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On 27 May the Supreme People¡¯s Court issued the Implementation of Legal Sanctions Against Avoidance of the Enforcement of Judgments Several Opinions (Fa [2011] No. 195), to curb the problem of avoidance of the enforcement of judgments. The document put forward new measures, ranging from searching the property of debtors and strengthening property preservation to taking measures to prevent malicious litigation, which are outlined below.

Ways to identify debtors¡¯ property

? A system for reporting debtors¡¯ property: where debtors have not fulfilled their obligations, the court should require them to give an accurate report of their property by a certain deadline. Where for the time being the debtor has no property, the court may request the debtor to make periodic reports.

? The party applying for enforcement provides leads about the property: the court may require the party applying for enforcement to report on the status of the debtor¡¯s property or to provide leads in relation to the property. It may also, via an investigation order or a letter commissioning an investigation, grant a lawyer the right of investigation of the property within the limits laid down by the law.

? The court uses its power to survey the property: the court should improve and broaden its property investigation and control network by coordinating with other relevant units, such those dealing with finance, real estate management, land resources and vehicle management and business administration.

? Audit where appropriate: where debtors have not fulfilled their obligations and assets are disposed of through transfer or concealment, investment in or establishment of branches, buying into the equity of other companies or illegally withdrawing registered capital, courts may, in accordance with a request from the party applying for enforcement, engage intermediaries to carry out an audit of the debtors. The audit fees should be paid in advance by the applicant and, where the debtor is found to have disposed of assets by means of transfer or concealment, after the court judgment has been successfully enforced, the costs should be borne by the debtor.

? Establish a property reporting mechanism: the court may, in accordance with a request from the party applying for enforcement, issue a public announcement of a reward for providing clues regarding the debtor¡¯s property, with the cost of the reward being met by the party applying for enforcement.

Preservation of property

? Strengthening measures for the preservation of property: during the filing of a case and the subsequent trial, courts should guide creditors to apply for the preservation of property in good time; after the enforcement process has begun, they should take timely measures to preserve and secure the property.

? Enforcing claims already confirmed as valid by a legal document: where there is a claim against the debtor which is confirmed as valid by a legal document, the court may inform the debtor in writing and request enforcement within a given time period. If the debtor fails to carry out the requested action within the time limit, the court may order enforcement in accordance with the law. Where a request for enforcement has been made, the court may request the people¡¯s court which is enforcing the claim to help freeze the relevant funds.

? Preserving debts which are not yet due: the court may, in accordance with the law, preserve debts which are not yet due and enforce against them when they become due.

? Subrogation or avoidance action: when a debtor fails to carry out the requested action in time, gives up a claim or transfers property for no consideration or at an unreasonably low price, resulting in damage to the party applying for enforcement, the court can notify the party applying for enforcement so that a subrogation suit can be brought or other action taken.

Preventing malicious litigation

? Jurisdiction over objections filed by third parties: during enforcement, if a third party files an objection to the sealing, confiscation or freezing of property, this should be handled by the court that ordered the sealing, confiscation or freezing. If a third party has commenced litigation in a court other than the enforcing court, and that other court has accepted the case but not yet made a ruling, it should halt the trial or dismiss the case.

? Strengthen the supervision of bankruptcy cases: where the court finds that the debtor has fabricated its bankruptcy, this should be reported in good time to the court which has accepted the bankruptcy case. If the party applying for enforcement thinks that the debtor is using the bankruptcy to evade its debts, an objection can be filed to the court which has accepted the bankruptcy case or to a higher court. The court that agrees to consider the objection should supervise in accordance with the law.

? Retry cases of malicious litigation in accordance with the law: in practice, some third parties violate the provisions about jurisdiction and, by filing cases with courts other than the enforcing court, obtain legal judgments that confirm their right to property that has been sealed, confiscated or frozen, or that divide the property among third parties. Alternatively, after colluding with third parties to fabricate facts and procure court judgments, debtors may apply to take part in the distribution of the property. In both these circumstances, if the court thinks that legal judgments are the fruit of malicious collusion to circumvent enforcement and that they damage the interests of enforcing creditors, it can make a written proposal to the court which issued the judgment or to a higher court. That court should pass a new judgment.

Other counter-measures

The Several Opinions provide for the use of coercive measures against the avoidance of enforcement such as increased fines and detention in custody; and holding the perpetrators criminally liable.

Where there is sufficient evidence to prove the debtor has maliciously transferred property to avoid enforcement through a divorce to divide assets; an illegal liquidation; restructuring or reorganization; related-party transactions or the mixing up of assets, the executing court may change the debtor or add an additional debtor, or tell the party applying for enforcement to recover the transferred property through litigation.

Other counter-measures include:

• Establishing a sound credit reporting system and entering information concerning debtors who do not fulfil their obligations into credit platforms or information databanks; increasing the degree of intensity of media exposure, announcing in the media typical cases of sanctions or punishment against debtors who have evaded execution; and
• Enhancing collaboration with public security organs to trace debtors whose location has been unclear for a long period due to their fleeing or who have changed their place of business.