China's International Commercial Courts hear first cases

Almost a year since their high profile establishment in June 2018, the International Commercial Courts of the Supreme People's Court (CICC) have recently conducted hearings on the first cases that were submitted to the CICC.

On 29 May 2019, the Second International Commercial Court of the Supreme People's Court of China heard a case concerning a dispute over shareholder qualification, relating to the energy drink manufacturer Red Bull's investment in China. On 31 May 2019, the First International Commercial Court of the Supreme People's Court of China heard a product liability case involving an Italian pharmaceutical company and its Chinese distributor.

Background

In June 2018, the Supreme People's Court (SPC) established two international commercial courts, in Xi'an and Shenzhen respectively, to handle international commercial cases, especially disputes arising out of projects under the Belt and Road Initiative. The courts offer a "one-stop shop" dispute resolution mechanism, with access to mediation, arbitration and litigation. See our posts of 4 July and 7 December 2018 which sets out detailed reports on the series of rules that set up the CICC and regulate the CICC's proceedings (the CICC Rules), including:

• Provisions of the SPC on Several Issues Concerning the Creation of the CICC (effective 1 July 2018);
• CICC Rules of Procedure (trial implementation) (effective 5 December 2018);
• Working Rules of the CICC Expert Committee (effective 5 December 2018); and
• SPC's Notification on the International Commercial Arbitration and Mediation Institutions Included in the "One-stop-shop" International Commercial ADR Mechanism (effective 5 December 2018).

Since December 2018, the CICC has accepted several cases concerning international commercial disputes, including, among others:

• disputes over shareholder qualification and shareholder disputes concerning Red Bull's investment in China (Red Bull Cases), and
• a product liability dispute brought against an Italian pharmaceutical company Bruschettini S.R.L. by its Chinese distributor, Guangdong Bencao Medicine Group Co., Ltd., (Bruschettini Case).

CICC proceedings

The Red Bull Case

According to a webcast on the China Court Website (the official multimedia website managed by SPC), the case was initially accepted by a Beijing court in January 2017. Subsequently, the CICC took over this case in 2019, on the basis that the CICC had already accepted four other cases related to a shareholder dispute over Red Bull's investment in China.

According to the webcast of the 29 May hearing, a pre-hearing conference was held on 15 and 27 May in accordance with the CICC Rules of Procedure. The procedural issues that were dealt with at the conference included:

• clarifying the parties' claims/defence,
• identifying uncontroversial facts and evidence,
• identifying the key issues in dispute that will be determined at the hearing,
• exchange evidence and cross-examination opinion,
• determining on the applicable law to the case,
• determining whether the hearing will be open to the public, and
• other procedural issues.

According to the webcast report on the SPC's website, the CICC asked about the parties' willingness to have their dispute mediated by the CICC Expert Committee. The parties had initially opted for mediation by the Expert Committee, but eventually the case moved on to the CICC court proceedings because one party gave up on mediation.

The 29 May hearing at the CICC Xi'an court concerned one of the Red Bull Cases, which involves a dispute over the shareholder qualifications of Ruoychai International Group Co.,Ltd.(a Thai company) and Inter-Biopharm Holding Limited (a BVI company) in the Chinese company Red Bull Vitamin Drink Co.,Ltd. The hearing was before a bench of five SPC judges, and lasted for about four hours. No judgment was rendered immediately after the hearing.

The Bruschettini Case

According to the CICC's website, a pre-hearing conference was held on 29 April, during which, in addition to discussing and determining procedural issues, two judges of the CICC explained the "one-stop-shop" dispute resolution mechanism to the parties. The issues discussed and/or determined at the conference include:

• procedural issues in the pre-trial mediation, including selection of the mediators and timeline for the mediation. The mediator candidates from the Expert Committee and the timeline for confirming the selection of the mediators were determined at the conference.
• the likely hearing date, if mediation is not successful.

The 31 May hearing at the CICC Shenzhen court was a substantive hearing of the Bruschettini Case, which lasted for about three hours. Similarly, it was before a bench of five SPC judges, who did not render a judgment immediately after the hearing.

Conclusion

Even though these first two cases heard at the CICC are not specifically related to any Belt and Road projects, they are still of significant importance, as they are the first cases heard under the CICC Rules. They are helpful illustrations of how the CICC handles its cases. In particular, they help to demonstrate how the CICC uses pre-hearing conferences to ensure smooth conduct of the trial, the role that the CICC plays in mediation, and how the CICC can provide efficient resolution of international commercial disputes.

However, these cases do not show all of the interesting features of the CICC proceedings established by the CICC Rules. It remains to be seen, for example, how the CICC will interact with the one-stop-shop institutions for arbitration or mediation, and how mediation by the Expert Committee of the CICC will work in practice.