China’s Jurisdictional Maximalism

 

Photo by Beijing Patrol on Flickr (CC BY 2.0)

In 2020, Chinese courts issued an unexpected wave of anti-suit injunctions over just five months. These injunctions targeted major foreign owners of telecommunications technology, many of them European, and barred them from pursuing foreign litigation related to their patents. In 2022, the European Union (“EU”) filed a request for consultations at the World Trade Organization (“WTO”), alleging that China’s issuance of anti-suit injunctions violated the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”). While the WTO panel initially rejected key aspects of the EU’s claims, the WTO arbitration panel later reversed, concluding that China’s anti-suit injunctions were inconsistent with its TRIPS obligations. According to the European Commission’s press release, China has since announced the withdrawal of its anti-suit injunction policy. The Commission, however, stated that it would continue to monitor China’s compliance, citing the unwritten nature of that policy.

In a forthcoming article, I argue that the wave of anti-suit injunctions should be understood as both the starting point and a crucial element of China’s broader strategy of jurisdictional maximalism: that is, the aggressive expansion of control by Chinese courts over litigation that implicates China’s overseas interests. China’s jurisdictional maximalism reflects a trend through which Chinese courts seek to advance the new state policy of foreign-related rule of law and represents a significant development in extraterritoriality that will reshape the global landscape of transnational litigation.

Background

In 2019, China began promoting the policy of foreign-related rule of law (“FROL”). This development coincided with sanctions and legal actions faced by such Chinese technology giants as Huawei and ZTE in the United States. At its core, China’s FROL policy seeks to challenge U.S. extraterritoriality (or what Chinese discourse often describes as “U.S. long-arm jurisdiction”) and, more broadly, to defend China’s perceived legitimate overseas interests.

At roughly the same time, those Chinese technology firms faced a different vulnerability in Europe. The key development was Unwired Planet v. Huawei, where the U.K. court broke new ground by holding that a domestic patent infringement action could be used to set the terms of a global royalty license. After that decision, Huawei and ZTE were sued by foreign patent owners in the United Kingdom, where Chinese firms risked having either to accept a global license on terms dictated by U.K. courts or to face an injunction that would exclude their products from the U.K. market. The jurisdictional rulings to set global royalty rates were upheld in 2020 by the U.K. Supreme Court. As a result, Chinese firms were left with a stark choice: accept licensing terms they viewed as exploitative or lose access to a lucrative foreign market. Transnational patent litigation thus became the first arena in which China’s broader jurisdictional assertiveness took concrete form.

Emerging Maximalist Paradigm

China’s jurisdictional maximalism first manifested through the issuance of anti-suit injunctions. Chinese law has explicitly allowed parallel proceedings for many years. Yet in 2020, against the backdrop of foreign market restrictions facing Chinese firms and China’s promotion of FROL, Justice Luo Dongchuan, then President of the Supreme People’s Court’s Intellectual Property Court, publicly called for the development of anti-suit injunctions within the Chinese legal system to counter foreign legal challenges. Three months after his speech, the Supreme People’s Court issued China’s first anti-suit injunction in Huawei v. Conversant.

Although Huawei v. Conversant prevented Conversant from enforcing a German injunction against Huawei, later Chinese courts went further. At the ex parte request of Chinese firms seeking determinations of global royalty rates, Chinese courts issued global anti-suit injunctions that prohibited foreign patent owners from continuing or initiating related patent litigation abroad. These orders relied in part on a lis pendens-like logic. Because the Chinese court was first seized of the dispute, restraining the foreign action produced much the same effect as a lis pendens stay or dismissal.

When these aggressive anti-suit injunctions triggered resistance from foreign jurisdictions, Chinese courts pivoted quickly by significantly broadening their jurisdiction—both personal and subject matter jurisdiction—over global patent litigation to support domestic firms. In particular, Chinese courts developed an “appropriate connection” rule to overcome foreign parties’ objections that their contacts with China were insufficient to justify the exercise of personal jurisdiction. Chinese courts can now assert personal jurisdiction over foreign parties based on a single negotiation in China or because the anticipated place of future contract performance is in China. Once Chinese courts broadened their authority to adjudicate global royalties, they retreated from their reliance on lis pendens and returned to the traditional position that Chinese law permits parallel proceedings, under which foreign parallel litigation does not affect Chinese proceedings.

Implications

China’s jurisdictional maximalism has three important implications for the future of transnational litigation. First, non-Chinese parties have begun to make strategic use of this maximalist jurisdictional paradigm. For example, Samsung, a Korean company, asked the Wuhan Court to determine global royalty rates for Ericsson’s patents. In addition, it petitioned the court for a global anti-suit injunction that would forbid Ericsson from pursuing or maintaining foreign patent litigation. Samsung further requested an anti-anti-enforcement injunction barring Ericsson from asking a foreign court to enjoin Samsung’s enforcement of the Chinese antisuit injunction. The Wuhan Court granted both of Samsung’s requests, an action that then prompted the U.S. District Court for the Eastern District of Texas—where a related dispute was already pending—to issue an anti-anti-suit injunction to preserve its own jurisdiction.

Second, the maximalist paradigm that emerged from transnational patent litigation has now formally encompassed all foreign-related civil and commercial cases. In 2023, China’s national legislature significantly broadened Chinese courts’ subject matter jurisdiction over foreign-related civil and commercial cases by enacting major amendments. Framed by the Ministry of Justice to advance the FROL policy, the expansion addressed the inadequacy of existing jurisdictional rules over such cases in light of the expanding overseas footprint of Chinese enterprises and citizens. The 2023 amendments also formally expanded the scope of personal jurisdiction over non-domiciled parties by codifying the rules of “appropriate connection,” first developed in transnational patent litigation.

Finally, China’s assertive jurisdictional posture may reshape transnational litigation by increasing the likelihood of parallel proceedings, expanding the practical reach of Chinese law, and generating more frequent conflicts over judgment recognition. China’s expansive jurisdictional rules and stringent application of forum non conveniens may increasingly require foreign parties to litigate related disputes in both Chinese and foreign courts. That jurisdictional expansion becomes more consequential because Chinese courts have shown a homeward tendency in choice-of-law decisions. This means that disputes with substantial foreign elements may still be governed by Chinese law. Parallel litigation may also produce competing judgments: when Chinese courts can assume jurisdiction over related proceedings, foreign judgments are not recognized in China absent a treaty, reciprocity, or another limited basis for recognition.

Conclusion

China’s jurisdictional maximalism has already begun to affect foreign legal systems, including that of the United States, and may ultimately reset the global jurisdictional order of transnational litigation. In a case not involving China, a U.S. district court recently enjoined the litigation of U.S. patents in Germany. It may therefore be time for U.S. courts to rethink their litigation isolationism and respond more aggressively to this new challenge.