China Property Preservation Orders – New Rules And New Ways.

23 January, 2017

 

China issues new provisions on handling property preservation cases.

 

Introduction

 

On 17 October, 2016, the PRC Supreme People's Court published Provisions on Several Issues concerning the Handling of Property Preservation Cases by the People's Courts (the Provisions), which came into force on December 1, 2016.

In this legal update, we will focus on some significant content of the Provisions, including the separation of trials from enforcement actions, the approval and enforcement deadlines for property preservation, the form and amount of guarantees for property preservation as well as enquiries for preservation respondent's property information.

 

Background

 

Prior to the implementation of the Provisions, the preservation of property was mainly dealt with under the Civil Procedure Law of the People's Republic of China and its interpretations (the Regulations). In practice, due to the fact that the Regulations were not particularly detailed, Courts of all levels often exercise considerable discretion when ordering the preservation of property. As a result, there have been inconsistent practices in different levels of courts when handling applications for the preservation of property.

 

The Provisions contain more detailed regulations which are intended to facilitate the simplification and standardization of the granting of orders for preservation of property.

 

Key Contents of the Provisions

 

The Provisions comprise of 29 articles, which can be summarized as follows:

 

Separation of trial and enforcement courts

 

Article 2 of the Provision stipulates that where a people's court issues a property preservation order, the case-docketing or adjudicative body (i.e the trial court) shall render a ruling, which will then be delivered to the enforcement division for implementation. This provision is designed to improve on the current situation where there is no clear division between the trial court and the enforcement court. 

 

Deadlines for issuing of property preservation orders

 

Article 4 of the Provisions stipulates that after accepting an application for an order preserving property, a people's court shall render a ruling within five days. If security needs to be provided, it shall render a ruling within five days after the security is provided.  If the Court renders a ruling to take a preservation measure, the enforcement of the ruling must commence within five days. In case of emergency, a ruling or an application for a preservation measure should be rendered within 48 hours and, if an order is made, it must be enforced immediately.  Article 4 also sets out the timeline for rendering a ruling and enforcing a property preservation order in non-urgent cases for the first time.  This should enhance the speed by which property preservation orders are granted and enforced.

 

Adjustment to level of security

 

Article 5 of the Provisions stipulates that when applying for property preservation in a law suit, the amount of security shall not exceed 30% of the requested amount of property to be preserved or the value of the subject matter under dispute. Prior to the publication of the Provisions, courts of all levels usually requested that 100% of the requested amount of property be secured. Article 5 accordingly lowers the threshold for making an application for the preservation of property, which will be good news for claimants.

 

Insurance

 

Articles 7 and 8 indicate for the first time that insurance companies could provide security for property preservation by way of property preservation liability insurance. Similarly, financial institutions formed with the approval of a financial supervision authority could provide security for the applicant by issuing an independent letter of guarantee. In addition, Article 9 stipulates that for those institutions with the capacity of repaying their debts independently such as commercial banks and insurance companies etc., the people's court may waive the provision of security.

 

The investigation of the preservation respondent's property

 

Article 10 of the Provision stipulates that where a party who applies for a property preservation order during a law suit is unable to provide specific information on the property to be preserved but can provide some basic evidence of the property owned by the other party, the people's court may still render a ruling to take a property preservation measure. In such cases, according to Article 11, during the enforcement of the ruling, the preservation applicant can apply to the court of execution to obtain information as to the respondent's property through the online enforcement check and control system which is administered by the court of execution. This will assist those applicants who know that a respondent has property but does not know the exact details or whereabouts of that property.  At the time of writing this article, it is not yet known which courts have set up the online enforcement check and control system or how effective this system will be.  Time will tell.

 

Summary

 

The implementation of the Provisions has undoubtedly clarified and streamlined the procedures for issuing and enforcing property preservation orders. However, whether the Provisions will be effective in providing speedier and better relief to claimants remains to be seen.