The past year has once again made the world aware that things are always in flux. By virtue of the thorough implementation of pandemic prevention measures, social life and production order gradually returned to normal in most parts of China by the middle of 2020.
Partner
Commerce & Finance Law Offices
It remains to be seen in what ways the impact of the pandemic – or the changing times on such things as the flow of people, trade activities, geopolitical relations, etc. – on an international scale will transmit to the field of dispute resolution services in China in the future, and what specific new requirements it will place on the legal community.
However, for the legal services industry, there are constants that remain in the midst of great changes, and there are certain directions that can be followed into an unpredictable future. Along with the modernisation of the country in past decades, laws are always being updated and improved in lockstep, and legal services are also facing greater demands for specialisation and refinement.
The maturation of economic activities has been accompanied by an increasing complexity in types of business behaviour and the multiplication of legal relationships, and the Civil Code, which came into effect this year, is just such a response to modern economic activities and will guide and accompany all aspects of social life for a long time to come. For practitioners in the field of dispute resolution, not only does the Civil Code contain specific rule changes, but, more important, are the challenges that it poses by updating systems.
Take the provisions of the Tort Liability Part of the Civil Code, on the scope of protection offered by the tort rules, as an example. Article 1 of the Tort Liability Part of the Civil Code modifies the “generalisation + enumeration” legislative model of article 2 of the original Tort Liability Law, and specifies in a generalised manner the scope of protection of the tort rules as being civil rights and interests.
In combination with chapter 5, Civil Rights, of the General Provisions Part of the Civil Code, types of civil rights that were not originally explicitly set out now have a basis for regulation by tort law. This change provides answers to issues long debated in certain academic and practical circles, e.g., whether tort rules are applicable when purely economic interests, such as claims, sustain injury.
Disputes over harm to relative rights, such as claims, have long existed in practice, e.g., disputes over false statements relating to securities, for which the Securities Law and related judicial interpretations provide express compliance guidelines. However, with the increasing complexity of trading instrument portfolios, and the integration of multiple legal relationships in investment products, other instances of damages to claims that for the moment lack specific rule guidance have arisen in reality. The handling of disputes involving these civil torts, in the broadest sense, requires legal counsel to have an in-depth and substantive understanding of the legal relationships involved in such disputes, and the intrinsic connection among the branches of law.
Before the promulgation of the Civil Code, the author’s team handled several cases involving the exploitation of the bankruptcy system by the holding company of the debtor, to hollow out the debtor, to evade the debt. As the second paragraph of article 2 of the Tort Liability Law does not expressly enumerate claims as being subject to the protection of tort law, the majority of creditors of such debtors opt to take the contract law route, while the author’s team, in contrast, opted to take the tort law route, claiming that the series of acts by the holding company of the debtor harmed the creditors’ claims.
In another dispute handled by the author, the other party adopted an approach that combined malicious litigation with attacks in media reports, so materially harming the party’s corporate economic interests. In that case, the author’s team also took the approach of instituting a general tort action, and it was only by resorting to fundamental legal principles, where the Tort Liability Law lacked clear guidance, that we were able to assist the client in resolving the dispute.
With the promulgation of the Civil Code, there are now more solid grounds for applying tort law for protection in purely economic damage disputes, such as damage to claims. However, if legal practitioners lack an awareness of the substance of tort law, or an in-depth understanding of the intrinsic logic of the branches of law, they will be unable to grasp the systemic updates in the Civil Code, accurately understand the connotation of the legal provisions, or apply them as powerful tools to defend the interests of parties in individual cases.
The challenges faced in dispute resolution practice circles in the new year lie not only in the thousands of newly promulgated legal provisions, and the hard to precisely count judicial interpretations, but also in how to provide modern legal services for economic activities under a modernised legal regime.
The handling of complex commercial disputes in the new age requires stepping out of an isolated and one-sided perspective to examine a dispute, and the legal relationships involved, in order to find the most logical and effective solution.
Facing frequent iterations of the rules, not only do legal service providers need to update their knowledge of specific legal provisions, but, more importantly, they need to build a spectrum of legal knowledge that is consistent with legal principles and logic, and systematically upgrade their legal service approach before they can provide quality legal services in the new age that meet or even exceed clients’ expectations. This is a challenge that every forward-looking legal service worker must face and overcome.
Cui Qiang is a partner at Commerce & Finance Law Offices. He can be contacted on +86 10 6569 3399, or by email at cuiqiang@tongshang.com
