Rule of Law in China: the Falling

By David C. Buxbaum

When I arrived in China in the spring of 1972, there were no courts, arbitration tribunals nor law firms. Almost all law departments in universities were closed. The publically promulgated laws (aside from special rules and regulations for state-owned enterprises) consisted of a Constitution of very poor quality, the “Marriage Law” of 1950, and the Counter-Revolutionary Regulations.

Nevertheless, parties, including foreign parties continued to sign contracts and perform them, perhaps more consistently than today. If there were contractual legal disputes, one of the parties approached the higher authority of the government agency that signed the contract, to resolve the dispute.

Having participated in legal work and proceedings in China since 1972, I was privileged to see the growth of laws, law departments, lawyers, courts and administrative tribunals since 1978 as result of the great reforms in China spearheaded by Zhao Ziyang, Hu Yaobang and Deng Xiaoping, among others.

China now has a relatively comprehensive body of good laws, with significant lacunae, high quality lawyers in abundance, many excellent law departments and law institutes, better qualified judges, improved administrative tribunals and a failing judiciary.

While China has witnessed tremendous economic and political growth in the past three decades, sharply unmatched by such growth is China’s judicial system, which has been falling far behind its development while other political, social and economic institutions are improving rapidly.

Fundamental problems

The problems with the Chinese judicial system are well-known to the Chinese government, and it has been reliably reported that senior officials in the Ministry of Justice and Supreme People’s Procuratorate (the state prosecutor office) have acknowledged the need for substantial reform.

In an article in Century Weekly and subsequent writings in the South China Morning Post last year, well-known publisher Hu Shuli nails the problem of governance in China: “For the rule of law to function, China needs a legislature that makes laws with public support, government that enforces the laws strictly, and a judiciary that independently monitors the legality and legitimacy of government decisions. These must be the starting blocks for improvements to China’s governance.” She further points to the fundamental problems underlining the lack of judicial legitimacy and independence.

Judges

Compared to a successful lawyer, an equally honest, hard-working and righteous judge in China earns a very low income, yet they undertake work not required by judges in other jurisdictions. In other countries, certain work is undertaken by bailiffs, for example, the sealing of bank accounts, the seizure of assets, and the like. The combination of low wages and the burden of non-judicial work demeans judicial personnel, who do not receive proper respect.

Many countries do not have enforcement tribunals and court judgments are enforced by bailiffs under the supervision of the judge in charge of the case. In countries which have enforcement tribunals, such tribunals are often administrative organizations for enforcing judgments. This means judgments are given to the administrative organization for enforcement.

In China, however, to affect compulsory enforcement of a judgment, one must take a judgment to the enforcement tribunal, which had nothing to do with the rendering of the judgment. It is common for defendant to attempt to re-try cases in the enforcement tribunal. The enforcement tribunal is a waste of time, money and encourages corruption.

Judges in China are permitted and do consult with higher courts before making their decisions. It is common, for example, for a judge from the civil tribunal of an intermediate court to consult with the head judge of the civil tribunal of a higher court, about the decision he intends to make. Once they make a decision based on the higher court’s opinion, naturally an appeal becomes useless.

Interference and corruption

In China, judicial procedures are often interfered with by:

· persons outside of the court who have relationship with the judges, such as government officials, party officials, business persons, etc.;

· persons outside the court, who contact higher officials within the court, such as the head of the court or the judicial committee, with intention to interfere with the collegial panel’s decision making;

· higher officials in the court interfere with the collegial panel’s decision making, and

· lawyers approaching the judge, without the knowledge of the other party, in an attempt to influence the judge’s decision.

These all violate Chinese laws. Yet little is done to stop these malpractices.

Corruption exists in the judicial system, such as:

· financial corruption: because of lack of proper remuneration, judges are open to bribery and are recipients of bribes;

· political corruption: judges are pressured to decide cases in a certain way, as a result of political pressure, and

· judges are pressured within the court system to decide cases in a certain way by being promised either additional benefits or having benefits withheld.

While judges are prosecuted from time to time, a serious crackdown on judicial corruption has not been undertaken.

Evidence

China does not have an independent and comprehensive code of evidence, and for many years the National People’s Congress has not enacted such law, therefore, there is excessive reliance on documentary evidence. Furthermore, the lack of oral testimony means that a great body of facts is never heard by the judge, making it extremely difficult to issue proper verdicts.

As to perjury in commercial and civil cases, very little legal action can be taken against the perjurer since there are no serious legal restrictions on perjury in civil and commercial cases. Even if a witness lies at his pleasure, the judge does not have enough power to punish him or her for such an act. On the other hand, judges do not adequately value oral testimony of witnesses, and ordinary courts generalize that oral testimony is valueless and do not consider it.

Compared to foreign judges and lawyers, Chinese judges and lawyers lack sufficient authority. Judges – aside from not having the authority to administer their own judgments – lack authority to compel the production of evidence in a forcible way, to interrogate witnesses, to swear witnesses and seriously punish them for perjury, etc. This has affected their ability to make just decisions.

Lawyers also have insufficient authority to collect evidence from government and public agencies. Lawyers, particularly in sensitive cases and criminal cases, are subject to prosecution and detention for minor matters, seriously affecting their ability to defend their client’s legitimate interest.

In many instances, the courts do not follow the law. This is particularly true, for example, where courts do not want to receive certain cases. Instead of following the “Civil Procedure Law”, and receiving a case file and deciding in seven days whether or not to accept the case, courts often just do not accept a case and refuse to make a decision on whether or not the case should be accepted, so that there is no appeal possible. Furthermore, in enforcing foreign arbitral awards, the courts are often in violation of Chinese law which requires enforcement within six months of application.

Because of the problems with the court system, the Chinese government has emphasized conciliation rather than having courts make decisions. This extreme emphasis on conciliation is undermining the entire judicial function.

Furthermore, the government has re-introduced the old system of people’s assessors, whereby two non-specialists assist the judge in handling a case, instead of three judges in the normal collegiate panel hearing the case. The assessors are generally unhelpful and often do not even participate in the trial. This further undermines judicial professionalism.

Problems with arbitration

Arbitration is a good way to resolve commercial disputes. However, because of the weakness of Chinese courts and their resistance to enforcement of arbitral awards, international commercial arbitration in China, is not a good alternative to litigation. Arbitration of foreign related disputes in China has been fraught with many of the same problems as the judiciary, corruption, inefficiency and lack of enforcement. CCPIT arbitration does not countenance ad hoc arbitration and discriminates as to arbitration fees between local arbitrators and panelists outside of mainland China.

Chinese courts do not enforce ad hoc arbitration decisions and their enforcement of institutional decisions is quite poor. While pursuant to the Rules of the Supreme People’s Court, foreign award should be enforced within six months of application to a court in China, in a recent case we handled, it took four years to enforce the decision. Fortunately, we were able to attach respondent’s assets prior to their disappearance.

While the New York Convention for Compulsory Enforcement of Arbitral Awards, of which China is a member, provides very narrow grounds to refuse enforcement, Article 213 of China’s “Civil Procedure Law” provides grounds for the courts to resist enforcement. Article 68 of the “Arbitration Law” even provides for applications to cancel arbitral awards. According to a report in the Legal Daily in last November, serious consideration is being given to narrowing the grounds on which enforcement of arbitral awards can be refused.

The Chinese courts are clearly in breach of Chinese law and China is in breach of its responsibilities under the New York Convention by its long delays in enforcing foreign arbitral awards. To rectify this problem, Chinese law should recognize ad hoc arbitral decisions and enforce all arbitration decisions promptly and virtually automatically.

Moving mountains

As stated by Hu Shuli: “The selection of judges cannot be done in the same way that party cadres and government officials are chosen; the process for the former must be based on established practice in societies with rule of law. Also, the budget for the justice department must be channeled through congress, not tied to the administration, so as to ensure the judiciary remains impartial.” The fact that judges are now beholden to local governments, who pay their salaries and often try to influence their decisions, undermines judicial independence.

Judges’ salaries should be reasonably raised to provide adequate financial incentives for judges to do their job and reward those for high quality performance. They should also be encouraged to improve their qualifications and attend judicial conferences in China and overseas.

With respect to judges being burdened with much non-judicial work, bailiffs and other enforcement officers should undertake seizure and freezing of assets under the judges’ direction; such work should not be done by the judges themselves.

Enforcement tribunals should serve only as an administrative organization to enforce judgments, but never a judicial organ. It is best to eliminate the enforcement tribunal.

In February 2011, the Supreme People’s Court promulgated the “Notice on Promulgating the ‘Provisions on Withdrawal by Leading Cadres and Judges in Charge of Adjudication or Execution Whose Spouses or Children Practice as a Lawyer’” This document provides for conditions regarding avoidance of conflict of interest to be implemented, as well as circumstances which such avoidance applies to. Though helpful in ensuring impartiality of court trials, this is still is inadequate to eradicate the problem of interference with judicial procedures.

On the other hand, the authority of the judiciary should be significantly boosted. Reforms like enacting a comprehensive code of evidence, establishing administrative courts for administrative matters, and eliminating the enforcement tribunal are worthy little steps. While these little steps may not mean much individually, they can move mountains in aggregate.

David C. Buxbaum was the first American lawyer invited to China to represent American business interests in 1972, after President Richard Nixon’s historic visit. A well regarded expert on private international and Chinese law, Buxbaum has written extensively on Chinese law, intellectual property law, contract law, arbitration and traditional Chinese law. He is also the Chairman of IPR Committee of South China AmCham and sits on other committees of AmCham, American Bar Association and International Trademark Association. – Editor’s note