Strictly Controlling Cross-Regional Law Enforcement and Standardizing Enterprise-Related Case Trials | A Plain-Language Article-by-Article Look at the SPC Notice

Recently, the Supreme People’s Court issued the “Notice on Adhering to Strict and Fair Justice to Standardize the Trial and Enforcement of Enterprise-Related Cases” (hereinafter referred to as the “Notice”).

The core of the Notice is: “Standardize the trial and enforcement of enterprise-related cases, actively promote the building of a law-based business environment, and serve and guarantee high-quality development with strict and fair justice.”

The Notice contains ten articles covering equal protection, distinguishing economic disputes from criminal offenses, standardizing case filing jurisdiction, and reasonably adopting coercive measures.

Among them, multiple articles address the prevention of “profit-driven law enforcement/justice” issues.

Below is an article-by-article analysis of the Notice’s impact on enterprises.

*This article reflects only the author’s personal views and does not constitute legal advice or a legal opinion.

I. Implementing Equal Protection According to Law

Article 1’s core is “equal protection according to law of the property rights and independent management rights of enterprises under all forms of ownership.”

All enterprises (regardless of size or form of ownership) are equal, with equal litigation status and legal application.

Equal protection according to law of the property rights and independent management rights of enterprises under all forms of ownership, ensuring equal protection of lawful rights and interests according to law, and holding illegal and criminal acts accountable according to law. Adhere to equal rights, equal opportunities, and equal rules for all forms of ownership economies, treat all property rights subjects equally in litigation status and legal application, equally protect the property rights of all forms of ownership economies according to law, and punish according to law all acts that infringe upon the property rights and lawful interests of any form of ownership economy.

Those who understand will understand — no further explanation needed here.

II. Resolutely Preventing Economic Disputes from Being Treated as Crimes

Article 2’s core emphasizes strictly distinguishing economic disputes from criminal offenses, preventing economic disputes from being treated as crimes.

Strictly distinguish between contract disputes and contract fraud, lawful financing and illegal fundraising, participation in mergers and acquisitions and malicious embezzlement of state-owned assets, legitimate business operations and illegal and criminal acts, strictly grasp the standards for identifying criminal offenses, resolutely prevent and correct the use of administrative and criminal means to interfere in economic disputes, and effectively prevent illegal cross-regional law enforcement and profit-driven law enforcement in the administration of justice. For economic conduct in production, operation, financing, and other activities that violates laws or regulations but does not constitute a crime, acquit according to law, or recommend that the procuratorate withdraw the prosecution.

In recent years, certain industries have seen some enterprises using [cross-regional] criminal means to attack “suspected infringement” activities, leading to normal businesses being criminally filed, business leaders being detained in other jurisdictions, and company operations suffering greatly.

This practice of criminalizing civil disputes not only frightens business leaders but also disrupts normal economic order.

The Notice now explicitly requires resolute prevention of using various means to interfere in economic disputes, and prevention of cross-regional and profit-driven law enforcement.

Combined with the earlier rumor that “enterprises suspected of crimes shall be under the jurisdiction of the public security bureau where the enterprise is located,”

it is believed that cross-regional law enforcement will be greatly reduced in the future.

III. Preventing and Correcting Local Protectionism

This article has two core points:

First, implementing the case filing registration system without wavering — “All cases that should be filed shall be filed.”

Second, strictly prohibiting the expansion of jurisdiction over enterprise-related cases and the artificial creation of cross-regional jurisdiction — “Where it should be filed, there it shall be filed.”

Implement the case filing registration system without wavering, protect the parties’ right to sue according to law, and resolutely eliminate issues such as delaying case filing, illegally refusing case filing, restricting case filing, and selective case filing. Adhere to the principle of statutory jurisdiction as the norm and transferred jurisdiction and designated jurisdiction as exceptions, strictly prohibit the expansion of jurisdiction over enterprise-related cases and the artificial creation of cross-regional jurisdiction under the influence of local protectionism or for profit-driven purposes, and do not refuse to file or dismiss civil cases related to enterprises that should by law be filed on the grounds of suspected criminal offenses.

The former targets various situations where “small claims against large parties” are not filed, while the latter once again emphasizes “prohibiting all forms of artificial cross-regional jurisdiction.”

Cases where someone used to find a local citizen to file a police report, leading to the direct removal of a company’s boss, are expected to decrease significantly.

IV. Standardizing the Application of Disciplinary Measures

The core of this article in plain language is: Do not use “freezing” as a means to force a company to plead guilty or to cripple its operations, do not arbitrarily “freeze” others’ lawful property, and do not completely “lock down” operations.

Strictly prohibit exceeding authority, scope, targets, and time limits in adopting seizure, impoundment, and freezing measures. Strictly distinguish between illegal gains and lawful property, personal property of involved individuals and corporate property, etc. Property unrelated to the case shall not be seized, impounded, or frozen.

For property that can be “flexibly frozen,” try not to impose a “dead freeze” as much as possible.

In simple terms, only freeze as much property as is involved in the case — if the case involves 1 million yuan, do not freeze all accounts of the entire company.

Also, in company-related cases, the responsible person’s total income and personal accounts cannot all be treated as involved property and frozen.

And as long as accounts can still receive funds, let them continue receiving; as long as expenditures are outside the scope of involved property, allow them — do not completely “freeze to death” and affect the normal operations of the company (and its partners).

V. Substantively Resolving Disputes

The core of this article: If mediation is possible, mediate; if not, deliver a judgment promptly.

Strictly standardize the filing and mediation work for enterprise-related civil cases, fully explain the advantages of pre-litigation mediation, and guide parties to resolve disputes through pre-litigation mediation as much as possible in a timely manner, striving to achieve case resolution and harmony. If mediation fails, proceed to trial and judgment in a timely manner according to law, and resolutely eliminate forced mediation, prolonged mediation without judgment, and using mediation to pressure judgments that violate the principle of voluntary mediation.

But it also means that “mediation” is a necessary step before “trial.”

The overall trial period will also be relatively extended.

If there is no intention to mediate, remember to firmly express “no mediation” before, during, and after the trial.

VI. Fairly Adjudicating Civil Cases to Promote Fair Market Competition

Two core points:

One is to prevent “the big bullying the small” — forcing small and medium-sized enterprises to sign unreasonable terms.

The other is to crack down on malicious acts such as “paid online mobs” and “trolls.”

Strictly implement the Supreme People’s Court’s Reply on Issues Concerning the Validity of Clauses Where Large Enterprises Agree with Small and Medium-Sized Enterprises to Make Payment Contingent on Receipt of Payment from Third Parties, preventing large enterprises from “bullying the small” by leveraging their advantageous position, and ensuring that small and medium-sized enterprises can participate in market competition fairly. Strengthen judicial efforts in antitrust and anti-unfair competition, legally sanction monopolistic agreements, abuse of market dominance, and other monopolistic acts, and legally punish extortion, rumor-mongering, defamation of business reputation and product reputation against enterprises and entrepreneurs, ensuring fair participation in market competition and legally protecting the lawful rights and interests of enterprises.

The former is self-explanatory, but let’s also discuss the Reply mentioned.

If a large enterprise, in the course of construction, procurement of goods, or services, agrees with a small or medium-sized enterprise to make payment contingent on receipt of payment from a third party, because such content violates Articles 6 and 8 of the Regulations on Safeguarding Payments to Small and Medium-Sized Enterprises, the people’s court shall, pursuant to Article 153, Paragraph 1 of the Civil Code, find such clauses invalid.

In the context of gaming, this means that when a developer cooperates with a large platform or operator, if the large platform/operator requires payment from a third party before paying the developer, this may be a violation and render the clause invalid.

The other point addresses the increasingly severe problem of malicious attacks against enterprises, their management, and various products — whether paid “online mobs” or “trolls” deliberately seeking attention, all are within the scope of crackdown.

In the future, gaming companies facing similar “paid online mob” behavior can strike back hard.

VII. Fairly Adjudicating Administrative Cases to Promote Civilized Law Enforcement

The core is to tighten the restrictions on administrative penalties and reduce the arbitrary imposition of administrative sanctions.

Increase judicial review of administrative cases in key areas such as enterprise-related market access, administrative permits, administrative penalties, administrative coercive measures, and administrative compensation. Resolutely rectify arbitrary fees, fines, inspections, and seizures, and resolutely pursue legal liability for administrative inaction and misconduct. Implement basic principles such as proportionality, due process, and legitimate expectations, and effectively correct issues such as heavy penalties for minor offenses, light penalties for serious offenses, using fines to replace management, and using fines to replace criminal prosecution.

This situation is relatively rare in the gaming industry.

It might help reduce penalties in cases involving “unauthorized use of game publication numbers” that constitute “illegal business operations” (but do not reach criminal liability).

The situation where Guangxi once issued fines totaling over 100 million yuan at once should be greatly reduced.

VIII. Strengthening the Connection Between Civil, Administrative, and Criminal Procedures

Procedural requirements: “Arrest where arrest is due, sentence where sentence is due, and release where release is due.”

Implement the work requirements for transferring criminal leads — for enterprise-related civil and administrative cases, if after review it is suspected that a crime has been committed, the criminal lead shall be promptly transferred to the relevant authorities for handling. For enterprise-related civil cases that do not need to be based on the outcome of criminal proceedings, civil litigation shall not be delayed on the grounds that a criminal case is under investigation or has not yet been concluded. For enterprise-related criminal cases, if after review they are found not to constitute a crime under the law, an acquittal shall be entered, or the procuratorate shall be recommended to withdraw the prosecution.

There are not many points for gaming companies to note regarding this article.

IX. Strictly Standardizing the Recovery and Disposal of Case-Related Property

Once again, property unrelated to the crime shall be returned promptly; for investment returns that have already generated profits, only the returns need to be addressed directly, and the investee shall not be required to return the principal.

Lawful property of the defendant entity and property unrelated to criminal activities, along with its fruits, if meeting the conditions for return, shall be returned promptly. For investment rights and interests formed from property accumulated or obtained through illegal and criminal activities, such investment rights and interests shall be disposed of according to law, and the invested property shall not be directly recovered.

Good to know.

X. Precise Identification and Classified Measures, Adhering to Both Active Rescue and Timely Clearance

Core: Save the enterprise.

Apply bankruptcy reorganization and conciliation procedures according to law, fully leverage the functions of suspending enforcement and stopping interest accrual, promptly preserve the debtor’s property and prevent further expansion of debt, and help enterprises with rescue potential and value to restore vitality and return to the market. During bankruptcy proceedings, explore the promotion of integrated resolution of issues where entrepreneurs provide guarantees for corporate debt, effectively dissolving the corporate debt chain. Methodically clear zombie enterprises from the market according to law, release and revitalize market factor resources, and assist in the development of new productive forces.

For enterprises that can be saved, do everything possible to save them, avoiding situations where “interest exceeds principal” due to prolonged trials or case delays.

Ensure as much as possible the “right to survival” of small and medium-sized enterprises, while simultaneously implementing measures to drive zombie enterprises that do not engage in actual production out of the market.