Rethinking the Territorial Jurisdiction of the Chinese Internet Courts

 

Zhou Qiang, President of the Supreme People's Court of China, at the inauguration scene of Hangzhou Internet Court

Zhou Qiang, President of the Supreme People’s Court, at the inauguration scene (photo ©Zhejiang News

Lin Yifu

Internet technology has brought challenges against the traditional rule of territorial jurisdiction, rethinking and reconstructing the rule of territorial jurisdiction is a must. Even though a plaintiff now can file a lawsuit over the internet without incurring considerable pre-paid traveling cost, the question becomes in which internet courts can plaintiff file the lawsuit.

This Note explores the issues of the territorial jurisdiction of the Internet Court in China. Beginning with the introduction of the Internet Courts in China, the history and the current development of Internet Courts are provided. Judicial provisions regarding the jurisdiction of Internet Courts are provided in this section as well. Then follows the discussion of issues of territorial jurisdiction that arise in the context of Internet Courts. This Note argues that, regarding general territorial jurisdiction, the policy consideration behind the general principle of “deferring to the defendant’s place of residence” bears little weight in the internet era. As to specific territorial jurisdiction, this Note argues that the jurisdiction connections are quite hard to ascertain. The remaining part of the Note, instead of dispensing with the traditional rules, sets forth possible solutions in optimizing the rules, i.e., the adoption of no-priority free selection scheme and permission of forum selection.

I. The Establishment of Internet Courts in China

Considering the unprecedented transformation brought by the internet technology, the leadership of the Supreme People’s Court of China (hereinafter “SPC”) during the past few years has been releasing the signal of promoting the establishment of “Smart Courts.” The establishment of “Smart Courts” is meant to modernize the trial competency via digitization of the judicial system, improve adjudication efficiency, enhance judicial transparency, provide more convenient litigation services and cut down litigation cost. Bearing in mind such goals of judicial reform, the leadership has been working on drawing Smart Courts into practice.

A. Pre-Internet Court Era

The first step launched by the leadership, also the most systematic pilot project, is the Online Tribunals of E-Commerce in Zhejiang Province (hereinafter “Online Tribunals”). Considering the speedy development of the internet industry in its jurisdiction area, the High People’s Court of Zhejiang Province in April 2015 designated three Primary People’s Court in Hangzhou City to adjudge different internet-related matters. Specifically, the Primary People’s Court of Xihu District would handle online payment cases, that of Binjiang District would take charge of online copyright cases, and that of Yuhang District would adjudicate online transactions cases. At the upper level, the Intermediate People’s Court of Hangzhou was accordingly designated as the appellate court. According to the data provided by the paper, all three Online Tribunals have registered more than 22,000 cases. In view of the initial success achieved by Online Tribunals, the SPC leadership in 2016 put the establishment of a full-fledged internet court high on the agenda.

B. Post-Internet Court Era

On June 26, 2017, the Leading Group of the Central Comprehensive Deepening Reform, the coordinating organization for decision-making which is directly responsible to Communist Party of China, resolved to establish the Hangzhou Internet Court, the first internet court around the globe. At the organizational level, the Hangzhou Internet Court supersedes the Online Tribunals. As expected, the Hangzhou Internet Court has fully achieved the aim of hearing cases via internet, exercising jurisdiction over internet-related cases as per the Guidelines on the Jurisdiction of the Hangzhou Internet Court.

On July 7, 2018, the Commission of the Central Comprehensive Deepening Reform passed the Proposal of the Establishment of Beijing Internet Court and Guangzhou Internet Court. Drawing lessons from the Hangzhou Internet Court, the second and third Internet Courts are subsequently established. On September 6, 2018, SPC issued the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases by the Internet Courts (hereinafter “the Provisions”). In terms of jurisdiction, the Internet Court could only hear internet-related cases as per the specification in the Provisions. Parties and lawyers could submit documents via internet and hearings would be conducted online. However, while internet courts blossom, challenges arise as well. Issues have been flagged regarding the challenges against the traditional territorial jurisdiction.

II. Challenges against the Traditional Rule

The development of internet technology has brought challenges to the traditional rule of territorial jurisdiction in China. Territorial jurisdiction refers to the concept that each people’s court, according to its jurisdiction area, adjudicates criminal, civil and administrative cases. In other words, territorial jurisdiction by definition relates to the jurisdiction area of the people’s court. However, that determinative factor—jurisdictional area—is no longer that significant in the era of the internet. As the internet technology further transforms the judiciary system, reconstructing the territorial jurisdiction rule is a must.

A. Challenges against the General Territorial Jurisdiction

General territorial jurisdiction refers to the determination of the venue by the relationship between the place of residence of the parties and the jurisdictional area of the people’s court. The general principle under general territorial jurisdiction is the so-called “deferring to the defendant’s place of residence.” This principle dictates that the plaintiff shall file the lawsuit at the court which the defendant’s place of residence is located.

The main policy consideration behind the general principle is that placing the traveling cost on the plaintiff’s side could deter the plaintiff from abusing the process and protects the defendant from malicious prosecution. When devising the procedural rules, one basic principle is reasonably allocating the necessary cost of litigation between litigants. In that vein, the general principle has taken into consideration the point that he who initiates the procedure shall bear the cost. Under such a scheme, the plaintiff has to bear the cost of traveling to the defendant’s place of residence, which serves as deterrence against abuse of litigation.

However, the policy consideration that incurring traveling costs serve as deterrence against abuse of litigation bears less weight, if any, in the context of the internet court. Participation in litigation no longer means having to physically come to the scene. Registering the case, submitting the evidence, participating in the trial, receiving the judgment—each procedure theoretically can now be conducted via the internet. For that reason, traveling expenses that plaintiff would have incurred under that general principle no longer matters. Simply put, the establishment of internet court has exempted plaintiff from incurring expensive traveling costs. Therefore, the policy consideration that placing the traveling expenditures on the plaintiff’s side would deter abuse of process bears little weight in the internet court.

B. Challenges against the Specific Territorial Jurisdiction

Specific territorial jurisdiction refers to the determination of venue by the place of the subject matter of the action and the place of residence of the defendant. Within the context of specific territorial jurisdiction, this Note only dwells on contract disputes and torts disputes because cases involving internet under the specific territorial jurisdiction mainly includes contracts cases and torts cases.

The venue for both contract cases and torts cases under specific territorial jurisdiction is determined by the place where legal facts happen or where the defendant resides. As the Civil Procedure Law of People’s Republic of China (hereinafter “the Civil Procedure Law”) and its corresponding judicial interpretation has provided, a contract dispute is subject to the jurisdiction of the people’s court at the place where the defendant resides or where the contract is or is to be performed. Likewise, torts disputes are under the jurisdiction of the people’s court at the place where the tort occurs or where the defendant resides.

However, because in the internet era ascertaining the jurisdictional connections becomes more difficult, venue determination becomes more difficult as well. Traditionally, it is not difficult, in contractual disputes, to determine where the contract is to be performed. It is also not that difficult to determine where the tortious conduct occur in torts disputes. But what if the contractual obligation is to be performed via the internet? For instance, what will be the place of performance for a contract in buying online value-added products, such as online game tokens? Likewise, torts conducted via internet often involves multiple stages of infringement, and it impacts multiple network devices. Therefore, in cases involving torts done through internet, it is very difficult to determine the place where the tortious conduct was actually conducted and where the result occurred.

III. Solutions in Optimizing the Traditional Rule

Embracing the challenges brought by the internet technology, then the question is boiled down to whether the whole set of rules regarding territorial jurisdiction is applicable to the internet courts, and if yes, to what extent shall those traditional rules be adjusted to new circumstances. Because territorial jurisdiction remains the most important category of jurisdiction in the civil law system, this Note proposes to adapt the rules on territorial jurisdiction to the idiosyncratic nature of the internet court. Two adjustments, based on the initial scheme proposed by Professor Xiao Jianguo, are propounded below.

A. New Mechanism Adopted

This Note proposes a scheme of “no-priority free selection among multiple jurisdictional connections.” Such scheme responsively addresses the concerns with respect to the general territorial jurisdiction and the specific territorial jurisdiction. Recognizing challenges presented, such a scheme incorporates many jurisdictional connections as the basis for determining the ultimate venue while giving litigants autonomy in selecting the forum. The following firstly deals with “multiple jurisdictional connections” and secondly explains the “no-priority free selection.”

“Multiple jurisdiction connections” incorporates jurisdictional connections from both general territorial jurisdiction and specific territorial jurisdiction. For general territorial jurisdiction, territorial jurisdiction shall be granted to either court, because it does not matter whether cases will be adjudicated by the plaintiff-residence court or defendant-residence court. As mentioned above, the rationale basis of the general principle “deferring to the defendant’s place of residence” has been undermined in the context of internet courts. For internet-related cases, the internet court gets rid of the burdensome traveling cost on the part of the plaintiff. Trial by either plaintiff-residence court or defendant-residence court bears less significance. Therefore, under such scheme, territorial jurisdiction will be granted to the people’s court at the place where either the plaintiff or defendant resides. For specific territorial jurisdiction, territorial jurisdiction shall be granted to the people’s court determined by the object of action, the place of the subject matter of the action, and the place where legal facts happen. In that vein, by incorporating all possible jurisdiction connections, it increases possible choices for litigants under the second feature of such a scheme.

“No-priority free selection” allows litigants to freely choose from a pool of jurisdictional connections. Allowing the plaintiff to select the forum from all jurisdictional connections fully respects the policy considerations behind each jurisdictional connection. Regarding general territorial jurisdiction, plaintiff-residence court has the greatest potential to successfully subpoena witnesses because of the least efforts and time incurred by the witnesses (though in practice Chinese courts are not active in subpoenaing witnesses). Defendant-residence court is the most convenient court to enforce the judgment upon the reluctant defendant. As to specific territorial jurisdiction, the court where the legal facts happen, by its own nature, is the most competent in terms of fact finding. To conclude, exclusion of any jurisdictional connection from the pool might sacrifice the procedural justice in the sense that each jurisdiction connection has its own consideration.

B. Forum-Selection Allowed

This Note proposes that parties be allowed to select the forum, either the internet courts or traditional courts, ex ante in the dispute resolution clause of the contract. In the context of internet court, forum-selection denotes two scenarios: forum selection within the internet court system and forum selection between the internet courts and traditional courts. Pursuant to the Provisions, parties are free to choose the forum among already-established internet courts provided that the selected-forum is actually related to the dispute. Nonetheless, the Provisions does not address the question of whether or not parties are allowed to choose between internet courts and traditional courts. The following explores the issue in length.

Considering the difficulties those challenged by computers encounter, forum selection between the internet courts and traditional courts is practically the optimal strategy. The UK experience in establishing internet courts has been that of establishing and refining the online court system in separate stages, with each stage focusing on different tasks. At its initial stage, considering the technical difficulties faced by those litigants challenged by computers, it is better not to impose the “burden” of going to an online court on those computer illiterate. Though the Provisions itself are silent on this issue, drawing lessons from the UK experience and considering the much greater computer illiteracy in contemporary China, the procedure of the internet courts would be better designed if it were optional rather than mandatory.

Another reason for upholding forum-selection between the internet courts and traditional courts is that the internet courts to a large extent discourage, if not diminish, the hearings feature of traditional perception of litigation. Critics of UK online court have pointed out that the online court can only offer second class justice in the sense that it discourages hearings which are one of the essences of litigation. Though the adversarial system in UK which involves plentiful arguments from both sides might not hold true in the fullest extent in China, China has adopted the principle of direct verbal trial as well, which emphasizes the importance of hearings. In that vein, it will be practically optimal to preserve litigants’ autonomy in selecting among internet courts, in which procedural efficiency prevails, and traditional courts, in which procedural justice prevails.

IV. Conclusion

This Note, beginning with the introduction of internet courts in China, points out the challenges brought by the internet courts against the traditional rules on territorial jurisdiction. Considering that the policy consideration behind the defendant residence principle bears little weight in the internet era and that ascertaining the jurisdictional connections is becoming increasingly difficult, this Note proposes a scheme of “no-priority free selection among multiple jurisdictional connections.” As the subject matter over which the Internet Courts have jurisdiction might expand, it remains to be seen how the leadership of the SPC will further refine the design of internet courts.

Leave a Reply

Your email address will not be published. Required fields are marked *