The legal system of China

  • China
  • 12/05/2007
  • Migalhas

1. Constitution, Government & Legislation
The Chinese Government has always been subordinate to the Chinese Communist Party (CCP); its role is to implement party policies. The primary organs of state power are the National People’s Congress (NPC), the President, and the State Council. Members of the State Council include Premier Zhu Rongji, a variable number of vice premiers (now four), five state councilors (protocol equal of vice premiers but with narrower portfolios), and 29 ministers and heads of State Council commissions.

Under the Chinese Constitution, the NPC is the highest organ of state power in China. It meets annually for about 2 weeks to review and approve major new policy directions, laws, the budget, and major personnel changes. These initiatives are presented to the NPC for consideration by the State Council after previous endorsement by the Communist Party’s Central Committee. Although the NPC generally approves State Council policy and personnel recommendations, various NPC committees hold active debate in closed sessions, and changes may be made to accommodate alternate views.

When the NPC is not in session, its permanent organ, the Standing Committee, exercises state power.

The government’s efforts to promote rule of law are significant and ongoing. After the Cultural Revolution, China’s leaders aimed to develop a legal system to restrain abuses of official authority and revolutionary excesses. In 1982, the National People’s Congress adopted a new state constitution that emphasized the rule of law under which even party leaders are theoretically held accountable.

Since 1979, when the drive to establish a functioning legal system began, more than 300 laws and regulations, most of them in the economic area, have been promulgated. The use of mediation committees – informed groups of citizens who resolve about 90% of China’s civil disputes and some minor criminal cases at no cost to the parties – is one innovative device. There are more than 800,000 such committees in both rural and urban areas.

Legal reform became a government priority in the 1990s. Legislation designed to modernize and professionalize the nation’s lawyers, judges, and prisons was enacted. The 1994 Administrative Procedure Law allows citizens to sue officials for abuse of authority or malfeasance. In addition, the criminal law and the criminal procedures laws were amended to introduce significant reforms. The criminal law amendments abolished the crime of “counter- revolutionary” activity, although many persons are still incarcerated for that crime. Criminal procedures reforms also encouraged establishment of a more transparent, adversarial trial process. The Chinese constitution and laws provide for fundamental human rights, including due process, but these are often ignored in practice.

2. Sources of law
The highest and ultimate source of legal norms in the PRC is the Constitution of the People’s Republic of China. It establishes the framework and principles of government, and lists the fundamental rights and duties of Chinese citizens.

Unlike some civil law jurisdictions such as Germany, China does not systematically lay down general principles in its constitution which all administrative regulations and rules must follow. The principles of legislation and the validity and priority of law, rule and administrative regulations are instead listed in the Legislation Law, constitutional provisions, basic laws and laws enacted by the National People’s Congress and its standing committee, regulations issued by the State Council and its departments, local laws and regulations, autonomous-zone regulations, legal explanations and treaty norms are all in theory incorporated into domestic law immediately upon promulgation.

Signed international treaties are in practice automatically incorporated into PRC law, and they are superior to the relevant stipulations of PRC laws. However, the PRC reserves the right to make reservations regarding provisions of a treaty.

Unlike common law jurisdictions, there is no strict precedential concept for case law and no principle of stare decisis. In addition, there is no case or controversy requirement, which would requires that the Supreme People’s Court limit its decisions to actual cases, and the SPC does issue general interpretations of the law. In practice, lower people’s court judges attempt to follow the interpretations of the laws decided by the Supreme People’s Court. In addition, unlike common law jurisdictions, higher courts have the power of supervision and guidance, which means that they can on their own initiative reopen a case that has been decided at a lower level.

Courts in the PRC do not have a general power of judicial review, which enables them to strike down legislation. However under the Administrative Procedure Law of the People’s Republic of China, they do have authority to invalidate specific acts of the government. In cases where there is a conflict of laws, the process to resolve this conflict is outlined in the Legislation Law of the People’s Republic of China, in which an interpretation is requested by the legislative body that is responsible for the law.

This process has been criticized both by Western and Chinese legal scholars for being unwieldy and for not allowing for judicial independence and separation of powers. At the same time, the counterargument has been made that resolving legal conflicts is primarily a legislative activity and not a judicial one.

Finally courts outside of the special autonomous regions including the Supreme People’s Court do not have jurisdiction over the Hong Kong and Macao SAR’s, although the Standing Committee of the National People’s Congress does have and has used its authority to interpret the Basic Law of Hong Kong.

3. Varieties of law
PRC governmental directives exist in a hierarchy, which is defined by the Legislation Law of the People’s Republic of China. The hierarchy of regulations are:

The Constitution of the People’s Republic of China

National laws (guójiā), which are issued by the National People’s Congress

Administrative regulations, which are issued by the State Council

Local decrees, which are issued by local People’s Congresses

Administrative and local rules, which are issued by an administrative agency or by a local People’s Government

Major areas of law are substantive laws and procedural laws. The former include administrative law, criminal law, civil law or business law, and economic law. These are separated into different branches. For example, contract law is considered a branch of civil law. The latter includes civil procedure law, criminal procedure law and administrative procedure law.

3.1 Civil law and Civil Procedure Law
In 1986 the National People’s Congress adopted the General Principles of the Civil Law of the People’s Republic of China, which helped clarify the scope of the civil law. Article 2 of the document states that the civil law governs personal and property relationships between natural persons and legal persons having equal status. It covers a wide range of topics, including the General Principles, marriage law, property law, contract law, copyright law, and trademark law. From the point of view of some scholars, business law, such as corporation law, bankruptcy law, insurance law, and law on negotiable instruments, is distinguished from civil law.

However, in contrast to other civil law jurisdictions, the PRC has not yet consolidated its civil law into a single code, and the civil law of the PRC has developed in such a way that leads to a large amount of confusion and contradiction within the legal code. With China’s booming economy, a new, more affluent class is emerging, the property of which is in urgent need of legal protection.

Civil procedural law advocates the principle of ‘open trial’ – a system in which the second instance is the final hearing, although Chinese courts are notorious for their inefficient and bureaucratic working styles. Enforcing rulings can prove particularly difficult.

3.2 Criminal law and Criminal Procedure Law
The criminal law is based on the Criminal Code (first adopted in 1979 and later amended in 1997) and supplemented by a number of additions for the NPC’s Standing Committee. One key provision of the Legislation Law of the PRC is Article 8, which states that only a national law passed by the NPC can criminalize behavior.

The harshness of criminal law is under heavy criticism, especially the insistence on capital punishment for many crimes. China accounts for over 70% of criminals executed in the world per year, which has raised great concern among different human rights groups and international organizations.

The criminal procedural law provides for the defense of the accused. However, due to the structure of the PRC’s government and its organs, there is little balance in cases where it should theoretically be present.

3.3 Administrative law and Administrative Procedure Law

The State Council is authorized to promulgate laws and regulations on social law, especially in economic regulation, which also consists of economic laws. These laws include environmental protection law, regulations on taxation and customs, product quality law, and so on. In these areas, the central government and its organs are superior to other parties, such as enterprises and individuals, for they exercise the power of regulation.

The Administrative Procedure Law of the People’s Republic of China (1989) allows legal persons to bring legal challenges against administrative actions. The types of administrative actions that can be challenged must be “concrete actions”, which include: administrative punishments (such as detentions and fines), administrative coercive measures, interference with the operations of enterprises, refusal to take action or perform an obligation, unlawful demands for performance of duties, and violations of rights of the person or property rights. The review of state action is carried out in the local people’s court. Court review of agency action is not permitted for state action involving national defense or foreign affairs. Moreover, the court cannot review administrative legislation.

As a matter of fact, although administrative litigation involving governments is on the rise due to citizens using legal measures to protect their property from government violation, it is still quite difficult for the court to give fair judgements or efficient execution, as the court’s judges are appointed by the Communist Party and finance comes from the government.

4. The Judiciary
4.1 The types of courts in China, and the paths of appeal.
The judge and prosecutor still are regarded as public servants. It is widely recognized that the quality of judges and prosecutors are lower than lawyers. In 2002, the unified State Judicial Exam (SJE) was introduced, partly to improve the quality of the judiciary. Any person who wants to work as a judge, prosecutor, or become a practicing lawyer or a public notary, will need to pass the SJE to obtain a Certificate of Legal Profession Qualification. Like in courts of imperial times, judges are also inquisitors who question witnesses, but unlike traditional courts, only evidence given in court is taken into account. Parties are permitted agents ad litem who may be lawyers or any citizen approved by the court. A major concern with the modern court system is bribery of judges resulting from low salaries and financial dependence on local government. Though most disputes that reach the courts still end in mediated rather than adjudicated outcomes, Chinese judges still apply formal laws and follow rules of civil procedure.

4.2 People’s courts
Under the Organic Law of the People’s Courts (1983), judicial power is exercised by the courts at four levels:

basic people’s courts (jī céng rénmín fyuàn; also called “local” people’s courts): Courts at county or district level. Tribunals may also be set up in accordance with local conditions.

intermediate people’s courts: Prefecture-level courts.

higher people’s courts: Provincial-level courts.

the Supreme People’s Court (or National Supreme Court, or Supreme Court)

The highest court in the judicial system is the Supreme People’s Court in Beijing, directly responsible to the NPC and its Standing Committee. It supervises the administration of justice by the people’s courts at various levels. There is also a Politics and Law Committee in CCP which is in charge of the direction and cooperation of court, procuratorate, police and ensure CCP’s leadership over judicial issues.

Cases are decided within two instances of trial in the people’s courts. This means that, from a judgement or order of first instance of a local people’s court, a party may bring an appeal only once to the people’s court at the next highest level, and the people’s procuratorate may protest a court decision to the people’s court at the next highest level. Additionally, judgments or orders of first instance of the local people’s courts at various levels become legally effective if, within the prescribed period for appeal, no party makes an appeal. Any judgments and orders rendered by the National Supreme People’s Courts as court of first instance shall become effective immediately.

In accordance with Article 11 of the Organic Law, “the people’s courts at all levels shall set up judicial committees within the courts” in order to sum up judicial experience and to discuss important or difficult cases and other issues relating to the judicial works.

4.3 Professional and special courts
Other special courts include military courts, maritime courts and railway courts. The military court, established within the People’s Liberation Army, is the relatively closed adjudication institution in charge of hearing criminal cases involving servicemen. The maritime courts are located at the major sea and river port cities. They have jurisdiction over maritime cases and maritime trade cases of first instance. It ranks equivalent to an intermediate court in the judiciary hierarchy. The railway transport court deals with criminal cases and economic disputes relating to railway and transportation.

4.4 People’s procuratorates
Under Article 129 of the Constitution, people’s procuratories are “the State organs for legal supervision”. Its functions are defined by the Organic Law of the People’s Procuratorates (1983).

The Supreme People’s Procuratorate is set up at national level. The local people’s procuratorates are divided into three tiers, as with the people’s courts. Procuratorial committees are created inside the people’s procuratorates at different levels. According to Article 3 of the Organic Law, “the procuratorial committee shall apply the system of democratic centralism and, under the direction of the chief procurator, hold discussions on important cases and other major issues”.

4.5 Informal mediation
Like in imperial times, resolving disputes in Communist China has relied heavily on community mediation rather than litigation within a formal court system. Most disputes in China to this day are settled informally through community mediation. Likewise, the emphasis has been on compromise, maintaining social harmony, and establishing order. But unlike previous eras, there existed, notably in the first part of the Communist era, mass show trials and public criticisms to enforce the party line, establish party dominance, and make examples of certain elements of society.

After the Communist Party took control, it institutionalized many of the existing informal community mediation systems into the party-state structure. Mediation Committees, staffed by five to eleven community members, were made part of larger Residents’ Committees and charged with settling disputes through peer pressure and conciliation. Like in imperial times, the more formal court system was only employed when community mediation failed to resolve the dispute.

With the emphasis on promoting the party, state, and revolution, one party could bring on accusations against another party without any direct dispute between them. The Communists established a formal court system based on the Soviet model following their victory, but ideological conflict between law specialists and cadres caused the system to break down. In the 1952 “three anti” (san fan) and “five anti” (wu fan) movements, mass public trials with crowds of onlookers shouting criticisms resulted in the execution and detention of hundreds of thousands of “counterrevolutionaries” without employing the formal legal system. During the Cultural Revolution, the court system was abolished entirely and laws stopped being enacted. This resulted in community mediation systems taking on more importance. The People’s Liberation Army was put in control of judging cases. Red Guard brigades often forced individuals to conduct self-criticisms and sent people to reeducation camps for being “reactionaries.”

With the Deng Xiaoping reforms, there has been a return to socialist legality, though upwards to 90% of all cases are still resolved traditionally-through community mediation.

5. Law enforcement
The Ministry of Public Security is the principal police authority. It is responsible for maintaining social and public order, and also for conducting investigations and arrest of suspects in criminal cases. It maintains public order in accordance with the administrative power granted by law and through the police force. It can also settle civil disputes between citizens.

The People’s Armed Police is a paramilitary force, which is used in cases of serious disturbances.

The Ministry of State Security exists a counterespionage organ and is also used to monitor and control perceived threats to the government and party.

6. Legal reasoning and implementation of law
In China, laws are usually broadly drafted with much discretion left to implementing authorities. Some laws in the PRC have amounted to little more than statements of principle. Real clarity exists only at the level of administrative rules , circulars or bylaws.

6.1 Equality and justice
Since 1978, the government has departed significantly from its focus on class status, and replaced it with a qualified presumption of equality. The principle of legal equality is enshrined in basic laws such as the Economic Contract Law (1982), which provides that contracting parties enjoy equal rights, the General Principles of Civil Law (1987), which ascribes various rights universally to all natural persons, and the Administrative Litigation Law (1989), which allows any citizen to file suit against administrative agencies. However, the doctrine does not extend to the right of labour to engage in collective bargaining or strike action.

The PRC constitution and laws provide principles for fundamental human rights, but there is general agreement, even among members of the government, that many of these rights are just in principle not fully implemented. There is, however, considerable disagreement over which rights require the most attention and how the PRC should address these deficiencies. In particular, the Chinese government tends to argue that major improvements in China’s human rights record can be made within the context of leadership of the Communist Party of China, while many both in China and outside of the government argue that any real improvement is impossible without fundamental changes in the political system. (See human rights in the People’s Republic of China)

The expansion of the legal profession has been beneficial for legal awareness. As of 2002, there have been established 2,156 legal aid centres staffed by over 7000 full-time legal professionals. According to the Ministry of Justice, this system will continue to expand, given that “establishing a legal aid system” is a priority of the Chinese government as outlined by the 10th Five-Year Plan (adopted April 2002).

6.2 Guanxi and corruption
Personal, client and familial relationships (often called guanxi) override the concept of legal equality and justice in civil and economic relationships. The basic regime tenets of legality are not being assimilated. Guanxi contacts are exploited in order to surmount institutional barriers.

The influence of these extra-legal norms harm the impartiality of administrative bodies as well as the judicial system. In some cases, strong feelings of localism cause local courts to refuse to cooperate in enforcing awards, even when the award has been made by an arbitration body in Beijing. However, this negative view of guanxi is not universal, Schramm and Taube argue that guanxi has personalistic systems of social relationships have positive elements in producing social capital and that personalistic norms can co-exist with impersonal legalistic ones.

7. Legal Profession
Mainland Chinese legal practitioners, defined in the August 1980 Interim Regulations of the People’s Republic of China on Lawyers as ‘state legal workers’, function in legal advisory offices under the supervision of the Ministry of Justice. The importance of and demand for legal services is increasing rapidly and there is now a move towards lawyers engaging in private practice from their own offices. These non-state law firms operate as collectives. Although economically and administratively independent, they are subject to the approval and management of the local justice agency.

8. Law Schools
Over the last two decades, legal education has paralleled the growth of the legal profession. It is one of the most competitive academic disciplines in terms of university and college enrolment, and the number of judicial and legal training institutions continue to grow. The trend has been determined by a strong demand in the market for legal services, and the need to improve the professional quality of judges and prosecutors.

Chinese judicial and legal training facilities are divided into law schools, law universities and justice colleges; and specialized judicial and professional training centres.

Law courses last three years. Although emphasis is placed upon the political content of jurisprudence, the curriculum in major institutions has expanded considerably in recent years. A semi-annual nationwide bar examination is open to individuals who have completed university or correspondence courses plus a further two years of judicial work. Candidates may then apply for a lawyer’s qualification certificate.

Approximately 70% of practicing lawyers have university degrees, and 30% only have college diplomas.

9. China Legal — The elevator speech
Obey the law. You will hear of those who are violating this or that law and getting away with it, but that just means they have been lucky so far.

Intellectual Property. IP is where your company’s value lies and you must protect it. Trademarks are very valuable in China and cost very little to register. But, if you don’t register your trademark, someone else surely will and you will lose it. First to register gets it, so register right away. Don’t wait. Copyrights and patents, we will discuss next time. Non- competes, non-disclosures (NDA), and trade secret agreements work there and we will definitely need to talk about your need for those.

Contracts. You need good contracts. They need to be specific and usually they should be in Chinese. Choice of jurisdiction for disputes is critical and is the most common error I see. We will talk more about this later.

Due Diligence. I should have mentioned this first because it is probably most important. With whom you do business is key. If you team up with a crook, we lawyers cannot help you much, if at all. We have companies with whom we work that can help you investigate your Chinese partners.