• Fri
  • Aug 1, 2014
  • Updated: 11:18am

Guideline helps courts enforce judgments

PUBLISHED : Thursday, 23 June, 2011, 12:00am
UPDATED : Thursday, 23 June, 2011, 12:00am

The Supreme People's Court has issued another guideline designed to tackle common difficulties faced by court officials when trying to enforce judgments in civil lawsuits - a major problem plaguing the mainland judicial system and weakening judicial authority.

A common complaint about the judicial system is that those who win lawsuits are often unable to recover their money. Losing parties often claim they have no money, and courts used to say there was nothing they could do about it.

Under the guideline, issued at the weekend, courts now have two extra tools they can use to investigate the financial situation of the losing party in a lawsuit.

They can order a professional accounting assessment of the losing party and related companies, and they can offer a monetary reward - to be paid by the winning party - for information from the public regarding the losing party's financial situation.

There are many legally grey methods that a losing party can use to hide or protect their assets and appear broke. An individual might initiate a divorce, transfer all his money to a trusted third party, or ask a friend to bring a fake lawsuit against him for the same sum of money. A company could claim bankruptcy, initiate corporate restructuring, or fake the existence of prior debts.

The courts' limited powers to investigate the finances of a losing party and enforce judgments are two other major reasons for weak enforcement.

About 15 per cent of each court's staff is dedicated to enforcement of judgments. But enforcement takes time, often requires actions outside the local jurisdiction and is dependent on co-operation from other government units, such as financial and real estate regulators, traffic departments and commerce bureaus.

Unenforceable judgments have also become a major cause for petitioning. Some people see the courts' failure to do so as a reflection of a weak, or even corrupt, judiciary.

The Supreme People's Court has introduced a series of measures in the past decade to strengthen courts' powers to investigate and punish those who refuse to answer a judgment, such as stopping a losing party from spending lavishly on holidays or golf.

Beijing commercial litigation lawyer Shu Jie , who has represented a handful of Hong Kong businessmen who sued mainland partners in contractual disputes, said the latest guideline should be applauded on several fronts.

For the first time, it expands accounting targets from the losing party to related companies, which might have received transferred assets. It also gives lawyers, for the first time, the right to investigate with a court's approval, and pledges to simplify procedures for investigation by the courts.

'The biggest problem with enforcing judgments is finding out what assets the losing party has,' Shu said.

'If by providing the name of a losing party, a court will be able to liaise with all banks and government departments and get relevant information, this will be most helpful. This guideline is a step in that direction.'

However, Hong Kong businesswoman Luk Wai-ping is not as confident. It has been more than 10 years since Luk obtained a favourable judgment regarding 2 million yuan (HK$2.41 million) she invested in a government-owned tourism company in Shanghai's Changxing town. She has recovered only half the sum - paid in piecemeal fashion over the years every time she tried petitioning.

'It's still very difficult if the losing party is the government,' she said.

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