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The Supreme People's Court, the country's highest-level court, assigned the right of handling commercial cases involving foreigners to some middle-level courts. The order took effect on March 1.

In line with China's World Trade Organization (WTO) membership, the new order is an example of judicial reforms that will help China conform to the WTO principle of "non-discrimination."
In the past, foreign-related commercial cases can be heard by any grassroots and intermediate courts around the nation.

Now, the order has restricted the right of handling foreign-related commercial cases only to high courts, intermediate courts in municipalities, provincial and autonomous regions' capitals and special economic zones, as well as some courts in economic and technological development areas in cities.

The Supreme People's Court will authorize other intermediate courts if necessary, according to the new judicial explanation.

"Higher level courts are more professional and, therefore, can better ensure judicial justice and protect the legitimate interests of foreign individuals and enterprises," said Yu Lingyu, president of the No 4 Civil Division of the Supreme People's Court.

In 1979, the civil procedure law for trial implementation stipulated that the first instance of cases involving foreign individuals or enterprises, whether civil or commercial, should be heard by the intermediate courts.

At that time, competent judges familiar with international trade disputes were few and far between at the grassroots level.

In the 1991 new civil procedure law, grassroots courts were given de facto jurisdiction for such cases.

Article 19 of the law rules that the intermediate people's court is competent to rule on the first instance of "major cases involving foreigners, cases of great impact within its jurisdiction and those cases determined by the Supreme People's Court as coming under its jurisdiction."

"The article actually permits the grassroots courts to deal with some of such cases, because it assigns only major cases to the rule of the intermediate courts," explained Liu Dongjin, professor with the Law School of Peking University.

However, problems have occurred with the involvement of lower-level courts in foreign-related commercial cases.

Such cases involve complicated international trade issues. To better judge the cases, judges are required to at least have a basic knowledge of international trade law, judicial procedures and foreign languages.

"But at the grassroots level, few judges can meet the requirements," said Yu Lingyu. "As a result, there have been many unnecessary judicial disputes relating to foreign commercial exchanges."

"My understanding is that the supreme court this time interprets 'commercial cases involving foreign parties' as the 'major cases' stipulated in the Article 19 of the civil procedure law," said Liu Dongjin.

The interpretation concerning jurisdiction will concentrate judicial resources in hearing foreign-related commercial cases.

The higher professional quality of the designated intermediate court judges, who have rich experience in dealing with commercial cases concerning foreign parties, will ensure judicial justice, Yu said.

Protectionism is another serious problem facing the judgments of grassroots courts.

In some cases, fair judgments will have an impact on local interests and sometimes on local governments. Therefore, these interests often interfere in the work of local courts.

"Such interference has seriously disturbed the judicial order," Yu said.

By turning over the right of hearing such cases to the designated intermediate courts, the Supreme People's Court endeavours to help courts shake off disturbances arising from protectionism.

The reform will leave much less room for protectionism to interfere, Yu said.

In Zhejiang Province, for example, there used to be 11 intermediate and 88 grassroots courts that could hear foreign-related cases. Now, only two intermediate courts retain the right, according to the new judicial explanation, Yu said.

The new reform is also an innovative judicial manoeuvre by the Supreme People's Court. It enables the supreme court to supervise the judgment of foreign-related commercial cases more effectively, said Liu.

China has a four-grade judicial structure - grassroots court, intermediate court, high court and the Supreme People's Court.

According to its judicial supervision system, if a party disagrees with the judgment by a court, it can appeal at most to courts two levels higher.

If the grassroots courts have the right to hear foreign-related commercial cases, as was the case in the past, the parties involved can only appeal at most to the high courts. They cannot reach the supreme court.

The supreme court can redress the judgments by lower-level courts if it thought the judgments were wrong. However, without receiving the appeals, it did not have many chances to know the disputes.

This is a systematic flaw, Liu said.

Now that the intermediate courts handle such cases, the disagreeing parties can appeal to the supreme court and the supreme court can have more effective judicial control over the cases, Liu added.

Noticeably, not all foreign-related cases are handed over to the intermediate courts in the jurisdiction reform. The exceptions are cases concerning border trade, real estate and violation of intellectual property rights involving foreign parties.

"Border trade disputes are few and the value involved is small, so it is unworthy to put them under centralized jurisdiction," explained Wan Exiang, vice-president of the Supreme People's Court.

From 1995 to October last year, there were 478 border trade disputes involving 777.8 million yuan (US$94 million) in the seven provinces and autonomous regions - excluding the Xinjiang Uygur Autonomous Region - bordering on foreign soil.

Real estate disputes are excluded because the new judicial explanation deals with international "trade" disputes. Real estate cases concern immovable property, not commodity flows.

"It is also because, technically, the hearing of real estate cases is not very complex and the grassroots courts are competent to handle them," said Liu.

As to cases of intellectual property rights, there have been prior laws that define the jurisdiction.