Processing FIE Complaints

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The economic changes that took place in China in the 1980s led to, amongst other initiatives, a notable drive to increase protection of consumer rights. This culminated in the promulgation of the General Principles of the Civil Law of the People's Republic of China, followed by two other laws, thePRC Product Quality Law and the PRC Law on the Protection of the Rights and Interests of Consumers.

According to these laws, product liability claims can be founded on any of the following grounds:

i. strict liability (for example, under the Quality Law);

ii. fault-based tortious liability (Civil Law);

iii. contractual liability.

This article focuses on liability as imposed by the Quality Law (although liability may also arise from tort and contractual obligations); it uses two recent cases to illustrate the general policy considerations at the forefront of the courts' agenda and shows the difficulties encountered by those making or defending such claims. In serious cases, criminal liability may also apply.

Bai and others vs. Shanghai Pioneer Electronic Equipment Factory and others (Shanghai Pudong New Area People's Court, August 16 2004)

The plaintiffs brought a claim in connection with an electronic leakage protector produced by one of the defendants and installed by the deceased, which they alleged had malfunctioned and caused the death of the deceased. There are two notable procedural/evidentiary points that arise from the court's decision.

First, the plaintiffs introduced evidence from a witness to prove that the device did not function properly and was correctly installed by the deceased. Although the witness was not apparently qualified to give evidence on technical issues, the court seems to have accepted this evidence because the defendants failed to prove that the plaintiffs' witness was biased.

Second, during the proceedings, the court commissioned the Shanghai Municipal Bureau of Quality and Technical Supervision, which determined the product to be of an unsatisfactory standard to the extent that it failed to function as an electronic leakage protector. On this basis, the court found the product to be defective and substandard.

Also of interest is the award of damages, which are compensatory (and not punitive) in nature. When determining the quantum, the court exhibited an analytical approach that bases calculations on objective benchmarks and factors from the available evidence.

Although the court found that the deceased had contributed to the cause of the accident, as he had failed to follow regulations and hire a qualified electrician to install the product, it did not reduce the amount of damages awarded. This suggests that the court regarded the plaintiff as having brought the claim under the Quality Law, which does not include the concept of contributory negligence.

Jiangsu Institute of Building Science vs. Clariant Chemicals (China) Ltd. and others (Jiangsu High People's Court, March 20 2003)

This case illustrates the potential difficulties in processing a claim according to the Quality Law when the product is mixed with other products used by the consumer.

The plaintiff purchased emulsion paint produced by Clariant Chemicals. The plaintiff then mixed the emulsion paint with base paint and applied the mixture to several construction projects. This concoction caused discoloration in the construction parts painted and led to the plaintiff's financial loss. The plaintiff initiated proceedings under the Quality Law but the claim was dismissed by an Intermediate People's Court.

On appeal, Jiangsu High People's Court upheld the lower court's decision. The High Court decided that the case did not fall within the scope of the Quality Law and the liability of the defendant was contractual. It held that the defendant's emulsion paint did not cause the plaintiff's financial loss. The High Court drew a distinction between the direct application of the emulsion paint and its indirect use (i.e., alteration of the emulsion paint caused by mixing it with base paint).

The High Court's narrow reading of the Quality Law is interesting, as it appears to have confused the concept of causation with the scope of the Quality Law. It suggests that producers of intermediate products may not be liable under the Quality Law for damages caused when an intermediate product is reprocessed and subsequently becomes a different product regardless of whether the damage is caused by the defective component.

Conclusion

It goes without saying that in civil law jurisdictions such as China the doctrine of precedent does not apply. A review of these recent cases nevertheless indicates the approach that courts in China may adopt when trying product liability cases. The trend of protecting consumer interests appears to be prevailing, and very much at the forefront of the courts' thinking. However, the courts appear to grapple with, on some level, the issues associated with establishing defectiveness and causation.