Zhiheng Original | Interpretation and Sharing of the Implementation of the New Judicial Interpretation of the Intersection of Civil and Criminal Justice under the Supreme Law
Author | Attorney Zhu Lizhen
On September 22, 2026, the “Provisions of the Supreme People’s Court on Several Issues Concerning the Adjudication of Civil Disputes Involving Criminal Offenses” (Fa Shi [2026] No. 19, hereinafter referred to as the “Provisions”) shall come into force.The Supreme People’s Court has issued the “Provisions on Several Issues Concerning the Adjudication of Civil Disputes Involving Criminal Offenses.”
This is the first domestic judicial interpretation that systematically and comprehensively regulates civil–criminal intersection cases. Comprising 24 articles, it addresses—across a range of issues from procedural acceptance and suspension of proceedings to the admissibility of evidence, the validity of contracts, liability for guarantees, and the coordination between criminal and bankruptcy proceedings—the longstanding and persistent challenges that have plagued judicial practice for nearly three decades.
For business operators, financial creditors, guarantors, and victims in criminal‑related cases, this regulation directly alters the previous conventional judicial approach of “dismissal of civil claims upon the involvement of criminal proceedings,” “automatic invalidation of contracts upon finding them to constitute fraud,” and “guarantors being relieved of liability once the principal debtor is imprisoned.”
This article provides a systematic overview from four perspectives: the background to the issuance of the regulations, a comparison between the old and new rules, the key changes, and their practical implications.
01Why is this regulation worthy of the attention of the entire commercial law community?
The intersection of civil and criminal law is not a new issue.
As early as 1998, the Supreme People’s Court issued the “Provisions on Several Issues Concerning Criminal Suspicions in the Adjudication of Economic Dispute Cases” (Fa Shi [1998] No. 7), which has now been in effect for nearly 30 years. Thereafter, sporadic responses were provided through documents such as the Opinions on Illegal Fund-Raising, the Judicial Interpretation on Private Lending, and the Minutes of the Ninth National Conference on Civil and Commercial Trials.
However, the old rules have three fundamental limitations:
First, the provisions are broad and have narrow coverage.Document No. 7 of 1998 contains only 12 provisions and primarily addresses traditional economic crime scenarios, falling far short of covering the complex cases today that involve intertwined issues of investment and financing, guarantees, platform-based wealth management, and corporate bankruptcy.
Second, standards are vague, and judicial discretion varies across regions.What constitutes the “same fact,” under what circumstances proceedings should be suspended, and how the validity of contracts involving criminal matters should be determined have long lacked uniform standards, resulting in the prominent phenomenon of inconsistent judgments in similar cases.
Third, two extreme deviations have emerged in practice.On the one hand, there is a mechanical application of the “criminal‑first, civil‑second” principle—whenever a case involves even the slightest criminal suspicion, civil claims are summarily dismissed and proceedings are indefinitely suspended, leaving creditors with no avenue for redress. On the other hand, criminal means are misused to intervene in economic disputes, with criminal investigations being employed as a tool to delay civil enforcement and evade debt obligations.
According to a survey conducted by the Supreme People’s Court, contract disputes account for more than 60% of cases involving both civil and criminal issues, directly affecting the legitimate rights and interests of enterprises and entrepreneurs. This Regulation was promulgated against this backdrop, with a clear objective: to standardize judicial criteria across the board, unblock bottlenecks in civil remedies, and curb the practice of using criminal proceedings to obstruct civil litigation or interfere in economic disputes.
02Program rule restructuring
The era of the mechanical “criminal first, civil second” approach has come to an end; the parallel handling of civil and criminal cases has become the norm.
The central procedural principle of the Regulations is to restore the “criminal‑first, civil‑second” approach from a frequently abused “principle” to an exceptional measure subject to strict conditions of application.
Core criteria for determination: the same fact vs. related facts
Article 2 of the Regulations for the first time clearly defines:
The same facts refer to situations in which the parties and the underlying facts are identical in both a civil case and a criminal case.
Furthermore, when civil disputes and criminal cases are merely “related but not based on the same facts,” they constitute related facts and should be handled concurrently under both civil and criminal law.
Six circumstances in which civil and criminal proceedings should be handled concurrently (Article 3)
Article 3 of the Regulations sets forth six specific circumstances under which courts are required to accept a case, thereby completely eliminating the practice of refusing to file a case on the ground that it involves criminal matters:
① If a person enters into a contract in the name of a legal person or another individual and such conduct constitutes a crime, the other party may seek to hold the non-criminal legal person or individual civilly liable;
② Where the acts performed by the legal representative or employees in the course of their duties constitute a crime, the other party may request that the entity, which has not committed the crime, bear civil liability;
③ Where the debtor’s execution of the principal contract constitutes a crime, and the creditor seeks to hold the guarantor, who did not participate as an accomplice, liable;
④ Where some of the multiple debtors have committed a crime, the creditor requests that the other debtors assume liability;
⑤ Where the tort constitutes a crime, the insured or the beneficiary requests the insurer to pay the insurance benefit;
⑥ Other circumstances that are related but do not pertain to the same facts.
Strict conditions for suspending proceedings (Articles 4 and 5)
The Regulations stipulate that, in principle, civil cases that have been accepted shall not be affected by criminal proceedings; suspension is permissible only in one circumstance: when the determination of the basic facts of the civil case must be based on the outcome of the criminal case, and the criminal case has not yet been concluded.
More importantly, Article 5 of the Regulations directly addresses the issue of “using criminal penalties to deter the public”:
• If a party applies to suspend civil proceedings solely on the basis of a criminal case acceptance receipt, the court must conduct a substantive review and shall not grant such an application if the conditions are not met.
• If a relevant authority requests the transfer of a civil case on the ground that a criminal case has been filed, the court shall also review the matter—where the facts are not the same, it shall continue to hear the case after informing the authority of the reasons.
• If the court finds that criminal prosecution is clearly improper, it shall also transfer the relevant leads to the competent authorities.
The potency of this rule lies in the fact that, in the past, debtors could indefinitely delay civil enforcement proceedings simply by obtaining a criminal case-filing notice; that loophole has now been largely closed.
03Substantive rule breakthrough
Contracts involving criminal offenses are no longer automatically void.
This is the most impactful and also the most disruptive change in the entire set of Regulations.
Traditional judicial practice: once a crime is established, the contract is deemed invalid.
In the past, there has long been a simplistic judicial approach: as long as the perpetrator constitutes the crime of fraud, contract fraud, or obtaining a loan by deception, the principal contract is directly deemed invalid. If the principal contract is invalid, the guarantee contract, as an accessory agreement, also becomes invalid, thereby relieving the guarantor of liability and making it difficult for the creditor to recover its losses.
New regulation stance: Separation of criminal evaluation and civil validity (Article 17)
Article 17 of the Regulations states unequivocally: “Where the act of entering into a contract by a party constitutes a crime, the validity of the contract and whether it produces legal effects on the principal or other parties shall be determined in accordance with the provisions of the Civil Code.”"
The legal core of this statement is:
• In criminal law, the determination of a crime constitutes a negative legal evaluation of the actor at the level of public law;
• In civil law, the determination of a contract’s validity is a private-law assessment of the transactional relationship;
• The two evaluation systems operate independently; the fact that a party has been imprisoned does not automatically invalidate the validity of the transaction contract.
The head of the Supreme People’s Court Research Office stated quite plainly in response to questions from reporters: “Determining that the act of entering into and performing a contract constitutes a crime reflects a negative assessment of the criminal defendant; affirming the validity of the contract, on the other hand, is intended to better protect the interests of the victim.” The two are not mutually contradictory."
Liability in Three Typical Scenarios (Articles 18 to 20)
Scenario 1: Apparent agency/Authorized agency → The contract is valid for the entity.
When a person enters into a contract in the name of an entity and such conduct constitutes fraud, contractual fraud, or obtaining loans by deception, if the act amounts to authorized agency or apparent authority, the court shall uphold the counterparty’s claim that the contract is binding on the entity and that the entity shall bear liability for breach of contract.
Scenario 2: Unauthorized agency that does not constitute apparent authority → The contract is not binding on the entity, but the entity shall be liable for damages if it was at fault.
In such a case, the contract is not binding on the entity; however, if the entity is at fault—for example, due to lax management of its official seal or by allowing employees to enter into contracts with third parties—it shall bear the corresponding liability for damages pursuant to Article 157 of the Civil Code.
Scenario 3: Embezzlement of corporate assets and misappropriation of funds → The contract remains valid for the entity.
Where an employee enters into a contract in the name of the entity and then unlawfully appropriates or misappropriates the funds, and is found guilty of embezzlement or misappropriation of funds, if the other party asserts that the contract is valid against the entity and that the entity should bear liability for breach of contract, the court will uphold such claim. If the other party is also at fault, the amount of compensation to be paid by the entity may be reduced.
In a nutshell: An employee’s criminal conduct does not automatically make the employer liable, nor does it necessarily absolve the employer entirely—key factors include the scope of the employee’s authority, whether apparent authority applies, and whether the employer was at fault.
04Revaluation of guarantee liabilities
If the principal debtor commits a crime, the guarantor cannot escape liability unscathed.
This is the provision that creditors care about most and that guarantors need to reassess their risks for.
Old approach: The principal contract is invalid → The guarantee contract is invalid → The guarantor is only liable for one-third.
In the past, the reasoning in many cases followed this logic: the principal debtor commits a crime → the principal contract is invalid → the guarantee contract is also invalid by virtue of its accessory nature → the guarantor is liable at most for one-third of the portion that the debtor is unable to repay. This has resulted in numerous creditors being unable to locate even the guarantors after the principal debtor was imprisoned.
New rule rationale: The validity of the principal contract is assessed independently, and the liability for guarantees is determined in tiers (Article 21).
Article 21 of the Regulations completely restructures this logic:
Step 1: First, independently review the validity of the main contract. The principal debtor’s commission of a crime does not, by itself, render the principal contract automatically invalid. Where the principal contract is valid, the guarantee contract is, in principle, also valid.
Step 2: The four circumstances under which a guarantor may seek to rescind the guarantee contract are as follows:
① The debtor fraudulently induced the guarantor to provide a guarantee, and the creditor knew or should have known of such fraud;
② The debtor coerces the guarantor into providing a guarantee;
③ The creditor engaged in fraud, coercion, or other grounds for rescission when entering into the security contract;
④ The guarantee contract itself is subject to other grounds for revocation.
Step 3: In the event that a guarantee contract is invalid or rescinded, the allocation of liability shall be determined by comprehensively considering factors such as the guarantor’s professional status, cognitive capacity, and relationship with the debtor, to ascertain whether there was any fault and, if so, the extent thereof.
Step 4: If the creditor has failed to fulfill its duty of reasonable review and bears fault for the loss, the guarantor may claim that its liability be appropriately reduced.
What does this mean for creditors? As long as the principal contract is valid and the guarantor does not meet the conditions for revocation, the guarantor shall bear full liability within the scope of the guarantee, and the “principal contract invalid → guarantee invalid → at most one-third compensation” safeguard no longer applies.
What does this mean for guarantors? They can no longer simply use “the principal debtor committed a crime” as a defense for exemption from liability. For a guarantor to claim exemption from liability, they must prove that they were subjected to fraud or duress at the time of providing the guarantee, and that the creditor was aware of such circumstances—this evidentiary threshold is significantly higher than in the past.
05Parallel criminal and civil proceedings and execution coordination
Fill the void of the past.
In addition to the two major core changes—procedural and substantive—the Regulations also address several long-standing coordination issues that previously lacked clear oversight.
Criminal and bankruptcy proceedings run concurrently: A unit’s involvement in criminal matters does not affect the acceptance of a bankruptcy application (Article 11).
A common question in the past was: If a unit is subject to criminal investigation for suspected wrongdoing, can it still apply for bankruptcy?
The Regulations provide a clear answer: yes. After an entity enters criminal proceedings, if it meets the conditions for bankruptcy acceptance, the court shall accept the case. Bankruptcy proceedings and criminal litigation shall be conducted separately; however, efforts should be coordinated to ensure seamless coordination between the recovery of illegal proceeds and the collection of bankruptcy assets, thereby providing comprehensive protection to both criminal victims and bankruptcy creditors.
This provision is of great significance for the rescue of distressed enterprises—companies will no longer be barred from bankruptcy proceedings simply because they are under criminal investigation, thereby opening up a market‑based channel for orderly resolution.
Rules on Deduction in Criminal Asset Recovery and Civil Compensation (Article 9)
The Regulations stipulate that any amount already recovered through criminal confiscation, orders for restitution, or other such means shall be correspondingly deducted in civil judgments. The same rule also applies during the civil enforcement phase.
This means that criminal asset recovery and civil compensation are not mutually exclusive options, but rather complementary measures. If criminal prosecution is insufficient, civil action may be pursued; however, double recovery is not permitted.
After a criminal case is not filed, withdrawn, or dismissed, or after an acquittal, the matter may be pursued civilly (Article 15).
In the past, it was common for public security organs to refuse to initiate a case, for the procuratorate to decline to prosecute, and for the court to acquit the defendant; yet when theThe party concerned subsequently sought to file a civil lawsuit in court, the court would refuse to accept the case on the grounds that the matter had already been “resolved.”
Article 15 of the Regulations clearly stipulates: As long as any one of the following four circumstances exists—failure to initiate a case, withdrawal of a case, decision not to prosecute, or acquittal/finding of no criminal responsibility—the people’s court must accept the civil lawsuit filed by the parties based on the same facts.
Interest during the suspension period shall also be calculated in a reasonable manner (Article 22).
In the past, once a case was suspended, it could remain so for several years. When proceedings were resumed, how was interest calculated? Courts often dismissed the matter with a single sentence: “Interest does not accrue during the period of suspension.”
Article 22 of the Regulations stipulates that, upon resumption of proceedings following a suspension, disputes over interest shall be subject to thorough debate, and an appropriate determination shall be made by comprehensively considering factors such as the fault of both parties, their capacity to perform, and the duration of the suspension. This prevents debtors from being improperly relieved of their interest obligations due to the objective delays inherent in criminal proceedings.
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Practical Implications for Enterprises, Creditors, and Guarantors
For business operators
• An employee’s personal criminal conduct does not automatically mean that the enterprise bears full liability, nor does it mean that the enterprise is completely exempt from liability. The court will examine the scope of the agent’s authority, whether apparent authority exists, and whether the enterprise was at fault.
• The involvement of a company in a criminal investigation does not preclude its normal application for bankruptcy reorganization, and the market-based exit channel remains open.
• Be vigilant regarding the “malicious collusion” clause: If the legal representative colludes with the other party to the detriment of the company’s interests, the company may assert joint and several liability.
To financial institutions and creditors
• The principal debtor’s commission of a crime no longer automatically renders the principal contract invalid—creditors may assert that the contract remains valid and require the guarantor to assume its guarantee obligations.
• If a debtor uses the fact that a criminal case has been filed against them as an excuse to delay civil enforcement, the court will conduct a substantive review and, if the conditions for suspension are not met, will proceed with the trial.
• To the extent that criminal asset recovery is insufficient, civil judgments may continue to be enforced; interest accruing during the period when criminal proceedings are suspended may also be claimed.
• Note: If a creditor, knowing that the debtor has defrauded the guarantor, nevertheless accepts the guarantee, the guarantor may seek to rescind the guarantee contract.
To the guarantor
• The notion that “if the principal debtor commits a crime, I am no longer liable” is no longer valid.
• To revoke a guarantee, one must prove that they were subjected to fraud or duress, and that the creditor was aware of such circumstances—significantly raising the burden of proof.
• If the creditor bears its own fault in the review process, the guarantor may claim a corresponding reduction in liability.
Victim of a criminal case
• It’s not the case that “criminal proceedings must precede civil proceedings” is the only option. If there are guarantors, entities, or other debtors who are not involved in the case, a civil lawsuit may be filed concurrently.
• After the public security authorities refuse to initiate a case, the procuratorate decides not to prosecute, and the court acquits the defendant, the civil claim channel remains open.
• Where a criminal suspect’s prolonged flight results in the suspension of criminal proceedings, a civil action may also be brought directly, and provisional execution may even be sought.
The deeper significance of these Regulations lies not merely in the introduction of 24 new rules, but also in the formal establishment, at the level of judicial interpretation, of the principle that public law evaluation and private law liability are to be kept separate.
Over the past nearly thirty years, the most significant misconception in the intersection of civil and criminal law has been the practice of using a criminal conviction to directly supplant the determination of civil legal effects—once a person is found guilty, the contract is deemed invalid, the guarantor is relieved of liability, and the civil case is not accepted for adjudication. This line of reasoning, which appears to “severely crack down on crime,” in reality often ends up sacrificing the legitimate rights and interests of victims, creditors, and bona fide third parties.
The Regulations have corrected this approach: criminal matters are handled as criminal matters, and civil matters are handled as civil matters. Individuals who commit crimes should be imprisoned, and any illicit proceeds should be recovered; however, the validity of transaction contracts, the assumption of guarantee liabilities, and the civil liability of legal entities must be assessed independently within the framework of the Civil Code.
For legal practice, this means that many previously taken-for-granted assumptions must be revisited: if a case involves criminal liability, whether a criminal case can be initiated, whether proceedings should be suspended, whether the contract is valid, whether the guarantor can be relieved of liability, and whether the entity is liable for damages—each of these issues must be reassessed in accordance with the new rules.
This is precisely where the professional value of criminal–civil intersection practice lies.
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Introduction
Attorney Zhu Lizhen
Zhiheng (Foshan) Law Firm
Member of the Foshan Management Committee of ZhihengDirector of the Foshan Center for Criminal-Civil Interdisciplinary Legal Affairs at Zhiheng
Arbitrator of the Shanwei Arbitration Commission
Member of the National Criminal Law Committee of Guangdong
Member of the Compulsory Enforcement Law Professional Committee of the Guangdong Provincial Lawyers Association
Guangdong Provincial Association of Insolvency Administrators:
Member of the Pre-restructuring Professional Committee, the Micro and Small Enterprise Restructuring Professional Committee, and the Business Development Committee.
Vice President of the Heyuan Branch of the Guangdong Zhu Xi Academic Thought Research Association
Corporate Compliance Officer (Senior Level) Attorney Zhu Lizhen specializes in criminal defense, corporate compliance, real estate disputes, and dispute resolution, and has developed a distinctive practice focused on cases that intersect criminal and civil law. Since entering the legal profession in 2015, she has successively served as a salaried lawyer, an independent attorney, and a de facto equity partner. She has also acted as the operational lead of a bankruptcy administration team, playing a pivotal role in the firm’s insolvency practice. Over time, she has systematically assembled a specialized team comprising legal professionals, tax and accounting experts, and marketing and operations specialists, while establishing a comprehensive team management framework, thereby demonstrating exceptional professional expertise and leadership.Past issuesRecommendation
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