All questions

Litigation

i Forum

In accordance with Article 47 of the PQL, when there is a civil dispute regarding product quality, the parties may resolve their dispute by negotiation, mediation, arbitration or litigation. In practice, the most common forum is litigation.

In the Chinese civil system, there is a two-tier trial system, under which a party has the right to appeal a decision at first instance to an appellate court. In general, the second instance judgment is final and binding. However, under special circumstances, a party may also apply for a retrial. However, the standards to be met to initiate a retrial are very strict, and a request for a retrial is granted at the court's discretion. In practice, it is very rare for a court to grant a retrial.

If a product liability dispute is relatively simple and with a small amount in dispute, a summary procedure or small claims procedure may apply to the litigation. These two types of procedures are more flexible and quick, and the small claims procedure does not allow the parties to appeal.

In civil litigation proceedings, a party may also resolve the dispute by negotiation or settlement. A settlement judgment issued by the court has the same effect as a civil judgment. If one party fails to perform its obligations under the settlement judgment, the other can apply to court for enforcement.

In China, any contractual or other disputes over property rights and interests between citizens, legal persons and other organisations can be submitted to arbitration. Since arbitration procedure relies on the parties' agreement, it may be more applicable to a seller's contractual disputes arising from defective products, rather than product liability disputes.

ii Burden of proof

In product liability proceedings, the plaintiff has the burden of proving:

  1. the product is defective;
  2. damage or loss owing to the defective products; and
  3. a causal relationship between the defect and the damage suffered.

However, in practice, the plaintiff, as an individual, usually has limited technical knowledge about the product in dispute. As a result, courts do not generally impose too stringent a burden of proof on the plaintiff. As long as the plaintiff has prima facie evidence (such as the inspection report from a professional inspection institution) that the product has problems, the burden of proof will be shifted to the manufacturer or seller. The manufacturer or seller will then have to prove that the product does not have any defects. It will thus have to prove that the product meets the national and industrial standards (if any), and does not present any reasonably foreseeable danger to a person's health, nor will it damage a person's property.

In practice, the inspection procedure plays an important role in determining whether the product is defective. A party may apply to a court for inspection to determine whether a product is defective (in particular, whether there is a design defect or manufacturing defect). The inspection will be conducted by inspection institutions with appropriate qualification or by judicial inspection institutions. The parties may agree to appoint a specific inspection institution; if not, the court can appoint one. Furthermore, even if the parties do not apply for inspection, if necessary, the court may itself decide to appoint an inspection institution to determine whether the product is defective. The inspection fees are relatively high and the process is time-consuming, and there may be technical issues that are beyond the expertise of certain inspection institutions, which may present some obstacles for the plaintiff.

Furthermore, it may be difficult to prove that there is a causal relationship between the defect and the damage incurred. In general, a court would not require the victim to prove that the injury or damage was in fact caused by the defective product. The victim only needs to prove that there is connection between the injury or damage and the defective product. Lastly, courts usually take a 'presumptive approach' when determining whether there is a causal relationship. This means that, if a product is defective and other possible causes of injury have been ruled out, the causal relationship is therefore presumed to be established.

iii Defences

Under Chinese law, defences include procedural defences and substantive defences.

Relying on a statute of limitations is a procedural defence. There have been discussions on the limitation period to be applied in product liability cases. After the amendment of the PQL on 29 December 2018, the limitation period remains at two years, which still differs from the three-year limitation period provided in the General Provisions. We will have to wait to see what changes are effected in judicial practice, in order to see which limitation period shall prevail.

In relation to substantive defences, there are three statutory defences under which a manufacturer may avoid liability. First, a manufacturer may avoid liability if the products have not been put into circulation. For example, this defence may be available if a manufacturer is about to destroy some defective televisions stored in the warehouse; however, a thief steals one and then sells it to a person who is subsequently injured when using it. Notwithstanding the person's injury, the person could not claim compensation from the television manufacturer. Secondly, a manufacturer may avoid liability where the defects do not exist when the products are put into circulation. In other words, the manufacturer could demonstrate that the defect was caused by the victim. Thirdly, the scientific and technological standard at the time the product was put in circulation has not reached a level to enable the manufacturer to discover the defect in the product. The manufacturer will bear the burden of proving the above three statutory defences.

As outlined above, the plaintiff has to meet its burden of proving three elements in a product liability claim (i.e., defects, injuries or damage and causal relationship). If a defendant successfully challenges the plaintiff's proof in respect of any of these three elements, the defendant will not be found liable. Of these three elements, the defendant usually challenges the 'defects' and 'causal relationship'. For example, in a case where the explosion of a microwave oven caused injuries, if the plaintiff wants his or her claims for compensation to be supported, the plaintiff shall prove that the microwave oven was defective resulting in the explosion; the plaintiff was injured owing to the explosion; and there was causal relationship between the injury and the defects. In this case, the defendant might challenge the existence of the defects on the basis that the microwave oven's design and manufacture satisfy the relevant compulsory national or industrial standards. The defendant might deny the causal relationship by proving that the plaintiff improperly used the products.

iv Personal jurisdiction

The PQL applies to all manufacturing and marketing activities within the territory of China. Accordingly, the PQL regulates both manufacturers and sellers with businesses operating within China, including a seller who imports products manufactured outside China and sells the products within China. Any violation of provisions in this law may lead to aforementioned civil, administrative and even criminal liabilities.

In accordance with the Civil Procedure Law, as a tort case, product liability claims are under the jurisdiction of the court at the place where the tort occurs or at the place of domicile of the defendant. The place where the tort occurs includes the place where a tortious conduct is committed and the place where the consequence of a tortious conduct occurs. If the manufacturer and seller are domiciled in China, the Chinese courts will without doubt have jurisdiction over the proceedings. Even if the manufacturing and selling were committed outside China, if the damage occurs within China, the manufacturer and seller outside China may still fall under the jurisdiction of the Chinese courts.

v Expert witnesses

The Chinese legal system recognises the role of expert witness in disputes. Any party can apply to a Chinese court for an expert to testify at court on certain issues of fact that are within his or her expertise. Where an application of a party is permitted by a Chinese court, the party making the application will bear the costs of the expert witness' attendance. The judge hearing the proceedings or any party may cross-examine the expert. Where permitted by the court, experts may address each other during proceedings in relation to issues arising in the proceedings.

vi Discovery

Contrary to the common law jurisdictions, there is no general process of discovery in Chinese civil litigation. Except where the burden of proof has shifted (as outlined above), each party has the evidentiary burden of proving its claims. However, if there is evidence that a party and its representative are unable to collect, the party may apply to the court for investigation and collection. For example, if a vital inspection report regarding product defects was kept by the product manufacturer, and the consumer is unable to obtain it, the consumer could apply to the court to collect this evidence from this manufacturer. In addition, there may be a situation in which there is evidence demonstrating that a party possesses certain evidence, but that party refuses to provide it without any proper justification. In such cases, if the other party claims that the evidence is unfavourable to the party that possesses it, a court may infer that the claim is established.

vii Apportionment

Where any harm is caused by a defective product, the victim may seek compensation from the manufacturer or the seller. That is, for the victim, both the manufacturer and the seller assume liability. Between the manufacturer and the seller, after any party assumes liability, this party may be entitled to be reimbursed by the other. However, when a manufacturer seeks reimbursement from a seller, it will have to provide evidence that the product's defect was caused owing to the fault of the seller.

viii Mass tort actions

To date, the Chinese legal system does not provide for class actions as they exist, particularly in the United States. However, where the subject matter of action is same or is of the same kind, courts may allow the parties to hear the case concurrently. However, 'collective action' is uncommon in product liability cases. In addition, where the subject matter of a claim is of the same kind in nature, but the number of potential plaintiffs is unclear when the claim is initiated, courts may publish a notice to describe the case and claims and notify right holders to register with the court within a certain period. The parties that have registered with the people's court may recommend a representative or representatives to participate in the litigation. The judgment or ruling issued by the court will bind all right holders that have registered with the court. Such a judgment or ruling will also apply to actions instituted during the statute of limitations by right holders that have not registered with the court.

ix Damages

Under Chinese law, where a defective product causes any harm to another person, the manufacturer or seller, or both, will assume tortious liability. Where a person suffers personal injury owing to a defective product, damages will often include: medical treatment expenses; funeral service fees; compensation for mental distress (if applicable); and other economic compensation. Where a person suffers damage to his or her property owing to a defective product, a court will often order the tortfeasor to remedy the damage or pay compensation in an amount equal to the remediation costs. Where the defect of a product endangers the personal or property safety of another person, the victim shall be entitled to require the manufacturer or seller to assume tortious liability by removing the obstruction or eliminating the danger.

In addition, there is punitive compensation under Chinese law. Under the TL, where a manufacturer or seller is aware that a product is defective and continues to manufacture or sell the product, and the defect causes death or serious damage to the health of another person, the victim may be entitled to obtain punitive compensation. Under the PCRI, business operators that fraudulently provide commodities or services will, as required by consumers, increase the compensation for consumers' losses. The increase in compensation will be three times the payment made by a consumer for the commodity purchased or the service received or it will be 500 yuan if the increase calculated above is less than 500 yuan. Where business operators knowingly provide consumers with defective commodities or services that cause death or serious damage to the heath of consumers, the victims have the right to claim punitive compensation of no more than two times the amount of losses incurred. Under the Food Safety Law, in addition to claiming damages, a consumer may require a manufacturer of a food product that fails to meet food safety standards or a trader knowingly dealing in such food to pay an indemnity of 10 times the price paid or three times the loss. If the amount of the additional compensation is less than 1,000 yuan, it will be 1,000 yuan, except for a defect in the labels or instructions on the food that does not impair food safety or mislead consumers.