18 May 2021
Corporate and Business Law
On May 28th 2020 the XIII the China Republic National Congress approved the adoption of the new Civil Code (the “Code”), entered into force on January 1st 2021.
Indeed, despite previous attempts, this is the first Civil Code adopted in China. Previously, and since the Seventies, single laws regulated different aspects of civil law, taking inspiration from the civil law systems and from case law. However, such laws were never collected in a systematic way.
Art. 1 of the Code states a provision that can be defined as programmatic, indicating the purposes of the Code itself: protection of civil rights and interests of natural and legal persons, regulation of civil law relationships, maintenance of social and economic order, in compliance with the Constitution of the People’s Republic of China. Such purposes seem very similar to what in the West are called “general principles of law” and recall entirely the ones stated by the previous General Principles of Civil Law, now abolished.
The same art. 1 reaffirms the social and political reality that is the frame in which the abovementioned purposes should be implemented: development of socialism with Chinese characteristics, and improvement of the core socialist values.
Despite the content of the provisions regulating the different fields of civil law being inspired by the principle governing European civil law, one may wonder whether the frequent reference to the socialist values may limit the free interpretation of law during judicial proceedings.
The adoption of the Code constitutes a significant event not only from the legal point of view, but also for its social importance. This is demonstrated by the fact that almost 900,000 public comments were expressed during the legislative process.
The Code includes 1260 articles that basically collect in one single law the previous provisions of the General Principles of Civil Law, Contract Law, Property Ownership Law and Guaranty Law, Tort Liability Law, Marriage Law, Inheritance Law, Adoption Law. Such laws are now abrogated and the most recent case law principles are integrated into the Code.
At the present, the Code is divided in 7 main parts (each of them is further divided in sub-parts on specific matters):
Among the parts listed above, the only one that does not correspond to a previous autonomous law is the part on personality rights. Such part of the Code includes some rules that were provided by the General Principles of Law. To this respect, a debate occurred among the legislator and scholars because a part of the latter argued that the protection of personality rights should have been regulated in other parts of the Code and, in particular, in the part on tort liability. In any case, the part on personality rights is autonomously provided in the Code and regulates, among other, the right to life, body and health, right of name, reputation and honor and right to privacy.
The latter is defined by the Code at the second paragraph of art. 1032 as the “undisturbed private life of a natural person and his private space, private activities, and private information that he does not want to be known to others”. Privacy, as defined above, is protected by the Code provision under which no organization or individual “may infringe upon the other’s right to privacy by prying into, intruding upon, disclosing, or publicizing other’s private matters”. This rule is applicable unless otherwise possibly provided by law or expressly agreed upon by the person whose privacy right is at stake.
With reference to the other parts of the Code, we highlight only the points that we consider, in a way, interesting or innovative, not only from the legal point of view, but also from the social and cultural one.
The Code states some general provisions (such as, for example, the ones on expression of intent, termination, conditions and terms) and regulates some typical contracts as well as quasi-contracts. The latter category includes management of affairs (or negotiorum gestio) and unjust enrichment. Among the typical contracts regulated by the Code, there are sale, lease, technology contracts and factoring.
It is interesting to mention that the Code provides for an improvement of protection to the weak contractual parties, in particular with reference to standard contractual clauses (art. 496). Such protection is implemented by placing on the party that drafted a standard clause an obligation to “call the other party’s attention” on the clauses that may potentially be detrimental for the weak party (the Code itself mentions, as an example, the clauses that exclude or alleviate the drafting party’s liability). In addition to such obligation, the drafting party shall be available for giving information and clarifications upon request of the non-drafting party.
If the party who drafted the clause does not comply with the abovementioned protection obligations, “the other party may claim that such clause does not become part of the contract” (art. 496) losing its effectiveness.
Despite the wording of the abovementioned provision demonstrates an improvement in the protection of the weak contractual party, it seems that the provision leaves a broad discretion to the court in case of dispute. This leads to a potential risk for legal certainty for the party who, in the remarkable intentions of the Code, should be protected.
Concluding on contracts, we highlight the provisions dictated for emergency circumstances in case of pandemic: possibility of requisition of movable and immovable goods in a temporary or final way. In the latter case, as well as in case of destruction or damage, compensation shall be made.
Rights in rem
The part on rights in rem includes, in general, the provisions previously stated by Property Law and Security Law, introducing however a new right in rem, the right of habitation. Such right can be created by will, but it may not be transferred or inherited by the beneficiary.
Also in the part on rights in rem, the Code states an amended provision in the regulation of the right to use a plot of land for construction of residential buildings. The matter relates to the right to keep a residential building on a public plot of land, since private entities, being natural or legal persons cannot own land. The above mentioned right to use public land was previously granted for a period of twenty years with automatic renewal upon expiry. Art. 359 of the Code provides now that, upon expiry of the abovementioned period of time, “payment, reduction, or exemption of the renewal fees shall be dealt with in accordance with the provisions of laws and administrative regulations”, suggesting that the renewal shall not take place automatically.
It is our concern that, in this case, the Code overlooked, at least in part, clarity and certainty of law, putting at potential danger the right of hundred millions of people, in case of lack of renewal or of unsustainable terms and conditions.
Hence, it will be interesting to monitor the application of the provision in order to evaluate whether the abovementioned risk is an actual one.
Marriage and Family
This part of the Code includes provisions stated in the previous laws on marriage and adoption.
The Code provides for some family key principle. Among that, there are: freedom of marriage, monogamy, equality among man and woman, protection of rights of women, minors, the elderly, and persons with disabilities (art. 1041) as well as equality of rights among children born out of wedlock and the ones born in wedlock (art. 1071).
With specific reference to adoption, the Code states that adoption shall be conducted in the best interest of the adoptee and prohibits trafficking minors in the name of adoption (art. 1044).
The Code disciplines also the relationship among spouses, among parents and children and among other close relatives (under art. 1045 such category includes spouses, parents, children, siblings, paternal and maternal grandparents, and paternal and maternal grandchildren) as well as divorce.
It is interesting to highlight the provision under which a husband cannot file a divorce request while his wife is pregnant, within one year after childbirth, or within six months after termination of her pregnancy. Such provision is not applicable in case is the wife requesting the divorce or in case “the people’s court deems it necessary to hear the divorce request made by the husband” (art. 1082). Such provision is relevant because it shows a balance, taken by the legislator, among the rights at stake: on one hand, the husband’s right to request a divorce and, on the other hand, the wife’s right to be supported in a moment that the legislator deems as a particularly delicate one.
What is interesting from the social and cultural point of view is the outcome of such balance that can be “overturned” in the abovementioned cases.
The Code provides for new types of will (compared to the ones listed in the previous Inheritance Law).
Indeed two new types of will are implemented: the will in printed form (art. 1136) and the will made in the form of an audio or video recording (art. 1137), that need to be dated and validated by the person expressing the will and two witnesses.
It seems that the rationale under there provision is to favour the possibility to make wills. However, this leaves space to a number of uncertainties, also of technical and technological nature, that the Court may have to deal with during judicial proceedings.
The Code’s part on tort liability recalls largely the law previously in force.
The matter is dealt with by the new Code in ten chapters that regulate, among other issues, general principles of tort liability and damages, product liability, liability for medical malpractice, liability for environmental damage, for motor vehicle accidents and punitive damages for IP infringements.
Under the purpose of implementing an ecological environment politics, the provisions on damages caused by the infringement of provisions protecting the environment have been strengthened. To this respect compensation covers, in these cases, both costs for the assessment of damage and restoration.
Also the new rules on tort liability in case of tortious acts committed online (art. 1194) are interesting.
Indeed, under art. 1195, if “a network user commits a tortious act through using the network service, the right holder is entitled to notify the network service provider to take such necessary measures as deletion, block, or disconnection”.
The service provider shall forward the notification to the user and take the measures mentioned above.
In case the service provider does not comply with such obligation, it will be responsible, jointly and severally with the network user, for the further damage caused by the lack of measures aimed at the protection of the damaged person.
Such provision, among the others stated by art. 1194 seq., gives to the network service provider an important role in the protection of the network user damaged by the tortious act.
It is also interesting to mention that the Code explicitly provides for liability in case objects are thrown from a building, covering a specific conduct.
Moreover, we highlight that the tort liability part of the Code provides for a certain forms of self-responsibility and self-protection to be taken by the individuals.
The first aspect, is regulated by art. 1176 under which if a person, who voluntarily participates in a recreational or sports activity that involve certain risks, he/she may not be entitled to claim damage to the person, participating in the same activity, that caused the damage.
This provision applies only if the damage is caused intentionally or by gross negligence.
With reference to the self-protection, this is regulated by art. 1177 according to which a person may take “reasonable measures” for the protection of his/her rights if:
As an example of reasonable measure, the Code itself mentions the seizure of the goods owned by a tortfeasor, to the necessary extent for the protection of the infringed right.
It is, hence, easy to imagine the case in which a guardian seizes the good he/she is taking care of, hence changing the legal title for keeping it.
Immediately after such measures are taken, the damaged person shall request assistance to the competent State authorities and he/she shall be responsible in case the measured adopted caused a damage to the early tortfeasor.
These tort liability rules, as well as others already mentioned, leave a broad space to the discretion of the Court potentially dealing with an actual dispute. Hence, case law will determine the actual grounds for the application of the Code’s provisions.
What stands out from the brief analysis above is the impact of the Code’s provisions, not only from a legal point of view, but also from a social one.
Indeed, as seen above, the protection granted to individuals is strengthened with the purpose of protecting his/her rights within society (for example with the provisions on privacy and protection of weak contractual party) as well as in family (for example in case of divorce).
From the latter point of view, what still is missing in the Code, is some sort of protection for the common law family, particularly, the one among same sex persons.
Lastly, there are several matters on which it will be interesting to track case law in order to understand the actual interpretation that Courts give to the provisions.
- does not cover every aspect of the topics with which it deals;
- is for general informational purposes only and is not intended to constitute legal advice or a legal opinion and should not be considered as doing so.
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