How to Apply for Property Preservation in Chinese Lawsuit?
When one files an action in Chinese court, he/she may find that the counter-party is trying to transfer the property in order to evade the effective judgment in the future. What can the plaintiff do to avoid the unfavorable situation? Today we would like to introduce you some information abou the property preservation in Chinese lawsuit.
1. What is property preservation?
As mentioned above, it is common that the counter-party tries to transfer his property after he knows the lawsuit he being against or the counter-party may actually have no sufficient property to execute the judgement. These situations seriously influences the plaintiff’s interests, because even if the plaintiff wins the lawsuit with much efforts, the defendant may still refuse or have no ability to perform his duty according to the final judgment.
Therefore, it is very important for the plaintiff to apply for a property preservation against the counter-party before or in the process of filing a suit.
If the property preservation application is granted by the Chinese court and the preservation is conducted successfully, it means that the property of the counter-party ( such as bank account, real estate, vehicles, shares, etc.) has been frozen, so the counter-party can not transfer or hide its property to avoid performing the legal obligations.
2. Why need the property preservation?
Properly carrying out the property preservation can not only guarantee the losing party to perform his duties according to the effective judgment, but also bring great inconvenience to the defendant's normal operation when his/her bank account is frozen, so the defendant may positively initiate negotiations with the plaintiff, which may facilitate the possible settlement of disputes between the plaintiff and defendant.
3. How to apply for property preservation?
Please note that, even if the property preservation does help a lot for the plaintiff in the Chinese lawsuit, but it does not equal to a 100% success of the lawsuit.
First, the plaintiff should submit the specific information on the defendant’s property or at least, some clues of those property to the Chinese court. Otherwise, it may hard for the court to clearly know what properties of defendant can be preserved.
Second, you may ask if lawyer can do the investigation for you.
If the counter-party is a natural person:
Chinese lawyer can act on behalf of the plaintiff investigate about the vehicles in the name of the counter-party in the Vehicle Administration Center.
As for the bank account, if the plaintiff does not exactly know any clue of the person’s accounts, the lawyer can try to request the court to investigate and to freeze the accounts within the value of preserver property.
As for the real estate, it is hard to reach success because only the accurate address of the real estate are known, can the lawyer take investigation in the Real Estate Registration Center.
If the counter-party is a company, Chinese lawyer can investigate on the properties including the company’s business registration information, the bank account registered with the authority, real estate, etc. Also, for the real estate like buildings or houses, the accurate addresses should be known by the applicant for investigation purposes.
If the plaintiff exactly knows the said information of the counter-party’s properties, it may better request the preservation for the said purpose. However, the situation and condition may change with the complexity of case, the region or area.
4. What expenses would be incurred?
After the property preservation is successfully preserved, it would have a great influence on the counter-party’s normal business or operation. Therefore, if the plaintiff loses the suit finally, while the defendant suffers damages from the preservation, the plaintiff needs to compensate for that even if he has no fault.
In addition, the applicant needs to pay the application fee for preservation to the court. And in practice, the court usually would ask the applicant to provide some guarantee, in case the said risks occur. Because it is less likely for a foreign party to directly provide guarantee on its own, so the guarantee usually is provided by some Chinese insurance company.
As for the application fee for preservation except the acceptance fee paid to the court, according to Measures for the Payment of Court Fees （《诉讼费用交纳办法》），the fee is in the range from RMB 30 to 5000 and the fee shall be paid based on the amount pf preserved property at three rates.
As for the fee for guarantee, the fee is also paid based on the amount of property preserved at different rates from 0.5% to 6% for the total amount of claim.
In summary, in order to promote the negotiation between parties in disputes and to better urge the losing party to effective judgment, the plaintiff can try to simultaneously apply for property preservation before or in instituting an action.
If you have any further questions, please feel free to contact us in any time.
Larry Zhou, Partner
Landing Law Offices China
Mobile& WhatsApp: +86 13342931852
Linkedin: Larry Zhou