Class/collective actions in China: overview

A Q&A guide to class/collective actions in China.

The Q&A gives a high level overview of class/collective actions, including current trends; the regulatory framework; limitation periods; standing and the procedural framework for bringing an action; funding and costs; disclosure; damages and relief; settlement; appeals; alternative dispute resolution and proposals for reform.

To compare answers across multiple jurisdictions, visit the Class Actions Country Q&A Tool.

This Q&A is part of the Class Actions Global Guide.

Yao Feng and Linzhu Wang, Broad & Bright
Contents

Overview of class/collective actions and current trends

1. What is the definition of class/collective actions in your jurisdiction? Are they popular and what are the current trends?

Definition of class/collective actions

Overview. In China, "class actions" are referred to as "representative actions". These actions have the following features:

  • Representatives who are appointed from among the claimants to represent the claimant in the case.

  • Agents ad litem, who can be appointed by the representatives to conduct the action.

  • A minimum of ten claimants.

  • Easing the burden on courts and parties to improve the litigation efficiency.

Representative actions can be classified into two categories:

  • Actions with a fixed number of claimants.

  • Actions where the number of claimants is not fixed.

Where the number of claimants is fixed at the time the case is filed, the participants' claims could either have a common subject matter and be heard together, or the subject matters of the participants' claims could differ and therefore be capable of being heard separately, but be in the same category and similar to each other. Where the number of participants is not fixed, the subject matters of the participants' claims could also differ and be capable of being heard separately, but be in the same category and similar to each other.

Appointment of representative(s). To qualify as a representative in an action, a participant must:

  • Be a claimant in the case.

  • Be competent to litigate.

  • Have the capacity to be engaged in litigation.

  • Perform his or her duty in good faith.

Except where a single representative is appointed (see below) between two to five representatives can be appointed and each representative can appoint between one and two agents ad litem.

In claims with a fixed number of claimants, all the claimants can choose to elect a common or single representative. For claimants who fail to elect a representative, they can either choose to conduct the litigation themselves or file a separate lawsuit.

In claims where the number of participants is not fixed, a common representative can be appointed, but this is unlikely. If active claimants fail to elect a representative, the court can consult them and propose suitable candidates. Where such consultation is unsuccessful, the court can appoint representatives from among the claimants who filed the suit.

Binding nature of representatives. The conduct of the representatives is binding on all claimants except where it is a legal requirement that the conduct be specifically approved. Where conduct involves the substantive rights of the claimants, such as amending, waiving or settling a claim or acknowledging a counterparty's claim, approval must be sought from the claimants.

Any court judgment or decision will be binding on the representatives and all the parties that they represent. Where an action does not have a fixed number of participants, a court judgment will be binding on all of the active claimants to the action.

It also acts as a preliminary judgment on any future claimants covered by the class of individuals who might have a claim (see below, Use of class/collective actions) who file actions within the relevant statute of limitations.

Use of class/collective actions

In China, group disputes often occur in the field of tort, including product liability, environmental pollution, consumer rights and interests as well as other issues. For example, in one food safety incident involving milk and infant formula milk powder, poor product quality caused personal injury to more than three customers. In another case, many victims of cadmium pollution were found along the Long River in Guangxi province. These are examples of group disputes with potentially high numbers of unascertainable victims found in a large area which are suitable for representative actions.

From a practical perspective, however, it is not common to use representative actions as most courts do not proactively employ them to resolve group disputes.

Current trends

The first case to utilise a representative action was brought by 1,569 farmers against Yue'an County Seeds Company. It concerned a purchase and sale agreement and was heard by Sichuan Yue'an People's Court in 1986. Given the large number of claimants, it was not practical for them all to participate in a court action. The court therefore used a representative action, even though the law did not at that stage include specific provisions regarding representative actions. The court judgment was binding on all the disputes between the farmers and the Seed Company who had similar purchase and sale agreements.

Due to rapid economic and societal development, group economic disputes and civil disputes involving multiple participants are increasing.

 

Regulatory framework

2. What are the principal sources of law and regulations relating to class/collective actions? What are the different mechanisms for bringing a class/collective action?

Principal sources of law

The principal sources of law include the PRC Civil Procedural Law (Civil Procedural Law) and the Supreme People's Court's Interpretation on the Application of the PRC Civil Procedural Law (Supreme Court Interpretation), as well as other relevant laws and regulations.

Principal institutions

Representative actions are mainly used in general civil proceedings. Claimants can also elect representatives to participate in mediation or arbitration on their behalf in employment disputes.

Since there are no laws which set out specifically the territorial jurisdiction of representative actions, courts will apply general provisions on jurisdiction under the Civil Procedural Law and its judicial interpretation.

Different mechanisms

Representative actions are relatively complicated compared with straightforward litigation, especially for representative actions with no fixed number of claimants. For these types of actions, some specific provisions apply, including:

  • Acceptance. The courts usually determine whether the lawsuit qualifies as a representative action at this stage.

  • Public announcement. Where a party has no fixed number of claimants at the time the suit is filed, and the subject matter of the litigation falls into one category, the court can issue a public announcement explaining the facts and the claims in the case and notifying potential participants to register with the court within a certain period of time.

  • Registration. During the public announcement period, the potential participants who have not filed the suit can register with the court. The participants (claimants) must prove their legal relationship with the defendants and detail the damages they have suffered. Registration will not be approved if no proof can be provided. In that case, the participants may file a separate lawsuit.

  • Election of representative(s). The claimants must elect a representative or representatives (see Question 1, Definition of class/collective actions: Appointment of representatives).

 
3. Are class/collective actions permitted/used in all areas of law, or only in specific areas?

There are no special provisions on applicable areas for representative actions in China. Therefore, in principle, representative actions can be used where the disputes fulfil the statutory conditions for them including, in principle, product liability, environmental law, competition law, pension disputes and consumer redress for financial services.

There are no special provisions on representative actions concerning criminal procedures, however, they can be used for civil actions connected with criminal cases.

 

Limitation

4. What are the key limitation periods for class/collective actions?

There are no special provisions on limitation periods for representative actions, therefore the general rules concerning statutes of limitation set out under the Civil Procedural Law will apply. The limitation period for general civil litigation is two years, which begins to run from the point at which a claimant knew, or should have known, of the injury or damage. However, the limitation period runs out 20 years after the injury or damage occurs.

There are certain special provisions under the law regarding:

  • Short-term limitation periods of one year, such as personal injury, or certain product quality claims.

  • Long-term limitation periods of more than two years, such as environmental damage (three years), or international sales contract (four years).

In addition, provisions concerning suspension and interruption of the litigation will be applicable.

 

Standing and procedural framework for bringing an action

Standing

5. What are the rules for bringing a claim in a class/collective action?

Definition of class

The minimum number of participants in a representative action is ten, regardless of whether the number of participants is fixed or whether there are more potential claimants at the time the lawsuit is filed (see Question 1, Definition of class/collective actions: Overview).

Potential claimant

There are no special rules relating to the criteria for a claimant in a representative action. Therefore, general provisions under the Civil Procedural Law apply. Under this law, a claimant must be a citizen of China, a legal person or other organisation with a direct interest in the case.

Claimants outside the jurisdiction

For representative actions with a fixed number of claimants (indispensable joint litigation), a court must hear the case on a consolidated basis because the litigation has the same subject matter (see Question 1, Definition of class/collective actions: Overview). Where two or more courts have jurisdiction over the same case, the claimant may file the lawsuit with one or other of the courts. Where a lawsuit has been started in two or more courts, it will come under the jurisdiction of the court in which it was first initiated.

With regard to representative actions with no fixed number of claimants (dispensable joint litigation), because the subject matter of the actions falls within the same category, the following four conditions must be satisfied for the court to determine whether to combine the various actions into one representative action with numerous claimants:

  • The object of actions must fall under the same category.

  • The actions to be combined fall under the jurisdiction of the same court.

  • The court must deem that the litigation may be combined for trial.

  • The claimants must agree to have their actions combined for trial.

Claimants that are inside or outside China could both be involved in the same representative action if the relevant conditions are satisfied. Assuming there are several independent cases filed with a court, the court must have jurisdiction over all the independent cases to consolidate them into one representative action. Whether the claimant is inside or outside China is just one of the factors that should be considered when determining the jurisdiction of the specific case.

Professional claimants

There are no provisions on this under Chinese law.

Other

Not applicable.

Qualification, joinder and test cases

6. What are the key procedural elements for maintaining a case as a class action?

Certification/qualification

Any claimant can institute an action alone, but if the claimant meets the criteria to participate in a representative action, the court may decide to hear that claimant's case as part of a wider joint action if other parties have instituted similar claims. If the court subsequently deems it improper to hear such a case as part of a joint action, it can separate the cases and hear them individually.

Minimum/maximum number of claimants

The minimum number of claimants is ten (see Question 1, Definition of class/collective actions: Overview). There are no provisions on the maximum.

Joining other claimants

A mechanism called "Registration by Public Announcement" is adopted in representative actions with no fixed number of claimants.

Under this mechanism, the court issues a public announcement setting out the particulars of the case, and informing potential claimants that they can register with the court within a certain period of time. The duration of the public announcement is determined on a case-by-case basis but must not be less than 30 days. The court may choose to issue the public announcement through the court notice board, newspaper, television or any other medium depending on the scope of the specific dispute.

Claimants registered with the court must prove the legal relationship between them and the opposing party and provide details of damage suffered. Judgments or rulings rendered by the court are binding on all claimants registered with it. Such judgments or rulings also apply to claimants who have not registered with the court but who subsequently institute actions within the statute of limitations.

Test cases

There are no express provisions on test cases. However, owing to the continuous appearance of group disputes, scholars have suggested establishing such a system.

The courts have established certain practices that are similar to test cases. For example, some claimants or interested persons who have not filed a lawsuit, can sit in on the trial of a typical case. Based on the judgment passed in the case, those claimants or interested persons can predict the chances of winning their own case. Usually these potentially similar cases will be resolved through settlement or mediation under the co-ordination of the judge without being heard in court.

Timetabling

7. What is the usual procedural timetable for a case?

A two-tier trial system applies under Chinese law: simplified procedure and general procedure. Representative actions are governed by the rules on general procedure. The timetable for the general procedure is outlined below.

Acceptance and initiation

The court determines whether to initiate the case within seven days of receiving a claim.

First instance procedure

The court aims to conclude the case within six months from the date that it was initiated. Where an extension is required because of special circumstances, six extra months may be given subject to the approval of the president of the court. Any further extension must be approved by a superior court.

Second instance procedure

A party has the right to file an appeal with a superior court within 15 days from the date on which the written first instance judgment was served (see Question 22). A party may lodge an appeal with a superior court within ten days from the date on which the written ruling of the first instance court was served (a ruling will usually concern a determination related to a procedural matter, rather than a judgment, which usually concerns a determination in relation to a substantive matter).

Usually, the court trying an appeal case against a judgment will conclude the trial within three months from the date on which the appeal was filed. The court trying an appeal case against a ruling will make a ruling of final instance within 30 days from the date on which the appeal was filed.

Effect of the area of law on the procedural system

8. Does the applicable procedural system vary depending on the relevant area of law in which the class/collective action is brought?

The procedural system does not generally vary depending on the area of law.

Funding

9. What are the rules governing lawyer's fees in class/collective actions?

There are no special rules regarding lawyer's fees in representative or joint actions. However, under Chinese law, lawyers are not permitted to act on the basis of a success fee in group actions.

 
10. Is third party funding of class/collective actions permitted?

There are no specific provisions with regard to third party funding of representative or joint actions.

 
11. Is financial support available from any government or other public body for class/collective action litigation?

Where a claimant has genuine difficulty paying for litigation expenses, the claimant can apply to the court for the payment to be deferred, reduced or exempted. This provision is available generally, including for representative actions.

 
12. Are other funding options available to claimants in class/collective actions?

There are no specific provisions under Chinese law concerning other funding options.

Costs

13. What are the key rules for costs/fees in class/collective action litigation?

Costs and fees for representative actions are the same as for general civil litigation (excluding divorce proceedings). There are no statutory requirements providing a ceiling on the amount of litigation costs or fees.

Generally, litigation costs are borne by the party who loses the case, unless the party who wins the case volunteers to pay them. Where each party partially loses the case, the court will (depending on the specific conditions of the case) determine the amount of costs to be borne by each party. Where claimants to a joint action lose their case, the court will (based on their respective stake in the subject matter of the litigation) determine the amount of costs to be borne by each of them.

Case filing fees must be paid in advance by the claimant/appellant. Where a claimant applies for withdrawal of the claim and the court makes a ruling to approve the application, the filing fee will be borne by the claimant.

Where a case is settled through conciliation or is withdrawn by the claimant, only half the filing fees need to be paid. Where a settlement agreement is reached through mediation by the court, which party bears the costs will be determined by negotiation. If the negotiation fails, the court will determine who bears the costs.

Key effects of the costs/funding regime

14. What are the key effects of the current costs/funding regime?

The key effects of the current costs/funding regime are the same that are applicable to most systems where the costs are usually borne by the losing party.

 

Disclosure and privilege

15. What is the procedure for disclosure of documents in a class/collective action?

Before litigation

The general rules on exchange of evidence apply; there are no special rules for representative actions. Evidence can be comprised of statements of the parties, documentary evidence, physical evidence, audio-visual materials, electronic data, testimony of witnesses, expert opinions and records of inspections and examinations. The principal rules are:

  • Exchange of evidence can either be applied for by the claimant or determined by the judge at the judge's discretion. In principle, exchange of evidence is required for cases tried by a hearing as it helps to define the focus of the dispute.

  • The time for exchanging evidence may either be agreed on by the parties concerned and approved by the court, or determined by the court. Where the court arranges for the parties to exchange evidence, the time limit for producing new evidence expires on that day. The parties may apply for an extension which must be approved by the court. The exchange of evidence is conducted under the supervision of a judge.

  • Evidence is exchanged between the parties under the control of a judge and in principle all evidence submitted by the parties must be exchanged. In the process of evidence exchange, the judge records in the case the facts and evidence to which the parties have no objection. Evidence to which parties object is recorded in the case file with reasons for the objection. The facts that need to be determined and proved are also noted in the case file. Through this process, the major issues at dispute can be determined. There must not be more than two exchanges of evidence, unless the case is very important or complicated, or the court believes it to be necessary.

During litigation

The exchange of evidence procedure is conducted before trial.

 
16. Are there special considerations for privilege in relation to class/collective actions?

Regulations provide that evidence involving state secrets, commercial secrets and personal privacy must be kept confidential and cannot be presented in open hearings. This is similar to the concept of "privilege". During a trial, the claimant may refuse to submit evidence on the grounds that it involves secrets or personal privacy. However, the consequences may be unfavourable if, as a result of the refusal, the claimant fails to fulfil the burden of proof.

There are no special considerations in relation to representative actions.

 

Evidence

17. What is the procedure for filing factual and expert witness evidence in class/collective actions?

There is no pre-trial system for civil actions in China.

General

When submitting evidence to the court, the claimants must submit the original. If the claimants need to preserve the original or if it is difficult to provide, then a photocopy or reproduction that has been deemed original by the court after verification can be submitted instead.

If the evidence submitted by the claimants originated outside China, it must be certified by a notary from the country concerned and authenticated by the Chinese embassy in that country. Alternatively, it must be subject to any relevant certification formalities prescribed in treaties concluded between China and that country. If documentary evidence submitted by the claimants is in a foreign language, translations into Chinese must also be provided.

Claimants must categorise and number all evidential materials and prepare a brief statement on their sources, object and content. They must also sign and date a statement of submission and provide the required number of copies. In practice, an evidence list is required and only the evidence list should be signed; there is no need to sign each piece of evidence. There are no regulations regarding the length of statements or the issues that can be covered.

Expert evidence

The claimants may apply for one or two person(s) with professional knowledge to appear in court to clarify specialist questions relating to the case (expert witness). The claimants must submit the written opinion prepared by the expert witness to the court before the time limit for producing evidence expires. The court can then arrange for the parties concerned to exchange evidence before the hearing.

Generally speaking, the court will consider the following when deciding whether to approve an expert witness:

  • Whether the expert witness is equipped with professional knowledge and experience relevant to the case.

  • Whether the expert witness has provided any opinions that go against professional ethics.

 

Defence

18. Can one defendant apply to join other possible defendants in a class/collective action?

Joining other defendants

If there are defendants who have not participated in the litigation, the court must notify them to participate. Defendants may also apply independently to the court to join the existing parties.

Rights of multiple defendants

There are no explicit provisions on whether multiple defendants can enter into "joint defence agreements" or other similar arrangements. Generally, such agreements or arrangements do not violate the law.

Although there are no explicit provisions on whether multiple defendants can instruct the same lawyer, it is common for them to do so in practice.

There are no explicit provisions on whether multiple defendants can instruct the same expert. The courts usually do not prohibit joint expert(s) in practice.

 

Damages and relief

19. What is the measure of damages under national law in the field of class/collective actions?

Damages

There are no specific regulations regarding damages in representative actions. Therefore, general rules of civil law will be applied to both court proceedings and judgment. A claimant may claim damages for infringement or breach of contract but the method of calculation of the damages depends on the nature of the case.

Punitive compensation

The calculation of damages generally follows the principle of compensation based on actual loss rather than punishing the wrongdoer (punitive compensation).

However, punitive compensation is allowed under certain circumstances. For instance, punitive damages are awarded if a business operator provides goods or services with gross negligence or wilful misconduct and causes damages to customers. Where a food manufacturer has made products that do not comply with safety standards (or a seller has sold the products knowing that they do not comply with food safety standards), consumers may claim compensation worth ten times the price of the food.

Cap on compensation

Caps on damages vary depending on the nature of the case. For instance, in certain circumstances, a buyer can claim compensation that is no more than double the payment obtained already. There are also explicit provisions for a cap on nursing and living expenses for those who have suffered personal injury.

Apportionment of compensation

The judgment or ruling of the court is binding on all registered claimants. The judgment or ruling will also apply to unregistered claimants who file a lawsuit within the statute of limitations. The amount of compensation and method of apportionment are usually set out in the written judgment.

Recovering damages

There are some regulations on recovering damages. For instance, there are particular rules that apply to product defects, traffic claims, environmental pollution attributed to third parties, harm done by domestic animals and damage to property.

Interest on damages

There are no special regulations in the context of representative actions regarding interest on damages. Therefore, the general rules apply. Where a defendant does not meet the relevant payment obligations within the period stipulated in a judgment, ruling or any other legal document, the defendant will pay double the interest on the debts during the deferred performance period. Where a defendant fails to perform other obligations during the period stipulated in the judgment, ruling or any other legal document, the defendant will pay a deferred performance fine.

 
20. What rules apply to declaratory relief and interim awards in class/collective actions?

Declaratory relief

There are no specific rules for representative actions and therefore general rules apply. Generally, declaratory relief is available if all the conditions for such relief are satisfied.

Interim awards

There are no specific rules for representative actions and therefore general rules apply. Where the action of a party to a lawsuit causes difficulty in enforcing a judgment or causes other harm to the claimants, the court may rule on property preservation or order the party to either undertake, or be prohibited from undertaking, certain acts.

A court may provide advance enforcement of a claimant's application in the following circumstances:

  • Alimony, payment of maintenance, payment of child support, pension, and medical fees.

  • Salary payments.

  • Where there is a need for prior enforcement under urgent circumstances.

Property preservation includes both pre-trial and in-trial preservation. Advance enforcement will be applied by the court after accepting a case and before the final judgment.

 

Settlement

21. What rules apply to settlement of class/collective actions?

Settlement rules

There are no specific rules for representative actions and therefore general rules apply. The parties to a lawsuit may reach a settlement on their own, outside the court proceedings. The procedure for the purpose of settlement of a case conducted via the court is called "mediation".

There are no rules on whether the settlement of class actions is subject to the approval of a certain percentage of claimants. If the settlement plan would in theory be effective for all claimants, then in principle all the claimants should approve the plan. Anyone who is against the settlement plan can opt out or, alternatively, select another representative.

Separate settlements

In principle, each defendant can settle separately without impacting the other defendants but there are no specific rules with regard to this.

 

Appeals

22. Do parties have a right to appeal decisions relating to class actions, such as a decision granting or denying certification of a class action?

A party has the right to file an appeal with a superior court within 15 days from the date on which the written first instance judgment was served. Alternatively, a party may lodge an appeal with a superior court within ten days from the date on which the written ruling of first instance court was served. Judgments usually involve determinations related to substantive matters while rulings usually involve determinations related to procedural matters.

The appeal court will organise a collegiate panel for the appeal and conduct a hearing to try the case. After examining the case file and investigating and questioning the claimants, if there is no new fact, evidence or reason, and the collegiate panel deems that an appeal hearing is not necessary, the case may be tried without a hearing. The collegiate panel is convened for both judgments and rulings.

Usually, the appeal court will conclude the appeal within three months from the date on which the appeal was filed. The court trying an appeal case against a ruling will make a ruling of final instance within 30 days from the date on which the appeal was filed.

 

Alternative dispute resolution

23. Is alternative dispute resolution (ADR) available in class/collective actions?

There are no particular rules concerning ADR for representative actions.

Generally, there are two types of ADR:

  • Social ADR, where the parties involved in the dispute directly seek other settlement methods rather than litigation, for example, mediation, mediation for labour issues, administrative mediation, discussion by the parties, commercial arbitration, labour arbitration and personnel arbitration. If the parties submit a dispute to an arbitration institution, it is not possible to request a remedy from the court, because its jurisdiction is ruled out. Other methods of social ADR do not exclude the parties' rights to subsequently file a lawsuit.

  • Judicial ADR, where the court transfers the case to certain personnel with no judicial function or designates those personnel to resolve the dispute (mediation). Where mediation is unsuccessful, the court will promptly issue a judgment. A settlement agreement reached through mediation will be voluntary between both parties and must not be coerced.

 

Proposals for reform

24. Are there any proposals for reform concerning class/collective actions?

There are no proposals for reform concerning class/collective actions.

 

Online resources

Central People's Government of the People's Republic of China

W www.gov.cn/flfg/2012-09/01/content_2214662.htm

Description. This website is administered by the State Council of PRC. The information it contains is official and up-to-date.

China Court

W www.chinacourt.org/law/detail/2015/01/id/148091.shtml

Description. This website is under the leadership of the Supreme People's Court and depends on People's Court Daily. The information it contains is official and up-to-date.

The English-language translations of the Civil Procedural Law and the Supreme Court Interpretation can not be obtained from official websites or from trusted unofficial sites.



Contributor profiles

Yao Feng, Partner

Broad & Bright

T +86 8513 1810
F +86 8513 1819
E yao_feng@broadbright.com
W www.broadbright.com

Professional qualifications. State Bar of New York

Areas of practice. Anti-trust; international trade; customs; foreign direct investment

Linzhu Wang, Partner

Broad & Bright

T +86 8513 1802
F +86 8513 1819
E linzhu_wong@broadbright.com
W www.broadbright.com

Professional qualifications. National Bar of China

Areas of practice. Litigation and arbitration; intellectual properties; real estate and construction.


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