Expert Judgments
A new financial court in Beijing, only the second in China, is set to be strident in institutional innovations and reforms
China's 13th Standing Committee of the National People's Congress (NPC), China's highest legislative body, approved the resolution on establishing a financial court in Beijing on January 22. In March, 25 judges were appointed to the court, media reported. It will be China's second financial court following the Shanghai Financial Court (SFC) founded in 2018.
The Beijing Financial Court (BFC) will be an intermediate court and will take over financial business, civil and administrative cases that were previously dealt with by Beijing's regular system of intermediate courts. These are at the second-lowest level in municipalities and prefectures, and hear important cases and appeals from lower courts.
The defendants in those cases will be Beijing-based financial organs or financial infrastructure, which means the hardware and institutions needed for financial operation, such as payment systems and security networks.
Given Beijing has a concentration of national financial regulatory
departments and State-owned financial organs, the BFC is expected to play a larger role in institutional innovations and reforms, compared to the SFC which focuses more on integrating international practices and gaining more influence on international financial rulemaking.
Complicated Disputes
According to Xiao Kai, the SFC'S deputy director, Shanghai has been planning a specialized financial court since 2009 after the central government designated the southeastern city as an international financial center. Before it established the SFC, there were financial jurisdiction halls in eight Shanghai courts at different levels, including the municipal high people's court, and it had formed an independent institution for financial trials.
The BFC will be similar. The capital has seen a soaring number of financial, civil and administrative cases since 2013 and the focus has shifted from simple bank card disputes to complicated disputes that involve loans or internet finance. In the third quarter of 2020, courts in Beijing dealt with over 10,000 cases connected to internet finance.
Yin Yong, Beijing's deputy mayor, revealed at a finance and technology forum held in September 2020 that Beijing had more than 700 financial organs licensed to operate, and the capital's financial transaction value exceeds 45 percent of the country's total.
Beijing already has financial jurisdiction halls in lower courts in the districts of Xicheng, Chaoyang, Haidian and Fangshan where financial business and civil cases are concentrated, and a team of judges that presides over financial administrative cases at Xicheng District Court and Beijing No.1 Intermediate Court.
At a meeting to discuss the financial court in Beijing, Zhou Qiang, president of the Supreme People's Court (SPC), China's top court, said that Beijing is “well prepared” to establish a financial court in terms of organization and personnel. Beijing has 240 judges and 256 assistant judges who specialize in financial business and civil cases. As the central bank and national regulatory departments for banks and securities are all in Beijing, cases involving those organs and departments are already dealt with by the capital's courts.
“Different courts may vary in understanding law clauses and make different judgments on similar cases, which is against the solemnity and justice of laws... A specialized financial court is helpful to unify judgments by channeling financial cases to [more] professional and experienced judges,” Zuo Shenggao, a partner at Beijing Jingsh Law Firm, told Newschina.
Xiao agrees. “We need a specialized financial court to deal with professional problems which cannot be simply judged by common sense or [personal] preference, but by expertise,” he said. “Financial trials have to follow the logic of laws and the market, with the latter related to whether a judgment can be acknowledged by the market and promote financial development,” he added.
Institutional Reforms
According to Xiao, the SFC has innovated to meet market demands. For example, it took the lead in implementing a “demonstration case” system for cases involving multiple plaintiffs but one defendant. For instance, if many investors sue a listed company over fraud, the SFC would choose one reference case for the initial trial as a precedent for the others to unify the judgment and save resources.
The SFC also set up a “green channel” for smaller investors to protect their rights and interests and worked out regulations on the legal assistance related to large blocks of shares.
“We have to keep up with the pace of international financial trials and combine international experience with China's national conditions,” said Xiao.
Yet as a local court, observers said it is hard for the SFC to enact deep reform in the judicial system and better prevent financial risk.
The BFC is expected to work more on this aspect. At the Beijing meeting, Zhou Qiang emphasized the city is China's “national hub for financial management,” and the BFC is designed to “implement and ensure the central government's financial strategies, improve the judicial system, prevent systematic financial risk and further increase China's international say and influence on financial justice.”
Experts predicted that the BFC, though also an intermediate court, will be responsible for more trans-regional cases and “break” the regional jurisdiction over specialized issues.
“Compared to Shanghai, Beijing has more advantages on administrative cases because Beijing High People's Court and Beijing No.1 Intermediate Court have experience in cases related to national financial institutions. The capital has richer talent resources and better conditions to make innovations in relevant institutions or in administrative or financial laws,” Huang Zhen, director of the Financial Law Institute, Central University of Finance and Economics, told NewsChina.
Huang Tao, a law professor at Zhejiang University, said that the court's scope should be expanded. “It will be of little significance if the BFC merely serves as [an ordinary] intermediate court, so we have to expand the BFC'S functions to some extent. For example, by allowing the BFC to deal with cases related to Beijing-based financial infrastructures (such as the China Securities Depository and Clearing Corporation), financial exchange centers and the relevant industry commissions,” he wrote in a commentary for the 21st Century Business Herald.
“Meanwhile, given that most national financial departments and State-owned financial organs are based in Beijing, the BFC will have more chances [than the SFC] to serve as a judicial watchdog or to examine whether or not those departments' administrations follow the law... Since many of these departments are of a higher administrative level than the BFC, it will be a big challenge for the BFC to remain neutral and objective in those cases. It will largely determine the BFC'S value in [judicial] reforms,” he added.
It will also be a breakthrough for the BFC if it is allowed to deal with finance-related criminal cases, although neither the SFC nor the BFC have clearly said criminal cases are within their jurisdiction.
“Considering Beijing is the hub of China's financial regulation, there is great significance in exploring if we can send criminal finance cases to the financial court. It needs much more effort of course, since criminal cases involve multiple departments, including police and prosecutors,” Huang Zhen said.
According to Huang Tao, the SFC has given up trying criminal cases after they encountered many obstacles when coordinating with police and prosecutors. He believes the BFC could pave the way to deal with cases that involve both civil disputes and crimes.
Growing Need
Based on previous experiences establishing the SFC, experts predict the BFC will be established in the first half of 2021, but Huang Zhen believes that many more courts are needed. “Two financial courts are far from enough to meet the demands arising from finance, especially when internet finance has penetrated everyone's life,” he told Newschina.
As the SFC was getting underway, Zhou Qiang of the Supreme People's Court told media that some departments had suggested the SPC make a general, top-down design to establish financial courts nationwide, although the SPC decided to do tests in several cities first.
It may indicate that Shanghai and Beijing, as Huang expected, will not be the only two cities to have a financial court. Media reported that Sichuan Province and Chongqing Municipality are considering establishing a financial court.
During the two sessions, China's annual legislative meetings that took place in early March, Liu Xinhua, a National People's Congress delegate on the Finance and Economics Commission, reportedly suggested establishing a financial court in Shenzhen, Guangdong Province.
“Considering Shenzhen is [China's] third-largest financial center after Beijing and Shanghai, it's likely that the third financial court will be in Shenzhen or elsewhere in the Guangdong-hong Kong-macao Greater Bay Area,” said Huang Zhen.
Huang Zhen emphasized that financial courts, no matter where they are, will work only when the judges are fully empowered with the discretion and the right to explore new institutions and trial standards for new forms of disputes.
“Financial courts should play a big role in demonstration. What I mean is that they can take the West's case system for precedents and use some reference cases to fill gaps in the laws, and the SPC may play a guiding role by publishing those landmark cases after they review them,” he said.