CHINA Trends and Developments Contributed by: Wenxuan Lu, Kangda Law Firm
Special Litigation Procedures for Foreign-Related Insurance Disputes Special provisions In China, the litigation procedures for insurance dis- putes involving foreign parties differ from those for domestic insurance disputes, particularly in terms of jurisdiction, service and enforcement. Regarding jurisdictional venue, according to Chinese law, if one involved party is a foreign entity and does not have a domicile within Chinese territory, the insurance dis- pute can be brought before the court located: • in the place where the contract was signed; • in the place where the contract was performed; • in the location of the subject matter of the litigation; • in the place where the property available for attachment is located; • in the place where the tort occurred; or • where the representative office is domiciled. This is provided that these addresses are within Chi- nese territory. For enforcement, if the property of the person subject to enforcement is located outside China, and if other countries have concluded or participated in relevant international treaties with China, the parties may apply directly to foreign courts for recognition and enforce- ment of the judgment or request the People’s Court to seek recognition and enforcement from the foreign court. Recent changes Since November 2023, the Convention Abolishing the Requirement of Legalisation for Foreign Public Docu- ments has officially taken effect in China. The imple- mentation of this convention in China will simplify the process for the international circulation of docu- ments, particularly for those that previously required dual certification. “Dual certification” refers to the process where a notarised foreign-related document issued by a Chinese notary office, or other certification documents, must first be authenticated by the Con- sular Affairs Department or the Foreign Affairs Office of the Ministry of Foreign Affairs of China and then further authenticated by the consulate of the country where the document will be used. After the conven- tion’s implementation, documents used in contract-
insurance company can invoke exclusion clauses in the insurance contract to claim exemption from liabil- ity. The prevailing judicial view is that insurance com- panies have a dual role as insurers and guarantors in these cases. Insurance companies not only issue policies but also provide irrevocable guarantees to the court. Therefore, insurance companies cannot claim liability exemption due to exclusion clauses in policy. However, in certain situations, insurance companies can seek reimbursement from the insured after pay- ing the claim. Financing guarantee insurance Since 2015, and supported by policies, inclusive finance in China has experienced significant growth. Large insurance companies have established inclusive finance departments to promote financing guarantee insurance business. However, due to relatively loose management and lack of credit experience among some insurance practitioners, risks began to surge from 2019 onwards, exposing insurance companies to significant risk. In response, the CBIRC issued the Supervision Measures for Credit Insurance and Guarantee Insurance Business in 2020, further tight- ening the regulation of financing guarantee insurance. Against this backdrop, litigation cases in the field of financing guarantee insurance have surged in recent years, becoming a focal point in the insurance indus- try. Several contentious issues have arisen in disputes involving financing guarantee insurance, which were partially addressed by the Supreme People’s Court in the Minutes of the Financial Trial Work Conference (Draft). For example, if a lender did not conduct credit investigations on a borrower because the borrower had purchased guarantee insurance, could the insur- ance company refuse to pay claims based on exclu- sion clauses? The Supreme People’s Court holds a negative view on this matter. Additionally, if the insur- ance company pays the insurance indemnity and subsequently seeks subrogation against the borrower, can the scope of subrogation include penalties, over- due interest and other losses? The Supreme People’s Court also holds a negative view on this issue.
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