I am working for a foreign company with offices in China. For some commercial disputes, the foreign company intends to bring an action in the people's court of China. My questions are: (1) as a foreign company bringing a commercial action in a Chinese court, is the standard of legal costs for it the same as that for a Chinese plaintiff? (2) How to pay for the costs? (3)Does the foreign company need to provide security for the action?
Dear Mr. Mitchell Wilson,
At the request of China Law magazine, I made the answers below to questions in your letter foyer reference.
As the company you work for is a foreign company, if it wants. To bring a commercial action in a Chinese court, the relevant provisions on the collection of legal costs from foreign litigants by the people's courts.
Article 35 of the Supreme People's Court’s Rules on Collection of Legal Costs by the People’s Courts (adopted by the Judicial Committee of the Supreme People's Court in 1989 and effective as of September 1 in the same year) provides that: “These Rules shall apply to actions in the people’s courts carried out by foreigners, stateless persons or foreign enterprises or organizations. However, where a foreign court imposes legal costs on Chinese citizens, enterprises or organizations differently from its domestic citizens, enterprises or organizations, the people's courts shall deal with this matter in the principle of mutuality.” Pursuant to this provision, the people's courts collect legal costs from foreign enterprises in the principle of national treatment but conditioned upon reciprocity and mutuality. That is, where a foreigner, stateless person or foreign enterprise or organization brings an action in a people's court, the people’s court collects legal costs from it in the same way as it does from a domestic litigant, in the principle of national treatment or equal treatment, regardless of the foreign character of a litigant. However, such an equal treatment is not conferred upon foreign litigants without limitations, but on the mutual basis. Where a country discriminates Chinese litigants in litigation rights including the legal costs, the Chinese courts are entitled to impose limitations alike according to Chinese legal provisions above.
The above provisions on the relevant principles for the people's courts to collect legal costs from foreign parties are consistent with Article 5 of the Civil Procedural Law of the People’s Republic of China on the adoption of national treatment principle based on mutuality for foreign parties to bring or plead actions or in the people's courts, and are the embodiment of the aforesaid legal principle. Meanwhile, the above provisions are appropriate for the furtherance of reform and opening up of China as well as the resulting needs for the extensive international economic and trade cooperation and frequent exchange of persons, substantially conforming to the general practices in the international community.
Pursuant to provisions of Article 12 of the Rules on Collection of Legal Costs by the People’s Courts, a plaintiff should prepay the cost for the acceptance of a civil or commercial case. Whereas defendant counterclaims, the defendant should prepay the case acceptance cost computed as per the amount of counterclaims or prices. The case acceptance cost should be prepaid according to the standards set forth in Article 5. The people's court should decide the prepaid amount of other legal costs according to the specific situations of a case. The aforesaid Article 5 of the Rule son Collection of Legal Costs by the People's Courts provides for the standards of costs collection, and the costs are collected at different rates of the disputed amounts of prices or claims indifferent cases. In the national treatment principle, the above provisions on the collection of legal costs should also apply to civil or commercial actions filed by foreign litigants in the people’s courts.
In respect of whether a foreign party bringing a civil or commercial action in the people’s court should provide a security for legal costs, the relevant provisions of the people's courts have experienced a process of changes. In early 1980s, China once implemented a system of provision of security for legal costs. Usually, at the request of the defendant, a foreigner or a person without residence in China who filed a civil or commercial action in the people's court was ordered by the people's court to provide a security for legal costs, in order to prevent the plaintiff from abusing its litigation rights and avoiding legal costs after losing the action. After the adoption and enforcement of the Rules on Collection of Legal Costs by the People's Courts in 1989, the system of provision of security for legal costs has been replaced by the national treatment principle conditioned upon reciprocity and mutuality, that is, mutual exemption from provision of security for legal costs, based on reciprocity. It is worth mentioning that China has, so far, entered into bilateral judicial assistance treaties or agreements with more than 40 countries, and many of these treaties or agreements contain clauses on mutually exempting nationals of other member countries from the provision of security for legal costs. According to the provisions of the Rule son Collection of Legal Costs by the People's Courts and relevant bilateral international treaties, the applicability of foreign parties to such an exemption is determined mainly according to two standards: (1) nationality, that is, as long as the party concerned is a national of the member country or certain country, the national treatment principle under the international treaty concluded with that country or based on mutuality should apply; and (2) residence in addition to nationality, that is, the party concerned must have a domicile or residence in the member country in addition to the nationality of that member country. It should be clear that an exempted foreign party bringing a civil or commercial action in the needle’s court should arena the legal costs under the same conditions and in me same scope as roar a Chinese party, according to the national treatment principle.
In your letter, no reference is made to the country of which the foreign company you work forks. Hence, if the company you work for intends to bring a civil or commercial action in the people’s court, information on the relevant judicial assistance treaty or bilateral agreement entered into band between the country in which the foreign company you work for is registered and the People’s Republic of China should be inquired．