China increasingly asserts itself in international legal disputes

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INEAR JANUARY the Communist Party has published a five-year plan for the development of a “socialist rule of law with Chinese characteristics”. Most of the document focuses on the country, but a section is devoted to foreign affairs. He calls on China to help shape international law, become the jurisdiction of first choice when resolving cross-border disputes, and encourage the use of Chinese law abroad.

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The party’s goal, according to the plan, is to promote “just and reasonable” international rules. But over the past year, it has become increasingly clear that the party intends to wage a legal fight in the world. President Xi Jinping wants China’s legal apparatus to be bolder when dealing with international issues and reshaping international legal and regulatory standards. In areas such as patents, maritime rights, cybersecurity, sanctions and extradition battles, the Communist Party uses its legal system to protect and advance China’s interests in a way that it does not. has never done before.

The most visible part of this push has been the party’s aggressive response to Western sanctions imposed for the repression of the ethnic Uyghur, a Muslim minority. China has imposed retaliatory sanctions on Western officials and academics. It then authorized the seizure of assets and the blocking of transactions carried out by companies complying with foreign sanctions. (In August, the legislature delayed a vote on extending the same provision from mainland China to Hong Kong.)

China is also advancing its conception of the rule of law – which exists under the unchallenged leadership of the party – beyond its borders in other areas, such as intellectual property. At a Politburo meeting last November, Xi called for greater assertiveness in cross-border disputes, saying China should “promote extraterritorial enforcement” of its intellectual property laws. Xi was in fact “arming the judiciary” to defend China’s interests abroad, said Mark Cohen, a specialist in Chinese intellectual property law at the University of California at Berkeley.

Over the past year, Chinese courts have issued sweeping orders on behalf of Chinese smartphone makers seeking to prevent lawsuits against them in other countries for using the intellectual property of foreign companies. Chinese courts have ordered these “anti-suit injunctions” so that they (rather than foreign courts) can decide how much Chinese companies should pay in royalties to patent holders their products use. Jorge Contreras of the University of Utah says this marks an unusual escalation in the use of the judiciary globally.

The assertion by Chinese courts of a right to set global tariffs in patent litigation is not without precedent; a British court did something similar in 2017. But Chinese courts have become much more militant than others in claiming this authority. The stakes are high. Chinese courts usually award a fraction of what could be ordered by a Western court. And China generally has influence over foreign parties in these cases. Those who manufacture products in China or sell in the Chinese market must heed these decisions or face heavy penalties.

Over the past year, Huawei, Oppo, and Xiaomi have all won anti-prosecution injunctions against foreign patent holders. Out-of-court royalty rate agreements are typical in such cases. Experts say the Chinese injunctions have helped Huawei and Xiaomi achieve better regulations, and may do the same for Oppo.

Another priority of the courts has been the Belt and Road initiative (BRI), Xi’s sprawling efforts to finance and build physical and digital infrastructure around the world. It has given rise to numerous disputes between foreign entities and Chinese entrepreneurs and banks. China has set up a special international trade tribunal to resolve some disputes. In 2019, the Supreme People’s Court called for strengthening the capacity of Chinese courts to hear international business cases and improving arbitration, in order to better resolve these issues in China.

Foreign experts say such cases would normally be dealt with in the country where the work was performed. “It would be incredible for a foreign company doing business in its country, and not in China, to accept dispute settlement in China unless it is politically or economically compelled to do so,” says Jerome Cohen of New York University. .

The party would argue that it has simply started to play a more active role in the development of international law. China has concluded international treaties and bodies, such as the UN and the World Trade Organization (WTO), under the rules, he did not have the power to write, after years in which the Communist Party was either hostile to such institutions or followed the advice of Deng Xiaoping, a former leader, to keep a low profile in international affairs. Mr. Xi has abandoned this caution.

Foreign companies have started to note the willingness of Chinese courts to claim more authority in cases beyond their borders. At least one, Samsung Electronics of South Korea, has tried to take advantage of it. In December, a Wuhan court granted an injunction to Samsung, barring Ericsson, a Swedish telecommunications company, from entering any other court in the world to resolve a global dispute over the use of Ericsson’s patents in hardware. Samsung. A Texas judge, at Ericsson’s request, tried to overrule the Chinese ruling with an “anti-interference order”, which some have called an “anti-anti-suit injunction.” The Texas judge ruled that Ericsson deserved a hearing in America over a royalty rate for the use of its patents in the US market. But the Wuhan court had included as a preventive measure an “anti-anti-anti-prosecution injunction” in its initial decision. Samsung and Ericsson agreed to a comprehensive settlement in May, with the Wuhan court strengthening Samsung’s negotiating position.

Judges, officials and businessmen bristled at the new aggressiveness of Chinese courts. In July, the European Union filed a request with the WTO that China be more transparent on such cases. Its decisions are often not made public, but Chinese judicial authorities have tended to view these cases as important benchmarks for future decisions. The office of the we The trade representative also raised concerns about China’s use of anti-prosecution injunctions.

Xi could argue that the rules of the game have been skewed against China for too long. Mr Contreras said Chinese officials now see judicial assertiveness as an important new tool that can help tip things in their direction.

This article appeared in the China section of the print edition under the headline “The Influence of the Court”

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