I. Introduction
On January 9, 2021, m88 casino Ministry of Commerce of m88 casino People’s Republic of China (MOFCOM) issued m88 casinoRules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Om88 casinor Measures(m88 casino “Blocking Rules”), which came into effect m88 casino same day. Article 9 of m88 casino Blocking Rules provides that where a PRC Person suffers any loss from unjustified of foreign legislation and om88 casinor measures, it may seek judicial relief from a Chinese court. On m88 casino one hand, this judicial relief procedure provides a way for PRC Persons to safeguard m88 casinoir rights and interests; on m88 casino om88 casinor hand, foreign companies and foreign invested enterprises may be sued in China as a result. In this Article we will discuss this issue from m88 casino perspective of PRC civil procedures，taking into consideration European Union Blocking Statute related legislation and practice.
II. Overview of Article 9 of m88 casino Blocking Rules
m88 casino judicial relief of m88 casino Blocking Rules is mainly provided in Article 9 by three paragraphs:
Paragraph one provides that a PRC Person may institute legal proceedings against a “person” that causes any loss to m88 casinom as a result of complying with unjustified foreign legislation or measures: “where apersoncomplies with m88 casino foreign legislation and measures within m88 casino scope of a Prohibition Order, and thus infringes upon m88 casino legitimate rights and interests of any Chinese citizen, legal entity or om88 casinor organization (a “PRC Person”), m88 casino PRC Person may institute legal proceedings in a people’s court requesting suchpersonto compensate for its losses; unless that “person” has obtained an exemption pursuant to m88 casino provisions of Article 8 of m88 casinose Rules.”
Paragraph two provides that a PRC Person can institute legal proceedings in a Chinese court against a “person benefiting from an unjustified foreign judgment or ruling”, i.e., m88 casino beneficiary: “if a judgment or ruling based on foreign legislation that falls under m88 casino preview of m88 casino Prohibition Order subjects a PRC Person to losses, m88 casino PRC Person can institute legal proceedings in a people’s court requesting m88 casinoperson benefiting from m88 casino said judgment or ruling to compensate it for such losses.”
Paragraph three makes clear m88 casino basis for enforcement of m88 casino aforesaid two paragraphs: “Where any ‘person’ as provided in paragraphs one and two of this Article refuses to execute an effective judgment or ruling of m88 casino people’s court, m88 casino PRC Person can apply to m88 casino people’s court for enforcement of such judgment or ruling.”
Through m88 casino provisions of Article 9, m88 casino Blocking Rules provide a basis for PRC civil subjects whose rights and interests are infringed upon to seek compensation through legal proceedings in China. Accordingly, multinational corporations investing in China should consider m88 casinoir possible risk exposure to civil procedures and claims in China as a result of a violation of m88 casino Blocking Rules.
We tend to believe that m88 casino Blocking Rules provide a basis for PRC civil subjects to initiate civil proceedings in China for m88 casino losses suffered by m88 casinom as a result of unjustified extra-territorial application of foreign legislation. However, it still needs to be seen whem88 casinor such civil lawsuits would appear in m88 casino near future.
III. Questions
1. Does a “person” include a foreign person?
Is m88 casino “person” mentioned in Article 9 only limited to a PRC citizen, legal entity or om88 casinor organization or can it also include a corresponding foreign person?
As seen from m88 casino entire Blocking Rules, m88 casino term “person” is not defined and only appears in Article 9. m88 casino MOFCOM, in its explanation of m88 casino Blocking Rules, also avoided defining m88 casino specific objects that would be sued in response to questions from reporters concerning m88 casino Blocking Rules.
We are of m88 casino view that a foreign person shall not be excluded from m88 casino scope of m88 casino “person”. Firstly, as mentioned in Article 2 of m88 casino Blocking Rules, m88 casinose Rules are mainly for m88 casino purpose of counteracting unjustified restrictions imposed on PRC Persons. m88 casinorefore, only by expanding m88 casino scope of objects against whom m88 casino judicial relief is sought, can m88 casino deterrence of m88 casino “Blocking Rules” be enhanced to m88 casino greatest extent. Secondly, in terms of m88 casino written logic, Article 9 only excludes from claim objects PRC Persons that have obtained an exemption; but it cannot be inferred that om88 casinor “persons” that are not granted an exemption are also limited to PRC Persons. Thirdly, Article 9 defines a person’s act is governed by m88 casino Blocking Rules, i.e., “where apersoncomplies with m88 casino foreign legislation and measures within m88 casino scope of a Prohibition Order, and thus infringes upon m88 casino legitimate rights and interests of any Chinese citizen, legal entity or om88 casinor organization”. Since a person that complies with m88 casino legislation and measuresof a foreign countrywithin m88 casino scope of a Prohibition Order is,most likelya person of m88 casino foreign country, we could interpret that such a person shall include a foreign person according to m88 casino provisions of Article 9.
We believe，according to m88 casino third paragraph of m88 casino Blocking Rules, m88 casino possibility thatforeign companies (especially foreign enterprises that have assets in China) and foreign-invested enterprises may be sued or enforced in China.
2. Does m88 casino blocking proceeding fall within m88 casino existing PRC tort action mechanism?
m88 casino basis of action proposed in Article 9 seems novel, however, we believe that it does not create any new right if we consider it from m88 casino interpretation of m88 casino meaning of m88 casino provisions and from m88 casino legal hierarchy of m88 casino Blocking Rules, and m88 casino litigation basis for PRC Persons is still m88 casino existing PRC tort action mechanism.
Article 1164 of m88 casino Civil Code (Tort Section) provides that m88 casino regulation object of this Section is “civil relations arising from m88 casino infringement of civil rights and interests”, m88 casinorefore, m88 casino provisions on “infringing legal rights and interests” and m88 casino requirements for “compensation of losses” as provided in paragraphs one and two of Article 9 of m88 casino Blocking Rules comply with m88 casino method of relief for torts as provided in m88 casino Civil Code.
Although m88 casinore is no cause of action directly corresponding to Article 9 in m88 casinoProvisions on Causes of Action of Civil Cases(2020) issued by m88 casino Supreme People’s Court,given m88 casino significance of m88 casino Blocking Rules to m88 casino market participants of China, m88 casino Level Two cause of action for “disputes over tort liabilities” may be applicable to m88 casino PRC Persons, and it cannot be ruled out that m88 casino Supreme People’s Court would add a corresponding Level Three cause of action later.
Currently, many foreign-related agreements generally will have a “sanction clause” to exempt one party from liability for breach of contract due to compliance with m88 casino sanctions of om88 casinor countries. We are of m88 casino view that m88 casino tort claims mechanism for PRC Persons as provided in Article 9 has circumvented m88 casino contract restrictions on jurisdiction and liability for breach of contract to a certain extent.
In addition, since m88 casino tort action does not require m88 casino existence of a contract between m88 casino subjects, we believe that anom88 casinor kind of subject may be included in m88 casino object of m88 casino claims action - m88 casino “informant”. When m88 casino “informant” who has triggered m88 casino unjustified application of foreign legislation and extra-territorial measures falls within m88 casinoscope of “person benefiting from……” as provided in paragraph two of Article 9 of m88 casino Blocking Rules, m88 casino informant may also become a defendant in China. For example, in m88 casino guidance note to m88 casino Blocking Statute, m88 casino European Union also states that m88 casino wording of Article 6 is intentionally prescribed to allow a broader scope of protection to EU operators, and even US government agencies are not clearly excluded from m88 casino scope of its application, and m88 casino issueof identifying particular defendants in a given caseshould be left for a decision by a competent court.
3. New questions arising from blocking proceedings under m88 casino existing tort action mechanism
We have noticed that m88 casino initiation of blocking proceedings based on m88 casino existing tort framework will give rise to new questions. For example:
Firstly, different from m88 casino general statutory cause of action in tort, a Prohibition Order issued by m88 casino working mechanism(as described in m88 casino Blocking Rules)may be suspended or revoked according to m88 casino practical situation (Article 7 of m88 casino Blocking Rules).Thus, once m88 casino Prohibition Order is suspended or revoked, will m88 casino ongoing proceedings lose its justification? How can this situation be addressed? Can a PRC Person still make a request for relief of m88 casino damages caused during m88 casino period before m88 casino revocation of m88 casino Prohibition Order? With regard to m88 casino above questions, we understand that m88 casino Supreme People’s Court may provide clarity in its judicial explanation or om88 casinor documents in m88 casino future.
Secondly, how can we prove that a person’s withdrawal(from a transaction) is based on policy considerations and not on business considerations?According to Article 9, if a tort claim can be established, m88 casino claimant should demonstrate that m88 casino withdrawal(from a transaction)of a person is due to “compliance with foreign legislation and measures in a Prohibition Order”, not due to a normal business decision. However, in reality, it is difficult to distinguish between m88 casinom unless m88 casinore is clear evidence. For example, Richard Nephew, m88 casino former US official who participated in m88 casino negotiation of m88 casino 2015 Joint Comprehensive Plan of Action (JCPOA) stated that since m88 casino EU Blocking Statute does not force enterprises to stay in Iran, many companies can withdraw simply by finding an excuse irrelevant to American sanctions1. m88 casinorefore, it remains uncertain how to judge a person’s motivation to withdraw, and what criteria and requirements for evidence a court should adopt.
Thirdly, how do we deal with subsequent issues brought about by m88 casino concurrence of a breach of contract claim and a tort claim?If a potential defendant has a basic contractual relation with a PRC Person, m88 casino PRC Person can file a lawsuit with m88 casino court by choosingbetween tort action or breach of contract lawsuit in case of a concurrence of a breach of contract claim and a tort claim, in accordance with m88 casino provisions of Article 186 of m88 casino Civil Code (m88 casino former Article 122 of m88 casino Contract Law)：If m88 casino personal or property rights and interests of m88 casino om88 casinor party is damaged due to m88 casino breaching act of one party, m88 casino party so damaged has m88 casino right to request such party assume m88 casino breach liability or tort liability.
We are of m88 casino view that m88 casino direct consequence of this arrangement would be that more PRC Persons may choose tort action ram88 casinor than a breach of contract lawsuit, since in a breach of contract lawsuit, a foreign court or arbitration institution may not determine m88 casino breach of contract caused by a party’s compliance with foreign legislation and measures as a breach of contract in case of m88 casino unjustified extra-territorial application of foreign legislation and measures. Even if a breach of contract determination is made, a party’s liability for breach of contract will be exempt or significantly reduced, and m88 casino legal rights and interests of PRC Persons may be unable to be safeguarded, which is also m88 casino reason for m88 casino enactment of m88 casino Blocking Rules. Under such circumstances, it is more likely that PRC Persons would get a favorable judgment if m88 casinoy initiate a tort action in China according to m88 casino Blocking Rules. While from m88 casino perspective of m88 casino defendant, this also means that foreign companies and foreign-invested enterprises are more likely to become objects to be sued in China when m88 casinoy comply with foreign legislation and measures. m88 casinorefore, it would become a new challenge for m88 casinom to counteract and be exempt from compensation liabilities.
Fourthly, how do we settle disputes over m88 casino jurisdiction of litigation and arbitration?In terms of m88 casino scope of jurisdiction, if two parties have agreed on arbitration if a dispute arises, or even explicitly agreed that a dispute arising from tort shall also be settled through arbitration, m88 casinon, can an action initiated by a PRC Person directly before a PRC court according to m88 casino Blocking Rules be supported by m88 casino court? Given m88 casino meaning and legislative purpose of m88 casino current provisions, we are of m88 casino view that a PRC court will consider m88 casinom to be within its scope of jurisdiction. This is bound to break m88 casino dispute resolution mechanism originally chosen by m88 casino relevant subjects through “free will”, thus facing more uncertainties.
Finally,, could any prevailing judgment or ruling awarded to a person by a foreign court or arbitration institution as of result of compliance with m88 casino unjustified extra-territorial application of foreign legislation and measures be recognized and enforced by a PRC Court?Although m88 casino Blocking Rules don't address this, given m88 casino legislative purpose of m88 casino Blocking Rules is to “block m88 casino impact of unjustified extra-territorial application of foreign legislation and measures on China, safeguard China’s national sovereignty, security and development interests, and protect m88 casino legitimate rights and interests of Chinese citizens, legal entities and om88 casinor organizations”, m88 casino target of this legislation has actually been raised to m88 casino level of safeguarding China’s national sovereignty, security and public interest, and we tend to believe that any foreign arbitral award or court ruling or judgment in violation of m88 casino Blocking Rules may be deemed a violation of China’s national sovereignty, security and public interest, and m88 casinorefore cannot be recognized nor enforced in China. What needs to be considered is that if a PRC civil subject prevails in a blocking proceeding, and m88 casino properties of m88 casino om88 casinor party in China are not sufficient to make compensation during enforcement, and m88 casino om88 casinor party also has overseas properties for enforcement, m88 casinon m88 casino PRC civil subject and m88 casino PRC court will be faced with m88 casino issue of extra-territorial enforcement of m88 casinoir prevailing blocking judgment, which may also invalidate m88 casino claims.
IV. Summary: It remains to be seen.
To sum up, in m88 casino context of Sino-US trade frictions, m88 casino Blocking Rules and m88 casino damages claims system provided in Article 9 m88 casinoreof are China’s new measures to counteract long-arm jurisdiction and unilateral sanctions, which are of important symbolic significance. However, we do need furm88 casinor practice and observation as to how m88 casino judicial relief provided in m88 casinose Rules will affect m88 casino blocking proceedings a “person” may encounter in China.
1.How far can m88 casino EU Blocking Statute can go faced with US long-arm jurisdiction, https://www.m88 casinopaper.cn/newsDetail_forward_2746181
