Accurately Understanding and Applying “The Doctrine of Forum Non Conveniens” to Provide Fair Dispute Mechanisms for Commercial Affairs for Foreign Concerned Parties ——Trust Bank Z v. Liu and Chen, a case of dispute over a guarantee agreement

Basic Facts

On 6th October 2014, the borrowers Company A, Company B, Liu and Chen signed a master contract for General Financing and Credit Extension with Trust Commercial Bank Z Co., Ltd., and the line of credit was 5.3 million dollars. Liu and Chen provided an unlimited Guarantee Letter to Trust Bank Z, bearing joint and several liabilities for the guaranty. Both the master contract and the Guarantee Letter agreed to apply the law of Hong Kong Special Administrative Region and to be under the non-exclusive jurisdiction of courts of Hong Kong Special Administrative Region. Subsequently, for four times, the Trust Commercial Bank Z of Hong Kong distributed 1.9159 million dollars of financing funds in total to Company B. Moreover, the arrears resulting form an advance settlement owing to the breach of contract of the derivatives of Company A was 507.6 thousand dollars. After the disputes arose, considering that the executable property of Liu and his wife were in Shenzhen, the Trust Commercial Bank Z of Hong Kong sued Liu and Chen, in the Qianhai Court, claiming that the two were to bear joint and several liabilities for the financing funds. During the trial, Liu and his wife proposed an objection over the jurisdiction to the Qianhai Court according to “The doctrine of forum non conveniens” of China because they considered themselves to be Tai Wan citizens but the dispute case occurred in Hong Kong.    

Judgement

The Qianhai Court held that it had jurisdiction over this case since both parties agreed to “non-exclusive jurisdiction” and the only securable subject matter of Liu and Chen were under the jurisdiction of the Qianhai Court. Besides in this case, China entrusted notaries to provide convenience for the parties’ certification. Shenzhen is adjacent to Hong Kong, which is convenience for the parties to appear in the court in Qianhai. Qianhai also has professional legal identification agencies and collectively exercises jurisdiction over Hong Kong commercial cases as well as having professional judicial mechanisms. None of the established facts and law application in this case constitute of “major difficulties”, which explains why it is convenient for the Qianhai Court to trial this case. Thus “the doctrine of forum non conveniens” is not applicable. To sum up, the court rejected the objection over the jurisdiction of the defendant.  

Significance

In the understanding and application of “the Doctrine of Forum Non Conveniens” in this case, comprehension is not only from legal articles but the basis on which judges make judgements from the basis of profits and value on a discretionary basis, reflects that the goal of civil judicature is to maintain and achieve social fairness and justice. On one hand, it fully demonstrated the fundamental spirit of the system of civil judicature over foreign cases of China. Fully respecting the legitimate right of the plaintiff to choose court in accordance with the Civil Procedure Law of the People 's Republic of China not only reflected the rights of and the effective exercise of national judicial sovereignty, but more importantly, it provided fair and effective dispute resolutions for civil and commercial subjects and gained the trust of the civil and commercial subjects of nations and regions to China’s judicature. It also fully demonstrated the core orientation of “the doctrine of forum non conveniens”. In this case, the Qianhai Court made substantive and legal judgements on “the doctrine of forum non conveniens” and fully considered whether there were malicious litigations or not, i.e, whether the plaintiff caused a waste of judicial resources for the defendant and the court that accepted the case, and whether the defendant deliberately avoided legal liabilities and obligations. On these basis, the rejection of the objection over the jurisdiction by the defendant effectively maintained judicial authority and reflected the judicial value of legal fairness and justice.