Product Liability & Safety 2019

Last Updated July 09, 2019

China

Law and Practice

Authors



Baker McKenzie FenXun is the first joint operation approved by the Shanghai Bureau of Justice and the Ministry of Justice under the SHFTZ regime in 2015. Delivering integrated international and PRC legal services, the joint operation is staffed by both locally-admitted and foreign-licensed lawyers from Baker McKenzie and FenXun Partners. It works closely with lawyers and professional staff across Baker McKenzie’s 78 offices worldwide, advising leading Chinese and multinational companies on both China domestic and cross-border issues across the full spectrum of corporate and commercial law, employment, tax, intellectual property, dispute resolution and litigation, antitrust and competition. Baker McKenzie FenXun offer significant expertise in product liability issue-related litigations and actions in Chinese courts. The team has a deep understanding of the technical issues concerning a case, specialising on fast entry into the relevant technology fields of a given case, and subsequently providing incisive legal services to clients. Since 1998, Ms Liu Honghuan’s team has successively represented Nissan, Mitsubishi, Mazda, Subaru, Daimler, Porsche, Chrysler and other brand manufacturers of automotive product liability cases, including technical areas such as air bags, engines, ESC system, ABS system, installation of winches, cause-analysis of the original and installation of electrical circuit fire, BOA system. The team won all of the aforementioned cases, no product defect being found.

China’s product quality and safety laws and regulations system is generally composed of four parts: (i) the leading law – the PRC Product Quality Law; (ii) specialised laws for certain specific categories of products – see list of laws and regulations for special types of product and their special governing laws, below; (iii) the national standard system; and (iv) the product recall rules and system.

Firstly, with regard to China's Product Quality Law, it was initially an administrative regulation promulgated in 1986 that formally became a law in 1993. After years and several rounds of revisions, the latest version of the Product Quality Law was published in 2018. Three types of products were explicitly excluded from the Product Quality Law: construction projects, military products, and products that are not processed and manufactured; these will be separately regulated by the State.

Secondly, other laws in the field of specialised products have been legislated successively since the 1980s, and have been amended many times. Typically, these are the Food Hygiene Law, the Drug Administration Law, the Cosmetics Hygiene Supervision Regulation, the Agricultural Product Quality and Safety Law, and the Special Regulations of the State Council on Strengthening Supervision and Management of Food and Other Products Safety. They provide specifications for many types of products, which constitute special refinements of the product quality law and so belong to special laws that should be applied with priority; see lists of laws and regulations for special types of product and their special governing laws, below. 

Thirdly, there is the national standard system. In fact, China has a system of national and industrial standards for products, which is governed by the PRC Standardisation Law. China's national standards are divided into mandatory ones and recommended ones; a large number of mandatory national standards concern product safety. 'Mandatory' means it must be followed by the market entities, such as: GB 7102.1-2003: Hygienic standards in the Frying Process of Edible Vegetable Oil; GB 17761-2018: Technical Specifications for the Safety of Electric Bicycles; GB 9706.7-2008 Medical Electrical Equipment. According to the Product Quality Law, if there is a mandatory national standard to protect personal and property safety, the product will be directly regarded as having product defects if it does not comply with that mandatory standard.

Fourthly, product recall laws and regulations: according to the Tort Liability Law and the Consumer Rights Protection Law, if defects are found after products are put into commercial circulation, producers and sellers should give timely warning, recall, and take other remedial measures. Accordingly, China has gradually established a recall system for many kinds of special products through separate regulations and departmental rules, including automobiles, foods, pharmaceuticals, medical devices, consumer goods, children's toys and special railway equipment, etc. For example, China has a special automobile product recall system. The core laws and regulations are the Regulations on the Management of Defective Automobile Product Recall promulgated and implemented by the State Council and the Implementation Measures for the Regulations on the Management of Defective Automobile Product Recall promulgated and implemented by the former State Administration of Quality Supervision, Inspection and Quarantine, now the State Market Regulation Bureau. When automobile products are identified as defective (by producers or government departments), producers should recall automobile products in accordance with legal procedures, which can be divided into active recall and compulsory recall (ie, recall ordered by government agency).

List of the Major Laws and Regulations (Both General and Special)

For general law: the Product Quality Law, to better implement it, the State Council and General Administration of Quality Supervision, Inspection and Quarantine (now the State General Administration of Market Supervision and Regulation) issued several important administrative regulations and departmental rules, including:

  • Regulations of Industrial Product Quality Responsibility (State Council, 1986);
  • Trial Measures for Product Quality Supervision (State Council, 2011);
  • Administrative Measures for Supervisory Sampling Inspections Concerning Product Quality (General Administration of Quality Supervision, Inspection and Quarantine, 2011);
  • Opinions on Several Issues Concerning the Implementation of the Product Quality Law (General Administration of Quality Supervision, Inspection and Quarantine, 2011).

Special laws for agricultural products:

  • Law on Quality Safety of the Agricultural Product (Standing Committee of the National People’s Congress, revised in 2018);
  • Administrative Measures on the Quality Safety Monitoring for Agricultural Products (Ministry of Agriculture, 2012);
  • Measures for the Supervision and Administration of Marketing of Edible Agricultural Products (Food and Drug Administration, 2016).

Special laws for food products:

  • Food Safety Law (Standing Committee of the National People’s Congress, revised in 2018);
  • Implementing Regulations of the Food Safety Law (State Council, revised in 2016);
  • Administrative Measures on the Health-care Food (Ministry of Health, 1996);
  • Administrative Measures on Food Safety Sampling Inspection (Food and Drug Administration, 2014);
  • Administrative Measures on the Safety of Imported and Exported Food (General Administration of Customs, revised in 2018).

For special equipment that involves great danger to the personal and property safety – for example, boilers, pressure vessels (including gas cylinders), pressure pipelines, elevators, cranes, passenger cableways, large entertainment facilities and in-plant special motor vehicles:

  • Special Equipment Safety Law (Standing Committee of the National People’s Congress, 2013);
  • Regulations on the Safety Supervision of Special Equipment (State Council, revised in 2009).

Special laws for drug and medical devices:

  • Drug Administration Law (Standing Committee of the National People’s Congress, revised in 2015);
  • Implementing Regulations of the Drug Administration Law (State Council, revised in 2016);
  • Regulations on Supervision and Administration of Medical Devices (State Council, revised in 2017);
  • Measures for the Supervision and Administration of Medical Device Production (Food and Drug Administration, revised in 2017).

For cosmetics, now mainly regulated under administrative regulations:

  • Regulations on the Hygienic Supervision of Cosmetics (Ministry of Health, revised in 2019);
  • Implementing Rules for the Regulations on the Hygienic Supervision of Cosmetics (Ministry of Health, revised in 2005);
  • Measures for the Inspection, Quarantine, Supervision and Administration of Import and Export Cosmetics (General Administration of Customs, revised in 2018).

In the past, China's supervision of product quality and safety was regulated and managed by different state government organs, each on an equal level in terms of power. Three of the most important agencies were: (i) the State Administration of Quality Supervision, Inspection and Quarantine; (ii) the State Administration of Industry and Commerce; and (iii) the State Administration of Food and Drug Administration. 

Due to the unclear division of government powers and responsibilities among these equal level state agencies, in 2018 the institutional reform of the State Council merged the above three directly affiliated agencies of the State Council to form a new State Administration of Market Supervision and Regulation, which is now the core organ in charge of product quality and safety in China. It consists of the Quality Development Bureau, the Quality and Safety Supervision Department, the Food Production and Safety Supervision Department and the Food Safety Co-ordination Department, it also has departments such as the Department of Safety Supervision of Special Equipment and the Division of Standards and Technology Management specialising in the management of general products, food, special equipment, national standards, industry standards and other fields.

However, some special products are still supervised by special departments. For example, the quality and safety of drugs, medical devices and cosmetics are supervised by the State Drug Administration; the quality and safety of agricultural products are supervised by the Ministry of Agriculture and Rural Areas and the Department of Quality and Safety Supervision of Agricultural Products.

In addition, other than the abovementioned central-level administrative organs, China's administrative departments at all local levels have set up corresponding product supervision departments to take charge of local product quality and safety issues – for example, provincial market supervision and regulation bureaux, provincial drug supervision bureaux, provincial agricultural departments and so on.

The main responsibilities of the abovementioned institutions mainly include: (i) formulating specific regulatory rules for products, food, drugs, special equipment, agricultural products, etc, which are basically completed by the central level, and the rules formulated are called 'departmental regulations'; (ii) supervising and managing the quality and safety of products in the daily production and sale process; (iii) supervising and managing the products with quality and safety problems. Enterprises also conduct investigations and impose administrative penalties.

According to laws and regulations – such as the Law on Product Quality and the Law on Protection of Consumer Rights and Interests – if a business operator finds that the goods or services he/she provides are defective and dangerous to the safety of another person or to property, the operator shall immediately stop production and sale, inform the consumers and report to the relevant administrative departments. Secondly, the business operator shall take warning, recall and implement destruction measures for the products already sold. Where a recall measure is taken, the operator shall make a public announcement and bear the necessary expenses incurred by the consumer for the recall of the commodity.

The issue of announcement also has regulatory requirements in the field of China’s company law. Especially for listed companies, large-scale product safety recalls are likely to be announced according to the relevant rules of securities law.

As mentioned above, in accordance with the provisions of the Product Quality Law and the Consumer Rights Protection Law, if an operator finds that the goods or services he/she provides are defective and endanger the safety of another person or of property, the operator shall immediately stop production and sale, report to the relevant administrative departments and notify the consumers, and take such measures as recall, making innocuous (ie, safe) and destruction of the product.

The legal provisions must be carried out immediately; how to interpret 'immediately' may depend on the individual case, but in any case there must be no unreasonable delay.

It should be pointed out that the reporting obligation of product safety problems usually means that problems need to be reported when any defects are found. However, Chinese law has special requirements for certain products, such as new energy automobile products. In case of traffic collision, fire and other accidents, whether there are defects or not, producers should immediately organise investigation and analysis and submit their findings to the General Administration of Market Supervision and Regulation, also reporting to the Quality Development Bureau about the results of investigation and analysis.

The recall of drugs and medical devices shall be reported by the producer to the provincial drug regulatory department.

For general defective consumer goods, food and other products related to personal health and life safety, according to the Measures for the Administration of the Recall of Defective Consumer Goods and the Special Provisions of the State Council on Strengthening the Safety Supervision and Administration of Food and Other Products, the penalties for failure to report are as follows:

  • administrative penalties – producers and sellers failing to report may be fined (three times the value of the goods to the producers, and CNY1,000 to CNY50,000 to the sellers); for those causing serious consequences, the violator's business licences can be revoked;
  • punishment case example – in the special administration of ginkgo biloba medicines charged by the State Food and Drug Administration in 2015, local food and drug administrations investigated more than 60 manufacturing enterprises and imposed administrative penalties on more than 50 enterprises. Enterprises which violated reporting obligations and deliberately concealed the facts were severely punished, while those which voluntarily reported defects were mitigated in terms of penalties.

For defective automobile products, the penalties for concealing defects are as follows, according to the Regulations on the Management of Recall of Defective Automobile Products.

  • administrative penalties – if the producer conceals the defect, the product quality supervision department shall impose a fine of less than 1% or less than 10% of the value of defective automobile products and confiscate the illegal income; for those resulting in serious consequences, the violator’s business licence may be revoked;
  • punishment cases – so far there are no published cases of administrative punishment for failure to report.

In addition, according to the Regulations on the Management of Consumer Recall (Draft for Consumption Consumption) published by the General Administration of Market Supervision (2 February 2019), law enforcement agencies further clarified the obligation of the producer’s information-reporting obligation and increased penalties. Producers who conceal defects are ordered to self-correct within a required limited period of time and subject to a fine of up to CNY30,000. However, this regulation drafting is still in the stage of asking for comment and opinions and has not been formally promulgated yet.

As the Supreme Court of China purposefully promulgated Rules of Cause of Actions for all varieties of civil litigations, the product liability disputes are categorised under tort liability disputes, and have been further divided into four sub-causes of actions:

  • liability of the product manufacturer;
  • liability of the product distributors;
  • liability of the transportation entity; and
  • liability of the warehouse entity.

All the above cases about defective products caused damages claims filed by the infringed party. 

Plaintiff – any infringed person can be a plaintiff for these causes of action. These persons are usually buyers of the product, users of the product, and any person who suffered property damage or injury because of the product defect.

Defendant – this can be the product manufacturer, the product distributor, the entity transporting the product, and the entity warehousing the product. Among them, the manufacturer and distributor bear the same liability externally toward the infringed plaintiffs. Internally, if the defect was caused by the manufacturer, the plaintiff sued the distributor and the distributor compensated the plaintiff, then the distributor can ask the manufacturer to indemnify. Vice versa, if the defect was caused by the distributor, a manufacturer who was sued and has compensated the plaintiff can ask the distributor to indemnify the manufacturer.

The transporter and warehouser can be sued only when the defect was caused by their fault committed during transportation or warehousing; they can be only sued by the manufacturer/distributor who was sued first by the plaintiffs, and then ask the transporter/warehouse to indemnify for their fault. 

Constitutional elements of the product liability:

  • defect, which refers to unreasonable endangering of personal safety and property safety – if there is mandatory state standard, then non-compliance with the state standard presumes existence of such a defect;
  • the infringed person has been damaged; and
  • causation between the defect and the damage – the causation relationship here means (i) without such defect, the damage definitely would not have happened; and (ii) with such a defect, usually speaking it will result in damage. This is called 'proper causation' or 'adequate causation'.

The top-level governing laws include: the PRC General Principals of Civil Law, the PRC Tort Liability Law, the PRC Product Quality Law and the PRC Consumer Rights Protection Law. 

The victim/infringed party of product defect has the right to initiate product liability litigation, which includes: the purchaser of the product and the victim (whether or not he is the user of the product) who is damaged by the defect accident.

In addition, the defendant under the above-mentioned case may exercise the following rights of recourse-indemnification as the plaintiff:

  • producers/manufacturers and sellers/distributors of products are equally liable to the victim for their defective products; internally between the defendants, if the product defects of are caused by the producers, the sellers have the right to recover compensation from the producers, while if the product is defective due to the fault of the seller, the producer has the right to recover the compensation from the seller;
  • compensation relationship between producers, sellers, transporters and warehousers.

If the defect of the product is caused by the fault of the transporter and the warehouser, the producer and the seller of the product have the right to recover from the transporter and the warehouser after compensating the victim.

The PRC Product Quality Law stipulates two years in 2009; in 2017, China promulgated the PRC General Provisions of Civil Law, which changed the general limitation of action to three years; therefore, the issue of product quality limitation involves the following two aspects.

Firstly, there is the question of whether the two-year limitation of the original Product Quality Law is still applicable. So far the Supreme Court of China has not issued its opinion through any judicial interpretation or cases. However, some high-level local courts (eg, the Beijing High Court) have made it very clear that the previous two-year clause was actually following the provisions of the General Principles of Civil Law, and now since the new law – the General Provisions of Civil Law – was promulgated, they should follow the General Provisions and apply the three-year limitation. While the views of some other local courts in judicial practice are contradictory, we believe that three years should be considered a mainstream trend.

Secondly, the Supreme Court did reach a conclusion on another question: for cases that happened around the promulgation time of the General Provisions of Civil Law, which law should apply – the old law (General Principles) or the new law (General Provisions)? The Supreme Court concluded as follows:

  • before the implementation of the General Provisions of Civil Law, for a case that has already happened, if the two-year limitation prescribed by the old law has not yet expired, the court shall grant the parties’ application if they apply to adopt the new three-year limitation of action;
  • if the limitation of action begins only after the implementation of the General Provisions of Civil Law, then the new three-year limitation of action must be applied;
  • if the two-year limitation prescribed by the old law already expired before the implementation of the General Provisions, then the new three-year limitation is not applicable.

The jurisdiction of Chinese law involves two aspects: territorial jurisdiction and hierarchical jurisdiction. Territorial jurisdiction determines which court from which area of China shall have jurisdiction over the case; for hierarchical jurisdiction, there are four levels of jurisdiction in China: the Supreme Court of China, provincial high courts, intermediary courts and district courts. The hierarchical jurisdiction rule determines which level of court should be the court of first instance jurisdiction.

Territorial Jurisdiction

Territorial jurisdiction rules of product liability disputes: courts in many venue/places have jurisdiction, including the place of manufacture, place of sale, place where the infringement happened, and place of the defendant’s residence.

Hierarchical Jurisdiction

The core principle here is that the hierarchy is determined in accordance with the monetary amount of the disputed subject/claims. The latest rule promulgated by the Supreme Court in May 2019 uniformly requires that no matter whether or not it is a foreign-related case, only a case disputed for CNY5 billion can be subject to first instance jurisdiction of the provincial level high courts. For cases disputably belowCNY5 billion, the first instance trial will go to intermediary level or district level courts. 

Different provinces have different standards to divide the hierarchy amount between the intermediary and district courts, and the judicial policy-maker will consider the amount of disputes, whether they involve foreign affairs and whether a case has a significant social impact. For example, in Beijing, if both parties are in Beijing for non-foreign-related cases, a case disputed for an amount less than CNY100 million shall go to district court for its first instance trial; a case disputed between CNY100 million and CNY5 billion shall go to intermediary courts. Those cases involving amounts higher than CNY5 billion can be trialled in Beijing High Court for its first instance.

With respect to the appellate court’s jurisdiction, the court for the second instance is simply whichever is the higher level court of the first instance trial court.

For a product liability case, because sometimes it may trigger actions that involve a large group of individual plaintiffs, as a consequence in judicial practice and policy, such group disputes are usually to be handled by district courts. 

Note: the jurisdiction of intellectual property cases has special circumstances in China, but because it does not include product liability dispute, its special jurisdiction rules will not be stated here.

Before the commencement of a product liability litigation in China, there was no compulsory pre-procedure. To commence a civil litigation, the general applicable requirement are:

  • the plaintiff is a citizen, legal person or other organisation that has a direct interest in the dispute;
  • there are clearly specified defendants;
  • there are clearly specified claims, facts and reasons;
  • the case belongs to the scope of civil litigations accepted by court and subject to the jurisdiction of that court.

If a foreign enterprise or organisation participates in a lawsuit in China, it should submit an identity certificate about itself to the court, and such document shall be notarised by the notary organ of the country in which it is located and certified by the embassy or consulate of the People's Republic of China in that country, or perform the certification procedures prescribed in the relevant treaties concluded between the People's Republic of China and the country in which it is located.

There are no evidence preservation regulations specifically provided for product liability cases. In practice, general civil procedure rules about evidence preservation will apply, as described below.

Preconditions of application: where the evidence may be extinguished or may become difficult to be obtained at a later time, a party may apply to the court for evidence preservation.

Time limit for application: according to the Interpretation of the Understanding and Implementation of the Interpretation of the Supreme Court on the Application of the Civil Procedure Law, Article 98 provides that a party which applies for evidence preservation may submit an application in writing before the expiration of the time limit for adducing evidence.

Methods of preservation: according to interpretation of the Supreme Court to Article 98, evidence preservation normally would not cause financial damage to evidence holders (eg, for evidence-keeping methods such as taking photographs, audio and video recordings, copying, making transcripts, etc), therefore normally there is no need to provide security. However, for evidence preservation measures that seize and detain property or securities, etc, it may have an impact on the transaction values of the preserved evidence. Therefore, when a property loss may be caused to the evidence holder, the court shall order the party applying for evidence preservation to provide corresponding security as a guarantee.

The PRC Civil Procedure Law requires the parties to provide corresponding evidences respectively, and there is no compelling evidence discovery procedure as under common law, and it is the same answer for product liability litigation in China, there is also no evidence discovery procedure. Instead, China has two basic co-ordination paths, as detailed below.

Firstly, China has a system that a case party can apply for courts to obtain evidence. In practice, the court will issue an investigation order to the applying party or directly issue an evidence production order to the opposing party, ordering it to submit evidence. That is, under the authority of the court, the other party is required to provide evidence. According to the 2018 policy of the Shanghai High Court, when any party refused to submit without proper reasons, deliberately destroyed the relevant evidence, or submitted false evidence, the consequence will be that the court can legally accept and grant the facts claimed by the applicant, and impose sanctions and fines on the impediment party.

Secondly, China has regulations against nuisance on evidence production in civil procedure. According to Article 112 of the Supreme Court’s Interpretation of Civil Procedure Law (2015), where the documentary evidence is under the control of the opposite party, the party who bears the burden of proof may submit a written application requesting the court to order the opposite party to submit it before the expiry of the time limit for adducing evidence. Where the opposite party refuses to submit without justified reason, a people's court may identify that the contents of the documentary evidence adduced by the applicant are true.

In China’s Civil Procedure Law and product liability cases, there is no expert witness system identical to that under the American law, for example, but there is a similar position called 'expert assistant'. Persons with expertise can testify in court to explain the specific problems, and give opinions on technically relevant evidence, especially for appraisal opinions, including inquiries and challenges to the appraiser. The opinions of the expert assistants are not statutorily independent evidence, but rather a form of representation by the party itself.

Another path for Chinese courts to solve technical problems – the main path so far – is judicial appraisal. The appraisal opinions formed in judicial appraisal are one of the eight major statutory evidences under Civil Procedure Law. The appraisal opinion shall be issued by a special agency or appraiser upon the application of the party or the authorisation of the court, and the opinion shall not be accepted by court until after passing the cross-examination in court.

Some courts now have their own expert pool for special issues. At the same time, they have begun to apply the technical investigator system outside the intellectual property field. Courts hire specialised technical personnel to assist the judges on the technical issues involved in cases.

Burden of Proof

The victim bears the burden of proof for the existence of product defect, damages, and any causation between defect and damages.

For product liability actions brought by consumers, manufacturers bear the burden of proof for the three circumstances under which manufacturers should not be liable for product liability, which include:

  • the product has not been put in commercial circulation;
  • the defect causing the damage did not exist at the time when the product was put into circulation; or
  • the science and technology at the time the product is put in circulation is at a level incapable of detecting the defect.

If the manufacturer is to sue the seller for recovery of compensation, it shall bear the burden of proof for the seller’s faults.

If the manufacturer or seller is to sue the warehouser or transporter for recovery of compensation, it shall bear the burden of proof for the warehouser's or transporter’s faults.

Chinese Law on the Protection of Consumer Rights and Interests differentiates 'flaws' and 'defects'. Therefore, technically, burden of proof for 'flaws' as required by Article 23 to operators shall mean burden of proof for quality that is lower than that which is agreed on. However, in judicial practice, there are cases rendered by a high people’s court wherein Article 23 is understood to mean a shift of burden of proof for 'defects', and therefore the manufacturer is requested to bear the burden of proof for durable products not having defects. In respect to this issue, we still need confirmation from further legislation or judicial interpretation from a higher level of people’s court.

Standard of Proof

According to Section 1, Article 108 of the Supreme People’s Court’s judicial interpretation of the Civil Procedural Law, the party bearing the burden of proof must provide its evidence to a level of “having high probability” – this being the minimum standard of proof to convince a judge. Laws and judicial interpretation do not provide a specific definition for such “high probability”, but the general practice and understanding is that the percentage of such high probability should be at least 75%.

Considering the complicated technological issues involved in product liability cases and the difference in two litigation parties’ abilities to present evidence, the court might lower the victim’s burden of proof:

  • for defects – if there usually would not be accidents when the product is used under normal circumstances, then the judge would deem the burden of proof born by the victim as completed;
  • for damages – if such use usually would incur damages, then the judge would deem burden of proof for causation born by the victim as completed.

China does not provide specific rules on the jurisdiction of product liability disputes, therefore the jurisdiction for such cases would follow such general jurisdiction rules as other civil cases are bound by.

China does not have a jury system, as it is understood in some other countries, but does have a so-called 'people’s juror' system; the people’s juror in the Chinese judicial system is completely different from the jury member in the common law system. Although people’s jurors are also normal citizens, they are entitled with the same rights as judges during the entire trial; they have right to review all the case materials, to take part in investigation, and also to attend court hearings and meetings for comments on the cases.

Additionally, first trial civil procedures in China could be classified into either normal procedure or simplified procedure. Normal procedure cases are heard by a panel of judges, while simplified procedure cases are heard by one single judge, and all the relevant procedures are simplified. The dispute for product liability cases are usually applied within the normal procedure, but for those cases with clear facts, specific right and obligation relationships, and a low amount of money in dispute, they could also be applied within the simplified procedure.

In principle, China does not have an upper limit for compensation – it should all be based on actual damages. Personal injury damages are also limited to actual damages, but there are a couple of items having an upper limit on years: disability compensation and death compensation should both be calculated based on 20 years, and if victim is above 60 years old then, with each year above 60, this should be subtracted from the compensation; if victim is above 75 years old, then compensation should be calculated based on five years. Also, for the nursing care fee, it should be calculated until the victim regains the ability to take care of him/herself; if the victim is unable to recover his/her ability to take care of him/herself because of the disability, the court may determine a reasonable period of nursing according to the age and health condition of the victim, but the maximum period of nursing is 20 years. Therefore, such legal calculation method could be understood as an upper limit.

Essentially, China has no limitation for appeals of civil litigations, including product liability actions. The parties could appeal if they do not accept the first instance ruling, and both parties could appeal to the higher court based on any reason, no matter if it is related to determination of facts or laws.

An appeal against first instance judgment should be brought within 15 days after the judgment is served. A party which has no domicile within the territory of China, shall file an appeal within 30 days from the date the written judgment or verdict is served (Article 269 of the Civil Procedure Law). If representatives or principals of the foreigner, foreign company or organisation is located within the territory of China, then a 15-day appeal period should apply.

Second instance ruling in principle is final ruling. However, China does have a retrial procedure; no matter whether the first instance ruling is effective because there are no appeals, or the second instance ruling is effective after it is made, the parties could apply for retrial to the court one level higher than the second-instance court, and such court would review the matter to determine whether a retrial should be initiated. Once a retrial is initiated, the original second-instance court or the court that accepts the retrial application would conduct the retrial procedure: if the original effective judgment was issued by the first-instance court, then the retrial procedure should be applied with the first-instance procedure, and the retrial ruling could be further appealed; if the original effective judgment was issued by the second-instance court, then such retried ruling is a final and effective judgment or verdict.

Since January 2019, for first instance, intellectual property cases that involve difficult technology issues, such as invention patents, technology secrets, and new varieties of plants, etc, will be directly tried by the intellectual property tribunal of the Supreme People’s Court in the second instance. However, such new rules do not apply to product liability disputes.

Statutory defences are: non-existence of defect in the product, that the plaintiff suffers no loss, and that there is no causation between defect and loss. In practice, the most common is improper use or modification by consumers, including damage caused by third parties.

When the product is eventually found defective, other statutorily allowed defences are:

  • the products have not been put into commercial circulation yet;
  • the defects did not yet exist when the products were put into commercial circulation; or
  • the defects cannot be found at the time of its being put into commercial circulation due to lower scientific and technological levels at that time.

In product liability cases, defects would be found where products do not conform to the compulsory standards set by the State or the specific industry standard; however, when the product does conform to such standards, whether such product is defective or not would still be considered according to the substantive element, namely, whether such product unreasonably endangers the safety of human beings or property.

When the defendant argues that there is no defect in the product, usually, the fact that the product per se or the manufacturing process conforms to Chinese laws and regulations, standards set by the State, or the specific industry standard will still be presented as evidence, in order to strengthen the judge's inner understanding that there is no defect in the product.

Court fees are collected based on the plaintiff’s claimed amount of money in its subject matter. The plaintiff shall pay it first, and then at itsdiscretion the court will allocate the obligation among the parties based on the proportion of amount the court granted the plaintiff’s claims. 

Attorneys' fees are borne by each party respectively.

The judicial appraisal fee shall be advanced by the applying party, and finally paid in the way decided by the court according to the result of the case.

The testimony by an expert witness is regarded as a party’s own statement; hence, the costs incurred would be borne by the party itself.

The necessary expenses incurred in travelling, accommodation, meals, etc, of a witness for testifying in court, as well as loss of wages, shall be borne by the losing party. A party which applies for the witness to testify shall advance the costs; when no party applies and the court notifies a witness to testify, the court shall advance the costs.

In foreign-related cases, the spoken and written languages commonly used in the People's Republic of China must be applied. Upon request of the parties, interpretation may be provided at the expense of such parties.

Litigation Fund

There is no litigation fund system stipulated by law in China. The law also does not encourage any institution to make an agreement with the parties to "share the compensation for winning or losing a lawsuit".

However, the law stipulates that legal aid can be obtained in litigation for the parties who meet certain conditions and have difficulty in paying litigation fees to the court. The Regulation on Legal Aid issued by the State Council do not explicitly include product liability cases in the types of legal aid cases that can be applied for. However, this Regulation authorises provincial governments to supplement the scope of cases. At present, many provincial governments have incorporated product liability cases into the scope of legal aid. For example, Article 9, Item 7, of the Legal Aid Regulation of Beijing City clearly states that those who claim compensation for personal injury caused by product quality accidents can apply for legal aid.

In addition, as early as 2014, China’s Supreme Court proposed to explore the construction of a reasonable cost-bearing mechanism in environmental public interest litigation cases and encourage the payment of plaintiff's environmental public interest litigation costs from the environmental public interest litigation fund. In September 2018, the General Office of the Supreme Procuratorate responded to a proposal made by a representative of the National People's Congress that it would explore the establishment of a national environmental public interest litigation fund. In practice, some local governments, such as Yunnan, Zhejiang and Jiangsu provinces, as well as the high courts in Guizhou and Hainan, have successively explored the establishment of environmental public interest litigation funds and set up environmental public interest litigation fund accounts. As for product liability litigation, there is no special litigation fund, but because environmental litigation may be caused by defective products, the defendant of such litigation may include the manufacturer of the product.

Contingency Fee

A contingency fee is one type of attorney fee charge arrangement allowed by Chinese law. According to the Regulations on the Administration of Lawyer's Service Fees, in civil cases involving property issues, the maximum fee amount for risk agency shall not be higher than 30% of the amount agreed upon in the fee contract. However, the same Regulation also stipulates the types of cases in which contingency fees cannot be applied, especially in criminal proceedings, administrative proceedings, state compensation and mass group litigation cases. Therefore, when product liability cases do not fall into the category of cases that prohibit the use of contingency fees (such as group litigation or state compensation litigation etc), a contingency fee model can generally be used.

Under China's litigation system, there are no class actions that correspond to the Anglo-American litigation system. However, there are two routes/systems that can play a similar role in group action and provide corresponding proceedings for group victims.

First, under the existing civil litigation system, including product liability disputes, when the commodities or services provided by operators are defective and infringe upon the legitimate rights and interests of many unspecified consumers, this may lead to 'consumer public interest litigations'. Consumer rights protection associations established in local areas may file lawsuits with the courts. If the consumer rights protection association does not bring a lawsuit, the procuratorial organ may instead bring the lawsuit to the court.

A typical case published by the Supreme People's Procuratorate shows that in 2016, the Intermediate Court of Shiyan City of Hubei Province tried the case of Shiyan City Procuratorate of Hubei Province v Citizen Zhou Kezhao. In this case, the defendant citizen violated the legitimate rights and interests of many consumers by selling counterfeit iodised salt. Therefore, the Shiyan City Procuratorate of Hubei Province initiated civil public interest litigation in this group product liability disputes.

The other route is called the 'representative litigation system'. When a large number of victims of defective products occur, sometimes the court will issue a notice to explain the case and the litigation request, notify the obligee to register with the people's court within a certain period of time, and the registered obligee will elect a representative or the people's court will agree with the registered obligee that the representative will participate in the litigation procedure.

The litigation act of a representative shall have effect and bind on the party he/she represents. The judgments and rulings rendered by the court shall be effective and binding for all the obligees participating in the registration. The judgment or ruling shall apply if the obligee who has not participated in the registration institutes a lawsuit during the limitation period of action. For example, in 2014, the Court of Keshan County, Heilongjiang Province, heard a case of Liu Hongzong and others v Dalian Bangda Fertilizer Co., Ltd. In this case, because of the large number of victims, Liu Hongzong and other three people participated in the trial as representatives.

Case 1: Defect and Causality

This case concerns the seed coating products of a transnational corporation. In 2015, in north-eastern China, a large area of maize planting land failed to produce adequate maize crops. The seed producer claimed that the quality of seed coating products provided by the defendant company had a defect. After multiple rounds of court hearings, the court adjudicated that there was no evidence to prove the seed coating products of the defendant company were defective, and there was no causal relationship with the damage results. The significance of the case is that the defendant's lawyer used the system of expert witness and judicial expertise to effectively rebut the evidence of the plaintiff. Finally, the court determined that it is impossible to determine the defect and causality according to the burden of proof rules.

Case 2: Facts and Liability

This case concerns the automobile products of a multinational company. One day in October 2012, a vehicle caught fire at the right tire when parked outside the plaintiff's residential area, and finally exploded inside the vehicle's bonnet. Post-market winches, light wires and walkie-talkies had been added on the vehicle (ie, they were not from the original manufacturer, the defendant company). The core controversy was whether the line that caught fire in the vehicle was the post-market added line or the original line. In the second instance in 2015, the appellate court overturned the result of the trial court, holding that the possibility of fire caused by factors other than the original vehicle could not be ruled out when the plaintiff installed the equipment. Therefore, the plaintiff victim failed to prove the defect of the vehicle. The trial judgment was vacated and the original complaint request dismissed. The significance of this case is that, after discovering the facts, when the real cause of the fire is unknown, the liability issue should be determined and allocated according to the statutorily required burden of proof.

Recently, China's laws and regulations on product liability have increasingly strengthened supervision, emphasising that producers and other market players should assume product liability and responsibility. For example, the Regulations on the Management of Consumer Recall (Draft for Public Comments, not effective as yet) issued by the General State Administration for Market Regulation on 2 February 2019 further clarifies the producer's obligation to report information and adds penalties for failure to do so. For producers who intentionally conceal the existence and knowledge of defects, they are ordered to self-correct within a certain limited time period and receive a fine of up to CNY30,000. This provision is still in the consultation stage and has not been formally established, but nevertheless represents a legislative trend.

In the automotive industry, China is strengthening the supervision of new energy vehicle recalls. In March 2019, the State Administration of Market Supervision and Regulation promulgated the Notice on Further Strengthening the Management of Recall of New Energy Vehicle Products (Municipal Supervisory Letter No 531), which stipulated several work items on strengthening the supervision of recall of new energy vehicles. With the increase of new energy vehicles year by year, their safety is increasingly important. The main causes of defects were electronic control, machinery, electrical appliances and batteries system failures. 

In 2018, the State Administration of Market Supervision and Regulation, relying on the National Vehicle Accident Deep Investigation System and Defect Information Collection System, organised three defect investigations upon new energy vehicles, conducted five fire accident site investigations in conjunction with relevant departments, and urged seven production enterprises to implement recalls involving 124,000 defective vehicles of 33 models. Such a law enforcement practice will continue and strengthen in the coming years.

The latest legislative trend related to product liability and product safety in China began on 24 April 2019. On that day, the General State Administration for Market Regulation led the organisation of a leading group and an expert advisory committee to substantially revise the Product Quality Law. Although the specific content draft is not published yet, the primary goal is clear, to: (i) further strengthen the supervision of product safety and product quality, and innovate in terms of the supervision mechanism; (ii) let the general business enterprise in the market be the main body of quality safety, strengthening their product responsibility and improving the general responsibility system.   

Take the automobile industry as an example. China's General Administration of Market Supervision and Regulation will continue to promote the construction of an automobile recall system. On the one hand, it will carry out legislative research on the Motor Vehicle Safety Law and promote the formation of consensus on this legislation. On the other hand, it will implement the requirements of the Air Pollution Prevention and Control Law, speed up the legislative process of vehicle emission recall, set up a technical support system for vehicle emission recall, establish relevant system norms such as problem clues in vehicle emission recall, investigation and identification of emission defects, supervision and management of recall implementation, quality assurance of vehicle emission components, and co-ordinate the promotion of vehicle pollution prevention and control.

China's regulators will also promote the construction of national product safety laboratories, authorise or identify technical institutions to participate in defect identification, solve the shortcomings brought by technological capabilities, strengthen communication with public security, transportation, customs and environmental protection departments, promote the sharing of safety information, and deepen co-operation with medical, environmental and engineering institutions. It will establish a National Product Injury and Safety Scientific Committee, explore co-operation with the National Internet Emergency Response Centre, Alibaba, Baidu, insurance institutions and other units, and will use internet platform to grasp the problem clues, strengthen consumer tips and improve the recall completion rate.

China’s regulators will also strengthen research on automotive safety policies, strengthen the research on the common problems of product safety, guide enterprises to improve product design and standards, and promote the overall improvement of quality and safety level of small and medium-sized enterprises and regions in line with industry departments and associations.

China's regulators will also strengthen the research on the quality and safety of automobiles and products, compile the report on the status of automobile safety and recall, and provide data support for promoting high-quality development of the industry, as well as strengthening the epidemiological investigation of product injury and disease, injury mechanism and preventive measures.

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Baker McKenzie FenXun is the first joint operation approved by the Shanghai Bureau of Justice and the Ministry of Justice under the SHFTZ regime in 2015. Delivering integrated international and PRC legal services, the joint operation is staffed by both locally-admitted and foreign-licensed lawyers from Baker McKenzie and FenXun Partners. It works closely with lawyers and professional staff across Baker McKenzie’s 78 offices worldwide, advising leading Chinese and multinational companies on both China domestic and cross-border issues across the full spectrum of corporate and commercial law, employment, tax, intellectual property, dispute resolution and litigation, antitrust and competition. Baker McKenzie FenXun offer significant expertise in product liability issue-related litigations and actions in Chinese courts. The team has a deep understanding of the technical issues concerning a case, specialising on fast entry into the relevant technology fields of a given case, and subsequently providing incisive legal services to clients. Since 1998, Ms Liu Honghuan’s team has successively represented Nissan, Mitsubishi, Mazda, Subaru, Daimler, Porsche, Chrysler and other brand manufacturers of automotive product liability cases, including technical areas such as air bags, engines, ESC system, ABS system, installation of winches, cause-analysis of the original and installation of electrical circuit fire, BOA system. The team won all of the aforementioned cases, no product defect being found.

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