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In most countries, “commercial law” is well accepted as an independent body of law in the legal community. Commercial law (or, more commonly, parts of commercial law) is being taught in law schools and researched by scholars who specialize it as a distinct subject. Specific areas of law regarded as comprising commercial law, however, vary depending on a country.
Legislation in the field of commercial law is more diverse. Some countries now have a special code covering general commercial law matters (commercial code). Other countries have a group of individual statutes on specific areas of commercial activities. China has taken the approach of governing commercial law matters with individual statutes.
The paper purports to discuss dynamic development in commercial law in China. In addition to the introduction and conclusion, the paper comprises three parts. Section I is a bird’s eye view of the development of commercial law in Mainland China. The section shows that commercial law in China mainly takes the form of individual statutes, supplemented by numerous judicial interpretations; and in additions to national laws, there are local commercial law legislations. In Section I, the author further divides commercial law into two groups-organizational commercial law statutes, and commercial law statutes governing commercial acts (commercial transactions); and explores the roles and functions played by those individual commercial law statutes. In Section II, the author explores the very important relationships between commercial law and civil law and finds out that commercial law statutes are recognized as special law to civil law. There are statutes, as well as individual articles in a statute, however, governing both civil law matters and commercial law matters. In Section III, after reviewing the proposals on the general principles of commercial law, the author believes that the individual-statute-approach has its advantages and hence might not be changed in the near future.
I. A Bird’s Eye View of PRC Commercial Law
A.The Progress of Commercial Legislation in Mainland China
Commercial law legislation in Mainland China only became possible when China started to move from a plannedeconomy to a more market-oriented economy. Actually, most individual commercial statutes are adopted and substantially revised after 1990 when the 14th Communist Party of China(CPC) Congress decided that China shall move to the market economy, including the Maritime Law, the Company Law, the Insurance Law, the Negotiable Instrument Law, the Partnership Enterprise Law, the Securities Law, the Sole Proprietorship Law, the Trust Law and the Enterprise Bankruptcy Law.
Each of the above-listed commercial law statutes is supported with judicial interpretations, evidencing the importance of the judicial in shaping commercial law in China. For example, the Company Law is supplemented with Provisions of the Supreme People’s Court (SPC) on Issues Concerning the Application of the Company Law (I), (II) and(III), the Insurance Law is supported with Interpretations of the SPC on Issues Concerning the Application of the Insurance Law (I), the Negotiable Instrument Law is supported with Provisions of the SPC on Issues Concerning the Trial of Cases of Negotiable Instrument Disputes, the Securities Law is supported with Provisions of the SPC on Issues Concerning the Trial of Civil Compensation Cases Caused by False Statement in Securities Market, while the current Enterprise Bankruptcy Law is supported with Provisions of the SPC on Issues Concerning the Application of the Enterprise Bankruptcy Law (I).
Generally speaking, individual commercial statutes in Mainland China have their root in Germany and Japan, in particular in terms of legislative framework and terminologies. Influences from the Anglo-America, however, are also obvious in some of the statutes.
Taking Company Law for instance, Mainland China’s Company Law merely adopts two types of company, i.e. Limited Liability Company and Company Limited by Shares, which is quite continental Europe-rooted, rather than the public company and private company (closed company), which is adopted in the U.S. In terms of corporate governance, Mainland China originally adopted the Board of Supervisors to monitor the directors, managers and other officers, which has its German root. In 2005, when the Company Law was amended by the SCNPC, the independent director system was formally introduced to listed companies, under the influence of Anglo-American law.
In addition to the national-level commercial law statutes, there are also local legislations on commercial law. The Shenzhen SEZ Commercial Regulations, for example, might be the only commercial law general provisions in Mainland China. The Shenzhen SEC Commercial Regulations are based on the concept “merchants”. Chapter 2 “Merchants”defines merchants as natural persons, legal persons and other economic organizations, which are registered according to law to undertake commercial acts in their own names for profits. Notably, this is the first time to give definition of merchants in legislation. As for commercial acts, the Regulations stipulates that commercial acts refer to the acts carried out by the merchants, such as manufacturing and providing services, wholesale or retail of commodities, science and technology development. It might be fair to state that the Shenzhen SEZ Commercial Regulations is merchant-based, similar to German HBG.
B.Categorizing Commercial Law Statutes in China
Individual statutes in Mainland China can be roughly divided into two groups. One defines merchants (or business organizations), and the other defines various commercial acts(or commercial transactions).
The first group of statutes includes but not limited to: the Sole Proprietorship Law, the Partnership Enterprise Law, the Company Law, Sino-Foreign Equity Joint Venture Law (SFEJVL), Sino-Foreign Contractual Joint Venture Law(SFCJVL), Wholly Foreign Owned Enterprise Law (WFOEL), the Law on Industrial Enterprises Owned by the Whole People, the Law on Township Enterprises, and the Law on the Peasant Professional Cooperative Organization. In the broad sense of law, there are also some administrative regulations and administrative rules issued respectively by the State Council or ministries/commissions subject to the State Council defining merchants, such as Provisional Regulations on Private Enterprises, Regulations on Administration of the Individual Industrial and Commercial Household, Regulations on Rural Collectively-owned Enterprise, Regulations on Urban Collectively-owned Enterprise, Implementing Regulations for SFEJVL, Detailed Rules for SFCJVL and Detailed Rules for WFOEL.
The second group of individual commercial statutes, including but not limited to the Maritime Law, the Insurance Law, the Negotiable Instrument Law, Securities Law, the Trust Law and the Enterprise Bankruptcy Law, mainly deals with commercial acts such as marine transportation, the issuance and transactions of securities, acceptance of negotiable instrument, bankruptcy liquidation. Those statutes, however, contain provisions on the qualification and organizational structure of merchants in specific fields, e.g., securities brokerdealers, insurance companies.
C.Importance of Commercial Law in Practice
Commercial law legislation in Mainland China has been part of its economic reform since 1990s. In this process, a number of individual commercial statutes and relevant judicial interpretations have played important roles in promoting Mainland China’s economic system reform. The social stability and economic prosperity over the past two decades would not have been possible without those individual commercial statutes. Those individual commercial statutes have laid the legal foundations of Mainland China’s modern enterprise system and standardized the market order.
The importance of commercial law in practice also can be seen in the trial work of people’s courts. According to statistics, in 2010, courts throughout Mainland China tried 6,112,695 civil and commercial cases (the value of object of litigation comes to 913.725 billion Yuan), which accounted for 61.34% of the total number of cases tried that year. As for commercial adjudication, courts across Mainland China tried 73,178 cases on credit card dispute and 58,885 cases on insurance contract dispute in 2010. In addition, the courts tried 3,567 bankruptcy cases. As for maritime affairs, maritime courts across Mainland tried 7,287 maritime cases as the first instance court, with the value of object of litigation up to 7,659 million Yuan.
II.Commercial Law Statutes as Special Law to Civil Law
A.A Brief Review of Civil Law Legislation in China
So far, civil law in China comprises individual statutes such as the Inheritance Law, General Principles of the Civil Law (GPCL), the Guarantee Law, the Contract Law, the Adoption Law, the Marriage Law, the Real Right Law, the Tort Liability Law, and the Law on the Application of Law for Foreign-related Civil Relations.
Almost each of the above-mentioned individual civil statutes in Mainland China is supported by relevant judicial interpretations of the Supreme People’s Court, namely: Opinions of the Supreme People’s Court (SPC) on Issues Concerning the Implementation of the Inheritance Law, Opinions of the SPC on Issues Concerning the Implementation of the GPCL (Trial Implementation) (GPCL Opinions), Interpretations of the SPC on Issues Concerning the Application of the Guarantee Law, Interpretations of the SPC on Issues Concerning the Application of the Contract Law (I) and (II), and Interpretations of the SPC on Issues Concerning the Application of the Marriage Law (I) (II) and (III). The Adoption Law, however, is supplemented by Opinions on Issues Concerning the Implementation of the Adoption Law issued by the Ministry of Justice (MOJ).
Various efforts have been made to compile a civil law code, culminated in the drafting of uniform Civil Code in 1998. On the 23rd December 2002, the Legislative Affairs Commission of the SCNPC submitted a draft of the Civil Code to the SCNPC for review but only received severe criticisms. Scholars in China, however, never give up the idea of compiling a civil law code. Various versions of civil law code have been proposed by leading civil law scholars in China.
While the codification of civil law is already on the track, there is no plan for the moment to codify individual commercial statutes, however.
B.Relationships between Civil Law and Commercial Law in China
Civil law and commercial law are both recognized as private law by Chinese scholars. As shown in previous sections, there is neither a Civil Code nor a Commercial Code in Mainland China at the moment. At least theoretically speaking, however, individual commercial statutes are regarded as specific statutes of civil law. As stated by the Information Office of the State Council in its 2011 “The Socialist System of Laws with Chinese Characteristics” white paper— “Civil laws adjust property and personal relationships between civil subjects with equal status, that is, between citizens, between legal persons and between citizens and legal persons, and follow the principles of equal status between civil subjects, autonomy of will, fairness, honesty and credibility, and other basic principles. Commercial laws adjust commercial relationships between business subjects, and follow the basic principles of Civil Law and the principles of the freedom of commercial transaction, compensation of equal value and convenience and safety, among other principles.”
By saying that individual commercial law statutes are special law to civil laws, however, the author doesn’t intend to say that commercial law statutes are inferior to civil laws in the legislative hierarchy, however. Actually, the GPCL adopted in 1986 is often regarded as the parents for all individual civil law and commercial law statutes.
In terms of the application of law, the general provisions in GPCL and Contract Law on capacity for rights, capacity for conduct, freedom of contract doctrine and good faith doctrine, etc., are all applicable to commercial matters. Given the legal maxim that the special law derogates the general law (lex specialis derogate generali), however, provisions in individual commercial statutes prevail provisions in civil statutes in governing commercial matters. When an individual commercial statute in such areas is absent or has no explicit provision in point, the civil law applies supplementary. For instance, in dealing with marine transportation contract, the provisions in Maritime Law prevail over the provisions in Contract Law concerning contracts of carriage. The Contract Law, however, is applicable when Maritime Law fails to provide legal rules in point.
Commercial statutes and civil statutes, however, are not“oil and water” (together but not mixed). Actually, there are evidences that some statutes, or at least specific articles in some statute, are designed to deals with both civil matters and commercial matters. Examples can be found in the Contract Law, the Guarantee law, as well as the Real Right Law.
The 1999 Contract Law deals with both civil contract and commercial contract in a single statute. Among those 15 kinds of classified contracts stipulated by the Contract Law, except the contract of donation (gift contract), 14 of them, are either purely commercial contracts (including but not limited to contracts for financial lease, contracts for warehousing, and contracts for construction projects), or contracts that may either for civil transactions or commercial transactions(including but not limited to contracts for sale, contracts for supply and use of electricity, water, gas or heating, contracts for loans, contract for lease, contracts for work, contracts for transportation, contracts for technology, agency contracts, etc.). Articles in those chapters which provides for contracts which may either be civil or commercial are designed to cover both the civil transaction and the commercial transactions. Taking agency contracts for example, art. 405 of the Contract Law provides that when the agent has finished the entrusted matters, the principal shall pay remuneration to it, unless otherwise agreed upon in the contract; while in civil law theory, the agency contracts are gratuitous in principle. In terms of rescission of agency, however, the Contract Law seems to adopt the civil law theory by providing that “the principal or the agent may dissolve the entrustment contract at any time”(article 410, Contract Law), while a commercial agency shall not be rescinded in such a discretionary way.
The Guarantee Law also governs both civil guarantee and commercial guarantee. In terms of the mode and liability, the guarantee falls into general guarantee, and joint and several liability guarantee. In most civil law jurisdictions, it is provided that if there is no agreement on whether it is a general guarantee or joint and several liability guarantee, the civil guarantee shall be regarded as a general guarantee, while the commercial guarantee shall be regarded as a joint and several liability guarantee. The Chinese Guarantee Law, however, making no distinction between civil and commercial guarantee, provides a uniform rule that if there is no explicit agreement, a guarantee shall be regarded as a joint and several liability guarantee. In fact, the provision has blurred the distinction between the civil guarantee and commercial guarantee. In other words, the provision of the Guarantee Law placing heavier liability on civil guarantor shows the influence of the commercial law.
The same case can also be found in Real Right Law. Taking the provisions on bona fide purchaser for example, the Real Right Law defines bona-fide over the transferee’s cognition of whether the transferor has the authorization to dispose a realty or chattel, rather than whether the transferor is the owner of the property. According to art. 106, of the Law, if the transferee didn’t know and shouldn’t have known about the transferor’s unauthorized disposition of a realty or chattel, the transferee is a bona fide purchaser. In countries adopting separate Civil and Commercial Code, however the definitions of the bona-fide in Civil and Commercial Code are different. For example, in German BGB, the provisions from article 932 to 935 provide for the Bona Fide Acquisition of chattels. According to articles 932-934, the transferee shall be considered bona fide if he has reasons to believe the transferor is the owner. However, if the belief is based on the right of disposition, for example, believing the transferor to be a bankruptcy trustee, it shall not be considered a bona fide purchaser. In addition, German HGB has special provisions on the Bona Fide Acquisition of chattels. The paragraph 1of article 366 of HGB has broadened the scope of bona fide in BGB from the belief based on the right of ownership to the right of disposition, because as for the merchants, the right of disposition is sufficient for commercial transactions. To sum up, the bona fide in BGB is based on the cognition of whether the transferor has the ownership, while the bona fide in HGB is based on the cognition of whether the transferor has the right of disposition, which is quite different between civil and commercial field.
It might be safe to draw the following conclusion from the above instances, i.e., some individual civil statutes’ endeavor to regulating both civil and commercial matters results in the generalization of the commercial law rules into civil provisions. Apart from that, there are also some special provisions which are designed only for commercial transactions stipulated in relevant civil laws. For example, article 231 of the Real Right Law stipulates that “the chattels taken as lien by the creditor and the creditor’s rights shall fall into a same legal relationship, except for the lien between enterprises”. The article provides for civil lien and commercial lien respectively. As for commercial lien, i.e. the lien between enterprises, it doesn’t have to fall into the same legal relationship with the creditor’s rights, which is exactly the premise of the civil lien. The individual civil statutes as the Real Right Law containing special commercial provisions also shows the influence of commercial law on civil law.
III.The Future of Commercial Law Legislation in China
A.Individual-statute-approach in Commercial Law Making Fits the Need of Fast Changing Social-economic life in China
One of the reasons for Mainland China’s individualcommercial-statute-style commercial law legislation is that commercial law must be responsive to the fast changing social-economic life; while the social-economic situation of Mainland China has always been changing for the past couple of decades. The constant change in the commercial law can be manifested by the high frequency of statute-amendments and numerous judicial interpretations to supplement the law. In other words, for a field like commercial law which is changing and developing so fast, individual-statute-style legislation might be a proper strategy.
B.Proposals on General Principle of Commercial Law
Commercial law scholars in China, however, do feel the need for general provisions governing commercial matters. Some scholars even advocate the adoption of General Principles of Commercial Law.
Prof. Wang Baoshu goes further in suggesting that General Principles of Commercial Law shall contain three parts, with the “General Provisions” as the first part stipulating the purpose of the law, the scope of application, and basic principles of commercial law; the “Merchants” as the second part defining the concept, qualification and classification of merchants, as well as provisions about commercial register, trade names, business transfer, commercial books, managers and other commercial employees and commercial agents; the “Commercial Acts” as the third part providing the concept and classification of commercial act, commercial agent, commercial lien, commercial guarantee and so on.
The proposed General Principles of Commercial Law, according to Professor Wang, shall play the following two roles, i.e., to lay down principles and a unitized conceptual framework for existing individual commercial statutes, and to provide specific institutions, such as business transfer, commercial books, and so on, which are not stipulated concretely either in civil law or in individual commercial statutes.
If the General Principles of Commercial Law were adopted, and the civil law were codified, the civil and commercial law in Mainland China would present the following picture, i.e., a civil code, and individual commercial statutes with the General Principles of Commercial Law providing general provisions on commercial law. That layout doesn’t take the mode of separation of civil and commercial codes, as the General Principles of Commercial Law is an individual statutes rather than a commercial code. Neither does it take the pattern of combining commercial law into civil code, as the civil code won’t embody the individual commercial statutes; moreover, there is a General Principles of Commercial Law which provides the general rules on commercial matters.
It seems, however, the proposed general principles on commercial law are not possible to be adopted in any near future.
C.Summary
Given the fast changing social-economic situation in China, it is predictable that commercial law in China may remain as special laws to civil law and take the form of individual statutes for quite a while. The proposed general principles on commercial law makes a lot senses. It may take a long time, however, for the proposal to become reality.
Conclusion
Overall, there is no commercial code at the national level; commercial law in China takes the form of individual commercial statutes. Moreover, individual commercial statutes in Mainland China are regarded as specific statutes of civil law. There are no general provisions on commercial law at national level. The Shenzhen SEC Commercial Regulations might be the only general provisions in Mainland China, which, however, only applies locally in Shenzhen.
At present, the legislation framework of the civil and commercial law is that a set of individual statutes regulating civil and commercial matters with the GPCL serve as the parent law. Mainland China has yet to enact a comprehensive Civil Code, it can be predicted that those individual commercial statutes won’t be incorporated into the future Civil Code as none of the Civil Code drafts proposed by the Legislative Affairs Commission of the SCNPC or scholars has embodied any of the commercial statutes. [ The Civil Code draft proposed by the Legislative Affairs Commission of the SCNPC has nine parts including the General Parts, Real Right Law, Contract Law, Personal Right Law, Marriage Law, Adoption Law, Inheritance Law, Tort Liability Law, Law of the Application of Law for Foreign-related Civil Relations. The Civil Code draft proposed by Prof. Liang Huixin has seven parts containing the General Part, Real Right, General Debt Law, Contracts, Torts, Domestic Relation and Inheritance, while another version proposed by Prof. Wang Liming has eight parts containing the General Part, Personality Right Law, Domestic Relation Law, Inheritance Law, Real Right Law, General Debt Law, Contract L aw, Tort Liability Law. From this it is evident that there is no effort to incorporate those specific commercial statutes into the Civil Code.1
There are proposals on adopting general principles on commercial law. The adoption of general principles of commercial law, however, will not occur in the near future. In other words, commercial law may stay as it is in the foreseeable future.
Legislation in the field of commercial law is more diverse. Some countries now have a special code covering general commercial law matters (commercial code). Other countries have a group of individual statutes on specific areas of commercial activities. China has taken the approach of governing commercial law matters with individual statutes.
The paper purports to discuss dynamic development in commercial law in China. In addition to the introduction and conclusion, the paper comprises three parts. Section I is a bird’s eye view of the development of commercial law in Mainland China. The section shows that commercial law in China mainly takes the form of individual statutes, supplemented by numerous judicial interpretations; and in additions to national laws, there are local commercial law legislations. In Section I, the author further divides commercial law into two groups-organizational commercial law statutes, and commercial law statutes governing commercial acts (commercial transactions); and explores the roles and functions played by those individual commercial law statutes. In Section II, the author explores the very important relationships between commercial law and civil law and finds out that commercial law statutes are recognized as special law to civil law. There are statutes, as well as individual articles in a statute, however, governing both civil law matters and commercial law matters. In Section III, after reviewing the proposals on the general principles of commercial law, the author believes that the individual-statute-approach has its advantages and hence might not be changed in the near future.
I. A Bird’s Eye View of PRC Commercial Law
A.The Progress of Commercial Legislation in Mainland China
Commercial law legislation in Mainland China only became possible when China started to move from a plannedeconomy to a more market-oriented economy. Actually, most individual commercial statutes are adopted and substantially revised after 1990 when the 14th Communist Party of China(CPC) Congress decided that China shall move to the market economy, including the Maritime Law, the Company Law, the Insurance Law, the Negotiable Instrument Law, the Partnership Enterprise Law, the Securities Law, the Sole Proprietorship Law, the Trust Law and the Enterprise Bankruptcy Law.
Each of the above-listed commercial law statutes is supported with judicial interpretations, evidencing the importance of the judicial in shaping commercial law in China. For example, the Company Law is supplemented with Provisions of the Supreme People’s Court (SPC) on Issues Concerning the Application of the Company Law (I), (II) and(III), the Insurance Law is supported with Interpretations of the SPC on Issues Concerning the Application of the Insurance Law (I), the Negotiable Instrument Law is supported with Provisions of the SPC on Issues Concerning the Trial of Cases of Negotiable Instrument Disputes, the Securities Law is supported with Provisions of the SPC on Issues Concerning the Trial of Civil Compensation Cases Caused by False Statement in Securities Market, while the current Enterprise Bankruptcy Law is supported with Provisions of the SPC on Issues Concerning the Application of the Enterprise Bankruptcy Law (I).
Generally speaking, individual commercial statutes in Mainland China have their root in Germany and Japan, in particular in terms of legislative framework and terminologies. Influences from the Anglo-America, however, are also obvious in some of the statutes.
Taking Company Law for instance, Mainland China’s Company Law merely adopts two types of company, i.e. Limited Liability Company and Company Limited by Shares, which is quite continental Europe-rooted, rather than the public company and private company (closed company), which is adopted in the U.S. In terms of corporate governance, Mainland China originally adopted the Board of Supervisors to monitor the directors, managers and other officers, which has its German root. In 2005, when the Company Law was amended by the SCNPC, the independent director system was formally introduced to listed companies, under the influence of Anglo-American law.
In addition to the national-level commercial law statutes, there are also local legislations on commercial law. The Shenzhen SEZ Commercial Regulations, for example, might be the only commercial law general provisions in Mainland China. The Shenzhen SEC Commercial Regulations are based on the concept “merchants”. Chapter 2 “Merchants”defines merchants as natural persons, legal persons and other economic organizations, which are registered according to law to undertake commercial acts in their own names for profits. Notably, this is the first time to give definition of merchants in legislation. As for commercial acts, the Regulations stipulates that commercial acts refer to the acts carried out by the merchants, such as manufacturing and providing services, wholesale or retail of commodities, science and technology development. It might be fair to state that the Shenzhen SEZ Commercial Regulations is merchant-based, similar to German HBG.
B.Categorizing Commercial Law Statutes in China
Individual statutes in Mainland China can be roughly divided into two groups. One defines merchants (or business organizations), and the other defines various commercial acts(or commercial transactions).
The first group of statutes includes but not limited to: the Sole Proprietorship Law, the Partnership Enterprise Law, the Company Law, Sino-Foreign Equity Joint Venture Law (SFEJVL), Sino-Foreign Contractual Joint Venture Law(SFCJVL), Wholly Foreign Owned Enterprise Law (WFOEL), the Law on Industrial Enterprises Owned by the Whole People, the Law on Township Enterprises, and the Law on the Peasant Professional Cooperative Organization. In the broad sense of law, there are also some administrative regulations and administrative rules issued respectively by the State Council or ministries/commissions subject to the State Council defining merchants, such as Provisional Regulations on Private Enterprises, Regulations on Administration of the Individual Industrial and Commercial Household, Regulations on Rural Collectively-owned Enterprise, Regulations on Urban Collectively-owned Enterprise, Implementing Regulations for SFEJVL, Detailed Rules for SFCJVL and Detailed Rules for WFOEL.
The second group of individual commercial statutes, including but not limited to the Maritime Law, the Insurance Law, the Negotiable Instrument Law, Securities Law, the Trust Law and the Enterprise Bankruptcy Law, mainly deals with commercial acts such as marine transportation, the issuance and transactions of securities, acceptance of negotiable instrument, bankruptcy liquidation. Those statutes, however, contain provisions on the qualification and organizational structure of merchants in specific fields, e.g., securities brokerdealers, insurance companies.
C.Importance of Commercial Law in Practice
Commercial law legislation in Mainland China has been part of its economic reform since 1990s. In this process, a number of individual commercial statutes and relevant judicial interpretations have played important roles in promoting Mainland China’s economic system reform. The social stability and economic prosperity over the past two decades would not have been possible without those individual commercial statutes. Those individual commercial statutes have laid the legal foundations of Mainland China’s modern enterprise system and standardized the market order.
The importance of commercial law in practice also can be seen in the trial work of people’s courts. According to statistics, in 2010, courts throughout Mainland China tried 6,112,695 civil and commercial cases (the value of object of litigation comes to 913.725 billion Yuan), which accounted for 61.34% of the total number of cases tried that year. As for commercial adjudication, courts across Mainland China tried 73,178 cases on credit card dispute and 58,885 cases on insurance contract dispute in 2010. In addition, the courts tried 3,567 bankruptcy cases. As for maritime affairs, maritime courts across Mainland tried 7,287 maritime cases as the first instance court, with the value of object of litigation up to 7,659 million Yuan.
II.Commercial Law Statutes as Special Law to Civil Law
A.A Brief Review of Civil Law Legislation in China
So far, civil law in China comprises individual statutes such as the Inheritance Law, General Principles of the Civil Law (GPCL), the Guarantee Law, the Contract Law, the Adoption Law, the Marriage Law, the Real Right Law, the Tort Liability Law, and the Law on the Application of Law for Foreign-related Civil Relations.
Almost each of the above-mentioned individual civil statutes in Mainland China is supported by relevant judicial interpretations of the Supreme People’s Court, namely: Opinions of the Supreme People’s Court (SPC) on Issues Concerning the Implementation of the Inheritance Law, Opinions of the SPC on Issues Concerning the Implementation of the GPCL (Trial Implementation) (GPCL Opinions), Interpretations of the SPC on Issues Concerning the Application of the Guarantee Law, Interpretations of the SPC on Issues Concerning the Application of the Contract Law (I) and (II), and Interpretations of the SPC on Issues Concerning the Application of the Marriage Law (I) (II) and (III). The Adoption Law, however, is supplemented by Opinions on Issues Concerning the Implementation of the Adoption Law issued by the Ministry of Justice (MOJ).
Various efforts have been made to compile a civil law code, culminated in the drafting of uniform Civil Code in 1998. On the 23rd December 2002, the Legislative Affairs Commission of the SCNPC submitted a draft of the Civil Code to the SCNPC for review but only received severe criticisms. Scholars in China, however, never give up the idea of compiling a civil law code. Various versions of civil law code have been proposed by leading civil law scholars in China.
While the codification of civil law is already on the track, there is no plan for the moment to codify individual commercial statutes, however.
B.Relationships between Civil Law and Commercial Law in China
Civil law and commercial law are both recognized as private law by Chinese scholars. As shown in previous sections, there is neither a Civil Code nor a Commercial Code in Mainland China at the moment. At least theoretically speaking, however, individual commercial statutes are regarded as specific statutes of civil law. As stated by the Information Office of the State Council in its 2011 “The Socialist System of Laws with Chinese Characteristics” white paper— “Civil laws adjust property and personal relationships between civil subjects with equal status, that is, between citizens, between legal persons and between citizens and legal persons, and follow the principles of equal status between civil subjects, autonomy of will, fairness, honesty and credibility, and other basic principles. Commercial laws adjust commercial relationships between business subjects, and follow the basic principles of Civil Law and the principles of the freedom of commercial transaction, compensation of equal value and convenience and safety, among other principles.”
By saying that individual commercial law statutes are special law to civil laws, however, the author doesn’t intend to say that commercial law statutes are inferior to civil laws in the legislative hierarchy, however. Actually, the GPCL adopted in 1986 is often regarded as the parents for all individual civil law and commercial law statutes.
In terms of the application of law, the general provisions in GPCL and Contract Law on capacity for rights, capacity for conduct, freedom of contract doctrine and good faith doctrine, etc., are all applicable to commercial matters. Given the legal maxim that the special law derogates the general law (lex specialis derogate generali), however, provisions in individual commercial statutes prevail provisions in civil statutes in governing commercial matters. When an individual commercial statute in such areas is absent or has no explicit provision in point, the civil law applies supplementary. For instance, in dealing with marine transportation contract, the provisions in Maritime Law prevail over the provisions in Contract Law concerning contracts of carriage. The Contract Law, however, is applicable when Maritime Law fails to provide legal rules in point.
Commercial statutes and civil statutes, however, are not“oil and water” (together but not mixed). Actually, there are evidences that some statutes, or at least specific articles in some statute, are designed to deals with both civil matters and commercial matters. Examples can be found in the Contract Law, the Guarantee law, as well as the Real Right Law.
The 1999 Contract Law deals with both civil contract and commercial contract in a single statute. Among those 15 kinds of classified contracts stipulated by the Contract Law, except the contract of donation (gift contract), 14 of them, are either purely commercial contracts (including but not limited to contracts for financial lease, contracts for warehousing, and contracts for construction projects), or contracts that may either for civil transactions or commercial transactions(including but not limited to contracts for sale, contracts for supply and use of electricity, water, gas or heating, contracts for loans, contract for lease, contracts for work, contracts for transportation, contracts for technology, agency contracts, etc.). Articles in those chapters which provides for contracts which may either be civil or commercial are designed to cover both the civil transaction and the commercial transactions. Taking agency contracts for example, art. 405 of the Contract Law provides that when the agent has finished the entrusted matters, the principal shall pay remuneration to it, unless otherwise agreed upon in the contract; while in civil law theory, the agency contracts are gratuitous in principle. In terms of rescission of agency, however, the Contract Law seems to adopt the civil law theory by providing that “the principal or the agent may dissolve the entrustment contract at any time”(article 410, Contract Law), while a commercial agency shall not be rescinded in such a discretionary way.
The Guarantee Law also governs both civil guarantee and commercial guarantee. In terms of the mode and liability, the guarantee falls into general guarantee, and joint and several liability guarantee. In most civil law jurisdictions, it is provided that if there is no agreement on whether it is a general guarantee or joint and several liability guarantee, the civil guarantee shall be regarded as a general guarantee, while the commercial guarantee shall be regarded as a joint and several liability guarantee. The Chinese Guarantee Law, however, making no distinction between civil and commercial guarantee, provides a uniform rule that if there is no explicit agreement, a guarantee shall be regarded as a joint and several liability guarantee. In fact, the provision has blurred the distinction between the civil guarantee and commercial guarantee. In other words, the provision of the Guarantee Law placing heavier liability on civil guarantor shows the influence of the commercial law.
The same case can also be found in Real Right Law. Taking the provisions on bona fide purchaser for example, the Real Right Law defines bona-fide over the transferee’s cognition of whether the transferor has the authorization to dispose a realty or chattel, rather than whether the transferor is the owner of the property. According to art. 106, of the Law, if the transferee didn’t know and shouldn’t have known about the transferor’s unauthorized disposition of a realty or chattel, the transferee is a bona fide purchaser. In countries adopting separate Civil and Commercial Code, however the definitions of the bona-fide in Civil and Commercial Code are different. For example, in German BGB, the provisions from article 932 to 935 provide for the Bona Fide Acquisition of chattels. According to articles 932-934, the transferee shall be considered bona fide if he has reasons to believe the transferor is the owner. However, if the belief is based on the right of disposition, for example, believing the transferor to be a bankruptcy trustee, it shall not be considered a bona fide purchaser. In addition, German HGB has special provisions on the Bona Fide Acquisition of chattels. The paragraph 1of article 366 of HGB has broadened the scope of bona fide in BGB from the belief based on the right of ownership to the right of disposition, because as for the merchants, the right of disposition is sufficient for commercial transactions. To sum up, the bona fide in BGB is based on the cognition of whether the transferor has the ownership, while the bona fide in HGB is based on the cognition of whether the transferor has the right of disposition, which is quite different between civil and commercial field.
It might be safe to draw the following conclusion from the above instances, i.e., some individual civil statutes’ endeavor to regulating both civil and commercial matters results in the generalization of the commercial law rules into civil provisions. Apart from that, there are also some special provisions which are designed only for commercial transactions stipulated in relevant civil laws. For example, article 231 of the Real Right Law stipulates that “the chattels taken as lien by the creditor and the creditor’s rights shall fall into a same legal relationship, except for the lien between enterprises”. The article provides for civil lien and commercial lien respectively. As for commercial lien, i.e. the lien between enterprises, it doesn’t have to fall into the same legal relationship with the creditor’s rights, which is exactly the premise of the civil lien. The individual civil statutes as the Real Right Law containing special commercial provisions also shows the influence of commercial law on civil law.
III.The Future of Commercial Law Legislation in China
A.Individual-statute-approach in Commercial Law Making Fits the Need of Fast Changing Social-economic life in China
One of the reasons for Mainland China’s individualcommercial-statute-style commercial law legislation is that commercial law must be responsive to the fast changing social-economic life; while the social-economic situation of Mainland China has always been changing for the past couple of decades. The constant change in the commercial law can be manifested by the high frequency of statute-amendments and numerous judicial interpretations to supplement the law. In other words, for a field like commercial law which is changing and developing so fast, individual-statute-style legislation might be a proper strategy.
B.Proposals on General Principle of Commercial Law
Commercial law scholars in China, however, do feel the need for general provisions governing commercial matters. Some scholars even advocate the adoption of General Principles of Commercial Law.
Prof. Wang Baoshu goes further in suggesting that General Principles of Commercial Law shall contain three parts, with the “General Provisions” as the first part stipulating the purpose of the law, the scope of application, and basic principles of commercial law; the “Merchants” as the second part defining the concept, qualification and classification of merchants, as well as provisions about commercial register, trade names, business transfer, commercial books, managers and other commercial employees and commercial agents; the “Commercial Acts” as the third part providing the concept and classification of commercial act, commercial agent, commercial lien, commercial guarantee and so on.
The proposed General Principles of Commercial Law, according to Professor Wang, shall play the following two roles, i.e., to lay down principles and a unitized conceptual framework for existing individual commercial statutes, and to provide specific institutions, such as business transfer, commercial books, and so on, which are not stipulated concretely either in civil law or in individual commercial statutes.
If the General Principles of Commercial Law were adopted, and the civil law were codified, the civil and commercial law in Mainland China would present the following picture, i.e., a civil code, and individual commercial statutes with the General Principles of Commercial Law providing general provisions on commercial law. That layout doesn’t take the mode of separation of civil and commercial codes, as the General Principles of Commercial Law is an individual statutes rather than a commercial code. Neither does it take the pattern of combining commercial law into civil code, as the civil code won’t embody the individual commercial statutes; moreover, there is a General Principles of Commercial Law which provides the general rules on commercial matters.
It seems, however, the proposed general principles on commercial law are not possible to be adopted in any near future.
C.Summary
Given the fast changing social-economic situation in China, it is predictable that commercial law in China may remain as special laws to civil law and take the form of individual statutes for quite a while. The proposed general principles on commercial law makes a lot senses. It may take a long time, however, for the proposal to become reality.
Conclusion
Overall, there is no commercial code at the national level; commercial law in China takes the form of individual commercial statutes. Moreover, individual commercial statutes in Mainland China are regarded as specific statutes of civil law. There are no general provisions on commercial law at national level. The Shenzhen SEC Commercial Regulations might be the only general provisions in Mainland China, which, however, only applies locally in Shenzhen.
At present, the legislation framework of the civil and commercial law is that a set of individual statutes regulating civil and commercial matters with the GPCL serve as the parent law. Mainland China has yet to enact a comprehensive Civil Code, it can be predicted that those individual commercial statutes won’t be incorporated into the future Civil Code as none of the Civil Code drafts proposed by the Legislative Affairs Commission of the SCNPC or scholars has embodied any of the commercial statutes. [ The Civil Code draft proposed by the Legislative Affairs Commission of the SCNPC has nine parts including the General Parts, Real Right Law, Contract Law, Personal Right Law, Marriage Law, Adoption Law, Inheritance Law, Tort Liability Law, Law of the Application of Law for Foreign-related Civil Relations. The Civil Code draft proposed by Prof. Liang Huixin has seven parts containing the General Part, Real Right, General Debt Law, Contracts, Torts, Domestic Relation and Inheritance, while another version proposed by Prof. Wang Liming has eight parts containing the General Part, Personality Right Law, Domestic Relation Law, Inheritance Law, Real Right Law, General Debt Law, Contract L aw, Tort Liability Law. From this it is evident that there is no effort to incorporate those specific commercial statutes into the Civil Code.1
There are proposals on adopting general principles on commercial law. The adoption of general principles of commercial law, however, will not occur in the near future. In other words, commercial law may stay as it is in the foreseeable future.