A. Introduction
On 28 October 2010, the Standing Committee of the Eleventh National People's Congress adopted China's first statute on the Conflict of Laws: the ‘Act on the Application of Laws over Foreign-related Civil Relationships’ (‘Conflicts Act’).Footnote 1 The adoption was an historic event in Chinese legislative history, as it indicates China has modernised its conflict-of-law rules after many years of unremitting efforts made by legislators and scholars. More importantly, it means that ‘a socialist legal system with Chinese characteristics’ has been successfully established, and allows China to claim to have a systematic legal system.Footnote 2
In essence, the Conflicts Act was a response to the increased volume and growing diversity of international civil disputes. Another impetus was the acceleration of the development of private international law across the globe, notably the adoption of the Rome I Regulation and Rome II Regulation, and legislative reforms in Germany, Switzerland, Italy, and the United Kingdom, as well as China's neighbours such as Japan and South Korea.
The promulgation of the Conflicts Act means that China has succeeded in achieving the goal of codifying substantial parts of its private international law, and the significance cannot be overestimated. Nevertheless, the Conflicts Act is far from perfect; for example, it contains choice-of-law issues on civil relationships only, thus failing to keep up with the worldwide development of private international law characterised by a trend towards comprehensive codification.Footnote 3 In addition, some articles in the Conflicts Act have aroused suspicion and criticism. The clamour comes mainly from within China's legal communities, and stems from a view that the final draft of the Conflicts Act ignores the suggestions and opinions put forward by conflicts scholars, and its hasty passing was an expedient to satisfy the fulfilment of political targets.
As the Conflicts Act has attracted attention, both at home and abroad, it is beneficial and necessary to provide a timely and systematic review of it. This article will begin by introducing the legislative background of the Act. It will then make an objective and comprehensive assessment of the Act by scrutinizing its most important provisions. In conclusion, the article will summarize the striking features as well as the defects of the Act, and outline steps to improve it.
B. Legislative Background
1. An Evaluation of Chinese Private International Law Prior to the Conflicts Act
Sixty-one years after the establishment of the People's Republic of China (‘PRC’), the country finally enacted an Act on the conflict-of-laws. An ex-post examination will reveal that the legislative development of private international law in the PRC has been full of frustration. It should be noted that the study of private international law was only regarded as an independent discipline after 1978, when China adopted a new policy of reform and opening up to the outside world. For many years, private international law was regarded by scholars in China as a forbidden, even perilous, academic pursuit. The anti-foreign sentiments that dominated China from the 1950s to the 1970s were so pervasive that it was difficult associate with any Western ideas or influence. The same attitude was also manifested by the legislature and the judiciary, in their reluctance to recognise the effect of foreign law in civil cases involving foreign elements.Footnote 4
However, this attitude became untenable for China due to the reform and open-door policy. With the development of external economic cooperation and trade, increasing numbers of disputes involving foreign factors arose, and were brought to the Chinese People's Courts. Moreover, China's accession to the WTO in 2001, resulted in a greater proliferation of international civil and commercial disputes of ever increasing complexity. Meanwhile, with a huge number of Chinese civilians overseas, China began to realise conflict rules were needed to coordinate the interaction between the legal systems involved in order to deal with the rights and obligations of Chinese nationals. Under such circumstances, private international law was introduced in China in the late 1970s to assist in the resolution of these disputes.
In the past thirty years, China's private international law has made significant progress; however, objectively speaking, prior to the promulgation of the Conflicts Act, Chinese legislation on private international law remained un-sophisticated, compared with the United States, major European countries and its East Asian neighbours. Before the new Conflicts Act, Chapter Eight of the General Principles of Civil Law (‘GPCL’) was the most important source of private international law in China.Footnote 5 However, like the rest of the GPCL, Chapter Eight did not purport to be a comprehensive codification. Instead, it contained nine articles that dealt with contractual obligations, torts, and succession, and was often hard to follow, particularly in complicated cases. Though in recent years, other relevant laws, such as the Maritime Act,Footnote 6 Civil Aviation ActFootnote 7 and Contract Act,Footnote 8 have been enacted in succession, and contain conflict rules that fall within their scope of regulation respectively, legislation on Chinese private international law during this period, for a variety of reasons, remained fragmentary, incomplete, hesitant, and less influential than in other areas of private law.
Chinese scholars argued that private international law legislation in China before the enactment of the Conflicts Act had five major defects: (1) the conflict rules contained in various Chinese statutes and regulations were incomplete; (2) some statutory conflict rules were insufficient or out of date; (3) some conflict rules contradicted each other; (4) some conflict rules included in the judicial interpretations of the Supreme’ People's Court were in disharmony with statutory conflict rules; and (5) the existing Chinese private international law legislation lacked a consistent legislative technique.Footnote 9 In light of this, Chinese scholars argued that Chinese private international law legislation was in need of fundamental reform, and a code of private international law should be enacted as soon as possible.Footnote 10
2. Legislative Process
The restructuring of private international law first appeared on the agenda of National People's Congress (‘NPC’) in 2001. In that year, the Standing Committee of the Ninth NPC formulated an ambitious plan to draft the Civil Code of the PRC,Footnote 11 which would include not only substantive private law, such as contract law, property law, tort law, but also conflicts law.Footnote 12 After one year of preparation, the Draft Civil Code was presented to the Standing Committee of the Ninth NPC for its first reading on 23 December 2002.Footnote 13 The Draft Civil Code consisted of nine books, and the ninth book,Footnote 14 entitled The Law on the Application of Law over Foreign-related Civil Relationship, was specifically concerned with choice-of-law problems. Chinese scholars were so optimistic about the legislative project that they predicted that the first Civil Code of the PRC would soon be passed.
However, to their disappointment, the plan of drafting a comprehensive Civil Code was abandoned when the Tenth NPC and its standing Committee was elected in March 2003.Footnote 15 Given the extensive coverage of the Civil Code, the newly constituted legislature maintained that it would be unrealistic, and risky, to enact the Civil Code in one stroke; therefore, it decided that the Civil Code would not be adopted as a whole but book by book. Within such a setting, the Property Act and the Tort Liability Act were adopted on 16 March 2007 and 26 December 2009 respectively.Footnote 16 No sooner had those two acts been enacted than the legislative process of the Conflicts Act was resumed. On 27 December 2009, the day after the adoption of the Tort Liability Act, WANG, Deputy Director of the Legislative Affairs Committee of Eleventh NPC's Standing Committee stated: ‘the NPC's Standing Committee now places top priority on the drafting of “the Act on Application of Laws over Foreign-related Civil Relationships” after the Tort Liability Act has been approved. The Legislative Affairs Committee will see to it that the bill of the Conflicts Act would be submitted to the NPC's Standing Committee for deliberation by the end of 2010 to safeguard the establishment of the socialist legal system with Chinese characteristics on schedule’.Footnote 17 After this, the drafting of the Conflicts Act was accelerated. Entrusted by the Legislative Affairs Committee of NPC's Standing Committee, the Chinese Society of Private International Law, an academic organization, established a drafting group. After a year's discussion and preparation, the Society submitted a draft entitled The Act on Application of Laws over Foreign-related Civil Relationships (‘Suggested Draft’) at the end of March 2010, which was expected to serve as a blueprint for the NPC's Standing Committee to enact the conflicts code.Footnote 18 Based on the Suggested Draft, the task force, created a draft bill of the Conflicts Act and submitted it to the Standing Committee of the Eleventh NPC for deliberation on 23 August 2010. The full text of the draft bill was published on the website of the NPC for public comment from 28 August to 20 September 2010.Footnote 19 After receiving the comments, the Legislative Affairs Committee proceeded to prepare a final draft of the Conflicts Act in October 2010. The bill was submitted to Seventeenth Session of the Standing Committee of the Eleventh NPC on 16 October 2010. Among the hundred and fifty-eight members of the Standing Committee that attended the Session, all voted in favour of adopting the Conflicts Act.Footnote 20 Passed by the Chinese Legislature, the Conflicts Act was promulgated by President Jintao HU as ‘Order of the President of the PRC No. 36 of 2010’, and came into force on 1 April 2011.Footnote 21
3. Features in Style
Entitled ‘Act on the Application of Laws over Foreign-related Civil Relationships’, the new Conflicts Act contains eight chapters and fifty-two articles, with headings that are indicative of their respective scope: Chapter One, ‘General Provisions’ (articles 1–10); Chapter Two, ‘Civil Subjects’ (articles 11–20); Chapter Three, ‘Marriage and Family’ (articles 21–30); Chapter Four, ‘Succession’ (articles 31–35); Chapter Five, ‘Property’ (articles 36–40); Chapter Six, ‘Obligations’; (articles 41–47); Chapter Seven, ‘Intellectual Property’ (articles 48–50); and Chapter Eight, ‘Supplementary Provisions’ (articles 51–52).
From the title and structure of the Conflicts Act, the following two points can be observed as the main style features. First, it is not a comprehensive code; it contains choice-of-law issues on civil relationships, and excludes not only jurisdictional rules, rules of recognition and enforcement of foreign judgments and awards, but also choice-of-law issues on commercial relationships.Footnote 22 It should be emphasised that such a model does not accord with the original expectation of most Chinese conflicts scholars, who had been espousing enacting a comprehensive code of private international law following the legislative model of Switzerland's Federal Code on Private International Law of 1987.Footnote 23 Particularly as, encouraged by the conflicts codification movement abroad during the second half of the twentieth century, the Chinese Society of Private International Law had drawn up the Model Law of Private International Law of the People's Republic of China in 2000 which was intended to serve as a kind of restatement of law and a blueprint for the Chinese legislature.Footnote 24 The Model Law, which embodied the latest and highest level of research in China, in the field of private international law, contained one hundred and sixty-six articles, divided into five chapters, including international civil jurisdiction, and the application of law and judicial assistance.Footnote 25
Despite the scholars’ calls, Chinese legislators have not showed enthusiasm for enacting a comprehensive conflicts code; on the contrary, they maintained that the first Conflicts Act should contain choice-of-law rules over civil relationships only. They held such a position, partly because of their conservative ideology,Footnote 26 and partly because of their concern that enacting a comprehensive code would require tremendous amendments to many existing laws, such as the Civil Procedure Act, the Arbitration Act, the Contract Act, the Succession Act, the Maritime Act, which would be long and arduous work.Footnote 27
Second, the Conflicts Act is not a simple re-compilation of the existing conflict rules that are scattered throughout different laws, regulations and judicial interpretations. Instead it establishes a relatively systematic regime in which general provisions are introduced and many new specific conflict rules covering various areas are enacted. This represents a significant improvement in building a modern system of private international law.
C. Comments on the Important Issues of the Conflicts Act
1. General Provisions
One conspicuous characteristic of modern codes of private international law is that there is usually a general part, distinguished from other specific provisions, which is similar to a modern code of civil law or criminal law.Footnote 28 Such a structural change manifests a significant legislative improvement of private international law.
Chinese legislation on private international law, prior to the Conflicts Act, had only two articles which could be classified as general provisions, and these were contained in the GPCL.Footnote 29 The lack of a complete framework of general provisions caused much confusion to judges dealing with foreign-related cases in judicial practice.Footnote 30 In this respect, it is very fortunate that the Conflicts Act has devoted an entire chapter (Chapter One) to regulating the general provisions, which are now considered.
a) Purpose of the Law
In article 1 the purpose of the Conflicts Act is stated: ‘This Act is formulated to ascertain the application of law in foreign-related civil relationships with a view to solving foreign-related civil disputes properly and safeguarding the legitimate rights and interests of the parties.’ From this article, it follows that the Conflicts Act has been enacted to solve the choice-of-law issues in foreign-related civil disputes. As mentioned, the past three decades have witnessed rapid growth in both the number and the complexity of international civil disputes that occur in China; therefore, it is not surprising that a Conflicts Act is needed to deal with the legal issues posed by such disputes in order to safeguard international transactions and the interests of the parties.Footnote 31
It can also be deduced from article 1 that jurisdiction issues and issues of recognition and enforcement of foreign judgments and awards would not be covered by the Conflicts Act, as those issues are beyond the objectives of the act. More importantly, a careful reading of the article reveals that the first Conflicts Act of the PRC adopts a cosmopolitan attitude, disregarding the forum-centred parochial belief, insofar as it aims to solve disputes appropriately and to protect the parties equally, irrespective of their nationalities and domiciles.
b) The Principle of Closest Connection and Party Autonomy
The principle of closest connection, or the most significant relationship, has already played an important role in the conflict of laws in China. It has been applied not only to the field of contracts but also to several particular issues in other areas.Footnote 32 Given the merits of the principle of closest connection, the Conflicts Act purports to strengthen and expand its application, insofar as article 2 (second paragraph) provides that a foreign-related civil relationship is governed by the law most connected to it, if neither this Act nor any other law designates the applicable law.Footnote 33
This principle is also reflected in other articles. Under article 6, in the case the applicable law is a law of a foreign country, in which different laws are enforced in different jurisdictions, the law having the closest connection with the international civil relation in question shall be applied.Footnote 34 Also under article 19,Footnote 35 which provides that where a natural person has two or more nationalities, the national law shall be the law of his habitual residence; if a natural person has no habitual residence in the countries of his nationalities, the national law shall be the law of the country with which he has the closest connection. Another example is article 41,Footnote 36 under which a contract is governed by the law most connected to it in the absence of parties’ choice.
Similarly, while the existing Chinese legislation has permitted party autonomy in the context of foreign-related contracts,Footnote 37 the Conflicts Act expands this doctrine by introducing it into the General Provisions, as article 3 provides that the parties are entitled to choose in an explicit manner, pursuant to law, the law applicable to a foreign-related civil relationship in case neither this Act nor any other law has any provisions on such relationship.Footnote 38
It is worth noting that party autonomy is subject to two restrictions under this article: first, the parties’ choice of applicable law should be made in an explicit manner only; and second, their choice should be conducted pursuant to law. It is believed that tacit choice is not permitted mainly because of the concern that the boundary line that separates reasonable interpretation from arbitrary fabrication is not clear. The second restriction, however, manifests a dilemma that the Chinese legislators are facing: on the one hand, given the merits and importance of party autonomy in modern society, they recognise it as a principle of Chinese conflicts law; on the other hand, they feel anxious about the possibility of parties’ misuse of the principle.
It is submitted that the first restriction is reasonable, given the judicial environment in China is far from perfect, while the second is unnecessary, insofar as relevant articles contained in the Conflicts ActFootnote 39 and other legal documents,Footnote 40 can frustrate parties’ intentions, if they attempt to abuse party autonomy. More importantly, as the relevant articles contained in the subsequent chapters of the Conflicts Act, as well as in other laws, have specified the circumstances under which party autonomy is permitted, this article seems paradoxical: on the one hand, it purports to expand party autonomy by permitting the parties to choose the applicable law when neither this Act nor any other law has any provisions; on the other hand, it requires parties to do so pursuant to law. Obviously, requiring the parties to choose applicable law pursuant to law will make the efforts of strengthening party autonomy meaningless.
However it should be emphasised that party autonamy has been increased as a result of the Conflicts Act. Apart from incorporating it in Chapter One and confirming its application to contracts (article 41), the Conflicts Act extends party autonomy to govern matrimonial property regimes (article 24), divorce by agreement (article 26), torts (article 44), unjust enrichment and negotiorum gestio (article 47), and real rights in the cases of real rights in movables (articles 37, 38). The specific reflection of party autonomy in those areas will be discussed in more detail in Part C.
Generally speaking, by enacting two articles reflecting the principle of closest connection and party autonomy respectively in Chapter One, ‘General Provisions’, the Conflicts Act aims to promote the flexibility of the application of law and to overcome the unjust result that the rigid conflict rules may potentially produce, which, undoubtedly, represents significant progress.
c) Mandatory Rules
Article 4 of the Conflicts Act introduces the notion of ‘Mandatory Rules’ (‘lois d’ application immédiate’), which in view of its legislative purpose may not be derogated from, even if a law of another country is designated as the applicable law. This article prescribes: ‘The laws of the People's Republic of China which are mandatorily applicable to foreign-related civil relationships shall be applied directly.’
Notwithstanding the lack of any express provision reflecting the direct application of mandatory rules in existing Chinese law, this doctrine has been advocated by Chinese conflicts scholars for many years.Footnote 41 It is worth noting that under the wording of article 7 of the Conflicts Act, mandatory rules seem to refer to the mandatory rules of the forum; that is to say, mandatory rules of a foreign country are not directly applicable. With regard to the mandatory rules contained in international conventions, it is believed that those rules should be applied directly, as long as the PRC is a contracting party State.Footnote 42
d) Public Order Reservation
China has consistently adopted an affirmative attitude towards the application of the doctrine of ordre public. Since the founding of the PRC, the doctrine has been reflected in the relevant legislation and is invoked occasionally in international civil litigation, otherwise known in China as ‘civil cases involving foreign elements’. Before the enactment of the Conflicts Act, the most important article in existing Chinese legislation which reflected the doctrine was article 150 of the GPCL : ‘The application of foreign laws or international practice in accordance with the provisions of this Chapter shall in no way violate the socio-public interests of the People's Republic of China.’Footnote 43
This article, along with other relevant various laws, aroused the criticism of Chinese scholars on the following grounds.Footnote 44 First, the expression of the doctrine of ordre public in Chinese legislation is neither precise nor uniform; the wording related to the doctrine sometimes appears in terms of ‘sovereignty, security and social and public interests’ and sometimes in terms of ‘socio-public interests’. Second, there are no provisions to govern what law should be applied as a substitute for the foreign law that would normally be applicable in the case. Third, Chinese scholars believe that there is no need for recourse to the ordre public reservation as a rationale for excluding the relevant international practice, as article 142 of the GPCL states clearly that the application of international practice is in any case a matter of discretion, rather than mandatory.Footnote 45 Fourth, Chinese scholars believe that a court should not necessarily apply the lex fori once a foreign law has been excluded on the ground of ordre public because the application of the domestic rule, without exception, under those circumstances would encourage the misuse of the ordre public.Footnote 46 Last, but not least, as an exception to the application of foreign law, the ordre public reservation should be interpreted restrictively and invoked prudently. In light of this, Chinese scholars suggested that more restrictive words, such as ‘manifestly’, should be added into the ordre public reservation rule. Partly accepting those suggestions, article 15 of the Conflicts Act contains an article which provides: ‘The application of a foreign law shall be excluded if such application is offensive to the socio-public interests of the PRC, and the law of the PRC shall apply.’
Attentive reading of the above article reveals that the legislators chose to adopt but two suggestions out of the five, which, inevitably, makes this article a provision with defects.
e) Rejection of Renvoi
Though existing Chinese legislation before 2010 was silent on renvoi, a judicial interpretation issued by the Supreme People's Court choose to exclude it completely, as paragraph 2 of article 178 of ‘Opinions on Application of the General Principle of Civil Law’ provides: ‘Upon handling the cases involving foreign elements, the People's Court shall determine the applicable substantive law according to the regulations of Chapter VIII of the GPCL’ (emphasis added).Footnote 47
The complete exclusion of renvoi may simplify the application of law; nonetheless, judicial practice during the past few centuries since renvoi surfaced has shown that neither absolute acceptance nor its absolute rejection is preferable. The truth would appear to be that in some situations renvoi is convenient and promotes justice, and in others it is inconvenient and ought to be rejected.Footnote 48 Hence most modern codes of private international law permit renvoi in certain fields especially the matters concerning the legal status of a natural person.Footnote 49
For these reasons, Chinese conflicts scholars advocated that the Conflicts Act should permit renvoi in certain fields, such as matters concerning personal or family status which, on the one hand, may expand the application of the lex fori, but on the other may promote international decisional harmony.Footnote 50 Nevertheless, legislators did not accept suggestions to partially permit renvoi , because they worried that permitting it, even partially, may further complicate the judicial task of Chinese judges. Therefore, article 9 rejects renvoi entirely, as it stipulates: ‘The foreign law applicable to a foreign-related civil relationship does not include the conflicts law of that foreign country.’
However it is submitted that the complete exclusion of renvoi may be comprehensible to some degree at the present stage but the justification is likely to weaken given the anticipated improvement in the quality of Chinese judges. Moreover, as renvoi would increase the possibility of the application of forum law, permitting it could alleviate the burden of Chinese judges in general.
f) Characterisation
Characterisation, or classification, is an important issue in private international law, since in a conflict-of-law situation, a court must determine at the outset whether the problem presented to it relates to tort, contract, property, or some other field, or to a matter of substance or procedure, in order to refer to the appropriate law.Footnote 51 Though the problem of characterisation has attracted the interest of Chinese private international lawyers for many years, existing Chinese law and core law prior to the Conflicts Act did not cover characterisation, except for the purposes of the statute of limitation.Footnote 52 In practice, when a Chinese court was seized with a foreign related dispute, it would usually employ Chinese law, namely, the lex fori, to resolve the characterisation problem. The Conflicts Act confirms the practice of Chinese courts, providing in article 8 as follows: ‘The classification of foreign-related relationships shall be governed by the law of forum.’
Characterisation is effected on the basis of the law of the forum. This is the accepted position under the common law and in most civilian systems.Footnote 53 However, it is also widely accepted that the lex fori in the context of private international law should be interpreted in a liberal manner, and it should not be insisted that all its technical requirements are complied with. Moreover, the court should not be deterred by the fact that the particular foreign claim was not recognised under the lex fori. Under that circumstance, it shall characterise it in accordance with what it considered to be the closest equivalent under the lex fori. This method of characterisation could be referred to as the ‘liberal’ or ‘enlightened’ lex fori.Footnote 54 In this light, it is suggested that the Supreme People's Court of China should interpret article 8 as soon as possible; otherwise, if a foreign legal institution or a rule of foreign law is unknown to Chinese law, the Chinese court seized will be in an awkward position.Footnote 55
h) Ascertainment of Foreign Law
Unlike common law jurisdictions, Chinese courts do not depend on pleadings and proof by the parties concerned to ascertain foreign law. Chinese civil procedure adopts an inquisitorial system. Therefore, it is an established principle that where a People's Court applies foreign law as the applicable law, it has to identify the law ex officio.Footnote 56 However, although it is the court's duty to ascertain the content of a foreign law, in China, as well as in many other civil law States, the judge may require the parties to provide assistance. The specific means to ascertain foreign law has already been provided in several documents issued by the Supreme People's Court.Footnote 57 Nonetheless, the existing provisions contained in different documents remain fragmented, with some articles outdated. Hence, the Conflicts Act provides a more systematic solution, as stipulated in article 10: ‘The foreign law applicable to a foreign-related relationship shall be ascertained by the relevant People's Court, arbitration institution, or administrative agency; Where the parties choose to apply a foreign law, the parties concerned shall ascertain such foreign law. In case the foreign law cannot be ascertained or there is no pertinent rule of law after ascertainment, the law of the PRC shall apply.’
It should be noted that the article is not a mere compilation of existing rules, instead, it blends the traditional approach with some innovative elements. First, the article follows the civilian tradition, as it provides expressly that, as a general principle, courts or other quasi-judicial institutions, shall ascertain the content of foreign law ex officio. Second, the article distinguishes a specific situation (ie the parties choice of a foreign law as the governing law) where the parties concerned shall bear the burden of proof to ascertain the content of the chosen law. The rationale behind this provision is that since the parties have reached agreement on the applicable law, it is reasonable to presume that they are familiar with the law in question and possess sufficient materials to ascertain its content; therefore, it is logical to ask the parties to bear the burden of proof. Third, the article makes clear that failure to ascertain foreign law or the lack of pertinent rules of law after ascertainment would lead to the application of Chinese law.
There are two points, inter alia, which bear mentioning. First, unlike earlier legal documents, this article does not spell out the specific methods to ascertain foreign law. This is because with the rapid development of science and technology, it is impossible to list the specific methods exhaustively; therefore, the lack of this list will increase the flexibility of the article, which will, in turn, facilitate the task of ascertaining foreign law. Second, the article ignores the suggestions put forward by conflicts scholars who argued that Chinese law should not be applied automatically when foreign law cannot be ascertained or there is no pertinent rule of law after ascertainment. They held such a position because they worried that the application of the lex fori without exceptions would encourage the ‘homeward trend’ which has prevailed in Chinese judicial practice over years.Footnote 58 In this light, it is submitted that this article may be manipulated by judges to expand the application of the lex fori.
2. Civil Parties
A logically structured system of private international law should first establish a single personal law for individuals and legal persons, which determines their personal status, legal capacity and other personal rights.Footnote 59 The Conflicts Act (apparently) follows such an approach, and has devoted an entire chapter (Chapter Two), to regulating the status, capacities and other personal rights of civil parties.
It may be noted that habitual residence, rather than nationality, is established by the Conflicts Act as the principal connecting factor to determine personal status, in family law and succession law. The most important reason for China to deviate from the orthodox position of civil lawFootnote 60 is believed to be that lawsuits are usually brought where parties live, the nexus of habitual residence favours the application of the lex fori, whereas reliance on the lex patriae rends to increase choice of law problems; or to be more specific, as in most foreign-related civil cases that Chinese People's Courts hear, the parties have habitual residences in China; switching to establishing habitual residence as the principal connecting factor should increase the application of the lex fori, which is believed to be in conformity with the interests of the forum.
Notwithstanding the vital importance of habitual residence, neither the Conflicts Act nor other Chinese legislation provides a definition of this term which will inevitably pose difficulties for judges when they apply the articles containing this connecting factor. Hence, it is suggested that the Supreme People's Court should define habitual residence to close the statutory loophole as soon as possible.
a) Lex Personalis of Natural Person
As stated above, one of the most striking features of the Conflicts Act is that habitual residence is established as the principal connecting factor to determine the lex personalis. Consequently, under the relevant articles of Chapter Two, the law of the place of habitual residence governs civil rights capacity (ie capacity to be entitled to rights), civil conduct capacity (ie capacity to act), declaration of death or absence, and the right of personality of a natural person.Footnote 61 When it is not possible to ascertain the habitual residence of a natural person, his/her present residence is deemed to be the habitual residence.Footnote 62
Nonetheless, there is one exception to the application of habitual residence: when affecting a jural act (excluding the jural acts relating to family or succession), a natural person's civil conduct capacity shall be governed by the lex loci actus, provided that he/she has such capacity under that law, even if he/she lacks it under the law of his/her habitual residence.Footnote 63 The rationale behind this exception is evident: protecting the security of transactions. With regard to jural acts relating to family and succession, as they have direct impact on the personal status of a natural person, the application of the lex loci actus may provide opportunities for the parties to evade that law; therefore, such acts are excluded from the exception.Footnote 64
When the law of nationality shall be applied under this Act, and the natural person in question has more than one nationality simultaneously, the Conflicts Act provides solutions depending on the specific situations as follows. First, where the person has a habitual residence in one of the countries of which he is a citizen, the law of that country shall apply. Second, where a person has no habitual residence in all the countries of which he is a citizen, the nationality which is most closely connected to him shall be determinative for purpose of the applicable law. Moreover, where a natural person has no nationality or his nationality cannot be ascertained, the law of his habitual residence shall apply.Footnote 65
b) Lex Personalis of Legal Person
For a legal person, the Conflicts Act adopts the ‘registration/incorporation theory’ by providing that civil rights capacity, civil conduct capacity, institutional structure, liability of the shareholders of a legal person, as well as its branches, shall be governed by the law of the place of registration.Footnote 66 Given that it is often the case that the principal place of business of a legal person is different from its place of registration, article 14(2) provides an alternative choice-of-law rule and stipulates that the law of its principal place of business may apply in such case. One problem, however, arises out of this alternative reference rule: if the principal place of business of a legal person differs from its place of registration, judges would be left with considerable discretion in deciding which law applies, as there is no guiding principle for the selection between the law of the place of registration and that of the principal place of business.
c) Agency and Trust
Under article 16 (1) of the Conflicts Act, an agency shall be governed by the lex loci actus, and the civil relationship between the principal and the agent shall be governed by the law of the place where the agency relationship is established. The second paragraph of this article goes on to stipulate that the parties may choose the law applicable to voluntary agency.
A noticeable feature of this article is that it is different from provisions of most other countries under which the civil relationship between the principal and the agent (ie the internal relation) is normally governed by the lex cauase of the contract between them.Footnote 67
The place where an agency relationship is established is chosen as the connecting factor mainly because of the legislators' idea of localizing the legal relationship. However, as a Korean scholar noted, ‘such idea may be a source of disputes, for example, if the principal is located in China and the agent is located in Korea and the civil relationship between them has been established by a contract which has been entered into by exchange of emails, is the civil relationship established in China, Korea or both China and Korea?’Footnote 68
The trust was an unknown legal institution in China until the enactment of the Trust Act of the PRC in 2001.Footnote 69 Prior to its enactment, a Chinese People's Court was once seized of a foreign-related case concerning a trust, but due to the lack of trust law in China at that time, there were great divergences between the courts which heard the case.Footnote 70 Though the Trust Act was enacted to satisfy the economic development in China, it contains no choice-of-law rule; therefore, it is still necessary for China's first Conflicts Act to provide conflict rules for trusts.Footnote 71
Under article 17 of the Conflicts Act, the parties may choose the law applicable to a trust, and in the absence of such choice, the law of the place where the trust assets are located, or the place where the trust relationship is established, shall apply.
Party autonomy is the primary principle in determining the law applicable to trusts, which has been widely accepted by national laws and international conventions;Footnote 72 the Conflicts Act, apparently, accepts this principle. In the absence of choice, the principle of the most significant relationship has been well established as a fundamental test to determine the applicable law.Footnote 73 However, the Conflicts Act fails to endorse this widely accepted approach and instead provides two hard and fast connecting factors. Given the complexity of the disputes arising out of trusts, it is submitted that such a rigid arrangement may be problematic. It merits mentioning that in the Suggested Draft prepared by the Chinese Society of Private International Law, the principle of the most significant relationship is employed to determine the applicable law to a trust in the absence of parties’ choice;Footnote 74 regrettably, such a suggestion was rejected by the legislators for reasons unknown.
3. Family Relationships and Succession
Prior to the Conflicts Act, Chinese legislation on private international law (including formal legislation and judicial interpretations) was especially underdeveloped in the field of family law, which was criticised by Chinese scholars for three reasons. First, among various family issues, the existing Chinese law provided but a few choice-of-law rules for very limited issues such as marriage, divorce, maintenance, adoption and custody, leaving many important family issues untouched. Second, the existing provisions were not consistent. Third, some of the existing rules were theoretically indefensible and practically troublesome.Footnote 75 Therefore, Chinese scholars had been expecting China's first Conflicts Act to establish a systematic and coherent private international law regime of family law.
The Conflicts Act provides an entire chapter (Chapter Three) to family relationships, covering a wide range of issues in this area, including marriage, personal and property relation between husband and wife, divorce, personal and property relation between children and parents, adoption, maintenance and custody. The chapter is an appropriate response to the fact that more cases are adjudicated by the Chinese People's Courts, and existing conflict rules were unable to provide an efficient and satisfactory resolution.Footnote 76
a) Marriage and Divorce
Unlike article 147 of the GPCL which does not differentiate formalities from the essential validity of marriage,Footnote 77 the Conflicts Act distinguishes the former from the latter. Issues of essential validity of marriage are dealt with in article 21: ‘The law of the place where the parties have their common habitual residence shall apply to the essential validity of marriage; in the absence of a common habitual residence, the common national law of the parties shall apply; in the absence of both, the lex loci celebrationis shall apply provided that the marriage is celebrated in the place where one party has his/her habitual residence or in the country of which one party has his/her nationality.’
It follows that the law of the parties’ common habitual residence or common nationality shall prevail over the lex loci celebrationis only if the spouses have a common habitual residence or common nationality. The legislative policy of this article is clear: preventing the prospective spouses to contract an unassailable marriage in a haven jurisdiction.Footnote 78 Such consideration is defensible; nevertheless, close examination of the article reveals a problem: if the parties have neither a common habitual residence nor common nationality, and their marriage is celebrated in neither the place where one party has a habitual residence nor the country of which one party has the nationality, which law shall govern the essential validity of the marriage? In such a situation, the only solution seems to refer to article 2(2) which reflects the principle of closest connection; nonetheless, this would lead to too much uncertainty in practice.
Article 22 provides that a marriage will be formally valid as long as its form complies with either the lex loci celebrationis, the national law, or the law of the habitual residence of either party. The alternative reference rule found in this article reflects the international trend of favor matrimonii.
As regards divorce, the Conflicts Act distinguishes uncontested divorce from divorce by litigation.Footnote 79 In the case of uncontested divorce,Footnote 80 the parties may choose a governing law by agreement between the law of habitual residence and the national law of either party; in absence of such choice, the law of the parties’ common habitual residence shall apply; in absence of a common habitual residence, the common national law of the parties shall apply; in absence of both, the law of the place where the parties go through the divorce procedures shall apply. In case of divorce by litigation,Footnote 81 the lex fori shall apply.
b) Personal and Property Relation between Husband and Wife
The matrimonial conflict-of-law rules provided by the Conflicts Act fills the legal gap left by existing Chinese private international law, whose significance cannot be overestimated. Under article 23 of the Conflicts Act, the personal relations between husband and wife shall be governed by the law of their common habitual residence, and in its absence, by the law of their common nationality.Footnote 82 As to the property relations between husband and wife, the Conflicts Act provides in article 24 that it shall be governed by the law selected by the parties by agreement among the law of habitual residence of one party, the national law of one party, and the law of the place where main assets are located. In the absence of such choice, the law of the parties’ common habitual residence shall apply; in the absence of a common habitual residence, the common national law of the parties shall apply.Footnote 83
The above two articles regulate personal and property relations between husband and wife respectively. Unfortunately, the articles suffer from the same problem in that they do not determine which law shall govern property relations, when the parties have neither a common habitual residence nor a common nationality. In addition, if the parties do not reach an agreement on the applicable law in the above situation, which law shall govern their property relations? Unfortunately, these two articles fail to provide solutions if such situations occur.Footnote 84 Similar to the problem existing in article 21, the only remedy is to resort to article 2(2); however, again, this will lead to uncertainty in practice.
c) Parent-Child Relationships, Adoption, Maintenance and Guardianship
The Conflicts Act provides a set of rules for both personal and property relationships between parents and children, without distinguishing legitimate children from illegitimate ones. This is keeping with the principles of equality and non-discrimination cherished by modern legal doctrines. Article 25 provides a flexible solution to determine the law governing personal and property relationships between parents and children. According to this article, such relationships shall be governed by the law of the place where the parents and children have a common habitual residence; in the absence of such common habitual residence the law which is more favourable to protect the interests of the weaker party, between the national law and the law of the habitual residence of either party, shall apply.Footnote 85
As regards adoption, existing Chinese law, including the Adoption ActFootnote 86 and the Measures of the Registration for Foreigners to Adopt Children in the PRC,Footnote 87 provide conflict rules only in situations where foreigners adopt children in China under which both adopters’ lex patriae and Chinese law apply. This is because the overwhelming majority of international adoptions in China are cases in which Chinese children are adopted by foreign couples. Most of those adopters are nationals of western countries. Therefore, the purpose of the double application of the adopters’ lex patriae and Chinese law is to guarantee the benefit and interests of the adopted children.
However, with the rapid development of the Chinese economy and society, the number of cases in which Chinese couples adopt foreign children is on the increase; therefore the Conflicts Act provides conflict rules that are of general applicability. Article 28 of the Conflicts Act states that the formalities of an adoption shall be governed by both the law of the habitual residence of the adopter and that of the adoptee, the effect of an adoption shall be governed by the law of the habitual residence of the adopter, and termination of an adoption shall be governed by the law of the habitual residence of the adopter at the time of adoption or the lex fori.
As regards maintenance, the existing Chinese private international law prior to the Conflicts Act was quite distinctive, insofar as the doctrine of closest connection had been fully reflected.Footnote 88 The incorporation of this doctrine, increased flexibility, yet this in turn sacrificed stability, and predictability. The Conflicts Act, therefore, abandons this approach, and switches to the principle in favour of the maintenance creditor. Article 29 provides that maintenance is governed by the national law or the law of habitual residence of either party, or by the law of the place where the main property supporting the maintenance creditor is situated, depending on which is more favourable to the maintenance creditor.
Under article 30 of the Act, international guardianship shall be governed by the law which is most favourable to the ward between the national law and the law of habitual residence of either party.Footnote 89 Needless to say, both this article and article 29 reflect the principle of protecting the interests of the weaker party.
d) Succession
According to the Chinese doctrine of private international law, choice-of-law rules relating to succession differ according to whether the deceased left a will or died intestate. In addition, it is necessary to examine the rules relating to the succession of vacant estate.Footnote 90 However, in the existing Chinese legislation before 2010, there were choice-of-law rules relating to intestate and vacant succession only, and among those rules, different rules contained in different laws were not consistent;Footnote 91 therefore, establishing a comprehensive, coherent and consistent framework of succession was an important task for China's first Conflicts Act to accomplish. Entitled ‘Succession’, Chapter Four of the Act covers not only the conflict rules in intestate and testate succession, but also the succession of vacant estate and the administration of estate.
With regard to intestate succession, the Conflicts Act follows the scission principle which has been traditionally adopted by Chinese law, thus, the movables shall be governed by the law of the habitual residence of the deceased at the time of his death, while the immovables shall be governed by the law of the place where the immovables are situated.Footnote 92
For testate succession, the Conflicts Act distinguishes formalities from essential validity.Footnote 93 The Conflicts Act apparently adopts the principle of favour testamenti in regards to the form of a will or to be more specific, the form of a will is valid only if it conforms with of the following laws: the law of the testator's habitual residence either at the time of his death or at the time the will was made, the testator's national law either at the time of his death or at the time the will was made, or the law of the place where the testator made the will.Footnote 94 Essential validity of a will shall be governed by the law of the testator's habitual residence either at the time of his death or at the time the will was made, or the testator's national law either at the time of his death or at the time the will was made. The law where the estate is situated at the time of decedent's death shall govern the administration of the estate.Footnote 95
A vacant succession in this context denotes an inheritance that is claimed by no person, or where all the heirs are unknown, or where all the known heirs have renounced it. The Conflicts Act provides that the disposition of the vacant estate shall be governed by the law of the place where the estate is situated.Footnote 96
4. Property or Real Rights
Until 2010, the existing Chinese legislation contained one article (article 144 GPCL) dealing with the law governing the ‘ownership’ of ‘immovables’.Footnote 97 In comparison, the Conflicts Act establishes a relatively elaborate framework to regulate the choice-of-law issues of various categories of property, including movables, immovables, res in transitu and securities.Footnote 98 As the Conflicts Act follows the universal principle that the lex situs governs the real rights in immovables,Footnote 99 the analysis of this section will focus on movables.
a) Movables
One of the most striking features of the Conflicts Act is that party autonomy has been introduced into the field of movables, insomuch as article 37 provides that the parties may choose the law applicable to the real rights in movable property; in the absence of such choice, the lex situs at the time that the legal fact occurred applies.Footnote 100 Although China is not the first country to incorporate party autonomy in the field of movables, it is submitted that such a liberal approach may go too far.
It should be emphasised that article 37 imposes no limit on the scope of party autonomy; that is to say, the parties may choose a law that has no material relation with the movables, they may choose a law applicable not only to acquisition and loss of real rights in movables, but also to the content and the exercise of such real rights; furthermore, they may even choose a law which is injurious to the interest of a third party. Needless to say, in those cases, the reasonable basis or the validity of the choice is open to challenge.
In contrast, the Swiss Private International Law Act takes a more restrictive approach. Like the Chinese Conflicts Act, the Swiss Private International Law Act introduces party autonomy to the real rights in movable property; however, it spells out the limits of the parties’ choice. First, the parties can choose ‘the law of the State of shipment, or the State of destination or the law applicable to the underlying legal transaction’;Footnote 101 in other words the parties cannot choose a law that has no substantial relationship with the property of the underlying legal transaction. Second, Swiss law limits party autonomy to the issues of acquisition and loss of real rights in movables which specifies that the extent and the exercise of interests in movable property shall be governed by the lex situs.Footnote 102 Third, Swiss law states unambiguously that the choice of law shall not be applied against a third party.Footnote 103
The Swiss approach is favoured by this article, inasmuch as those necessary limits constitute the reasonable basis of the choice and can prevent party autonomy from being misused. In this light, it is submitted that article 37 needs amendment and improvement.
b) Res in Transitu and Commercial Securities
Given some kinds of objects are by their nature, and purpose, not appropriate to be governed by the lex situs, the Conflicts Act provides certain exceptional provisions to regulate them.
First, when goods in transit are at issue, the parties are entitled to choose the law applicable to the change of real rights; in the absence of choice, the law of the country of destination shall apply.Footnote 104 Again, party autonomy is reflected here, and for similar reasons, it is suggested that certain limits on the parties’ choice should be imposed.
Second, the Conflicts Act provides conflict rules for commercial securities, under which such securities shall be governed by the law of the place where the rights are to be exercised or the law which is most closely connected with the securities.Footnote 105 There are two points, inter alia, which are worthy of discussion. First, from the wording of this article, it is hard to identify whether ‘commercial securities’ refers to the rights embodied by such securities, or the securities as such in the form of pieces of paper.Footnote 106 Second, as securities held with an intermediary is a particular category of securities, the Hague Convention provides different conflict rules;Footnote 107 therefore, one may submit that the lack of conflict rules for this type of securities implies the high possibility of China's accession to the Convention in future.
5. Contracts
Compared with other areas, existing Chinese private international law, before the Conflicts Act, was more developed in the field of contracts. This is displayed not only in the acceptance of modern doctrines, such as party autonomy, the principle of closest connection and characteristic performance, but also in the quantity of the relevant laws and judicial interpretations.Footnote 108 Nevertheless, the legislation was far from perfect. For instance, it contained no conflict rules for certain special categories of contracts which need special treatment, eg, employment contracts, consumer contracts. Furthermore, the provisions contained in different legal documents were not completely coherent and consistent and therefore, establishing a complete and systematic conflicts regime of contracts was one of the most important tasks for the Conflicts Act.
a) Party Autonomy
Almost all modern private international laws and international conventions recognise that in international situations the parties are free to determine the law applicable to the merits of the dispute, which is referred to as the principle of party autonomy. This principle has long been accepted by Chinese law, and is formally confirmed by the Conflicts Act in article 41(1), which provides that the parties to a contract may choose the law governing the contract.Footnote 109 This is a very general provision, and according to the Chinese judicial practice, the parties may choose a law objectively unconnected with the contract, a law governing the contractual issues in part or in whole, and different laws governing different issues or aspects of the contract. Moreover, the parties may choose international practice and an international convention which is not effective in the country that they belong to, as the governing law of the contract.Footnote 110
Though the Conflicts Act does not impose any restrictions on party autonomy, a number of statutory restrictions can be found in existing Chinese law and case law. Those restrictions have four aspects: (1) some special categories of contracts shall be governed by Chinese law exclusively, thus excluding party autonomy;Footnote 111 (2) the parties concerned shall choose or alter the choice of the law applicable to contractual disputes in an explicit manner;Footnote 112 (3) party autonomy should not be contrary to the ordre public of the forum;Footnote 113 (4) choice of law submitted to the court will be scrutinised to exclude evasion of law.Footnote 114
b) Principle of Closest Connection and Characteristic Performance Test
In the absence of choice, the governing law shall be determined under the ‘principle of closest connection’. Again, this is an approach that has already been adopted by Chinese law, and is affirmed by the Conflicts Act.Footnote 115 In an attempt to help make a meaningful determination of applicable law under the principle of ‘closest connection’, the Conflicts Act expressly employs the ‘characteristic performance test’, providing in article 41(2): ‘In the absence of parties’ choice, the law of the habitual residence of the party whose performance obligation can be the best to embody the essential characteristics of the contract or other law which is mostly connected with the country shall apply.’Footnote 116
As the test of ‘characteristic performance’ provides an objective criterion to evaluate the ‘relationship’ or ‘connection’, it has gained recognition both in legislation and case law in many countries;Footnote 117 in this respect, the incorporation of this test in the Conflicts Act conforms with international practice. However, the expression of the above article is somewhat different from the relevant provisions contained in the laws of other countries and international conventions. This is because article 41(2) employs an alternative reference rule, ie in the absence of choice, the contract is governed either by the law of the habitual residence of the party whose performance obligation reflects the essential characteristic of the contract, or the law which has the closest connection with the contract. By employing this, the ‘principle of closest connection’ and the ‘characteristic performance’ test are on equal footing. In comparison, the laws of most other countries provide otherwise, under which the contract shall be governed by the law of the State with which it is most closely connected in the absence of choice of law; and then they usually go on to state that it is presumed that the closest connection exists with the State in which the party who must perform the characteristic obligation is habitually resident.Footnote 118 In this manner, the characteristic performance test has been established as the principal method to ascertain which connecting factor has the most significant relationship with the dispute in question.
Hence, it is submitted that the alternative reference rule contained in article 41(2) reflects an improper understanding of the relationship between the principle of closest connection and the characteristic performance test, which may produce problems in practice: if the habitual residence of the party whose performance reflects the essential characteristic of the contract points to the law of Country A, while the law of Country B has the closest connection with the contract, which law shall apply?
c) Consumer Contracts and Employment Contracts
As discussed, prior to the Conflicts Act, Chinese private international law did not contain conflict rules for consumer contracts and employment contracts; therefore, providing special rules for such contracts is particularly noteworthy.
The special choice-of-law rules for consumer contracts are in article 42 which states: ‘Consumer contracts shall be governed by the law of the place in which the consumer is habitually resident; if the consumer chooses to apply the law of the place where the goods and services are provided, or if the business party does not engage in any soliciting activities in the place in which the consumer is habitually resident, the law of the place where goods and services are provided shall apply.’Footnote 119
Under this, consumer contracts principally shall be governed by the law of the place in which the consumer is habitually resident. The rationale behind this is the consumer will normally expect to be protected by the law of his habitual residence in the absence of a choice of law. However, the consumer may choose the law where the goods and services are provided; and in the absence of such choice, consumer contracts shall also be governed by the law where goods and services are provided, if the business party does not engage in any soliciting activities in the place in which the consumer is habitually resident. The reason underlying such arrangement is that the consumer will normally choose the law where the goods and services are provided when such law is more beneficial to him/her. Permitting consumers such a choice reflects the consideration of protecting the weaker party; in case the business party does not engage in any soliciting activities in the place in which the consumer is habitually resident, a consumer is referred to as an ‘active consumer’, rather than a ‘passive consumer’. The consumer in this context is not eligible for protection of the law of the country of his habitual residence.
It is established also that employment contracts, like consumer contracts, need special treatment for the purpose of determining the applicable law, as the weaker party, ie employees, should be equally protected.Footnote 120 This is especially true in the case of China, as the country has always been criticised for the poor protection of the interests of employees, especially migrant workers.Footnote 121 The insertion of special conflict rules for employment contracts in China's first Conflicts Act is believed to be part of the country's efforts to build a legal system which ensures that the legitimate interests of workers are better protected.
As a principle, under article 43 of the Conflicts Act, an employment contract shall be governed by the law of the place where the employee carried out his work (locus laboris); when it is difficult to ascertain the place where the employee performed his work, the employment contract shall be governed by the law of the principal place of business of the employer. A placement arrangement may be governed by the place where the employee was dispatched.
Whilst The first two paragraphs of article 43 bear considerable resemblance to those of article 121 of the Swiss Private International Law ActFootnote 122 paragraph three exhibits distinctive Chinese characteristics, and is worthy of discussion.
A placement arrangement in the context of Chinese law usually involves three parties: ‘staffing firm’, ‘employee’, and ‘accepting unit’. Under the Act on Employment Contracts of the PRC, staffing firms are employers which shall perform an employer's obligations towards its employees; the employment contract between a staffing firm and an employee shall specify the matters such as the unit with which the employee will be placed, the term of the placement, the position, etc. Staffing firms shall pay labour compensation on a monthly basis. During periods when there is no work for employees to be placed, the staffing firm shall pay such employees compensation on a monthly basis at the minimum wage rate prescribed by the People's Government of the place where the staffing firm is located. When placing employees, staffing firms, shall enter into staffing agreements with units that accept employees (‘accepting units’). Staffing firms shall inform the employees placed of the content of the placement agreements.Footnote 123
From the above provisions, it follows that a placement arrangement consists of an employment contract between the staffing firm and the employee, and a placement contract between that staffing firm and the accepting unit. As the relationship between the employer (ie the staffing firm), and the employee is somewhat different from that in an ordinary employment contract, and the place where the employee is dispatched usually has a close connection with the disputes between the employer and the employee, article 43(3) provides an alterative connecting factor; the place where the employee was dispatched. Though such provision is reasonable in this respect, the expression of this paragraph is not accurate, insofar as ‘a placement arrangement’ consists of two different contracts, ie the employment contract between the staffing firm and the employee, and the placement contract between the staffing firm and the accepting unit; and judging from the legislative intent, one can conclude that only the first contract falls under article 43(3); whereas the second is but an ordinary contract which does not need special treatment, as there is no apparent weaker party between the two contracting parties.
6. Torts
Prior to the Conflicts Act, Chinese private international law contained only a general conflict rule determining the law applicable to torts in article 146 of the GPCL, which stated that compensation for damages arising from a tort shall be governed by the lex loci delicti; however, if both parties have the same citizenship or domicile, the lex partriae or the lex domicilii may apply; and an act committed outside the PRC shall not be treated as an infringing act if under the law of the PRC it is not considered a wrongful act.Footnote 124 Although in a document, the Supreme People's Court interpreted the specific meaning of the lex loci delicti,Footnote 125 the existing provisions remain too fragmentary and rigid to solve the increasing complexity of tortious liability.
Abolishing article 146 of the GPCL, the Conflicts Act prescribes relatively elaborate conflict rules for torts which contain both rules for torts in general and specific rules for product liability,Footnote 126 torts via internetFootnote 127 and IPR torts.Footnote 128 Moreover, it introduces party autonomy to the field of torts, thus increasing the flexibility of the application of law. However, regardless of this progress, several problems still exist.
a) Torts in General
The Conflicts Act retains the orthodox doctrine; to be more specific, as a general rule, the governing law of tort is the lex loci delicti.Footnote 129 However, compared with the existing provisions, two important changes have been made.
First, the double-actionability rule reflected in the GPCL has been abolished.Footnote 130 This is because the rule operates in favour of the defendant, to the disadvantage of the plaintiff, and can lead to absurd and anomalous results; therefore, Chinese private international law scholars have questioned the merits and rationality of the incorporation of this out-dated common law rule.Footnote 131 They contend that even in the the United Kingdom, the double-actionability rule in Phillips v Eyre has been abolished in respect of all torts except defamation committed after 1 May 1996,Footnote 132 and there is neither theoretical justification nor practical necessity for Chinese law to retain this rule.Footnote 133 In response to their suggestions, the Conflicts Act does not include the outdated rule.
Second, the application of the lex loci delicti is subject to two exceptions: first, if the alleged tortfeasor and the victim have their habitual residence in the same place, the law of that place shall apply.Footnote 134 As habitual residence has been elevated to a fundamental status by the Conflicts Act, it is not surprising that the law of the habitual residence of the parties replaces the lex partriae or lex domicilii. Second, and more strikingly, if the parties choose a governing law after the event causing damage has occurred, that law shall apply.Footnote 135 This exception, obviously, is the reflection of party autonomy. The introduction of this exception represents a paradigm shift: in tort, achieving the public interests of justice had traditionally been considered to be paramount but adjusting the private interests of the parties is increasingly considered to be important. The new rule imposes no restriction on the range of legal systems to choose from. Nonetheless, it does not permit a choice before a tort takes place, as it aims to prevent the socially stronger party from imposing its unilateral choice on the weaker party.
There are two problems with article 44 of the Act. First, the Conflicts Act fails to provide any guiding principle where a tortious act and the ensuing damage occur in different places; consequently, judges are left with considerable discretion in selecting the applicable law. Chinese scholars have suggested that the law which is more favourable to the victim should apply in such circumstances;Footnote 136 unfortunately, the Conflicts Act does not include that suggestion. Second, as analysed above, neither the Act nor other Chinese legislation provides a precise definition of habitual residence, and the application of the law of common habitual residence, therefore, depends on the arbitrary interpretation of this term by the judges.
b) Particular Torts
With the increasing complexity of tortious liability, it is widely recognised that there is a need to indicate particular conflict rules for particular types of torts in addition to providing conflict rules for tort in general. The Conflicts Act, in response to such need, introduces special conflict rules for product liability, torts via the internet, and intellectual property rights (‘IPR’) torts.
In recent years, there has been a rise of cases in China concerning liability for the harm caused by defective products manufactured in foreign countries, and Chinese People's Courts have not adopted a consistent approach to solving the choice-of-law issues in those cases due to the lack of clear guidance from the law.Footnote 137 Therefore, it was of considerable significance for the Conflicts Act to provide specific conflict rules for product liability.
Article 45 of the Conflicts Act provides that the claims for damages relating to product liability shall be governed by the law of the habitual residence of the victim; if the victim chooses the law of the principal place of business of the person alleged to be liable, the law of the place where the damage occurred, or if the person alleged to be liable does not engage in any soliciting activities in the place in which the victim is habitually resident, the law of the principal place of business of the person alleged to be liable, or the law of the place where the damaged occurred shall apply.Footnote 138
Special rule is also considered necessary for defamation via the internet, as such torts do not happen in a ‘real place’. Under article 46, infringements of the right of personality, including the right of personal name, portraiture right, privacy, and reputation via the internet, shall be governed by the law of the victim's habitual residence.Footnote 139 Therefore, a single law will apply even if the victim's personal rights is harmed in more than one jurisdiction. Taking the characteristics of internet torts into consideration, this rule avoids the complexity of applying different laws to a single, and usually inseparable, tortious act. The victim's habitual residence is established as the connecting factor for the following reasons: first, as it is often in the place where the victim is habitually resident that his personal right is harmed most seriously, such provision is helpful to protect the interests of the victim; second, it may also provide the alleged tortfeasor a certain degree of predictability.
It is interesting to note that the Conflicts Act permits a limited degree of party autonomy in the IPR torts, as article 50 provides that the liability of an IPR tort case shall be governed by the law of the protecting country (lex loci protectionis); however, the parties to an IPR tort case may choose the lex fori as the governing law after the tort has happened.
In summary, the Conflicts Act provides conflict rules for some particular types of torts in addition to providing conflict rules for torts in general, which represents a historic progress; nonetheless, it neglects other important torts which call for special treatment, say, maritime torts, aircraft torts, unfair competition, and environmental and nuclear pollution. The lack of provisions on maritime torts and aircraft torts is mainly due to the fact that the Maritime Act and the Civil Aviation Act have already contained the relevant provisions,Footnote 140 while failing to include rules for unfair competition, and environmental and nuclear pollution is probably because the legislators believe that those problems have not been sufficiently analysed and no universally accepted solution has emerged yet.
7. Unjust Enrichment and Negotiorum Gestio
Both unjust enrichment and negotiorum gestio are important legal institutions under the civil law doctrines.Footnote 141 Nevertheless, prior to the new Conflicts Act, neither Chinese legislation, nor judicial interpretation, contained any conflict rule for such claims. In practice, the People's Courts had adjudicated several foreign-related cases concerning the choice-of-law issues of unjust enrichment. In those cases, the courts all applied Chinese law either on the ground the parties had based their claims on the Chinese law,Footnote 142 they had agreed that Chinese law should apply,Footnote 143 or they had not challenged the application of Chinese law and it was also the law that the dispute was most closely connected with.Footnote 144 The lack of conflict rules apparently led to the inconsistent approaches that the Chinese People's Courts adopted. With regard to negotiorum gestio, there are no reported cases concerning choice-of-law issues; nonetheless, it is still necessary to set forth conflict rules for it to meet the needs of judicial practice in future.Footnote 145
Under article 47 of the Conflicts Act, the claims arising from unjust enrichment and negotiorum gestio shall be governed by the law chosen by the parties; in the absence of such choice, the law of the common habitual residence of the parties applies; in the absence of both, the law of the place of enrichment or the law of the place where the causal fact took place shall apply.
As the claims arising from unjust enrichment and negotiorum gestio are non-contractual claims, they are subject to choice-of-law rules which broadly follow those for torts claim, which are also non-contractual. Therefore, article 47 is quite similar to article 44 as analysed above. A notable difference between the two articles is that the parties in the claims arising from unjust enrichment or negotiorum gestio may choose a law at any time; in contrast, the parties in a tort claim may choose a law only after the tort happens. The rationale behind the difference is that in an unjust enrichment or negotiorum gestio case, the apparent weaker party does not exist; whereas in a tort case, the victim is usually the weaker party who needs protection.
D. Conclusion
The above analysis shows that China's first statute on conflict rules has some striking features in comparison with the existing conflict rules scattered in different statutes and case law. Two points in particular are worth noting from this.
First, the Conflicts Act is more systematic in structure, and more comprehensive in content, which is the product of the efforts to eliminate the problems in existing Chinese law. Though the Conflicts Act confines itself to choice-of-law issues, it provides a general part distinguished from other specific provisions, contains relatively comprehensive coverage, and introduces various new articles that did not previously exist in the Chinese law. It bears mentioning that as various Chinese civil and commercial statutes already include some conflict rules, for the areas that are not covered by the new Act, such as Maritime Act,Footnote 146 Civil Aviation ActFootnote 147 and Negotiable Instrument Act,Footnote 148 the conflict rules in these statutes still apply.
Second, strongly influenced and much inspired by modern foreign and international legislation, the Conflicts Act incorporates many of the most advanced developments discussed in private international law.Footnote 149 For instance, the principle of closest connection has been stipulated as a subsidiary principle of application of laws; party autonomy has been confirmed and expanded, besides contracts and family law, its application was extended to torts and real rights in movables; moreover, the Conflicts Act reflects the notion of the protection of weaker parties; most impressively, abandoning the traditional civilian tradition, the Conflicts Act follows the Hague Conventions which establishes habitual residence, rather than nationality, as the principal connecting factor to determine lex personalis. With the incorporation of those advanced notions, the Conflicts Act has successfully modernised substantial parts of Chinese private international law to a considerable degree.
However, as China's first statute on conflict rules, the Conflicts Act suffers from some obvious defects. First, the Conflicts Act is not a comprehensive code of private international law. Second, as analysed, some articles are defective, and need further work. Third, certain provisions are somewhat incomplete; thus, legal gaps remain.
In this light, it is argued that the improvement of the Conflicts Act may take two steps: First, the Supreme’ People's Court should interpret the Conflicts Act so that minor defects of the Conflicts Act can be overcome.Footnote 150 Second, when the judicial interpretation no longer suffices, the National People's Congress, as China's supreme legislature, should amend the Conflicts Act, and when the time is right, a comprehensive code of private international law should be enacted.
