When a Commercial Dispute Meets a Criminal Case: Six Changes in China's New Supreme People's Court Rules

Background for readers outside China

What is a "judicial interpretation"? The SPC issues binding interpretations (司法解释) that fill in how statutes are applied. Lower courts must follow them and cite them when relying on them in a judgment. In practice they work much like detailed regulations for the courts.

What is "criminal first, civil later"? Under a long-standing practice known as xian xing hou min (先刑后民), civil courts would dismiss or suspend a civil case once a related criminal case was opened, and wait for the criminal case to finish. Criminal cases in China can take years, and the result was that creditors, counterparties and investors were often left with no civil remedy in the meantime. Some parties also used a criminal complaint tactically, to stall a civil claim against them.

Why codify now? Many of the principles below already existed: in a 1998 SPC interpretation on economic disputes involving suspected economic crimes (amended 2020), in the SPC's rules on private lending, and in the 2019 Minutes of the National Courts' Work Conference on Civil and Commercial Trials (the "Ninth Minutes"). But the rules were scattered or vague, and the Ninth Minutes, although detailed, have a lower legal status and cannot be cited as the legal basis of a judgment. Courts applied them inconsistently. The New Rules bring the rules together, covering acceptance of the case, trial, liability and recovery.

According to the head of the SPC Research Office, the purpose is to correct a one-sided, mechanical reading of "criminal first, civil later," to apply parallel proceedings or sequential proceedings according to the situation, and to prevent criminal measures from being used to interfere in economic disputes (SPC press Q&A, September 21, 2026, in Chinese).

Here are the six changes that matter most in practice.

1. Can a criminal case still block my civil lawsuit?

Less often than before. Courts commonly dismissed civil claims by citing Article 11 of the 1998 interpretation as soon as they heard there was a criminal case. The New Rules require the court first to ask whether the civil case and the criminal case arise from the same facts or only related facts.

• Same facts (Article 2): the parties and the basic facts of the civil and criminal cases are the same. Here the traditional sequence still applies: the criminal case goes first.

• Related facts (Article 3): the court must accept the civil case. Examples given in the rules include:

  • a person commits a crime while signing a contract in a company's name, and the counterparty sues the company, which itself committed no crime;
  • a debtor commits a crime in signing the main contract, and the creditor sues a guarantor who was not an accomplice;
  • some co-debtors commit a crime, and the creditor sues the others.

  A catch-all clause covers other civil cases based on facts connected with, but not identical to, the crime. Most of Article 3 incorporates Article 128 of the Ninth Minutes.

Suspension is the exception, not the rule. A civil case accepted on related facts is, in principle, heard separately from the criminal case (Article 4). It is suspended only if the basic facts of the civil case must be determined on the basis of the criminal case's outcome and the criminal case is still pending. Once that reason falls away, the civil case must resume.

Two common tactics are addressed (Article 5):

• A party produces a police "case acceptance receipt" or similar paperwork and asks for suspension. If the conditions for suspension are not met, the request is refused.
• An authority asks the court to transfer the case because a criminal case has been opened. The court must examine the request. If the two cases do not involve the same facts, it informs the authority of its reasons and continues the trial.

When the criminal case goes nowhere, the civil route opens (Article 15). If criminal liability is not pursued, because the police decline to open a case, withdraw it, the procuratorate (China's public prosecution authority) decides not to prosecute, or the defendant is acquitted or not criminally liable, the court must accept a civil claim on the same facts. The same applies to the part of the facts that falls into one of these categories. For example, if the procuratorate decides not to prosecute some of the facts, a civil claim can be brought on those facts. The private lending rules already said this for illegal fundraising cases; the New Rules extend it to criminal-civil disputes generally.

What to expect: whether two cases involve "the same facts" will become one of the main battlegrounds, because it decides whether the civil court accepts the case and whether it must be transferred.

2. How can criminal evidence and findings be used in the civil case?

In practice, one party produces a criminal judgment showing that certain money was the proceeds of fraud, or that a certain contract was the means of a crime. Even if the other side had contrary evidence, civil courts often refused to look at it, on the ground that the facts had been "confirmed by an effective judgment." Those most affected were people who were never part of the criminal case, such as guarantors or companies whose names were misused. They had no chance to present evidence or argue in the criminal proceedings, yet the criminal findings could decide their civil liability.

Chinese civil procedure already allowed facts found in an effective judgment to be accepted without further proof, unless rebutted by contrary evidence (Article 93 of the SPC Interpretation of the Civil Procedure Law; Article 10 of the SPC Provisions on Evidence in Civil Proceedings). But it was unclear how this worked when a criminal judgment was involved. If a civil court simply made a different finding, the same facts would have two conflicting conclusions; if it would not, the rebuttal rule had little practical effect.

Article 6 keeps the rule and adds a coordination procedure:

• Facts found in an effective criminal judgment need not be proved in the related civil case, unless there is contrary evidence sufficient to overturn them.
• If the contrary evidence is sufficient to overturn facts on which the conviction or sentence was based, the civil court must notify the court that gave the criminal judgment. If that court considers its judgment correct, the civil court refers the matter to their common higher court. According to the SPC's Q&A, the civil court may not simply proceed to give a civil judgment in that situation. If the criminal court agrees its judgment was wrong, it should start retrial proceedings.

In practice, three situations should be kept apart:

1. Ordinary rebuttal. Facts in the criminal judgment are presumed, but a party can rebut them with sufficient contrary evidence. Merely raising doubts is not enough.
2. Facts underlying conviction or sentence. If those are overturned, the civil court cannot give judgment directly; the coordination procedure applies first.
3. Legal conclusions. Whether a contract is valid and who bears civil liability are questions of civil law for the civil court. A civil judgment that reaches a different view on these questions does not overturn criminal findings of fact, and no coordination procedure is needed.

Articles 7 and 8 deal with material in the criminal file and facts the criminal court did not find:

• Confessions and witness statements in the criminal file that were neither relied on as the basis of the criminal judgment nor excluded as illegally obtained must be examined by both sides in the civil trial before the civil court decides whether to rely on them.
• A fact that was not found in the criminal judgment because it did not meet the criminal standard of proof can still be found in the civil case if it meets the civil standard. The criminal standard is "reliable and sufficient evidence" excluding reasonable doubt; the civil standard is generally "high probability."

The effect is that a civil court no longer has to treat a criminal judgment as beyond discussion. For third parties who were not in the criminal case, the rebuttal route and coordination procedure in Article 6 should now be used in real cases. One open question deserves attention: in cases resolved through China's guilty-plea procedure (认罪认罚, "admission of guilt and acceptance of punishment," broadly comparable to a plea agreement), a defendant may not contest certain facts in exchange for leniency. How civil courts should treat those facts remains to be seen.

3. If the defendant cannot pay restitution, can victims pursue others?

Yes. Chinese criminal judgments often order the defendant to return or make restitution for the victim's losses (退赔), but many defendants have nothing to pay with, and victims recover only a small part. When victims then sued a guarantor or the company that signed the contract, a common defense was that the criminal judgment had already ordered restitution, so the victim's loss had already been "awarded" and the victim had to wait.

Article 3 now gives a basis for suing these other parties, and Article 9 sets a deduction rule. A liable party other than the criminal defendant may deduct, in the civil judgment or at enforcement, what the victim has actually recovered through confiscation, restitution or otherwise. It is the amount actually received that counts, not the amount ordered. If a criminal judgment orders RMB 1 million in restitution but only RMB 200,000 is actually returned, the deduction is RMB 200,000, not RMB 1 million.

The deduction must relate to the same loss or the same scope of payment, and it must be raised by the opposing party or the judgment debtor with proof of the recovery. The aim is to prevent double recovery; it is not set-off in the sense of the Civil Code.

In short, victims keep an independent civil claim and do not lose it merely because a restitution order exists, while the deduction rule prevents them from being paid twice.

4. My assets were frozen in someone else's criminal case. Where do I go?

This is common. The police seal a property registered in a suspect's name or freeze a company's bank account, but part of the property actually belongs to someone else: a buyer who has paid in full but not yet completed registration, the real purchaser of a home bought in another person's name, or the real investor behind a nominee shareholding. Can that third party sue in the civil courts to confirm ownership, recover the asset or lift the freeze?

No. The claim has to be made within the criminal proceedings.

Under Article 10:

• A civil court will not accept a third party's lawsuit over assets sealed, seized or frozen in a criminal case. It must tell the third party that it can raise the matter with the authority handling the case, by petition or complaint.
• If the criminal case has already been brought to court, the civil court must also tell the third party that it can file an ownership objection with the criminal trial court, which must hear the third party and, where necessary, have the third party appear in court.
• If the third party believes that an effective criminal judgment's disposal of the assets infringes its rights, it can petition under the trial supervision (retrial review) procedure, and the court must examine the petition.

Much of this was already in criminal procedure rules: Article 279 of the 2021 SPC Interpretation of the Criminal Procedure Law, and Article 15 of the SPC Provisions on Enforcement of the Property Part of Criminal Judgments. But those are criminal-law instruments, and judges and lawyers handling commercial cases did not always know them. Article 10 puts two points into civil rules: the civil route is closed, and the civil court must tell the third party where to go instead.

Timing matters. Before a criminal judgment takes effect, the third party can petition the investigating or prosecuting authority. Once the case is in court, it can file an ownership objection with the criminal trial court, which is the most effective stage. After the judgment takes effect, the only route is a petition for retrial review, which is much harder.

Limits remain. A third party is not a party to the criminal case. In ordinary proceedings it has no clear right to read the case file, and Article 10 does not give it a right to appeal the part of the criminal judgment that disposes of the assets. When an appearance is "necessary" is left largely to the court. Whether the third party is really heard depends on the practice of the criminal court.

By comparison, in the special procedure for confiscating illegal gains (where the suspect has fled or died), interested parties may apply to join, appoint a representative and appeal (Articles 299 and 300 of the Criminal Procedure Law).

What to do: if your assets are caught up in a criminal case, follow its progress from the start. Submit written objections to the investigating authority and the procuratorate during the investigation and prosecution review stages, file an ownership objection with the criminal court promptly once the case is brought to trial, and prepare evidence of ownership and lawful source, such as contracts, payment records and registration documents.

5. If a company's manager commits a crime, is the company liable?

It can be. The New Rules settle the threshold question first: a contract does not become void merely because signing it was a crime. I argued this in an earlier article, Is a Contract Void in China If a Crime Was Involved?, based on the Civil Code, the private lending rules, the SPC's interpretation on the contracts part of the Civil Code, and decided cases.

Article 17 now provides that where the act of entering into a contract constitutes a crime, the validity of the contract, and whether it binds the principal, are determined under the Civil Code. The private lending rules already said this for loans (Article 12); the New Rules extend it to contracts generally. The SPC's explanation is that treating the conduct as criminal is a negative judgment on the defendant, while upholding the contract better protects the victim. If a loan were void just because of the crime, the guarantee would fall with it, and the lender would lose its claims to interest, damages for breach and the guarantee, which "clearly does not help protect the victim."

For a contract signed by someone in a company's name, three questions need separate answers: Is the contract valid? Does it bind the company? Is the company liable for breach of contract, or only for damages based on fault? Articles 18 to 20 answer the second and third.

Collusion (Article 18). If the legal representative, a manager or an agent colludes with the counterparty to sign a contract in the company's name that harms the company and constitutes a crime:

• the company cannot have the contract declared void under Civil Code Article 154;
• the counterparty cannot make the contract binding on the company, unless the company ratifies it;
• the company can hold both colluding parties jointly liable for its losses.

According to the SPC, this is handled under the Civil Code rule on abuse of agency (Article 164). The difference matters: a void contract cannot be made valid by ratification, but a contract that is merely not binding on the company can become binding if the company ratifies it.

Agency (Article 19). If someone signs a contract in a company's name and commits fraud, contract fraud, loan fraud or a similar crime, and the counterparty sues the company, which committed no crime:

• if the person had authority, or there was apparent authority (表见代理: the counterparty reasonably believed the person had authority), the company is liable for breach of contract;
• if the person had no authority and there was no apparent authority, there is no contractual liability, but a company at fault may be ordered to pay damages proportionate to its fault, by reference to Civil Code Article 157.

The same applies where the legal representative, a manager or an employee acts in the company's name. For a legal representative (法定代表人, the single officer registered as having statutory power to act for a Chinese company), the rules on representation apply and an act beyond authority is assessed under Civil Code Article 504. So whether the company is liable is not just a matter of whether the company seal was genuine. It depends on whether the person had authority to act or represent, whether the counterparty checked what it should have checked, and whether the company itself was at fault.

An example from the SPC's case database. In a loan dispute between a lender, Liu, and a property developer in Beihai (case database no. 2025-16-2-103-001), the company's former shareholders had asked a person named Wei to replace the company's business license and seal and handle a registration change. Wei used this access to forge the company seal and shareholder resolutions, became the registered legal representative, and then borrowed RMB 20 million from Liu in the company's name, secured by a mortgage over the company's land. The money went to Wei's personal account.

A criminal court convicted Wei of contract fraud: Wei had paid RMB 800,000 in interest, so RMB 19.2 million was found to have been obtained by fraud, to be recovered from Wei, with any shortfall to be made up by restitution. In the civil case, the first-instance court ordered the company to repay principal and interest; on the company's retrial application, the Nanning Intermediate Court ordered it to repay RMB 19.2 million in principal plus interest. After the criminal judgment took effect, the Guangxi Higher Court, on retrial, set aside the earlier judgments and dismissed the lawsuit on procedural grounds, without deciding the merits. Following a protest by the Supreme People's Procuratorate, the SPC in November 2024 set aside the Higher Court's ruling and reinstated the Nanning judgment. The litigation had lasted ten years.

The SPC found that the lender had checked with due care, and that the company, knowing Wei had become legal representative by improper means, had neither corrected the registration nor made any public statement, so the lender had reason to believe Wei could represent the company. Civil liability, the SPC said, "cannot simply be determined directly from an earlier criminal judgment." Having paid, the company can seek reimbursement from Wei. Wei's crime and the company's contractual liability were not in conflict.

Embezzlement and misappropriation (Article 20). If a person signs a contract in the company's name, then takes or diverts what was received, and is convicted of occupational embezzlement or misappropriation of funds, the counterparty can hold the company liable for breach of contract. If the counterparty was itself at fault, damages may be reduced accordingly.

6. If the debtor committed a crime, what defenses does a guarantor have?

After a borrower is convicted of obtaining a loan by fraud, the lender often turns to the guarantor, and the guarantor often says: "I was deceived too." Article 21 sets out four routes, roughly in order.

Route 1: Challenge the main contract. Where the debtor's act of entering into the main contract is a crime and the creditor sues the guarantor, the court must examine whether the main contract is valid. If the main contract is void, the guarantee is generally void too (Civil Code Article 682). Under Article 17(2) of the SPC interpretation on guarantees, a guarantor without fault then bears no liability, and a guarantor at fault pays no more than one third of what the debtor cannot pay. If the guarantee is valid, by contrast, the guarantor is liable in full within the scope of the guarantee unless it has a specific defense. The difference is large.

But under Article 17 of the New Rules, the crime alone does not make the main contract void. The guarantor must identify a specific ground of invalidity under civil law, for example:

• the creditor and debtor colluded maliciously (Civil Code Article 154);
• the loan was a sham concealing another transaction (Article 146);
• the contract violated a mandatory provision of law or administrative regulation, or public order and good morals (Article 153); or
• the lender knew or should have known the money would be used for illegal or criminal activity (Article 13 of the private lending rules).

Route 2: Rescind the guarantee. If the main contract is valid but the guarantee is voidable, the guarantor can apply within the statutory period to rescind it. Article 21(1) lists four situations:

• the debtor induced the guarantee by fraud, and the creditor knew or should have known;
• the debtor induced the guarantee by coercion;
• the creditor used fraud, coercion or similar means when the guarantee was signed; or
• other grounds for rescission apply.

Where the debtor deceived the guarantor, the guarantor must also prove that the creditor knew or should have known, which is often the hardest part.

Route 3: Reduce or avoid liability after the guarantee fails. Even if the guarantee is void or rescinded, the guarantor may still owe damages. Under Article 21(2), the court must consider the guarantor's occupation, understanding and relationship with the debtor in deciding whether, and how far, the guarantor was at fault. A professional guarantee company, a company affiliated with the debtor and an ordinary friend or relative are likely to be judged very differently. The share of liability is then set under Article 17 of the guarantee interpretation.

Route 4: Point to the creditor's own fault. Under Article 21(3), if the creditor failed to check what it reasonably should have, and that contributed to the main contract being signed and to the loss, the guarantor can ask for its liability to be reduced. This does not depend on the guarantee being void or rescinded; it is available even if the guarantee is valid. The guarantor needs to show what the creditor should have checked, what it actually missed, and how that failure is connected to the contract and the loss.

What this means

The New Rules are among the most important SPC interpretations in this area. They address procedure, the use of criminal facts and evidence, contract validity, remedies for third parties and guarantor liability.

Most of the rules are not new. They systematize and clarify existing rules or adopt settled court practice. The genuinely new mechanisms are:

• the coordination procedure when a civil court finds that facts underlying a conviction have been rebutted;
• the right to bring a civil claim on the same facts once criminal liability is not pursued; and
• the guarantor's right to seek reduced liability where the creditor was at fault.

For anyone involved in a dispute that also has a criminal dimension in China, the most direct change is this: "there is a criminal case" is no longer enough on its own. Whether the aim is to have a civil claim dismissed or suspended, to have a contract declared void, or to show that a company or guarantor is not liable, the argument has to be made on the specific facts and on civil law: Do the two cases involve the same facts? Does the civil case really have to wait for the criminal result? Is there a ground of invalidity under the Civil Code? Did the person have authority to act or represent? Who was at fault?