On December 26, 2009, the Standing Committee of the National People’s Congress promulgated the Tort Law of the People’s Republic of China (Tort Law), which will come into effect July 1, 2010. Legal scholars and commentators see the enactment of the Tort Law as a milestone in the development of China’s tort law regime. Prior to the enactment of the Tort Law, myriad tort related provisions were enacted in a haphazard way throughout numerous pieces of legislation, but this time the Tort Law summarizes the existing tort laws and practices and introduces a number of new tort liabilities.
In short, the Tort Law not only addresses general rules regarding causation, evidentiary burden, methods for calculating damages, and so on, but also covers a wide range of specific subject matters, including, among others, product liability, motor vehicle accidents, highly hazardous work, medical malpractice, environmental pollution, harm caused by animals, and damage caused by objects.
The release of the Tort Law demonstrates the efforts of China’s top legislature to systematically codify widely dispersed legislation and practices relating to torts. The Tort Law will not only significantly impact people’s day-to-day lives, but will also have implications for entities such as business operators providing products and services to consumers and hospitals that are frequently faced with complicated medical disputes. This article will discuss the important provisions of the Tort Law and their implications for entities and individuals.
DEFINITION OF TORTIOUS LIABILITY In the Tort Law, tortious liability is defined as liability arising from the infringement of a broad category of civil rights and interests, including but not limited to the rights to life, health, reputation, honor, marriage, privacy, ownership, security interests, intellectual property interests and other such personal and proprietary rights. The broad scope of protected civil rights and the catch-all provision will seemingly give a claimant almost unlimited cause of action to seek relief from the defendant for the damage suffered by such claimant.
LIABILITY FOR FAULT AND STRICT LIABILITY In addition, The Tort Law stipulates liability for fault and strict liability, as well as their application. Generally, in order to successfully seek remedies from the defendant, the plaintiff needs to prove all of the following: (1) the tortious act occurred; (2) the tortious act caused damage and loss to the plaintiff; (3) the causation between the tortious act and the damage and loss; and (4) culpability on the part of the defendant. In some cases, the defendant is presumed to be at fault, so the plaintiff does not have to prove fault (point (4) above), and it is the defendant who is obligated to rebut the assumption of fault by raising a defense of absence of fault. In strict liability situations, however, the defendant will be held liable even if he/she is not found to be at fault. That is, strict liability makes a person responsible for the damage and loss caused by his/her acts and omissions without a finding of fault. Strict liability applies to circumstances involving hazardous or inherently dangerous ventures, but will apply only when the law expressly stipulates so.
MULTIPLE TORTFEASORS Under the Tort Law, two or more parties who jointly conduct a tortious act and therefore cause damage to a person should be jointly and severally liable, and a party who incites or assists another party to conduct tortious acts also should be jointly and severally liable together with such parties. Under joint and several liability, the injured party has the sole discretion to recover all the damages from any or all of the tortfeasors regardless of their individual share of the liability. After remedying the injured party, defendants can sort out their respective proportions of liability and payment, and if it is impractical or difficult to differentiate the liability of each tortfeasor, all tortfeasors should be equally liable. A tortfeasor making payment beyond its share will have the right to pursue the other tortfeasors for a contribution to their share of the liability.
METHODS OF UNDERTAKING TORTIOUS LIABILITIES According to the Tort Law, a tortfeasor should accept liability, according to the particulars of a case, by: (1) ceasing the tortious act; (2) removing obstacles to the injured party; (3) eliminating danger posed to the injured party; (4) returning property; (5) restoring the status quo ante; (6) making compensation; (7) making an apology to the injured party; and/or (8) eliminating adverse impacts resulting from the tortious act and recovering the injured party’s reputation.
The Tort Law also prescribes certain circumstances under which the a tortfeasor does not have to accept responsibility for the damage caused and cases in which his/her liability in tort can be mitigated. Article 26 recognizes the principle of contributory fault, according to which the tortfeasor’s liability can be mitigated if the damage is partly attributable to the fault of the injured party. Article 27 further states that tortfeasors can be exempted from any liability if the injured party intentionally causes the damage to occur. In addition, a party should not be liable for any damage caused by Force Majeure or a third party.
EMPLOYMENT RELATED LIABILITY Article 34 of the Tort Law makes it clear that employers should be liable for any damage caused to other parties by their employees during the course of the employees' performance of their work duties.
Apart from that, the Tort Law provides specific rules on laborer dispatch related liability in tort. In laborer dispatch situations, while it is already clear that the company using the dispatched laborer and the dispatching agencies are jointly liable for work-related injuries to such dispatched laborer, there is no clear guidance under Chinese law as to who should be responsible for the torts committed by a dispatched laborer during his/her working process.
Article 34 stipulates that the company accepting the seconded laborer should be liable for any tortious acts conducted by such seconded laborer when working for such company. If found to be at fault, the dispatching agency should also be liable, but in this situation, the company accepting the seconded laborer and the dispatching agency should bear liabilities in the following sequence: first, the company should compensate the injured party; in the event the company is incapable of fully compensating the injured party, the dispatching agency will be responsible for the payment of the remaining compensation.
LIABILITY FOR INTERNET SERVICE PROVIDERS In response to the increase in online infringements such as plagiarism, defamation and invasion of privacy, the Tort Law provides the injured party with an important protection against internet service providers. According to Article 36, if a website operator is aware, by itself or through notification by the affected party, of the existence of any infringement occurring on its website, but fails to stop such infringement by taking necessary such corrective measures as removing, blocking access to, and deleting the links to such infringing contents, such website operator should be jointly and severally liable with the tortfeasor.
PRODUCT LIABILITY Article 43 of the Tort Law reiterates and confirms the rules under the Product Liability Law: plaintiffs may seek damages from either the producer or the seller of a defective product, no matter whether the producer or the seller is at fault. If the defect contained in the product exists prior to its circulation, the producer should be liable; if the defect is caused by the seller, or the producer or the upper distributors are not identifiable, the seller should be liable; if the defect results from the transportation or storage process, the producer or the seller that has made compensation to the injured party has the right to seek compensation from the responsible transportation or storage providers.
Additionally, the Tort Law requires the producer and seller to take remedial measures for defective products. Specifically, Article 45 mandates that plaintiffs have the right to request that the producer or the seller eliminate the danger or remove obstacles where defects in the product endanger the safety of persons or property. Article 46 of the Tort Law further provides that if a product is found to be defective after being put into circulation, the producer or the seller should take remedial measures, such as sending a warning to consumers and initiating a recall of defective products, 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, the manufacturer or seller shall assume the liability for the tort.
One of the highlight of the Tort Law is that punitive damages can be generally applied in product liability litigations. In the past, punitive damages were generally unavailable to injured parties in China. Exceptions included the Consumer Rights Protection Law and the recent Food Safety Law, which allow for punitive damages to a very limited degree. Specifically, under the Consumer Rights Protection Law, in the event of fraud against consumers, consumers can seek compensation of up to twice the price for the disputed commodity or service; under the Food Safety Law, a consumer has the right to seek compensation of up to ten times the price from a food producer or seller if such producer or seller produces or knowingly sells food that falls short of food safety standards.
For the first time, the right to request punitive damages is expressly articulated under Chinese Law. Article 47 of the Tort Law provides that where a defendant knowingly produces or sells defective products causing injury to life or health, the injured party has the right to claim corresponding punitive damages. However, uncertainties still surround this provision, because the Tort Law does not provide detailed calculation methods of punitive damages, leaving such methods for the Supreme Court to clarify in the future.
LIABILITY FOR ENVIRONMENTAL POLLUTION In response to increasing environmental pollution in China, the Tort Law enhances the liability in tort on polluters in that it applies a strict liability doctrine to polluters and restates the shift of the burden of proof under the current Chinese environmental laws to hold polluters liable even if the pollution was actually caused by a third party.
Firstly, Article 65 of the Tort Law provides that a company is liable for the damage caused by its pollution of the environment. This represents a broadening of previous environmental regulations under Chinese law where liability was primarily based on violation of environmental laws. The current position under PRC law in respect of liability for environmental pollution is contained in Article 124 of the General Principles of Civil Law, which states that persons who pollute the environment and thereby cause harm to others shall incur civil liability only where they have violated national regulations on environmental protection. Unlike the rule set forth in the General Principles of Civil Law, violation of environmental laws or regulations is not a prerequisite for tort liability under the Tort Liability Law. Under the new law, a defendant may presumably be found liable in tort even if it fully complies with all environmental law requirements, such as emission standards.
Second, Article 66 of this new law restates the shift of the burden of 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 that 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. This special burden of proof will lower the evidentiary barrier for a plaintiff to bring an environmental tort claim, and will increase the difficulty and cost for defending against such claims.
It should be noted that in practice, local Chinese courts tend to require the injured plaintiff to present prima facie evidence regarding the likelihood that the polluter’s actions caused the damage. Then, the polluter should submit evidence to refute that link, and only when the polluter fails to refute such link shall the polluter be subject to liability. For example, if a farmer living along a river wants to sue a chemical factory located upstream because his crops have been contaminated by wastewater discharged from the chemical factory, he should at least present prima facie evidence to show that the chemical factory had been discharging wastewater into the river and that he had been using water from the river to irrigate his fields. Once the farmer has presented such evidence, the factory should bear the burden of proving that it can be exempted from any liability or its liability can be mitigated according to relevant provisions of other laws, or that there is no causal relationship between its discharge of wastewater and the damage suffered by the farmer.
Finally, Article 68 stipulates that the plaintiff can claim compensation from polluters or a third party where the environmental pollution is actually caused by this third party. This article certainly imposes more liabilities on polluters in that polluters may still be liable for damages even if the pollution was not caused by their own actions.
CONCLUSION The Tort Law marks a new development in China’s civil laws in that it lays a fundamental foundation with statements of important general provisions with respect to torts. Given the general nature of the Tort Law and the broad scope of issues that it covers, there is an apparent lack of specific rules for the purpose of fully assessing how these general provisions will be applied in various situations, and it is expected that detailed implementation procedures and enforcement guidance will be introduced before the Tort Law takes effect on July 1, 2010. In any case, the Tort Law will have significant ramifications for companies doing business in China. In light of the existing or potential heightened exposure to tort claims, companies active in the China market should closely track further developments in this regard, and revisit their internal regulations and management measures to minimize the risk of running afoul of the Tort Law and its coming implementing regulations and court interpretations.