Interim measures in China

1.1.1 In the People’s Republic of China (PRC), interim measures in general civil matters are governed by the PRC Civil Procedure Law (CPL) 1 The following refers to the law of the PRC. It does not cover or purport to cover the law applicable to the Special Administration Regions of Hong Kong and Macao or the law of Taiwan. . The CPL in its current form took effect on 1 January 2013, after being revised by a Decision of the Standing Committee of the National People’s Congress issued on 31 August 2012 (CPL Amendment 2013). One of the major developments of the CPL Amendment 2013 dealt with interim measures, specifically the introduction of preliminary injunctions.

1.1.2 Further details on interim measures are provided in the Supreme People’s Court Interpretation of the Application of the PRC Civil Procedure Law issued by the Supreme Court on 4 February 2015 (Interpretation) and the Provisions of the Supreme People's Court on Several Issues concerning Cases of Property Preservation Handled by People's Courts issued by the Supreme Court on 1 December 2016 (Provisions) 2 Such as the requirements for making an application for an interim measure, the security to be provided by the applicant and the property preservation methods which can be adopted by the court. .

1.1.3 As well as the provisions in the CPL, interim measures applicable to intellectual property disputes are set out in Articles 57 and 58 of the PRC Trademark Law, Articles 66 and 67 of the PRC Patent Law and Articles 50 and 51 of the PRC Copyright Law.

International jurisdiction

2.1.1 Civil actions against PRC domiciled parties, individuals residing in or bodies corporate registered in the PRC, are subject to the jurisdiction of the PRC courts.

2.1.2 Where an action is instituted against a defendant who is not domiciled within the PRC concerning a dispute over a contract or rights and interests in property, the PRC courts have jurisdiction if the:

• contract was executed or performed;
• subject matter of the action is located;
• defendant has distrainable property; or
• defendant maintains a representative office

within the territory of the PRC 3 CPL, art 265. .

Where a dispute pertains to breach of a contract which is deemed to be foreign-related there may be a choice of governing law, even where the PRC courts have jurisdiction 4 Interpretation, art 522: a case which falls within any of the following circumstances shall be deemed to be a foreign-related civil case: (i) a party or both parties involved in the case are foreigners, stateless persons, foreign enterprises or foreign organisations; (ii) a party or both parties involved in the case have their habitual residence outside the territory of the People’s Republic of China; (iii) the subject matter of the case is outside the territory of the People’s Republic of China; or (iv) the legal fact that establishes, changes or terminates the civil relations occurs outside the territory of the People’s Republic of China. If there are any other circumstances under which a case may be deemed a foreign-related civil case, it will be deemed as such. .

Geographical jurisdiction for interim measures

2.1.3 If court proceedings have not been commenced, then an application for an interim measure must be made to the people’s court located in the area where:

• the property to which the dispute relates is located;
• the respondent is domiciled; or
• when an interim measure is sought to preserve evidence, the evidence is located 5 CPL, art 101. .

Where a lower court which has jurisdiction considers that a higher level court should hear the application, the lower court has discretion to move the application to a more senior court 6 CPL, art 18, 19, 20: the intermediate people’s courts have jurisdiction as courts of first instance over the following types of civil cases: (i) major cases involving foreign parties; (ii) cases with significant impact in the areas over which the courts exercise jurisdiction; and (iii) cases determined by the Supreme People’s Court to come under the jurisdiction of the intermediate people’s courts. Higher people’s courts shall have jurisdiction as courts of first instance over civil cases with significant impact in the areas over which they exercise jurisdiction. The Supreme People’s Court shall have jurisdiction as the court of first instance over the following types of civil cases: (i) cases with significant impact on the whole country; and (ii) cases that the Supreme People’s Court deems it should handle itself. .

2.1.4 If an action has already commenced, the interested party seeking the interim measure may only file the application for an interim measure with the same court as the court in which the action has been commenced 7 Although the term “interested party” is repeatedly used in the CPL and the Interpretation, no precise definition exists in PRC law or guidance as to its meaning. . If the parties commence an action later at a court other than the court in which the pre-trial preservative measures were issued, this court shall transfer the pending case and, thus, the jurisdiction for the preservative measures to the court in which the parties commenced proceedings 8 Interpretation, art 160. .

2.1.5 The courts first enforcing the seizure, detainment or freezing of the property are responsible for the relevant disposal of such property. However, for claims where security is to be repaid first, or claims where issues relating to priority over the seized property involved are the subject of execution procedures within the jurisdiction of any other courts, those courts that are examining the priority claims may require the transfer of such seized property for execution, provided at least 60 days have lapsed from the date of first seizure and the courts first enforcing the seizure have not yet issued an auction announcement on the seized property, or begun the selling procedure for the seized property 9 Official Reply to Issues concerning the Disposal of Seized Property by Courts First Enforcing the Seizure and Those Executing Priority Claims, art 1. .

2.1.6 If a party to a dispute arising from: (i) foreign economic and trade activities; (ii) international transportation; or (iii) maritime activities, refers the dispute to an international arbitral institution established by the PRC 10 CPL, art 272; see paragraph 10.1.2 below.  and subsequently applies for an interim measure, the international arbitral institution must submit the application to the intermediate-level court where the respondent is domiciled or the respondent’s property is located 11 Interpretation, art 29. .

2.2.1 Under article 34 of the CPL, the parties to a dispute may, by written agreement, choose the court to hear the dispute. This could be by way of a jurisdiction clause in the written contract to which the dispute relates, or the parties can agree a stand-alone jurisdiction agreement after a dispute has arisen 12 . When specifying their preferred jurisdiction, the parties may choose any of the locations where: (i) the claimant or respondent is domiciled; (ii) the contract is performed or signed; (iii) the disputed subject matter is located; or (iv) any other place connected to the dispute.

2.2.2 Legally speaking, a jurisdiction clause or a stand-alone jurisdiction agreement does not affect the jurisdiction of the PRC courts to hear applications for interim measures 13 CPL, art 35. . However, in practice PRC courts are often reluctant to accept applications for interim measures if there is a foreign court jurisdiction clause, unless the jurisdiction clause expressly excludes the jurisdiction for interim measures.

2.3.1 In addition to the general courts known as People’s Courts, the PRC has three more specialised court systems – the military, railway transport and maritime courts. These specialised courts have exclusive jurisdiction over disputes relating to certain subject matters determined by the Provisions of the Supreme Court on Several Issues Concerning the Jurisdiction of Military Courts over Civil Cases, the Several Provisions of the Supreme Court on the Jurisdiction of the Railway Transport Courts and the PRC Special Maritime Procedure Law.

2.4.1 Where a dispute does not fall within the scope of the specialised court systems set out above and in the event that more than one court could have jurisdiction, the claimant may institute an action in any one of the available courts (as outlined in paragraph 2.1.3 above).

2.4.2 If a claimant institutes the same action in two or more courts which could have jurisdiction over the action, then the court which accepts the case first will be deemed to have jurisdiction over the action 14 Provisions, art 1. .

2.4.3 Foreign parties and parties with foreign owners or investors should take into account the fact that courts located where domestic Chinese parties are domiciled may be inclined to protect the local party. This is particularly the case outside established international business regions. This should be a practical consideration before choosing a venue, if more than one is available.

3.1.1 The two main articles that govern interim measures are articles 100 and 101 of the CPL. Interim measures under article 100 are only available during the course of litigation, i.e. after the case has been accepted by the court and before the final judgment has been given. In contrast, interim measures under article 101 are only available before an action has been instituted or before applying for arbitration. This distinction is important as different procedures and criteria will apply, depending on whether the party applies for an interim measure before or after instituting proceedings.

3.2.1 Under PRC law, there are four types of interim measure, specifically:

• measures relating to the preservation of property;
• prohibitory injunctions (orders prohibiting a party from carrying out certain acts);
• mandatory injunctions (orders requiring a party to perform certain acts); and
• measures relating to the preservation of evidence.

3.3.1 Under article 102 of the CPL, “property” is limited to property within the scope of the dispute (for example the subject matter of the contract, payment due under it, etc.)

3.3.2 Under article 103 of the CPL, property can be preserved by the court by means of seizure, impounding, freezing of accounts or any other means prescribed by the law. The court has a specialised enforcement department who will enforce the court’s order for seizure, impounding of assets etc.

3.3.3 When applying for property preservation, the applicant shall submit his application to the court along with the relevant evidential materials. An application shall set out the following items:

• the identity, delivery addresses, and contact information of the preservation applicant and the person against whom preservation is adopted;
• the claims as well as the facts and reasons they are based on;
• the amount of the property concerned or the subject matter of the dispute concerned;
• clear information on, or specific clues to, property under preservation;
• information or credit certification on the security to be provided for property preservation, or reasons why it is unnecessary to provide security; and
• other matters that need to be set out 15 Provisions, art 4. .

During litigation proceedings

3.3.4 The preservation measures under article 100 of the CPL are only available to parties to ongoing litigation. The court may order an interim measure for the preservation of property upon the application of either party or at its own discretion. This will be done where the court determines that it may be difficult to enforce a judgment due to the behaviour of a party or because not issuing an interim measure may cause damage to a party, or for some other reason.

3.3.5 Where a party has applied for an interim measure, the court may require the applicant to provide security as a pre-condition to issuing its order. Should the applicant fail to provide such security when requested by the court, the application will be dismissed.

3.3.6 Where a court accepts an application for property preservation, it shall decide whether to award an interim measure to preserve property within five days; if a security needs to be provided, it shall decide within five days upon provision of the security; if it rules to adopt preservation measures, such measures shall be implemented within five days. In urgent situations, a court must decide whether to award an interim measure to preserve property within 48 hours of accepting the application; if preservation measures are decided to be adopted, such measures shall be implemented immediately 16 Interpretation, art 166. .

Prior to litigation proceedings

3.3.7 The property preservation measure under article 101 of the CPL is only available to parties who have not yet commenced litigation or applied for arbitration. The circumstances must be such that the lawful rights and interests of the applicant would be irreparably damaged should the application for the preservation measure be refused.

3.3.8 The applicant must provide security equivalent to the value of the property to be preserved, otherwise the application will be dismissed. If the applicant fails to institute a court action or apply for arbitration within 30 days of the preservative measure being granted, the court shall revoke the preservation order ex officio.

3.3.9 Under article 101 of the CPL, a court must always issue a ruling within 48 hours of accepting an application.

3.3.10 Once a property preservation measure is issued by the court under either articles 100 or 101 of the CPL, it should be executed immediately (as set out in paragraph 9.1.2 below).

Duration

3.3.11 Once a court has issued a preservation measure, no entity may revoke it within its validity period (called the preservation period), except for the issuing court or a superior court 17 Interpretation, art 163. .

3.3.12 A preservation measure may be revoked where:

• it is deemed to have been wrongly granted;
• the applicant withdraws its application for the preservative measure;
• the litigation or the applicant’s claim fails; or
• the court deems that the preservative measure should be revoked due to other relevant circumstances 18 CPL, art 108. .

3.3.13 Furthermore, if the creditor fails to apply for enforcement within five days of the expiry of the enforcement period (which is stipulated in the judgment), the court shall revoke the preservation measure 19 Interpretation, art 171. .

Reconsideration – no appeal

3.3.14 Where a party objects to a property preservation order, it may apply for reconsideration of the order by the court 20 CPL, art 154. . An application for reconsideration must be submitted within five days of receiving the preservation order 21 CPL, art 155. . If the court considers that the property preservation was incorrectly granted, the court may modify or revoke the original order 22 Interpretation, art 167. . The application for reconsideration and subsequent process will not suspend or postpone execution of the order.

3.3.15 A property preservation ruling cannot be appealed 23 Provisions, art 13. . Therefore, any property preservation ruling that is not reconsidered or is reconsidered and subsequently affirmed will be legally effective 24 CPL, art 105. .

Substitution of property

3.3.16 According to article 104 of the CPL, if a party that is subject to a property dispute provides alternative property in substitution of that initially preserved, the court may revoke the interim preservation measure and release the previously preserved property.

3.3.17 The property provided in substitution may comprise of any asset, for example real estate, or cash etc. However, such assets must be regarded by the court as being sufficiently easy to enforce against. 25 Provisions, art 5.

3.3.18 Where the person against whom preservation is adopted has several items of property available for preservation, as long as the preservation purpose can be achieved, the court shall choose to preserve the property with minor impact on the production and operating activities of the person affected 26 Interpretation, art 152. .

3.3.19 It is recommended that, in practice, foreign parties provide property located in the PRC as a substitute for initially preserved property when aiming for its release. It is not recommended that foreign parties provide cash funds for substitution. Due to the PRC’s foreign exchange control policy, it is often difficult, or even impossible, for the courts to remit back abroad any money provided for substitution after the property preservation measure has been removed.

Compensation

3.3.20 Where an application for a property preservation measure is successful, but is subsequently found to be unjustified or erroneous, the applicant must compensate the respondent for any losses incurred 27 Provisions, art 5. .

Security

3.3.21 According to article 100 of the CPL, the court is not obliged to require security from the applicant but is entitled to do so at its own discretion.

3.3.22 Where a court orders a preservation applicant to provide security in accordance with article 100 of the CPL, the amount of the security shall not exceed 30% of the applied preservation amount; if the property involved in an application for preservation is the subject matter of a dispute, the amount of the security shall not exceed 30% of the value of the subject matter of the dispute 28 Provisions, art 5. .

3.3.23 In contrast, an applicant making use of article 101 of the CPL must provide security, otherwise the court will be obliged to dismiss the application. The security must be of equivalent value to that of the property to be preserved. Only in special circumstances may the court determine an alternative amount 29 Interpretation, art 164. . No guidance is given in the legislation on what “special circumstances” may include.

3.3.24 During the property preservation period, where the security provided by a preservation applicant is insufficient to compensate the possible losses caused to the person against whom preservation is adopted, the court may order the applicant to provide additional guarantees accordingly; if the applicant refuses to do so, the court may order release of the preservation wholly or partially 30 For further details on situations which are deemed to be urgent please refer to paragraph 6.2.3 below. .

3.3.25 The court can order the applicant to provide security by written notice 31 Interpretation, art 152. .

3.3.26 Any asset class may be suitable security and may be accepted by the court by means of seizure, detention or freezing 32 nterpretation, art 152. . In practice, the PRC courts accept various categories of property as security e.g. bank guarantee letters, letters of undertaking by insurance companies, movable assets, real estate, etc.

3.3.27 Foreign applicants should carefully consider the risks of being caught by foreign exchange controls before providing cash as security. As referred to above, it is often difficult, or even impossible, for the courts to remit the cash used as security abroad after termination of the litigation proceedings. A practical solution is to ensure that a foreign-invested enterprise (FIE) is established in the PRC with investment by the foreign applicant. Upon the authorisation and on behalf of the foreign applicant, this FIE may then receive the cash used as security once it is no longer required. A court transferring cash to an FIE would not fall within the scope of foreign exchange controls.

3.4.1 Since 1 January 2013, parties have been able to apply for prohibitory and mandatory injunctions under articles 100 and 101 of the CPL.

3.4.2 Under article 102 of the CPL, the prohibitory or mandatory injunction sought must relate to the underlying proceedings and be required in order to protect the underlying claim. Different rules apply depending on whether the parties have already commenced litigation proceedings.

During litigation proceedings

3.4.3 Prohibitory and mandatory injunctions under article 100 of the CPL are only available to the parties to ongoing litigation. The court may grant a prohibitory or mandatory injunction upon an application by either party. As set out in paragraphs 3.3.4 to 3.3.6 above, the court retains discretion to grant an interim order of this nature and may require the provision of security. In emergency situations, the court must issue a ruling within 48 hours of accepting the application.

3.4.4 The court may grant a prohibitory or mandatory injunction upon the application of either party or of its own initiative. Further, the court may also require the applicant to provide security as a condition for issuing the injunction. Should the applicant fail to do as requested, the application will be dismissed.

3.4.5 If the circumstances are urgent, the court must issue a ruling within 48 hours of accepting the application 33 CPL, art 101. . Once a prohibitory or mandatory injunction is granted by the court, it should be executed immediately.

Prior to litigation proceedings

3.4.6 Before parties have commenced litigation or arbitration, article 101 of the CPL offers the same relief as article 100 (applicable during ongoing litigation), provided that the lawful rights and interests of an interested or concerned party would otherwise be irreparably damaged should the application be refused.

3.4.7 Article 101 of the CPL does not explicitly list prohibitory and mandatory injunctions as possible interim measures, rather it more generally lists “preservative measures”. The fact that article 101 enables an applicant to apply for the same measures as article 100 has been expressly confirmed by the Interpretation 34 Legislative Affairs Commission of Standing Committee of the National People’s Congress, Interpretation on PRC Civil Procedure Law (2012), p 229. .

3.4.8 As set out in paragraphs 3.3.8 and 3.3.9 above, the applicant must provide security otherwise the application will be dismissed. The value of security required shall be decided by the court according to the specific facts of the case 35 CPL, art 105. . The applicant must also institute proceedings or apply for arbitration within 30 days of the prohibitory or mandatory injunction being granted.

3.4.9 A court must issue a ruling within 48 hours of accepting the application 36 CPL, art 108. . Once a prohibitory or mandatory injunction is granted by the court, it should be executed immediately.

Types of prohibitory and mandatory injunctions

3.4.10 Since prohibitory and mandatory injunctions are relatively new instruments under the PRC law, there are few practical examples of such injunctions being awarded. In general, such injunctions include prohibiting the respondent from disposing of the subject matter of a contract or forcing the respondent to cease committing a tortious act. 37 CPL, art 154.  In principle, restraining a party from a breach of contract could also be the subject of a prohibitory injunction.

3.4.11 In intellectual property-related litigation, prohibitory and mandatory injunctions have been available for a considerable amount of time under articles 57 and 58 of the PRC Trademark Law, articles 66 and 67 of the PRC Patent Law and articles 50 and 51 of the PRC Copyright Law. Such injunctions include attachment orders relating to the preservation of property and evidence, including cease-and-desist injunctions to stop certain acts being committed by a defendant that infringes intellectual property rights and orders to remove certain published content. It is likely that similar types of injunctions will be adopted in general civil litigation under articles 100 and 101 of the CPL.

Compensation

3.4.12 If an application for a prohibitory or mandatory injunction was successful but the injunction is subsequently determined to be unjustified or erroneously granted, the applicant shall compensate the defendant for any losses incurred 38 CPL, art 155. .

Reconsideration – no appeal

3.4.13 Where a party objects to a prohibitory or mandatory injunction, it may apply for reconsideration by the court 39 Interpretation, art 161. . The process is the same as for orders for the preservation of property, see paragraphs 3.3.14 to 3.3.16 above. As for property preservation orders, a prohibitory or mandatory injunction ruling cannot be appealed 40 Interpretation, art 163. . Therefore, any ruling that is not reconsidered or is reconsidered and subsequently affirmed will be legally effective 41 Legislative Affairs Commission of Standing Committee of the National People’s Congress, Interpretation on PRC Civil Procedure Law (2012), p 234. .

3.5.1 Parties may apply for the preservation of evidence under article 81 of the CPL. However different rules apply depending on whether litigation proceedings have already commenced.

3.5.2 According to article 81 of the CPL, the provisions of chapter 9 of the CPL on preservative measures (articles 100 et. seq.) shall also apply to the preservation of evidence.

During litigation proceedings

3.5.3 According to article 81 of the CPL, the court may issue an evidence preservation order during litigation proceedings if it decides that any evidence may be destroyed or be harder to obtain at a later time. The court may issue an evidence preservation order on the application of a party to the proceedings or on its own initiative.

Prior to litigation proceedings

3.5.4 An interested party who has not yet commenced litigation or arbitration proceedings may also apply to the court for an evidence preservation order. To grant such an application, in addition to finding that any evidence is likely to be destroyed or harder to obtain at a later time, the court must also determine that the circumstances are urgent.

3.5.5 If the applicant fails to commence court proceedings or apply for arbitration within 30 days of the evidence preservation measure being granted, the preserved evidence shall be released ex officio.

3.5.6 A court must issue a ruling within 48 hours of accepting an application for the preservation of evidence. Once a prohibitory or mandatory injunction is granted by the court, it should be executed immediately.

3.6.1 If, in an appeal against a first instance judgment, and before the court of second instance receives the appellate case, a party removes, conceals, sells or damages assets and preservative measures appear necessary, the court of first instance must take measures to prevent such conduct either on the application of the other party or ex officio. The ruling of the court of first instance on preservative measures must be reported promptly to the court of second instance 42 For example, Beijing High Court Provisions on Several Issues regarding Property Preservation, art 2. .

3.7.1 After a judgment has been handed down, a party may apply to the enforcing court to issue preservative measures. To be successful in its application, the applicant must prove that the other party is transferring assets and that the judgment might not be enforced, or that it will be difficult to enforce without obtaining the requested preservative measures 43 CPL, art 264. .

4.1.1 All the types of interim measures set out in this chapter may be granted by a court upon application by a party (or future party to proceedings). If litigation proceedings have already commenced, the court may also grant an interim measure on its own initiative. In practice, the courts rarely impose interim measures without an application being made 44 Several Provisions of the Supreme Court on Evidence in Civil Procedure, art 11. .

Form of the application

4.1.2 There are no specific requirements which an application for an interim measure must meet in the CPL. However, several provincial level courts in municipal cities have stated that applications must be in writing 45 For example the Shanghai High Court Several Provisions on Property Preservation of Shanghai Court, art 12. .

4.1.3 A practical obstacle to fast and efficient injunctive relief before Chinese courts for foreign applicants is that if an applicant appoints a lawyer or another PRC citizen as an agent ad litem, the applicant must file a power of attorney. Further, where the applicant for injunctive relief is a foreigner, stateless person, foreign enterprise or foreign organisation without a domicile within PRC territory, its power of attorney will only become effective:

• after it has been notarised by a notary public from the applicant’s own country; and
• when it has been authorised either by the PRC embassy or a consulate in that state, or has been certified under the procedures provided in the relevant treaty between the PRC and the issuing country 46 Legislative Affairs Commission of Standing Committee of the National People’s Congress, Interpretation on PRC Civil Procedure Law (2012), p 233. .

4.1.4 In addition, where a foreign applicant is a body corporate, its certificate of incorporation and a certificate evidencing its legal representative must be submitted to the court. To the extent that these documents are of foreign origin, the above notarisation and authentication procedures applicable to powers of attorney will again apply 47 CPL, art 100 and 101. . This process may take several weeks. As it is not possible to expedite this process, even in the event that an urgent injunction is sought, the above formalities constitute a major obstacle for efficient injunctive relief.

Content of the application

4.1.5 There are no specific requirements relating to the content of an application for a preservative measure in the CPL. However, several provincial level courts in municipal cities have stated that applications must include the following information 48 CPL, art 101. :

• basic information regarding the applicant and the respondent;
• a description of the preservative measure applied for;
• facts relevant to and reasons for the application; and
• when applying for the preservation of property, details of the property including its name, description, quantity (where there is more than one property in question), value, owner, location and any other relevant evidence.

4.1.6 Since prohibitory and mandatory injunctions were newly introduced by the CPL Amendment 2013, no guidance has been provided regarding such applications by any higher courts. In the meantime, it would be advisable to include the details listed in paragraph 4.1.5 in any application.

4.2.1 The CPL does not grant the respondent the automatic right to present counter-arguments and evidence before the interim measures have been granted. The court may rule on the interim measure ex parte, based on the evidence presented by the applicant only, without notice given to the respondent. If the case is not urgent, the court may, in its discretion, give notice to the respondent to present himself at the court and submit counter-arguments regarding whether it is appropriate to grant the interim measure 49 CPL, art 101. .

4.2.2 Where interim measures have been granted, the court must inform the respondent. The respondent may apply for reconsideration of the ruling as set out in paragraphs 3.3.14 to 3.3.15 above.

4.3.1 As a general rule the PRC courts prefer written, contemporaneous supporting evidence over witness statements. It is therefore advisable to support any application in this way, for example by evidencing the behaviour of the opposing party to the dispute, or by showing the court why it would be difficult to enforce a judgment or to compensate for the type of damage which would be caused to the applicant if the application was refused 50 CPL, art 101. . PRC law does not require the negative effects of not granting an interim measure on the applicant to outweigh the negative effects of imposing an interim measure on the respondent. However, in practice this may be taken into consideration by PRC courts when deciding whether to grant an interim measure. Thus, an applicant may also wish to include arguments of this nature in its submissions.

4.3.2 Often the courts are willing to grant an interim measure as long as valuable security is provided, rather than overly scrutinising the legal requirements.

5.1.1 While the CPL does not grant the respondent the automatic right to present counter-arguments and evidence before the interim measures have been granted, the respondent may present its counter-arguments and evidence by applying for reconsideration of the ruling as set out in paragraphs 3.3.14 to 3.3.15 above.

5.2.1 During litigation proceedings the court may require the applicant to provide security as a pre-condition for issuing the requested interim measure. Where an applicant applies for preservation measures before litigation has commenced, the applicant must provide security regardless of whether the court orders it.

5.2.2 Should the applicant fail to provide security in any of the above situations, the court must dismiss the application for the preservation measures. Further details regarding security are set out in paragraphs 3.3.21 to 3.3.27 above.

5.3.1 The respondent has the right to seek compensatory damages in the event of an unjustified interim measure being granted. Under article 105 of the CPL, the applicant must compensate the respondent for any losses incurred due to the granting of an interim measure which is later found to be unjustified or erroneously granted. Such damages cannot be raised as a counterclaim in the ongoing litigation, rather the respondent must commence separate court proceedings subsequently to recoup his loss.

6.1.1 If an applicant files for an interim measure before litigation has commenced, he will have a greater choice of court in which to make an application 51 CPL, art 100. . Where the applicant is granted an interim measure prior to the commencement of litigation, he is subject to a time limit of 30 days to institute an action or apply for arbitration 52 Interpretation, art 170. .

6.1.2 Applicants who have already commenced court proceedings are not subject to a corresponding time limit.

6.2.1 Applications for interim measures that are filed before instituting litigation or applying for arbitration are generally granted faster in practice than applications that are filed during court proceedings.

6.2.2 Where the applicant has not yet instituted court proceedings, once the court has accepted the application it must issue a ruling within 48 hours. Where the court decides to grant the interim measure, it must be executed immediately 53 Acceptance fees are fees payable to the court when it accepts the claim. The fees are payable for the main proceedings, not specifically for interim measures. For interim measures, application fees must additionally be paid (see paragraph 7.1.3 below). .

6.2.3 Where applicants have already instituted proceedings, the 48-hour time-limit only applies in urgent circumstances 54 Whilst there is no exact definition of an “adjuster” under the PRC law, the term usually refers to “Average Adjusters” who are experts in marine insurance and maritime law. Under the Special Procedure Law of the People’s Republic of China on Admiralty, the court will appoint an Average Adjuster to generate an adjustment report and will use such a report as the basis for deciding the contribution of liabilities between two parties to a dispute under maritime law. . No guidance is given on what circumstances are urgent when deciding on interim measures. However, article 170 of the Interpretation contains criteria for circumstances to be regarded urgent when deciding on the provisional enforcement of judgments and these criteria may be taken into account by the courts when deciding on the urgency of interim measures. The court may determine the circumstances to be urgent if it is necessary to:

• immediately stop infringement or remove an obstacle;
• immediately stop a certain act;
• obtain compensation by claiming on an insurance policy which is urgently needed to restart production or business operations;
• immediately return social insurance payments and social assistance funds; and/or
• return monies immediately where the failure to do which would severely affect the life, production and/or business operation of the respective party 55 Measures, art 11 and 20. .

General court fees

7.1.1 Under article 6 of the Measures for the Payment of Court Costs (Measures), the parties to court proceedings must pay for court costs which consist of the following:

• acceptance fees 56 Measures, art 29: no costs order will be made when the court rules on the interim application. The winning party must wait until the end of the court proceedings before recovering the cost of applying for an interim measure. ;
• application fees;
• travelling, lodging, meal expenses and compensation for absence from work for relevant witnesses of fact, payments to expert witnesses, translators or interpreters and adjuster’s costs of appearing before the courts 57 Measures, art 14(2) and 38. ; and
• expenses for copying archived materials and legal documents of the case.

These expenses are payable only after the reason for payment has arisen 58 Measures, art 38. .

7.1.2 The court costs will be borne by the losing party in the final proceedings, unless the successful party volunteers to pay the costs 59 PRC Copyright Law, art 49. .

Application fee

7.1.3 The application fee for interim measures is separate from the application fee for the main litigation under the Measures. For the time being, it is understood that application fees should also be paid for prohibitory and mandatory injunctions, despite them not being included in the scope of the current Measures.

7.1.4 For preservative measures, the application fee payable is RMB 30 for each application provided that the value of the property to be preserved does not exceed RMB 1,000 or if no quantifiable property is involved. Where the value of property exceeds RMB 1,000, the application fee will be 1% of the portion of the property which exceeds RMB 1,000 but does not exceed RMB 100,000, and 0.5% of the portion exceeding RMB 100,000. The application fee is capped at RMB 5,000.

7.1.5 The application fee for an interim measure is payable by the applicant 60 Interpretation of the Supreme Court on Certain Issues Concerning the Application of Law in the Trial of Civil Cases Involving Copyright Disputes, art 26. There are local government regulations on standard amounts of lawyers’ fees. Only an amount up to this standard can be claimed as compensation. . If the applicant is also the party that commences the main proceedings, the applicant can seek compensation of both application fees in the main proceedings from the other party 61 PRC Trademark Law, art 56. .

Compensation for professional representation

7.1.6 As a matter of principle, lawyer’s fees incurred by the winning party must be borne by the winning party itself. Under PRC law, there is generally no legal basis for the courts to award the winning party compensation for lawyer’s fees. Exceptions are detailed in paragraphs 7.1.7 to 7.1.9 below.

7.1.7 Under the PRC Copyright Law, the infringer of a copyright or copyright-related right must compensate the copyright owner for his actual losses 62 Interpretation of the Supreme Court on Certain Issues Concerning the Application of Law in the Trial of Civil Cases Involving Trademark Disputes, art 17. . Compensation will include the reasonable expenses of the innocent party – this has been interpreted to include lawyers’ fees incurred in investigating and collecting evidence in respect of the infringement, provided that the fee complies with the relevant laws and regulations 63 PRC Patent Law, art 65. .Although not explicitly stated in the law or in any publicly available court judgments, it is reasonable to conclude that the above also covers lawyer’s fees incurred in relation to copyright-related interim measures.

7.1.8 Similarly, under the PRC Trademark Law, damages for infringing a trademark will be equal to the benefits gained by the infringing party or losses suffered by the infringed party 64 Measures, art 29. . The losses suffered include reasonable expenses incurred by the infringed party in stopping the infringement which has been interpreted to cover lawyers’ fees 65 CPL, art 118. .

7.1.9 Paragraphs 7.1.7 and 7.1.8 also apply in patent infringement cases under the PRC Patent Law 66 CPL, art 108. .

7.2.1 As set out above, subject to limited exceptions, a wining party will usually pay its own costs. Where a party partially loses the case, the court will determine the amount of court costs to be borne by each party respectively 67 Interpretation, art 171. .

7.2.2 Where it is difficult for a party to pay their litigation expenses, the party may apply to the court for a postponement, reduction or waiver of the amount due 68 Interpretation, art 171. .

8.1.1 As mentioned above, if the respondent is dissatisfied or disagrees with the ruling on interim measures it may apply for reconsideration of the ruling 69 CPL, art 108, 154 and 155. . This application must be submitted within five days of receiving the order 70 CPL, art 100 and 101. . However, the enforcement of the ruling will not be suspended during the period of reconsideration. The court must consider its ruling within ten days of receiving the application for reconsideration. If the court decides that the ruling on interim measures was incorrectly granted, the court will modify or revoke the original order. Otherwise it will reject the application for reconsideration 71 Interpretation, art 154. .

8.2.1 It should be noted that there are no appellate remedies available for interim measures in the PRC. Once the court has reconsidered the ruling on interim measures and has denied this application, the ruling is considered to be effective 72 Interpretation, art 153. . Article 154 of the CPL confirms this by excluding rulings on interim measures from the list of appealable rulings.

Effective rulings

9.1.1 A ruling on interim measures falls under the scope of article 154 of the CPL. Since it is not appealable, unless a ruling on interim measures has been reconsidered and consequently revoked, it will be an effective ruling.

9.1.2 Once the ruling on interim measures is made by the court, such ruling shall be enforced immediately 73 Interpretation, art 155. .

Preservation of Property

9.1.3 Under article 103 of the CPL, a preservation ruling may be executed by seizure, impoundment, freezing of an account, or by any other means prescribed by law. After the property is preserved, the court is required immediately to issue a notification to the person whose property is preserved.

9.1.4 As a matter of principle, the court keeps the preserved property in custody. In the event it is not appropriate for the court to keep the property, the court may order the party against which the preservation is issued or other parties to retain it 74 Interpretation, art 157. . The Interpretation does not provide guidance on what ‘not appropriate’ means. Where the property which has been preserved is seasonal, fresh or perishable goods, or other items with a short shelf-life, the court may order the party subject to the order to sell such items or organise their sale, after which the proceeds will be kept by the court as preserved property 75 Interpretation, art 158. . During the preservation period, if the continued use of the preserved property would have no significant impact on its value, then the person subject to the court order may use the property 76 Interpretation, art 159. .

9.1.5 Mortgaged or pledged property can be subject to preservation, but the court will not impede the rights of the mortgagee or pledgee 77 Interpretation, art 168. . The court may take preservative measures over the proceeds to be collected from financial institutions by the party subject to the preservative measure. In this case, the court would restrict the transfer or withdrawal of such proceeds by issuing a notice to the respective financial institution 78 Most of the articles in paragraphs 9.1.4 to 9.1.6 apply specifically to property. Thus, in cases of mandatory and prohibitory injunctions where no property is involved, for example, an order to carry out or refrain from a certain type of behaviour, these rules will not apply. . If the party against which the preservation is issued has outstanding claims against third party debtors, the court may rule that the third party debtors must make payments to the court, rather than to the creditor 79 CPL, art 281. .

9.1.6 Where a measure on property preservation has been issued prior to the commencement of litigation or arbitration, and has not been revoked by the time that the enforcement procedure in the main proceedings begins, the property preservation measure will be automatically converted into seizure, detention or freezing as part of the enforcement process to ensure the court order can be enforced 80 CPL, art 281: if a foreign country has concluded a treaty with China on the enforcement of judicial decisions, and these decisions also cover interim measures, depending on the specific clause in the treaty an applicant may apply directly to the PRC court to enforce the foreign court’s decision. .

Mandatory and prohibitory injunctions

9.1.7 There are no special rules on the enforcement of mandatory and prohibitory injunctions and it is uncertain when further guidance will be issued. Until further guidance is issued by the higher courts, the rules on enforcing property preservation measures set out above in paragraphs 9.1.4 to 9.1.6 apply where possible 81 CPL, art 281. .

9.2.1 A party wanting to enforce an effective judgment or ruling of a foreign court before a court of the PRC will have to apply directly to an intermediate level court which has jurisdiction for recognition or enforcement 82 For example, article 17(3) of the Civil and Commercial Judicial Assistance Treaty between China and Kuwait provides that “… this treaty does not apply to preservation measures or provisional measures excluding those involving payment of living expenses.” . Alternatively, the foreign court may directly request that the PRC court recognises or enforces the foreign judgment or ruling 83 For details please refer to CMS Guide to Arbitration, Vol. 1, Arbitration in the People’s Republic of China. . In both cases, whether the PRC courts will allow enforcement will be determined in accordance with the provisions of the relevant international treaty concluded or acceded to by the PRC or under the principle of reciprocity 84 CIETAC, art 23(1), SCIA art 24, SHIAC, art 18. .

9.2.2 The court must consider the following criteria when deciding whether to recognise a foreign judgment or ruling and to issue an order for enforcement:

• the ruling by the foreign court must have become legally effective;
• the country in which the foreign court is located and the PRC must have concluded or acceded to the same international or bilateral treaty relating to the mutual recognition or enforcement of court judgments or rulings or have a reciprocal relationship of recognition and enforcement of court judgments or rulings (principle of reciprocity); and
• the judgment or ruling must not violate the basic principles of the laws of the PRC and its sovereignty and security or the public interest.

9.2.3 As foreign interim injunctions fall under the same definition as a foreign judgment or ruling, they would be subject to recognition and enforcement in the PRC in accordance with the above principles.

9.2.4 In practice, interim injunctions issued by foreign courts are unlikely to be recognised and enforced in the PRC. The PRC has not acceded to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters or any other similar international treaties which would require the PRC to recognise and enforce interim measures granted in other countries. In addition, there has yet to be a publicised case in which a PRC court has found that the PRC has reciprocal interests with another country.

9.2.5 Therefore, it appears that interim measures can only be recognised or enforced in countries that have bilateral treaties with the PRC relating to the recognition and enforcement of judgments. However, even where bilateral agreements are in place relating to the recognition and enforcement of judgments, many do not cover interim measures and some expressly exclude them, for example the bilateral treaties between the PRC and Kuwait and the UAE and Tunis 85 For example Arvin Lee, Deputy Head (China) and Counsel at the Singapore International Arbitration Centre, China Business Law Journal, March 2013, p 23. . Furthermore, several bilateral treaties fail to define the scope of the term “judgment” and whether it covers interim measures. The PRC courts will therefore have discretion to reject or grant the interim measure depending on their interpretation of the treaty. In practice, it is rarely possible for parties to have interim injunctions, which have been issued by foreign courts, recognised or enforced in the PRC.

10.1.1 Arbitration before international arbitral institutions seated in the PRC is a very common dispute resolution method between foreign and Chinese parties 86 CIETAC, art 21(2), SCIA art 25. . However, at present, there is no established mechanism by which international arbitral institutions can directly issue enforceable interim measures via those arbitration institutions.

10.1.2 Where a party submits an application for an interim measure to an international arbitral institution of the PRC, article 272 of the CPL requires the institution to submit the application to the Intermediate Court at the place the respondent is domiciled or the respondent’s property is located.

10.1.3 The China International Economic and Trade Arbitration Commission (CIETAC), South China International Economic and Trade Arbitration Commission (SCIA) and Shanghai International Arbitration Centre (SHIAC) Arbitration Rules require the arbitral institutions to forward applications for interim measures to a competent court designated by the applicant 87 CIETAC, art 21(2), SCIA, art 25. .

10.1.4 Before the commencement of arbitration proceedings, the parties subject to an arbitration agreement can apply directly to the competent court for interim measures. The wording of the law leaves it open whether such right to apply directly to a court for interim measures before the commencement of arbitration proceedings requires the arbitration to be seated in the PRC. Article 101 of the CPL refers to ‘arbitration’ which could be interpreted as referring to domestic and/or foreign arbitration. However, the strong opinion of scholars and practitioners is that article 101 is limited to arbitrations with their seat in the PRC and that the court would reject an application for pre-trial interim measures in disputes sat outside the PRC 88 The PRC has declared a reservation to the New York Convention and, thus, only acknowledges arbitration awards issued in another contracting state of the New York Convention, and only on commercial matters. For further details please refer to CMS Guide to Arbitration, Vol. 1, Arbitration in the People’s Republic of China, paras 11.2.4 and 11.2.5. . Certain PRC Maritime Courts are more generous and accept applications for interim measures under article 101 of the CPL before commencement of foreign arbitration proceedings. After the commencement of arbitration, the parties shall file a request for interim measures with the arbitration institution which will forward it to the court.

10.2.1 CIETAC and SCIA may, in accordance with their respective arbitration rules, issue their own interim measures upon the request of a party 89 CIETAC, art 21(2), SCIA art 25. . The arbitral tribunal also has the right to require the party applying for the interim measures to provide appropriate security 90 CIETAC, art 21(2), SCIA, art 25. . However, the CPL does not yet recognise the authority of the CIETAC and SCIA. Therefore, no PRC court will enforce interim measures issued by these organisations, which makes them of very limited use in practice.

10.3.1 Interim measures issued by arbitration tribunals with seats abroad are not recognised or enforced in the PRC. The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) governs the recognition and enforcement of foreign arbitral awards in the PRC 91 The PRC has declared a reservation to the New York Convention and, thus, only acknowledges arbitration awards issued in another contracting state of the New York Convention, and only on commercial matters. For further details please refer to CMS Guide to Arbitration, Vol. 1, Arbitration in the People’s Republic of China, paras 11.2.4 and 11.2.5. . However, it does not apply to the enforcement of interim measures as interim measures decisions do not qualify as awards enforceable under the New York Convention. Furthermore, the CPL fails to define the term “award” so it is not clear if an interim measure decision qualifies as an award under the CPL either.

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