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Exit Control In China Civil Litigation – Civil Law


Exit control, or restriction on departure from China, can be
imposed on individual debtors to urge them to fulfill their
obligations in civil litigation. It can be applied before or during
a civil proceeding, as well as during the enforcement procedure.
This article summarises the application of exit control
measures in civil litigation.

LEGAL BASIS

Application of exit control in enforcement procedure is mainly
based in article 262 of the Civil Procedure Law, which provides
that if a person subjected to enforcement fails to fulfill
obligations provided in legal documents, the court may impose exit
control measures on him/her.

In the absence of express legal basis, courts may choose from
two approaches to imposing exit control measures before or during a
litigation proceeding. One option is to make a preservation ruling
pursuant to articles 103 and 104 of the Civil Procedure Law
regarding act preservation. The other option is to make a ruling or
decision on the ground of “pending civil cases” according
to articles 12(3) and 28(2) of the Exit and Entry Administration
Law.

RESTRICTED PERSONS

During the enforcement procedure, according to article 24 of the
Interpretation of the Supreme People’s Court on Several Issues
Concerning the Application of the Enforcement Procedure of the
Civil Procedure Law, persons subject to exit control measures
include, in the case of a natural person, the judgment debtor or
statutory custodian – or in the case of an entity, the legal
representative, person in charge or persons directly responsible
for performance of debt of the judgment debtor. Among them, the
“persons directly responsible for performance of debt”
may include major shareholders, actual controllers and handlers of
subject matter of the case.

Before and during the litigation proceeding, persons subject to
exit control may include parties to the case (in the case of a
natural person) or the parties’ legal representative or person
in charge (in the case of an entity).

CONDITIONS

Exit control measures can be applied before and during the
litigation proceeding, as well as during the enforcement procedure,
regardless of whether the case is foreign-related. In
foreign-related commercial litigation, the conditions for
application of exit control measures are rather
straightforward.

According to article 93 of the Minutes of the Second National
Working Conference on the Trial of Foreign-Related Commercial and
Maritime Cases in 2005, and article 50 of the Minutes of the
Symposium on the Trial of Foreign-Related Commercial and Maritime
Cases by National Courts in 2021, both of which were promulgated by
the Supreme People’s Court, the conditions are that:

(1) there is a pending foreign-related commercial case;

(2) the applicant is more likely than not a winner in the case,
and there are chances that the respondent exits China to evade
participating in the litigation and fulfilling legal obligations;
and

(3) the respondent’s exit may present difficulties in
reviewing or enforcing the case.

However, if the respondent has sufficient property available for
seizure in China, the exit control measures will not apply.

INITIATION

According to article 23 of the SPC interpretation, there are two
approaches to initiating exit control measures in the enforcement
procedure. One is by court decision upon the application of a
party; and the other is by ex officio court decisions. In judicial
practice, courts mainly impose exit control measures in the form of
decisions; and in some cases, in the form of rulings on
enforcement.

As for exit control before and during civil proceedings, in the
absence of clear legal instruments, the judicial practice endorses
two approaches of initiation. One approach is that a party requests
the court to impose preservation measures that include, among
others, the exit control measure, according to articles 103 and 104
of the Civil Procedure Law – and the court makes a
preservation ruling on exit control. The other approach is that the
court makes a decision or ruling on exit control according to
articles 12(3) or 28(2) of the Exit and Entry Administration Law.
In some cases, both approaches are adopted concurrently. For
example, in Taizhou Huatai Industrial Holding Co v Wang Xinghua
(2021), the court made both a preservation ruling and a decision on
exit control to prohibit the respondent from exiting China. Either
way, the court may require the applicant to provide security in the
form of cash, letter of guarantee, real estate or others for its
application.

RESTRICTION PERIOD

There is no clear legal provision on the period of exit control.
In practice, when a court imposes exit control measures, it may
specify a period, mostly one to six months, which can be extended,
or it may generally decide to prohibit exit before the case is
concluded.

ASSISTANCE FOR ENFORCEMENT

After a court imposes exit control measures, it will usually
notify and request the public security authorities to prohibit the
restricted persons from travelling abroad. In addition, the court
may also ask the employer of the restricted person for
assistance.

RELEASE AND RECONSIDERATION

In the enforcement procedure, according to article 25 of the SPC
interpretation, if the judgment debtor performs all debts
determined by legal documents, the court of enforcement shall lift
the exit control. If security or applicant’s consent is
provided, the court may also lift the exit control.

During the litigation proceeding, according to article 50 of the
2021 minutes, if the respondent subject to exit control – or
legal representative or person in charge – provides security
or performs legal obligations, the court shall immediately lift the
exit control. During the litigation proceeding, a respondent
dissatisfied with a ruling on exit control may apply to the same
court for reconsideration of such ruling within five days of
receiving it. But the enforcement will not be suspended during the
reconsideration.

However, for exit control measures adopted in the form of court
decisions pursuant to the Exit and Entry Administration Law, courts
have revealed disagreements in practice as to the reconsideration
authority and the reconsideration period due to the lack of clear
legal provisions – an issue that is yet to be resolved.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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