On 15 May 2020, the SPC issued the Guiding Opinions on Several Issues Concerning the Proper Trial of Civil Cases Involving Novel Coronavirus Pneumonia Epidemic Cases (II), with immediate effect.

The opinions guide China's lower people's courts in applying various legal principles to address the practical difficulties encountered as a result of the COVID-19 pandemic. The opinions follow the issuance of related guidance in April 2020. For information on the prior guiding opinions, see Legal update, COVID-19: SPC issues guidance on handling civil disputes related to pandemic.

The new opinions are aimed at addressing four key aspects of the fallout from the pandemic, alleviating the corporate debt crisis through bankruptcy reorganisation and reconciliation, ensuring the stability of industrial supply chains, protecting the people's livelihood and promoting economic and social development.

The opinions are grouped into three main categories of cases, those involving various types of contracts and commercial leases, medical insurance and other financial contracts and corporate bankruptcy.

In relation to contract disputes, the people's courts are required to support claims to vary the terms of a contract, including the price and the time or method for performance, in accordance with the principle of fairness. Courts should encourage parties to negotiate variances or alternative means of performance and support claims for termination only where the purpose of a contract can no longer be achieved.

Likewise, courts are required to reject claims to terminate commercial leases for non-payment. Where the premises are owned by a state-owned enterprise or government organ, courts should support claims for temporary rent abeyance made by weaker players with operating difficulties due to the pandemic.

In relation to loans, mortgages and credit cards, the opinions require courts to enforce policies that discourage unilateral termination, disguised interest charges and so on. Where the pandemic causes distress, courts may amend repayment terms in accordance with the principle of fairness, especially in cases involving the production of epidemic prevention materials.

The opinions also restrict an insurer's defences based on the scope of coverage and medical provider and require courts to assist parties to negotiate and eliminate the cause of a bankruptcy filing by adopting instalments, extending the performance period, changing the price and so on.

Source: SPC website, Guiding Opinions of the Supreme People's Court on Several Issues Concerning the Proper Trial of Civil Cases Involving New Coronary Pneumonia Epidemic Cases (II).