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Cases Against Stock Fraud Suspended
China's Supreme Court has temporarily frozen lawsuits initiated by shareholders of two listed companies for "necessary legal and judicial preparations,'' sources said.
A local court in Wuxi in East China's Jiangsu Province has decided to postpone legal proceedings against Guangxia (Yinchuan) Industry Co, after receiving a circular from the Supreme Court that said "judicial explanations'' of related laws are going to be conducted to guide dealing of such lawsuits, solicitors said.
The Wuxi court was the first to formally accept litigations by shareholders against Shenzhen-listed Guangxia, which allegedly fabricated earnings figures and whose stock prices nose-dived since it resumed trading earlier this month following a suspension period.
Angry shareholders of Yorkpoint Technology, another company accused of manipulating its share price, are also expected to run into a "temporary refusal'' from an intermediate court in Beijing.
"The notice from the court has not come yet,'' said an official with a Beijing-based law firm representing Yorkpoint plaintiffs.
Despite worries that all legal proceedings against the two listed firms, which have mustered strong support from angry shareholders across the country, may be shelved for at least half a year, lawyers expressed hopes that the postponement may eventually result in better handling of these cases.
"It's not cancelled, it's just delayed,'' said Yan Yiming, a solicitor at the Shanghai Allbright Law Office, which is representing hundreds of individual shareholders suing the biochemical maker Guangxia. The lawsuit "will be handled by the court. It's a very positive step.''
Yan tasted more bitterness in 1998 when a court rejected a similar indictment without explanation after initially agreeing to take it.
He said he believed the Supreme Court would make positive judicial preparations to make the legal process consistent.
That could include tabulation of standards on compensation claims and a stocking up of adequate personnel to handle the financial losses of shareholders.
Much has to be clarified by legislators regarding how the financial losses are quantified and how they can be proved to be a direct consequence of the false information presented by the accused, legal experts have said.
But some are still sceptical about the properness in the courts' attitude, arguing that existing laws, including the Civil Procedural Law and the Securities Law can provide adequate guidance in handling such cases.
"Be it procedural law or not, I don't see any reason why the court can't handle such cases,'' Wednesday's Financial Daily quoted Tang Xin, a legal expert at Tsinghua University, as saying.
Xuan Weihua, a solicitor who is also representing some Yorkpoint shareholders, said: "It's not that we don't have a law to apply; it's a judicial precedent that we're lacking.''
Legal experts say that 1993's provisional rules governing stock issuance and trading and draft provisions on civil lawsuits enacted in 2000 respectively have made the legislative and judicial preparations for legally protecting China's millions of stock investors when they are victimized by fraud.
Yan said the Supreme Court was likely to pick one local court, probably in Shanghai, to handle the Guangxia case after the preparatory period, which he estimated to be around six months.
"Plaintiffs have mainly come from Shanghai and its vicinity, like Wuxi,'' he said. "And it's where the only large-scale litigation so far has taken place.''
More than 1,000 shareholders of Guangxia have entrusted Yan and his law firm in what is possibly China's biggest lawsuit in terms of plaintiffs. That number is growing, he said.
Source: China Daily
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