Update on information technology used by Chinese courts and arbitration institutions - CWG

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Ariel Ye*
King & Wood Mallesons
ariel.ye@cn.kwm.com

There has never been so much attention paid to how information technology could help courts and arbitration institutions conduct cases during the Covid-19 pandemic. This is as true in China as in the rest of the world. In fact, information technology has been quietly adopted and widely used by judiciaries in many countries since the 1990s when the Netherlands judiciary set up its first platform to discuss information technology for its courts.^[1]

Chinese courts and arbitration institutions started this journey in 2009. As a country of 1.4 billion people, the adoption of IT for judiciaries is an unavoidable pathway to achieving not only efficiency, convenience and cost-savings, but also quality and consistency across the country, as well as environmental benefit from reducing the use of paper.

As of 30 June 2019, China had 854 million net citizens, an increase from 620,000 in 1997. The number of mobile internet users had reached 847 million by 2019, instant messaging with 824 million users, followed by online video users at 759 million. The number of online shoppers had increased to 639 million.^[2]The data traffic consumption of mobile phones and devices reached 55.39 billion gigabytes.^[3] Against this background, setting up online court and online arbitration is a must. Such online courts and arbitration in China were directly translated into ‘internet court’ or ‘internet arbitration’.

‘Online court’ or ‘online arbitration’ referred not only to virtual hearings but the entire court/arbitration proceedings being conducted online without physical hearings with judges, and without paper files as evidence is entirely in electronic form.

Courts’ use of information technology

Since 2012, four official websites have been set up by the Supreme People’s Court (SPC) to provide for online research into laws and regulations, as well as finalised court judgments, court decisions and enforcement orders.^[4] A platform was later established to provide live broadcast of court hearings, as well as big data platform to archive court files on a daily basis, significantly improving judiciary transparency.^[5]

As of 31 October 2019: more than 1.1 billion case status information of about 22 million cases have been posted on China Judicial Process Information Online; 5.5 million cases had been broadcasted live on China Court’s Live Trial website, attracting more than 20 billion viewers.^[6] China Judgment Online published over 80 million court decisions and attracted over 37 billion visits from more than 210 countries and regions, which makes the website the world’s largest judicial information database.^[7] China Enforcement Information Online provides a great deal of useful information on enforcement proceedings around the country.^[8]

The first e-court was set up in Hangzhou in 2015, where is the birthplace of Alibaba, the biggest e-commerce provider; followed by two more e-courts: Beijing in August 2017, and Guangzhou, southern China in September 2018.

On 6 September 2018, China’s Supreme People’s (SPC) issued the Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Cases by E-Courts (SPC Provisions) to provide further guidance on how e-courts or e-tribunals should administer cases. According to the SPC Provisions, these online courts are designed as primary courts with designated jurisdiction over e-commerce-related cases.^[9] The SPC identifies more than 11 types of e-commerce-related cases, including contracts for online purchases, financial loans, services, and copyright, etc, to be handled by such e-courts.^[10]

Such e-courts are widely recognised for their judicial quality and efficiency.^[11] For cases filed to such e-courts, litigants and their representatives have access to 24-hour online self-service through computer or mobile phone who can enjoy functions including online filing, online submission of document and evidence, payment of court fees and online hearing. Their lawyers are also able to check case status online, and raise questions to courts via the online platform, remarkably saving time and cost. Since its establishment, judges working in such e-court have concluded an overage of more than 700 cases per year.^[12] As of 31 October 2019, the three e-courts served 96,857 documents via phone, email, WeChat, SMS, and official online accounts.^[13]

In addition to the three e-courts which only hear e-commerce-related cases, special e-tribunal has been set up within traditional courts to hear e-commerce-related disputes in Shanghai, Shenzhen, and Wuhan, etc.^[14]

Traditional courts are no longer ‘traditional’, as an increasing number of them have been embracing new technologies. By 13 December 2018, across China, 2,995 courts had set up official court websites. Of these, 1,623 courts offered litigation service mobile applications.^[15] Beijing courts have launched their online filing system to provide full-coverage online filing services for the parties and their representatives so that case documents can be filed at any time.^[16]

Big data, cloud computing, blockchain and artificial intelligence, the application of modules such as voice recognition in online hearings, digitalised evidence presentation, automatic document verification, and simultaneous transcript of hearings, technology assisted case management, are also being adopted by many Chinese courts.^[17] For example, in August 2019, courts in Beijing-Shanghai-Guangzhou, the Yangtze River Delta, and the Beijing-Tianjin-Hebei region implemented not just cross-regional filing but also cross-level filing, for example, cases appealed to higher level of court, files usually transmitted physically, took significant time to reach appellate court, are now much less time consuming because of e-filing.^[18]

A national information platform, National Enterprise Bankruptcy Information Disclosure Platform was also set up for both liquidation and reorganisation cases, given the circumstances that bankruptcy cases involve a large number of creditors, complicated legal relations and significant social impact.^[19] Judges, bankruptcy administrators, and lawyers share this platform and are able to proceed with bankruptcy procedures online.^[20] Relevant information is disclosed promptly and proportionately, while creditors, debtors, market investors and other stakeholders can all participate online.^[21]

One special approach adopted by e-court is an ‘asynchronous trial’, which allows the litigants and their representatives to log in at different times to participate in hearing as the time difference is one of the major obstacles of online court or arbitration for international cases.^[22] The SPC white paper indicates that so far, 2,495 cases have been concluded in this way.^[23] It is certainly easier for civil law style hearings to be conducted as asynchronous trials than any common law style hearing.

For example, a Taobao shop owner Ms Wang who lives in Canada was sued by her Taobao client in China at Hangzhou e-court.^[24] Due to the 12-hour time difference between, Ms Wang can only participate in the online trial late in the evening or in the early morning if a virtual hearing is to be conducted. However, under the asynchronous trial, she was able to answer any question raised either by the opposite counsel or by the court at the convenience of her own time by logging into the system and record her answers or vice versa. In the end, the judge could hear the entire arguments recorded by the system and print out the transcripts.

Although the asynchronous trial approach is rarely used, having this option can effectively deal with ‘time difference’ issues facing international litigants.

Online arbitration

Online arbitration mechanisms were developed largely for the purpose of administering e-commerce-related disputes, where evidence is entirely in electronic form if parties choose arbitration rather than litigation in court. According to the survey conducted by China Arbitration Institution of China University of Political Science and Law, more than 30 Chinese arbitration institutions have adopted online arbitration mechanisms, and that online arbitration cases accounted for more than 40 per cent of the overall arbitration cases in 2019.^[25]

In 2009, the China International Economic and Trade Arbitration Commission (CIETAC) issued the CIETAC Online Arbitration Rules to administer e-commerce-related arbitrations.^[26] These Arbitration Rules were revised at end of 2014. The Rules are for dealing with foreign-related commercial disputes, especially B2B e-commerce disputes. All arbitral documents, notices and materials will be delivered by email, fax and electronic data interchange.^[27] Hearings are usually conducted online via video conferencing except for special cases.^[28]

Allied with the development of online arbitration, one must also look at the recognition and enforcement rate of online arbitral awards.

Research indicates that although enforcement is gaining momentum, there are still improvements to be made. A survey conducted in connection with the 13th China Arbitration and Judicial Forum in August 2020 reviewed the enforcement rate of 59,778 arbitration awards rendered pursuant to online arbitration proceedings (including e-filing, virtual hearing, and e-award).^[29] Of these awards, 14.3 per cent were refused enforcement (8,571 cases) and 11.2 per cent were set aside (6,719 cases). The overall enforcement rate was approximately 75 per cent.^[30]

The survey revealed that enforcement of online arbitration awards varied by locality, largely due to the disparity in experience and understanding of the online arbitral process and the underlying technology. For example, the non-enforcement rate in Beijing was 0.6 per cent.^[31] Whereas the non-enforcement rate in Jiangsu Province, roughly 29 per cent, and in Chongqing 53.8 per cent, due to courts there lacking understanding or knowledge of online arbitration proceedings, particularly the electronic service of court documents.^[32] According to the survey, the Guangzhou Arbitration Commission administered more than 4,000 online cases, but records indicate that none of its online arbitral awards have been denied enforcement or set aside.^[33]

Virtual hearing 

Despite the developments discussed above, Chinese court takes a conservative approach regarding virtual hearings, that is, unless both parties have no objection, usually, the court will not conduct virtual hearings.

On 14 February 2020, the Chinese Supreme People’s Court issued the Notice by the Supreme People's Court of Strengthening and Regulating the Online Litigation Work during the Period of Prevention and Control of the Covid-19 Outbreak (SPC Notice), which allows court cases to be handled online if the parties have no objection.^[34]

With respect to virtual hearings, article 2 of the SPC Notice contains the consent requirement and the factors which Chinese courts should take into account when determining whether to conduct a virtual hearing are listed below:^[35]

‘[…] online court hearings may generally apply to civil and commercial cases, and administrative cases. However, online hearings shall not apply, where both parties to a case disagree with online court hearings, the technical conditions for online court hearings are not met, the identity needs to be found out, the original documents need to be verified, and the physical objects need to be inspected, among others.’

Consequently, when parties object to a virtual hearing, a judge must postpone the procedures until an in-person hearing can be held.

Like the international arbitration community, the Chinese arbitration community recognises the benefits of virtual hearings. To ensure the fairness and efficiency of arbitral proceedings, several of the major Chinese arbitration institutions are considering permanent changes to their rules which would allow arbitral tribunals to issue directions for a virtual hearing appropriate under the circumstances. In such cases, the parties’ selection of those arbitral rules would suggest their consent to a virtual hearing directed by the tribunal under the rules.

However, prior to the changes of institutions’ rules, Chinese arbitration institutions only conducted virtual hearings when both parties gave consent, which is different from most international arbitration institutions,^[36] where their rules empower tribunals to decide if virtual hearings are suitable or appropriate to avoid unnecessary delay or expense.

On 28 April 2020, CIETAC issued the Guidelines on Proceeding with Arbitration Actively and Properly during the Covid-19 Pandemic (Trial)(CIETAC Guidelines) which came into effect from 1 May 2020.^[37] Article 2(6)(2) of the CIETAC Guidelines provides that ‘[w]hen deciding whether to hold a virtual hearing, the arbitral tribunal shall take into consideration the views of both parties.’^[38] Even though the CIETAC Guidelines only require the arbitral tribunal to ‘consult’^[39] with the parties, in practice, tribunals will adopt the Chinese court position and require written consent before allowing a virtual hearing to proceed.

Coupled with the consent requirement in Article 2 of the SPC Notice, which requires consent for a virtual hearing in Chinese court cases,^[40] may create some uncertainties about whether a foreign arbitral award rendered in proceedings in which a virtual hearing was held despite a party’s objection would be recognised and enforced in China. This is less likely to be a concern for a domestic arbitration award, given the current Chinese arbitral practice of requiring consent for a virtual hearing.

Articles V(1)(d) and V(2)(b) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards allow a court to deny recognition or enforcement of an award if ‘the arbitration procedure was not in accordance with the agreement of the parties’ or ‘the recognition or enforcement of the award would be contrary to the public policy of that country’. It is unclear the extent to which either of these provisions may provide a basis for a Chinese court to deny enforcement of a foreign arbitral award.

However, if the applicable arbitral rules and/or procedural law expressly or implicitly allow for the conduct of virtual hearings or empower the tribunal with the discretion to determine whether to hold them, it is not expected for a Chinese court to deny recognition or enforcement solely on this basis. Provided Chinese courts are satisfied that due process is ensured and parties are offered a reasonable opportunity to present their case, the uncertainties associated with the virtual hearing conducted with one party’s objection should not be a major concern.