A new measure to aid litigation

A Shanghai court has suggested that companies registered in the Shanghai Free Trade Zone should include in their business contracts the address that litigation documents regarding contractual disputes should be sent to in order to ensure proper delivery and receipt.

This will be an effective measure to elevate the efficiency of the judicial work of the court and safeguard the rights of the parties involved in the disputes, said the Shanghai Pudong New Area People’s Court, which had released a document pertaining to this suggestion on Sept 27, two days ahead of the third anniversary of the founding of the Shanghai FTZ.

Cao Kerui, director of the FTZ tribunal under the Pudong court, said that the problem of companies not receiving litigation documents is more pronounced in the financial zone as there are many businesses that are registered inside the FTZ but operate outside.

“The other frequently encountered situation is that one company trades with another that is an overseas entity. Once the address of the latter is changed, it’s hard for it to receive the litigation document,” Cao said.

Statistics from the court showed that, in the past three years, more than 20 percent of the litigation documents for more than 4,700 civil and commercial lawsuits that involved one or both parties based in the FTZ were not received properly by the defendant, and numbers are rising every year.

“Under such circumstances, it will take the court another two to three months to inform the defendant via other methods, including pasting a notification at the notice board on the door of the court, at the residence of the legal representative of the company and in the newspaper. This means the plaintiff has to wait for a longer period of time before he can even attempt to claim money,” Cao said.

Many companies have applauded the court’s suggestion, saying it will shorten the duration of the process and present a better image of the Chinese courts and the legal business environment in China.

Far East International Leasing, a company specializing in finance leasing, was one of the companies in the FTZ that underwent a pilot trial for this practice since the beginning of last year.

Wang Weijun, manager of the asset management department of the company, said that the duration of the process was reduced from 232 days to 145 days after the address was included in the contract.

Liu Yun, manager of the legal department at the FTZ-based Ingram Micro, a multinational IT firm from the United States, could also attest to the effectiveness of this practice, saying that the time required to receive payments from their clients has been reduced.

“The practice will urge those who maliciously postpone payment to pay earlier and help companies maintain a better cash flow,” she said.