The Status of Foreign Law in Chinese Courts
8 May 2019
If there is no satisfactory answer to what the foreign law is, Chinese courts will apply Chinese law by default. Unlike English or Hong Kong courts, Chinese courts do not presume that foreign law is the same as Chinese law. Instead they simply disregard the foreign law and apply Chinese law.
Why should this matter? It all turns on what the constituent elements of the applicable foreign law are. A legal system such as China’s will have statute law pertaining to all matters in court. With a common law system statute law will quite often be quiet on the matter, so the only evidence as to the content of the applicable foreign law will be based on judicial precedent.
This issue arose in a recent case before the PRC Supreme Court, which considered whether, where the court of first instance was presented with conflicting opinions by legal experts, it should make its own further investigations into the content of foreign law, or if the lack of consensus meant it was free to apply Chinese law by default.
In Keep Bright Ltd, Super Auto Investments Limited v Four Treasure Limited (Zhuhai), Supreme People’s Court 2013, the plaintiff sought specific performance of a letter of intent against the three other entities (the respondents). The respondents argued that Chinese law should apply to the case as the disputes concerned real estate located in Mainland China. Both the plaintiff and the respondents adduced legal opinions from Hong Kong solicitors in support of their cases from the perspective of Hong Kong law.
The High Court found that it was unable to ascertain the applicable Hong Kong law from the conflicting legal opinions, and concluded that Chinese law should be applied by default.
On appeal, the Supreme Court reversed the High Court’s decision with respect to the ascertainment of Hong Kong Law and held:
It is natural and normal practice that there are inconsistencies on the application of Hong Kong law presented in the respective legal opinions of the parties. In this regard, the court should take the lead and decide how to apply Hong Kong law, rather than ruling that ‘the content of Hong Kong law cannot be ascertained.’
In other words, the Supreme Court held that the court below had erred in ascertaining Chinese law as the proper law merely because the parties did not refer to statutes, cited different cases and came to different conclusions.
As the authors point out,
The problem this case highlights lies in the difference between the structure of Chinese law and the systems of common law in Hong Kong and the UK. In common law systems there may not be a statute or statutes that are relevant to an issue in dispute. Many Chinese judges in such a situation would conclude that the foreign law expert has therefore failed to adduce evidence to their satisfaction. This has the result that the Chinese court applies Chinese law by default. The same would happen as it did in this case, that when different foreign law experts present conflicting opinions on the foreign law at issue.
As economic relations with the PRC continue to expand, the supervision of Chinese courts on questions involving English law gains in importance, and there are clearly lessons to be learned from the PRC Supreme Court’s approach to the common law of Hong Kong.
