The China Venture

The courts are the state organs exercising exclusive state adjudicatory power. Higher level
courts supervise the work of the lower courts, and the courts at various levels are responsible
to the respective people’s congresse s that created them. The courts have four levels, namely
the Supreme People’s Court at the national level, high courts at provincial level, intermediate
courts at prefectural level and basic courts at county and city level, respectively. The
procuratorates are the organs for legal supervision. Within the structure of the procuratorates,
higher level proc uratorates direct the work of those at lower levels. The procuratorial organs
at various levels are responsible to both the corresponding people’s congresses which created
them and pe ople’s procuratorates at higher levels.
The trial process is greatly influenced by the civil law jurisdiction in which the judge is the
dominant party conducting a trail. In principle, each case has at the most two trails, which
means that the right to appeal is limited. However, the parties may challenge a final decision
through a trial supervision procedure.
According to law, courts are to exercise their power independently and free from interference
from any organisations or individuals. However, there exist in practice all sorts of interfe rence
from inside and outside sources. Whereas interference from inside sources are known to
Western systems as well, interference from outside sources do create a certain unease among
Westerners. Protectionism between judges and the respective appointing bodies is still quite
frequent in contemporary China. Very often judgements are entered under pressure from local
governments and other organisations to bend justice for local interests or economy. Also in
some places, taking gifts from parties to a litigation is not an uncommon practice. 9
The above problems as regards the judicial independence are a lesser issue for foreigners than
for China itself. The so-called Two-track System is a feature in Chinese law that treats foreign
business concerns differently from domestic ones. In different aspects, such as taxation,
foreign exchange, but especially in dispute settlement, foreign firms, as an incentive to
investment in China, are accorded different, and in general more favourable, treatment than
domestic firms. 10 According to this Two-track System, the principal institution for the
resolution of disputes involving foreign firms is the China International Economic and Trade
Arbitration Commission. It serves in all arbitration cases in which a foreign person, legal or
9 This problem has been addressed by a new law lately, the actual results however are yet to be seen.
10 From China’s point of view, this system appears to be a necessary stop-gap measure in the
evolution of its economic and social reform. It was obvious that the general reform of the Chinese legal
system would take time. But the special need for foreign investment law could not wait. Therefore,
China had to start with the latter first, while at the same time beginning to build a body of domestic law.
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