Can I resolve cross-border online shopping disputes through the Chinese Internet Court: Inside China’s Internet Courts Series -03

If I purchase goods from China through a cross-border e-commerce platform, and I have a dispute with a Chinese in this process, I don’t have to go to China to engage a lawyer for litigation. I can kick start the lawsuit with a computer at home in the US, Germany, Italy or anywhere else, and file a claim for compensation for my losses against the Chinese in question with the Chinese Internet Court by myself. In this case, it won’t cost me much to safeguard my interests by applying Chinese laws.

Can this scenario be a reality now?

The current answer is: you will encounter some obstacles.

A reader of CJO recently asked us this question. Coincidentally, three months ago, an Italian reader raised a similar question to us.

So, we set out to explore this possibility and made multiple phone calls with the Guangzhou Court of the Internet to understand the actual situation.

Internet courts in China:

1. What are the advantages of my lawsuit lodged with the Internet court in China?

First, it facilitates the enforcement of the judgment. If you win the case in a Chinese court, it would be convenient for the Chinese court to execute the property of the defendant; by contrast, if you win in other countries, you may have to apply for a Chinese court to recognize and enforce the judgment of the foreign court, which can incur additional costs and be time-consuming.

Second, it is cost-effective. The court fees charged by Chinese courts are very low. For example, in cases with an amount in controversy of USD 1,000, the court fee is about USD 10; in cases with an amount in controversy of USD 10,000, the court fee is about USD 200.

2. Can I bring a lawsuit with the Internet court for the dispute with a Chinese seller?

If the dispute arises from an online shopping contract that you sign through an e-commerce platform, then the dispute between you and the seller may fall within the jurisdiction of the Internet court.

Article 2, Paragraph 1 of the “Provisions of the Supreme People’s Court on Several Issues Concerning the Case Trial by Internet Courts” (最高人民法院关于互联网法院审理案件若干问题的规定) (referred to as the "Provisions"): Disputes over online shopping contracts refer to disputes arising from the signing or performance of online shopping contracts through electronic commerce platforms. It shall be under the jurisdiction of the defendant's domicile and the place where the contract is performed.

The Hangzhou Internet Court interprets this as follows: The seller displays its products on the Internet and makes an offer; the buyer searches the information online and accepts the offer, and the two parties form a contract. Their dispute arises out of the signing or the performance of the contract.

The judges of the Supreme People's Court (SPC) of China further explained that for sales contracts concluded or performed only in the form of electronic contracts (such as contracts concluded by email) while e-commerce platforms are not involved, it currently shall not be considered as e-commerce disputes to be handled by Internet courts.

3. Can I bring a lawsuit with the Internet court for the dispute with a Chinese carrier?

If you entrust a Chinese carrier to transport goods for you from China to the destination, from which a dispute arises, this transport service is not under the jurisdiction of the Internet court but rather subject to the jurisdiction of other traditional Chinese courts. Because, although the contract of carriage is a service contract, the Internet court only accepts the disputes of online service contracts that are signed and performed on the Internet.

4. Can Chinese Internet courts govern all online shopping disputes?

There are currently three Internet courts in China, located in Beijing, Hangzhou, and Guangzhou. They only govern Internet disputes within their own jurisdiction.

To be more specific, the domicile of the defendant (that is, the Chinese seller) and/or the place of performance of the contract are in Beijing, Guangzhou, and Hangzhou (see Article 23 of China's Civil Procedure Law, referred to as the “CPL”). For online shopping contracts, the place of delivery is deemed to be the place where the contract is performed (see Article 20 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China (最高人民法院关于适用<中华人民共和国民事诉讼法>的解释), referred to as the “CPL Interpretation”).

If neither the domicile of the Chinese seller nor the place of delivery is in any of these three cities, you can only resort to other relevant traditional courts.

However, many e-commerce platforms are located in these three cities. For instance, Alibaba is located in Hangzhou. So, if the situation permits, you may consider taking the e-commerce platform as one of the defendants.

5. Can I register an account with the Internet court and file a lawsuit now?

First, you need a mainland China mobile phone number to register an account on the Internet court’s website. Although there are options for mobile phone numbers in various countries on the website of Guangzhou Court of the Internet, at present, only the mainland China phone number can be used for such purposes.

Second, you also need to go through the online real-name authentication. At present, online authentication is mainly carried out through three methods: WeChat, Alipay and Facial Recognition. We (CJO) guess that since WeChat and Alipay are usually bound to their users' Chinese bank accounts, while the Facial Recognition can match the photos in China’s ID card system, these three methods can make the Internet court obtain the real identity of the registered user.

Foreigners usually do not have a WeChat or an Alipay account that is bound to a Chinese bank account, neither there is information or photos of them in China’s ID card system, so foreigners cannot complete the online authentication.

Guangzhou Court of the Internet also allows the parties to conduct offline authentication at its office and expressly states that it will separately establish offline authentication guidelines for foreigners. However, according to our telephone communication, the guidelines are currently being drafted, and Guangzhou Court of the Internet has not yet encountered cases involving foreign parties.

Guangzhou Court of the Internet suggests that in this case, you can entrust a Chinese lawyer to complete the offline authentication for you.

In addition, if a foreigner personally goes to the Internet court for offline authentication, only his/her own passport will be needed[2]. However, if you entrust a lawyer to do this, you will need to submit to the court a copy of your passport which is notarized in your country and certified by the local Chinese embassy or consulate. However, in this case, you will need to pay for the notarization, usually one hundred to two hundred US dollars.

6. How do I entrust a Chinese lawyer? Can I entrust someone else?

If you have to entrust a Chinese lawyer to help you with some offline work, then your power of attorney is also required to go through the notarization and certification mentioned above, which will incur additional costs.

You can also entrust others who are limited to your close relatives, your employees, and the persons recommended by the Chinese community you live in or the relevant Chinese social groups. But in most cases, foreigners may find it harder to find such persons in China.

7. What if I don't know Chinese?

In Chinese lawsuits, only Chinese can be used. The court can provide you with an interpreter, but the translation fee is borne by you. You can also find a friend who knows Chinese to translate for you.

8. How does the court serve documents on me?

Documents of the Internet court are usually served on the parties via SMS. If you don't have a mainland China phone number, you can provide your e-mail address to the court when you conduct the offline authentication and the court can serve the process on you by e-mail.

9. If I win the case, can I apply for enforcement of the judgment on the Internet court's website?

The application for online enforcement is currently not available in Guangzhou Court of the Internet, and you need to submit printed documents to the court offline.

10. During the enforcement, how does the court remit the compensation received by it from the defendant to me?

Guangzhou Court of the Internet will ask you to provide a Chinese bank account to which they will remit the said compensation.

If the defendant compensates you in RMB, you may convert it to another currency by yourself, if needed.

In summary, if you want to resolve cross-border online shopping disputes fast and cost-effective in China's Internet courts, you may encounter some obstacles.

We believe that this may be attributed to the fact that China has not yet considered foreign parties for the time being when it established the Internet courts. We intend to submit a written proposal to the Internet courts, hoping that they will be aware of this need.

Notes:

[1]《最高人民法院关于互联网法院审理案件若干问题的规定》的理解与适用 , https://www.chinacourt.org/article/detail/2018/09/id/3489797.shtml

[2]《最高人民法院关于进一步做好边境地区涉外民商事案件审判工作的指导意见》, http://www.court.gov.cn/fabu-xiangqing-2481.html

Below is a write-up from our reader Frem in response to this post.

The article covers much of my experience on this topic. I am a US-based consumer who purchased goods from a Chinese company. I took my time to do all the due diligence I could possibly do before deciding on a supplier to go with. And it seemed all that patience in researching paid off as my goods were produced and ready in record time. However, unfortunately for me, I ended up with a fraudulent shipping company.

In order not to tell a lengthy story, the summary of the issue was that the shipping company decided to double the agreed shipping price once my goods were handed over to them. For the most part, I felt helpless because, short of hiring a China-based attorney, there didn’t seem to be much I could do.

…that was until I discovered the existence of the Chinese Internet Court! I couldn’t have been happier. After having talked to a China-based attorney who was asking for even more money than what the rogue shipper was asking, it was such a delightful discovery to find out that China’s judiciary system has established an online court that – in theory – means litigants can be based anywhere where there is internet access and can participate fully in the litigation process.

This joy though was short-lived as I began to run into different obstacles that seemed to make the concept of me initiating a lawsuit in China from New York where I’m based, without using a China-based lawyer, impractical. The China Justice Observer article “Can I resolve cross-border online shopping disputes through the Chinese Internet court” does an excellent job of covering all the bases. Yes, in theory, I could litigate a case in China remotely, but (in my case), no, because the issue of ‘jurisdiction’ became a handicap for me.

As already explained in the article, under Chinese law, there appears to be a distinction between sales contracts and service contracts. Sales contracts cover actual purchases of items online while shipping is considered a service (carriage) contract. Service contracts on their own do not fall within the jurisdiction of the Chinese Internet courts. As a foreigner, this was a tough concept for me to grasp because since the whole premise of transacting online is to purchase items that will need to be delivered (as opposed to being picked up from a physical store), it only makes sense that the entire process (buying and shipping) should be considered under the jurisdiction of the Online Court.

I got a lot of help from the staff at China Justice Observer, but I also reached out to two of the three online courts (Hangzhou and Guangzhou). The initial response from the court staff at the Guangzhou Internet Court was that my case could not be considered because it was under a service contract. But I persisted, pointing them to their post online that seemed to reference that disputes around " e-commerce, transactions, logistics, small amount loan, intellectual property rights, etc." were all well within the jurisdiction of the court. I was asked to share the link and screenshots of the post, which I did (https://www.netcourt.gov.cn/portal/main/en/index.htm). I was then advised that the Judge would research the information and get back to me.

I did not pursue the issue much thereafter because with the help of WCA (Worldwide Cargo Alliance) a global shipping association which the fraudulent shipper belonged to, the shipper was pressured into releasing the goods. However, it seems the Chinese judiciary might be taking a second look at the exclusion of service contracts from the jurisdiction of China Internet Courts.

If all the kinks around foreign-based litigants accessing the Online Courts can be worked out, this would be really groundbreaking for China – not just for the Chinese judiciary, but also for China’s economy and public image globally. As more and more companies – both large and small – are beginning to look away from China as the go-to place for affordable products mostly because of unscrupulous suppliers, making the Online Courts practically accessible to foreign-based litigants will help to boost the trust of foreign investors and trade partners.

Frem

New York, USA

If you would like to discuss with us about the post, or share your views and suggestions, please contact Ms. Meng Yu (meng.yu@chinajusticeobserver.com).

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Lin Haibin also contributes to the post.

Contributors: Guodong Du 杜国栋 , Meng Yu 余萌