In specific circumstances, Chinese courts may dismiss a case on forum non conveniens (FNC) ground and inform the plaintiff to bring a lawsuit in a more convenient foreign court. However, Chinese courts rarely make such rulings, but tend to exercise jurisdiction over relevant cases. Grace Young International Ltd. v. Seoil Agency Co. Ltd. (Case No. [2017] Lu Min Zhong No. 577) discussed in this post is currently one of the only two cases in which the Chinese courts grant an FNC dismissal.
1. The Doctrine of FNC in China's Civil Procedure
The Supreme People's Court's Interpretation on the Application of the Civil Procedure Law of the People's Republic of China (CPL Interpretation), which came into effect on 4 February 2015, newly added the doctrine of FNC in Article 532 of the CPL Interpretation, that is, in certain circumstances, if the Chinese court considers that another foreign court may more conveniently hear a case, it may rule to dismiss the case, and inform the plaintiff to bring a lawsuit in a more convenient foreign court.
The article stipulates the conditions under which Chinese courts may apply the doctrine of FNC, that is, if a foreign-related civil case simultaneously meets the following circumstances, the people's court may rule to dismiss the case and inform the plaintiff to bring a lawsuit in a more convenient foreign court:
(1) Where the defendant raises the request that the case should be governed by a more convenient foreign court, or raises an objection to jurisdiction;
(2) Where there is no agreement between the parties to select a court of the People's Republic of China as the competent court;
(3) Where the said case does not fall under the exclusive jurisdiction of the courts of the People's Republic of China;
(4) Where the said case does not involve the state interests of the People’s Republic of China, the interests of citizens, legal persons or other organizations of the People's Republic of China;
(5) Where the main disputed facts did not occur within the territory of the People's Republic of China, and the case is not governed by the laws of the People's Republic of China, posing significant difficulties to the people's court in finding facts and applying laws during case trial; and
(6) Where a foreign court has jurisdiction over the said case, and it is more convenient for the foreign court to hear the case.
To date, according to our incomplete statistics on cases involving the doctrine of FNC since 2015, only two of over 50 cases have been dismissed by Chinese courts according to the doctrine of FNC, and it is believed that the cases should be under the jurisdiction of more convenient foreign courts. Grace Young International Ltd. v. Seoil Agency Co. Ltd. is one of them. The other case can be found in the post "Think Twice Before Filing a Motion to Dismiss on Forum Non Conveniens Grounds in China".
On 25 April 2017, the Shandong High People's Court issued a second-instance ruling in which it held that the case of fuel payment disputes occurred outside China between the first-instance plaintiff Grace Young International Ltd.( “Grace Young”), an offshore incorporation registered in the British Virgin Islands, and the defendant Seoil Agency Co. Ltd. (“Seoil Agency”), a company registered in Busan, Korea, was in conformity with the doctrine of FNC in Article 532 of CPL Interpretation, therefore it dismissed the case, and informed Grace Young to bring a lawsuit in a more convenient foreign court.
2. Case Background
Grace Young filed a lawsuit against Seoil Agency in Qingdao Maritime Court in Shandong Province, China, demanding that it pay US$370,450 for fuel.
Grace Young had applied to Qingdao Maritime Court for pre-litigation property preservation. According to Grace Young's application, Qingdao Maritime Court seized a vessel named "SLBOGO" from Seoil Agency. Subsequently, Grace Young filed the aforementioned lawsuit with Qingdao Maritime Court.
Seoil Agency filed an objection to the jurisdiction to Qingdao Maritime Court, arguing that the case conformed to the doctrine of FNC in Article 532 of CPL Interpretation, namely:
i. All the disputed facts in this case occurred in Korea, and Chinese courts have great difficulties in finding facts.
ii. Fuel payment disputes should be governed by Korean law rather than Chinese law, and Chinese courts have great difficulties in applying laws.
iii. Korean courts have jurisdiction over the disputes.
iv. Whether to recognize and enforce the effective judgments of Korean courts does not affect the first instance court to grant an FNC dismissal.
Qingdao Maritime Court held that although Seoil Agency's "SLBOGO" vessel was seized by the court in pre-litigation preservation, and thus gained jurisdiction over the case, the said case conformed to the doctrine of FNC in Article 532 of CPL Interpretation. Therefore, Qingdao Maritime Court ruled that (Civil Ruling: [2016] Lu 72 Min Chu No. 2039): the case is hereby dismissed, and the plaintiff shall bring a lawsuit in a more convenient foreign court.
Seoil Agency dissatisfied with the ruling and appealed to the Shandong High People's Court. In the second instance, the High People's Court supported the view of Qingdao Maritime Court and made a final ruling: Seoil Agency's appeal is hereby dismissed and the original ruling is affirmed.
3. Our Comments
Up to now, Chinese courts have rarely dismissed a case on the FNC grounds. In most cases, as long as one of the litigants is a Chinese citizen, legal person or other organization, Chinese courts will consider the case does not conform to the doctrine of FNC, and thus the Chinese courts will exercise jurisdiction over the case. Therefore, whether there are Chinese citizens or legal persons among the litigants has become the core issue.
In some cases, the plaintiff may intentionally include Chinese citizens and enterprises related to the case into the plaintiff or the defendant, thus making the Chinese court consider the case does not conform to the doctrine of FNC, though these Chinese citizens and enterprises may have very little connection with the case.
Currently, Grace Young International Ltd. v. Seoil Agency Co. Ltd. is the only case involving no Chinese citizens and enterprises and meets the doctrine of FNC. This case is a rare perfect sample, reflecting the stringent standards adopted by Chinese courts on the doctrine of FNC.
Contributors: Guodong Du 杜国栋 , Meng Yu 余萌
