Jolene Chen
On May 19, 2021, the Supreme People’s Court released the third batch of model cases where the people’s court fully exercised its judicial power to protect property rights and the interests of entrepreneurs. In particular, the cases pertain to the distinction between what is considered an offense in criminal cases, such as fraud cases and tax evasion cases, and also the application of punitive damages in civil intellectual property cases, as well as excessive seizure in preservation actions and wrongful enforcement in national compensation. The cases are organized based on the many aspects of protecting the property rights and interests of the parties and have important guiding significance for similar cases adjudicated by the people’s courts. In this article, two of the cases are briefly introduced.
I. Compensation for wrongful enforcement by the court
This case involving the application of a certain investment company for compensation for wrongful enforcement by an intermediate people’s court of a certain city is the first national compensation case brought to trial by the Compensation Committee of the Supreme People’s Court. An intermediate people’s court seized six parcels of land of a tire factory in a certain city according to the property preservation application of an investment company. The investment company subsequently obtained a successful judgment and carried out the enforcement. During the enforcement of the case, the court lifted its seizure of 3 parcels of land held in the name of the party subject to the enforcement. The proceeds from the transfer of the seized property were used to repay internal debts to the employees, funds raised from the employees, medical expenses, and general debts, but the investment company was not repaid. The Supreme People’s Court held in the proceedings that the lifting of the seizure by the intermediate people’s court was part of enforcement, to accommodate the government’s transfer of the lands at issue, but the court failed to effectively control and distribute the land transfer payment pursuant to law, which resulted in the failure to repay debts held by the investment company, thereby impairing its rights and interests. Since the party subject to the enforcement had already become insolvent, and the wrongful enforcement has been shown to have caused the investment company to suffer actual losses that could not be recovered through other methods, the people’s court should have accepted the corresponding application for national compensation pursuant to law. The Compensation Committee of the Supreme People’s Court arranged a negotiation between the parties, who reached a compensation agreement on the spot, with the intermediate people’s court to pay a corresponding national compensation to the investment company. In this case, the Supreme People’s Court held that the end of enforcement is not an absolute criterion for the initiation of state compensation proceedings. When there has been a lack of progress in an enforcement action conducted by a people’s court with little prospect of any further progress, or the party subject to the enforcement has become insolvent, or the enforcement applicant cannot recover losses caused by wrongful enforcement, the enforcement applicant should be allowed to apply for national compensation. Therefore, the enforcement applicant whose rights and interests were impaired in this case received corresponding national compensation.
II. Fraud Case
In the case of fraud by a Zhao, the parties disputed over the full payment for goods. One of the parties reported this case to a public security agency alleging fraud by the other party. The court of first instance held that since the relevant evidence did not prove that Zhao had the subjective intent to engage in fraud and committed fraud, Zhao was acquitted. The procuratorial authorities appealed. The court of second instance held that Zhao was guilty of fraudulently obtaining cold-rolled sheets from a cold-rolled sheet company and sentenced him to five years in prison along with a fine. The Supreme People’s Court held in the retrial that Zhao did not have the subjective intent to take illegal possession in the transaction with the cold-rolled sheet company, nor did he objectively falsify facts and concealed the truth, so there was no fraud offense. Accordingly, the Supreme People’s Court reversed the second instance decision, acquitted Zhao, and refunded the fine. In this case, the Supreme People’s Court strictly differentiated the boundary between economic disputes and criminal offenses by analyzing the elements of fraud and holding that the substantive boundary between criminal fraud and economic disputes lies in whether the perpetrator defrauded others of their property through false facts and whether such act presents serious harm to the public. For ordinary commercial disputes in the market economy, if judicial remedies can be obtained through civil litigation, the parties should be allowed to realize their rights and balance their interests through evidence, cross-examination, and arguments in civil litigation instead of using last resort remedies like criminal punishment.