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New judicial interpretation of Supreme People's Court has greatly reduced
judgment debtor's costs
for its delay in performance of effective judgment


15 August 2014
On July 30, 2014, the PRC Supreme People's Court promulgated "Interpretation on Law Application Issues relating to Enforcement Procedures regarding Calculation of Interest on Overdue Judgment Debt". The said judicial interpretation has been implemented as from August 1, 2014.
Assuming a judgment debtor fails to honor the judgment which does not specify the default interest rate applicable to the judgment debt overdue, before the said judicial interpretation being implemented, the judgment debtor would pay the "double interest" which was calculated at 200% of the highest RMB lending interest rate published by the People's Bank of China applicable to the same or similar period; however, after the said judicial interpretation being implemented, the "double interest" has been changed to be 0.0175% per diem (approximately 6.39% per annum). This change has significantly lowered the "double interest" to be accrued on the judgment debt overdue.
In addition, if the enforcement proceeds cannot satisfy in full the judgment debt, before the said judicial interpretation being implemented, the enforcement proceeds would be used to settle both principal amount and accrued interests on a pro rata basis; however, after the said judicial interpretation being implemented, the enforcement proceeds shall be used to first repay the principal amount and secondly settle the accrued interest.
In conclusion, the new judicial interpretation has greatly reduced judgment debtor's costs for its delay in performance of effective judgment, and adoption of the principle which is to settle principal amount first and interests secondly will greatly reduce the willingness of the judgment debtor to quickly settle the remaining interest.

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Disclaimer
Any legal information contained in this newsletter is general in nature and laws and regulations are changing from time to time and compliance will always depend upon the particular circumstances. We have not attempted to give exhaustive descriptions of law or to give a legal opinion on specific legal issues. You should not rely on this newsletter as a legal advice for any particular purpose.

 

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