On 26 December 2009, the Standing Committee of the National People's Congress of the People’s Republic of China passed the Tort Liability Law after more than nine years of drafting and deliberation. This new law will come into effect on 1 July 2010.
In brief, the Tort Liability Law contains 12 chapters covering various tort liabilities for the infringement of a wide range of statutory civil rights and interests by tortfeasors including but not limited to product liability, environmental pollution, medical malpractice, motor vehicle accidents, extra-hazardous work, harm caused by animals and injury caused by objects. Even though this new law essentially summarises the existing tort-related liabilities under current Chinese law and practice, the following new developments are still worth noting.
Adoption of Punitive Damages for Products Liabilities
Punitive damages as a civil remedy have been widely used by courts of common law jurisdictions for various tort actions, but punitive damages are generally not available in the Chinese civil justice system. As rare exceptions, the Consumer Rights Protection Law and the most recent Food Safety Law, enacted after the notorious contaminated milk incident, touch slightly on punitive damages by granting very limited punitive damages in cases of fraud against consumers or violation of food safety regulations. In these instances, the punitive damages are limited to one (under the Consumer Rights Protection Law) or 10 (under the Food Safety Law) times the purchase price of disputed commodities purchased by the consumers.
This is the first time the term “punitive damages” has been officially used in a Chinese law. Article 47 of the Tort Liability Law provides that where a manufacturer or seller obviously knows a product is defective and continues to manufacture or sell such defective product, the injured victim shall be entitled to corresponding punitive damages if the defective product causes death or serious injury to his or her health.
However, the Tort Liability Law does not set forth the standard or methodology to calculate the punitive damages. This issue may be clarified by the Supreme People’s Court through judicial interpretation. It is believed that the amount of punitive damages will be considerable, or it will make no sense to introduce such a system. However, the excessive punitive damages granted by juries in common law countries may not be repeated in China, because, like most European countries, trial by jury does not exist in the Chinese judicial system.
Extending Recall Systems for All Defective Products
Prior to the promulgation of this Tort Liability Law, the defective products recall is only applicable to auto products, toys, medicine and food. The Tort Liability Law extends the coverage of the recall system to all products manufactured or sold in China. Article 46 of the Tort Liability Law provides that if any defect of a product is found after the product is put into circulation, the manufacturer or seller shall take remedial measures, such as warning and recall, in a timely manner. If the manufacturer or seller fails to take remedial measures in a timely manner or the remedial measures are insufficient or ineffective and damages are caused, it shall assume the liability for tort.
It is also notable that the above statutory liabilities for failure to take remedial measures for defective products discovered after the circulation are rather vague and broad, which may invalidate the existing defenses granted by China’s Products Quality Law to the manufacturers. According to the second paragraph of Article 41 of the Products Quality Law, manufacturers shall not be liable if the product defects do not exist at the time of circulation, or if the defects cannot be discovered at the time of circulation because of scientific and technological limitations. Apparently, such defences may not stand the test of the above provisions of the Tort Liability Law.
Enhancement of Liabilities for Environmental Pollution
In response to increasing pollution in China, the Tort Liability Law sets forth tort liabilities in connection with environmental pollution as an independent chapter. Even though this new law does not create any new environmental torts, it enhances the tort liability on polluters by reiterating the shift of proof burden under the current Chinese environmental laws and holding the polluters jointly liable even if the pollution was actually caused by a third party..
According to the judicial interpretation by the Supreme People’s Court of China in 2001, Chinese courts shall adopt the shift of proof burden for environmental tort actions. In other words, polluters are responsible for proving under the law that there are situations that would leave them with no liability or very little liability, and must prove that there is no causality between the polluter’s actions and environmental damage caused. However, in practice, local Chinese courts tend to request that the injured plaintiff be responsible for providing prima facie evidence about the likelihood that the polluter’s actions caused the damage. The polluter then provides evidence to refute that link, and only when the polluter fails to refute, then it is assumed that its actions did cause the damage and the polluter is liable for compensation.
In contrast to the above practice of the Chinese courts, Article 66 of this new law restates the shift of burden proof and provides that, where any dispute arises over environmental pollution, the polluter shall assume the burden to prove that it should not be liable, or its liability could be mitigated under certain circumstances as provided by law, or to prove that there is no causality between its conduct and the harm.
It is also notable that Article 68 of the Tort Liability Law further states that plaintiffs can claim compensation from polluters or a third party if the environmental damage was caused by a third party. This article certainly imposes more liabilities on the polluters in that polluters may still be liable for damages even if the pollution was not caused by their own actions.
Employers’ Liabilities for Dispatched Labourers
Labour dispatch has been widely used by labour-intensive manufacturing sectors in China as a way to cut the direct employment relationships between the manufacturers and their labourers dispatched by dispatching agencies. Under this arrangement, the manufacturers skip signing direct employment contracts with the dispatched labourers, paying statutory employment benefits or meeting the minimum requests on remunerations to the dispatched labourers on the ground that the dispatched labourers were not legally hired by them.
Although under Chinese labour laws the manufacturers and the dispatching agencies are jointly liable for work-related injuries to dispatched labourers, Chinese law and practice is far from clear as to who shall be responsible for the torts committed by the dispatched labourers in connection with their work. Article 34 of the Tort Liability Law clarifies this issue by providing that where during the period of labour dispatch, a dispatched employee causes any harm to another person in the course of performing his or her work duty, the entity receiving the dispatched employee shall assume the tort liability; and the dispatch agencies shall assume the corresponding complementary liabilities if they are also found at fault.
Protection of Privacy
Unlike many western countries, China still lacks a comprehensive legal framework to regulate the use and disclosure of personal data. There is no national, generally applicable data privacy law, even though a right to prevent disclosure of personal data may arise only within the context of a defamation action for infringement of the Reputational Rights broadly defined under Chinese civil laws or a criminal prosecution against persons who misappropriate personal information during the course of performing their professional duties.
The Tort Liability Law recognises an independent right of privacy for the first time in Chinese legislative history. Article 2 of this new law expressly includes the right of privacy in the list of protected civil rights and interests, and thus subjects infringement of this privacy right to the tort liabilities, including paying damages for actual losses (in the event that the actual losses are difficult to be quantified, then the damages will be granted by reference to the unlawful profits that may arise from such violation) and compensation for emotional harm, if applicable.
In provisions concerning medical malpractice, this new law also obligates the medical institutions to treat the private data of a patient in extreme confidence and prohibits any disclosure of such information without the authorisation of the patient.
Additionally, according to Article 36 of the Tort Liability Law, a website operator that acknowledges that a party’s civil rights are being infringed (in practice, infringement of the right of privacy is one of the most common website torts) through contents posted on its website and fails to take necessary corrective measures to stop such infringement is jointly and severally liable with the infringing party. Moreover, if a website operator is warned of such infringement by an affected party and fails to remove the contents or adopt other corrective measures, it will also be jointly and severally liable with the infringing party.
Like most high-level Chinese national laws enacted by the Standing Committee of the PRC National People's Congress, the Tort Liability Law lacks detailed implementation procedures and enforcement guidance. Pending the judicial interpretation on this law by the Supreme People’s Court of China, it remains to be seen how this new law will be actually enforced in the legal practice. However, the summarisation of the existing tort liability law and practice in China and the introduction of certain new tort liabilities by such a high-level national law may likely facilitate and encourage the tort litigations.