CHINA Law and Practice Contributed by: Elsie Shi, George Yu, Eleanor Gu and Zach Xu, Jincheng Tongda & Neal Law Firm
the contra proferentem rule (resolving ambiguities in favour of the consumer) and impose heightened pre- contractual disclosure obligations on insurers. Reinsurance dispute arbitration and litigation are not very common. Insurers and reinsurers in China gener- ally prefer to negotiate to resolve their disputes, with- out resorting to litigation or arbitration. The Insurance Law requires that the right to claim insurance payment must be exercised within two years (for non-life insurance) or five years (for life insurance), after the date when an insured or a beneficiary knew or should have known of the occurrence of the loss. Typically, an unnamed beneficiary or other third party cannot enforce an insurance contract. However, under Article 65 of the Insurance Law, in liability insurance disputes where the insured’s liability to a third party has been determined, the insurer must compensate the third party directly upon the insured’s request. If the insured fails to make such a request, the third party retains the right to claim direct compensation from the insurer for the portion due to the insurer. 9.2 Insurance Disputes Over Jurisdiction and Choice of Law Insurance disputes must comply with the exclusive, hierarchical and territorial jurisdiction provisions of the Civil Procedure Law. Exclusive jurisdiction vests with the court at the location of real estate or a port with authority over disputes concerning that property or port operations. Hierarchical jurisdiction operates through a four-tiered court system, including primary, intermediate, high and SPC, where first-instance juris- diction is generally allocated based on the dispute’s significance and amount in controversy. Territorial jurisdiction generally places insurance contract dis- putes under the jurisdiction of the court at the defend- ant’s domicile or the location of the insurance subject matter. The Insurance Law and the PRC Law on the Applica- tion of Laws to Foreign-Related Civil Relations contain no specific regulations on jurisdiction and choice of law for insurance disputes. Jurisdiction for such dis- putes shall be determined pursuant to Chapter 2 of the Civil Procedure Law. Regarding the law applica-
ble to foreign-related insurance disputes, Article 41 of the Law on the Application of Laws allows the par- ties to choose the governing law. If the parties have not made a choice, the law of the habitual residence of the party whose obligation best characterises the contract, or another law most closely connected to In the PRC court system, the second-instance judg- ment is the final one. In contrast to common law sys- tems, judges in China often hold broader authority, enabling them not only to question the parties actively but also to investigate facts on their own initiative. Litigation is generally initiated by the plaintiff’s filing, and encompasses ordinary procedures, summary procedures, special procedures, etc. A party who disagrees with a first-instance judgment or ruling has the right to appeal to the courts at the next higher level. The second-instance court will examine the rel- evant facts and the application of law based on the grounds of the appeal. the contract, shall apply. 9.3 Litigation Process If a party considers that a legally effective judgment or ruling contains an error, they may apply to a high- er-level court for a retrial. However, the enforcement of the judgment or ruling continues during the retrial process. 9.4 Enforcement of Judgments For domestic insurance disputes, legally effective judgments are to be enforced by either the court of first instance or a court situated where the property subject to enforcement is located, provided that the latter is at the same level as the court of first instance, pursuant to Article 235 of the Civil Procedure Law. When seeking enforcement of a foreign judgment in China, an interested party may directly petition the competent intermediate court. Alternatively, the for- eign court may request enforcement from PRC courts under the terms of an international treaty binding upon both states or based on the principle of reciprocity. Following review, if it is determined that enforcement would not violate fundamental principles of PRC law nor impair China’s sovereignty, security or public inter-
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