Watson & Band     Xiaobo He, Jie Jia

The various issues in overlapping civil and criminal cases have always attracted attention from all parties involved. In criminal cases involving infringement upon property, an order to return or compensate is an important way to make up for the damages incurred to the victim; however, in practice, compensation is often not very effective, typically due to reasons such as: the defendant is incapable of return or compensation; the defendant is not willing to return or compensate; the investigative agencies did not preserve the defendant’s property earlier; or obstacles occur during the court’s enforcement procedure. All these have resulted in the serious phenomenon known as “empty sentences” by courts. [1]

Under this situation, the victim must seek other legal remedies, and has a need to bring civil actions against the defendant and related subjects in order to recover his or her losses.

     Does a criminal order to return or compensate entirely block or eliminate the possibility of a civil action (including civil actions collateral to criminal proceedings)? Under what circumstances can one separately initiate a civil action? Questions such as these are greatly disputed in the current fields of theory and practice. This article will try to combine current legal regulations and typical cases to analyze and discuss these issues.

I. The scopes of application for orders to return or compensate and civil actions collateral to criminal proceedings

Let us first list the related laws and regulations.

According to Article 64 of the P.R.C. Criminal Law, “All property illegally obtained by criminals shall be recovered or ordered to be returned or compensated; legal property of the victim should be returned in time.” Based on authoritative explanations, the “order to return or compensate” mentioned herein refers to an order imposed upon the criminal to return or compensate for the illegally obtained property based on its value, when the property has already been squandered or destroyed. [2]

According to Article 99 of the P.R.C. Criminal Procedure Law, “If the victim suffered material damages from the defendant’s crime, during the criminal proceedings, he/she has a right to initiate an incidental civil action.”

According to Article 138 of the Supreme People’s Court’s Explanations on Application of the Criminal Procedure Law of the People’s Republic of China (the “Criminal Procedure Law Judicial Explanations”), “If the victim suffered material damages due to the criminal infringement of his/her personal rights, or due to property destruction by the criminal, the victim shall have the right to initiate an incidental civil action during the criminal proceedings.”

According to Article 139 of the Criminal Procedure Law Judicial Explanations, “If the defendant illegally occupied or disposed of the victim’s property, the property shall be legally recovered or ordered to be returned or compensated. If the victim initiates an incidental civil action, the People’s Court shall not accept the case.”

On April 1, 2013, the Henan Province Higher People’s Court consulted the Supreme People’s Court on the application of Article 64 of the P.R.C. Criminal law. On October 21, 2013, the Supreme Court issued the Reply on Questions Related to the Application of Article 64 of the Criminal Law (the “Supreme Court’s Reply”), which stated:

 “According to Article 64 of the Criminal Law and Articles 138 and 139 of the Criminal Procedure Law Judicial Explanations, if the defendant illegally occupied or disposed of the victim’s property, the property shall be legally recovered or ordered to be returned or compensated. Based on this, the specific content recovered or ordered to be returned or compensated should be written clearly in the main text of the judgment, wherein any property that has already been returned to the victim before the judgment should be clarified. If the victim initiates an incidental civil action, or initiates a separate civil action petitioning for return of property that was illegally occupied or disposed of, the People’s Court shall not accept the case.”

Based on the above provisions, civil actions collateral to criminal proceedings are only applicable to situations where the victim suffered material damages due to criminal infringement of his/her personal rights, or due to property damages by the criminal. On the other hand, if the defendant illegally occupied or disposed of the victim’s property, the victim should seek relief through the procedure of recovery and order to return or compensate.

II. Judicial Perspectives on Ordering to Return or Compensate and Initiating Separate Civil Proceedings

Currently, there is much dispute regarding whether the victim can initiate a separate civil action when the defendant was not sentenced an order of compensation; the content of the order of compensation was unspecific or unclear; or the order of compensation cannot make up for the victim’s losses. Next, a categorized analysis will be given in conjunction with recent typical cases.

1. The main text of the criminal sentence does not involve or does not make clear the specific content of the return or compensation

According to Article 6 of the Several Regulations on the Execution of Sections Involving Property in Criminal Trials (2014.10.30), “In sections involving property in criminal trials, sentence content should be clear and specific. In the event of a great amount of property or a great number of victims involved, which are unsuitable to be listed in details in the main text of the sentence, then a summary can be given and a list can be separately attached. When the defendant is sentenced to recovery or order of compensation, the sum of money, or the names and quantities of the properties that are subject to recovery or order of compensation should be clearly identified.”

In the case involving unjust enrichment between Jiangsu Jiabang Power Equipment Co., Ltd. and Hefei Huanhong Electricity Installation Co., Ltd., the main text of the first instance criminal sentence stated: [3] “The automobile bought by defendant Shouming Zhang with the illicit money shall be returned to the victim by the seizure agency; the illicit money that was not returned shall be recovered and returned to the victim.” To this end, the Supreme Court held that “Based on the provisions in the ‘Supreme Court’s Reply’, whenever the defendant is discovered to possess property, judicial authorities can legally recover the property. If the victim of the criminal case initiates a separate civil action, the People’s Court will not accept the case.”

It should be noted that in this case, Jiangsu Jiabang, as a victim of the criminal case, tried to initiate a civil action against a third party related to the case, instead of the defendant of the criminal case. Thus, based on the “Supreme Court’s Reply”, the Supreme Court completely eliminated the possibility of the victim to initiate any civil action.

In the case involve compensation for property damages between Yanqing Wen and Jing Li, the main text of the first instance criminal sentence stated: “The illicit money and property seized after the crime shall be returned to the victim. The remaining illicit money and property shall continue to be recovered.” The second instance court held that “Recovery and order for compensation are complementary to each other in terms of legal relief to the criminal case victim; their purpose is to protect the victim’s legal rights. Under the circumstances that the criminal sentence did not sentence the defendant to return or compensate the illegally occupied or handled property, because the criminal sentence did not fully provide the victim with relief, and Jing Li’s total losses cannot be covered with recovery, a separate civil action can be initiated.” [4]

What’s interesting is that in this case, the Supreme Court’s opinion is clearly different from the previous case. In this case where the defendant was not sentenced an order of compensation, the Supreme Court held that [5] “When criminal recovery and compensation cannot fully cover Jing Li’s losses, the victim Jing Li is granted the right to separately initiate a civil action before the People’s Courts, which is beneficial for protecting the victim’s legal rights to the greatest extent. The criminal sentence and the civil judgment support each other in terms of legal relief to the criminal case victim, and do not increase the compensation duty of Yanqing Wen. It is appropriate for People’s Courts to accept the civil action initiated by Jing Li.”

Our opinion is: the above “Supreme Court’s Reply” and the Several Regulations on the Execution of Sections Involving Property in Criminal Trials have stated that if the defendant illegally occupied or handled the victim’s property, the property shall be legally recovered or ordered to be compensated. The content of the order of compensation should be clear and specific. If the defendant was not sentenced an order of compensation, or if the content of the order of compensation was not clear and specific, then since the criminal sentence did not provide sufficient relief for the victim, the courts should accept the separate civil action initiated by the victim.

2. Coordination between an insufficient order of compensation and a separate civil action

Generally speaking, two situations may involve recovery or compensation that is insufficient to cover the losses: First, after the recovery or compensation, the original illicit goods were not fully recovered, and the principal illicit money was not fully returned; second, the principal was fully returned, but losses of the victim were still not covered, for example, if there are losses in the interests (we will not discuss this type of case in this article).

According to the aforesaid “Supreme Court’s Reply”, if the defendant illegally occupied or handled the victim’s property, the property shall be legally recovered or ordered to be compensated. If the victim initiates an incidental or a separate civil action, the People’s Court will not accept the case. However, many victims have not given up trying to initiate separate civil action. Article 5 of the Supreme People’s Court’s Regulations on the Scope of Civil Suits Collateral to Criminal Proceedings (abolished as of January 19, 2015), has often been quoted as a basis for victims to bring up a suit, and has even been used by courts as a basis for judgment. Said Article 5 provides as follows: “If the defendant illegally occupied or handled the victim’s property, the property shall be legally recovered or ordered to be compensated. Recovery or order of compensation can be considered by People’s Courts as given circumstances for sentencing. If losses are still not covered after the recovery or compensation, the Courts can accept separate civil action initiated by the victim.”

As to how to understand and interpret this article, in the case involving compensation for property damages between Baicheng Yinxi Coal Washing Co., Ltd. and Shouhe Wang[6], the Supreme Court held that the scope of acceptable civil actions under the said provision is limited to situations in which the criminal illegally occupied or handled the victim’s property, leading to “material damages” that cannot be covered even after recovery or compensation. It does not include cases in which the defendant illegally occupied or handled the victim’s property, leading to inability to recover or compensate for the property. In this case, the claim made by Yinxi Coal Washing focused on the property illegally occupied by Shouhe Jiang and Guang Wang, instead of the property damages that consequently occurred, and therefore is not within the range of civil actions acceptable by People’s Courts.

In addition to the above laws and regulations, in practice, different legal facts, different legal relations and different subjects of liability will influence whether or not a separate civil action is possible.

A. Initiating a separate civil action based on the same facts

Guidance and Reference for Civil Procedures once published a commentary article titled Suggestions for the Situation where Criminal Case Victim’s Losses are Not Covered by Recovery or Compensation, and a Separate Civil Action is Initiated before the Civil Tribunal of People's Courts. The criminal case quoted in the article did not sentence the defendant to recovery or order of compensation; the victim involved in the case initiated a separate civil action to the court based on the same facts.

The second instance court of this case held that the victim should claim his rights through recovery in accordance with the criminal sentence; the civil action initiated before the first instance court based on the same facts is not within the range of civil actions acceptable by the court.

Regarding this matter, the Supreme Court’s First Civil Tribunal held that:

 “As the same legal facts simultaneously infringed criminal legal relations and civil legal relations, this constitutes an overlapping criminal and civil case. If an event simultaneously created civil and criminal legal facts, then identification of this event may be meaningful for both the civil and the criminal legal facts. The different natures of punishment in criminal cases and compensation in civil cases also reflect the mutual independence bewteen criminal and civil cases; there is no conflict between the civil compensation paid by the defendant to the victim, and the recovery and order of compensation for the crime by judicial authorities in criminal cases. If losses are still not covered after the recovery or compensation, People’s Courts should accept separate civil actions initiated by the victims.” [7]

In contrast, in the case involving a private lending between Shulin Wang and Shandong Chenguang Real Estate Development Co., Ltd.[8], the Supreme Court’s attitude has clearly changed. The Supreme Court held that:

 “Criminal punishment plays simultaneously the functions of punishment on the defendant and compensation to the victim. The order of compensation in criminal sentences is a judgment made by the People’s Court, after ascertaining during the trial that the victim had suffered damages due to the illegal possession or disposal of their property, which judgment orders the defendant to bear liability for civil compensation. This judgment has restrictive power, determinative power, and executive power, and its nature is to provide relief for the victim’s civil rights; it has equivalent legal effect to a civil judgment. In addition, the property portion of this criminal sentence has entered the execution phase; although the execution phase was ended because the second defendant’s property available for execution could not be found, based on the relevant provisions, if available property of the person concerned is found, the victim can once again apply for execution. Therefore, Shulin Wang can still seek relief for his losses through the execution procedure. That Shulin Wang initiated a separate civil action based on the same facts and reasoning and the same object was in violation of the principle of ‘ne bis in idem’.”

Our opinion is: the nature of an order for compensation is a remedy for the victim’s property damages, and relief for the victim’s property rights; it should be the victim’s private right. [9] However, currently, orders for compensation are a way adopted by the judicial authorities to demand compensation from the criminal “in place of” the victim, and indicate a compulsory compensation sanction from the judicial authorities. [10] However, under the current legal framework, when the compensation does not cover the victim’s losses, it is not advisable to initiate a separate civil action based on the same facts; one should continue to obtain relief through the execution procedure, or else repetition or conflicts between the criminal sentence and the civil judgment may occur.

B. Initiating a separate civil action against a different subject of liability based on a different legal relation

Even when the criminal sentence has already clearly ordered the defendant to compensate, if there exists a civil guarantee relation, an agency by estoppel relation based on the employee position, a joint infringement relation and the like that are related to the facts of the case, the victim can initiate a separate civil action against a different subject of liability based on one of these different legal relations. Of course, in this type of civil actions, the defendant often argues that as the implication based on the criminal facts results in nullity of civil action, he or it should not bear the civil liability.

In the case involving an import and export agency contract dispute between China Zhongqing International Holding Co., Ltd. and China Grand Enterprises Co. Ltd. [11] (wherein the agency by estoppel relation is specifically involved), the retrial applicant, Zhongqing, argued that both the first and second instance courts recognized validity of the agency contract, which judgments were in conflict with the criminal sentence that ruled the conclusion of the agency contract as the behavior and manner that constituted the crime of contractual fraud.

Regarding this, the Supreme Court held that:

 “Differences do exist between criminal liability and civil liability in terms of the protected legal interests, standards for proof, principles of attribution and forms of liability. The legal effect of facts recognized in a criminal sentence in the civil and business realms should be determined based on civil and business laws. Even though the conclusion of the involved agency contract was ruled as a fraudulent behavior constituting the crime of contractual fraud, that does not necessarily mean the contract is invalid in the civil and business realm. Fraud in criminal law typically corresponds to using fraudulent means to conclude a contract under the civil law, unless under some special circumstances. The involved agency contract should in effect be identified as a revocable contract; if the revocation right holder, Zhongqing, does not exercise its right of revocation, the contract should be identified as valid.”

On the other hand, the Supreme Court held that:

 “Where the same legal facts separately form a criminal legal relation and a civil legal relation, an aggregation of criminal liability and civil liability is actually constituted; assuming criminal liability does not deny the assumption of civil liability. The fact that the execution of the criminal case has not been completed also does not influence the acceptance and trial of the civil case. When recovery of losses is sentenced in the criminal case, and the person liable is ruled to assume civil liability in the civil case, the determination and execution of the recovery of losses and the civil liability should be coordinated. In the trial of the civil case, the recovered money should be deducted from the amount of compensation imposed upon the person liable in the civil case.

Similarly, in the case involving a financial loan contract dispute between Agricultural Development Bank of China, Jinta County Branch and Jinta County Jianxing Cotton Co., Ltd.[12], and the case involving a loan contract dispute between Shizuishan Beijian Material Trade Co., Ltd. and Wensheng Wang[13] (note: both cases involved guarantee relations), the Supreme Court held that:

 “Regarding loan contracts concluded under fraudulent conditions, if the victim of the fraud does not exercise his/its right of revocation, then the loan contract will be valid, and the guarantee contract will also be valid. When the creditor requires the guarantor to assume the guarantee liability, the subject of liability is not entirely identical to the subject of liability in the criminal case. It is in compliance with the law if the creditor claims for repayment against the guarantors based on the contract.”

Conclusion

Under the current legal framework, if the victim suffered material damages due to criminal infringement of his/her personal rights or due to property damages caused by the criminal, he/she has the right to initiate an incidental civil action. If the criminal illegally possessed or disposed of the victim’s property, the property shall be legally recovered or ordered to be compensated by the People’s Courts.

If the defendant was not sentenced to recovery or order of compensation, or if the content of the order of compensation was not clear and specific, courts should accept the separate civil action initiated by the victim.

Similarly, under such a situation, certain cases may have sentences including expressions such as “If losses are still not covered after recovery or compensation, People’s Courts should accept the separate civil action initiated by the victim.” Of course, this does not mean that the victim can initiate a separate civil action based on the same facts; contrarily, courts should accept the case when the victim initiates a separate civil action based on different facts, different legal relations or against different subjects of liability. Additionally, the fact that the execution of the criminal case has not been completed does not influence the acceptance and trial of the civil case.

 [1] Yuan, Hui. “An Empirical Study into the Phenomenon of Impracticable Orders of Compensation—an Investigation Centering on Criminal Sentences in Two-Tier Courts in City L” Journal of Law Application, Issue 01, 2015.

 [2] Hu, Kangsheng, and Lang, Sheng. Interpretation of the Criminal Law of the People’s Republic of China. Law PressChina, 2004.

 [3] (2015) Supreme Court Min Shen Zi Civil Ruling No. 3588

 [4] (2015) Liao Min Yi Zhong Zi Civil Judgment No. 204

 [5] (2017) Supreme Court Min Shen Civil Ruling No. 4094

 [6] (2017) Supreme Court Min Shen Civil Ruling No. 1158

 [7] Wang, Yuying. “Suggestions for the Situation where Criminal Case Victim’s Losses are Not Covered by Recovery or Compensation, and a Separate Civil Action is Initiated before the Civil Tribunal of People's Courts” Guidance and Reference for Civil Procedures, Vol. 61, 2015, p.184-190.

 [8] (2017) Supreme Court Min Shen Civil Ruling No. 106

 [9] Li, Yiyou. “Several Thoughts on Order of Compensation Issues in Criminal Proceedings.” Hebei Law Science, Issue 11, 2014.

 [10] Cheng, Yue, and Cheng, Yanzhou. “Overlapping Criminal and Civil Cases in the System of Order to Return or Compensate” The People’s Judicature (Application), Issue 19, 2017.

 [11] (2017) Supreme Court Min Shen Civil Ruling No. 1914

 [12] (2017) Supreme Court Min Zai Civil Ruling No. 304

 [13] (2017) Supreme Court Min Shen Civil Ruling No. 2582