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P.R. China’s First Statute on Choice of Law

I am grateful to XIAO Fang, Post-doctoral fellow and lecturer at Remnin University Law School, for contributing this report.

The Statute on the Application of Laws over Foreign-Related Civil Relations of the People’s Republic of China was adopted at the 17th Session of the Permanent Committee of the 11th National People’s Congress of the People’s Republic of China on October 28, 2010. It has been promulgated and shall come into force as of April 1, 2011. This is the P.R. China’s first statute on conflict rules.

The Statute comprises 52 articles which are divided into 8 chapters (general rules, civil subjects, succession, real rights, obligations, intellectual property, and supplementary provisions). It will be applied over the civil affairs with elements relating foreign countries and China’s special administrative regions of Hong Kong and Macao as well.

According to the legislators, during the process of drafting, the conflict law statutes of some countries, principally Germany, Switzerland and Japan, and the conventions of the Hague Conference of Private International Law and some Europe Union’s regulations have been referred to.

As most of Chinese civil and commercial statutes already include some conflict rules, for the areas that are not covered by this new statute, such as maritime law, civil aviation law and negotiable instrument law, the conflict rules in the related statutes should still be applied .

In the Chapter of General Rules, the Statute provides for the “application immédiate” of Chinese mandatory rules (Article 4), the defense of public policy against the application of foreign law (Article 5) and excludes renvoi in Chinese courts (Article 9). Pursuant to the new Statute, the limitation of action is governed by the law applicable to the civil relation (Article 7); characterization is governed by the lex fori (Article 8); the applicable foreign law should be ascertained by judges, while the parties should provide for the content of foreign law if they chose to apply it by agreement (Article 10).

During the process of drafting, the principle of most significant relationship has ever been stipulated as the principle of application of laws, like the provision of Article 1 of the 1978 Austrian Statute on Private International Law, which provided for: “The law applicable to foreign-related civil relation should have the most significant relationship with the relation.” Nevertheless, in the final draft of the Statute, the article was deleted, and it was provided for in Article 2(2) that the most significant relationship principle will be supplementally applied in absence of conflict rules in the Statute.

Party autonomy got significant development in the new Statute. Besides contracts and family law, its application was extended to torts and real rights: in the cases of real rights in movables (Articles 37, 38) and tort (Article 44), the parties may choose freely the applicable law.

The new Statute also attaches importance to the protection of weaker parties in international civil relations. In the cases of relations between children and parents (Article 25), maintenance (Article 29), Guardianship (Article 30), consumption contract (Article 42), and product liabilities (Article 45) and so on, the lex personalis i.e. law of the nationality or the habitual residence of the weaker parties or the law which is favorable to the protection of the interests of the weaker party should be applied.

Comments on this entry are closed.

  • S.Averin November 3, 2010, 5:54 pm

    I would be grateful if you tell us where to download the text of the new Statute.

  • Anna Gardella November 4, 2010, 10:10 am

    Thanks a lot for the outline of this very interesting statute which seems to incorporate many of the most adavnced developments currently discussed in PIL. With regard to real rights, which are subject to the law chosen by the parties, could you please clarify whether the application of mandatory norms or ex post corrections is provided in case the applicable is a foreign law?

  • Martin Illmer November 4, 2010, 12:06 pm

    Following up on the first comment: Is there even an English translation available (or alternatively a German one)?

  • Fang Xiao November 4, 2010, 2:11 pm

    You could find the Chinese version of the text here: http://www.npc.gov.cn/huiyi/cwh/1117/2010-10/28/content_1602779.htm.

    I’m sorry that there is not English translation available for the moment.

    As to law application of real rights in movables, the application of mandatory norms is provided, but not ex post corrections.

  • Anna Gardella November 7, 2010, 11:27 pm

    Thanks a lot for your reply, and … we look forward to an English translation of the statute!

  • LU Song November 9, 2010, 4:05 am

    In response to the inquiry of Anna Gardella, let me share with you some of my personal comments on Chapter Five (Right in Rem) of the Law of the PRC on the Law Applicable to Foreign-related Civil Relationship, which comprises five articles as follows (my translation):

    Article 36 In respect of the rights in rem in immovable property, the law of the place where the property locates will be applicable.
    Article 37 The parties may by agreement choose the law applicable to the rights in rem in movable property. Where the parties do not made such a choice, the law of the place where the movable property locates when the legal facts occurs will be applicable.
    Article 38 The parties may by agreement choose the law applicable to the change of the rights in rem in movable property which is in transit. Where the parties do not made such a choice, the law of the destination of the transportation will be applicable.
    Article 39 In respect of valuable papers, the law of the place where the rights in such valuable papers is realized or another law which has closest relationship with such valuable papers will be applicable.
    Article 40 In respect of pledge of a right, the law of the place where such pledge is created will be applicable.

    Comments:
    1. China follows the Civil Law system by making a distinction between “rights in rem (real rights)” and “rights in obligations”.
    2. There was general consensus as to Articles 36, 38 and 40 among the people involved in the discussion of the draft law, though suggestions on their wording had been made during the process. I, together with some other scholars, think that Article 37 and Article 39 need to be changed or deleted.
    3. With respect of Article 37, I believe the rule incorporated in the first sentence is a bit misleading. As a general rule, the law of the place where the movable property locates will be applicable to such property. Only when the owner decides to dispose his movable property, whether in a way of sale, creation of a security interest or otherwise in the form of a contract, will the mutual choice of a governing law to the rights in that property becomes a possibility. In this limited case, the issue falls into the category of contract, no longer remain in the realm of the rights in rem. Accordingly, the applicable laws in case of rights in rem will be those directly provided by statutes or other law, not by agreement of the parties.
    4. Regarding Article 39, the previous draft version of this article reads like this: “The parties may by agreement choose the law applicable to valuable papers; in case so such choice has been made, the law of the place where the rights in such valuable papers is realized or the place where the principal place of business of the issuer locates will be applicable.” I am in favour of deleting this article, primarily because there is no statutory or judicial definition of “valuable papers” under Chinese law. The draft of this previous version was originally based on Article 106 of the Swiss Code of Private International Law where you find it talks about title documents. (The present wording may be partly attributable to translation.) However, valuable papers may include not only title documents, but also negotiable instruments, securities, etc. Although the adopted version provides for the applicable law which has the closest relationship with the valuable paper, which may be an omnipotent prescription, it is not right when the law itself does not have a definition on the object to which the governing law is stipulated, which might cause difficulty in litigation and arbitration.
    5. One last comment on the respect and emphasis of party autonomy in this statute. Under current Chinese judicial practice, if the litigating parties, in their written submissions or oral arguments, expressly base their positions on the law of one and the same country, the court can view it as the parties’ agreement on the choice of law.

    LU, Song
    lusong99@gmail.com

  • LU Song November 9, 2010, 4:13 am

    Sorry, there are some typos in the translation. The corrected version:

    Chapter Five Right in Rem

    Article 36 In respect of the rights in rem in immovable property, the law of the place where the property locates will be applicable.
    Article 37 The parties may by agreement choose the law applicable to the rights in rem in movable property. Where the parties do not make such a choice, the law of the place where the property locates when the legal facts occurs will be applicable.
    Article 38 The parties may by agreement choose the law applicable to the change of the rights in rem in movable property which is in transit. Where the parties do not make such a choice, the law of the destination of the transportation will be applicable.
    Article 39 In respect of valuable papers, the law of the place where the rights in such valuable papers is realized or another law which has closest relationship with such valuable papers will be applicable.
    Article 40 In respect of pledge of a right, the law of the place where such pledge is created will be applicable.

  • Anna Gardella November 11, 2010, 9:25 am

    Lu, thanks for providing the translation and for your comments. Actually party autonomy in rights in rem is a debated issue in current PIL, as a remedy to the traditional lex rei siate rule which seems unable to accomodate ease of displacement of chattels across borders in the current world. In this respect the new Chinese Statute incorporates a very modern solution, even if it is not in line with the traditional division between rights in rem and law of obligations. Any news on follows up is highly appreciated.

    Anna
    anna.gardella@unicatt.it

  • LU Song November 11, 2010, 11:02 am

    Dear Anna, thanks for the compliment to the new Chinese Statute on conflict rules. Generally speaking, it is a statute incorporating many new developments in the area of private international law worldwide and making them suitable for the social reality in China.

    It is a statute based still on jurisdiction-selection rather than rule-selection.

    Three cascading principles guiding judges to choose substantive law applicable to a particular case are provided under this new law: (1) observe the conflict rules directly prescribed by the statute; (2) respect the parties choice of the governing law where permitted by law; (3) select the law which has the closest connection to the legal relation absent any statutory rules or parties choice.

    In respect of movable property, as in the case of other legal relationships, the most important value of PIL is certainty. It is difficult to tell which law is better in the interest of justice to the parties in a particular case until you carefully study the content of relevant laws. Situation occurs where a judge, with much effort and legal reasoning, find a substantive law which turns out to be a law less desirable in the eyes of the same judge than another law he/she is familiar. However, the law of every sovereign country will be treated with equal respect.

    In case of movables, lex situs is a principle with certainty and convenience, which can be supplemented by the judge’s discretion to choose another law which has the closest connection with the movable. Of course, the parties can always select the governing law in contract they have concluded.