China is becoming more assertive in international legal disputes

china is becoming more assertive in international legal disputes
china is becoming more assertive in international legal disputes

IN EARLY JANUARY the Communist Party published a five-year plan for the development of “socialist rule of law with Chinese characteristics”. Most of the document is domestically focused, but one section is devoted to foreign matters. It calls on China to help shape international law, to turn itself into the first choice of jurisdiction when resolving cross-border disputes and to promote the use of Chinese law abroad.

The party’s goal, the plan says, is to promote “a fair and reasonable” international system of rules. But in the past year it has become increasingly clear that the party means to take a legal fight to the world on multiple fronts. President Xi Jinping wants China’s legal apparatus to grow more muscular in international disputes, and to reshape international legal and regulatory norms. In areas such as patents, maritime rights, cybersecurity, sanctions and extradition battles, the Communist Party is using its legal system to safeguard and advance China’s interests in ways it has not previously done.

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

But China is advancing its conception of the rule of law—one that exists under the unquestioned leadership of the party—beyond its borders in other areas, such as intellectual property. At a Politburo meeting last November, Mr Xi urged that China be more assertive in cross-border disputes, saying that it should “promote the extraterritorial application” of its intellectual-property laws. Mr Xi was in effect “weaponising the judiciary” to defend China’s interests abroad, says Mark Cohen, a scholar of Chinese intellectual-property law at the University of California, Berkeley.

In the past year Chinese courts have issued sweeping orders on behalf of Chinese smartphone-makers that seek to prevent lawsuits against them in other countries over the use of foreign companies’ intellectual property. The Chinese courts have ordered these “anti-suit injunctions” so that they (rather than foreign courts) can decide how much the Chinese firms—Huawei, Oppo and Xiaomi—should pay in royalties to the holders of patents that their products use. Jorge Contreras at the University of Utah says this marks an unusual escalation in the use of judicial power globally.

The assertion by China’s courts of a right to set global rates in patent disputes is not unprecedented; a British court did so in 2017, a fact that Chinese judicial authorities have been quick to note. But China’s courts have become much more activist than any in the West in asserting this authority.

The stakes are high. Chinese courts typically grant a fraction of what might be ordered by a Western court. And China typically has leverage over the foreign parties in these cases. Foreign companies that manufacture goods in China or sell to the Chinese market must pay heed to such rulings or else face massive penalties that could damage their operations.

Since August 2020 Huawei, Oppo and Xiaomi have all won anti-suit injunctions against foreign patent-holders. Out-of-court agreements on royalty rates are typical in such cases. Experts say the Chinese injunctions surely helped Huawei and Xiaomi win better settlements, and may now do the same for Oppo.

Another focus for the courts has been the Belt and Road Initiative (BRI), Mr Xi’s sprawling effort to finance and build physical and digital infrastructure in more than 100 countries. It has spawned numerous disputes between foreign entities and Chinese contractors and banks. China has set up a special international commercial court to resolve some disputes. In 2019 the Supreme People’s Court issued an opinion on the bri that called for the strengthening of the country’s courts to hear international commercial cases and improve arbitration, the better to settle such matters in China.

Western legal experts say such cases would normally be handled in the country where the contract work was done. “It would be unbelievable for any foreign company that’s doing business in their country, not in China, to accept dispute resolution in China unless they’re politically coerced or economically coerced into doing it,” says Jerome Cohen of New York University.

The party would argue that it has merely begun to take a more active role in shaping international law. China entered international treaties and bodies, such as the UN and the World Trade Organisation (WTO), under rules it had no hand in writing, after years during 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 shed that caution as he seeks more of a leadership role for China in the world.

Foreign companies have begun to take note of the willingness of the Chinese courts to hold more sway in matters beyond their borders. At least one, Samsung Electronics of South Korea, has tried to benefit from it. In December a court in Wuhan granted an injunction to Samsung, forbidding Ericsson, a Swedish telecoms firm, from going to any other court in the world to resolve a global dispute over the use of Ericsson’s patents in Samsung hardware. A judge in Texas, at Ericsson’s request, tried to rebuff 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 on a royalty rate for use of its patents in the American market. But the Wuhan court had pre-emptively included an “anti-anti-anti-suit injunction” in its original ruling. Samsung and Ericsson agreed on a global settlement in May, the Wuhan court having strengthened Samsung’s negotiating position.

Judges, officials and business people in the West have bristled at the new aggressiveness of China’s courts. In July the European Union filed a request with the WTO that China be more transparent about such cases. Its rulings are often not made available to the public, yet Chinese judicial authorities have tended to view these cases as important guideposts for future rulings. The office of the US Trade Representative has also registered concern about China’s use of anti-suit injunctions.

Mr Xi might argue, not without justification, that the playing field has for too long been skewed toward the West. Mr Contreras says Chinese officials now see judicial assertiveness as an important new tool to help tilt things their way.

The Economist

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