Introduction

According to the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China, foreign-related civil cases encompass the following circumstances: (1) where one or both parties are foreign nationals, stateless persons, foreign enterprises, or foreign organizations; (2) where one or both parties have their habitual residence outside the territory of the People's Republic of China (PRC); (3) where the subject matter of the dispute is located outside the territory of the PRC; (4) where the legal facts giving rise to, altering, or extinguishing a civil relationship occur outside the territory of the PRC; (5) other circumstances that may be determined to constitute foreign-related civil cases.

With respect to cases involving Hong Kong, Macao, and Taiwan, the People's Courts may, in adjudication, apply by reference the provisions governing foreign-related civil procedure and judicial review of foreign-related arbitration cases. For ease of exposition, this Guideline collectively refers to foreign-related cases and cases involving Hong Kong, Macao, and Taiwan as "foreign-related cases", unless otherwise specifically provided.

In foreign-related civil cases, issues concerning competence and jurisdiction may arise even before litigation is initiated. Once proceedings are filed before the People's Courts, competence and jurisdiction constitute the primary threshold issues. Part I of this Guideline, titled"Competence and Jurisdiction", focuses on this central matter and provides detailed elaboration of its application in light of the relevant laws and judicial interpretations.

 

Competence

1. Definition of Competence

Civil litigation and arbitration are the two fundamental mechanisms of civil dispute resolution in China, the core of which lies in the allocation of competence. People's Courts shall accept civil actions brought between and among citizens, legal persons, or other organizations arising from property or personal relations. At the same time, contractual disputes and other disputes over property rights and interests between citizens, legal persons, and other organizations as equal subjects may also be resolved through arbitration.

The arbitral system emphasizes party autonomy. The adoption of arbitration to resolve disputes requires the voluntary agreement of both parties and the conclusion of an arbitration agreement. In the absence of such an agreement, if one party applies for arbitration, the arbitration commission shall not accept the case. Where the parties have concluded an arbitration agreement and one party nonetheless brings an action before a People's Court, the People's Court shall not accept the case, except where the arbitration agreement is invalid.

Accordingly, an arbitration agreement has the procedural effect of excluding the competence of the People's Courts. That is, while the courts lawfully enjoy unified jurisdiction, the parties may, by virtue of an arbitration agreement, effect the exclusion of the courts' competence.

2. Validity of Arbitration Agreements

An arbitration agreement includes an arbitration clause contained in a contract, as well as any other written agreement reached before or after a dispute to submit the dispute to arbitration.

An arbitration agreement shall contain the following elements: (1) an expression of intent to submit the dispute to arbitration; (2) the matters to be arbitrated; (3) the chosen arbitration commission.

An arbitration agreement shall be invalid under any of the following circumstances: (1) where the agreed matters fall outside the statutory scope of arbitration; (2) where the agreement is concluded by a person without capacity for civil conduct, or with limited capacity for civil conduct; (3) where one party coerces the other into concluding the arbitration agreement; (4) where the agreement fails to specify, or specifies ambiguously, the matters to be arbitrated or the arbitral institution, and the parties fail to reach a supplementary agreement.

An arbitration agreement shall be deemed valid under the following circumstances: (1) where the arbitration institution or the People's Court has confirmed its validity; (2) where no party raises an objection to its validity before the first hearing of the arbitral tribunal; (3) where the arbitration agreement complies with Article 16 of the Arbitration Law and does not fall under the circumstances set forth in Article 17 thereof.

3. Judicial Confirmation of the Validity of Arbitration Agreements

Applications for confirmation of the validity of arbitration agreements fall within the jurisdiction of the Intermediate People's Court or specialized People's Court at the place of the agreed arbitral institution, the place where the agreement was executed, the domicile of the applicant, or the domicile of the respondent. In the Shanghai region, such cases shall be filed with the Shanghai First Intermediate People's Court and heard by the Shanghai International Commercial Court.

Rulings rendered by the People's Courts in arbitration-related judicial review cases shall, except for rulings on non-acceptance, dismissal of applications, or jurisdictional objections, take legal effect immediately upon service. Applications for reconsideration, appeal, or retrial shall not be entertained, unless otherwise provided by law or judicial interpretation.

4.Procedure for Raising Objections to Competence

Before the first hearing of the People's Court, a party may raise an objection to competence on the ground of the existence of a valid arbitration agreement and shall submit such agreement to the Court. Failure to raise such an objection before the first hearing shall be deemed a waiver of the arbitration agreement. Where a party lawfully raises an objection to competence, the People's Court shall examine the validity of the arbitration agreement. If the agreement is found to be valid, the Court shall rule to dismiss the plaintiff's claim.

Where a party disagrees with the first-instance ruling of the People's Court on an objection to competence, if the party has a domicile within the PRC, it may file an appeal to the next higher People's Court within ten days from the date of service of the ruling; if the party has no domicile within the PRC, the appeal period shall be thirty days from the date of service.

 

Jurisdiction

1. Jurisdiction by Hierarchical Level

In the Shanghai region, the Shanghai High People's Court shall have jurisdiction over first-instance foreign-related civil and commercial cases where the amount in controversy is RMB 5 billion or above (inclusive), or cases that otherwise have significant impact within its jurisdiction.

The Shanghai Intermediate People's Courts shall have jurisdiction over the following first-instance foreign-related civil and commercial cases: cases where the amount in controversy is RMB 40 million or above (inclusive); cases that are complex in nature or involve a large number of parties; and other cases having significant impact within their jurisdiction. Cases where the amount in controversy is below RMB 40 million shall be under the jurisdiction of district-level People's Courts. Cases involving marriage, inheritance, family, property services, personal injury compensation, traffic accidents, labor disputes, and mass disputes shall generally fall under the first-instance jurisdiction of district-level People's Courts.

For foreign-related intellectual property civil cases, the Shanghai High People's Court shall have jurisdiction over first-instance disputes concerning invention patents, utility model patents, new plant varieties, integrated circuit layout designs, trade secrets, computer software ownership and infringement, and monopoly disputes, where the amount in controversy is RMB 100 million or above. The Shanghai Intellectual Property Court shall have jurisdiction over first-instance cases under RMB 100 million concerning patents, new plant varieties, integrated circuit layout designs, trade secrets, computer software ownership and infringement, recognition of well-known trademarks, and monopoly disputes. Other types of intellectual property cases shall generally fall under the jurisdiction of district-level People's Courts.

2. Territorial Jurisdiction

In foreign-related civil disputes, where a lawsuit is brought against a defendant who has no domicile within the territory of the People's Republic of China, except for cases involving personal status, if the place of contract conclusion, contract performance, location of the subject matter, location of property available for seizure, place of the tortious act, or domicile of the representative office is within the territory of the People's Republic of China, the People's Court at such location shall have jurisdiction.

In addition, where a foreign-related civil dispute has other appropriate connections with the People's Republic of China, the People's Courts may also exercise jurisdiction.

3. Centralized Jurisdiction

In the Shanghai region, starting from 1 January 2025, the Shanghai First Intermediate People's Court, Shanghai International Commercial Court, shall exercise centralized jurisdiction over the following cases:

(1) First-instance commercial cases that would otherwise fall under the jurisdiction of the Shanghai First and Second Intermediate People's Courts, including:

(a) foreign-related and Hong Kong/Macao/Taiwan-related commercial cases;

(b )applications for recognition and enforcement of civil and commercial judgments and rulings rendered by foreign courts, as well as courts of the Hong Kong Special Administrative Region, the Macao Special Administrative Region, and the Taiwan Region;

(c) applications for confirmation of foreign-related and Hong Kong/Macao/Taiwan-related mediation agreements;

(d) commercial cases relating to the establishment of foreign-invested enterprises, capital contribution, confirmation of shareholder qualification, profit distribution, merger, division, or dissolution, and other disputes concerning such enterprises;

(e) commercial cases in which one party is a wholly foreign-owned enterprise.

(2) Arbitration-related judicial review cases that would otherwise fall under the jurisdiction of the Shanghai First and Second Intermediate People's Courts, including:

(a) applications for confirmation of the validity of arbitration agreements;

(b) applications to set aside or to refuse enforcement of arbitral awards;

(c) applications for recognition and enforcement of arbitral awards rendered by foreign arbitral institutions, as well as institutions in Hong Kong, Macao, and Taiwan;

(d) applications by parties to arbitration for property preservation, conduct preservation, evidence preservation, or investigation orders.

(3) Appeals and applications for retrial against judgments and rulings rendered by district-level People's Courts in respect of the types of cases listed in item (1) above.

4. Jurisdiction by Agreement

Where the parties to a foreign-related civil dispute enter into a written agreement choosing the People's Courts for jurisdiction, the People's Courts shall have jurisdiction. It is not required that the chosen People's Court have a practical connection with the dispute.

Where the jurisdiction agreement entered into by the parties expressly designates the courts of a given country as having jurisdiction, but does not provide that such jurisdiction is non-exclusive, the agreement shall be presumed to be one of exclusive jurisdiction.

Jurisdiction agreements should primarily include provisions on basic jurisdiction, choice of law, and service of process.

Jurisdiction clauses shall be agreed upon in writing. They may be incorporated into the"Dispute Resolution" section of a contract at the time of its conclusion, or executed separately as an independent jurisdiction agreement. The written form includes contracts, correspondence, and data messages (including telegrams, telexes, facsimiles, electronic data interchange, and emails).

5. Exclusive Jurisdiction

The following civil cases fall under the exclusive jurisdiction of the People's Courts, and the parties may not agree to confer jurisdiction on a foreign court, except where they agree to arbitration:

(1) actions arising from disputes concerning the establishment, dissolution, or liquidation of a legal person or other organization established within the territory of the People's Republic of China, or the validity of resolutions adopted by such legal person or organization;

(2) actions arising from disputes concerning the validity of intellectual property rights granted upon examination within the territory of the People's Republic of China;

(3) actions arising from disputes concerning the performance of contracts for Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, or Chinese-foreign cooperative contracts for the exploration and development of natural resources within the territory of the People's Republic of China;

(4) actions arising from disputes over immovable property, which shall fall under the jurisdiction of the People's Court at the place where the immovable property is located;

(5) actions arising from disputes in port operations, which shall fall under the jurisdiction of the People's Court at the place where the port is located;

(6) actions arising from inheritance disputes, which shall fall under the jurisdiction of the People's Court at the decedent's domicile at the time of death or at the place where the principal estate is located.

In addition, the following maritime actions fall under the exclusive jurisdiction of designated maritime courts:

(1) actions arising from pollution damage to the marine environment caused by the discharge, leakage, or dumping of oil or other hazardous substances, or by offshore production, operation, or ship dismantling and repair, which shall fall under the jurisdiction of the maritime court at the place where the pollution occurred, where the damage resulted, or where pollution prevention measures were taken;

(2) actions arising from disputes concerning contracts for marine exploration and development performed within the territory of the People's Republic of China and in waters under its jurisdiction, which shall fall under the jurisdiction of the maritime court at the place of contract performance.

6. Jurisdiction in Parallel Proceedings

Where the same dispute arises between parties, and one party brings an action before a foreign court while the other party brings an action before a People's Court, or one party brings actions both before a foreign court and a People's Court, the People's Court may accept the case if it has jurisdiction according to law. Where the parties have entered into an exclusive jurisdiction agreement choosing a foreign court, and such agreement does not contravene the provisions on exclusive jurisdiction under this Law, nor involve the sovereignty, security, or public interest of the People's Republic of China, the People's Court may rule not to accept the case; if the case has already been accepted, the Court shall rule to dismiss the action.

7. Objections to Jurisdiction

After a People's Court accepts a foreign-related civil case, if a party has an objection to jurisdiction, it shall raise the objection within the period for submitting a statement of defence. The People's Court shall examine the objection raised by the party. If the objection is upheld, the Court shall rule to dismiss the plaintiff's claim; if the objection is not upheld, the Court shall rule to dismiss the jurisdictional objection.

Where a party disagrees with the first-instance ruling on a jurisdictional objection, if it has a domicile within the territory of the People's Republic of China, it may appeal to the next higher People's Court within ten days from the date of service of the ruling; if it has no domicile within the territory of the People's Republic of China, the time limit for appeal shall be thirty days from the date of service. No case acceptance fee shall be charged for appeals against rulings on jurisdictional objections.

The People's Court of second instance may, in cases of appeal against rulings on jurisdictional objections, decide not to hold a hearing.

Where a party fails to raise an objection to jurisdiction, but instead responds to the action on the merits or files a counterclaim, it shall be deemed to have accepted the jurisdiction of the People's Court. However, the rules on jurisdiction by hierarchical level shall still be observed.

8. Forum Non Conveniens

Where a People's Court has accepted a foreign-related civil case and the defendant raises an objection to jurisdiction, the Court may rule to dismiss the action and inform the plaintiff to bring the case before a more convenient foreign court if all of the following conditions are satisfied:

(1) the basic facts in dispute did not occur within the territory of the People's Republic of China, and it is manifestly inconvenient for the People's Court to hear the case and for the parties to participate in the proceedings;

(2) the parties have not entered into an agreement choosing the People's Courts for jurisdiction;

(3) the case does not fall under the exclusive jurisdiction of the People's Courts;

(4) the case does not involve the sovereignty, security, or public interest of the People's Republic of China;

(5) a foreign court is more convenient for the hearing of the case.

Where, after a ruling to dismiss the action, the foreign court refuses to exercise jurisdiction over the dispute, or fails to take necessary measures to hear the case, or fails to conclude the case within a reasonable period of time, and a party brings the action again before a People's Court, the People's Court shall accept the case.

 

Source: Changning District People's Court