CHINA Law and Practice Contributed by: Qingyou Wang, Yichen Lu, Chao Tang and Yuhe Gu, Anli Partners
2.4 Minimum and Maximum Amounts of Third-Party Funding In China’s third-party litigation funding market, there are no universally fixed minimum or maximum amounts prescribed by law. The funding amounts are typically determined on a case-by-case basis through negotiations between the funder and the client, heav- ily influenced by the specific details and potential value of the dispute. According to the statistics, the average amount a third-party funder in China will fund is 10-15% of the amount in controversy of the case. 2.5 Types of Costs Considered Under Third- Party Funding Third-party funders in China typically agree to cover the essential direct costs of pursuing or defending a legal claim, which most commonly include profes- sional fees for lawyers, court filing and administrative fees, appraisal fees and the costs of retaining neces- sary expert witnesses. Depending on the case, fund- ing may also extend to ancillary expenses such as document translation and notarisation. 2.6 Contingency Fees In litigation, while a contingency fee arrangement is not explicitly prohibited by statute and occurs in practice, it may be unenforceable. The legal principles against champerty and maintenance create significant uncertainty. 2.7 Time Limit for Obtaining Third-Party Funding In China, there are no specific statutory deadlines that require a party to obtain third-party funding during litigation.
freezing a defendant’s assets or preserving evidence before filing a lawsuit, provided they can demonstrate urgency and post-security. For employment and administrative disputes, the rules are more prescribed. Labour cases require manda- tory pre-litigation arbitration, meaning parties must first submit their dispute to an employment arbitra- tion committee and obtain a ruling before they are permitted to file a lawsuit in court. Similarly, for certain types of administrative cases challenging government actions, the law may require a mandatory reconsidera- tion process with a higher-level administrative body as a prerequisite to initiating litigation. 3.2 Statutes of Limitations In China’s civil litigation system, the general limita- tion period for most civil and commercial claims is three years, as provided by China’s Civil Code. A key procedural aspect is that courts do not conduct active investigations to determine whether a limitation period has expired; rather, they will only consider this defence if the defendant raises it explicitly during the proceedings. The three-year limitation period generally begins to run from the date the claimant knew, or should have known, that the contract was breached, their rights had been infringed and who the obligor was. The limitation period is not fixed; it can be interrupted by specific actions. Such actions include the claimant demanding performance, the obligor agreeing to fulfil the obligation, the claimant instituting a lawsuit, or applying for mediation. Each interruption restarts the clock, meaning the limitation period begins anew from the time of the interruption. 3.3 Jurisdictional Requirements for a Defendant A defendant in China is subject to suit primarily on the basis of their domicile. For individual defendants, this refers to their habitual residence, while for legal entities such as companies, it is their principal place of business or the address at which they are registered. Beyond domicile, jurisdiction can also be established based on the location where: • a contract was signed;
3. Initiating a Lawsuit 3.1 Rules on Pre-Action Conduct
China’s legal framework for pre-action conduct varies significantly depending on the nature of the dispute, with distinct pathways for civil/commercial, employ- ment, and administrative cases. In ordinary civil and commercial litigation, there is no universal mandatory pre-action protocol, but the system offers critical pre- emptive tools. A key mechanism is pre-action pres- ervation, which allows a party to seek court orders
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