Legal indemnity mechanisms involve a specialized insurance policy that protects a plaintiff against the financial risks of an unsuccessful asset seizure during a civil litigation process. Susong baoxian is the Chinese term for litigation security insurance, which is a contract between a litigant and an insurance company to provide a bond to the court. It governs the provision of security required by the People’s Court before it will issue a property preservation order to freeze a defendant’s assets.
The boundary of this insurance is determined by the judicial interpretations of the Supreme People’s Court, which allow for insurance policies to replace cash deposits as a form of security. This mechanism is widely used in commercial disputes to prevent a defendant from transferring assets while the trial is ongoing. It applies to both domestic and foreign plaintiffs who seek to secure their claims in a Chinese court.
This product has democratized access to property preservation by making it affordable for small companies.
Contractual agreements between the plaintiff and the insurer are finalized after a risk assessment of the underlying lawsuit and the defendant’s asset situation. When a company applies for susong baoxian, the insurer reviews the legal arguments to ensure that the claim is not frivolous and that the plaintiff has a reasonable chance of success. The premium is calculated as a percentage of the amount to be frozen, and the policy typically lasts until the case is resolved or the asset freeze is lifted.
The insurer issues a letter of guarantee that is then submitted to the court along with the plaintiff’s application for property preservation. This letter is an unconditional promise to the court that the insurer will pay for any damages the defendant suffers if the seizure is later found to be wrongful. This professional underwriting process adds a layer of scrutiny to the plaintiff’s case before it even reaches the judge.
The insurance policy is a key document in the plaintiff’s litigation strategy.
Administrative acceptance of the insurance bond is at the discretion of the court, which must verify that the insurer is authorized and has a sufficient credit rating. Not every insurance company in China is qualified to provide susong baoxian, and most courts maintain a whitelist of approved providers. The judge examines the policy to ensure it covers all potential liabilities and that the coverage amount is equal to the value of the assets being frozen.
If the court finds the insurance inadequate, it may require the plaintiff to provide additional cash or other forms of security. This filter protects the defendant from being harmed by a seizure that is not backed by a reliable financial institution. Once the court accepts the bond, it issues a preservation order and sends it to the relevant banks or land registries to implement the freeze.
This process is much faster than waiting for a cash deposit to be processed through the court’s accounting department.
Legal liabilities for the plaintiff and the insurer arise if the court finally decides that the property preservation was unjustified and caused financial harm to the defendant. If the plaintiff loses the case on its merits, the defendant can sue for damages, such as lost interest on frozen funds or business losses from a seized warehouse. Under the susong baoxian policy, the insurer will pay these damages up to the limit of the policy and then seek to recover the money from the plaintiff.
This recursive claim structure ensures that the plaintiff remains accountable for their decision to freeze the defendant’s property. The statutory position in China is that the applicant for preservation is strictly liable for any resulting damage if their claim is ultimately dismissed. This risk discourages parties from using asset freezes as a purely tactical move to harass their opponents.
The insurance product provides a way to manage this risk but does not eliminate the plaintiff’s ultimate responsibility.
PRC retrial applications do not stay execution; securing a stay requires 100 percent collateral, incurring statutory daily interest penalties of 0.0175 percent.
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