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Product Liability Lawsuit and Rules Under Chinese Law

27 August 2012 By In Contracts

In 2010 a new Tort Liability Law was introduced in China, which specifically deals with product liability. China has been faced with booming economic growth and, in this context, there have been a number of product liability episodes in the last few years, ranging from infant formula tainted with melamine to escalators unexpectedly reversing direction. Such product liability issues have prompted stronger governmental oversight and harsher punishment for those responsible.

The extent of potential product liabilities for Producers and Sellers is an important aspect to take into account when operating in the PRC. Any company producing or selling in the PRC should allocate sufficient resources towards monitoring product quality and establishing effective product distribution channels to mitigate the risk of such liabilities arising. Such companies should also have plans in place for product recalls, product liability litigation and even for public relations crisis management.

China Product liability History

Product quality, after-sales service and product liability concerns have been receiving increased attention in the PRC. High profile cases, such as the recent milk scandal involving Sanlu, have highlighted product liability concerns and put pressure on national and local authorities to enact legislation and streamline administrative proceedings. PRC consumers are becoming increasingly aware of their legal rights and are willing to enforce them, if necessary, through court proceedings. Generally speaking, sellers, manufacturers, importers and parts producers may be held liable for losses resulting from defective products, and claims can be based on breach of contract, tort or product liability laws. Losses due to a defect can be limited to the product itself, or, in more complex scenarios, can extend to damage caused by its use. Also, when a defective part damages a larger product, such as a motor vehicle, damage to the end-product may give an additional claim.

China New Product Liability Rules

The new product liability rules make both producers and sellers of defective products liable for damage caused by the defect. Injured consumers have the right to pursue either the producer or the seller, with rights of contribution for the pursued party to seek recovery of its losses from the party responsible for causing the defect, including from third parties involved in the supply chain. The law also permits the recovery of punitive damages if a product caused death or serious injury to a consumer, while the producer or seller was aware of the defectiveness of the product.

Influence of the new provisions on civil proceedings

It is too early for sufficient case law to help in predicting how civil courts will interpret key provisions of the new statute.  There is some debate about whether Chinese judges will understand the norms on the burden of proof to be matters of procedural law and therefore not subjected to the statute. It is also predicted that there will be notable problems for the Chinese judges in the interpretation and correct application of foreign norms. 

Considering that Chinese civil courts do not follow “precedents”, it is likely that for the time being they will develop and rely upon their own internal guidelines for interpreting both laws.  In turn, this may lead to inconsistencies among the different territorial jurisdictions. For these reasons, we expect a period of uncertainty for parties who do find themselves embroiled in product liability litigation, until binding guidelines and interpretations have been issued by the Supreme People’s Court.Furthermore, the norms under examination may add to the costs and duration of civil proceedings. Chinese courts will indeed face new complex legal challenges when interpreting foreign substantive laws and parties are likely to engage in long disputes on these preliminary procedural and substantial matters, prolonging the duration and increasing the costs of proceedings. Translations will also add to increased costs and duration of the proceedings.

In addition, these developments may impact multinational companies with manufacturing facilities in China. Although this type of litigation has been limited so far, a growing sense of consumer rights combined with a stronger legal framework to enforce these rights, might lead to cases being initiated against foreign invested companies in China. Therefore, it is of growing importance for their directors and senior management to be aware of the developments on product quality standards, product liability, recall measures and consumer protection.

Consult the Law Office of Peter Zhu if you have any questions with respect to China product liability issue. We have extensive experience in this area of law and has been representing multinational companies and defending them in product liability lawsuits.

Read 3436 times Last modified on Monday, 16 September 2013 14:05
Shenzhen Lawyer

A Shenzhen lawyer practicing in one of the best Shenzhen law firms handle commercial and family law matters across the country. Free preliminary legal consultation. Tel: +86 188 19019636. Email: peterzhulaw@hotmail.com

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