What is Property Preservation under Civil Litigation Procedure in China?
In China’s civil and commercial dispute resolution process, Property Preservation is a crucial measure to prevent the malicious transfer of property to evade debts. It acts as a vital protective barrier during litigation or arbitration, exerting pressure on the defendant and compelling it to fulfill its debt obligations. This article offers a clear analysis of its value, scope, and common misconceptions.
1. Why is Property Preservation Necessary?
A primary concern when litigating or arbitrating in China is winning the case only to discover that the opposing party has surreptitiously dissipated or transferred key assets essential for enforcement. The core function of Property Preservation is precisely to mitigate this risk. It allows a party to apply for property preservation to the court when filing the case, seeking preliminary restrictive measures against the respondent’s assets.
The core value of Property Preservation：
- Preventing Asset Transfer: Measures such as freezing bank accounts, sealing real estate, or impounding vehicles effectively prevent the opposing party from transferring, concealing, or selling off assets.
- Securing Future Enforcement: It preemptively identifies and secures assets that can satisfy a future judgment, thereby avoiding the predicament of a “hollow judgment”–winning the case but being unable to collect.
- Applying Performance Pressure: Preservation measures can significantly disrupt the respondent’s business operations, incentivizing them to proactively seek settlement or fulfill their obligations.
- Facilitating Dispute Resolution: It creates a more advantageous foundation for settlement negotiations, mediation, or other Alternative Dispute Resolution (ADR) mechanisms.
2. What Assets Can Be Preserved?
According to the relevant provisions of the Civil Procedure Law of the People’s Republic of China (CPL, 《中华人民共和国民事诉讼法》) and its Judicial Interpretations, the primary categories of preservable assets include:
- Bank Accounts:Freezing deposits is the most common measure, can directly restrict the transfer of deposits in the bank account.
- Real Estate: Propertiesand land use rights can be sealed, prohibiting sales, mortgages.
- Stocks, Bonds, Fund Units:Can be frozen through relevant registration and clearing institutions, restricting transactions.
- Vehicles, Vessels, Aircraft:Can be sealed and restricted for sales and mortgages through the relevant traffic control, vessel, or aircraft registration authorities.
- Equity/Investment Interests:Shares in limited liability companies, partnership interests, etc., can be frozen, restricting transfer and, depending on the scope of the application and the court’s ruling, the exercise of shareholder rights.
- Machinery, Equipment, Raw Materials, Inventory/Goods:The court may move the above items to a designated place and seal them up, restricting the transfer of anyone.
- Intellectual Property Rights:Proprietary rights within patents, trademarks, and copyrights can be frozen, prohibiting assignment or licensing.
- Cash Value of Insurance Policies (if enforceable):The cash surrender value of policies that have such value and are legally subject to compulsory enforcement can be frozen.
- Accounts Receivable:The court can notify the account debtor (the third party owing money to the respondent) to perform its payment obligation directly to the court.
- Rental Income:The court can order tenants to pay rent directly into a court-designated account.
- Other Property-Value Rights:Any rights possessing transferability and monetary value, such as future revenue arising under specific contracts, may theoretically be subject to preservation (subject to case-specific analysis and court approval).
3. What Should We Provide for Property Preservation
（1）Application letter for property preservation
（2）Property Clues:
- Bank Account: we need to provide the court with the bank account number of the respondentwhen applying for preservation. If you are unaware of the bank account number, you may consult with us for assistance in checking.
- Real Estate:the detailed address of the real estate is required to be provided
- Machinery, Equipment, Raw Materials, Inventory/Goods:we need to provide the location, product name, quantity, model, brand or other related information.
4. Liability for Wrongful Preservation
Property Preservation is a sharp “double-edged sword.” If applied for improperly or excessively, the applicant bears corresponding liability for damages. This is why courts usually require applicants to provide sufficient security when applying for property preservation. The form of security can be cash security (usually 30% of the amount preserved) or a guarantee letter a qualified institution (such as an insurance company or guarantee company)
The primary scenarios triggering liability include:
- Compensation after losing the case:If the applicant ultimately does not prevail on the claim for which preservation was sought, they are generally liable to compensate the respondent for all losses caused by the wrongful preservation. For example: Company A wrongfully freezes Company B’s bank account, causing B to lose a crucial business opportunity. A must compensate B for lost profits and potential reputational damage.
- Excessive Preservation:Even if the applicant partially wins the case, if the value of assets preserved significantly exceeded the amount ultimately awarded by the court (e.g., freezing ¥10 million but only winning ¥2 million), the applicant is liable for damages caused by the excessive portion of the preservation.
- Failure to Timely Lift Preservation: Once the grounds for preservation cease to exist (e.g., the claim is dismissed, the parties settle and the settlement is performed), the applicant has an obligation to promptly apply to the court to lift the preservation measures. Failure to do so resulting in additional losses renders the applicant liable for those expanded damages.
- Scope of Compensable Losses: Liability may cover direct property damage (e.g., operational losses due to wrongful frozen accounts, increased financing costs, losses from forced asset sales at depressed prices), lost profits (expectation damages), and, in extreme cases, indirect losses like reputational harm.
Conclusion
Property Preservation is a potent procedural tool within the Chinese legal system, significantly reducing the risk of “enforcement difficulties”. Given its high degree of technicality and the potential for significant liability consequences, it is strongly advisable to seek legal advice from qualified Chinese lawyer before applying for Property Preservation.
A experienced lawyer can help you:
- Investigate the assets of the defendant.
- Analyze the chance of the case and the risk of property preservation
- Gather necessary evidence.
- Prepare and arrange sufficient and appropriate security.
- Strategically navigate the application process to maximize the protective benefit.
- Minimize the legal risks associated with wrongful or excessive preservation.
Through careful planning and expert guidance, this “double-edged sword” can be effectively wielded as a robust shield to safeguard your legitimate rights and interests in China.
Saway Wang
Email: sawaywang@billionslawyer.com
Tel/Whatsapp: +86 18017682422
How New Civil Procedure Law Will Transform Foreign Litigation
Exploring the revisions to China’s Civil Procedure Law, effective from January 1, 2024, reveals a notable addition: a new section dedicated to foreign-related civil litigation procedures. This update expands the jurisdiction of Chinese courts over such cases and introduces key provisions like parallel proceedings. It also simplifies procedures for foreign-related service and enhances judicial assistance systems. Additionally, it outlines procedures for extraterritorial investigation and evidence collection and refines rules for recognizing and enforcing foreign court judgments. This article provides insight into the implications these changes hold for foreigners and foreign companies.
1. Extension of the jurisdiction of Chinese courts in foreign-related cases
Where the following circumstances exist, Chinese courts may have jurisdiction
(1) Six selections of jurisdictions
Chinese courts can extend their jurisdiction to foreign-related cases under certain circumstances. If a civil litigation (except for identity relations litigation) involves a defendant (i.e., a foreign individual or company) without domicile in China, jurisdiction may be established in the following locations:
(i) where the contract was made;
(ii) where it was executed;
(iii) where the subject matter of the dispute is situated;
(iv) where property may be seized;
(v) where the wrongful act occurred;
(vi) where the representative organization is domiciled.
(2) The parties have mutually agreed in writing to select the jurisdiction of Chinese courts.
(3) Where there are other appropriate connections
In a civil jurisdictional dispute involving Intellectual Property Bridge No. 1 LLC, a Japanese company, and Huawei Technologies Co., Ltd. among others, the Japanese company contested the jurisdiction of the lawsuit initiated by Huawei. They argued that the dispute, centered around a license for a standard-essential patent, was essentially contractual in nature. However, as the Japanese company did not have domicile in China, they maintained that the jurisdictional connections pertaining to the contractual dispute were not relevant to this case. Consequently, they urged the Chinese court to dismiss the lawsuit.
In response to the jurisdictional objections, the Supreme Court introduced the nuanced concept of the “principle of appropriate connection.” It determined that Dongguan City had a relevant link to the dispute, justifying its role as the territorial jurisdictional hub. Furthermore, under relevant regulations, the First Instance Court is empowered to handle inter-regional jurisdiction in initial patent civil cases within Guangdong Province, excluding Shenzhen City. Therefore, the court’s exercise of jurisdiction is considered appropriate and free from any wrongdoing.
(4) The parties did not raise objections to jurisdiction and instead responded to the defense or lodged counterclaims.
For instance, in a scenario where a Chinese company entered a sales agreement with a Canadian counterpart, specifying the jurisdiction of the People’s Court in Shanghai, subsequent legal action was taken by the Chinese company against the Canadian entity in the People’s Court of Beijing. Despite this, the Canadian company opted not to contest jurisdiction but rather filed a defense statement with the Beijing Municipal People’s Court. In light of the recently amended law, this action by the Canadian party was construed as an implicit acknowledgment of the jurisdiction of the Beijing Municipal People’s Court. Consequently, the court was deemed rightfully vested with jurisdiction over the case.
2. Additional provisions on parallel proceedings
(1) Parallel proceedings in general
In the same dispute between parties, if one party sues in a foreign court and the other party sues in a Chinese People’s Court; or if one party sues in both a foreign court and a Chinese court, the Chinese court with jurisdiction may still accept the case.For example, a Chinese company and a U.S. company signed a supply contract, the contract did not explicitly agree on the competent court. The Chinese company sues the American company in a Chinese court, and at the same time, the American company sues the Chinese company in a U.S. court. According to the newly amended law, if the Chinese court has jurisdiction under the Civil Procedure Law, it can still accept the Chinese company’s lawsuit even if the American company has also filed a lawsuit in the American court.
(2) Parallel Litigation under Exclusive Jurisdiction Agreement
If the parties enter into an exclusive jurisdiction agreement to choose a foreign court jurisdiction, and the agreement does not violate the provisions of this law on exclusive jurisdiction, does not involve the People’s Republic of China’s sovereignty, security or social public interests, the Chinese court may rule that it is not admissible; if it has been admissible, the Chinese court may dismiss the lawsuit.For example, a Chinese company signed a sales contract with a French company and concluded an exclusive jurisdiction agreement stipulating that only the French court had jurisdiction; if the agreement did not violate the exclusive jurisdiction and did not involve China’s sovereignty, security or social public interests, then even if the parties filed a lawsuit against the Chinese court, the court could rule that the lawsuit was inadmissible or dismissed.
3. Revisions to Acceptance Subjects and Modes of Foreign-related Service
(1) Litigation Representatives
(2) Branches
When the recipient is a foreign legal entity (company), documents can be served on its representative office, branch, or appointed business agent in China authorized to accept service. There is no requirement to demonstrate the branch’s authorization to accept service.
(3) Sole Proprietorship
If a company has established a sole proprietorship in China, legal documents can be served directly to the sole proprietorship without a separate authorization from the foreign shareholder.
(4) Foreigners or Stateless Persons
Should a foreigner or stateless individual serve as the legal representative or key decision-maker of a company or organization in China and be a co-defendant in a commercial dispute, serving documents on the company or organization is permissible.
(5) Foreign Legal Entity or Other Organization
When dealing with a foreign legal entity or organization, if its legal representative or primary decision-maker is situated in China, serving documents upon them is authorized.
(6) Electronic Means
Electronic service now extends beyond conventional methods like fax or email. What matters is ensuring acknowledgment of receipt by the recipient, as long as it complies with the recipient’s country’s laws.
(7) Flexible Alternatives
Agreed-upon alternative methods of service are permissible, provided they adhere to the legal framework of the recipient’s country. For instance, if a trusted friend or relative delivers the document on behalf of the recipient with their consent, and without violating local laws, it is deemed acceptable.
(8) Efficient Service through Public Announcement
In cases where traditional methods are impractical, service may be conducted through public notice. The duration for such service has been shortened to 60 days, after which service is considered effective from the date of publication.
4. Expanding Extraterritorial Evidence Gathering Methods
(1) China’s Reach for Evidence in Foreign Territories under Revised Civil Procedure Law
When evidence is located abroad, the Chinese court has the authority to obtain and collect it based on provisions outlined in international treaties between the People’s Republic of China and the respective foreign State. This also applies to treaties where China is a signatory. Alternatively, evidence can be procured through diplomatic channels.
For instance, if an international treaty exists between China and the foreign state, such as the Hague Convention on Evidence, the people’s court may seek assistance through China’s foreign diplomatic service to request the State where the evidence is located to assist in the investigation and collection process.
(2) Three Varieties of Extraterritorial Evidence Gathering Methods (Subject to Legal Compliance in the Respective Jurisdiction)
A. In cases where the party or witness holds Chinese nationality, the Chinese embassy or consulate in their residing country may be tasked with conducting depositions on their behalf.
Embassy or consulate personnel, acting under the authorization of the people’s court, can coordinate with the involved parties or witnesses, schedule the deposition proceedings, and forward the collected evidence to the court.
B. Upon mutual agreement, the People’s Court is empowered to gather evidence through instant messaging platforms.
For instance, if a critical witness resides abroad and is unable to attend court proceedings in person, both parties’ consent allows for remote testimony via a court-arranged video conference. During this session, the witness can provide responses to queries from lawyers and the judge. Similarly, electronic evidence such as email exchanges or WeChat conversations can be shared and presented in court hearings through instant messaging tools, subject to the consent of both parties, to substantiate relevant case facts.
C. Upon mutual agreement of both parties, the People’s Court is authorized to consider alternative approaches for gathering evidence.
The amendment to the Civil Procedure Law concerning foreign-related dispute resolution procedures not only marks a comprehensive overhaul of many foundational aspects of foreign-related legislation but also incorporates numerous subtle and ingenious system designs. This not only addresses the immediate needs of foreign-related judicial practice but also reflects the unparalleled wisdom and ingenuity of the legislators.It stands as a significant response to the evolving landscape of the times and represents an essential requirement for the full realization of China’s state governance strategy governed by the rule of law, the advancement of reforms, and the expansion of international engagement. This amendment embodies a profound adaptation to the evolving dynamics of our era and stands as an imperative for the comprehensive implementation of the rule of law strategy, the deepening of reforms, and the holistic expansion of international outreach.
Email: sawaywang@billionslawyer.com
Tel/Whatsapp: +86 18017682422
Find Out How Much a Lawsuit Will Cost in China ?
In most expats’ minds, going to court in China is a daunting prospect that costs a fortune. The actual fees, however, are far more transparent than you thought. Read on to understand how much it will exactly cost for filing a lawsuit in China.
1. Chinese Lawyer Fees Vs.Lawyer Fees in Europe and American
In most European and American countries, lawyer’s fees are charged on an hourly basis. As a result, this type of billing can lead to a lack of clarity in the total price, as the working hours always vary based on the workload, and extra work may be required when unforeseeable circumstances arise during the litigation. Moreover, the hourly rate is so high that the final lawyer’s fee will likely be higher than budgeted.
This is unlikely to happen in China where most local Chinese law firms charge fees mainly based on the claim amount rather than an hourly rate. As a matter of fact, most local governments will issue guiding prices for lawyer’s fees. In the case of Shanghai, the guiding standards of lawyer’s fees are as follows:
For cases involving property relations, the lawyer’s fees for one instance may be charged at a cumulative rate in segments according to the claim amount:
| Claim Amount | Rates for One Instance |
| For the portion of the claim amount up to and including CNY 100,000 | 8% to 12% of the total claim amount. However, if the claim amount is less than CNY 3,000, the lawyer’s fee will be at least CNY 3,000. |
| For the portion of the claim amount over CNY 100,000 up to and including CNY 1 million. | 5% to 7% for the portion of the claim amount |
| For the portion of the claim amount over CNY 1 million up to and including CNY 10 million. | 3% to 5% for the portion of the claim amount |
| For the portion of the claim amount over CNY 10 million up to and including CNY 100 million. | 1% to 3% for the portion of the claim amount |
| For the portion of the claim amount over CNY 100 million | 0.5% to 1% for the portion of the claim amount |
Here’s an example: Let’s say your landlord didn’t return your deposit on your really, really nice apartment, and the claim amount is 400,000 rmb. The lawyer’s fee for one instance would be calculated like this:
The first 100.000 Rmb are charged at 8%, that’s 8.000 Rmb.
The next 300.000 Rmb are charged at 5%, that’s 15.000 Rmb
Comes to a total of 23.000 Rmb.
However, those fees aren’t written in stone and a law firm might negotiate a different fee structure for cases with a high working load, for complex cases, or even based on the financial status of the client, the risks and liabilities that the lawyer and law firm might take, and the lawyer’s social reputation and working competence.
2. Lawyer’s Fees for Criminal Cases
Criminal cases usually don’t have a claim amount, so the calculation works differently. It goes by stages, and it’s a lot more up to the negotiation between you and the lawyer what fees you’ll settle on.
| For the criminal investigation stage: | 1,000-10,000 Rmb for each case |
| For the prosecution stage: | 2,000-10,000 Rmb for each case |
| The first instance stage: | 3,000-30,000 Rmb for each case |
Some lawyers may also choose to charge you by time. The range is huge and you might be quoted anything between 200 rmb and 3,000 rmb per hour. Better negotiate a fixed fee for each stage.
Lawyers may also have their own rates, which may be higher or lower than the above standards. But the above standard may also be used as a reference.
3. How Much are Court Fees?
In the same manner that lawyer fees are subject to the guiding rates, court fees vary depending on the specific cases, the standard of court fees in China is as follows:
For the cases where the claim concerns property relations, the court fee will be charged at a cumulative rate in segments according to the claim amount as follows:
| Claim Amount | Rates for One Instance |
| For the portion exceeding RMB 10,000 to CNY 100,000 | 2.5% of the portion |
| For the portion exceeding RMB 100,000 to CNY 200,000 | 2% of the portion |
| For the portion exceeding RMB 200,000 to CNY 500,000 | 1.5% of the portion |
| For the portion exceeding RMB 500,000 to CNY 1,000,000 | 1% of the portion |
| For the portion exceeding RMB 1,000,000 to CNY 2,000,000 | 0.9% of the portion |
| For the portion exceeding RMB 2,000,000 to CNY 5,000,000 | 0.8% of the portion |
| For the portion exceeding RMB 5,000,000 to CNY 10,000,000 | 0.7% of the portion |
| For the portion exceeding RMB 10,000,000 to CNY 20,000,000 | 0.6% of the portion |
| For the portion exceeding RMB 20,000,000 | 0.5% of the portion |
There are a few exceptions, divorce cases can be slightly more expensive – in the 50-300rmb range, with a 0.5% fee of the value of assets you are fighting over that exceed 200.000rmb.
Cases related to infringement of name, portrait, reputation, honor, or any other right related to personality, the court fee will be 100-500rmb, and 0.5 %- 1% of the compensation amount.
Luckily, there’s an online calculator that helps you calculate the court fees and execution fees. right here
4. The Fee for Preservation
Property preservation means if you sue someone, and you want to make sure that his property cannot transfer during the litigation, then you may apply for property preservation so that the judge will frozen the property. The fees there fore are in the xx to xx Rmb.
Evidence preservation is that when you sue someone, and the defendant has some evidence that is important for the case, but you are afraid that he will destroy the evidence. Then you can apply for evidence preservation, so that the judge will take some measures to avoid him destroying the evidence. The fees there fore are in the range.
| Claim Amount | Rates for One Instance |
| Not more than RMB 1,000 or no property amount is involved | RMB 30 for each case |
| For the portion of more than RMB 1,000 but less than RMB 100,000 | 1% of the portion |
| For the portion of more than RMB 100,000 | 0.5% of the portion (however, the total preservation fee will be capped at RMB 5,000) |
Certainly, you can also use the online calculator (http://www.zjcourt.gov.cn/zjzy/web/fee) as mentioned above to calculate the preservation fee.
5. The Fee for a Guarantee Letter
If you are applying for property preservation, the court will require you to provide a guarantee. The guarantee can be in the form of cash equal to 30% of the value of the preserved property, other property of the same value as the preserved property, or a guarantee letter issued by an insurance company.
Generally, the fee for a guarantee letter is around 0.2% of the value of the preserved property. However, the standard of guarantee letter fees may vary for different insurance companies.
6. Notarization Fee
Pursuant to Chinese law, any documents created abroad need to be notarized and certified. For instance, if you engage a Chinese lawyer while you are not in China, you have to sign the power of attorney outside of China. Then this power of attorney needs to be notarized in the notary office and certificated in the Consulate of China in the country where you sign it. As another example, if you need to provide the payment voucher as evidence in the litigation which is issued by an overseas bank, you have to make the payment voucher notarized and certificated, otherwise, the court may not recognize the validity of this evidence.
In this condition, you will have to pay for notarization fee. The notarization fee will depend on the standard of the country where you notarize the documents.
7. Translation Fee
When the evidence is in a foreign language, it will have to be translated when provided to the court. There are two translation agencies recognized by the Shanghai court for the translation of foreign litigation documents, namely Shanghai SISU Translation Service Co., Ltd and Shanghai Interpreters’ Association. You may visit their official websites for more information and quotations.
8. Do I Need to Pay an Execution Fee When Applying for Execution?
No. You don’t.
Although, if the plaintiff applies for execution after the judgment takes effect, the execution fee has to be paid to the court. However, in practice, the plaintiff does not have to pay for the execution fee in advance. The court will charge the execution fee from the executed properties of the defendant.
As a whole, it doesn’t take much to engage in a lawsuit in China — or, at least, not as much as you thought. Going to court might be a good choice for you to solve disputes and receive proper recompense.
Saway Wang
Email: sawaywang@billionslawyer.com
Tel/Whatsapp: +86 18017682422
