China Comment

Energy, Environment, and Economy

China’s Food Safety Law and Tort Reform

With its new Food Safety Law that went into effect on June 1st, 2009, China has edged closer toward an “Americanization” of its tort law system (at least in the Product Liability area). China has given a little more power to people who file lawsuits. The incremental changes in this particular law which allows greater monetary recovery; however, probably does not signal a near-term shift in China’s general attitude toward permitting recovery of higher sums in other sorts of tort law litigation.

China’s Tort Laws have been in semi-serious revision since around 2002, and have been through numerous drafts. (See 2002 draft translation; and a 2007 discussion.) One of the proposed drafts “doubles the [currently used] 1986 Code tort liability provisions from thirty-four articles to sixty-eight articles, which * * * state basic principles of tort liability.” (Conk, 937 ; 2007)

Whether or not “tort reform” in China (I.E. making it easier to sue and to recover more in damages) is necessarily a positive development or not is debatable, but it does seem that the trend in China has been to grant more power and recovery for individuals in certain circumstances.

China’s new Food Safety Law appears to demonstrate an intention to get tough on public health violations.  The Food Safety Law allows harmed consumers to claim higher punitive damages. “In addition to a compensation covering the damage they have suffered, [customers may claim] damages up to ten (10) times the purchase price of the product in question from the relevant manufacturer or seller.” (DLA Piper; additionally the law imposes more severe penalties against manufacturers and sellers, permitting criminal liability, confiscation of unlawful gains and property, and fines ranging from 2,000 RMB to 5-10 times the value of the defective product.)

Class action lawsuit reform which would make it easier for class action lawsuits to form, appears to be on hold. Although a class action suit was filed in January, the suit has not yet been accepted. The first individual lawsuit against a melamine-injecter was only accepted in Hebei in March.  To date, no class actions have been accepted against any actor involved in the melamine scandal. And class action lawsuits related to the Sichuan earthquake have also been rejected. (A more indepth study of class action lawsuit reform may be warranted at a later date).

Punitive Damages and Government-Based Compensation

Generally, the Chinese government is adverse to mass tort claims and it tends to rely on government-directed fines or state compensation to achieve the same ends that are achieved in American class action suits (Green, 152). Fines and government-directed compensation levied against Sanlu helped cause the firm to go into bankruptcy. (Also see: China milk firms ‘to pay victims,’ BBC, Dec. 27, 2008 ; demonstrating the government-fine system). In the wake of the Sichuan earthquake, Chinese local governments preferred to settle claims and give compensation rather than go to court. And indeed, few if any earthquake-related cases, have gone through trial.

[Also see an article on Xinhua that concerns possible updating of the state compensation system].

Conclusion

It is interesting to see the Chinese government taking a step back from government directed and centralized compensation policies and permitting lower courts to hear individual cases (at least one), and permitting higher recoveries on punitive damages.

Over the next few months as the case(s) wind their way through courts and the courts respond to societal pressures we will be able to see if there is any pending tectonic shift in the way that China practically handles tort law product liability cases. Although the law has “liberalized” somewhat, what really matters is what goes into practice- and a verdict on that will have to wait.

Appendix:

The Food Safety Law. (Promulgated February 28, 2009; In Effect June 1, 2009)

DLA Piper’s Report on China Product Liability.

George W. Conk, A New Tort Code Emerges in China:An Introduction to the Discussion and a Translation of Chapter 8 – Tort Law of the Official Discussion Draft of the Proposed Revised Civil Code,” 30 Fordham Int’l. Law Journal 935 (2007).

Andrew Green, Tort Reform With Chinese Characteristics: Towards a “Harmonious Society” in the People’s Republic of China, 10 San Diego Int’l Law Journal 121 (2008).

NY Times articles on the Sichuan Earthquake and the Chinese Government’s response.
PS: June 2nd, 2009 marked the one year anniversary of this website. :) 加油!(Over 65 articles, averaging 1.1 per week)

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22 June, 2009 - Posted by | China Future, China Law | , , , , ,

1 Comment »

  1. Excellent article. I wonder if I might offer a cynical observation or two? To set the stage:
    From what I remember, the Chinese government had some difficultly enforcing any sort of regulation on their runaway economy. Not necessarily that they cannot, but that such enforcement would be contrary to national interests. Also, if I recall correctly, China has two types of businessman: the party-affiliated, and the independent entrepreneur.

    Perhaps this legislation serves a number of purposes, regardless of the (dis)honest intention for it to serve as actual law (which I believe no such intent exists).

    1)The government can, as always, selectively decide against whom these laws will be applied, and in so doing acquire a new, more justifiable method for reigning in rogue economic entities.

    2) It looks to the people (and the world) as though China wants to become more responsible w/r/t the citizenry, when in fact this may still be far from true.

    With what we know about the Chinese government, they would never take steps that could come back to injure them, especially if they stood to gain nothing in return. In sum, I see this as a beautifully complicated and inspirational chess-move in the world of disingenuous governance.

    More apparatus! Bureaucratize, bureaucratize!

    Comment by C. O'Brien | 10 June, 2009


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