I INTRODUCTION TO CLASS ACTIONS FRAMEWORK

i Overview

A class action system has not been established in China as of present. However, the Civil Procedure Law of the PRC provides for two kinds of special procedures, which are similar to class actions to a certain extent: joint actions and public interest actions.

Joint actions refer to civil actions where at least one of the parties comprises two or more separate persons whose subject matters of the action are the same factually or are of the same question of law, and the people’s court may try the disputes together as one case by consent of the parties. Representative actions procedures can be applied to a joint action in which at least one party consists of more than 10 persons. Such party may elect one or more representatives from the group of individuals to act in the litigation as the party on behalf of the group to facilitate the litigation procedures. In a representative action, the interested party must register with the people’s court. The orders rendered by the people’s court in a representative action shall be binding on all the interested parties registered with the people’s court and can apply to claimants who have not registered with the people’s court but separately institute the action within the limitation period. The representative action is relatively uncommon and rarely practised by the people’s court.

Generally, joint actions, including representative actions, only share superficial similarities with class actions given the numerous members of parties and do not differ much with ordinary civil actions in terms of jurisdiction, proceedings and constitution. Thus, we will not provide a detailed introduction of joint actions in this book.

Article 55 of the newly amended Civil Procedure Law of the PRC provides that where there is conduct that pollutes the environment, infringes upon the lawful rights and interests of consumers, or otherwise damages the public interest, an authority or relevant organisation, as prescribed by law, may institute an action in a people’s court, including two kinds of special procedures that are similar to class actions to some extent (i.e., public interest actions are established).

Public interest actions are more distinct, have novel procedures specially provided by law, and are more close to class actions in their nature in the following respects: (a) the number of the persons being damaged is undefined when the case is filed with the court; (b) the claimant may lodge the case without the prior consent of others; and (c) the court shall issue special publications following relevant rules. Although the law limits the application of public interest action procedures to only two categories of disputes up till present, namely, environmental pollution cases and consumer rights protection cases, a trend exists for increasing protection of the public interest as well as expanding progress in the litigation system in this regard. The framework for public interest action procedures are detailed as follows.

ii Environment-related public interest actions

For acts that pollute the environment, damage ecology and harm the public social interests, social organisations that meet the following conditions may serve as competent claimants for public interest actions:

  • a social organisations that register with the civil administrative departments of the government at the city-level (divided into districts) or above in accordance with the law; and
  • b social organisations that specially engage in public environmental protection activities over a consecutive five-year period without a record of violations.

The form of corporation for such social organisations includes non-governmental organisations, private non-enterprise institutions, and foundations. In practice, the All-China Environment Federation is usually acknowledged as a competent social organisation that is qualified to initiate a public interest action in environmental pollution cases.

The civil court system comprises four levels, including district courts, intermediate courts, higher courts and the Supreme Court. In addition, the court system also includes a number of special courts or tribunals, such as:

  • a maritime courts, which deal with disputes arising from transportation by sea;
  • b military courts, which handle disputes relating to the military;
  • c tribunals that preside over intellectual property disputes established in the intermediate court, higher court and certain district courts; and
  • d circuit courts, which exist as part of a pilot programme and have the same level of jurisdiction as the Supreme Court.

People’s courts at or above the intermediate level shall have jurisdiction as courts of first instance at the place where: the acts that pollute the environment and damage the ecology take place; the damage occurs; or the defendants are domiciled.

The public interest action filed for pollution of the marine environment shall come under the jurisdiction of a maritime court at the place of occurrence of the pollution or damage, or at the site where pollution prevention measures are implemented.

The types of claims usually include cessation of infringement, removal of obstructions, elimination of danger, restoration to the original state, compensation for losses and formal apologies, along with payment of the expenses incurred by the claimant for taking reasonable prevention and treatment measures. If the claimant requests the defendant to bear the expenses for inspection and appraisal, reasonable attorney’s fees and other reasonable costs for litigation, the people’s court may provide support in accordance with the law.

iii Consumer-related public interest actions

For acts that infringe upon the lawful rights and interests of consumers, the China Consumers Association and the consumer associations formed in provinces, autonomous regions and municipalities directly under the central government may serve as competent claimants in filing public interest actions in people’s courts. Other institutions and organisations authorised by law or the National People’s Congress and its Standing Committee shall also have the right to file such actions.

Similarly, people’s courts at or above the intermediate level at the place where a tort occurs or where the defendant is domiciled shall have jurisdiction as courts of first instance over consumer-related public interest actions.

The types of claims usually include cessation of infringement, removal of obstruction, danger elimination, formal apologies and, where applicable, payment of the expenses arising from taking appropriate preventive measures, and the reasonable expenses arising from investigation and evidence collection based on the actual situation. However, compensation for losses may not be claimed in such action, and if the consumers wish to claim for damages, they shall lodge separate lawsuits.

II THE YEAR IN REVIEW

Against the backdrop that the sectors of consumption, investment and export are becoming the main drivers for China’s economic growth in recent years, the disputes arising from daily consumption of goods and services has come under the spotlight. Due to the serious information asymmetry and inequality of positions between consumers and business operators, the protection of consumer rights has become one of the priorities of the law-making body.

Under such circumstance, the Supreme People’s Court promulgated the Interpretations on Issues concerning the Application of Laws in the Trials of Civil Public Interest Actions in respect of Consumers’ Rights in April 2016, with an aim to enable the better functioning of the system for consumer-related public interest actions, as well as to boost the confidence of consumers in daily business activities.

The Interpretations have clarified various issues in relation to the consumer-related public interest actions in terms of the competency of claimants, the applicable scope of the actions, the jurisdiction of courts, the restrictions on disposition of rights by the claimants, the relationship between public interest actions and private interest actions, categories of claims, forms of liabilities and the principle of res judicata and so forth.

In parallel, environment-related public interest actions also witnessed a breakthrough in 2016. The Supreme People’s Court delivered a debut decision in the field of public interest actions related to environmental pollution by dismissing the application for the retrial of a high-profile environmental pollution case, Taixing Jinhui Chemical Co, Ltd v. Taizhou Environment Federation. After examining the facts and law from the second instance hearing of the case, the Supreme People’s Court rejected the retrial application by Taixing Jinhui Chemical Co, Ltd and the second instance decision which had found Taixing Jinhui Chemical Co, Ltd liable for damages in the amount of 160 million yuan has been officially effective ever since.

The rules and principles followed by the Supreme People’s Court during the examination of the retrial application are of great demonstrative significance for similar cases in the years to come.

III PROCEDURE

i Types of actions available
Necessary elements of the action

As required for ordinary civil actions, public interest actions also require the existence of basic procedural elements, including:

  • a a definite defendant;
  • b a specific claim;
  • c preliminary evidence of damages to public interests; and
  • d the case falls into the jurisdiction of the people’s court.

The special and key substantive element for environment-related public interest actions is that the act of the defendant has harmed or poses a major risk of harm to the social public interests; while that for consumer-related public interest actions includes: (1) the commodity or service provided is defective, resulting in infringement of the legitimate rights and interests of mass consumers; (2) the commodity or service provided has neither accurate statements nor a clear warning on potential dangers threatening consumers’ personal safety or the safety of their property, or fails to indicate appropriate ways to use the commodity or access the service; (3) there are dangers threatening consumers’ personal safety or property safety at places of business such as hotels, shopping malls, restaurants, banks, airports, bus or railway stations, harbours, theatres, resorts and entertainment areas; (4) the seller imposes unfair or unreasonable treatments on consumers, such as exclusion or restriction of consumers’ rights, reduction or waiver of the seller’s own liabilities, and aggravation of consumers’ liabilities by means of standard terms, notices, statements or entrance hall posts; and (5) any other acts of jeopardising the public interest, such as infringement of the legitimate rights and interests of mass consumers and endangerment of personal safety or property safety of consumers.

Statute of limitations period

Generally, the limitation period for a civil action is two years, which runs from the day when the complainant knows or should have known that his or her rights have been infringed upon.

However, the limitation period shall be one year in cases concerning the following:

  • a claims for compensation for bodily injuries;
  • b sales of substandard goods without proper notice to that effect;
  • c delays in paying rent or refusal to pay rent; and
  • d loss of or damage to property left in the care of another person.

Three years for the following:

  • a for any case brought in relation to compensation for environmental damage; and
  • b for claims with regard to compensation for oil pollution damage from ships.

Four years for the following:

  • a for disputes arising out of international trade contracts; and
  • b for disputes regarding international technology import or export contracts.

Accordingly, the law does not prescribe special limitation periods for public interest action procedures. The applicable limitation period depends on the nature of the disputes involved in a particular public interest action.

ii Commencement of proceedings
Environment-related public interest actions

A people’s court shall, after accepting an environment-related civil public interest lawsuit, deliver a copy of the statement of claims to the defendant within five days of the lawsuit being put on file and issue an announcement stating the acceptance of the case.

Where other organs and social organisations with the right to institute the action apply to participate in the action within 30 days as of the date of announcement, the people’s court shall list them as co-claimants, provided that they meet statutory conditions for being claimants to the action. Overdue applications will not be approved.

Where citizens, legal persons and other organisations apply to participate in the action due to their own personally incurred damages to self or property, such persons will be informed to institute separate actions.

Consumer-related public interest action

A people’s court shall, subsequent to the acceptance of a consumer rights action, make an announcement thereof and, within 10 days as of the date of case filing, report to the relevant administrative authorities. Any other agency or social organisation entitled to initiate proceedings by law may, prior to the first hearing, submit a motion to the people’s court to participate in the action. If the motion is granted by the people’s court, such agency or social organisation shall be listed as a co-claimant. Overdue submissions shall be rejected.

Where consumers who suffered from the same infringement submit a motion to participate in the action, they will be informed to institute separate actions.

It is noteworthy that the class represented by the claimant in the above two kinds of public interest actions is actually the mass population of residents or consumers without a definite number of members. The judgment rendered in such actions would not have immediate influence on the residents or consumers, as they cannot directly claim any portion of damages (if any) granted by such judgment. But they will benefit from the judgment in other indirect ways.

For example, if the residents or consumers, regardless of their nationalities, separately institute related actions subsequent to the public interest actions, they may directly rely on the facts that are already determined by the effective judgment of the public interest actions without bearing the burden of proof; while the defendants, on the other hand, shall prove the facts favourable to them, which may have already been determined by such judgment.

In addition, if a certain amount of damages is supported by the people’s court in an environment-related public interest action, such amount of damages may be designated for the restoration of the environment by the claimant, and in such way that the residents may share the success of the public interest actions.

Though the actions are aimed at public interest, the claimant in a public interest action is not exempted from the obligation of advancing the litigation fees. In some cases, the claimant as a social organisation may need to raise donations from the public in order to pay the litigation fees.

iii Procedural rules

It is stipulated by the law that defendants in public interest actions may not raise counterclaims. Moreover, the public interest shall be safeguarded by the people’s court during the action in the following ways.

Where alleged facts and evidence put forward or recognised by the claimant in the litigation process are against the interests of the claimant, and if the people’s court deems that the alleged facts and evidence may harm the social public interests, the court shall not allow such items to be admitted.

If a people’s court deems that the claims proposed by the claimant are insufficient to protect social public interests, the court may notify the claimant regarding the need of amending the claims by including additional claims such as those for cessation of infringement, restoration to the original state, among others.

After the parties of an environment-related civil public interest lawsuit reach a mediation agreement or reconciliation agreement by themselves, the people’s court shall make public the contents of the agreement for no less than 30 days.

After the expiry of the publicity period, if the people’s court deems that the contents of the mediation agreement or reconciliation agreement will not harm the social public interests upon examination, a mediation decision shall be issued. Where the reconciliation or mediation agreement violates public interests, the people’s court shall not issue a mediation decision, but shall continually try the case and make a judgment in accordance with the law. If the parties apply for withdrawal of the action for reasons that they have reached a reconciliation agreement, such withdrawal shall not be allowed.

Where a claimant to a public interest action applies to withdraw the action after court debate, the court shall not approve the application. However, in an environment-related case, if all claims of the claimant are fulfilled in that the departments responsible for supervision and management of environmental protection have performed the supervision and management responsibilities in accordance with the law, the people’s court shall approve the application for withdrawal of the action by the claimant.

After the judgment of a public interest action comes into force, where other organs and the relevant organisations associated with the claimant file another action for the same tort, a people’s court shall dismiss the action, save as otherwise stipulated by laws and judicial interpretations.

iv Damages and costs

For consumer-related public interest actions, the civil liabilities usually include cessation of infringement, removal of obstruction, danger elimination, formal apologies and where applicable, payment of the expenses arising from taking appropriate preventive measures to cease infringement, remove obstruction and eliminate dangers. The reasonable expenses arising from investigation and evidence collection of the infringement, appraisal fees as well as attorney fees requested by the claimants may also be supported based on the actual situation. It is noteworthy that damages shall not be claimed in such actions, and if the consumers claim for damages, they shall lodge separate actions.

For environment-related public interest actions, the civil liabilities usually include cessation of infringement, removal of obstruction, elimination of danger, restoration to the original state, compensation for losses, and formal apologies, along with the expenses incurred by the claimant for taking reasonable prevention and treatment measures to cease the infringement, remove the obstruction and eliminate the dangers. If the claimant requests that the defendant bear the expenses for inspection and appraisal, reasonable attorney fees and other reasonable costs for litigation, the people’s court may provide an order for such support in accordance with the law. The damages awarded by the people’s court may be very high based on the merits of the case in question. For example, the damages supported by the court in the case of Taixing Jinhui Chemical Co, LTD v. Taizhou Environment Federation reached 160 million yuan.

v Settlement

Settlement or mediation for the resolution of a case is widely encouraged by people’s courts. The top principle of voluntariness shall always be observed during procedures. Accordingly, the Supreme People’s Court has promulgated the Provisions on Several Issues concerning the Civil Mediation Work of the People’s Courts in 2004, which was amended in 2008.

Settlement or mediation is also allowed in a public interest action, yet the court shall exert more power over such proceedings and the settlement agreement shall be subject to the court’s examination. In the event that the parties of a public interest action reach a mediation agreement or reconciliation agreement by themselves, the court shall make public the contents of the agreement for no less than 30 days. After the expiry of the publicity period, if the court deems that the contents of the mediation agreement or reconciliation agreement will not harm the social public interests upon examination, the people’s court shall issue a mediation decision. For environment-related civil public interest actions, if the parties apply for withdrawal of the action for reasons that they have reached a reconciliation agreement, such withdrawal shall not be allowed.

The mediation decision shall clearly set forth the claims, the basic facts of the case, the contents of the agreement, and such decision shall be open to the public. The decision is only binding on the parties to the settlement agreement.

IV CROSS-BORDER ISSUES

According to the Civil Procedure Law, foreign nationals, stateless persons and foreign enterprises and organisations that institute or respond to actions in people’s courts shall have equal procedural rights and obligations as citizens, legal persons and other organisations of the People’s Republic of China. Nevertheless, where the courts of a foreign country impose any restrictions on the civil procedural rights of citizens, legal persons and other organisations of the People’s Republic of China and the people’s courts of the People’s Republic of China shall apply the principle of reciprocity to the civil procedural rights of citizens, enterprises and organisations of such foreign country. Thus, there are no special provisions for overseas claimants as both overseas claimants and domestic claimants shall be governed by the same rules established by PRC laws, although special restrictions may curtail the enjoyment of such civil procedural rights of non-domestic claimants as dependent on local court’s interpretations and applications of the principle of reciprocity as noted above.

In this case, as the identities of claimants to public interest actions are strictly defined to certain organs and social organisations registered under the laws and regulations of the PRC, it seems meaningless to discuss the issue of overseas claimants for public interest actions described herein. Of course, overseas claimants may lodge separate actions claiming for damages beyond the public interest actions if he or she fulfills the qualification for a claimant in a tort case.

V OUTLOOK AND CONCLUSIONS

Although joint actions and public interest actions share similarities with class actions, they are still not class actions in nature and lack sound supporting systems, such as distribution of litigation fees, and court management power over such cases. To this end, their application and consequential nature in judicial practice are rather limited at present in China. However, with globalisation and frequency of interactions between different jurisdictions, we reasonably believe that superior systems will gradually be adopted and the scope of disputes applicable to a public interest action will likely expand.

We are looking forward to the introduction of the class action system in China eventually for the preferential protection of rights of minorities and the disadvantaged, and for more severe sanctions in mass tort actions.


1 Zou Weining and Wang Lihua are partners and Chen Mingqing is an associate at JunHe LLP.