what we think

By Chen Yun and Fabian Knopf

In commercial disputes in China, being named as a third party in litigation is not uncommon. The real risk often lies not in the designation itself, but in failing to assess the situation promptly and take appropriate steps at an early stage.

I. Background

In Chinese legal practice, companies are frequently named as third parties despite having no substantive connection to the underlying dispute. This issue can arise where plaintiffs include factually connected but legally peripheral entities to increase procedural pressure or leverage against defendants or related parties. This concept is also known as joinder.

Once designated however, third parties are required to respond to court notices and comply with procedural obligations. Even where no liability is imposed, adverse or inaccurate statements concerning the third party may still appear in the judgment.

II. The Current Legal Framework for Joinder Withdrawal

The PRC Civil Procedure Law and relevant judicial interpretations set out the basic framework for third-party participation, mainly under Article 59 of the Civil Procedure Law and Article 81 of its Judicial Interpretation.

Article 59 of the PRC Civil Procedure Law law assumes that participation in litigation must be based on either

• an independent claim or
• a legitimate interest affected by the outcome.

If those conditions are not met, there is no statutory basis for a joinder.

These provisions offer limited guidance on how a third party may object to its designation or seek withdrawal once it has been notified or added to the proceedings. Although post-judgment remedies exist, such as third-party revocation actions, there is no explicit procedural exit mechanism during the litigation.

As a result, joined third parties often face uncertainty at an early stage of the case. Even where proper legal basis for a third party's participation is lacking, it may still be better to engage with the litigation proceedings to some extent,

III. Is Participation Necessary? The Core Practical Assessment

Once named as a third party, the first step is to assess whether participation is necessary. The decisive factor is not a factual or commercial connection, but whether the outcome of the case may materially affect the third party's legal or practical interests.

(i) Cases with Material Connection: Active and Measured Participation

Where a judgment can directly or indirectly affect the third party, participation in the proceedings is generally advisable. For example,

• the court's findings on key facts or legal relationships could be relied upon in subsequent proceedings involving the third party;
• the outcome of the case may give rise to recourse, indemnity, or separate claims against the third party; or
• without the third party's participation, the court may form its view of the third party's role mainly based on submissions made by the plaintiff and defendant, and this role could directly lead to liabilities or other negative consequences.

Participation allows the third party to clarify facts and legal relationships, reduce the risk of inaccurate or one-sided statements in the judgment, and protect its legal position.

(ii) Cases with Low Relevance: Raising Objections and Seeking Withdrawal

Where the third party has no substantive rights or obligations in relation to the subject matter of the dispute, and the judgment will not have a direct legal effect on the third party, substantive participation is generally unnecessary. This typically includes cases where,

• the third party appears only to provide context of the dispute,
• resolution of the dispute does not depend on the third party's evidence, or
• the third party has no connection to the core legal relationship at issue, such as a contract or tort, for example where an affiliated but legally independent group company is named solely because of its association.

Even where the connection is limited, ignoring the proceedings altogether is not advisable. A more effective approach is to communicate with the court at an early stage, clarify the lack of legal relevance, and seek withdrawal or limitation of involvement through written submissions. A written submission may help to clarify the third party's position, without incurring the cost of full participation.

Where formal withdrawal is not approved, courts often allow third parties to submit written statements clarifying their position. These statements may expressly limit participation and set out factual clarifications without engaging in legal proceeding in a substantive way.

Where withdrawal is accepted, confirmation may be reflected in court records or the withdrawal request is recorded in the judgment.

Courts typically base their decisions on whether the third party has a legal interest in the outcome and whether resolution of the dispute depends on the third party's submissions or evidence. In practice though, whether withdrawal is permitted often depends on the presiding judge's assessment and discretion. Judicial practice remains inconsistent.

VI. Conclusion

In the absence of a clear procedural exit mechanism, a third party's position depends largely on timely assessment, early procedural action, and effective communication with the presiding judge.

By grounding objections in legal analysis, judicial practice, and the specific facts of the case, third parties can often avoid unnecessary substantive involvement. Even where formal withdrawal is not approved, written submissions remain an effective way to clarify position, manage risk, and limit procedural burden.

R&P China Lawyers regularly advises companies that are named as third parties in PRC litigation, including on early risk assessment, objections to joinder, and strategies to limit procedural exposure and reputational impact. Our dispute resolution team works closely with our commercial and corporate lawyers to ensure that procedural responses are aligned with underlying contractual and group-structure realities. For further information or case-specific guidance, please contact Chen Yun ([email protected]), Fabian Knopf ([email protected]) or reach out to your regular R&P contact.