I have been working with colleagues at Renmin University over the past two months on an experts report concerning force majeure in contractual disputes related to the coronavirus outbreak and related government control and prevention measures. We are very pleased that the Supreme People’s Court requested a significant section of our report from one of my co-authors to feed into a guiding opinion addressing this issue, which was officially released today. The experts report is a part of a wider project promoting UK and China cooperation on Commercial Dispute Resolution under the Foreign and Commonwealth Office’s Prosperity Fund China Business Environment Programme.
I have translated the Supreme People’s Court Guiding Opinion below. All translation errors and omissions are my own!
Supreme People’s Court
Notice on “Guiding Opinion on the Proper Handling of Civil Cases Involving the Novel Coronavirus Outbreak in Accordance with the Law”
Provinces, autonomous regions, municipalities directly under the Central Government, the People’s Liberation Army Military Court, Xinjiang Uygur Autonomous Region High People’s Court Production and Construction Corps Branch:
The Guiding Opinion of the Supreme People’s Court on the Proper Handling of Civil Cases Involving the Novel Coronavirus Outbreak in Accordance with the Law is now issued to you. Please implement it carefully.
Supreme People’s Court, 16 April 2020
Supreme People’s Court
Notice on “The Guiding Opinion on the Proper Handling of Civil Cases Involving the Novel Coronavirus Outbreak in Accordance with the Law”
To carry out the spirit of the Party Central Committee’s conference on the overall planning and promotion of the prevention and control of the novel coronavirus epidemic and economic and social development, civil cases involving the novel coronavirus epidemic shall be properly handled in accordance with the law, while safeguarding the legitimate rights and interests of the people, safeguarding social and economic order, safeguarding social justice, and in accordance with the relevant provisions of the law and judicial interpretation, combined with practical experience from trial/adjudication work, (the SPC) put forward the following guidance.
1. Fully bring into play the role of judicial services safeguards. People’s courts at all levels must fully understand the significant impact of the epidemic on the economy and society, based on the overall plan to promote epidemic prevention and control and economic and social development; fully bring into play the role of judicial regulation of social relations; actively participate in managing the sources of litigation; putting alternative dispute resolution mechanism at the forefront; prioritising mediation and actively guiding parties to negotiate settlements, share risks, and overcome difficulties; and effectively resolve disputes at their budding stages and at the grassroots level. In the trial of civil cases involving the epidemic, according to the actual circumstances of the case, the law should be applied accurately, the interests of all parties should be balanced, the legitimate rights and interests of the parties should be protected, the interest of economic and social development should be served, and a unified legal and social effect should be realised.
2. Accurate application of force majeure rules in accordance with the law. When the people’s courts hear civil cases involving epidemic situations, they shall accurately apply the specific provisions of force majeure and strictly grasp the applicable conditions. For civil disputes directly affected by the epidemic situation or the epidemic prevention and control measures that meet the statutory requirements of force majeure, Article 180 of the General Rules of Civil Law of the People’s Republic of China and Article 117 and Article 118 of the Contract Law of the People’s Republic of China and related provisions shall apply. Where there are other laws and administrative regulations, such provisions shall be followed. The party claiming partial or total exemption from liability due to force majeure shall bear the burden of proof for establishing that force majeure directly resulted in the partial or total non-performance of its contractual obligations.
3. Properly handle cases of contractual disputes in accordance with the law. Unless the parties agree otherwise, when applying the law in contractual disputes directly affected by the epidemic situation or epidemic prevention and control measures, (the people’s court) should comprehensively consider the impact of the epidemic situation on different regions, different industries, and different cases to accurately grasp the causal relationship and the degree of causality between the epidemic situation or epidemic prevention and control measures and the party’s failure to perform the contract. These cases shall be handled in accordance with the following rules:
(1) If the epidemic situation or the epidemic prevention and control measures directly resulted in the party’s failure to perform the contract, force majeure provisions shall be applied in accordance with the law. The liability (of the non-performing party) shall be partially or completely exempted according to the degree of impact of the epidemic situation or epidemic prevention and control measures. If the failure to perform the contract or the extension of losses was “imputable” to the parties, they shall bear corresponding liabilities in accordance with the law. If the contractual obligations cannot be fulfilled due to the epidemic situation or epidemic prevention and control measures and the parties claim that they have fulfilled their obligation of timely notification (in relation to force majeure), they shall bear the corresponding burden of proof.
(2) If the epidemic situation or epidemic prevention and control measures only cause difficulties in performing the contract, the parties may renegotiate. If the parties can continue to perform the contract, the people’s court shall effectively strengthen its mediation work and actively guide the parties to continue to perform. If the parties request the termination of the contract based on the difficulty of performance, the people’s court shall not support it. Where continued performance of the contract is evidently unfair to one party, and if that party requests a change to the contract performance period, method of performance, price amount, etc., the people’s court shall decide whether to support the request in light of the actual circumstances of the case. If, after the contract is modified in accordance with the law and the parties still claim partial or full exemption from liability for non-performance, the people’s court will not support such a claim. If the purpose of the contract cannot be realised due to the epidemic situation or epidemic prevention and control measures and the parties request the termination of the contract, the people’s court shall support such a request.
(3) If a party has received government subsidies, tax relief or other types of funding and debt relief due to the epidemic situation or epidemic prevention and control measures, the people’s court may take this factor into account for determining the factual situation of whether the contract can continue to be performed.
4. Handle labour dispute cases in accordance with the law. Strengthen coordination with the government and relevant departments and support employers to adopt flexible work methods in accordance with laws and regulations during the period of epidemic prevention and control. When hearing labour dispute cases involving the epidemic situation, the provisions of Article 26 of the Labor Law of the People’s Republic of China and Article 40 of the Labor Contract Law of the People’s Republic of China shall be accurately applied. If an employer unilaterally dissolves the employment relationship on the basis that the worker is a patient diagnosed with the novel coronavirus, a patient suspected of having the novel coronavirus, an asymptomatic infected person, a person who has been quarantined in accordance with the law or a worker from an area with a relatively severe epidemic situation, the People’s Court shall not support the dissolution. Regarding the handling of relevant labour dispute cases, the policy documents formulated by the relevant administrative department of the State Council and the provincial people’s government to properly handle labour relations during the epidemic prevention and control period shall be properly considered and referenced.
5. Punitive damages shall be applied in accordance with the law. Where a trader deals with masks, goggles, protective clothing, disinfectants and other anti-epidemic items, as well as foods and medicines, in a situation covered by Article 55 of the Consumer Rights Protection Law of the People’s Republic of China, Article 148 (2) of the Food Safety Law of the People’s Republic of China, Article 144 (3) of the Drug Administration Law of the People’s Republic of China and Article 15 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Adjudication of Food and Drug Disputes, and the consumer claims for punitive damages in accordance with the law, the people’s shall support such a claim.
6. The statute of limitations shall be suspended in accordance with the law. If, within the last six months of the limitation period, a right holder requests the suspension of the limitation period in accordance with Article 194(1) of the General Rules of the Civil Law of the People’s Republic of China due to the epidemic situation or epidemic prevention and control measures, the people’s court shall support such a request.
7. The litigation period shall be postponed in accordance with the law. If the parties apply for a period of extension in accordance with Article 83 of the Civil Procedure Law of the People’s Republic of China where the epidemic situation or epidemic prevention and control measures delayed the litigation period as specified by the law or the people’s court, the people’s court shall comprehensively consider whether or not to grant the application in light of the epidemic situation and the evidence provided by the party and protect the litigation rights of the parties in accordance with the law. If the party concerned is a patient diagnosed with the novel coronavirus, a patient suspected of having the novel coronavirus, an asymptomatic infected person, or in close contact with a relevant person, the court shall grant the application for extension of the litigation period in accordance with this Article upon the expiry of the said period.
8. Strengthen judicial assistance. If a party is in financial difficulties due to the impact of the epidemic and applies for the exemption, reduction or suspension of litigation costs, the people’s court shall promptly examine the application and make a corresponding decision in accordance with the law. Litigating parties who require judicial assistance shall be provided with relief measures based on their applications in a timely manner.
9. Be flexible in adopting protective measures in litigation. For enterprises affected by the epidemic, especially small and medium enterprises and individual industrial and commercial households, (the people’s court) can adopt flexible measures of property preservation or property value preservation in litigation to effectively reduce the burden on enterprises and help enterprises resume work and production.
10. Ensure the uniform application of the law. People’s courts at all levels shall strengthen the guidance and supervision of trial work in civil cases involving epidemic situations, fully bring into play the role of professional (specialised) judges’ meetings and adjudication committees, and promptly submit questions on the application of laws in major, difficult, and complex cases to the trial committee for discussion and decision. The people’s court at a higher level shall strengthen guidance to people’s courts at a lower level by issuing typical cases, etc., to ensure the uniformity of adjudication standard.
