Chinese Supreme People's Court releases revised rules of evidence in civil proceedings and further policy paper on Shanghai's Lin-gang Free Trade Zone

The Chinese Supreme People's Court (SPC) issued a series of judicial interpretations and opinions in December 2019 in relation to the rules of evidence in civil proceedings and further liberalisation of litigation and arbitration practice concerning the Ling-gang Special Area of the Shanghai Pilot Free Trade Zone. In this post, we will share our thoughts on the key highlights of those judicial interpretations and opinions.

Revised rules of evidence in civil proceedings

The SPC released the revised Provisions on Evidence in Civil Proceedings (Fa Shi [2019] No.19) (New Rules) on 25 December 2019. The New Rules will come into force on 1 May 2020, replacing the old rules which have been in effect since 2002. Significant changes in the New Rules include among others the following:

Electronic data evidence

The Chinese Civil Procedure Law has recognised electronic data as a type of evidence in civil proceedings since 2012. Electronic information such as WeChat messages and online transaction records have been widely accepted by PRC courts as evidence in judicial practice.

The New Rules now formally define the scope of electronic data evidence. According to the New Rules, electronic data evidence includes a wide range of electronic information, including webpages, blogs, microblogs, text messages, instant messages, emails, user registration and authentication information, electronic transaction records, and any other types of documents and information stored, processed or transmitted in digital forms.

The courts may take into account a range of factors in determining the veracity of electronic data, including the hardware and software environment of the relevant computer system, its operating condition, and the methods that the data was stored, transmitted and extracted. There are certain situations where the courts will assume the veracity of electronic data information unless there is evidence to the contrary, including (i) where the data information was kept or submitted by a party to whom the contents of the information were unfavourable; (ii) where the data was provided or verified by an independent third party platform which stores such data; (iii) where the data was stored by way of official archive; (iv) where the data was generated during normal business operations; (v) where the data was stored, transmitted or extracted by methods agreed by the parties; and (vi) where the content of the data has been notarised by a notary public.

Disclosure of documents

Document disclosure requests traditionally were not allowed in civil proceedings in mainland China. In 2015, the SPC published the Interpretation on the Implementation of the Civil Procedure Law (2015 Interpretation) which, in Article 112, for the first time allowed parties to apply for disclosure of documents in civil proceedings as a matter of principle. However, the 2015 Interpretation does not provide detailed guidance for the parties and the courts to follow; therefore, in judicial practice, parties seldom rely on Article 112 of 2015 Interpretation to request evidence from counterparty.

The New Rules now set out detailed rules for parties and courts to follow in practice. Pursuant to the New Rules, where a party in possession of a document relied on that document in the proceedings, or created that document in favour of the other party, that document should be disclosed. Any documents that the other party is legally entitled to review or obtain, as well as any accounting books and vouchers, should also be disclosed. Where a request is not specific or is irrelevant or immaterial to the outcome of the case, or where the document requested is not within control of the other party, the court should not allow the request. The court should hear both parties' opinions in deciding whether to grant a document request. Where a party refuses to disclose a document without justifiable reasons in breach of a court order, the court is entitled to draw adverse inferences against that party. Finally, under the New Rules, parties are entitled to request disclosure of electronic data evidence, and the rules applicable to disclosure of documentary evidence apply equally to electronic data evidence.

Factual and expert witnesses

The New Rules also made certain changes to the rules on the presentation of factual witness evidence and expert witness evidence in civil proceedings. For example, under the New Rules factual witnesses are now generally required to provide a statement of truth, both orally and in writing, to the courts. Expert witnesses (who are mostly appointed by the courts in Chinese civil proceedings) are also required to provide an undertaking to the courts that they will act objectively and impartially when accepting the appointment.

Further internationalisation of Chinese litigation and arbitration practice

In December 2019, the SPC and the Shanghai High People's Court issued two policy papers on the Ling-gang Special Area of the Shanghai Pilot Free Trade Zone (Lin-gang FTZ) – the "Opinion on People's Courts' Provision of Judicial Services and Safeguard to the Development of China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area" published by the SPC on 13 December 2019 (SPC Opinion) and the "Implementing Opinion on Shanghai Courts' Judicial Services to Safeguard the Development of China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area" published by the Shanghai High People's Court on 30 December 2019 (Shanghai Courts Opinion).

We reported in August 2019 and November 2019 on the Chinese government's plan on the Ling-gang FTZ and the impact on the arbitration practice. The SPC Opinion and the Shanghai Courts Opinion set out the actions to be taken by the courts to implement the plan. Although the provisions contained therein are still expressed in general terms, a number of the provisions signal further policy liberalisation or internationalisation of the litigation and arbitration practice in China. In particular, the SPC Opinion and the Shanghai Courts Opinion confirm that:

• Registered foreign arbitration institutions will be allowed to set up businesses in Lin-gang FTZ and to "conduct arbitration businesses in relation to civil and commercial disputes arising in the areas of international commerce, maritime affairs, investment, etc.". This has been understood to be a green light for foreign arbitration institutions to administer arbitration cases seated in mainland China. (Article 6 of the SPC Opinion and Article 9 of the Shanghai Courts Opinion)

• Enterprises registered in Lin-gang FTZ are encouraged to submit their disputes to arbitration "in a specified location, pursuant to specified arbitration rules and by specified arbitrators". Such wording has been understood to be an endorsement for ad hoc arbitration seated in mainland China under certain circumstances, as we reported previously. As encouraging as it might seem, the provision is still very vague and how it will apply in practice still remains to be seen. (Article 6 of the SPC Opinion)
• Chinese courts may, upon the relevant parties' consent, allow foreign parties to use English when participating in court proceedings concerning international commercial disputes in relation to the Lin-gang FTZ. (Article 17 of the Shanghai Courts Opinion)
• Chinese courts will explore the possibility of hearing cases which do not have any "nexus" to mainland China and which were submitted to the Chinese courts' jurisdiction solely based on parties' agreement. (Article 12 of the Shanghai Courts Opinion)

If you have any questions or would like to discuss any aspect of this post, please contact Cathy Liu, Helen Tang, Weina Ye or your usual Herbert Smith Freehills contacts.