In this comprehensive guide, Attorney Wang Ao from the Shenzhen office of Landing Law Offices explores why foreign plaintiffs should consider filing lawsuits in China first. This article also outlines strategies for winning cross-border lawsuits, particularly in light of the newly amended Civil Procedure Law of the People’s Republic of China (effective January 1, 2024), which introduces significant changes to cross-border litigation.

Abby Wang, Partner at Landing Law Offices and ranked first in Greater China’s legal practice area by the Chamber of Commerce, has represented over 100 foreign plaintiffs in China over the past three years.

Key Changes in Chinese Law Impacting Cross-Border Litigation

As of January 1, 2024, the Civil Procedure Law of China was amended to address the complexities of foreign-related civil litigation. Chapter 4 of the law, titled “Special Provisions on Foreign-Related Civil Litigation,” provides clear guidelines on how foreign plaintiffs should approach cross-border lawsuits.

Article 280 of the amended law deals with concurrent litigation, specifying that if one party sues in a foreign court while the other party files in China, the Chinese court may accept the case under certain circumstances. However, if the parties have agreed to an exclusive jurisdiction agreement that designates a foreign court and this agreement does not conflict with China’s legal interests, the Chinese court may decline to accept the case.

For foreign parties involved in disputes with Chinese business counterparts, the question often arises: should they file a lawsuit in China first or pursue litigation in a foreign jurisdiction? This article presents the case for filing in China first, especially under the parallel litigation mechanism.

When Should Foreign Plaintiffs File Lawsuits in China?

Foreign plaintiffs should consider filing lawsuits in China first if:

1. The Chinese party has attachable assets in China.
2. Enforcement of a judgment is needed in China (whether from a Chinese or foreign court).

These strategic considerations are explored in detail below.

1. Preserving and Freezing Assets in China

One of the primary benefits of suing in China first is the ability to preserve assets. As a plaintiff in a Chinese court, foreign parties can apply for asset preservation orders, including the freezing of assets. Chinese courts will not assist foreign courts or arbitration bodies in freezing assets of Chinese parties. Therefore, if a foreign plaintiff only initiates litigation in a foreign jurisdiction, they may not be able to freeze the defendant’s assets in China, which can undermine their ability to enforce a judgment.

Preserving assets in China serves two main purposes:

• Creating pressure for settlement.
• Securing enforceable assets to ensure the judgment has practical value.

When foreign plaintiffs obtain a judgment from a Chinese court, it can be directly enforced against the defendant’s assets within China, without requiring recognition from foreign courts. Conversely, foreign judgments must be recognized by Chinese courts before they can be enforced within China—a process that can be time-consuming and uncertain.

2. The Importance of Filing Early in China to Avoid Delays

Another key consideration is timing. Under the 2024 Civil Procedure Law, foreign plaintiffs should file their lawsuits in China as early as possible to avoid delays caused by parallel lawsuits filed abroad. If a Chinese defendant files a lawsuit in a foreign jurisdiction first, they may request the Chinese court to suspend proceedings, which can delay the case.

According to Article 281 of the Civil Procedure Law (2024), if a foreign court has already accepted the case, the Chinese court may suspend proceedings. However, this suspension will not occur in cases where:

• The parties have agreed to submit the case to Chinese courts.
• It is clearly more convenient for the Chinese court to hear the case.

By filing in China first, foreign parties can avoid tactical interference and prevent the defendant from gaining the upper hand in the litigation process.

3. Foreign Plaintiffs Can Still Sue in Their Home Jurisdiction

Foreign plaintiffs are not precluded from suing in their own jurisdiction, even after initiating a lawsuit in China. Many jurisdictions allow for parallel litigation, meaning that after obtaining a favorable ruling in China, the foreign plaintiff may still pursue further legal action within their home country. This flexibility enables foreign businesses to maintain leverage in international disputes.

4. Suing in China Does Not Preclude the Application of Foreign Law

An important feature of China’s legal system is that it allows parties to choose foreign law as the governing law in foreign-related civil cases. Even if a lawsuit is filed in China, the courts can apply the foreign law agreed upon by the parties, especially in commercial and civil matters.

To optimize your chances of success and minimize the risk of parallel litigation, foreign plaintiffs can include asymmetric dispute resolution clauses in their contracts. These clauses specify in advance which jurisdiction will have priority for resolving disputes, ensuring that foreign parties can act swiftly.

The Supreme People’s Court of China has confirmed in the Minutes of the National Court Foreign-Related Commercial and Maritime Trial Work Symposium that foreign parties have the right to choose either Chinese courts or courts in their home jurisdiction for resolving disputes.

Conclusion: Using the “Sue First in China” Strategy

With the 2024 Civil Procedure Law and the growing importance of forum shopping, foreign businesses involved in cross-border disputes should seriously consider adding the “sue first in China” strategy to their litigation plans. This approach offers several advantages, including asset preservation, faster enforcement, and greater flexibility in international legal disputes.

By carefully planning litigation strategies and understanding the nuances of China’s legal system, foreign plaintiffs can increase their chances of achieving favorable outcomes in cross-border legal battles.

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