Key point:

According to legal provisions, if extraterritorial laws should be applied, the people's court should proactively investigate.

Basic Case Fact:

In 2015, A citizen of the United Arab Emirates and Chinese citizens Mr. Sheng and Mr. Gu jointly signed a company establishment contract to carry out the business of buying and selling sewing machine equipment. A citizen of the United Arab Emirates holds 51% of the shares, Mr. Sheng holds 25%, and Mr. Gu holds 24%. Mr. Hou Sheng transferred his company shares to Mr. Gu, and both parties agreed that Mr. Gu would pay the equity transfer fee of RMB 2.25 million before August 15, 2016. Mr. Gu is overdue in making the payment. On February 28, 2017, Mr. Gu, as the debtor, and Mr. Han, as the debtor's family member, issued a "commitment letter", which stated that Mr. Gu promised to repay all outstanding debts before March 25, 2017. Due to Mr. Gu's failure to fulfill his obligations, Mr. Sheng sued and requested that Mr. Gu and Mr. Han jointly settle the payment and bear the overdue interest.

Result:

After trial, the Hangzhou Intermediate People's Court found that the dispute in this case involves the dispute over the determination of the effectiveness of equity transfer and the payment of transfer funds by the United Arab Emirates company. According to the provisions of Article 14 of the Law of the China on the Application of Laws on Foreign related Civil Relations that "the civil capacity, civil capacity, organizational structure, shareholders' rights and obligations of legal persons and their branches shall be governed by the laws of the place of registration", the laws of the United Arab Emirates shall apply to the effectiveness of equity transfer of companies in the United Arab Emirates. As the way of ascertaining foreign laws submitted by the parties was not rigorous, and both parties did not cooperate, the Hangzhou Intermediate People's Court considered that the case should be subject to foreign laws after examination, so according to the Minutes of Cooperation on the Project of ascertaining Foreign Laws signed by the Hangzhou Intermediate People's Court and East China University of Political Science and Law, it decided to ascertain foreign laws on its own authority, and entrusted East China University of Political Science and Law to ascertain the relevant provisions of the UAE Company Law and the UAE Civil Transaction Law. After examination, it has been determined that the transfer of the company's equity involved in the case is legal and valid. With regard to the payment of equity transfer funds and the determination of liability for breach of contract, according to the provisions of Article 41 of the Law of the China on the Application of Law on Foreign related Civil Relations, the law of the place of habitual residence of the party whose performance of obligations best reflects the characteristics of the contract or the law most closely related to the contract, namely the law of the China, should be applied, Based on this, it is determined that Mr. Gu should pay the equity transfer fee to Mr. Sheng and bear the liability for overdue payment breach. Mr. Han signed as a member of the debtor's family and did not indicate the intention to assume joint repayment responsibility, so he does not bear civil liability. After the first instance judgment of the case, Mr. Sheng and Mr. Gu both appealed, and the second instance upheld the original judgment.

Typical significance:

Although Article 10 of the Law of the China on the Application of Laws in Foreign related Civil Relations stipulates in principle the subject of ascertainment of extraterritorial laws, it is not clear in what circumstances the parties or the court should be the subject of ascertainment of extraterritorial laws, and the parties do not cooperate, which brings difficulties to the judicial work. In judicial practice, if a party chooses to apply foreign law, the party should generally provide the foreign law. In this case, in the case where the parties did not choose to apply foreign laws, but the law stipulates that foreign laws should be applied, the court took full advantage of the advantages of the cooperation mechanism with East China University of Political Science and Law in foreign law investigation, took the initiative to assume the obligation of the subject of investigation, and smoothly promoted the trial work. The handling of this case has established the rule that the court should be the subject of foreign law investigation in cases where foreign law should be applied, and has accumulated experience for relevant trial practices.