How to choose a place to invest in virtual currency, sign a contract and file a lawsuit?

Where there are people, there will be disputes

Investment in the blockchain industry is a matter of different opinions. Although the methods are different, the purpose of making a fortune is the same. In practice, in many cases, blockchain investors (mostly retail investors) only sign a very simple agreement with the financing project party ** based on trust, given that they are relatives, friends or acquaintances of the financing project party (is it true? With you)**, even some investors do not sign any agreement (streaking investment). In the absence of a written agreement on their respective rights and obligations, the investor will pay the financing project party, which has a great risk.

You know, both the investor and the financing project party have their own little things in their hearts. Of course, everyone is happy when they make money. If they fail to make money, the boat of friendship will turn over at the right time.

Attorney Mankiw focuses on the particularity of the Web3.0 blockchain industry, which has enabled us to experience and handle a large number of cases involving virtual currency. On the whole, disputes involving virtual currency are mainly concentrated between individual players, investors and project parties between. The legal relationship between individual players is mainly reflected in disputes over the transfer of virtual currency between individual players, disputes over entrusted investment in virtual currency; disputes between investors and project parties are disputes over the return of unjust enrichment in virtual currency, Investment disputes.

Regardless of the above-mentioned disputes between the investor and the financing project party of relatives and friends, in the end, most of the things will go to court. As we said at the beginning, the two parties reached a consensus on an investment in a blockchain project and signed an investment agreement. Either the money was not earned and the investor "lost", or the money was invested, but the project Without any progress, the financing project party has since disappeared. Speaking of this, I must sigh that as long as it is not a streaking investment, this investment agreement may be the key to dispute resolution.

Virtual currency disputes can be resolved in China

Regarding the case of blockchain involving virtual currency, let's first review China's attitude towards the past and forge ahead. Presumably everyone can think of a few at this time. From 2013 to 2022, the "Notice on Preventing Bitcoin Risks"), " Announcement on Preventing Risks of Token Issuance and Financing", "Risk Warning on Preventing Illegal Fundraising in the Name of "Virtual Currency" and "Blockchain"", "Announcement on Preventing the Risk of Hype in Virtual Currency Transactions", "About Rectifying Virtual Currency "Notice on Mining" Activities", "Notice on Further Preventing and Dealing with Hype Risks in Virtual Currency Transactions" (unofficially known as 924 documents), etc., the activities of investing in blockchain projects are constantly active, bringing domestic The continuous strengthening of regulatory measures. Does that mean that all kinds of disputes involving blockchain and virtual currency are equivalent to no solution? The answer is of course not. The "National Court Financial Trial Work Conference Minutes (Draft for Comment)" published this year may bring new ideas to the handling of virtual currency disputes.

On the whole, China's recognition of virtual currency property attributes has changed from limited protection to invalidation to inadmissibility. Taking the "9.15 Notice" jointly issued by the People's Bank of China and other ten departments in 2021 as a boundary, although most courts are still inclined to accept disputes related to virtual currency, the data from public inquiries shows that the proportion of non-acceptance has reached 30% and is on the rise. trend. The reasons for dismissing the prosecution are mainly based on the "violation of public order and good customs" and "lack of legal economic evaluation standards" in the "9.15 Notice", except for the direct adoption of "punishment before the people" in criminal cases. At the same time, most of the courts in our country do not support the interest claim of virtual currency on the grounds that “there is no legal regulation”.

On the whole, although the property attribute of virtual currency seems to be gradually losing, it does not hinder the high probability of virtual currency cases being actionable in my country. That is to say, if there is a contract dispute, you can go to a Chinese court or arbitration organization to deal with.

So here comes the question, if the arrow has to be launched, and a good project wants to participate, whether as an individual player or as a project party, how should the contract be signed? How to choose dispute resolution? We give you the following suggestions based on practical experience.

1. Preferred arbitration institution to resolve disputes

Given the unfavorable litigation environment in my country, domestic investors may consider choosing arbitration as a dispute resolution method in advance when signing an investment agreement. Due to the confidentiality of arbitration, there are not many rulings that can be found at present, mainly based on the Beijing Arbitration Commission ("BAC"). On April 14, 2022, it was ruled that Bitcoin And other virtual currencies are virtual assets protected by law, and it is clearly stated that there are currently no laws and administrative regulations in my country that prohibit virtual currencies and trading activities based on virtual currencies**. Judging from the ruling trend of the BAC, compared with litigation, in addition to the fact that adjudication is more beneficial to investors, arbitration also has advantages that cannot be compared with litigation, such as strong confidentiality, high timeliness, and finality in one arbitration. At present, it seems that arbitration may involve virtual A better option for currency disputes.

Of course, when an arbitration clause is agreed upon, a clear and specific arbitration institution must be agreed upon**. Article 3 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Arbitration Law of the People's Republic of China: "If the name of the arbitration institution stipulated in the arbitration agreement is inaccurate, but the specific arbitration institution can be determined, it shall be determined that the arbitration institution has been selected", Article 6 "Where the arbitration agreement stipulates that an arbitration institution in a certain place shall arbitrate and there is only one arbitration institution in that place, that arbitration institution shall be deemed the agreed arbitration institution. If there are two or more arbitration institutions in that place, the parties may agree to choose one of them." An arbitration institution applies for arbitration; if the parties fail to reach an agreement on the choice of the arbitration institution, the arbitration agreement shall be invalid.”

This paragraph sounds a bit convoluted, Let me **** give an example** for everyone to understand. ** There are 2 arbitration commissions in Shanghai, one is called "Shanghai Arbitration Commission" and the other is called "China International Economic and Trade Arbitration Commission Shanghai Branch". Therefore, if you want to agree to resolve future disputes in the Shanghai Arbitration Tribunal, then the correct statement at the time of the agreement should be "If a dispute arises, either party can arbitrate in the Shanghai Arbitration Commission", or "If a dispute arises, either party Arbitration can be conducted at the China International Economic and Trade Arbitration Commission Shanghai Sub-Commission". If the agreement is unclear or the arbitration agreement is invalid, the case will only end up under the jurisdiction of the people's court. According to the current court's ruling ideas, it is indeed not very good for investors. friendly.

2. It is also important to choose which court to choose

Suppose I am an investor, and I have to go from Shanghai to Xinjiang to file a civil lawsuit, which is about 3,900 kilometers. The time cost and economic cost of rights protection are not a small amount, and the cost performance is too low. Speaking of this I can think of a lot of investors who are forced to choose to be bad or lie flat.

At this time, I will take you to look up the "Civil Procedure Law of the People's Republic of China", Article 34 stipulates that "The parties to a contract or other property rights and interests disputes may agree in writing to choose the place of the defendant's domicile, the place where the contract is performed, the place where the contract is signed, the plaintiff The people's court at the place of domicile, the location of the subject matter, and other places that have actual connection with the dispute shall have jurisdiction, but shall not violate the provisions of this law on hierarchical jurisdiction and exclusive jurisdiction". Of course, the investment disputes we are discussing today do not fall within the scope of exclusive jurisdiction, and the agreement on the jurisdiction of the agreement is fully applicable, so boldly use it.

To discuss a little bit more, if I sue as an investor, the plaintiff’s domicile includes my own domicile or habitual residence, and the court may be right at my doorstep. Or, when the investment agreement is signed, specify the place where the contract is signed. As far as the large number of cases we handle, choosing the place where the contract is signed is convenient for investors to file a lawsuit. Therefore, if it is a lawsuit, the two places that are more suitable to choose at present are the plaintiff's domicile or the place where the contract is signed, and you can choose according to your needs.

**If the investment project is abroad, can the court control it? **

We all know that many investments in blockchain projects have foreign-related factors** (investors and financing project parties are Chinese, and blockchain projects are abroad), which are foreign-related contracts.

For example, we received a client consultation. Their jurisdiction in the contract stipulated that "the investment agreement shall be governed by Singapore law; the parties hereby submit to the non-exclusive jurisdiction of the Singapore courts."

At this time, as an investor, you will first want to know, can this be sued in China? After all, the contract stipulates the application of foreign laws and the jurisdiction of foreign courts, but does not stipulate the application of domestic laws and the jurisdiction of domestic courts.

Let's make a plate according to different situations:

Situation 1: The agreement stipulates that foreign courts have non-exclusive jurisdiction: they can sue in Chinese courts

Let’s take a look at the (2015) Min Si Zhong Zi No. 57 case. **The Supreme People’s Court held that: when the parties to a foreign-related commercial dispute case agreed to have non-exclusive jurisdiction over the dispute, it did not exclude jurisdiction. jurisdiction of the people's courts. **If one party files a lawsuit in a mainland court, the people's court may accept the case if it has jurisdiction over the case in accordance with the relevant provisions of the Civil Procedure Law of the People's Republic of China. From the viewpoint of the Supreme Court, it can be seen that the agreement on non-exclusive jurisdiction in the contract does not exclude other competent courts from exercising jurisdiction.

Going back to our example at this time, you can also pick up your investment agreement. If the Singapore (foreign) court stipulated in the contract has non-exclusive jurisdiction, it indicates that the alternative jurisdiction court is not the only one. Parallel jurisdiction of multiple jurisdictions, where the plaintiff has the right to choose to litigate the dispute in a court of competent jurisdiction in China other than the Singapore (foreign) court with non-exclusive jurisdiction.

To put it bluntly, if you have such an agreement that foreign courts have non-exclusive jurisdiction, you don’t have to use it to suppress the bottom of the box. It’s not too late to try it first and then choose to lay it flat or put it badly.

Situation 2: The agreement stipulates that the jurisdiction of foreign courts: cannot sue in Chinese courts

Some friends affirmed that my foreign-related investment agreement only stipulates that foreign courts will have jurisdiction, so is there still a way to sue in China? First of all, on January 24, 2022, ** published a "Minutes of the Symposium on Foreign-related Commercial Maritime Adjudication Work of National Courts", which stipulates that "foreign-related contracts or other If the jurisdiction agreement signed by the parties to a dispute over property rights and interests clearly stipulates that the court of a country shall have jurisdiction, but does not stipulate that the jurisdiction agreement is a non-exclusive jurisdiction agreement, it shall be presumed that the jurisdiction agreement is an exclusive jurisdiction agreement.”

The vernacular is: Presumed to be an exclusive jurisdiction agreement, Chinese courts have no jurisdiction. Therefore, if you take such a virtual currency foreign investment agreement to bring a lawsuit to a Chinese court, there is a high probability that you will be dismissed by the judges of the filing court.

Situation 3: The agreement only stipulates the application of foreign laws, but does not stipulate the jurisdiction of foreign courts--you can still sue in Chinese courts

There is another situation that I would like to list for everyone. An irregular virtual currency foreign-related investment agreement is very likely to only stipulate the application of foreign laws, and the agreement on jurisdiction has been omitted. This time it is also easy to solve. Article 3 of the Law on the Applicability of Laws to Relations provides that "the parties may expressly choose the law applicable to foreign-related civil relations according to the law" and Article 9 "foreign laws applicable to foreign-related civil relations do not include the laws applicable to foreign-related civil relations".

The vernacular is: if the parties to a foreign-related agreement choose only the substantive part of the foreign law when they agree to choose the law (for example: the "Civil Code" is the substantive law, which is used by judges to try the case), instead of Including the procedural law part** (for example: the "Civil Procedure Law" is the procedural law, the basis for the judge to determine whether it should be governed by the court)**, and the determination of the competent court is precisely the content of the procedural law.

Therefore, the conclusion is: if you, as an investor, happen to have a foreign-related investment agreement on virtual currency in your hand, the dispute resolution clause only agrees on the application of foreign laws, and does not agree on the jurisdiction of foreign courts. At this time, it is deemed that there is no It is agreed that disputes should be under the jurisdiction of foreign courts. Therefore, Chinese courts may still have jurisdiction

Attorney Mankiw summarizes the knowledge points for you

The birth of the blockchain industry has created a new field. Its global market potential and profit space have attracted investors from various industries and fields. For investors who have entered the market or are about to enter the market, keep abreast of international regulatory trends and the latest legislative trends, adjust strategies in a timely manner based on their own characteristics, and actively explore investment methods under compliance, in order to protect their legitimate rights and interests and minimize risks . In this article, we will talk to you about the direction of "contracts involving virtual currency, the choice of dispute resolution methods", and finally we will make a key summary:

(1) Regardless of whether it is an investment involving virtual currency or not, it is recommended not to be a streaking investor anymore, and to sign an agreement in advance, which may be a life-saving straw to protect your legal rights in the future;

(2) For contracts involving virtual currency, it is recommended to choose arbitration first, followed by litigation. When agreeing to litigation, you can choose the plaintiff’s domicile or the place where the contract is signed, which is one of the keys to saving the cost of rights protection;

(3) If the investment matter is foreign-related, as an investor, considering the future and wanting to sue in China, then: it is recommended to give priority to explicitly agreeing to the non-exclusive jurisdiction of foreign courts** (there is some flexibility, and it can also be realized if you want to be under the jurisdiction of Chinese courts in the future) )**, it is not recommended to only agree on the application of foreign laws (such clauses are not always rigorous, after all, vagueness may cause disputes), and do not consider agreeing to the jurisdiction of foreign courts at all.