The Global Damages Review: China
Chinese law2 mainly comprises laws (enacted by the National People's Congress or its Standing Committee) and administrative regulations (enacted by the State Council). The Supreme People's Court (SPC) promulgates judicial interpretations from time to time, and those judicial interpretations are binding upon all the courts in adjudicating disputes, and are sometimes considered to be part of PRC law and regulations. In addition, practice guidance notes issued by the SPC and other PRC courts and case precedents serve as important references for judges and legal practitioners. With regard to damages, the most relevant provisions are to be found in the laws (i.e., the Contract Law,3 the General Principles of the Civil Law4 and the General Rules Provisions of the Civil Law5), related judicial interpretations and court practice guidance.
One thing to note is that the Civil Code,6 which will take effect on 1 January 2021, will replace, among other things, the aforementioned laws (i.e., the Contract Law, the General Principles of the Civil Law and the General Provisions of the Civil Law). That is to say, most of the current provisions pertaining to contractual damages will cease to be effective from the beginning of 2021. However, by comparing the Contract Law with 'Part Three: Contract' of the Civil Code, one will find that there are not many changes on laws of damages. Considering this, this chapter relies on the current laws and regulations, and the relevant provisions in the new Civil Code will be referenced in footnotes for the reader's reference.
Other recent noteworthy judicial developments relating to the law on damages include the promulgation of the Several Provisions of the Supreme People's Court on Evidence for Civil Procedure7 (the SPC Provisions on Evidence) and the SPC's release of the Minutes of the National Courts' Civil and Commercial Trial Work Conference8 (the Minutes of the National Courts).
The law on damages is typically engaged upon the occurrence of either a tort or a breach of contract. Damages arising out of tortious conduct can be compensatory, restitutionary, punitive or exemplary in nature, and the quantification of which may be complicated, especially where the losses relate to environmental, reputational or personal injury. In the sphere of contract, damages are compensatory in nature, and restitutionary damages apply only in rare circumstances. This chapter will focus on contract-related damages, including its legal basis, principles, quantification, the use of experts in assessment and recent cases.
Quantification of financial loss
Compensatory in nature
Article 1139 of the Contract Law provides that 'where one of the parties does not perform a contractual obligation, or does not perform a contractual obligation as agreed, resulting in losses to the other party, the total amount of compensatory damages shall be equivalent to the total losses incurred by the other party through the breach of contract, including profits that the other party would have been able to obtain upon the contract being performed, but this amount shall not exceed the total losses that the breaching party, at the time of concluding the contract, foresaw or should have foreseen would probably result from breach of contract'. Thus, damages should be equal to the losses suffered by the affected party. This provision lays the cornerstone of contractual damages, which is that the underlying principle of damages under Chinese law is to compensate the losses of the affected party. Where the plaintiff has not suffered any loss, even if the defendant breached the contract, the plaintiff is not entitled to damages. As can be seen, the function of damages in contractual disputes is to compensate the innocent party, rather than to punish the breaching party.
Damages can be either agreed between the parties or ascertained by the operation of law. Where an agreement on liquidated damages is present, the court has discretion to make necessary adjustments to the agreed amount stipulated or the amount calculated according to the agreed method for calculating the liquidated damages. Without an agreement on liquidated damages, damages will be ascertained by the operation of law. Article 113 of the Contract Law provides that the affected party shall enjoy full compensation, including compensation for its direct losses and indirect losses. Direct losses refer to those losses suffered as a direct consequence of the breach of the contract. Indirect losses refer to loss of profits (not loss of revenue) that the suffering party has expected and other consequential or incidental losses. A detailed analysis on relevant principles on determining loss of expected profits will be discussed later.
Adjustment of liquidated damages
Article 11410 of the Contract Law provides that 'if the agreed liquidated damages are lower than the losses incurred, any party may apply to the people's court or an arbitration institution for an increase; if the agreed liquidated damages are significantly higher than the losses incurred, any party may apply to the people's court or an arbitration institution for an appropriate reduction'. Pursuant to Article 114, the court has the discretion to make necessary adjustments to the agreed amount of liquidated damages to reflect the actual losses of the plaintiff. Under Article 29 of the Interpretations of the Supreme People's Court on Several Issues concerning the Application of the Contract Law II (the SPC Interpretations on Contract Law II), when the liquidated damages exceeds the incurred losses by 30 per cent or more, it may be deemed as 'significantly higher than the losses incurred' and the court can adjust the amount of liquidated damages at its discretion.11 According to Article 7 of the Guiding Opinions of the Supreme People's Court on Several Issues regarding the Trial of Civil and Commercial Contract Disputes under the Current Situation (the SPC Guiding Opinions on Trial of Civil and Commercial Contract Disputes),12 when adjusting liquidated damages, the primary factor that the court would take into consideration would be the actual losses incurred. However, the court may also take into consideration other factors including the progress of contract performance, relative fault of the parties, what the expected contractual profits are, the relative bargaining power of the parties, whether any standard clause was used, etc. In Feng et al v. Shanxi Zhongshi Investment Corporation , neither party quantified their actual losses, it was thus difficult for the court to decide whether the liquidated damages were significantly higher than the actual losses. In the first instance, the High People's Court of Gansu took into consideration the performance of contract, the fault of the parties, and the expected profits, and, by exercising its discretion, reduced the liquidated damages to half based on the general principle of fairness; on appeal, the first instance judgment was upheld by the SPC.13 Sometimes, a defendant may make a defence based on contesting liability without contesting quantum, for instance by arguing that the underlying contract was not formed, not effective, invalid, or there was no breach of contract, without simultaneously making an argument that the amount of liquidated damages claimed by the plaintiff was unreasonable and should be adjusted. In this situation, if the court contemplates a decision in favour of the plaintiff's case on liability, the court may indicate to the defendant that he or she may consider making a challenge regarding the amount of liquidated damages claimed by the plaintiff.14
Method of compensation
There are generally three ways to compensate for losses, namely restoration, monetary compensation and compensation through other means.15 Restoration refers to restoring the non-breaching party to its previous position, that is, the position before the conclusion of the contract. As a simple example, a buyer may return a malfunctioning machine and demand a return of the purchase money as restoration. This would restore the buyer to the position before he or she bought the malfunctioning machine. In addition to the original purchase money, the buyer may also claim interest to compensate for the loss of the time value of the purchase money. However, restoration is not always possible, for example, where a customer had received an unpleasant service, it is impossible for the provider to 'return' the service. In such a circumstance, the court may order the defendant to pay a reasonable amount of monetary compensation to the plaintiff. Where the breaching party does not have sufficient funds, it may also be possible for him or her to compensate the non-breaching party with other objects that the non-breaching party is willing to accept. That being said, if the dispute is brought to court, it is quite unlikely that the court will order the defendant to compensate the plaintiff with any object other than the subject matter of the dispute. The court order is usually in the form of monetary compensation, and in further enforcement proceedings, the court may order an auction on the defendant's assets in order to liquidate enough funds to compensate the plaintiff.
Quantification of damages
Quantification of damages involves identification of the subject matter, time and location. The general practice is to use the relevant market value of the subject matter in question to determine the quantum of damages. That is to say, in most circumstances, an objective market standard will be adopted. However, in rare circumstances, the court may take into consideration subjective considerations in ascribing value to an item. In one of the cases, a photography studio mistakenly destroyed the plaintiff's roll film containing photos of her late husband. Considering the emotional losses suffered by the plaintiff, the court ordered the photography studio to compensate the plaintiff 5,000 yuan, which was significantly higher than the market value of the roll films themselves.16 Time and location may also affect the quantification of damages, and the general practice is that the time when the breach occurred and the location where the breach occurred would be referred to when the court determines quantum of damages.
Deposit and liquidated damages
There are two provisions under the Contract Law pertaining to deposits (i.e., Article 11517 and Article 11618). Article 115 provides that contracting parties may agree that a party may pay a deposit to the other party as a guarantee for its performance obligations. It further provides that where there is a breach of contract, such a deposit should either be offset against the contract price or should be forfeited. Article 116 provides that if the parties had agreed both on the advance of such a deposit and for liquidated damages to be payable upon breach of contract, where there is a breach of contract, the non-breaching party can choose either to refuse to return the deposit or to make a claim for liquidated damages, but not both.
The burden of proof in regard to damages is no different from the general burden of proof in civil cases, i.e., the party who raises a claim has the onus to support its claim with evidence. In some special categories of tort cases, the burden of proof may be reversed;19 in contractual disputes, however, the burden of proving damages is almost always on the plaintiff. According to Article 11 of the SPC Guiding Opinions on Trial of Civil and Commercial Contract Disputes, for a claim for loss of expected profits, the plaintiff has the onus to prove the amount of expected profits and necessary transaction costs; while the defendant needs to adduce sufficient evidence if it seeks to establish that the plaintiff failed to mitigate its losses, that the plaintiff had benefited from the breach, or that the plaintiff had also contributed to the breach. In practice, we have seen cases in which the SPC rejected claims of expected profits in entirety since the plaintiff had failed to provide reasonable evidence.20
The majority of the PRC rules on evidence lie in the Civil Procedure Law21 and the SPC Provisions on Evidence. According to Article 63 of the Civil Procedure Law, evidence can be in the following forms: party statement, documentary evidence, physical evidence, video-audio evidence, electronic evidence, appraiser opinion and investigation record.22 Nowadays, electronic evidence has become increasingly important with the development of technology, and electronic data such as WeChat communication records are often relied upon as evidence. Recently, PRC courts have officially recognised evidence authenticated through electronic signature, credible timestamping, hash value verification and blockchain, which may be admitted as evidence in valid forms.23 Parties can apply for the court to investigate and collect evidence,24 and can also apply for the court to order an opposing party to disclose evidence.25 If there is serious concern that evidence may be destroyed or lost, a party can apply for evidence preservation pursuant to Article 81 of the Civil Procedure Law.26
iii Date of assessment
In PRC law, the presumed date of assessment for damages for most tort cases is the time when the damage was suffered;27 however, this date can be adjusted to maximise the benefits of the plaintiff within a reasonable range.28 In comparison, there is no statutory date of assessment for general contractual disputes. The most commonly used date of assessment would be the date of breach. The date of assessment, however, may be disputed if the relevant subject matter has changed in value between the date of the breach and the date of the judgment. If the value of the property at issue has declined or increased over the period since the breach occurred, the plaintiff may be advantaged or disadvantaged by the damages being assessed at the date of breach. For example, if shares in dispute enjoy a sharp increase in price after the date of breach, it is questionable whether the price increase between the date of breach and the date of judgment shall be considered as a part of plaintiff's loss.
An interesting tort case may shed some light on how this issue may be dealt with. In Zhang v. ICBC et al , the defendants defrauded Zhang to obtain her permission to deal with her stocks on her behalf and then sold Zhang's shares in a listed company without her permission in 2005. The SPC decided that Zhang had a right to all benefits derived from her shareholding (including price increase, dividends and share allotment) from 2005 to May 2008 (the last time of share allotment). The court looked into Zhang's track record of dealing with stocks and found that Zhang barely understood how to buy or sell stocks and had not dealt with the stocks for more than a year since she inherited them from her late husband. The court reasoned that it was very unlikely for Zhang to buy or sell the stocks on a frequent basis, and as such, it was likely that she would not deal with the shares from 2005 to 2008, and in turn, Zhang should have been able to receive all benefits from her shareholding from 2005 to 2008. The court did not use 2005 (time of breach), but instead used 2008, as the relevant time for assessing the plaintiff's losses. From this case, it can be seen that the court can exercise its discretion in determining a date of assessment that best reflects the plaintiff's losses.29
iv Principles to assess loss of profits under Chinese law
According to Article 9 of the SPC Guiding Opinions on Trial of Civil and Commercial Contract Disputes, the main types of expected profits include: (1) loss of production profits; (2) loss of operational profits; and (3) loss of resale profits. The SPC Guiding Opinions on Trial of Civil and Commercial Contract Disputes require courts to ascertain which of the above types of loss of expected profits has occurred.30
In ascertaining the amount of loss of expected profits, if the parties had agreed on how the loss of expected profits shall be calculated, the parties' agreement may be adopted by the court. Without such agreement, a court would at its own discretion decide what the appropriate amount of loss of expected profits based on parties' submissions should be. The court would make its decision in view of several principles, namely the principle of foreseeability, the principle of mitigation of losses, the principle of offsetting losses with gains and the principle of contributory liability. As such, a brief formula to calculate loss of expected profits31 may be:
loss of expected profits to be compensated = expected profits - unforeseeable losses - losses that could have been mitigated - profits derived from the breach by the plaintiff - losses that were contributed by the plaintiff itself
Having said the above, where the parties had agreed on how to calculate the loss of expected profits pursuant to Article 114 of the Contract Law, or where the breach had led to personal injury or death, the above principles may not apply.32
Principle of foreseeability
Article 113 of the Contract Law provides that damages for loss of expected profits cannot be higher than what the breaching party could have foreseen when entering into the contract. In Xinjiang Yakun v. Xinjiang Kangrui , the SPC found that the lower court had included losses caused by a fall of market price into the loss of expected profits awarded, so the SPC overruled the lower court's judgment. The SPC's reasoning was that the fall of market price was not foreseeable by the defendant, neither was it caused by the defendant; plaintiff's loss of resale profits was a profit that could be realised when the market price was at a low point, rather than at a high point; as such, losses caused by the market should not be borne by the defendant.33
Principle of mitigation of losses
Article 119 of the Contract Law and Article 114 of the General Principles of Civil Law provide for the duty of the non-breaching party to mitigate losses. Where there were reasonable means for the plaintiff to mitigate its losses but the plaintiff failed to exercise such means, the part of losses that could have been mitigated should not be borne by the defendant.34 This principle is commonly used to reduce the loss of expected profits claimed by the plaintiff. In Zhongxin Honghe v. Anshan Finance Bureau , the SPC found that although Zhongxin had lost the opportunity to participate in the underlying transaction because of Anshan Finance Bureau's failure to obtain necessary government approval, this would not prevent Zhongxin from seeking other business opportunities. Based on this reasoning, the SPC only granted 10 per cent of the loss of expected profits claimed by Zhongxin.35 In practice, where a contract has a long term, say 20 years, depending on the circumstances of the case, it would be advisable to claim for loss of expected profits for only a reasonable number of years and not the full duration, as a reasonable non-breaching party would be expected to try to find another opportunity to do business with other partners, rather than sit and wait for the entire remaining duration of the contract. Alternatively, a party may claim for the loss of profits for the whole duration and then propose to discount its loss of profits.
The principle of offsetting losses with gains
This is to ensure that the plaintiff only recovers its net losses. Generally, 'gains' refer to costs that can be avoided, residual value of the subject matter, taxes and duties that would have been paid, etc. This principle is not provided in the Contract Law, but it is explicitly identified in Article 31 of the SPC Interpretations on Issues regarding Laws Applicable for the Trial of Sale and Purchase Contract Dispute Cases (the SPC Interpretations on Sale and Purchase Contract) for sale contract disputes.36
Principle of contributory liability
Contributory liability is provided in PRC tort law. For contractual disputes, the relevant provision is not contained in a statute, but in the SPC Interpretations on Sale and Purchase Contract. This principle is widely adopted in judicial practice and judicial opinions (e.g., SPC Guiding Opinions on Trial of Civil and Commercial Contract Disputes). The rationale of this principle is that if the non-breaching party failed to reasonably protect himself or herself from losses or has violated laws, based on the principles of fairness and honesty, the breaching party shall not be liable for the part of loss that was not caused by him or her.
v Financial projections
Financial projections are not specifically regulated by PRC laws. The use of expert witnesses is not yet a common exercise in PRC civil litigation. As such, the court has a wide discretion to draw its own inferences from the facts to determine a reasonable amount of damages. The book Understanding and Application of SPC Judicial Interpretations on Sales Contract (published by the People's Court Press) provides some guidance, by listing three common methodologies for determining the loss of expected profits.37
This methodology looks at what the plaintiff would have received if the contract had been fully performed. This methodology is suitable to estimate expected profits of operation if the plaintiff has stable operations. For example, a plaintiff may use its profits from previous months or the profit level of a similar business to demonstrate potential loss of profits for future months. It is generally advisable for a plaintiff to prepare its financial statements of several previous years to show its level of profits. In Beijing Xindacheng v. Beijing Saiwai , the Beijing First Intermediate People's Court found that the profits of the previous year alone were not convincing evidence on the plaintiff's future profit level and that simply applying the profits from the previous year would neglect consideration of the business risks.38
This methodology applies when it is difficult to accurately ascertain the losses suffered by the plaintiff. In this situation, the court may decide on a reasonable amount of loss of expected profits. There is no statutory requirement for the judge to appoint an appraiser or order the parties to submit financial projection reports prepared by professionals, and the judge has the discretion to award any amount of loss of expected profits. In Beijing Xindacheng v. Beijing Saiwai , the Beijing First Intermediate People's Court used its discretion to reduce 200,000 yuan from the loss of expected profits claimed by the plaintiff, and reasoned that such deduction reflected market risks of the catering industry and potential increases in costs.
Where the parties had reached some agreement in terms of expected profits, the agreement may be taken into consideration by the court. For example, if the parties have agreed on an estimation of future profits, the court may rely on their estimation to determine the loss of expected profits. That being said, a court may deviate from the parties' agreement where it considers that relying on the parties' agreement would lead to an unfair result.
The integrity of any financial projection is dependent on the assumptions underpinning the specified model used. Assumptions for financial projections are not regulated by PRC laws. It is up to the court to decide whether assumptions relied on by a party are reasonable or not. Commonly applied assumptions include: the currency involved would not experience significant level of appreciation or devaluation; there would be no major unforeseen events that would significantly impact general market confidence; and the business would not cease to exist in the remaining term of the contract.
vii Discount rates
Discount rates reflect the time value of money. As a plaintiff making a claim for loss of profits may be receiving money in advance via a court judgment and would be able to use this money to re-invest or for other purposes, it may be considered appropriate for the plaintiff to only receive a discounted amount. Unlike in some jurisdictions, there is no statutory discount rate in the PRC. In judicial practice, discount rates are sometimes applied to reduce the amount of loss of expected profits that a court would award. In Zhejiang Fengyuan Medical v. Hainan Quanxing Pharmaceutical , Zhejiang Fengyuan Medical claimed for loss of expected revenue of 43,853,400 yuan for a period of 27 years. The SPC took into account increase of future costs, discount rates, market competition and substitution, and awarded Zhejiang Fengyuan Medical a discretionary 4 million yuan as loss of expected profits. The SPC did not specify the discount rate or give detailed calculation.39 If a specific discount rate is to be ascertained, the court may need to rely on appraiser opinions or reports prepared by professionals.
In practice, several kinds of approaches may be utilised to determine the applicable discount rate. Some examples include taking the parties' expected internal rate of return, applying WACC (weighted average cost of capital) and adopting the interest rate on bank loans. Some industries have their own discount rates, for example, in some hotel management disputes, an 8 per cent discount rate was adopted in 2017.
viii Currency conversion
Whether a Chinese court can award damages in currencies other than the yuan is unclear from the provisions of the statutes and judicial interpretations. Article 8 of the Regulations on Foreign Exchange Administration40 provides that '[i]t is prohibited to circulate foreign currencies in the People's Republic of China or use foreign currencies for pricing or account settlement'. However, court practice is not unified in this aspect. Some courts, while awarding damages in a foreign currency, will make it clear that if payment is to be made in mainland China, the payment shall be made in yuan of the equivalent amount. This practice is criticised as it encourages defendants to choose the venue of performance so as to avoid currency exchange rate fluctuation and minimise their payment obligations.41
If a court-ordered payment in a foreign currency has to be converted into yuan, a question to be considered is, what is the exchange rate. The SPC Reply to Request for Instructions on How to Determine the Exchange Rate of CNY to Major Foreign Currency in the Trial of Foreign-Related Civil and Commercial Cases42 made it clear that, from 4 January 2006, the central parity rate of yuan to a major foreign currency should be determined as per the rate published by the China Foreign Exchange Trade System, while the exchange rate for any other foreign currency should be calculated through its exchange rate to the US dollar.43
ix Interest on damages
There are three stages in which interest on damages accrue. These are from the date of breach to the date of judgment, from the date of judgment to the deadline of performance as specified in the judgment and from the deadline of performance to the date of enforcement. In each stage, a different interest rate may apply, either based on parties' agreement or on statutory provisions.
From the date of breach to the date of judgment
The plaintiff may claim for interest accrued on damages. Sometimes, the contract provides for an interest rate agreed by the parties. Alternatively, the contract may contain a liquidated damages clause, providing that a penalty interest shall accrue on an outstanding payment. Such a liquidated damages clause may in essence be regarded as an interest rate provision. Without such agreement, generally, the plaintiff can claim for a reasonable interest. Usually, when the plaintiff files the lawsuit, the plaintiff would specify how the interest would be calculated. It should be noted that there are some specific legal provisions on interest for certain types of contracts.
For private lending contract disputes, according to Article 25 of the Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases (the SPC Interpretations on Private Lending), absent any specific agreement on interest, the court will not uphold a claim on interest.44 Where the parties have agreed on an interest rate to be applicable in the event of breach, the court has the discretion to adjust the interest rate.
For sale of goods disputes, according to Article 24 of the SPC Interpretations on Sale and Purchase Contracts, where a plaintiff claims for interest and there is no relevant contractual basis for this, the court may apply the benchmark interest rate for loans of the same type in the same period prescribed by the People's Bank of China (PBC). Although the SPC Interpretations on Sale and Purchase Contract only deal with sales contracts, the court may refer to this legislation for guidance when handling disputes involving other types of contracts. The Minutes of the National Courts, which were issued in 2019, provide that, after 20 August 2019, the LPR (loan prime rate) shall be used instead of the PBC benchmark interest rate.
For construction contract disputes, according to Article 6 of the SPC Interpretations on Issues concerning the Application of Law for the Trial of Cases of Dispute over Contracts on Construction Projects,45 where the parties have no contractual provisions regarding interest on payments advanced by a contractor for the performance of work for an employer, the contractor's claim for the interest on such payments shall not be upheld; where there is a contractual provision providing for interest to be payable on such advances, such interest shall not exceed the PBC benchmark interest rate.46 With the issuance of the Minutes of the National Courts, it is conceivable that such upper limit may be replaced by the LPR.47
From the date of judgment to the deadline for performance
A judgment usually provides for a grace period for performance. For the period between the date of judgment to the deadline for performance, generally, the judgment would order that interest shall continue to accrue. In some provinces, this judicial practice is formalised by court guidances. For example, the High People's Court of Shandong has issued the Notice regarding Regulating Expressions on the 'Date When Default Interest Stops Accruing' in the Main Context of Civil Judgments , pursuant to which it is required that court judgments shall make clear that interest will not stop accruing until the time that the liable party pays the ordered amount in full.48 If a liable party only performs part of the judgment, interest will continue to accrue in regard to the outstanding amount.
From the deadline for performance to the date of enforcement
During this period, the interest ordered by the court will continue to accrue as the defendant has not duly performed the judgment. In order to deter late performance, under the SPC Interpretations on Several Issues concerning the Application of Law to the Calculation of Interest on Debt for the Period of Deferred Performance in the Enforcement Proceedings, where the defendant failed to perform its obligation under a judgment before the date specified in the judgment, the defendant is liable to pay a penalty (calculated on the basis of: principal amount not paid × 0.0175 per cent per day × number of days over the delayed period) in enforcement proceedings.49
Another issue to note is whether a contractual clause on interest is legally valid. As mentioned above, the court has the discretion to adjust liquidated damages agreed upon by the parties where the court believes that such clause is unfair. Following the same logic, the court also has the right to adjust an agreed interest rate if such interest rate is regarded as being unfair. The SPC Interpretations on Private Lending provide some guidance on when a stipulated interest rate would be deemed as being unreasonably high. According to Article 26 of the SPC Interpretations on Private Lending, a consensual interest rate lower than 24 per cent per annum would generally be supported by court; where the agreed interest rate is higher than 36 per cent per annum, the part exceeding 36 per cent would generally not be supported by court.50 On 20 August 2020, the SPC issued the revised version of the SPC Interpretations on Private Lending,51 and one of the key revisions relates to the upper limit of the agreed interest rate to be upheld by the court; this was changed from the 24 per cent/36 per cent per annum standard to four times the LPR per annum (at the time when the contract is formed) issued on 20th of each month by the National Interbank Funding Center. Taking the LPR per annum (3.85 per cent) issued on 20 July 2020 as an example, four times will be 15.4 per cent, which is much lower than 24 per cent/36 per cent. This change pegs the maximum applicable interest that may be awarded to the prevailing market interest rate.
Costs generally include litigation fees (charged by courts), legal service fees (attorneys' fees) and other costs (parties' out-of-pocket expenses). In PRC laws and judicial practice, there is no principle that costs should 'follow the event'.
According to Article 29 of the Measures on the Payment of Litigation Fees,52 litigation fees shall be borne by the party who loses the lawsuit, unless the party that wins the lawsuit bears the fees at his or her free will. Where a party partially wins a lawsuit, the court may, at its discretion, decide on the allocation of the litigation fees. In China Real Estate v. Suzhong Construction , the SPC ordered China Real Estate to reimburse the litigation fees paid by Suzhong Construction and made it clear that the fee paid for property preservation forms a part of litigation fees.53
Legal service fees and other costs
The general rule is that parties shall bear their own legal services fees and other costs. However, there are certain types of cases in which the party at fault should bear the legal service fees of the opposing party in entirety, for instance: cases on exercising revocation rights in contractual disputes;54 cases on copyright disputes;55 and cases on trademark disputes.56 There are also certain types of cases in which a court may exercise its discretion to determine the allocation of legal service fees as between the parties, for instance: patent infringement cases; unfair competition cases; guarantee cases; personal injury, defamation and traffic accident cases.57 According to Clause 22 of the SPC Opinions on Further Promoting the Efficient Distribution of Complex and Simple Cases and Optimizing the Allocation of Judicial Resources,58 where a party abuses litigation rights or procrastinates in making a claim or in its conduct of a case, and has led to direct loss of the counterparty or a third party, the court may order the party to compensate for the other party's reasonable fees, including legal service fees.
For arbitrations cases, rules of arbitration institutions in mainland China generally provide that the tribunal has discretion to allocate costs, including arbitration fees and expenses. In practice, arbitral tribunals often adopt the 'costs follow the event' principle.
Awards of damages may be subject to taxation if the damages are in the nature of remuneration, business income or other types of income as listed under the relevant tax laws. Usually, the party receiving compensation shall pay corresponding tax on the sum he or she receives. In employment contract disputes, the party performing the judgment may deduct tax beforehand and pay the rest to the other party. For example, in an enforcement case in the employment context before the Shenzhen Intermediate People's Court, Shenzhen Sike v. Gao , the Shenzhen court ruled that Shenzhen Sike was justified in deducting taxes before paying the compensation to Gao for wrongful termination of employment contract. The Shenzhen court specifically stated that 'to pay taxes according to law is the duty of each citizen . . . money awarded by court judgment is not exempt from taxes'.59 It should be noted that an employment contract dispute is a special kind of contractual dispute, and legal provisions in this regard may be different from those applicable to general contractual disputes.
Some losses that would have been taxable if there had been no wrong will not necessarily be taxable by the operation of law. For example, Article 41 of the State Compensation Law provides that no tax shall be levied on the compensation a claimant has obtained in regard to state compensation cases.60 Similar exemption is given to compensation awarded in personal injury cases.61 In contractual disputes, the party receiving compensation generally needs to pay taxes for the awarded amount.
There is no system of parties relying on 'expert witnesses' in Chinese court proceedings. As with some other civil law countries, China has adopted the 'appraiser' system, which basically refers to the use of court-appointed experts. However, under the appraiser system, judges may rely too much on the appraiser's opinions, and the parties may lack the expertise to comment on or challenge the appraiser's opinions. In judicial practice, the courts have tried to invite parties to comment on the appraiser's opinions, however, the effect is not satisfactory as parties generally would not have sufficient knowledge to provide effective comments. As such, the SPC introduced the concept of 'persons with specialised knowledge' in the 2001 version of the SPC Provisions on Evidence. The role of 'persons with specialised knowledge' is to assist parties, rather than the courts, to comment on an appraiser's opinions and to provide opinions on issues involving professional knowledge. A 'person with specialised knowledge' is not a witness in the sense that he or she does not provide testimony; instead, his or her comments and opinions would be regarded as party statements. As such, it should be understood that there are no party-appointed expert witnesses in Chinese litigation, and the corresponding roles in law are appraisers together with persons with specialised knowledge. Thus, it can be said that Chinese litigation adopts an expert evidence system comprising appraisers and persons with specialised knowledge.
ii The role of expert evidence in calculation of damages
Under PRC law, an appraiser may be either an institution (the appraiser's opinion needs to be formally sealed and endorsed by the institution and signed by the person in charge of the appraising work) or an individual person. An appraiser is entrusted by the court to assist the judge in understanding issues involving special knowledge and is required to have relevant qualifications. According to Articles 30 and 31 of the SPC Provisions on Evidence, the court can appoint a qualified appraiser if the court is of the view that certain facts should be proved by appraisers. The parties may also apply to the court to appoint an appraiser. In such a situation, the court will request the parties to reach an agreement on choosing a qualified appraiser; if the parties cannot reach such an agreement, the court will appoint a qualified appraiser at its discretion from the list of appraisers maintained and publicised by relevant courts.
Persons with specialised knowledge
Persons with specialised knowledge have two functions: (1) to comment on the appraiser's opinions; and/or (2) to provide opinions on issues involving professional knowledge. They are party-appointed and their role is to assist the party rather than the court. According to Article 83 of the SPC Provisions on Evidence, a written application shall be submitted to the court by the party seeking permission for such person to appear before the court. A party may only apply to the court for one or two persons with specialised knowledge to attend the hearing. The written application shall contain the information of the persons and the purpose for these persons to appear in court. As there is no statutory qualification requirement for persons with specialised knowledge, this information is supplied mainly for the purpose of confirming the identity of the persons. The purpose for such persons to appear in court is supplied to give the opposing party notice and the opportunity to make the necessary preparations. There is no requirement for a person with specialised knowledge to declare independence or impartiality.
In PRC judicial practice for civil and commercial cases, the subject matter of appraiser's opinions may involve various aspects, such as the quality of equipment or products, and the costs or other financial factors of a construction project. According to the Provisions on Judicial Appraisal Practice Categories issued by the Ministry of Justice,62 accounting is a category of appraisal; however, the court may not ask the appraiser to issue opinions on the exact amount of damages. The court may appoint an appraiser to evaluate relevant aspects of the case (for instance, the residual value of equipment or the costs of a construction project). This will facilitate the court's judgment on the final amount of damages. Even if there is no appraiser involved, a person with specialised knowledge may be engaged by a party to provide opinions on professional issues, such as to give a view on the amount of damages that should be awarded, for instance in complicated tort cases that may require specialised knowledge for assessment (i.e. environmental pollution disputes and medical disputes).
It should be noted that, in PRC arbitration, quantum expert witnesses are commonly engaged to give their views on damages quantification.
iii The court's role excluding and managing expert evidence
Appraiser's opinions are a named form of evidence in PRC law. According to Article 34 of the SPC Provisions on Evidence, the court shall ask the parties to examine any appraiser's opinion obtained; an appraiser's opinion that has not been examined by the parties involved cannot be used as basis for decision-making. For more effective examination, the parties may hire persons with specialised knowledge to comment on the appraiser's opinions.
Comments or opinions of persons with specialised knowledge
The comments provided by persons with specialised knowledge on an appraiser's opinions will assist judges in better understanding the appraiser's opinions. According to Article 122 of the SPC Interpretations on Civil Procedure Law, the opinions of persons with specialised knowledge on issues involving professional knowledge are regarded as statements by the party which has engaged them. Pursuant to Article 84 of the SPC Provisions on Evidence, judges may ask questions to persons with specialised knowledge, and as permitted by the courts, the parties may also raise questions to the said persons; the persons with specialised knowledge of each party may engage with each other regarding relevant issues in dispute; however, persons with specialised knowledge are not allowed to participate in court proceedings beyond the scope of commenting on the appraiser's opinions and providing opinions on issues involving professional knowledge.
iv Independence of experts
Appraisers have to be independent. It is required by law that they have to sign a declaration of independence, impartiality and honesty.63 However, for persons with specialised knowledge, there is no requirement regarding independence and impartiality, as the person is deemed to be a representative of the party who engages him or her.
v Challenging experts' credentials
Article 76 of the Civil Procedure Law generally provides that appraisers must be qualified. In practice, the court would appoint appraisers from the list of appraisers issued by relevant courts. Further, according to Articles 6 and 7 of the newly issued SPC Provisions on Several Issues concerning the Appointment by the People's Court on Appraisal in Civil Procedure,64 as for appraisal institutions, the court shall examine the qualification of the appraisal institution and its scope of business; in addition, where the court found that parties' choice of appraisal institution may harm the national interest or the interest of third parties, the procedure of choosing an appraisal institution by party agreement shall be terminated and the appraisal institution shall be chosen randomly (from the court's list of appraisers); according to Article 9, as for individual appraisers, the court shall examine strictly, inter alia, the individual's professional ability, experience, industry reputation, scope of practice, qualification of appraisal, the validity of the person's credentials and whether there are any reasons such as conflict of interest for refusing to appoint the person.
For persons with specialised knowledge, there is no statutory requirement regarding their credentials. It is up to the parties to choose who they wish to engage as persons with specialised knowledge by using their best judgment.
vi Oral and written submissions
Pursuant to Article 35 of the SPC Rules of Evidence, an appraiser shall complete the appraisal and submit his or her appraiser's opinions within the time limit set by the courts. Articles 37 and 38 further provide that either party may raise objections to the appraiser's opinions in written form, and the court shall require the appraiser to provide explanations or supplementations; if the objecting party insists on his or her objections, the court would ask that party to prepay the expenses for the appraiser to appear in court and inform the appraiser to attend the hearing. In this way, an appraiser may provide oral and written submissions to the courts.
Article 79 of the Civil Procedure Law, Article 122 of the SPC Interpretations on Civil Procedure Law and Article 83 of the SPC Rules of Evidence all provide that persons with specialised knowledge can appear in court. As such, persons with specialised knowledge can make oral submissions in court. Pursuant to Article 84 of the SPC Provisions on Evidence, the court has the right to ask questions, but whether the parties can examine the person with specialised knowledge is subject to the court's approval. There is no legal provision prohibiting persons with specialised knowledge from making written submissions, so, conceivably, persons with specialised knowledge can submit written opinions, especially when the issue at dispute is complicated.
Recent case law
Under the civil law tradition, previous court judgments are non-binding. However, in judicial practice, they serve as important references for courts and parties. In fact, case law has been becoming increasingly important in judicial practice. Since 2012, the SPC has started to publicise guiding cases, and so far has publicised 139 such cases.65 Recently, the SPC issued the SPC Guiding Opinions on Unifying Applications of Law and Strengthening Search of Similar Cases (for Trial Implementation),66 under which, in certain circumstances, the courts are required to search for similar cases and examine them before issuing judgments. The scope of search includes SPC guiding cases, case precedents of the SPC, case precedents of the high people's court of the relevant province/city, case precedents of a higher court and case precedents of the court itself, in this order of priority. Except for the SPC guiding cases, the courts should also prioritise searching for cases from the preceding three years. Where a retrieved precedent is an SPC guiding case, the court shall apply it mutatis mutandis in decision-making, except for cases that conflict with new laws, administrative regulations or judicial interpretations or have been replaced by new guiding cases. For other types of similar cases, the court may use these cases found as references in decision-making.
i Shanghai Lianda Petroleum v. Zhongsheng Petrochemical 67
This case was a large oil sale and purchase dispute. Shanghai Lianda Petroleum (Lianda) and Zhongsheng Petrochemical (Zhongsheng) entered into a contract for the sale and purchase of oil. The dispute arose as Lianda and Zhongsheng could not agree whether Lianda had agreed to buy 4,500 tons of oil or 5,000 tons of oil. Several PRC legal provisions and principles regarding damages were reflected in this case, such as the court's discretion to adjust liquidated damages and interest, contributory liability, foreseeability of losses, etc. With regard to each claim, the Shanghai First Intermediate People's Court ruled as follows.
Lianda claimed for return of its purchase money. Lianda paid for 21,305,000 yuan for 4,500 tons of oil, but was only allowed to take delivery of 4,000 tons of oil. The court ordered Zhongsheng to return 2,761,040 yuan to Lianda for the 500 tons of oil, with interest.
Lianda also claimed for liquidated damages based on the fact that Zhongsheng failed to release the 500 tons of oil. The court reasoned that Zhongsheng was entitled to withhold a small part of the goods as Lianda failed to pay storage fees and liquidated damages for delayed payments. As such, the court, at its discretion, decided that Zhongsheng was only liable for liquidated damages on 400 tons of oil.
Lianda also claimed for an indirect loss in the amount of 80,000 yuan, as it had entered into a resale contract with a third party for the oil that it purchased from Zhongheng and was unable to deliver to that third party due to Zhongsheng's delivery shortfall. The court rejected this claim and reasoned that Lianda was fully aware that it had not obtained possession with regard to the remaining 500 tons of oil, and it recklessly entered into the resale contract with a third party. Besides, the court also noted that as the third party company was an affiliate of Lianda and Lianda's demand for damages arising from the resale contract of 80,000 yuan had not been raised until the lawsuit was initiated, the authenticity of such damages claimed was questionable.
Zhongsheng claimed for liquidated damages as Lianda failed to make payment on time and failed to take delivery of goods on time. The court reviewed the contractual provisions regarding liquidated damages and found that liquidated damages would only apply where there were material breaches. As the court decided that the breaches for delay in payment and taking delivery were not material breaches, Zhongsheng's claim for liquidated damages was not granted.
Zhongsheng also claimed for penalties for delayed payment. The basis for this claim was Zhongsheng's contract with Company B (who acted as an agent to deal with import matters). As Lianda failed to make payment on time, Zhongsheng was liable to Company B for liquidated damages according to the relevant provisions in the agency contract between Zhongsheng and Company B. Zhongsheng submitted the agency contract as evidence. The court found that the Sales Contract between Lianda and Zhongsheng provided that an agent would be hired for import matters, as such, costs incurred with regard to the agent were foreseeable by Lianda, thus Lianda should be liable for the penalties for delayed payment. The agreed penalty for delayed payment was 0.1 per cent per day, and the court, in its discretion, reduced the penalty rate to 24 per cent per year.
Zhongsheng also claimed for storage fees incurred due to delayed pick-up. The court supported this claim and ordered Lianda to compensate Zhongsheng for storage fees.
Zhongsheng also claimed for damages for Lianda's giving up of an extra 500 tons of oil (Zhongsheng believed that the agreed number of supply was 5,000 tons, rather than 4,500 tons). The court took into consideration that Zhongsheng was partially at fault when performing the contract and had profited from the resale of the extra 500 tons of oil, and thus refused the claim.
ii Zhang v. Guilin Pharmaceutical 68
Zhang and Guilin Pharmaceutical entered into a sales agency agreement on Artesunatetablests in Tanzania. According to the sales agency agreement, Zhang would be the sole distributor for Guilin Pharmaceutical in Tanzania for five years. For the first year, Zhang would be responsible for distributing 500 boxes of Artesunatetablests, and for the remaining four years, Zhang would be responsible for distributing 1000 boxes each year. The Sales Agency Agreement further provided that Guilin Pharmaceutical would provide free samples (4 per cent of the total supply volume) to Zhang in years one to three, and that this percentage could be adjusted based on Zhang's sales performance. Guilin Pharmaceutical issued Zhang a power of attoney for Zhang to handle relevant administrative issues on its behalf with the Tanzanian government. When Zhang applied for legalisation of the power of attorney before the Chinese embassy to Tanzania, the embassy demanded a confirmation letter from Guilin Pharmaceutical affirming the document. Despite Zhang's multiple requests, Guilin Pharmaceutical failed to issue the confirmation letter, and thus Zhang failed to accomplish the necessary procedures in Tanzania in order to distribute Artesunatetablests.
In this case, the court found Guilin Pharmaceutical in breach of the sales agency agreement and ruled that Guilin Pharmaceutical should compensate Zhang for the medicine registration fees and other costs incurred by Zhang in his performance of the sales agency agreement. The issue left was whether Zhang's claim for loss of expected profits for distributing the medicine in Tanzania in the forthcoming five years should be granted. The SPC stated that the sales agency agreement had set forth specific requirement for Zhang to act as the sole agent in Tanzania, including sales quota. Whether Zhang could realise any profit would be affected by factors including actual supply, sales volume, price, relevant costs and operational risks. As there were too many uncertainties in Zhang's operation and there was no profit report on Artesunatetablests in Tanzania that could be used as a reference, it was insufficient for Zhang to rely solely on the sales agency agreement to claim an expected profit of 32.4 million yuan. As Zhang failed to adduce sufficient evidence, Zhang's claim on loss of expected profits was rejected entirely.
1 Lijun Cao is a partner and head of the firm's dispute resolution department and Sylvia Jiang and Angela Yan are associates at Zhong Lun Law Firm.
2 Note that this chapter only covers laws in mainland China. The legal systems in Hong Kong SAR, Macao SAR and Taiwan are different from that in mainland China.
3 Contract Law of the People's Republic of China (Presidential Decree No. 15), effective from 1 October 1999.
4 General Principles of the Civil Law of the People's Republic of China, issued in 1986 and amended on 27 August 2009.
5 General Provisions of the Civil Law of the People's Republic of China, effective from 1 October 2017.
6 Civil Code of the People's Republic of China (Presidential Decree No. 45), to be effective from 1 January 2021.
7 Several Provisions of the Supreme People's Court on Evidence for Civil Procedure (Fa Shi  No. 19), as amended on 25 December 2019 and effective from 1 May 2020.
8 Minutes of the National Courts' Civil and Commercial Trial Work Conference (Fa  No. 254), effective from 8 November 2019; '[t]his Minutes is not a judicial interpretation and cannot be cited as a basis for adjudication. After its promulgation, for the cases of first instance and second instance that have not yet been concluded by the people's courts, the reasoning may be made in accordance with the relevant provisions of this Minutes when the reasons for the application of law are specifically analysed in the “court opinion” section of the judicial documents.'
9 Article 113 of the Contract Law (corresponding provision in the Civil Code is Article 584).
10 Article 114 of the Contract Law (corresponding provision in the Civil Code is Article 585).
11 See Article 29 of the Interpretations of the Supreme People's Court on Several Issues concerning the Application of the Contract Law II (Fa Shi  No.5), effective from 13 May 2009.
12 Guiding Opinions of the Supreme People's Court on Several Issues regarding the Trial of Civil and Commercial Contractual Disputes under the Current Situation (Fa Fa  No.40), effective from 7 July 2009. Strictly speaking, these Guiding Opinions are not judicial interpretations in nature. However, SPC guiding opinions are similar in function with judicial interpretations, that is, the interpretation of existing laws in judicial application. In practice, the reasoning of judgment may be made by the courts in accordance with the relevant provisions of SPC guiding opinions.
13 Xiaojun Feng, Jianli Du and Weibiao Bian v. Shanxi Zhongshi Investment Co, Ltd, SPC  Min Er Zhong Zi No. 54-1.
14 See Clause 8 of the SPC Guiding Opinions on Trial of Civil and Commercial Contract Disputes.
15 Kangsheng Hu, 'Interpretation of the PRC Contract Law', Law Press China, p.206 (2012).
16 Kangsheng Hu, 'Interpretation of the PRC Contract Law', Law Press China, p.207 (2012).
17 The corresponding provision in the Civil Code is Article 587. These two articles are slightly different: Article 115 of the Contract Law provides that '[w]here the party paying the deposit fails to perform its obligations, such party is not entitled to demand a refund of the deposit'; Article 587 of the Civil Code provides that '[w]here the party paying the deposit fails to perform its obligations or its performance of obligations does not conform to the agreement, making it impossible to achieve the purpose of the contract, such party is not entitled to demand a refund of the deposit'.
18 The corresponding provision in the Civil Code is Article 588. Compared with Article 116 of the Contract Law, Article 588 of the Civil Code adds the second paragraph, which provides that '[i]f the deposit is insufficient to compensate for the losses caused by any party's breach of contract, the other party may request compensation for the losses exceeding the deposit'.
19 For example, Article 66 of the Tort Law provides that the defendant shall bear the burden to prove that he is not liable for the pollution in environmental pollution disputes.
20 Qingdao Wutong Investment Development Co, Ltd v. Qingdao Beihai'an Economic Zone Development&Construction Co, Ltd and et al,  Min Yi Zhong Zi No. 14.
21 Civil Procedure Law of the People's Republic of China (Presidential Decree No. 71), as amended on 1 July 2017 and effective from 1 July 2017.
22 Article 63 of the Civil Procedure Law provides that '[e]vidence shall include: (1) party statements; (2) documentary evidence; (3) physical evidence; (4) audio-audio materials; (5) electronic evidence; (6) witness statement; (7) appraiser opinion; and (8) investigation records. Evidence must be verified to be true before it can be used as the basis for ascertainment of facts.'
23 See Article 11 of the Provisions of the Supreme People's Court on Several Issues Concerning the Trail of Cases by Internet Courts (Fa Shi  No.16), effective from 7 September 2018.
24 See Article 20 of the SPC Provisions on Evidence for Civil Procedure.
25 See Article 112 of the SPC Interpretations on Civil Procedure Law and Article 45 of the SPC Provisions on Evidence for Civil Procedure.
26 See Article 81 of the Civil Procedure Law.
27 See Article 19 of the Tort Law.
28 Fuqing Guanqiang Garden Flower Co, Ltd v. Fuqing Municipal People's Government, SPC  Xing Pei Shen No. 360.
29 Zhang Chunying v. ICBC Changji Branch, Xinjiang Securities Co, Ltd, Yao Tao and Zhang Weimin, SPC Bulletin, Issue 2, 2013.
30 Article 9 of the SPC Guiding Opinions on Trial of Civil and Commercial Contract Disputes provides that '[a]s for breaches of sales contracts for producing equipment and raw materials, the buyer's loss of expected profits caused by the seller's breach of contract are usually loss of production profits. As for contracts on contracting operation or leasing operation, and contracts on provision of service or labour, the loss of expected profits caused by a party's breach of contract are usually loss of operational profits. As for successive sales contracts, the seller's loss of expected profits under the latter resale contract due to the breach of contract by the seller in the original contract are usually loss of resale profits.'
31 See Article 10 of the SPC Guiding Opinions on Trial of Civil and Commercial Contract Disputes.
33 Xinjiang Yakun Trade Co, Ltd v. Xinjiang Jinghe Kangrui Cotton Processing Co, Ltd, SPC  Min Er Zhong Zi No. 111.
34 See Article 119 of the Contract Law (corresponding provision in the Civil Code is Article 591); Article 114 of the General Principles of the Civil Law (corresponding provision in the Civil Code is Article 114).
35 Zhongxin Honghe Mining Co, Ltd v. Anshan Finance Bureau, SPC  Min Zhong No. 803.
36 Interpretations of the Supreme People's Court on Issues regarding Laws Applicable for Trial of Sale and Purchase Contract Dispute Cases (Fa Shi  No. 8), effective from 1 July 2012.
37 Xiaoming Xi, 'Understanding and Application of SPC Judicial Interpretation on Sales Contract', The People's Court Press, pp.463–464, (2012).
38 Beijing Xindacheng Property Management Co, Ltd v. Beijing Saiwai Feiyang Hot Pot Restaurant,  Jing 01 Min Zhong No. 5658.
39 Zhejiang Fengyuan Medical Co, Ltd v. Hainan Quanxing Pharmaceutical Co, Ltd, SPC  Min Zhong No. 701.
40 Regulations on Foreign Exchange Administration of the People's Republic of China (Order of the State Council No.481), as amended on and effective from 5 August 2008.
41 Fei He, 'The payment of foreign currency debt should adhere to the principle of benefiting the observant party', https://www.chinacourt.org/article/detail/2014/10/id/1459793.shtml.
42 Reply of the Supreme People's Court to Request for Instructions on How to Determine the Exchange Rate of CNY to Major Foreign Currency in the Trial of Foreign-Related Civil and Commercial Cases ( Min Si Ta Zi No.30), effective from 15 January 2010.
43 Reply of the Supreme People's Court to Request for Instructions on How to Determine the Exchange Rate of CNY to Major Foreign Currency in the Trial of Foreign-Related Civil and Commercial Cases (Min Si Ta Zi No. 30).
44 Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases (Fa Shi  No. 18), effective from 1 September 2015.
45 Interpretations of the Supreme People's Court on Issues concerning the Application of Law for the Trial of Cases of Dispute over Contracts on Construction Projects (Fa Shi  No.14), effective from 1 January 2005.
48 Notice of the High People's Court of Shandong regarding Regulating Expression on the 'Date When Default Interest Stops Accruing' in the Main Context of Civil Judgments (Lu Gao Fa Ban  No. 61).
49 Interpretations of the Supreme People's Court on Several Issues concerning the Application of Law to the Calculation of Interest on Debt for the Period of Deferred Performance in the Enforcement Proceedings (Fa Shi  No. 8), effective from 1 August 2014.
50 See Article 26 of the SPC Interpretations on Private Lending.
51 Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases (Fa Shi  No.6), effective from 20 August 2020.
52 Measures on the Payment of Litigation Fees (Order of the State Council No.481), effective from 1 April 2007.
53 China Real Estate Development Group Harbin Co, Ltd v. Jiangsu Suzhong Construction Group Stock Co, Ltd, SPC  Min Zhong No. 437.
54 See Article 26 of the SPC Interpretations on Contract Law I.
55 See Article 26 of the Interpretations of the Supreme People's Court regarding the Application of Laws in the Trial of Civil Disputes over Copyright (Fa Shi  No. 31), effective from 15 October 2002.
56 See Article 17 and Article 26 of the Interpretations of the Supreme People's Court regarding the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks (Fa Shi  No. 32), effective from 16 October 2002.
57 See Article 22 of the Interpretations of the Supreme People's Court regarding the Application of Law in the Trial of Cases on Patent Disputes (Fa Shi  No. 4); Article 20 of the Anti-Unfair Competition Law of the People's Republic of China; Article 119 of the PRC General Principles of the Civil Law (corresponding provision in the Civil Code is Article 119).
58 Opinions of the Supreme People's Court on Further Promoting the Efficient Distribution of Complex and Simple Cases and Optimizing the Allocation of Judicial Resources (Fa Fa  No. 21), effective from 12 September 2016.
59 Shenzhen Sike Industrial Co, Ltd v. Xuhao Gao,  Shen Zhong Fa Zhi Fu Zi No. 89.
60 Article 41 of the State Compensation Law of the People's Republic of China (Presidential Decree No. 68) provides that '[w]here the claimant for compensation claims for state compensation, the organ under compensatory obligations, the reconsideration organ and the people's court shall not charge any fee from the claimant for compensation. Tax shall not be levied upon the compensation money obtained by the claimant for compensation.'
61 Article 4 of the Individual Income Tax Law of the People's Republic of China provides that '[t]he following categories of individual income shall be exempted from individual income tax: . . . (4) welfare benefits, compensation and relief funds'.
62 Provisions on Judicial Appraisal Practice Categories (Si Fa Tong  No.159), effective from 1 January 2000.
63 See Article 33 of the SPC Provisions on Evidence.
64 Provisions of the Supreme People's Court on Several Issues concerning the Appointment by the People's Court on Appraisal in Civil Procedure (Fa  No.202), to be effective from 1 September 2020.
66 Guiding Opinions of the Supreme People's Court on Unifying the Application of Laws and Strengthening Similar Case Retrieval (for Trial Implementation), effective from 31 July 2020.
67 Shanghai Lianda Petroleum Co, Ltd v. Zhongsheng (Zhoushan) Petrochemical Co, Ltd,  Hu 01 Min Zhong No. 15843.
68 Xuecheng Zhang v. Guilin Pharmaceutical Co, Ltd SPC  Min Shen No. 4456.