Germany lags behind

By Dr. Falk Lichtenstein and Dr. Dorothee Ruckteschler

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In August 18, 2017, China’s first virtual court opened in Hangzhou and began work immediately. It is probably the very first virtual court worldwide and will hear disputes arising from internet-related activities. It is no coincidence that it is located in Hangzhou, the city where Alibaba and other leading internet enterprises have their headquarters.

China dispenses with formalities in favor of innovative procedural rules

Special procedural rules apply at the virtual court in Hangzhou. They appear surprisingly innovative, given the usually very formal and old-school approach of Chinese jurisprudence, in that all proceedings will be conducted online:

  • claims and responses filed online;
  • representatives of the parties identified by facial recognition software;
  • court fees paid online;
  • evidence submitted online;
  • oral hearings via videoconference;
  • court decisions issued and served to the parties online.

Taking part in these innovative virtual proceedings is, however, voluntary. If the defendant objects to online proceedings, they  will be conducted conventionally offline. Appeals against decisions made by the Hangzhou virtual court will also be conducted in the conventional way, i.e., offline. The Hangzhou virtual court is a court of the first instance (as are ordinary local people’s courts in China).

Virtual court resolves internet-related disputes involving China’s e-commerce giants

The new virtual court is charged with resolving disputes arising from:

  • contracts for online shopping, and contracts for services, microfinance loans, etc. concluded online;
  • product liability regarding products bought online;
  • ownership and infringement of online copyright;
  • infringement of other people’s personal rights via the internet;
  • domain names;
  • administrative measures on the internet; and
  • other internet-related civil or administrative cases designated by higher courts.

However, there will only be recourse to the new court if the dispute has a connection with Hangzhou, which is always the case when the claim is against one of the e-commerce giants headquartered in the city.

The competence of this court to also hear administrative cases is an interesting feature. To date, the legal protection mechanism against measures of the state is not very well developed in China. It remains to be seen the extent to which the new court will actually provide individuals with effective legal protection against administrative measures of the state.

Encouraging results from the trial phase

In terms of civil litigation, it is remarkable that China is emerging as a pioneer and introducing virtual proceedings ahead of other jurisdictions. So far, civil proceedings before ordinary Chinese courts have been very formal and old-fashioned. Evidence had to be presented in the form of original paper documents, preferably with the official company stamp of both parties.

Experience from the trial phase with virtual court proceedings before four courts also located in Hangzhou, however, has been encouraging. From these four trial phases, a collection of leading cases has been put together, containing typical cases for online proceedings. One of them gives a good example of the nature and scope of such cases. The plaintiff, a Chinese individual, maintained an account on Taobao, a popular e-commerce online platform. He bought a battery-powered bank on Taobao from the seller, another Chinese individual. After delivery of the product, the plaintiff requested a product return via the Taobao app on the grounds that the product was counterfeit. The plaintiff received a refund of RMB 48 by default because the seller failed to handle the request for a return during the required period. The plaintiff later filed a lawsuit against Taobao. The plaintiff argued that Taobao was in breach of contract for allowing the sale of counterfeit goods and claimed RMB 500, the statutory minimum compensation under Chinese law for e-commerce platform provider faults. In the end, the plaintiff failed to prove that Taobao knew or should have known that the seller was using its platform to commit acts that infringe the legitimate rights and interests of the plaintiff. The court held that Taobao was not liable for contributory infringement and dismissed the plaintiff’s claim.

Regarding legal innovations, China usually starts with pilot programs in certain geographical areas. If they are successful, they are then rolled out to larger regions and eventually the entire country. In this situation, we expect that more virtual courts will be established, covering regions beyond Hangzhou. It also seems likely that additional areas of law will be allocated to the virtual court’s jurisdiction. For example, trade mark disputes cannot currently be heard online although trade mark infringements are regularly committed online.

It is, however, very doubtful whether disputes without any connection to the internet, e.g., disputes arising from joint venture contracts, will be permissible for virtual litigation in the future. The higher the volume under dispute, the less likely this appears to be.

Germany’s lawyers and courts to communicate electronically by 2020

These recent developments in China are interesting from a German perspective. Germany is currently introducing the “special electronic mailbox for lawyers” (besonderes elektronisches Anwaltspostfach) in order to enable electronic communication between lawyers and courts. The Facilitation of Electronic Legal Communication with Courts Act of October 10, 2013, stipulates that at the latest by 2020 (!) all lawyers, public authorities and legal entities under public law will be obliged to file all briefs, requests or other statements electronically with the courts.

To date, however, the technical equipment of German courts is not nearly sufficient to comprehensively implement the digitalization of justice nationwide. The vast majority of courts have not even set up an electronic mailbox yet. In this respect, major efforts will be required over the next few years to prevent state courts losing touch with legal reality.

German law requires virtual proceedings to be open to the public

Even more obstacles would have to be overcome to allow a German court to conduct proceedings online. Since 2013, the German Code of Civil Procedure has provided for the possibility of conducting the oral hearing and also the interrogation of a witness via videoconference. However, for the time being, this new option is more theoretical in nature since only very few courts currently possess the necessary technical equipment. With regard to video­conferencing, special consideration must also be given to the statutory requirement that oral hearings must be held in public. The court must therefore ensure that the general public can follow the hearing at least via audio transmission.

One may, of course, raise the general question of whether oral hearings and interrogations of witnesses via videoconference are helpful. The German Code of Civil Procedure has good reasons for demanding that oral hearings and interrogations of witnesses or experts must be conducted directly before the presiding judge as experience shows that very often new aspects come to light and give the case a new twist.

Outlook: Major efforts required from the German courts

Despite many obstacles and doubts, in order to increase the efficiency of the German court system, it is essential to both enable and further develop methods of digital communication between state courts and the parties involved.

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