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Punitive damages under the new Chinese Tort Liability Law

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Abstract

With the adoption of the new Tort Liability Law (TLL) in December 2009, the Chinese legislature not only consolidated the basic principles for tortious liability in one piece of legislation, but also provided a legal framework for a number of special torts, including product liability. One novelty of the new TLL is the establishment of punitive damages—commonly acknowledged as a common law phenomenon—within the realms of Chinese product liability. The introduction of punitive damages in a civil law jurisdiction like China is of great interest to academics and legal professionals alike. From a practitioners’ perspective, awareness of this development is particularly important because companies, who may be their clients, produce and sell products in China, and may be obligated to pay punitive damages. This paper first describes the historical and political background of the various provisions awarding punitive damages under Chinese law. It then examines the circumstances under which punitive damages may be awarded according to Article 47 of the TLL in the context of product liability. As the Supreme People’s Court has not yet issued extensive judicial interpretations, and no case thus far has been published, it is not quite clear how far reaching Article 47 will be. A sub-section is dedicated to analysing problems that may arise from the insertion of this common law institution into a civil law jurisdiction. The last chapter concludes by evaluating the disadvantages and advantages of punitive damages, and assessing the necessity of punitive damages within the Chinese product liability system.

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Notes

  1. Adopted at the Twelfth Session of the Standing Committee of the Eleventh National People’s Congress on December 26, 2009. The law is available in Chinese at: http://www.gov.cn/flfg/2009-12/26/content_1497435.htm (last accessed April 10, 2013). For an English version see e.g. Zhu and Koziol 2010, pp. 362–375 and Brüggemeier 2011b, pp. 167–181. For a German version see Liu and Pißler 2010, pp. 41–55.

  2. On the development of a future Chinese Civil Code see e.g. Liang 2005, pp. 27–29 and Zhang 2009, pp. 1006–1018.

  3. For details see below 3.3.

  4. For more details regarding the necessity of punishment in Chinese tort law see below 3.3.2.

  5. Wendehorst 2010, pp. 7–10. According to Wang 1997–1998, p. 116, China has an “all-embracing attitude to the different legal systems”.

  6. Already in Ancient China law was codified, and a series of drafting codes had begun by the end of the Qing Dynasty, see Keller 1994, p. 717. For details of the drafting of different codes at the end of the last dynasty see Chen 1995, pp. 10–14. See also Pißler 2008, pp. 6–9. On China between the influences of civil law and common law see Ascher 2013a, pp. 16–31 with further references.

  7. Chinese scholars are well aware that punitive damages are not a category of civil law—especially not of German law, see Zhang and Li 2009, p. 9; Yang 2010b, p. 173. Yet there are several civil law jurisdictions that “covertly” award punitive damages, see e.g. Borghetti 2009, p. 56. Regarding recent developments of recognizing US-American punitive damages awards in France see Wester-Ouisse and Thiede (2012). Furthermore, several scholars from civil law jurisdictions advocate punitive or preventive damages, see e.g. Wagner 2010; Wagner 2011; Licari 2010; Janke and Licari 2012. On punitive damages in general see Schlueter 2005; Meurkens and Nordin 2012 with further extensive references.

  8. The terms “punitive damages” and “exemplary damages” are synonymous, see e.g. Wilcox 2009, p. 7 and Lunney and Oliphant 2008, p. 855. In the following I will refer to them as “punitive damages”, as this comes closest to the Chinese term 惩罚性赔偿—chengfaxing peichang.

  9. See e.g. Meurkens 2012, p. 3; Sebok 2009, pp. 155. Also Chinese scholars define them similarly, see e.g. Zhang and Li 2009, p. 6.

  10. Wilcox 2009, p. 7; Lunney and Oliphant 2008, p. 855.

  11. According to Yang 2010a, p. 333, in Ancient China punitive damages were part of the legal system, yet at that time no difference was made between private and criminal law.

  12. Adopted by the Fourth Meeting of the Standing Committee of the Eighth National People’s Congress (NPC) on October 31, 1993, currently under revision, see e.g. http://www.chinacourt.org/html/article/201011/10/435452.shtml (last accessed April 10, 2013). The law is available in Chinese and English at: www.lawinfochina.com (last accessed April 10, 2013).

  13. Yang 2010a, p. 332, does not discuss the term itself and automatically refers to these damages as punitive damages. See also Zhang and Li 2009, p. 5. For cases and a detailed analysis of the provision see Wang 1997–1998, pp. 111–123. According to him, Article 49 is “the first illustration of the adoption of punitive damages in China’s legislation”, see Wang 1997–1998, p. 116.

  14. Brooke 2009, p. 1; Wilcox 2009, p. 7.

  15. Yang 2010a, p. 334 and Wang et al. 2010, p. 545. According to Zhang and Li 2009, p. 11, Article 49 establishes an extra-contractual liability.

  16. 《关于审理商品房买卖合同纠纷案件适用法律若干问题的解释》—guanyu shenli shangpin maimai hetong jiufen anjian shiyong falv ruogan wenti de jieshi: available in Chinese and English at: www.lawinfochina.com (last accessed April 10, 2013).

  17. For details see Article 8 and 9 of the Interpretation. See also Zhang and Li 2009, p. 10.

  18. In 2007 the legislature adopted a provision for an award of double the amount of wages in the event that the employer does not provide the employee with a written labour contract, see Article 82 Labour Contract Law (LCL—劳动合同法—laodong hetong fa), adopted at the Twenty-Eighth Session of the Tenth National People’s Congress on June 29, 2007. Available in Chinese at: http://www.molss.gov.cn/gb/news/2007-06/30/content_184630.htm (last accessed April 10, 2013).

  19. Adopted at the Seventh Session of the Eleventh Standing Committee of the National People’s Congress on February 28, 2009. Available in Chinese at: http://www.gov.cn/flfg/2009-02/28/content_1246367.htm (last accessed April 10, 2013).

  20. This English translation by the U.S. Foreign Agricultural Service is available at: http://www.fas.usda.gov/gainfiles/200903/146327461.pdf (last accessed April 12, 2013).

  21. Liang 2011, p. 18.

  22. Yang 2010a, p. 336 and Gao 2010a, p. 545.

  23. According to Yang 2010a, p. 337, some even go as far as to assess punitive compensation in this context as mere “bluff” (虚张声势—xuzhangshengshi).

  24. Also Yang 2010a, pp. 336 f, undoubtedly regards them as “punitive damages”. See also Bu 2011, p. 226; Koziol and Zhu 2010, p. 351; Yang 2010b, p. 173; Liang 2011, p. 18; Sun 2011, p. 52; Zhang 2011, p. 483; Zhou 2010, pp. 108 f; Li 2010, pp. 75–77 and Kong 2010, p. 57.

  25. English Translation by Conk available at: http://ssrn.com/abstract=892432 (last accessed April 10, 2013). See also Conk 2007, pp. 954–999.

  26. The second draft for a new Tort Liability Law was on the agenda of the Sixth Session of the Eleventh NPC’s Standing Committee on December 23, 2008. English Translation by Conk available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1501302 (last accessed April 10, 2013).

  27. Koziol and Zhu 2010, p. 351; Yang 2010a, pp. 325–328.

  28. Adopted at the Fourth Session of the Sixth National People’s Congress on April 12, 1986. Chinese with English translation available at: www.lawinfochina.com (last accessed April 11, 2013).

  29. Adopted at the Thirtieth Session of the Standing Committee of the Seventh National People’s Congress on February 22, 1993, and amended by the Sixteenth Session of the Standing Committee of the Ninth National People’s Congress on July 8, 2000. An English translation is available at: http://www.most.gov.cn/eng/policies/regulations/200501/t20050105_18422.htm (last accessed April 11, 2013). The enactment of the PQL was necessary, as the number of accidents caused by defective products rose significantly during the 80s and 90s, see Liang 2010, p. 3. The PQL further clarified the vague provision of the GPCL, see Wang et al. 2010, pp. 514 f.

  30. Article 122 GPCL reads as follows: “If a substandard product causes property damage or physical injury to others, the manufacturer or seller shall bear civil liability according to law. If the transporter or storekeeper is responsible for the matter, the manufacturer or seller shall have the right to demand compensation for its losses.”

  31. Koziol and Zhu 2010, p. 350; Bu 2010, p. 226; Yang 2010a, p. 326 and Liang 2010, pp. 3 f.

  32. A Chinese translation is available at: http://www.civillaw.com.cn/article/default.asp?id=43965 (last accessed April 11, 2013).

  33. See e.g. Wang et al. 2010, pp. 515 f.

  34. Brüggemeier 2011a, p. 188.

  35. Wang et al. 2010, pp. 509–516; Yang 2010a, pp. 311 f; Gao 2010a, p. 500; Yang 2009, p. 9.

  36. Wang et al. 2010, p. 516; Yang 2010a, p. 326; Gao 2010a, pp. 503–521. This was already the majority view with regard to the provisions prior to the enactment of the TLL, see Feuerstein 2001, pp. 237 f with further extensive references. See also Gao 2010b, p. 10, according to whom there is only a minimal difference between the terms “strict liability” (严格责任—yange zeren) and “no fault liability” (无过错责任—wuguocuo zeren) when it comes to product liability. Similar also Zhang 2011, pp. 440–481.

  37. Regarding the various interpretations see Wang et al. 2010, pp. 514–516; Yang 2010a, pp. 311 f; Gao 2010a, p. 521 f. Following the systematic logic of both the TLL and the PQL, Article 42 TLL and PQL are the primary provisions for the attribution of liability to the seller, which define fault liability as basic liability, whereas strict liability shall apply only if he can specify neither the manufacturer nor the supplier of a defective product (see Article 42para 2 TLL), similar also Yang 2010a, p. 326; Wang S 2010, pp. 231 f, Binding 2012, pp. 80 f. For details see also Brüggemeier 2011b, pp. 189 f.

  38. Yang 2010a, p. 340. Other scholars define the requirements slightly differently. Wang et al. e.g. establish the following three prerequisites: first, that the subject of liability knows of the defect and continues to produce or sell; second, that there is serious damage to health or death occurs; and third, that there is a causal connection between the damage and the defective product, see e.g. Wang et al. 2010, p. 546.

  39. Applying the main doctrine and Article 49 CPL only for breach of contract. See above 2.1.

  40. See e.g. Yang 2010a, pp. 333 f, according to whom one major negative side effect is the growing idea that Chinese persons will take advantage of punitive damages in order to gain money. Also Zhang and Li often refer to a possible abuse of punitive damages if they are not clearly set out in the law, see Zhang and Li 2009, pp. 17 and 20.

  41. Some cases only refer to the prerequisites of applying punitive damages according to Article 47 TLL, yet they do not apply the provision, see e.g. case No. 4196, Guangdong Province Guangzhou Intermediate People's Court, issued on December 2, 2010.

  42. On May 30, 2010 the SPC only released a four-article-long notice on some issues concerning the application of the new TLL, 《最高人民法院关于适用《中华人民共和国侵权责任法》若干问题的通知(法发〔2010〕23号)》—zuigao renmin fayuan guanyu shiyong “zhonghua gongheguo qinquan zeren fa” ruogan wenti de tongzhi (fafa (2010) 23 hao): available at www.chinalawinfo.com (last accessed on April 15, 2013).

  43. Yang regards the lack of a method to assess the amount of punitive damages as the “biggest flaw” (最大缺陷—zuida quexian) of the provision, see Yang 2010b, p. 175.

  44. Zhang and Li expressly asked the legislature to lay out clear principles for the calculation of punitive damages and advised to consider three times the losses as a possible benchmark, see Zhang and Li 2009, p. 20. Also public reactions to the drafts included suggestions to limit the amount of punitive damages to two or three times the losses, see Wang S 2010, p. 549.

  45. Gao 2010a, pp. 546 f; Yang 2010a, pp. 340 f; Yang 2010b, p. 175; Zhang 2011, p. 484; Liang 2011, p. 18.

  46. Wang et al. 2010, p. 210.

  47. Yang 2010a, p. 340. Zhang e.g. suggests to take the losses of the victim as a basis and to award twice or triple the losses, see Zhang and Li 2009, p. 20. See also Zhang 2011, p. 484.

  48. Because of the lack of clear indications in Article 47 some scholars want to go back to US-American experience, see e.g. Wang Z 2010, p. 27.

  49. Liang 2005, p. 34. Regarding the impressive improvements in the legal education of judges in China since the 1980ies see e.g. Chen 2008, pp. 152–155.

  50. Zhang and Li 2009, p. 19, e.g. use the terms “intentionally” (故意—guyi) and “definitely know” synonymously. Similar also Wang et al. 2010, p. 210. In my opinion the legislature did not intend to award punitive damages for all intentional behaviour, but only for direct intent. See also Yang 2010b, p. 174.

  51. Zhang 2011, p. 483.

  52. Wang et al. 2010, p. 548; Yang 2010a, p. 340.

  53.  Zhang and Li 2009, pp. 19 f. They argue that even though gross negligence belongs to the category of negligence, gross negligent conduct shows that the tortfeasor does not respect the legal rights and interests of others and should therefore be punished.

  54. This field of law is now regulated in chapter VII TLL, without provisions for punitive damages. Other suggestions included punitive damages for causing harm when driving without a driver’s license or while being drunk and for harm caused by environmental accidents, see Wang S 2010, p. 549.

  55. The general public protested that a different amount of compensation for the death of rural and urban residents was discriminatory. This might have been the main reason why the legislature introduced Article 17, see e.g. Yang 2010b, pp. 68–72. For details see Zhang 2010, pp. 22–36. See also Zhang L 2009, pp. 1035 f.

  56. For details see Koziol 2012b, pp. 342 f.

  57. See Ascher 2013b, pp. 167 f.

  58.  Koziol and Zhu 2010, p. 337; Koziol 2012b, pp. 342 f.

  59. As civil compensation is often dealt with in criminal courts as “subsidiary civil compensation” (刑事附带民事赔偿—xingshi fudai minshi peichang), this problem is more related to the relationship between civil and administrative liability, see Yang 2010a, pp. 35 f and Yang, 2010b, p. 33.

  60. See also Brüggemeier 2011b, p. 191.

  61. See e.g. Zhang and Li 2009, pp. 6–9; Wang et al. 2010, pp. 546–548; Yang 2010a, pp. 337 f.

  62. Zhang and Li 2009, p. 5.

  63. Wang 2010, p. 245; Wang et al. 2010, pp. 543 f.

  64. According to Liang 2010, p. 4, it is necessary to adopt flexible regulations in order to meet the needs of the manifold problems of modern society.

  65. Jiang and Li 2010, p. 266.

  66. Zhang and Li 2009, p. 12.

  67. Article 51 of the Taiwanese Consumer Protection Law also stipulates a three times punitive compensation.

  68.  See e.g. Yang 2010a, pp. 337 f, who refers to English law when analyzing the necessity of punitive damages.

  69. E.g. Professor Zhang Pinghua from Yantai University retains that compensation as a function of tort law is “self-evident” (不言而喻的—buyan’eryude). Also Zhu states that “there is no doubt that the principal function of tort law in every country is to guarantee the plaintiff’s compensation for damage”, Zhu 2009, p. 114. Also Wang regards the compensation of losses as a method to achieve the aims stated in Article 1, see Wang S 2010, p. 20, and Wang et al. state that compensation is the core aim of tort liability, see Wang et al. 2010, p. 13. Similar also Zhang 2011, p. 428; Koziol and Zhu 2010, p. 336.

  70. For an overview of the various theories regarding the aims of tort law, all of which include compensation in one way or the other, see Gao 2010a, pp. 1–9.

  71. Koziol and Zhu 2010, p. 336.

  72. See e.g. Yang 2010a, pp. 337–342.

  73. Zhang and Li 2009, p. 6.

  74. Gao 2010a, pp. 547 f, with a list of the regulations regarding punitive damages in the various academic and official drafts.

  75. See Yang 2010a, p. 339, who proposes a general provision for awarding punitive damages (maximum of three times the losses) if a tortfeasor deliberately infringes upon the right to life, health or property (with a special emotional connection). A similar regulation was also suggested in the draft submitted by the Chinese Academy of Social Sciences, see Gao 2010a, p. 545.

  76. This seems to be true for most Continental-European jurisdictions, see Koziol 2009, p. 282. Koziol and Zhu 2010, p. 337, oppose punitive damages for various reasons, inter alia as “awarding punitive damages […] is contrary to the separation of criminal law and private law”. Bollweg et al. 2011, p. 98, regard the introduction of punitive damages in the Chinese TLL as mistaken—seen from a dogmatic as well from a legal-political point of view. See also Liang 2011, p. 18. For general considerations regarding punitive damages from a Germanic perspective see Koziol 2012a, pp. 50–55.

  77. This is true also for other jurisdictions in general, see e.g. Koziol 2012b, p. 346.

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Acknowledgments

I would like to express my gratitude to Professor Helmut Koziol, Professor Yu Min, Professor Xie Hongfei and Dr. Zhang Yudong for valuable advice and support in writing this Article.

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  1. European Centre of Tort and Insurance Law, Vienna, Austria

    Laura Emilia Ascher

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  1. Laura Emilia Ascher
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Correspondence to Laura Emilia Ascher.

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This paper is an extended version of a presentation given at the ECLS (European China Law Studies Association) 6th annual conference at Science Po in Paris on September 28, 2011.

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Ascher, L.E. Punitive damages under the new Chinese Tort Liability Law. China-EU Law J 2, 185–200 (2013). https://doi.org/10.1007/s12689-013-0028-2

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