China Courts: Equity, Equity, Equity

China litigation lawyer

We Westerners (particularly we lawyers) are used to courts being legalistic. We expect courts to rule “strictly” on “the law.” This expectation is wrong in the United States and very wrong in China.

It is wrong in the United States because about 50% (yes, I am making this figure up) of all cases could easily go either way based on the law. Our job as lawyers is to convince the Court why the world will be a better place if it rules in our client’s favor. When we win these, we call it justice. When we lose these, we call it words I cannot mention online.

The Chinese courts are far less interested in the law and far more interested in “justice” than Western courts. When we win these in China, we call it justice. When we lose these, there is a tendency to cry corruption. I am of the view that Western companies far too often fail to realize the importance of equity/justice in Chinese courts. This failure to understand the Chinese system for putting the doing of equity far above the legalistic interpretation of law can work against Western companies doing business in China.

I am aware of many instances where Western companies, relying on Western legal constructs, believed themselves better positioned for Chinese lawsuit than they actually were, and then mistakenly refused to compromise based on their wrong belief. I have also seen Western companies bring lawsuits in Chinese courts or before Chinese arbitration panels they were convinced they would win, but I knew they would lose based on the equities. Chinese courts and Chinese arbitration panels do not generally like legal technicalities as they do not view that as the way to a harmonious society. I am not saying this to be funny or glib, but because it is true.

A recent fascinating case (both from a legal and a factual perspective) really brings this home. Danwei writes on this case in its post, entitled, “Collective punishment for building occupants” [link no longer exists].  Danwei provides the following case summary:

In November 2008, Yuan Zhengming, a 22-year-old street vendor was walking along the road when she was struck in the head by a metal object.

The object was determined to have fallen from the apartment building nearby, but since no one stepped forward to accept responsibility, Yuan sued all of the households on that side of the building.

She has now been awarded 259,580.57 RMB, to be split among 48 households (60 people). The only defendant who escaped blame, Wang Aitang, had never renovated his apartment after purchase. The court found that he had sufficient evidence that he had never used the flat, and therefore could not have been responsible for Yuan’s injuries.

Now before I go all legal-wonk on you, let me just say this ruling could never happen in the United States. Not in a million years.

There is a famous U.S. torts case, Summers v. Tice, in which someone was hit by two bullets from defendants, all of whom were out hunting together. Though it could not be determined from which defendant the bullet came, each defendant was found to have acted negligently and because it was the defendants who put the injured party in the position of being unable to determine which defendant (or defendants) had actually struck her, all defendants were found equally liable.

This Chinese case is way different though, in that only one of sixty people could possibly have been truly liable (it may even have been a guest in one of the apartments) and the other 47 apartment owners did absolutely nothing wrong. And yet, in an effort to give compensation and achieve what it saw as fair/just/equitable, the Chinese court ruled that all 48 apartment owners (minus the only one who could conclusively prove no involvement) would have to share in the payment.

Two lessons to be gleaned from this one case. First off, Chinese courts view the law and justice very differently from Western courts. Second, before you buy a condo in China, you should think about doing some due diligence on your fellow owners (just joking).

16 responses to “China Courts: Equity, Equity, Equity”

  1. I’m confused, you have been saying for a few years now that China has been moving toward rule of law, but this doesn’t sound like that anymore. In any case what that episode highlights is the backwardness of the chinese legal system. Hopefully it will grow up, but I suspect not for some time.

  2. years living in india doing spiritual practices has left me with a great curiosity about collective consciousness, which is clearly a higher-order function than is individual consciousness. we don’t have models for this in the west, but china, and asia in general, is socially constructed based on some of its principles … and of course has been for centuries.

  3. Collective punishment has a traditional basis in Chinese society dating back to the Qin state. Mutual responsibility has various benefits, but the main drawback is, as you’ve said, the perception of justice. However, in the Chinese case, they tend to view people in the context of relationships (see Fei Xiaogang) and not as individuals, hence complaints about proper justice should be comparatively subdued.

  4. If you are a ‘westerner’ in china they would certainly go back 100 years to dole out their form of ‘justice’.

  5. Seems to me to be more of a res ipsa loquitur outcome? Byrne v. Boadle. Flour barrel falls out of window, injures pedestrian, no evidence of negligence or identity, flour business occupant of building liable. Or perhaps Larson v. St. Francis Hotel. Chair falls out of hotel window, pedestrian injured, no evidence regarding which room the chair came from, hotel management not liable because management practicing ordinary care cannot ensure that guests do not throw stuff out of their windows. In the first case, the court could be pretty certain that the flour company did something stupid and got someone hurt. In the second, the court wouldn’t impose liability on an innocent party just because someone got hurt. You’re right that the Chinese court reaches the opposite result.
    In any event, I would love to hear some of the facts and holdings of those Chinese cases involving western businesses that were short-sighted on principles of equity, if you can reveal them without violating any ethical norms (and I can’t how you would be if they are settled, public decisions). It sounds a bit like you are using very nice, lofty words to describe something that isn’t really all that nice, either from the standpoint of “justice” and “equity” or from the standpoint of a business that wants to be able to rely on the law. Did these companies know they were doing something corrupt or dishonest, although technically within the bounds of the law? Perhaps those companies thought they were on the right side of both law and equity, just like the many people that had to pay for injuries that the court knew they had no hand in causing. I also don’t see how this type of judgment is beneficial with regard to “harmony” or “social stability,” inasmuch as it imposes liability for one person’s injury on half a building’s worth of innocent people. Even split up among 60 people, assuming they are of average wealth, that’s an entire month’s wages…Seems wrong to me. Perhaps the state should be paying for these types of injuries?

  6. Qin Dynasty Military Law: Robin S. Yates (pg 31/32, Military Culture in Imperial China, ed. Nicola di Cosmo from Harvard University Press, 2009)
    “Most important, the philosopher-statesmen who have been traditionally associated with so-called legalist (fajia) thinking appear to have adopted certain basic principles of military organization and law and applied them to the civilian population as a whole. This had a most profound effect on Chinese social formation and on Chinese law throughout the entire later imperial period. Specifically, Wei Yang, the Lord Shang of the state of Qin in the mid-fourth century BCE, successfully persuaded Duke Xiao to reform the laws of the state of Qin on military lines, and this reform laid the foundation for Qin’s eventual conquest of all its rivals in the following century and for the First Emperor to establish the imperial system in 221 BCE. The latter story is too well known to be recounted here, but a brief review of Lord Shang’s reforms is appropriate. First, he organized the entire population under Qin control into household groups of five, and possibly ten, and then on up into larger units, each level legally responsible for the behavior of its members under the “mutual responsibility” (lianzuo) system. In the Qin army, squads of five men and platoons of ten were drawn from these household units, so that one man from each of a group of five households served in the five-man unit in the army. This ensured that men who served in the army would know each other intimately, would probably also be related to each other by blood and/or marriage, and would therefore be prepared to fight to the death to save the other members of their unit. The hierarchical organization of the civilian population as a whole mirrored that of the army. At each level of both institutions, officers or officials were given the authority by the state to manage their unit and were held legally responsible for their underlings’ performance. Thus, through the establishment of this order, the state was able to control and manipulate all the members of the society, penetrating right to the heart of the family and rupturing its internal solidarity. The loyalty and solidarity of every member of society were turned toward the Qin state.
    Second, under the system of mutual responsibility, in civil life members of the five-man households, led by a group head, were responsible for each other’s behavior and were obliged to denounce a fellow member’s crime; otherwise, they would be held equally responsible for the crime. In the military, the squad members were responsible for each other’s safety. If one man were killed, all the other members would be killed by the commanding officer unless they managed to kill an enemy and present his head to recompense the loss of one of their own. In both civil and military spheres, the language of the law of mutual responsibility indicates that those to the left and right and front and rear were held responsible for an individual’s behavior. Such spatial identification was obviously much more readily conceivable in a military unit marching in a group than in the civilian sphere, where–because of the nature of geography and topography–the ideal spatial relations between households would have been much more difficult to delineate. This is one of the reasons why I believe that the system of mutual responsibility was taken from the military sphere and applied to the civilian. This system of mutual responsibility was applied in imperial times. After the Han, it was reveived in the so-called baojia system of family responsibility and mutual protection by the Northern Song statesman Wang Anshi (10212-1086), and in the Ming, from whom the Tokugawa shoguns borrowed it for Japan in the seventeenth century. It obviously also has its counterpart in contemporary China, having been revived after 1949.”
    If individuals are understood as the sum of their social networks, such a practice easily can become normative and becomes understood that everyone is responsible for everyone in their immediate network, including their neighbors. This creates a useful layer of social control in that individuals have incentives to regulate their family, friends, and neighbors as their problems automatically become your problems.
    The main issue I see is that this effect is taking place in a modernizing society where individual ties become progressively more atomized. In a village, or any other traditional setting, everyone knows everyone and the person whose fork caused the brain damage of the street hawker would easily be exposed for fear of punishment. In a modern apartment building, on the other hand, I’d be surprised if you had a casual acquaintance with everyone on the same floor.

  7. Interesting. I agree with you regarding the idea that the Chinese legal system generally likes what it thinks of as equity (this is not necessarily the same as equity – ask the tenants whether they thought the outcome was equitable). If injury has been done, someone’s got to be found to pay for it – preferably a deep pocket. Thus operators of motorized vehicles always have to pay at least something when they hit a pedestrian, regardless of fault, on the assumption that drivers as a class are richer than pedestrians as a class.
    But courts, and the system generally, will not always come out this way. There was an identical case in Chongqing a few years ago: the plaintiff was struck in the head by a flowerpot that fell from an apartment building. At the first trial, all the households with windows facing that street were held liable, with the exception of a few who could show they had installed protective netting under their windows. But at the appeal, the Chongqing Intermediate Court ordered a retrial. At the retrial, the plaintiff lost for lack of evidence. He appealed, but the proceedings were suspended when he failed to show up. I don’t know what happened to the case after that.
    There’s actually a statute that’s partially on point: Art. 126 of the General Principles of Civil Law, which says, “When falling objects from a building cause harm to others, all of the building’s owners or managers should bear civil liability, unless they can prove that they are not at fault.” Thus, there’s arguably a legal basis for the judgment in the case you’ve reported entirely apart from questions of equity.

  8. Dan, it’s hardly unreasonable for people to expect the courts to rule on what the law is. Without the law being enforced, people will not bother to abide by it if it’s a significant inconvenience, as they will just assume “well I have a 50/50 chance of winning even if someone brings a case against me, because I think what I’m doing is reasonable even though it’s not legal, so I will do the much cheaper thing”. Law will stop being reliable as it will all boil down to the whims of the court – and, yes, who has better links to the judge in question (also known as corruption).
    You’re exaggerating that lawyers and companies from America and Europe assume that the courts will always rule on technicalities. Some do, but they’re stupid. Unless the law is extremely clear, a judge will always have a lot of leeway to do the “right thing”. Even if the law appears clear they may still try to find a way around it.
    Finally, how is the case you described a case of “justice” winning out against legal technicalities as you imply? Surely it’s a case of gross injustice as 47 households have to contribute towards the negligence of 1 other.
    Adam makes some good points in general.

  9. Dan, great post. Regarding the claim that Chinese courts are more interested in “justice,” I agree with the point but not the way it’s stated. As always we need to watch our language: “justice” from a Western perspective, is abstract and God-driven; the case you present as indicative of a Chinese penchant for “justice” isn’t about this at all. It’s much more about what we might call in Chinese 合理 (hélǐ) or “reasonableness.” We could argue a lot about whether it’s “reasonable” to hold several dozen people responsible for something they clearly could not have done. What I mean when I invoke the term 合理 is that the Chinese perspective, in this case, is grounded in the specific and the particular. From an abstract “justice” perspective it could hardly be more wrong than to hold people responsible for acts they could not possibly have committed. The Chinese court has thrown abstract “justice” to the wind and has said, in effect: “Well, we can’t pinpoint a perpetrator, but something has happened and a person has been hurt, and someone has to help the person out, so we might as well make it this big group of people.”
    I think what you mean to point out is that Chinese courts are more likely to take a “might as well” approach to the law than are Western courts. Fair interpretation?

  10. This is a very interesting post how the Chinese justice system function in comparison to the US courts. I do not whether I would like living in China with this type of justice system. Thanks for sharing.

  11. This decision is actually strictly “on the law” — the Tort Liability Law that was passed by the NPC’s Standing Committee last December. Article 87 (my translation) reads: “If an item is thrown or drops from a building, causing harm to another person, and it is difficult to determine exactly who is the tortfeasor, except for those who can prove that they are not the tortfeasor, all persons who use the building and who may have caused the harm shall pay compensation”. 从建筑物中抛掷物品或者从建筑物上坠落的物品造成他人损害,难以确定具体侵权人的,除能够证明自己不是侵权人的外,由可能加害的建筑物使用人给予补偿。 The language is similar to that in the General Principles, which Don has already identified. I confess I am not sure why Don says that the General Principles are only “partially” on point. Both art. 126 of the General Principles and art. 87 of the Tort Liability Law seem directly on point.

  12. Outcast, all the author is saying is that the Chinese have a different concept of law. One that is less concerned with splitting the hairs of legislation and more concerned with….doing the right thing?

  13. @joseph:
    As Raj pointed it is never a good idea to not consider the law when handing down judgements. Chinese have a different concept of law simply because the whole idea of “Rule of Law” is NOT chinese at all. The law is the law, and whether or not the law is fair should be determined by the law as it is written. “Doing the right thing” may sound good, but it opens up pandora’s box to a whole host of issues by opening the door to such things as corruption, discrimination, amoung many others.
    I remember reading a case about a women who was assaulted by her husband (who in addition to severly beating her had poured gasoline on her head and lit her on fire) because she came home late from work. The judge in the case ruled the husband was NOT guilty of assault because he had “good reasons” for beating her for being home late from work. Now it was clearly a textbook case of assault, but because the judge was more interested in “preserving social harmony” and “doing the right thing”, he got away with it.
    It doesn’t matter that it is different, it is still backwards and for the reasons i just decribed the wrong approach.

  14. The biggest problem in Chinese courts is the lack of judicial independence. All legal decisions are reviewed by a Communist Party committee & can be overturned, reversed or modified by the Party. All judges in China are also members of the Party & many of them have no formal legal education. In political cases this is a real problem b/c Chinese courts don’t afford political defendants due process of law or allow them to hire their own lawyers. In political cases, esp. ones dealing with Tibetans & Uyghurs, the outcome is pre-determined and appeals are meaningless.

  15. Is it possible to have a contract with a Chinese manufacturing Company, that wants to manufacture my patented product and pay me on the quantity they manufacture/Market, how could the figures be checked? and what would stop them manufacturing the product through another company, that they would hide from me? and if I found out they were Cheating on me, what could I do? if anything realistically. Thanks, Allan

  16. This is very interesting. I think Western courts are concerned with justice. However, you are right, the law acts as a barrier sometimes, preventing justice from being done. Thanks for posting this.

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