Fa Fa [2020] No. 17

Supreme People's Court

Issuing the《Guiding Opinions on Several Issues Concerning the Proper Trial of Civil Cases Involving the COVID-19 Epidemic in Accordance with the Law

（II）》Notice

To the Higher People's Courts of all provinces, autonomous regions, and municipalities directly under the Central Government, the Military Court of the People's Liberation Army, and the Production and Construction Corps Branch of the Higher People's Court of Xinjiang Uygur Autonomous Region:

　　The《Guiding Opinions of the Supreme People's Court on Several Issues Concerning the Proper Trial of Civil Cases Involving the COVID-19 Epidemic in Accordance with the Law (II)》is hereby issued to you. Please implement it conscientiously.

                                                                                                                                         Supreme People's Court

                                                                                                                                         May 15, 2020

Supreme People's Court

Guiding Opinions on Several Issues Concerning the Proper Trial of Civil Cases Involving the COVID-19 Epidemic in Accordance with the Law

Several Issues Concerning the Proper Trial of Civil Cases Involving the COVID-19 Epidemic in Accordance with the Law (II)

   In order to further implement the Party Central Committee’s arrangements for coordinating the prevention and control of the COVID-19 epidemic and economic and social development, to earnestly do a good job in the “six stabilities”, to implement the “six guarantees” tasks, and to guide people’s courts at all levels to properly hear civil cases involving contracts, finance, bankruptcy, etc. related to the COVID-19 epidemic in accordance with the law, the following guiding opinions are put forward.

1. Trial of contract cases

1. If the epidemic or epidemic prevention and control measures cause a party to be unable to perform the sales contract within the agreed time limit or increase the performance cost, and continued performance does not affect the realization of the contract purpose, the people's court will not support the party's request to terminate the contract.

  If the epidemic or epidemic prevention and control measures cause the seller to be unable to complete the order or deliver the goods within the agreed time limit, and continued performance cannot achieve the buyer's contractual purpose, the people's court shall support the buyer's request to terminate the contract and return the advance payment or deposit that has been paid; the people's court shall not support the buyer's request for the seller to bear liability for breach of contract.

2. If the sales contract can continue to be performed, but the epidemic or epidemic prevention and control measures lead to a significant increase in performance costs such as labor, raw materials, and logistics, or lead to a substantial drop in product prices, and continued performance of the contract is obviously unfair to one party, the people's court shall adjust the price in accordance with the principle of fairness, taking into account the actual circumstances of the case, if the party affected by the adverse effects requests an adjustment to the price. If the epidemic or epidemic prevention and control measures cause the seller to be unable to deliver the goods within the agreed time limit, or cause the buyer to be unable to pay within the agreed time limit, the people's court shall change the performance period in accordance with the principle of fairness, taking into account the actual circumstances of the case, if the party requests a change to the performance period.

If the contract has been changed by adjusting the price, changing the performance period, or other methods, the people's court will not support the party's request for the other party to bear liability for breach of contract.

3. If the seller resells the epidemic prevention materials to others at a high price after signing a sales contract for epidemic prevention materials with the buyer, resulting in the contract being unable to be performed, the people's court shall support the buyer's request to use the seller's profits as the amount of compensation for losses. If the seller is unable to perform the sales contract due to the government's legal requisition or temporary requisition of epidemic prevention materials, the people's court will not support the buyer's request for the seller to bear liability for breach of contract.

4. If the epidemic or epidemic prevention and control measures cause the seller to be unable to deliver the house within the period agreed in the commercial housing sales contract, or cause the buyer to be unable to pay the purchase price within the agreed period, the people's court will not support the party's request to terminate the contract and have the other party bear liability for breach of contract. However, if the party requests a change to the performance period, the people's court shall make changes in accordance with the principle of fairness, taking into account the actual circumstances of the case.

5. If the leased house is used for business, and the epidemic or epidemic prevention and control measures cause the lessee to have difficulties in capital turnover or a significant reduction in business income, the people's court will not support the lessor's request to terminate the lease contract on the grounds that the lessee has not paid the rent within the agreed time limit and have the lessee bear liability for breach of contract.

For temporary venue lease contracts reserved for specific purposes such as exhibitions, conferences, and temple fairs, if the event is canceled due to the epidemic or epidemic prevention and control measures, the people's court shall support the lessee's request to terminate the lease contract and return the advance payment or deposit.

6. If small and micro service enterprises and individual industrial and commercial households that lease houses from state-owned enterprises and administrative institutions such as government departments, universities, and research institutes for business purposes experience operating difficulties due to the impact of the epidemic or epidemic prevention and control measures, the people's court shall support their request for the lessor to waive the rent for a certain period in accordance with relevant national policies.

If non-state-owned houses are leased for business purposes, and the epidemic or epidemic prevention and control measures cause the lessee to have no business income or a significant reduction in business income, and it is obviously unfair to continue to pay rent according to the original lease contract, the people's court may guide the parties to mediate with reference to relevant rent reduction policies if the lessee requests rent reduction, extension of the lease term, or deferred payment of rent; if mediation fails, the contract shall be changed in accordance with the principle of fairness, taking into account the actual circumstances of the case.

7. If the epidemic or epidemic prevention and control measures cause the contractor to fail to complete the construction within the agreed construction period, the people's court will not support the developer's request for the contractor to bear liability for breach of contract; the people's court shall give discretionary support to the contractor's request for an extension of the construction period, depending on the degree of impact of the epidemic or epidemic prevention and control measures on the performance of the contract.

If the epidemic or epidemic prevention and control measures cause a substantial increase in the cost of labor, building materials, etc., or cause the contractor to suffer losses such as labor costs and equipment rental fees, and continued performance of the contract is obviously unfair to the contractor, the people's court shall adjust the price in accordance with the principle of fairness, taking into account the actual circumstances of the case, if the contractor requests an adjustment to the price.

8. If a face-to-face training contract is concluded by the parties concerned, but the face-to-face training cannot be carried out due to the impact of the epidemic or epidemic prevention and control measures, and the purpose of the contract can be achieved through online training, changing the training period, etc., the people's court will not support the trainee's request for termination; If the parties concerned request to continue to perform the contract through online training, changing the training period, adjusting the training fees, etc., the people's court shall modify the contract in accordance with the principle of fairness in light of the actual circumstances of the case.

If face-to-face training cannot be carried out due to the impact of the epidemic or epidemic prevention and control measures, and the purpose of the contract cannot be achieved through online training, or the actual circumstances of the case indicate that online training is not appropriate, the people's court shall support the trainee's request to terminate the contract. For training contracts with time limit requirements, if the purpose of the contract cannot be achieved by changing the training period, the people's court shall support the trainee's request to terminate the contract. After the training contract is terminated, the prepaid training fee shall be fully or partially refunded according to the number of class hours received.

9. If a person with limited capacity for civil conduct spends money on online paid games or online live streaming platforms without the consent of his/her guardian in a manner that is inconsistent with his/her age and intelligence, the people's court shall support the guardian's request for the online service provider to return the money.

II. Trial of Financial Cases

10. For financial loan disputes involving industries that are greatly affected by the epidemic or epidemic prevention and control measures, as well as enterprises with development prospects but temporarily encountering difficulties due to the epidemic or epidemic prevention and control measures, especially small and micro enterprises, the people's court shall fully consider the series of financial support policies such as the Notice on Further Strengthening Financial Support for the Prevention and Control of New Coronavirus Infection Pneumonia issued by the People's Bank of China and other five departments in the trial: The people's court shall not support litigation claims such as early maturity of loans and unilateral termination of contracts filed by financial institutions in violation of financial support policies; The interest charged by financial institutions and the disguised interest charged in the name of consulting fees, guarantee fees, etc., shall be strictly based on the provisions of the national special credit preferential interest rate policies such as re-lending and re-discounting, and the excess part shall not be supported; For personal loan disputes involving housing mortgages, credit cards, etc. involving people who are hospitalized or isolated due to infection with COVID-19, people who need to be isolated for epidemic prevention and control, people who participate in epidemic prevention and control work, and people who temporarily lose their source of income due to the epidemic or epidemic prevention and control measures, the people's court shall modify the repayment period in accordance with the principle of fairness in light of the actual circumstances of the case.

11. If an epidemic prevention material production and operation enterprise sets up a floating mortgage on its production equipment, raw materials, semi-finished products, products and other movable properties, and the mortgagee applies for the realization of the security interest in accordance with the provisions of Article 196 of the Civil Procedure Law of the People's Republic of China, after the people's court accepts the application, if the respondent or interested party can prove that the realization of the mortgage right will endanger the production and operation of the enterprise's epidemic prevention materials, it may be handled after the factors affecting the epidemic or epidemic prevention and control measures are eliminated.

12. For stock pledge and margin trading disputes caused by fluctuations in the securities market price during the epidemic prevention and control period, they shall be handled differently: For on-site stock pledge and margin trading disputes in which the creditor is a securities company, the people's court may refer to the relevant policies issued by the China Securities Regulatory Commission to guide the securities company to negotiate with different customer groups to resolve the disputes in accordance with the policies; If the negotiation fails, the litigation claim of the customer requesting the securities company to bear the compensation responsibility for the expanded part of the loss caused by the illegal forced liquidation shall be supported in accordance with the law. For off-site stock pledge disputes in which the creditor is another financial institution, the people's court shall fully consider the impact of the realization of stock pledge rights on the normal operation of listed companies, strengthen policy guidance and coordination of the interests of all parties, and strive to reduce the impact on the securities market.

13. When hearing civil compensation cases for infringement of listed companies due to false statements, the people's court shall, when determining the amount of investors' losses, distinguish the stock price decline losses caused by the epidemic or epidemic prevention and control measures and the false statement factors in accordance with the provisions of Item 4 of Article 19 of the Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Civil Compensation Cases Arising from False Statements in the Securities Market, and fairly and reasonably determine the scope of loss compensation in accordance with the law.

14. For disputes arising from the performance of 'performance betting agreements' between companies severely affected by the epidemic or epidemic prevention and control measures, such as wholesale and retail, accommodation and catering, logistics and transportation, and cultural tourism, or their shareholders and actual controllers and investors, the people's court shall fully consider the actual impact of the epidemic or epidemic prevention and control measures on the target company's performance, and guide both parties to negotiate to change or terminate the contract. If the parties fail to reach an agreement through negotiation, and it is obviously unfair to one party to continue to perform according to the agreed performance standard or performance compensation amount, the people's court shall change or terminate the contract in accordance with the principle of fairness in light of the actual circumstances of the case; If the contract is terminated, the losses caused by the termination of the contract shall be reasonably distributed in accordance with the law.

If the 'performance betting agreement' does not clearly stipulate that the small and medium shareholders of the company shall bear joint and several liability for performance compensation with the controlling shareholder or actual controller, the people's court shall not support the litigation claim of the investor requesting the small and medium shareholders to jointly and severally bear joint and several liability with the company, the controlling shareholder or the actual controller.

15. When hearing medical insurance contract dispute cases related to the epidemic or epidemic prevention and control measures, the people's court shall not support the insurer's defense that the disease does not fall within the scope of major diseases or insured events stipulated in the commercial medical insurance contract. If the insured person infected with COVID-19 incurs the agreed expenses for not receiving treatment at the medical service institution stipulated in the insurance contract due to the epidemic or epidemic prevention and control measures, the people's court shall support the insured person or beneficiary's request for payment from the insurer in accordance with the provisions of the insurance contract. If the insured person incurs the agreed expenses for receiving treatment for other diseases at a medical service institution not stipulated in the insurance contract, which is indeed caused by objective reasons such as the epidemic or epidemic prevention and control measures, the people's court shall support the insured person or beneficiary's request for payment. The people's court shall support the insured person or beneficiary's request for payment in accordance with the provisions of the medical insurance contract donated by the insurance company during the epidemic prevention and control period.

16. When hearing civil dispute cases arising from the medical equipment financing lease business carried out between the financing lease company and the medical service institution, the people's court shall not support the defense of the medical service institution that the financing lease contract is invalid on the grounds that the financing lease company has not obtained the administrative license for medical device sales.

　III. Trial of Bankruptcy Cases

17. If an enterprise is unable to pay off its debts due to the impact of the epidemic or epidemic prevention and control measures, and the creditor files a bankruptcy application, the people's court shall actively guide the debtor to negotiate with the creditor to eliminate the reasons for the bankruptcy application by means of installment payment, extension of the debt performance period, and modification of the contract price, or guide the debtor to resolve the debt crisis through out-of-court mediation, out-of-court reorganization, pre-reorganization, etc., so as to save the enterprise as early as possible.

18. When examining whether an enterprise meets the conditions for bankruptcy acceptance, the people's court shall pay attention to examining whether the enterprise's predicament is caused by the epidemic or epidemic prevention and control measures and treat it differently. For enterprises that were in good operating condition before the outbreak of the epidemic, but are unable to pay off their debts due to operating and capital turnover difficulties caused by the impact of the epidemic or epidemic prevention and control measures, it is necessary to comprehensively determine the enterprise's solvency in combination with the enterprise's ability to continue operating and the development prospects of the industry in which it is located, and prevent the enterprise that originally has the ability to survive from entering the bankruptcy procedure simply based on the enterprise's cash flow and balance sheet situation in a specific period. For enterprises that were already in trouble before the outbreak of the epidemic, and whose production and operation have further deteriorated due to the epidemic or epidemic prevention and control measures, and that have indeed met the reasons for bankruptcy, the bankruptcy application shall be accepted in a timely manner in accordance with the law to realize market survival of the fittest and resource reallocation.

19. Further promote the connection between enforcement and bankruptcy procedures. If, during the enforcement procedure, it is discovered that the person being enforced has grounds for bankruptcy due to the impact of the epidemic but has salvage value, the creditor or the person being enforced should be guided through clarification and other methods to transfer the case to bankruptcy review. Reasonably use the systems such as suspension of execution, release of preservation, and suspension of interest payment stipulated in the Enterprise Bankruptcy Law to effectively preserve the operating value of the enterprise and win space for the enterprise to regenerate. At the same time, actively guide enterprises to apply bankruptcy reorganization and reconciliation procedures to comprehensively resolve corporate debt crises, fairly and orderly repay all creditors, and achieve protection and rescue of enterprises in distress.

The judicial auction procedure initiated by the executing court before making the transfer decision can continue after the transfer decision is made. If the auction is successful, the auction target will no longer be included in the debtor's property scope in the bankruptcy procedure, but the proceeds from the auction shall be distributed in accordance with the law in accordance with the bankruptcy procedure. If an asset evaluation report or audit report has been made in the enforcement procedure, and the evaluation conclusion is within the validity period or the audit conclusion meets the needs of the bankruptcy case, it can continue to be used in the bankruptcy procedure.

20. In the bankruptcy reorganization procedure, if the reorganization plan draft cannot be submitted on time due to the impact of the epidemic or epidemic prevention and control measures, such as the inability to recruit investors, conduct due diligence, and negotiate, the people's court may, upon application by the debtor or the administrator, reasonably determine the period that should not be included in the period stipulated in Article 79 of the Enterprise Bankruptcy Law, according to the actual impact of the epidemic or epidemic prevention and control measures on the reorganization work, but generally shall not exceed six months.

For reorganization plans or settlement agreements that have entered the execution stage, but the debtor has difficulty in executing due to the impact of the epidemic or epidemic prevention and control measures, the people's court shall actively guide the parties to fully negotiate and change them. If the reorganization plan or settlement agreement is changed through negotiation, it shall be voted on and submitted to the court for approval in accordance with the provisions of Articles 19 and 20 of the 'National Court Bankruptcy Trial Work Conference Minutes'. However, if only the execution period is changed, the people's court may directly make a ruling upon application by the debtor or creditor, and the extended period shall generally not exceed six months.

21. We must effectively protect the substantive and procedural rights of creditors and reduce the adverse effects of the epidemic or epidemic prevention and control measures on the exercise of creditors' rights. The deadline for creditors to declare their claims in cases affected by the epidemic or epidemic prevention and control measures may be the longest statutory period depending on the specific circumstances. If a creditor is unable to declare the claim or provide relevant evidence and materials on time due to the impact of the epidemic or epidemic prevention and control measures, the supplementary declaration shall be made within ten days after the obstacle is eliminated, and the supplementary declarant may not bear the cost of reviewing and confirming the supplementary declaration claim. If it is indeed necessary to postpone the organization of hearings or the convening of creditors' meetings due to the impact of the epidemic or epidemic prevention and control measures, the relevant postponement procedures shall be handled in accordance with the law, and the administrator shall notify the creditors and other relevant parties 15 days in advance and do a good job of explanation.

22. We must maximize the debtor's ability to continue operations, give full play to the institutional function of common interest debt financing, and provide financial support for continued operations. If the debtor enterprise has the ability to continue operations or has the conditions for producing and operating epidemic prevention materials, the people's court shall actively guide and support the administrator or the debtor to continue the debtor's business in accordance with the provisions of Articles 26 and 61 of the Enterprise Bankruptcy Law, and on the basis of protecting the interests of creditors, select an appropriate operation and management model, give full play to the government-court coordination mechanism, and explore and release the enterprise's production capacity.

Adhere to the principle of maximizing the value of property disposal, actively guide the administrator to fully assess the impact of the epidemic or epidemic prevention and control measures on the asset disposal price, accurately grasp the timing and method of disposal, and avoid affecting the interests of creditors due to improper depreciation of asset value.

23. During the epidemic prevention and control period, in accordance with the requirements of the "Supreme People's Court's Opinions on Promoting the Lawful and Efficient Trial of Bankruptcy Cases", it is necessary to further promote the in-depth application of information technology in areas such as bankruptcy announcement notices, claim declarations, the convening of creditors' meetings, inquiries and disposal of debtor's property, and the introduction of investors. On the basis of increasing the intensity of information disclosure and ensuring creditors' right to know and participate in accordance with the law, efforts should be made to support epidemic prevention and control work, further reduce the cost of bankruptcy procedures, and improve the efficiency of bankruptcy procedures.