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Wednesday, April 1, 2009

China establishes public database of judgment debtors

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Here's a very interesting development: on March 30, 2009, the Supreme People's Court opened to public use a web-based database of all judgment debtors in all courts in the country (except military courts). When I say "judgment debtor" (the Chinese term is 被执行人, perhaps most directly translated as "executee"), I mean defendants who have had executable judgments rendered against them and have not yet complied, regardless of whether there is money involved; it may be they are required to do some act, not just to pay money. Since the purpose of this database is apparently to increase compliance, I am assuming without actually knowing that judgment debtors are removed from the list once they comply. The list includes all judgment debtors in new cases starting in 2007 and in cases begun before then where there is an unexecuted judgment. According to an article in Caijing, the database now has over 6 million cases.

Information is supposed to be posted to the web site by the court in charge of execution of the judgment. The database may be searched by party name, identity card number (if a person), or organization code (if an organization). I was surprised to read in the Caijing article that apparently courts have not in the past always required parties to provide their identity card numbers to the court, so this information is not always available. Although you can search by identity card number, the information displayed once you find someone omits the last four digits from the card number in order to preserve the party's privacy. (This seems like a good idea.)

If a party has an objection to the content, it may file an objection under a specific set of rules.

The database serves two purposes. First, it is intended to put pressure on defendants to perform judgments. This might function through a kind of public shaming, although it's not very public. More effecitve, I think, is the way this database can function as a check on the trustworthiness of potential business partners. If judgment-scoffers routinely find that nobody wants to do further business with them, they will have an incentive to comply.

Second, it is intended to put pressure on the reporting courts themselves to work hard on getting judgments performed; it looks bad when the public can look up judgments that are years old and still unexecuted.

Needless to say, not all unexecuted judgments indicate that something bad is going on. When the defendant is insolvent, the judgment will stay unexecuted. When the judgment is unjust - for example, the judge was bribed - then the defendant's resistance is understandable. But it's still a good idea to make this information public: if the defendant has a good case to make to a potential business partner, he can explain himself.

I hope law firms are paying attention to this database - it seems to me that not to make it a standard part of any due diligence investigation would amount almost to malpractice.

This seems to me, at least at first glance, to be an entirely positive development. The potential downside - the legitimate interests of defendants in the privacy of their identify card number - seems to have been taken care of. Are there other downsides I've overlooked? I'd welcome comments.

UPDATE: Here's a screen shot (click for full-size view) of a report on a random judgment debtor (I just picked the likely-sounding name of 张卫东, since many people got names like that in the 50s and 60s). One thing seems to contradict an assumption I made above: this record is still in the database even though it seems that the judgment has already been performed (已结). If so, this reduces the incentive of judgment debtors to perform, although perhaps it increases their incentive not to get on the list in the first place. This makes it critical to understand how you get on the list: is it just by losing an executable judgment, or is it by refusing to perform and thereby being subject to coercive execution (强制执行), or is still some other  circumstance?

UNTITLED

UPDATE #2 (April 2): Mr. Lan Rongjie, a Chinese lawyer currently an SJD candidate at Temple Law School and a PhD from Sichuan University Law Faculty, offers the following helpful clarification:

Initiation of execution depends on two conditions: 1) the defendant fails to perform the judgment within a specific period of time set by the court, and 2) the plaintiff files an application for forcible execution (强制执行). Please note when Chinese courts refer to execution of a court judgment, it means (forcible) enforcement. Therefore, even though all records show that all judgments against a specific person have been executed, it still indicates that this person does not have a good reputation in complying with court orders.

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Comments

The situation of Zhangweidong is understandable in that the expression "performed" means that the person has suffered from enforcing measures adopted by the court. That could only have happenned in the case that he had had refused to perform facing the demands of his creditor and that of the court, while the refusal itself is "condamnable" as a symbole of unhonesty and untrustworthness.

Posted by: bin | Apr 2, 2009 7:40:46 AM

This is an interesting report (http://npc.people.com.cn/GB/15177/123385/9093263.html)showing that the statistic on execution of judgment is not completely credible. Serious frauds exist in "execution rate", according to the SPC.
Bin LI

Posted by: bin | Apr 8, 2009 10:07:52 AM

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