Civil Procedure Asset Preservation Mechanisms in Chinese Commercial Disputes
Asset preservation under Chinese Civil Procedure Law instantly freezes bank accounts and equity upon post of insurance bonds, compelling rapid commercial settlement.
Fan Baoquan
Meaning
Counter preservation describes the legal act of a defendant providing a guarantee to the court to release assets that have been previously frozen. This fan baoquan allows a business to regain control of its property by offering an equivalent security that protects the plaintiff’s interests. It is a vital tool for maintaining business continuity when operational assets like bank accounts or manufacturing equipment are subject to a court order.
Substitution Mechanism
Cash deposits or bank letters of guarantee are the most common forms of security provided in these instances. When a defendant successfully initiates fan baoquan, the court issues a new order to lift the original freeze on the specific assets. The security provided by the defendant then stands in place of the property until the final resolution of the case.
Operational Continuity
Companies use this procedure to prevent the shutdown of production lines or the freezing of payroll accounts during a lawsuit. Seeking fan baoquan is often the only way for a respondent to mitigate the immediate negative impact of litigation on their daily operations. The value of the replacement security must be sufficient to cover the entirety of the claim and potential court costs.
Judicial Approval
Judges must verify that the replacement security is liquid and accessible before they will release the frozen property. The court will not approve fan baoquan if the proposed security is another asset that is difficult to value or sell. Once the court is satisfied with the substitute, the previous preservation is vacated immediately.