PRC Supreme Court Clarifies Proof of Foreign Law

By Patrick Zheng | Charles Qin

The approach adopted by Chinese courts as to the status and proof of foreign law[1] is not clearly established. Where English or Hong Kong courts are asked to consider a question of foreign law, the courts treat the contents of foreign law as being a question of fact.[2] As a result, like factual evidence, foreign law must be pleaded and proved by the parties (usually by way of expert witness opinion) as to what the foreign law is, and how the foreign law should be applied to deal with the issue being decided.

If both parties adduce conflicting evidence about the foreign law, the courts need to consider the conflicting evidence and reach a determination as they would on other kinds of issues of fact.[3]

If, however, neither party adduces factual evidence on the contents of the foreign law, English or Hong Kong courts will assume that the foreign law is exactly the same as the relevant English or Hong Kong law. This is the common law notion of “presumption of identity”, meaning that in the absence of evidence to the contrary, the foreign law is the same as the law of the forum.[4]

However, it is not crystal clear in China whether foreign law is treated as a question of law or fact, as Chinese courts retains the power to investigate and clarify the applicable foreign law on its own motion,[5] by which foreign law is seemingly regarded as a question of law, despite that Chinese law also provides that, in the event of choice-of-law agreement, the foreign law must be pleaded and proved by the parties to the satisfaction of the judge.[6]  

Chinese law provides a number of ways for the parties and the court to conduct this type of exercise to “investigate and clarify” the applicable foreign law, including submissions by:[7]

1. the parties;
2. the central authority of the contracting party with which the PRC has concluded a judicial assistance accord;
3. the embassy or consulate of the PRC in the foreign country;
4. the embassy of the foreign country in the PRC;
5. Chinese or foreign legal experts;
6. the institution rendering law searching services;
7. the member of the International Commercial Expert Committee; and
8. other reasonable ways to find foreign law, e.g. through the Internet.

If there is no satisfactory answer to what the foreign law is, Chinese courts will apply Chinese law by default. In this regard, Chinese courts do not presume that foreign law is the same as Chinese law. Instead, Chinese courts disregard the foreign law and simply apply Chinese law.

This gives rise to an interesting question: how should Chinese courts proceed on the determination of the applicable foreign law if the courts are faced with conflicting opinion-e.g. from different party appointed legal experts?

Faced with conflicting expert evidence, should Chinese courts apply Chinese law by default or should they make their own further investigations into what the foreign law is?

This issue was considered by the PRC Supreme People’s Court (“Supreme Court”) in the case below.[8]

Background

In 2006, Keep Bright Limited concluded a letter of intent concerning share transfer and other matters (“Letter of Intent”) with three other entities: Super Auto Investments Limited, Four Treasure Limited (Hong Kong) and Four Treasure Limited (Zhuhai). Article 7.1 of the Letter of Intent provides that:

“This Letter of Intent shall be governed by and construed in accordance with Hong Kong law.”

Later, disputes arose and Keep Bright Limited (“Plaintiff”) commenced proceedings before the Guangdong High People’s Court (“High Court”) against the three other entities (collectively “Respondents”), seeking specific performance of the Letter of Intent.

Although 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 qualified Hong Kong solicitors in support of their cases from the perspective of Hong Kong law.

Decision of the High Court

The High Court, the competent trial court, held that neither of the legal opinions submitted by the parties referred to statutes under Hong Kong law, therefore they merely reflect personal opinions of qualified Hong Kong solicitors. Moreover, the cases cited in the two legal opinions are not the same and arrived at contradictory conclusions. The High Court considered that the expert opinions could not be used to determine the case.

The High Court therefore concluded that it was unable to ascertain the applicable Hong Kong law, and Chinese law was to be applied by default.

Decision of the Supreme Court

On appeal, the parties adduced supplementary legal opinions, and the solicitors who issued the legal opinions appeared before the Supreme Court.

The Supreme Court reversed the decision made by the High Court 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.’”

Therefore, the Supreme Court held that the High Court 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 in the legal opinions.

Observation

The English law approach is that where there is no foreign precedent on the particular point or the authorities such as they are conflict, the court must, with assistance of expert evidence, decide the matter itself.[9] In carrying out this exercise the judge should apply the principle of foreign law to the facts as he/she finds them thereby undertaking essentially the same exercise as is performed by the judge in every case of domestic law.[10]

Influenced by civil law tradition and training, Chinese judges, learned though maybe in domestic laws, usually expect the foreign law expert to inform the court of the relevant contents of the foreign law, by identifying statues or other legislations and the effect of so identified foreign law.

However, common law case law system means that there may not be statute law that is relevant to an issue in dispute. A common law trained foreign law expert therefore may properly produce an expert opinion based on case laws only and without citing statutes.

As the present case highlights, many Chinese judges may in this situation conclude that the foreign law expert has failed to adduce evidence to their satisfaction–with the result that the Chinese judges may decide to apply Chinese law instead of the foreign law. The same outcome may also occur when, quite properly, conflicting foreign law experts present conflicting expert opinions on the foreign law at issue.

The decision above from the Supreme Court is a helpful and welcome clarification in this regard. Yet, it remains to be seen how Chinese judges will apply this exercise in practice, in other words, whether Chinese judges will still tend to apply Chinese law by default in the relevant circumstances.

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