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.
Judicial Preservation Insurance
Meaning
Financial guarantees provided by insurance companies to the People’s Court facilitate the freezing of assets without the need for cash deposits. This judicial preservation insurance acts as a surety bond that covers the risk of a plaintiff making an wrongful claim. It has become the primary method for satisfying the security requirements of the Civil Procedure Law in China.
Market Accessibility
Litigation participants purchase these policies for a fraction of the total value of the claim being secured. The availability of judicial preservation insurance means that small and medium sized enterprises can pursue large claims without tying up their own working capital in court deposits. Insurance companies evaluate the merits of the case before issuing the policy to manage their own risk exposure.
Policy Terms
Insurance contracts must be specifically designed to meet the standards set by the Supreme People’s Court. Every judicial preservation insurance policy must state that the insurer will pay damages to the defendant if the court determines the preservation was inappropriate. The policy period must cover the entire duration of the litigation plus any appeal process.
Court Acceptance
Judges check the registration of the insurer and the specific wording of the guarantee before accepting the filing. A valid judicial preservation insurance policy allows the court to proceed with the asset freeze immediately. The policy is filed as part of the official case record and cannot be cancelled without court approval.