The Interpretation on Issues of Application of Laws with respect
to Disputes on Financial Leasing Contracts (the
"Interpretation") published by the Supreme Court of China
came into force on 1 March 2014. The Interpretation consists of 26
provisions addressing the issues of the validity, performance,
termination and liability for breach of financial leasing contracts
as well as issues on litigation involving financial leasing
contractual disputes.
Identifying Financial Leasing Contract
In practice, there has always been controversy surrounding the
nature and validity of financial leasing contracts. For example, in
some cases financial leasing contracts were identified as loan
agreements and the business carried out by financial leasing
companies was considered to be "shadow
banking". This was particularly the case when the
framework of a financial lease adopted the "leaseback
model", as the nature of the contract could be mistaken for a
mortgage contract in
