China’s Supreme People’s Court (SPC) issued the “Provisions on Several Issues Concerning the Trial of Administrative Agreements Cases ” (关于审理行政协议案件若干问题的规定, hereinafter referred to as the “Judicial Interpretation”) in Dec. 2019.

If you enter into an administrative agreement with a Chinese government organ, and unfortunately disputes in connection with the administrative agreement occur, you can file a lawsuit against the said government organ in a Chinese court, pursuant to the Judicial Interpretation.

Since administrative agreements involve the agreed distribution of rights and interests between government organs and private parties hereto, the Judicial Interpretation has greatly attracted public attention. The SPC had worked on drafting the Judicial Interpretation since 2016. After extensively soliciting opinions from all walks of life, having revised the draft for 24 times, the SPC eventually issued the Judicial Interpretation in 2019.

1.What are the administrative agreements that can be accepted by Chinese courts?

Administrative agreements have following four characteristics: (1) either party to the agreement must be a government organ; (2) the purpose hereof is to achieve the goal of administrative management or public service; (3) the agreement involves rights and obligations provided in the PRC Administrative Litigation Law and other applicable laws and regulations; (4) the parties hereto must reach an agreement through mutual consultation.

Administrative agreements usually cover the following categories:

(1) Government concession agreements;

(2) Compensation agreements for land, houses or other expropriation and requisition;

(3) Agreements on the transfer of the right to use state-owned natural resources such as mining right;

(4) Agreements on rental, purchase, and sale of indemnificatory housing invested by the government;

(5) Cooperation agreements between the government and investors.

Does an agreement on the transfer of the right to the use of state-owned land between you and a Chinese government belong to administrative agreements? Previously, such agreement was regarded as a kind of civil agreement instead of an administrative agreement. However, after issuance of the Judicial Interpretation, some people think the answer may be “Yes”, because the rights to use the state-owned natural resources mentioned in the aforesaid third category of administrative agreements include specifically the right to use the state-owned land, to which nevertheless the Judicial Interpretation does not give a clear interpretation.

Does the government procurement agreement for you to sell products to the Chinese government constitute an administrative agreement? The answer is “No”. In general, government procurement agreements are deemed as civil agreements.

If the government gives you promises on certain matters in order to attract investment and hereby enters into an agreement with you, is such agreement an administrative agreement? The answer is “Yes”. The SPC has stated that one of its purposes in issuing the Judicial Interpretation is to ensure that administrative organs make every effort to fulfill their promises given to attract investment.

Is the employment agreement in which you sign as a staff member of the Chinese government an administrative agreement? The answer is “No”. You can solve relevant disputes in accordance with the PRC Labor Contract Law.

2.How to determine the defendant and the plaintiff in a lawsuit arising from an administrative agreement?

Whatever the dispute is, the administrative organ that enters into the administrative agreement is the defendant. Where an administrative organ entrusts another body to sign an administrative agreement on its behalf, the defendant is still the said administrative organ.

The plaintiff is the private party to the administrative agreement.

If you do not enter into an administrative agreement, but the administrative agreement affects your rights and interests, you can also file a lawsuit as a plaintiff. For instance, if you think that you should have won the bidding organized by the government and entered into an administrative agreement for the bidding, but the government does not enter into an agreement with you, you can file a lawsuit. For another example, if the government enters into an agreement with the house owner in order to expropriate the house and you are the tenant of that house, you can also file a lawsuit.

In no circumstance can the administrative organ file a lawsuit against the private party to the administrative agreement, not even bringing a counterclaim in the lawsuit. So what if the private party hereto breaches the administrative agreement? The administrative organ may make a written decision requiring the private party hereto to fulfill the agreement, and may file an application to the court for enforcement of the decision.

3.Consensual jurisdiction

According to Art. 7 of the Judicial Interpretation, you and the administrative organ may reach written agreements to select any of the following courts as the competent court: the court where the defendant is domiciled, the court where the plaintiff is domiciled, the court where the agreement is entered into or performed, or the court where the subject matter is located, or at other places which have actual connections with the dispute.

The aforesaid article on consensual jurisdiction allows the parties to choose any court, as long as the court has “actual connections” with the dispute. In other words, it is possible for the parties to choose a court other than the one at the place where the administrative organ is located, so as to avoid any possible impacts that the administrative organ may exercise on the local court. In fact, it is exactly what the SPC desires to achieve.

4.Who will bear the burden of proof?

If you or the administrative organ think that the other party has not fulfilled the contractual obligations, the obligor should prove that it has indeed fulfilled the obligation.

If the court needs to ascertain whether the administrative organ has lawful competence, whether it goes through legal procedures, or whether it performs relevant legal duties, the burden of proof should lie on the said administrative organ. The administrative organ shall also prove that its acts of concluding, performing, changing, or terminating such administrative agreements are lawful.

If you want to revoke or cancel the administrative agreement, you should prove that there are justifications for revoking or canceling the administrative agreement.

5.How will the court handle the case?

If the court regards the administrative agreement as void or ineffective, or the administrative agreement is revoked at the request of the plaintiff, the property acquired by either party as a result of the administrative agreement shall be restituted to the other party; if the property restitution is impossible, compensation shall be made at an estimated price. If it is the administrative organ that causes such consequences, the administrative organ shall take appropriate remedies or compensate you for your losses.

If you think that the administrative organ’s changing or revoking the administrative agreement constitutes a breach of contract, but the court thinks that such conduct is for the public interest, and accordingly considers that the conduct is legal, the court may dismiss your claim eventually.

If you believe that the administrative organ fails to perform its obligations in accordance with the law and administrative agreement, the court may require the administrative organ to continue to perform such obligations, or to compensate you for the losses, pay you liquidated damages, and the deposit.

If the administrative organ exercises its powers for the public interest, resulting in your obstacles, increased costs, and losses in your performance of the administrative agreement, the court may demand the administrative organ to make compensation for you.