This briefing is taken from JunHe’s recent article “The First Case on the Extraterritorial Application of the PRC Securities Law: Recent Developments in Cross-Border Financial Litigation”. It was written by JunHe partner Jiayin (Jay) Zhu, who specializes in dispute resolution, regulatory compliance and competition law matters. It discusses the jurisdictional rules established in a landmark case heard by the Beijing Financial Court and explores the potential extension of the court’s reasoning to disputes arising from offshore futures and derivatives trading and cross-border financial services. The article also examines how arbitration clauses, exclusive foreign court jurisdiction clauses and asymmetric jurisdiction agreements may affect the jurisdiction of PRC courts.
The first case regarding the extraterritorial application of the PRC Securities Law, heard by the Beijing Financial Court, was cited in the annual work report of the Sureme People’s Court for 2025 and drew widespread attention. As the first case in judicial practice to apply the extraterritorial provision introduced by the 2019 amendment to the PRC Securities Law, the court’s reasoning may have a profound impact on jurisdiction over cross-border financial disputes. This briefing discusses the latest developments in judicial practice and explores practical challenges based on our observations.
I. Case Overview and Key Findings
The defendant in this case was an offshore company incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange. Due to undisclosed illegal guarantees and other misconduct in 2017 and 2018, its shares were suspended from trading, and the company was ultimately delisted in 2021. A Chinese mainland investor who suffered losses therefrom brought securities misrepresentation claims before the Beijing Financial Court.
The defendant challenged the court’s jurisdiction, arguing that: (i) the conduct occurred before December 2018 and the extraterritorial provision introduced by the amended PRC Securities Law should not have a retroactive effect; and (ii) the extraterritorial provision requires both a disruption of PRC onshore market order and harm to the legitimate rights and interests of onshore investors, whereas the conduct at issue did not disrupt the onshore market.
Following proceedings before the Beijing Financial Court and the Beijing Higher People’s Court, the defendant’s jurisdictional challenge was dismissed. The case was ultimately settled through mediation, and the key judicial decision was therefore the ruling on jurisdiction. The ruling established two important principles:
Regarding retroactive effect, the court held that the harmful consequences continued until 2021, i.e., after the amended Securities Law had taken effect, and therefore the extraterritorial provision was applicable. This established the standard of “continuing harmful consequences”.
On triggering conditions, the court clarified that “disrupting the PRC onshore market order” and “harm to the lawful rights and interests of onshore investors” are alternative conditions and the satisfaction of either is enough to trigger the extraterritorial application.
II. Procedural Logic: Application of Law in Jurisdictional Review
One notable issue is why the applicability of the extraterritorial provision, which is a substantive legal issue, needed to be considered at the jurisdiction challenge stage. The logic appears to be that the extraterritorial provision also performs a procedural function and may provide a legal basis for PRC courts to exercise jurisdiction. The Supreme People’s Court had also made it clear that the extraterritorial provision of the Securities Law provides the legal basis for the Beijing Financial Court’s cross-regional jurisdiction over cross-border disputes.
The “other appropriate connections” jurisdictional ground introduced by the 2023 amendment to the PRC Civil Procedure Law provides PRC courts with a more flexible procedural basis for jurisdiction over cross-border financial disputes. In this case, possible procedural bases include: (i) treating harm to the legitimate rights and interests of PRC onshore investors itself as an “appropriate connection”; and (ii) on that basis, further treating the plaintiff’s domicile as a jurisdictional connecting factor. Although the original ruling has not been made public, it can be inferred from publicly available information that PRC courts may establish jurisdiction where conditions such as a prima facie showing harm and the applicability of the extraterritorial provision are satisfied.
III. Potential Extension of the Court’s Reasoning
The reasoning of this case may be extended to the following areas:
Offshore futures and derivatives trading. Article 2 of the Futures and Derivatives Law adopts an extraterritorial provision like that under the Securities Law, using “disrupting the domestic market order” and “harm to the legitimate rights and interests of onshore traders” as triggering conditions. Offshore futures trading activities that harm the rights and interests of PRC onshore traders may also be actionable before the PRC courts.
Offshore commercial banking services. Article 2 of the Commercial Bank Law (Draft Amendment) reflects a similar approach to extraterritorial application. The jurisdictional rules of all three PRC financial courts already cover disputes arising from financial services provided by offshore financial institutions that harm the legitimate rights and interests of PRC onshore investors, and this provision has already been applied in judicial practice.
IV. Constraints on PRC Court Jurisdiction
Although this case reflects a more proactive approach to the exercise of jurisdiction, PRC court jurisdiction may still be limited by the following factors:
1. Arbitration clauses. If a cross-border financial transaction contains a valid and generic arbitration clause, a PRC court may decline jurisdiction even if a party brings the claim in tort rather than contract. A 2025 typical case published by the Shanghai Financial Court addressed this issue, with the court ultimately exercising jurisdiction only after finding that the relevant arbitration clause had subsequently been removed.
2. Exclusive foreign court jurisdiction clauses. In principle, such clauses may exclude the jurisdiction of PRC courts. However, where a dispute involves PRC onshore market order or public interest, a PRC court may declare the clause unenforceable pursuant to Article 280 of the PRC Civil Procedure Law. Given that regulators are currently intensifying enforcement against illegal cross-border securities activities, some conduct may potentially be deemed to harm public interest, thereby precluding the application of foreign court jurisdiction clauses.
3. Non-exclusive jurisdiction clauses and asymmetric jurisdiction agreements. Non-exclusive jurisdiction clauses do not exclude PRC court jurisdiction. Asymmetric jurisdiction agreements, which allow only one party to choose among courts in multiple jurisdictions, are in principle valid, but may be held invalid where consumer rights are involved. Against a broader trend toward the active implementation of extraterritorial provisions, there remains a risk that asymmetric agreements restricting financial consumers’ access to PRC courts may be held unenforceable.
V. Evolving Jurisdictional Landscape
The introduction of the “other appropriate connections” provision under the amended Civil Procedure Law marks a shift in PRC jurisdiction over foreign-related civil disputes from a closed connecting factor model to a more open and flexible approach, providing more room for PRC courts to hear cross-border financial disputes.
As to whether the domicile of the plaintiff alone may constitute an appropriate connection remains unsettled. Certain cases heard by the Beijing Financial Court have recognized this view, while other courts have adopted a more conservative approach and considered additional substantive connecting factors such as the defendant’s domicile, the location of the payment and the location of the contract negotiations. Therefore, a case-by-case assessment based on specific circumstances is still required.
The three PRC financial courts exercise cross-regional centralized jurisdiction over two categories of offshore financial disputes (i.e. those arising from offshore securities and futures activities and offshore financial products and services). If the domicile of the plaintiff were to be generally recognized as an appropriate connection, this could lead to nationwide jurisdiction. However, issues such as whether other courts retain jurisdiction and how the rules on jurisdiction by the court level applies, remain to be further clarified in judicial practice.
Conclusion
The first case on the extraterritorial application of the Securities Law provides clear guidance on the judicial application of the Securities Law’s extraterritorial provision and may also establish a legal basis for jurisdiction over cross-border financial disputes in areas such as offshore futures trading, derivatives trading and offshore financial services. The introduction of the “other appropriate connections” provision under the amended Civil Procedure Law, together with the cross-regional centralized jurisdiction of the PRC financial courts, may significantly reshape the jurisdictional landscape for cross-border financial litigation.
Parties are advised to pay attention to the impact of arbitration clauses, jurisdiction agreements and other contractual arrangements on jurisdiction, and work with experienced counsel to assess risks and formulate litigation strategies on a case-by-case basis.
