[The author would like to express his gratitude for the sincere help he received from his peers in writing this article: Ms. Qi Hong, a lecturer at the China University of Political Science and Law, collected and organized a great deal of information, which made it possible to complete this article in a short period of time. Mr. Tian Tao, a historian, kindly allowed us to borrow historical documents from his collection, and the insights of this article on legal transplantation at the end of the Qing Dynasty also benefited from Mr. Tian's guidance. Mr. Alan Lepp, who was introduced to the author by Ms. Leroy Chang of the Ford Foundation, provided us with information on the cost of litigation in the U.S. federal court system, and his selection of perspectives has been very enlightening to the author. As usual, the knowledge, experience and wisdom of Mr. Tse Wai (bark) has always made it possible to solve those puzzling problems.
The main components of litigation costs: "case acceptance fee", property preservation application fee and enforcement application fee
Litigation costs are divided into six categories: (1) "case acceptance fee"; (2) investigation, appraisal, announcement, translation fees; (3) transportation, accommodation, living expenses and lost wages allowance for witnesses, appraisers and interpreters appearing in court; (4) preservation application fees and actual expenses; (5) costs of enforcing judgments, arbitration and mediation agreements; (6) "other litigation costs which the people's court considers should be borne by the parties" (Note: the '89 Measures for Litigation Fees, Articles 1 and 2.) .
According to the literal meaning of Article 107 of the Civil Procedure Law, all civil cases require the payment of "case acceptance fee", of which "property cases" also require the payment of "case acceptance fee". Other litigation expenses" other than "case acceptance fee". But in practice, the court charges "other litigation costs" is not limited to property cases.
1. "Case acceptance fee" of the collection standard, prepayment and refund
"Case acceptance fee" is the main component of litigation costs. The '89 Litigation Fees and Charges Measures provide for the collection of case handling fees according to the type of case, which is divided according to multiple criteria. All cases to which the Measures apply are divided into four categories: civil cases, "administrative cases," "labor dispute cases," and "enterprise bankruptcy cases"; civil cases are further divided into Property cases" and "non-property cases", with "non-property cases" subdivided into "divorce cases", "infringement of the right to a name or a right to a license", "infringement of the right to a trademark or a right to a trademark" and "infringement of the right to a license". Non-property cases are subdivided into four categories: "divorce cases", "cases infringing on the right to name, fame, portrait, reputation, and honor", "cases infringing on patent, copyright, and trademark rights", and "other non-property cases". The '89 Litigation Fees and Charges Measures do not provide any explanation of "property cases", and in practice, litigation fees are levied on the basis of the "amount in dispute" in all cases involving property claims, regardless of whether they are in civil or administrative litigation, and regardless of whether they are infringing or tortious. or administrative litigation, whether they are tort cases, matrimonial cases or contract cases (Note: Article 5 of the '89 Litigation Fees and Charges Measures on the specific categorization of cases and fees is as follows: (1) Divorce cases, with a fee of 10-50 RMB per case. If the divorce involves the division of property, and the "total amount of property" exceeds 10,000 yuan, the excess is paid at 1%. As for the "total amount of property" is the value of the property claimed by one of the parties, or the total value of the couple's **** property, the method does not explain; (2) infringement of the right to name, name, portrait, reputation, honor and other "moral rights" of the case, 50-50 yuan per case. (2) In cases of infringement of "moral rights" such as the right to name, portrait, reputation, honor, etc., a fee of 50-100 yuan is charged for each case. If the plaintiff has a request for compensation, should the court charge an additional fee for handling the case? There is no explicit provision on this in the Scheme. If we only interpret the meaning of the text, the answer should be negative. Because, the method with the enumeration, need to according to the "amount in dispute" separate charge of the infringement case does not include the infringement of "moral rights" case. However, the actual practice of the court is that even in cases relating to "moral rights", all parties requesting compensation are charged according to the "amount in dispute"; (3) "other non-property cases", each case is charged according to the "amount in dispute"; and (4) "other non-property cases", each case is charged according to the "amount in dispute". (3) "Other non-property cases", with a fee of $10-50 per case. In such cases, if the plaintiff claims monetary damages, the court also charges according to the "amount in dispute", even though the scheme does not explicitly provide for this; (4) "property cases" are charged according to the "value or amount in dispute" (the detailed criteria are omitted). Property cases" are charged according to "the price or amount in dispute" (detailed standards are omitted); (5) cases involving infringement of patents, copyrights and trademarks are charged 50-100 RMB per case. If there is an amount in dispute, the fee shall be paid in accordance with the fee standard for property cases; (6) The fee for "administrative cases" shall not exceed RMB 400 yuan per case. If there is an "amount in dispute", the fee shall be paid at the same rate as for property cases. After the implementation of the Administrative Litigation Law in October 1990, the fees for administrative litigation are still applicable to this provision; (7) for labor disputes, the fee for each case is RMB 30-50; (8) for bankruptcy cases, the fee for bankruptcy cases is in accordance with the fee standard for property cases, based on the total value of the bankruptcy enterprise's property). The fee for bankruptcy cases shall be paid according to the total value of the property of the bankruptcy enterprise.
The "case acceptance fee" is based on the "amount in dispute" between the parties - the plaintiff sues, the defendant counterclaims, and appeals against the first-instance judgment, all in accordance with the "amount in dispute". The "amount in dispute" is levied (Note: Article 5 of the "89 Litigation Fees and Charges" stipulates the standard of "case acceptance fee" for property cases). (Note: Article 5 of the '89 Litigation Fees Regulations sets out the criteria for charging "case handling fees" in property cases. The so-called "amount in dispute" actually refers to the monetary value of the property right claimed by a party. After the courts charged fees based on the "amount in controversy", all professional services followed suit. Today, lawyers, accountants, appraisers, auctioneers, securities underwriters, and securities brokers all charge a percentage of the "subject matter" for their services.
If a party adds a property right to his claim in a lawsuit, he must pay another fee for the new claim, or it will not be heard. If the defendant files a counterclaim, he must pay a docket fee for the property rights claimed in the counterclaim, whether or not the counterclaim and the present claim are against the same property.
In a second instance case, if both parties appeal, the court of second instance collects case fees from each party. The fees paid in advance for the second trial are usually the same as for the first trial, and even if the first trial court awards less than the amount requested by the plaintiff, or if the appellant recognizes part of the debt awarded by the first trial court and appeals the balance, the court still collects the fees based on the "amount in controversy" of the first trial.
Party prepayment of fees is a basic rule. The plaintiff pays in advance within seven days of receiving the court's "notice of advance payment of court costs", the counterclaimant pays in advance at the same time as filing the counterclaim, and the appellant pays in advance at the same time as filing the appeal to the court of second instance (Note: "89 Litigation Fees and Charges", articles 12 and 13). Only the following two types of cases can be subject to post-judgment payment of litigation fees: (1) group actions in which one party is "numerous"; and (2) bankruptcy petitions.) (2) bankruptcy applications. Litigation fees other than case acceptance fees are determined in advance at the discretion of the court (Note: "89 Litigation Fees and Charges Measures," Article 5.). .
If the parties have agreed in the contract to pay for goods, rents or service fees in some foreign currency, even if both parties are Chinese citizens or corporations, they may be required to pay litigation fees to the court in the foreign currency (Note: For example, in the case of Appeal filed by China Oriental Leasing Co. over a dispute in a financing contract, the parties to the lease calculated the rents in Japanese yen, so the courts of the first and second instance charged litigation fees in accordance with the Japanese yen). The court of first and second instance charged litigation fees in Japanese yen. (Note: For example, in the case of Appeal filed by Nanjing Broadcasting and Television Component Factory in respect of Dispute over Financial Lease Contract, both parties to the lease calculated the rent in Japanese yen, so the court of first and second instance charged the litigation fee in accordance with the U.S. dollar. (See Selected Cases of Economic Disputes Tried by the Supreme People's Court at Second Instance and Retrial, China University of Political Science and Law Press, 1997 edition, pp. 380-393.) . However, the parties to use foreign exchange under other items to pay the litigation fee, and may violate the foreign exchange control and be punished.
There is only one situation in which litigation fees can be refunded in full, i.e., when a civil case in progress is "transferred in its entirety" to the procuratorate, the public security bureau, or the criminal division of a court as a criminal case (Note: "89 Litigation Fees and Charges Measures," Article 15.). The fee is not refundable in all cases. There is also only one case in which litigation costs are partially refunded, namely, when the plaintiff withdraws the case, half of the case fees are collected, and the other costs are borne in accordance with the actual expenses incurred (note: "89 Litigation Fees and Charges", art. 23). . The court does not refund case acceptance fees in the event of a stay of proceedings, a ruling by the court of second instance to remand for a new trial, or a court ruling to end the proceedings (Note: '89 Litigation Fees and Charges Measures, Articles 16, 17, and 18). . If the court awards less than the amount claimed by the plaintiff, the court will not recalculate the litigation fee and refund the difference to the party who paid the litigation fee in advance. However, if the plaintiff files a claim for a lesser amount in order to avoid unnecessary litigation costs, the court may, on its own motion, determine the "amount in controversy" between the parties prior to the hearing of the case and charge the litigation costs in accordance with that amount (Note: '89 Litigation Fees and Charges, Article 7). .
2. Fees and the right of action
Parties in "genuine difficulty" may apply for a deferral or remission of fees (Note: Civil Procedure Law, Article 107). However, a party in "genuine difficulty" may apply for a deferral or remission of costs. However, "genuine difficulties" only means that the party can apply, but not necessarily get a fee waiver or reduction. In fact, the Civil Procedure Law does not impose a duty on the court to provide relief on costs - there is no rule for determining whether a party is in "genuine difficulty," and the court is not required to provide relief on costs within a certain period of time. There is no rule to determine whether a party is in "genuine hardship" and no requirement for the court to decide on an application for fee remission or deferral within a certain period of time; the party has no way of knowing whether the court has even made a decision on the application, let alone objecting to the court's decision.
Article 13 of the '89 Litigation Fees Regulations provides that plaintiffs, counterclaimants and appellants who fail to pay their litigation fees in advance "shall be deemed to have withdrawn from the litigation automatically". Failure to pay the fees in full and on time means that the plaintiff is temporarily prevented from exercising his right to sue, but can still sue once he has raised sufficient fees (note: a party can usually "sue" again on the same matter after withdrawing the case). See Civil Procedure Law, art. 111; Opinions of the Supreme People's Court on Several Issues Concerning the Application of the Chinese People's Law on Civil Procedure, art. 114). (a) The right of appeal is forever lost if the appellant misses the appeal period; for the counterclaimant, it means that he has no way to fight back, which he would otherwise have been able to do. The term "withdrawal" reflects a party's intention to dispose of his right to sue. A party who sues, counterclaims and appeals without paying the costs often faces insurmountable financial difficulties and does not necessarily intend to "withdraw", and the court will regard an inability to pay the costs as a "withdrawal". The court's treatment of the inability to pay the costs as a "withdrawal" seems to be a disposal of the parties' right of action on their behalf. In first instance cases, the plaintiff does not pay the legal fees, the court will not file the case at all - there is no written record, and the parties even have no way to prove that they have ever sued; in second instance cases, the appellant has filed a written appeal and has not paid the appeal fees in advance, the court usually ruled that "according to the automatic dismissal of the case "(Note: The Supreme People's Court's eight rulings, 1994, No. 100 and 1995, No. 159, are all rulings in which the appellant is unable to pay the fees for the second instance case and the Supreme Court rules that the appeal will be "automatically withdrawn". These are only the cases in which the Economic Trial Division of the Supreme Court chose to publish 76 judgments, conciliations and rulings from 1993 to 1996. It can be seen that the courts have ruled on the "automatic withdrawal" of appeals whenever the appellant is unable to pay the costs of the second instance, and that such "automatic withdrawals" are quite common. (See Selected Cases of Economic Disputes in the Supreme People's Court of Second Instance, pp. 495, 497, 499, 515, 527, 529, 533, 564, 627). .
A 1994 judicial interpretation by the Supreme People's Court stated: "After the plaintiff has filed a lawsuit or the party has filed an appeal, the payment of the case acceptance fee or appeal fee in accordance with the regulations is a prerequisite for the people's court to accept the case. If the party concerned fails to pay the case acceptance fee or appeal fee, or fails to pay the full amount of the case acceptance fee or appeal fee, and applies for a deferral, reduction or exemption and is not approved but still does not pay the fee in advance or does not pay the full amount in advance, the people's court shall not file a case for acceptance, and the case shall not enter into the litigation procedure." (Note: Supreme People's Court: "Reply to Two Requests on the Issue of Litigation Fees" (1994).) This interpretation creates additional legal confusion: (1) Conflict with the Civil Procedure Law. According to the Civil Procedure Law, as long as the plaintiff's lawsuit meets the statutory conditions, the court "must accept"; the court's "inadmissibility" ruling is limited to statutory matters, and the payment of litigation fees is not a statutory condition of the lawsuit, and the failure to pay litigation fees is not a statutory condition of the lawsuit. The court's decision of "inadmissibility" is limited to statutory matters, whereas the payment of court fees is not a statutory condition for filing a lawsuit and the failure to pay court fees is not a statutory matter of "inadmissibility" (Note: Code of Civil Procedure, Articles 108, 109, 110, 111). (2) Conflicts with the '89 Litigation Fee Scheme. According to the Measures, non-payment of litigation fees is regarded as "automatic dismissal"; according to the Civil Procedure Law, "dismissal" is a claim subject to review by the court (Note: Civil Procedure Law, Article 131). In the Civil Procedure Law, "withdrawal" is a claim subject to review by the court (Note: Civil Procedure Law, Article 131); "withdrawal" is decided by the court and is not subject to appeal, whereas "inadmissibility" is subject to appeal (Note: Civil Procedure Law, Article 140). (Note: Civil Procedure Code, Article 140). The prepayment of fees as a prerequisite for the acceptance of the case, this is the Supreme People's Court of the Civil Procedure Law substantive amendments.
The Supreme People's Court's "judicial interpretations" of costs are often contradictory and incomprehensible. According to Article 131 of the earlier Opinion: Litigation Costs, the plaintiff is not required to pay litigation costs for an "inadmissible" decision, and if the plaintiff appeals against the "inadmissibility" of the decision, he or she pays litigation costs as if the case were a "non-property case". If the plaintiff appeals against the "inadmissibility" decision, he or she is required to pay court fees for "non-property cases". According to a 1996 judicial interpretation: even in cases where the court of first instance ruled "inadmissible" or "dismissed the case", the party concerned still had to pay the "case handling fee" in accordance with the "non-property case". "case acceptance fee" (Note: Supreme People's Court: "Reply to the Higher People's Court of Henan Province on the issue of litigation fees in several types of cases"). The Supreme People's Court Require the court "not accept" the case and pay "case acceptance fee", this is really a semantic paradox: if the court did not "accept" the case, but the court charged a "case acceptance fee". If the court did not "accept" the case, but the court charged "case acceptance fee"; if the court "accepted" the case, the court's decision is "inadmissible".
3. Case Fees and Litigation Risks
(1) The Risk of Overestimating the "Amount in Dispute"
1) Plaintiffs, Counterclaimants, and Appellants are required to convert their claims into money and use this as the basis for calculating and paying litigation costs. This is tantamount to requiring the parties to first make a mistake, and then, pay the court to correct that inevitable mistake. This is because it is an extremely rare exception for a party's claim to be consistent with the court's judgment. So the litigation becomes a party first into the gambling money, and the court must become the winner of the game.
Before the case is heard on the merits, the court, like the parties, has no way of knowing whether the amount claimed will ultimately agree with the judgment. But the parties must pay for it. If the court awards the defendant less than the amount claimed by the plaintiff, the defendant returns to the plaintiff the costs of the lawsuit in decreasing amounts according to the amount awarded by the court, and the rest of the costs of the lawsuit goes to the court, and the plaintiff ultimately receives compensation that is not even enough to offset the loss of costs of the lawsuit. For example: the plaintiff's claim for 1.01 million yuan, should be in accordance with the prescribed standard prepayment of 15,059.87 yuan, the court awarded 10,000 yuan, then the defendant to the plaintiff to return the case fee of 410 yuan, the plaintiff prepaid the rest of the 14,649.87 yuan belongs to the court. If the party is unable to pay the costs or is unwilling to take unforeseen risks to reduce the amount of the claim, he can only waive his right to full compensation.
2) Example: the plaintiff overestimated the "amount in dispute", and the compensation he received was not even enough to cover the costs of the litigation (Note: "Zhang Jiting v. Toyota Motor Corp. of Japan, Personal Injury Compensation," in Beijing Haidian District People's Court, Selected Trial Cases, 1997 edition, 98-104, China University of Political Science and Law Press. (1997 edition, pp. 98-104).
In 1993, a Toyota sedan driven by the plaintiff collided with a building and the airbags did not deploy at the time of the collision. In addition, the plaintiff paid 25,000 yuan in attorney's fees. If the plaintiff had not filed the lawsuit, it would have avoided at least $26,302 in additional damages.
(2) Risk of losing the winning party's costs
1) According to the Civil Procedure Law, costs are borne by the losing party. Therefore, the court's judgment usually includes the burden of costs. However, instead of requesting the court to refund the prepaid costs, the winning party applies to the court to enforce the property of the losing party against the costs based on the effective judgment and the receipt of the costs, and the winning party is required to pay to the court a corresponding enforcement fee for the enforcement of the costs. If the losing party has no enforceable property, or the court has no ability to enforce the judgment, or the court is not serious about enforcing its own judgment, the party's advance payment of costs along with other judicial remedies awarded by the judgment will be in vain.
The court's practice of letting the successful party who has prepaid the costs claim them from the losing party faces a dilemma of rational interpretation. If the collection and payment of costs is a public law relationship between an individual and the government, then, after the judgment comes into effect, the court should first return the costs to the successful party who has paid the costs in advance, and then collect the costs from the losing party. If the winning party who paid the legal fees in advance means that the court assigns its claim against the losing party to the winning party who paid the legal fees in advance, and the winning party replaces the court as the losing party's creditor, then this assignment of claims is not only a relationship that can be argued through litigation, but also is subject to the rules of assignment of claims of the General Principles of the Civil Code (Note: According to Article 91 of the General Principles of the Civil Code, the assignment of contractual rights requires the consent of the other party). party's consent). , the court itself will be constantly embroiled in litigation as a result of the exercise of its judicial functions. If the success of the party who has paid the legal fees in advance means that a new claim or debt relationship is formed between the litigants in respect of the burden of the legal fees with the entry into force of the judgment, then the question that arises is: what is the reason for the formation of a claim or debt relationship between the litigants in respect of the legal fees? Is the litigation fee itself an independent "subject matter of litigation"? Critics believe that: the court will win the case fees paid in advance as the content of enforcement, in fact, by virtue of the judicial power, forcing the parties to form a new kind of debt - the court should have borne, can't collect from the losing party the risk of case fees to the winning party (note: Jia Hongyin, Li Hongyue: "let the Winning Party Advance Litigation Fees Improperly," People's Court Daily, January 7, 1998) . After reorganizing the courts in 1998, some courts changed their past practice of refunding prepaid case acceptance fees as long as the party wins the case, but this has not become a common practice (Note: "Yueqing (Court) Adjusts the Method of Refunding Pre-paid Litigation Fees," People's Court Daily, June 16, 1998). .
2 ) Example: the successful party did not receive a refund of the case processing fee (Note: See "Beijing Hundred Dragons General Company, etc. v. Han Chenggang Infringement of the Right to Reputation Dispute Case", People's Court Cases Selected (17th Series), pp. 77-83; "Mineral Spring Pot Outside the Discussion of Right and Wrong", August 20, 1997, "Legal Daily").
In 1994, four enterprises, including the Tianmagnet Company, sued Han Chenggang in the Taiyuan Intermediate Court for infringement of his reputation, and the plaintiffs paid RMB 1,450 yuan in advance for the case; the court of first instance ruled that the defendants had lost the case; Han appealed to the Provincial Higher Court, and paid the appeal fee of RMB 1,450 yuan in advance; in 1996, the final judgment found that Han had not infringed upon the right to reputation of the four enterprises, and ruled that the costs of the first- and second-instance trials were to be borne by the four enterprises. In 1996, the final judgment concluded that Han had not violated the reputation rights of the four enterprises and ruled that the costs of the first and second trials should be borne by the four enterprises. In November 1998, Han wrote to the author that more than two years had passed since the final judgment came into effect, but the losing party had not yet paid the RMB 1,450 yuan to the Provincial High Court to cover the costs of the second trial. As a result, the Finance Division of the Provincial High Court had not yet returned the appeal fee he had paid in advance. For this reason, he went to the Provincial High Court more than thirty times, travel expenses, lost wages and lost more than 1000 yuan.
4. Charging case fees according to the "amount in dispute" and the shrinking of non-litigation procedures
(1) Not all civil cases accepted by the courts involve litigation, and a considerable part of the case has only one party, and there is no, there is no way to identify or unnecessarily involved in the other party, the court to hear the case without having to A considerable number of cases involve only one party and do not, or cannot, identify or unnecessarily involve the other party. In some legislations, there is a separate "non-litigation law" in addition to the Civil Procedure Law, and the fee for non-litigation is only equivalent to about 2% of the litigation case (Note: In Taiwan, the fee for a first-instance litigation case with a "subject matter" value of NT$6 million is NT$60,000) Note: In Taiwan, a first instance litigation case with a "subject matter" of NT$6,000,000 will cost NT$60,000, while a non-litigation case with the same "subject matter" will cost NT$1,113, which is equivalent to 1.8% of the former. (See Taiwan's Civil Litigation Costs Act, Article 2; Non-Contentiousness Act, Article 102). See Taiwan's Civil Litigation Costs Law, Article 2; Non-Contentiousness Law, Article 102. In Japan and Taiwan, the scope of non-litigation is quite broad, such as: the enforcement of collateral (Note: Taiwan's "Non-Lawsuit Law", Article 71.). most matters relating to the dissolution, liquidation and reorganization of a company (Note: see Chapter 1, Title III of the Japanese Non-Contentious Cases Procedural Law; Taiwan Non-Contentious Cases Law, Articles 81-96) Shareholders dissenting from a special resolution of a shareholders' meeting or a merger requesting the court to determine the redemption price (Note: Taiwan Company Law, Articles 187 and 317; Taiwan Non-Complaint Law, Article 81; Japanese Commercial Code, Article 254 ter. Japanese Non-Contentious Cases Procedural Law, Article 126). Enforcement and validation of promissory notes (Note: Taiwan's Non-Complaint Law, Articles 100 and 101). The distinction between litigated and non-litigated cases. The distinction between litigation and non-litigation cases provide judicial remedies outside the litigation, reducing unnecessary litigation costs.
China's civil litigation legislation and practice does not emphasize the distinction between litigation and non-litigation cases. Civil Procedure Law only provides for the determination of unclaimed property, urging the debtor to fulfill the notice of loss of notes and bankruptcy and other four kinds of property-related non-litigation procedures, including bankruptcy and liquidation is in accordance with the "amount in dispute" of the property case charges, so the vast majority of non-litigation cases in our country as a lawsuit, according to the litigation case The majority of non-litigation cases in China are accepted as litigation cases and litigation fees are levied according to the litigation cases.
The Opinion: Litigation Expenses stipulates that: supervisory proceedings and public notification proceedings are charged a litigation fee of 100 yuan per piece (Note: Opinion: Litigation Expenses, Articles 132 and 134.). . However, given the stark contrast between the "amount in dispute" billing standard, it is difficult for the courts to be satisfied with the 100 yuan litigation fee, and even when they have no choice but to accept similar cases, the imposition of additional fees often becomes an uncontrollable impulse (Note: For example, in April 1997, an accountant in Guangdong Province, who had been robbed of two bank drafts, filed an application for a "public notice" with the court, and the court ruled that it would not be appropriate to charge a fee of 100 yuan for such procedures. "public notice". In accordance with the Opinion: Litigation Costs, the accountant paid 100 yuan for the public notice and 600 yuan for the public announcement fee as requested by the court. After the expiration of the public notice period, the court required the parties to pay an additional $20,548 in accordance with the fee schedule for litigation cases; otherwise, the money order would not be unfrozen. The actual fees charged by the court exceeded the statutory fees by 200 times. (See Yang Jin as "Individual Courts' Disorderly Charging Phenomenon is Worrisome," Shanghai Legal News, September 30, 1996.) .
(2) Artificially Increased Litigation and Litigation Fees: Disposal of Mortgages
With the entry into force of the Guarantee Law in October 1995 and the Auction Law in January 1997, the realization of mortgages has become the most costly type of judicial remedy in litigation.
If the debtor and the creditor agree in advance that ownership of the collateral is transferred to the creditor if the debtor fails to pay the debt as it becomes due, the agreement is null and void (Note: Guarantee Law, Article 40.). . Only after the fact that the debtor fails to pay the debt as it falls due can the creditor and the debtor reach an agreement on the disposition of the collateral. If the mortgagor both fails to satisfy the debt as it falls due and refuses to reach an agreement with the mortgagee on the sale or auction of the collateral, the mortgagee cannot apply directly to the court for compulsory execution of the mortgaged property, but must go through a lawsuit (Note: Guarantee Law, art. 53.). , and after winning the case, apply to the court for compulsory execution with the effective judgment (Note: Civil Procedure Law, Article 207.) . In the enforcement procedure, instead of the court directly auctioning the collateral, the court hires an appraisal company to value the collateral and an auction company to auction the collateral. As a result, the realization of a mortgage claim must be accompanied by litigation, appraisal, auction, and enforcement fees. The cost of realizing a mortgage claim greatly exceeds that of an unsecured claim.
If the collateral belongs to the "state-owned assets", it needs to be appraised before it is mortgaged (Note: The State Council: Measures for the Administration of State-owned Assets Appraisal (1991), Article 4). (Note: State Council: Measures for the Administration of State-owned Assets Appraisal (1991), Article 3. The appraisal of "state-owned assets" is subject to procedures such as "project formulation", "approval" and "confirmation", which involve a process that consists of the "enterprise", the "enterprise authority", and the "enterprise management". The appraisal of "state-owned assets" has to go through procedures such as "project initiation", "approval" and "confirmation", involving a network consisting of the enterprise, the "competent authorities of the enterprise", the "state-owned assets management department" and the "appraisal organization", which is a more complicated procedure than the litigation itself. Measures for the Administration of State-owned Assets Appraisal (1991), Articles 12-19.) The State Council has also recognized that appraisal is a licensed business. In addition, appraisal is a licensed business, with patents, trademarks, securities, and real estate appraisals each being specifically licensed. An appraisal organization that is qualified to appraise land use rights may not be qualified to appraise buildings on the ground, because the appraisal of the two is licensed by different government agencies (Note: Ministry of Construction: Several Provisions on the Management of Qualification Levels of Real Estate Price Appraisal Institutions (1997), Article 4; and the State Administration of Land Management: Provisional Provisions on the Management of Land Appraisal Institutions (1993)). . It is common for parties to engage more than two appraisal organizations for the purpose of appraising a single property used as collateral. Of course, all appraisals must be paid to the appraisal organization, and like court fees, appraisal fees are levied as a percentage of the "subject matter of the property". Generally speaking, a real estate appraisal of $1 million requires an appraisal fee of about $15,000, which is roughly the same as the cost of a court case.
The provisions of the Code of Civil Procedure relating to compulsory auctions are rather ambiguous: on the one hand, the "auction" is one of the measures of enforcement (Note: Code of Civil Procedure, Article 223.); on the other hand, the court is required to auction off the property to a third party. On the other hand, the court is required to "seize" or "detain" the property to be enforced "in accordance with the provisions of the relevant units to auction" (Note: Civil Procedure Law, Article 226.). (Note: Civil Procedure Law, article 226). "The Auction Law sets out only one form of consigned auction, and the auctioning of "confiscated" property by courts and administrative authorities is included in the "consigned auction" series, except that auction houses authorized to auction such property are subject to stricter special requirements. It is only the auction house that is authorized to auction such property that requires a more stringent special license (Note: Auction Law, Article 9). The Auction Law, Article 9. Given the ambiguity of the law and the fact that auctions have become a legally licensed business, courts do not usually auction off mortgages themselves, but rather use the execution fees paid in advance by the parties to hire an auction house, and the statutory maximum commission for an auction is 10% of the sale price, with the auctioneer charging the consignor and the buyer half each (Note: Auction Law, Article 56.). . Such a rule creates an artificial and strange pattern between the parties, the court and the auction house: for one thing, the enforcement fee borne by the parties increases several times. The applicant for enforcement has to pay the court an advance fee for the application for enforcement, and has to advance a large sum of money for the court to hire a licensed auctioneer; and secondly, the lack of the right of compulsory auction, which is indispensable for the enforcement of the judgment, makes it more difficult for the court to enforce the judgment. For example: if a third party claims ownership of the property at auction, he can sue the court and the auction house on the grounds that there is a consignment auction relationship between the court and the auction house, the court and the auction house without the consent of the sale of other people's property; if the mortgagor refuses to surrender the certificate of entitlement, real estate registry refuses to register the changes in the immovable property according to the certificate issued by the auction house, the buyer can also sue the existence of a consignment relationship between the auction house and the court; thirdly Thirdly, the auction house obtains the right to conduct the auction in the compulsory execution procedure, which does not belong to it, and obtains a business opportunity that it should not have had in the first place. On the contrary, if the court compulsory auction, the handling of the above problems is much simpler: the cost of the court's own auction or designated auction is much lower than the commissioned auction, the parties can reduce the burden of huge litigation costs; claiming ownership of the auction object is to the court to file an enforcement objection, but can never be the court or court-appointed auction house as the defendant to file a lawsuit; the court can declare the original owner's certificate of entitlement is invalid. A certificate of transfer of rights is issued directly to the buyer, and the buyer applies for registration of changes in real estate with the certificate of transfer of rights.
The realization of bankruptcy property is subject to the same appraisal and auction procedures as the enforcement of collateral claims. Creditors are often faced with a dilemma: if they file for bankruptcy, the bankruptcy estate will have priority in paying the liquidation costs, and it is not an exception that the absolute value of the liquidation costs exceeds the liquidated claims, and the whole bankruptcy procedure is just a fee-paying job for the courts, law firms, accounting firms, appraisal firms and auction houses; if they do not file for bankruptcy, the continued existence of a loss-making enterprise will sooner or later consume the entire property. 1996 An official survey in 1996 reported that, on the one hand, the proportion of bankruptcy claims (mainly bank claims) that were satisfied was extremely low: of 111 enterprises in Liaoning province that went bankrupt in the two years 1995 and 1996, creditors were not paid at all in 88 cases, and creditors were paid a negligible amount in 23 cases, ranging from a low of 0.0075 percent to a high of 8.4 percent; on the other hand, the proportion of claims that were satisfied was as low as 0.0075 percent and as high as 8.4 percent. 8.4%; on the other hand, "litigation, appraisal and many other expenses make the meager realization of the bankrupt enterprises disappear in the liquidation process. For example, in the bankruptcy of the chemical fertilizer factory in Jianli County, Hubei Province, there were more than 10 departments **** extracting more than 1 million yuan of liquidation expenses, accounting for 17% of the total value of asset evaluation, and the general loss of creditors amounted to 90%" (Note: the State Economic and Trade Commission and the People's Bank of China: "Investigation Report on the Merger and Bankruptcy Situation in Some Provinces and Municipalities (1996)" in the "Optimization of Capital Structure". "Optimizing Capital Structure" City Pilot Workbook, China Economic Press, 1996 edition, p. 291).
China's capital structure has been optimized in the past few years.
Certain features of Chinese law are often attributed to the influence of the civil law system. However, the fact that collateral enforcement must be litigated, and that the court's enforcement of collateral requires the commissioning of third-party appraisals and auctions, are unique rules with Chinese characteristics - a non-litigated case becomes litigated, an auction that exists as a matter of judicial competence becomes a commercial opportunity for for-profit organizations, and an otherwise irrelevant Evaluation has fostered a licensed industry that consumes a great deal of money and time, and in the 1990s, numerous legal texts were introduced in the name of "standardization" and "preventing the loss of state-owned assets". These rules, on the one hand, strengthened government control at all costs and, on the other hand, did everything possible to increase the fees charged by government agencies, litigation, litigation costs, and business opportunities for licensed appraisal firms, licensed auctioneers, and licensed attorneys. The practical effect of these rules is not so much to "prevent the loss of state assets" as to distribute property among businesses, courts, lawyers, and appraisers that could otherwise be used to settle bank debts. Perhaps we should realize that laws that reinforce government regulation without regard to transaction costs can be more dangerous than no laws at all.