, such as institutional defects relating to the market rules within the FTZs and administrative behaviors beyond the standard.

III. Lawfully support the innovations of enterprises in the FTZs and encourage them to exploring new modes of operation

6. Encourage the innovation and development in financial leasing industry within FTZs. Actively support financial leasing enterprises within the FTZs to legally conduct financial leasing business within the approved business scope. Fully respect the agreement between the Chinese and foreign parties concerned on the jurisdiction and application of law concerning the financial leasing contract disputes. Correctly determine the validity of the financial leasing contract and a financial leasing contract shall not be deemed invalid barely on the ground of a failure in fulfilling the relevant procedures and other situations. 

7. Support the development of cross-border e-commerce in the FTZs. Reasonably determine the nature of the contract between the consumer and the cross-border e-commerce operator. Where a consumer is personally liable for customs duties and risks of posting according to a contract, the commission contractual relationship between the consumer and the cross-border e-commerce operator shall be deemed to have been established. Where an e-commerce enterprise imports goods in bulk and sells them in batch, and a consumer claims to have concluded a sales contract with the e-commerce enterprise, the people's court shall uphold such claim. Where an e-commerce enterprise enters into an arbitration clause with a consumer based on the contract text provided by it, it shall remind the customer of such clause specifically, and the parties shall be deemed to have reached consensus on arbitration upon consent by the customer. 

IV. Explore reform and innovation of the judicial procedure while taking the characteristics of FTZs into consideration

8. Improve the system of judicial review and judicial confirmation, and support the diversified dispute settlement mechanisms within the FTZs. Encourage people's courts to solve civil and commercial disputes in the FTZs through arbitration, mediation and other diversified mechanisms, and further explore and improve the conflict and dispute resolution mechanisms that link up litigation and non-litigation methods. Support the innovation and development of arbitration institutions, people's mediation committees, commercial and industrial mediation organizations, and provide judicial convenience for diversified settlements of civil and commercial disputes in FTZs.

Strengthen the construction of court organs and judicial organizations within the FTZs. Primary people's courts at the location of FTZs may set up special courts or collegial panels based on the number, type and nature of cases to be heard and try cases involving the FTZs to accumulate trial experience and unify judgement standards. People's courts at all levels are encouraged to form trial mechanisms sharing local characteristics on the basis of summing up the trial experience.

9. Correctly determine the validity of arbitration agreements, and regulate the judicial review of arbitration cases. Where a foreign enterprise registered in the FTZ is bound to submit cross-border arbitration for commercial disputes, the relevant arbitration agreement shall not be invalidated on the ground that the dispute does not involve foreign factors.

Where one party or both parties concerned which are foreign-funded enterprises registered in the FTZ have agreed to submit cross-border arbitration for commercial disputes, after the occurrence of a dispute, the parties concerned submit the dispute for arbitration abroad but then claim to not acknowledge, recognize or execute the award on the ground of invalidity of the arbitration agreement after the relevant award is made, the people's court shall not uphold such request; where the other party concerned did not raised an objection to the validity of the arbitration agreement in the arbitration procedure, but claims that the arbitration agreement is invalid and refuses to acknowledge, recognize or execute the award therefor on the ground that the relevant dispute does not involve any foreign factor after the award is made, the people's court shall not support the request. 

In case companies registered within the Pilot Free-Trade Zones agree to arbitration in certain locations in the Mainland China, with certain arbitration rules, and by certain persons, such arbitration agreement may be recognized as valid. In case a people’s court finds such arbitration agreement to be invalid, it shall report the matter to a higher court for review. In case the higher court agrees with the lower court, it shall further report the matter to the SPC and shall only decide on the matter upon the SPC’s reply.

10. Explore innovation in the trial procedure to try cases involving FTZs in a fair and efficient manner. The people's court to civil and commercial cases in the first instance under the jurisdiction of the FTZ shall, if one or both parties are civil subjects from Hong Kong, Macao and Taiwan in the trial of the case involving the FTZ, may explore to elect Hong Kong, Macao and Taiwan residents to participate in the collegial panel as people's jurors.

When the people's court hears civil and commercial cases in the first instance relating to foreign countries, Hong Kong, Macao and Taiwan involving FTZs, provided that the facts are simple and the legal relationship is clear, the people's court may try to apply simple procedures.

Properly handle hard-to-deliver problems in cases where a party concerned is an enterprise "registered within a FTZ but operating business outside". Where legal persons and other organizations registered in the FTZ choose the place of registration as the address where the litigation document of the people's court may be served by mail. Where a foreign civil subject establishes a corporate or office as a business agent in the FTZ, it may serve on its business agent. Where a foreign civil subject generally appoints its branch office staff or a lawyer of a law firm in China as a legal representative for a specific business at a specific time in a specific region, the legal representative may be the agent to receive litigation documents. 

11. Establish a reasonable mechanism for the identification of foreign laws. Where the parties have agreed to apply foreign laws and not provided such foreign laws without justifiable reasons within the reasonable time limit specified by the people's court or there is no relevant provision governing the case in the foreign laws, the laws of the People's Republic of China shall apply; where the people's court knows any way to identify the provisions, it may inform the parties. In case that the parties fail to provide or identify the specific foreign laws through the way provided in the international treaties to which China has formally acceded, the parties may jointly designate certain experts to provide the aforesaid laws prior to the first instance. Where a foreign law is to be applied in accordance with the regulations of the law of conflict, the people's court shall, based on its authority and powers, identify the foreign law.

12. Trial of cases involving the FTZs and sum up the practical experience. The higher people's courts shall give full consideration to the trial of cases involving the FTZs and strengthen the forward-looking research work. All local people's courts shall timely study and summarize the hot and difficult issues found in the trial of cases related to FTZs, and come out with opinions and make recommendations to the SPC in a timely manner.

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*The original text is Chinese and has been translated into English for reference only. If there is any inconsistency or ambiguity between the Chinese version and the English version, the Chinese version shall prevail.