New jurisdiction regulations for cross-border financial disputes

Authors: Zhang Guanglei / Chen Cheng

(This article was first published on China Business Law Journal column "Cross-border dispute resolution", authorised reprint)

The Supreme People’s Court (SPC) has released the Regulations on the Jurisdiction of Beijing Financial Court over Cases (Beijing regulations), and subsequently revised the Regulations on the Jurisdiction of Shanghai Financial Court over Cases (Shanghai regulations, together with Beijing as the regulations). The regulations provide for clarity on the jurisdiction of cross-border financial disputes involving domestic investors for the first time.

Centralised jurisdiction

Based on the positioning of Shanghai as an international financial centre, and Beijing as the national financial management centre, China has set up financial courts in both cities. On this basis, the cross-regional centralised jurisdiction for cross-border financial disputes of Shanghai and Beijing financial courts has been formed through the enactment of the regulations.

Article 2 of the regulations provides that Beijing and Shanghai financial courts have jurisdiction over litigations brought by domestic investors on the grounds that securities issuance or trading activities, or futures trading activities occurring abroad, have harmed their legitimate rights and interests; and litigations brought by domestic individuals or entities on the grounds that financial products sold, or financial services provided by overseas financial institutions, have harmed their legitimate rights and interests.

As for potential jurisdiction conflicts between these two financial courts caused by the above-mentioned arrangements, the head of Second Civil Division of the SPC has stated that the conflicts can be solved by the rules of articles 35 and 37 of the Civil Procedure Law. The first court that registers the case has jurisdiction over the case, and if a dispute arises between two courts regarding jurisdiction, it can be reported to the SPC for designation of jurisdiction.

Legal basis

Before the introduction of the regulations, although there were very few cases in which Chinese courts have jurisdiction over cross-border financial disputes, there was a legal basis for Chinese courts to govern such disputes at the regulatory level. Chapter 6 of the Provisions on the Trial of Civil Compensation Cases Arising from Misrepresentation in the Securities Market (the misrepresentation compensation provisions) clearly stipulates that the liability of the perpetrators of misrepresentation is “joint tort liability”.

According to articles 28 and 265 of the Civil Procedure Law, and article 24 of the Interpretation of the Civil Procedure Law, infringement disputes where the infringers are located outside of China may be subject to the jurisdiction of the court in the place where the infringement was committed, or where the result occurred, or where the representative office of the infringers is located. Accordingly, for infringement disputes arising from offshore financial activities, even if the domicile of the infringer and the place where the infringing act is committed are located outside China, the Chinese court in the place where the domestic representative office of the infringer is located, or where the victim is located, also has jurisdiction.

In addition, article 2.4 of the Securities Law (revised in 2019) stipulates that: “Securities issuance and trading activities outside the People’s Republic of China, disrupting the order of the market in the People’s Republic of China, and harming the legitimate rights and interests of domestic investors, will be dealt with, and liability will be pursued in accordance with the relevant provisions of this law.” On this basis, the Securities Law, misrepresentation compensation provisions and other normative documents have the effect of extraterritorial application.

The SPC established the jurisdiction of the Beijing and Shanghai financial courts over cross-border financial disputes based on the National People’s Congress (NPC) Standing Committee’s decision. Article 15 of the Organic Law of the People’s Court stipulates that the establishment, organisation, authority, and appointment and removal of judges of specialised people’s courts (including military courts, maritime courts, IP courts and financial courts) are decided by NPC Standing Committee.

Therefore, the NPC Standing Committee issued the Decision on the Setup of Shanghai Financial Court and Decision on the Setup of Beijing Financial Court (the decisions). While setting up financial courts in Beijing and Shanghai, the decisions also specified the general jurisdictions of the Beijing-Shanghai financial courts, and clarified that the SPC might further determine the scope of the jurisdiction over cases. It is in accordance with the decisions that the SPC established the jurisdiction of the Beijing-Shanghai financial courts over cross-border financial disputes.

Issues to observe

In the past decade or so, large amounts of Chinese investors were frequently involved in disputes over liability for misrepresentation by overseas listed companies, including Chinese concept stocks. Since many litigations happened overseas, it was difficult for domestic investors to obtain remedies through litigation.

After the enactment of the regulations, the jurisdiction of Chinese courts has been clarified, providing new legal paths to solve the relevant disputes. In particular, for overseas listed Chinese companies with operating entities and related personnel located in China, if Chinese investors suffer losses due to misrepresentation of overseas listed companies, they can sue in China, and the defendants are not limited to overseas listed companies, but also include other subjects such as domestic operating entities, related managers, and intermediaries who participated in the misrepresentation.

If the infringer is located in China, owns assets or conducts business in China, the Chinese courts will have greater convenience in investigating and obtaining evidence, preserving property and evidence, and enforcing judgments.

From this perspective, domestic litigation is more conducive for the realisation of Chinese investors’ rights than offshore litigation. Certainly, Chinese courts face new challenges in adjudicating such disputes, such as the difficulty of cross-border evidence collection, the co-ordination of parallel litigation in and out of China, the efficiency of service of documents, and the requirements of the form of evidence, which may affect the effectiveness of the case trial, and may also constitute an obstacle for the parties to participate in litigation activities and realise their rights.

Therefore, it is an important step for the Chinese legislature and judiciary to clarify the jurisdiction of Chinese courts over cross-border financial disputes through the regulations. In order to ensure the proper effect, on the basis of the existing general provisions, it is still necessary to formulate specific and detailed rules as soon as possible, taking into account the characteristics of such litigation.

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作者介绍
 张光磊  

合伙人

010-5809 1515

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张光磊律师毕业于中国政法大学，获法学学士、民法学硕士和商法学博士学位。此外，获美国乔治华盛顿大学法学硕士学位，为哥伦比亚大学法学院访问学者。张律师拥有中国及美国纽约州律师资格，为香港国际仲裁中心在册仲裁员，中国政法大学法律硕士学院和对外经济贸易大学法学院兼职导师。

张律师的主要业务领域为争议解决，在民商事诉讼、仲裁、调解等领域拥有丰富的经验和良好的声誉，于2018年被CLECSS评选为“中国十大杰出青年律师”，于2020年被《商法》（CBLJ）评选为“A-List法律精英100强”，于2021年被《亚洲法律杂志》（ALB）评选为“中国十五佳诉讼律师”。在香港国际仲裁中心主办的2019国际仲裁中文赛中，张律师带领竞天公诚律师事务所获得北京赛区冠军和全国亚军，其个人在所有场次比赛中均被评为最佳律师。

张律师曾代表境内外客户处理中国国际经济贸易仲裁委员会及其分会、北京仲裁委员会、上海国际仲裁中心、深圳国际仲裁院、珠海国际仲裁院、香港国际仲裁中心、国际商会国际仲裁院等仲裁机构及中国不同层级法院的数百宗民商事案件，涉及行业领域包括房地产、金融、证券、国际贸易、医药、融资租赁、环保、文旅、教育、电信、征信、互联网、工业制造等。

张律师特别擅长处理投融资领域的争议，曾为客户成功处理业绩对赌、股权转让、公司控制权、董事和高管责任、员工股权激励、基金募集管理等投融资领域的多种争议。张律师也擅长在跨境交易纠纷中为客户制定整体解决方案，并多次在美国、新加坡、香港等地的诉讼和仲裁程序中担任中国法顾问及专家证人。

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陈程

律师

0755-2155 7050

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陈程律师毕业于清华大学法学院，获法律硕士学位，拥有中国律师执业资格。陈律师的主要业务领域为争议解决，曾代表境内外客户处理过数十宗民商事诉讼仲裁案件，也曾参与过多宗商事交易的尽职调查和谈判，在争议预防和解决方面拥有丰富的经验。

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