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China issues judicial ruling banning luxury consumption by judgment debtors

23 July 2010

In order to facilitate judgment enforcement and to limit debt avoidance, on 1 July 2010 the PRC Supreme People's Court published a judicial ruling to ban luxury consumption by judgment debtors.
According to the said judicial ruling, if any judgment debtor fails to honour the judgment within a given period, the people's court may order a ban on his luxury consumption which includes:
- travel by plane, or by train in first class sleeper, or by ferry in second class cabin or above;
- luxury consumption at hotels, restaurants, night clubs, golf courses, etc;
- purchase, construction, expansion or renovation of real properties;
- lease of a high-class office, hotel room or apartment to use as an office;
- purchase of a car which is unnecessary for business operation;
- having a tour or a holiday trip;
- sending a child?to a private school with expensive tuition;
- purchasing an insurance?investment product with?high premium;
- other luxury consumption which is unnecessary for daily life or work.
If the judgment debtor is not an individual but a company, the legal representative and/or head of such company may be banned from the above mentioned luxury consumption if such consumption is paid or reimbursed by the company.
According to the ruling, the People's Court may announce the banning order via any relevant media. Obviously such announcement may seriously affect the business name and reputation of the judgment debtor concerned.
The new ruling will be implemented as from 1 October 2010 and there are comments that the new ruling may not be easily and efficiently implemented. In this regard, we noted that according to a judicial interpretation published by the Supreme People’s Court in September 2008, if a judgment debtor is a company, its legal representative and/or head of company may be banned from going abroad; from the last two years practice, we have found that this judicial interpretation has been quite efficiently implemented. Therefore, if the new ruling is implemented similarly, the judgment debtors’ life will be further toughened in China.

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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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