Recently, the Supreme People’s Court and the Supreme People’s Procuratorate issued an interpretation (the “Interpretation”) on criminal actions for false lawsuits under Article 307-1 of the Criminal Law, which provides for punishment of up to three years in prison, detention or restrictions, as well as an additional or a standalone fine in initiating a civil action on false facts in obstruction of the judicial order or serious infringement of the rights of others. In case of a serious offense, the offender will be subject to imprisonment of three to seven years and a fine. The Interpretation provides a more detailed explanation on the determination of the facts and the severity of the criminal act. For details, please see the following:
1. Conduct constituting a false action
According to the Interpretation, the use of forged evidence, false statements, etc., to engage in any of the following acts or bringing a civil action to the people’s court by falsifying a civil legal relationship or fabricating a civil dispute shall be regarded as “bringing a civil action based on false facts” within the meaning of law:
(1) Malicious collusion with one of the spouses to fabricate a joint spousal debt.
(2) Malicious collusion with others to fabricate a creditor-debtor relationship and agreement on expiation of debts in kind.
(3) Malicious collusion with the legal representatives, directors, supervisors, managers or other management personnel of a company or enterprise to fabricate corporate debts or guarantee obligations.
(4) Make false intellectual property infringement claims or creating an unfair competition relationship.
(5) Reporting false debt claims in bankruptcy proceedings.
(6) Malicious collusion with people subject to enforcement to fabricate claims, or a priority right to or a security interest in seized, attached or frozen property.
(7) Unilateral or malicious collusion with others to claim false civil legal relationships such as identity, contract, infringement and inheritance.
In addition, bringing a civil action in a people’s court to compel performance of debts by another party while concealing the fact that such debts have been fully repaid shall be regarded as “bringing a civil action on false facts.” Petitioning a people’s court to enforce an arbitral award and notarized claim documents issued on false facts, or opposing an object of civil enforcement or applying to participate in the distribution of property subject to enforcement based on fabricated facts also constitute “bringing a civil action based on false facts” under Article 307-1, Paragraph 1 of the Criminal Law.
Meanwhile, the Interpretation points out that a civil action brought based on false facts under any of the following circumstances shall be regarded as “obstruction of the judicial order or serious infringement of the rights of others” within the meaning of law:
(1) Causing a people’s court to take measures to preserve property or acts based on false facts.
(2) Interference with normal judicial activities by causing a people’s court to conduct a hearing.
(3) Causing a people’s court to render a decision or a property distribution plan based on false facts, or set up a case to enforce an arbitral award or notarized claim document rendered based on false facts.
(4) Filing a civil action based on false facts multiple times.
(5) Was subject to civil enforcement measures or prosecuted for criminal liability as a result of bringing a civil action based on false facts.
(6) Any other circumstances relating to obstruction of judicial order or serious infringement of the rights of others.
2. Conduct constituting a serious offense:
Pursuant to the Interpretation, bringing a civil action based on false facts shall be deemed a serious offense if any one of the following circumstances is present:
(1) An occurrence of the circumstance under Article 2, Paragraph 1 of the Interpretation causing another person to sustain an economic loss of up to RMB1,000,000.
(2) An occurrence of the circumstances under Article 2, Paragraphs 2 through 4 of the Interpretation resulting in serious obstruction of normal judicial activities or serious undermining of judicial credibility.
(3) Causing an obligor to automatically perform a turnover of property as ordered by a valid judicial decision or causing a people’s court to enforce property rights and interests, with an amount in excess of RMB1,000,000.
(4) Making it impossible for others to collect on an owed obligation with an amount in excess of RMB1,000,000.
(5) Illegally occupying the property of another with an amount in excess of RMB100,000.
(6) Causing others to be detained, arrested or prosecuted for criminal liability due to a failure to enforce a judgment or ruling rendered by a people’s court based on false facts.
(7) Any other serious circumstances.
In addition, the Interpretation also states that certain conduct will result in greater punishment, such as a combination of a false lawsuit and committing fraud against a judicial officer.
3. Penalties on offenses committed by organizations
With respect to offenses committed by an organization, if the organization engages in an act under Article 307-1, Paragraph 1 of the Criminal Law, the conviction and penal standards under the Interpretation shall govern, the directly responsible supervisor and other directly responsible personnel shall be convicted and punished, and the organization shall be fined.
In general, the promulgation of this Interpretation provides a clearer standard for the application of law to offenses of false litigation. Enterprises should also pay attention as to whether they have taken appropriate measures to protect their own interests in their daily operations for avoiding unnecessary criminal liabilities in the end.