Wu Yiming[1]: Latest Development of Private International Law in China* (JURA, 2012/1., 217-222. o.)

The latest legislation of private international law (hereinafter: PIL) in China, which demonstrates the latest development of PIL, is the Law of Application of Law for Foreign-related Civil Legal Relations in People's Republic of China(hereinafter: Application Law) . Application Law was adopted at the 17[th] session of the Standing Committee of the 11[th] National People's Congress on October 28, 2010 and came into force on April 1, 2011. The birth of this new legislation has a significant meaning which is the first act of PIL in People's Republic of China(hereinafter: PRC) and symbols a new era in the history of PIL in PRC. Compare with previous legislations, it brings new changes in several aspects. However, it is not a perfect one with some defects as well.

1. Short Brief of Legislation History of PIL in China

In 1949, People's Republic of China was founded with a wholly new government, therefore the legislation history of PIL in China can be divided into two periods.

China is one of the earliest countries to regulate the provisions of PIL. The earliest written norms of PIL in China can be dated back to Yonghui Lu in Tang Dynasty about more than 1,300 years ago. In the modern times in China, the Beiyang Government had set forth the regulation of application of law in 1918.

The foundation of PRC in 1949 opened a new page in the history of China. As to the history of PIL after 1949, it can be divided into three periods. The first was the period between 1949 and 1979. During those years, the contact of Chinese people with foreigners seldom occurred, plus some special political reasons, the legislation of PIL was nearly stagnant and blank. The second was the period between 1979 and 2011. The Policy of Reform and Opening Up in China caused a sharp increase of the foreign related civil relationships which made it necessary to promulgate the related legislation. Several acts including the related norms came into force. While there was no specific act of PIL and provisions of PIL dispersed in different laws, such as civil law, inheritance law, maritime law, civil aviation law and so on. Besides, the judicial interpretations of supreme people's court also played a very important role in practice.[1] The third period began from the enforcement of Application Law. The following will elaborate the contents, changes and defects of the new act.

2. Main Contents of Application Law

There are eight chapters in Application Law, including general provisions, civil subjects, marriage and family, inheritance, real right, creditor's rights, intellectual property rights and supplementary provisions.

Chapter I (articles 1~10) is about the general provisions, most of the articles will be discussed in detail in the following text.

Chapter II (articles 11~20) is about civil subjects. The main contents include civil rights capacity and civil acts capacity of a natural person, declaration of missing or death; civil rights capacity and civil acts capacity of a legal person; applicable law of the right of personality, agency, trust and arbitral agreement; conflict of nationality and domicile.

Chapter III (articles 21~30) is about the marriage and family. The main contents involve the applicable law of the following matters: substantive and formal requirements of marriage; personal and property relation between husband and wife; personal and property relation between parents and children; divorce; adoption; maintenance and guardianship.

Chapter IV (articles 31~35) is about inheritance. In this chapter, there are the provisions of applicable law of legal inheritance, form of testament, validity of testament, administration of estate and default of heirs.

Chapter V (articles 36~40) is about real right. In this chapter, there are provisions of the applicable law of immovable property, movable property and other special property, such as movable property in transportation, negotiable securities and pledge of rights.

Chapter VI (articles 41~47) is about creditor's right. In this chapter, the provisions involve the applicable law of contract, consumer contract, labor contract, tort, product liabilities, internet infringement, ill-gotten gains and negotiorum gestio.

Chapter VII (articles 48~50) is about intellectual property right, which regulates the applicable law

- 217/218 -

of ownership and contents of intellectual property rights, the assignment and licensed use of intellectual property rights and the infringement of intellectual property rights.

Chapter VIII (articles 51~52) is the supplementary provision.

From the general view, the provisions in Application Law are more systematic and comprehensive. Before the enforcement of the new act, the most important resource of PIL in China was General Principle of Civil Code, in which chapter VIII is about the application of law in civil relations with foreigners. But there are only nine articles in this chapter, regulating the matters about movable property rights, marriage between Chinese and foreigners, contract, compensation of tort, maintenance, legal inheritance, public policy and so on. The provisions can't satisfy the need of international civil and economy activities. To a certain extent, the promulgation of Application Law makes up for the defect.

3. New Changes in Application Law

3.1 Addition of general provisions

It is the first time to provide general provisions in PIL. There are ten articles in part of general provisions, besides the aim of legislation. As view of the importance of general provisions, the articles will be introduced one by one.

Art.2(2) stipulates the doctrine of the most significant relationship: If there are no provisions in this law or other laws on the application of any laws concerning foreign related civil relations, the laws which have the closest relation with this foreign-related civil relation shall apply. During the process of drafting, some scholars suggested that the doctrine of the most significant relationship should be adopted as the general principle of the whole act as well as Austrian Private International Law Act.[2] While others put forward to an opposite opinion that it will lead a dangerous situation due to the flexibility of the doctrine, in which the judge will be entitled overdue discretionary power to decide the applicable law. Therefore, in the final text, article 2(2) becomes a residual clause with the function of supplementary. In this case, the judge still has the discretionary power, whereas the power is exercised in a limited circumstance to balance the certainty and flexibility.

Art.3 stipulates the way to choose the law: The parties may explicitly choose the laws applicable to foreign-related civil relations in accordance with the provisions of law. This demonstrates only the express way of choosing the law can be recognized by the law. Of course, the right to choose the law is not without any limitation. One of the limitations is to abide by the mandatory provisions. Art.4 is about mandatory provision: If there are mandatory provisions on foreign-related civil relations in the laws of the People's Republic of China, these mandatory provisions shall directly apply. This provision is similar with an article in the previous judicial interpretation. While there is a key issue needed to be clarified, that is, which provisions fall into the scope of mandatory provisions.

As to the limitation of law application, public policy is an important one, which is stipulated in Art.5. If the application of foreign laws will damage the social public interests of the People's Republic of China, the laws of the People's Republic of China shall apply. This is the clause of public policy, although the term of "social public interests" is referred to. The consequence of violating the social public interests is to apply the laws in P.R.C., which is common in most of the countries.

Art.6 is about the inter-region law conflict in foreign countries, which is not a new one. As for the application of foreign laws on a foreign-related civil relation, if different laws are enforced in different regions of this foreign country, the laws of the region which has the closet relation with this foreign-related civil relation shall apply. The same content has been stipulated in a previous judicial interpretation.

Art.7 is a wholly new one about the applicable law of limitation of action, which stipulates The proper laws applicable to the relevant foreign-related civil relations shall apply to the limitation of action. Art.8 is about the characterization with its first appearance in the legislation: Lex fori shall apply to the determination on the nature of foreign-related civil relations. The stipulation in this article is a popular one in most of the countries.

Art.9 stipulates: Foreign laws applicable to foreign-related civil relations do not include the law of the application of law of this foreign country. There is a similar provision in the previous judicial interpretation, while whether it is can be applied to other areas is on doubt because the interpretation is only related to the contract matters. Therefore, as a general provision, this article demonstrates any kind of renovi system cannot be recognized in China, even if the consequence is to apply the Chinese law, that is, direct renovi.

The last one in general provisions, article 10 is the ascertainment of foreign law, which stipulates: Foreign laws applicable to foreign-related civil relations shall be ascertained by the people's court, arbitral authority or administrative organ. If any party chooses the applicable foreign laws, he shall provide the laws of this country. If foreign laws can not be ascertained or there are no provisions in the laws of this country, the laws of the People's

- 218/219 -

Republic of China shall apply. Besides the further clarification of the obligation of the people's court, arbitral authority and administrative organ, there is an important change about the party's obligation to prove the foreign law chosen according to their own will. The possible reason lies in the purpose to reduce the burden and workload of judges. Anyway, judges always prefer to apply their own law instead of foreign law which will cost the time, effort, money and high risk of wrong application.

3.2 Adoption of habitual residence as main personal connecting factor

One of the important changes in Application Law is the adoption of habitual residence as main personal connecting factor. For a long time, there has been the difference in common law system and civil law system, the former preferring the domicile while the latter preferring the nationality as the personal connecting factor. In order to reconcile the conflict and contradiction, Hague Conference on Private International Law adopted the habitual residence as personal connecting factor in the conventions. Now, in China, in the new act, habitual residence displaces the nationality and domicile adopted in the previous legislation, which follows the trend of Hague Conference.[3] Therefore habitual residence are provided in the matters of civil right capacity and civil act capacity of natural person, conflict of nationality, marriage and family matters. Of course, in some circumstance, other connecting factors, such as nationality, still play a supplementary role. The new act also stipulates that if a natural person's habitual residence is uncertain, the laws of current residence shall be applied.[4] Form a general view, this change is scientific and reasonable.

3.3 Extension of the doctrine of party autonomy

The doctrine of party autonomy is one of the most popular doctrines adopted by almost all the countries. It was established irstly in the ield of contract, but now its application has expanded to other fields because of its value of efficiency, freedom, and justice. This trend also has been reflected in the new act.

As to the application of the doctrine, there are two different ways. One is to apply the doctrine without any limitation, that is, the parties can choice any law according to their own will. Except to the contract matter, doctrine of party autonomy also is stipulated in the fields of entrustment of agency (article 16), trust (article 17), arbitral agreement(article 18), movable property rights(article 37), any change of the right over the movables taking place in transportation by agreement(article 38), ill-gotten gains and negotiorum gestio(article 47) and so on.

The other is to choose the law within the scope supplied by the legislation. In other words, there is a limitation on the scope of law to be chosen. Article 24 provides, As for the property relation between husband and wife, the parties concerned may choose the applicable laws at the habitual residence, of the state of nationality or at the locality of the main properties of one party by agreement. Article 26 provides, As for a divorce by agreement, the parties concerned may choose the applicable laws at the habitual residence or of the state of nationality of party by agreement. In the two articles, the matters concerned are of personal nature, therefore it is a breakthrough to apply the party autonomy in spite of the limitation.

3.4 Emphasis on protecting the interest of the weak party

Although in the worldwide, the trend to protect the interest of the weak party has prevailed for decades of years, there were almost no such provisions in previous PIL legislation in China. Fortunately, in the new act, the legislator began to focus on protecting the interest of the weak party on the matters related with maintenance, guardianship, consumer contract and employment contract. Among these articles, there are two modes to protect the weak party.

One is to stipulate directly that the law most favorable to the weak party will be applied, such as arts 29 and 30. Article 29 provides: The laws in favor of protecting the rights and interests of the persons being maintained in the laws at the habitual residence, of the state of nationality or the locality of the main properties of one party shall apply to maintenance. Article 30 provides: The laws in favor of protecting the rights and interests of the persons under guardianship in the laws at the habitual residence or of the state of nationality of one party shall apply to guardianship.

Another mode is reflected in the articles of consumer contract and labor contract, which provide the different connecting factors from the general contract and suppose they are benefit to the parties. Article 42

- 219/220 -

provides: The laws at the habitual residence of consumers shall apply to consumer contracts; If a consumer chooses the applicable laws at the locality of the provisions of goods or services or an operator has no relevant business operations at the habitual residence of the consumer, the laws at the locality of the provision of goods or services shall apply. Article 43 provides: The laws at the working locality of laborers shall apply to labor contracts; if it is difficult to determine the working locality of a laborer, the laws at the main business place of the employer shall apply. The laws at the dispatching place of labor services shall apply to labor dispatches. However, as for the applicable law of consumer contract, some scholars queried the effect of protection.[5]

3.5 Complication of applicable law of marriage matters

As for the marriage, big changes have been taken place both in marriage and divorce. In the previous General Principle of Civil Law, applicable law of marriage and divorce matters are stipulated in the same article, which provides: The marriage of a citizen of the People's Republic of China to a foreigner shall be bound by the law of the place where they get married, while a divorce shall be bound by the law of the place where a court accepts the case. The article is too simple and doesn't cover all the types of foreign-related marriage.

The new act distinguishes the qualifications and formalities of the marriage and provides different connecting factors. Article 21 is about the qualifications of marriage: The laws at the mutual habitual residence of the parties shall apply to the marriage qualifications; if there is no mutual habitual residence, the laws of the mutual state of nationality shall apply; if there is no mutual nationality and marriage is established at the habitual residence or in the state of nationality of one party, the laws at the locality where marriage is established shall apply. Article 22 is about the formalities of marriage: Marriage formalities shall be valid if they conform to the laws at the locality where the marriage is established or the laws at the habitual residence of or the state of nationality of one party. Obviously, on the surface, the provisions are more complicated than before. Essentially, the reason is that the personal nature of marriage is taken into consideration. In article 22, there are three alternative connecting factors in the provision which demonstrates the idea to make the marriage valid as far as possible. While in article 21, the connecting factors should be applied in order.

As to the divorce, arts 26 and 27 distinguish the divorce by agreement from the divorce by court. Article 26 provides: As for a divorce by agreement, the parties concerned may choose the applicable laws at the habitual residence or of the state of nationality of one party by agreement. If the parties do not choose, the laws at the mutual habitual residence shall apply; if there is no mutual habitual residence, the laws of the mutual state of nationality shall apply; if there is no mutual nationality, the laws at the locality of the institution handing the divorce formalities shall apply. Article 27 provides: The laws at the locality of the court shall apply to a divorce by litigation. Although the distinction of divorce by agreement and divorce by court is an innovation, the sense of it is on doubt.

3.6 Clarification of characteristic performance in the applicable law of contract

Article 41 is about applicable law of the contract, and before the promulgation of Application Law, Article 145 in General Principle of Civil Law is also the article about contract. The former provides: The parties concerned may choose the laws applicable to contracts by agreement. If the parties do not choose, the laws at the habitual residence of the party whose fulfillment of obligations can best reflect the characteristics of this contract or other laws which have the closet relation with this contract shall apply. The latter provides: The parties to a contract involving foreign interests may choose the law applicable settlement of their contractual disputes, except as otherwise stipulated by law. If the parties to a contract involving foreign interests have not made a choice, the law of the country to which the contract is most closely connected shall be applied.

Compare with two articles, there are some difference with essential similarity. The first half of the two articles is same, which means party autonomy is the primary principle, while the second half of the articles is different. The previous legislation provides the doctrine of the most significant relationship in case there is no choice of law by parties, while the new legislation provides the habitual residence of the party whose fulfillment of obligations can best reflect the characteristics of this contract as a connecting factor. Notwithstanding the difference, the essential meaning is similar. The new provision still reflects the same doctrine.

The doctrine of the most significant relationship is another popular doctrine in private international law. While the connecting factor is flexible to be decided by judge case by case, there are different ways to deal with it in two legal systems. In common law system, for example, in the Second Statement of Conflict law in United States, the judge has judiciary discretionary power to decide the law which has the closest connection with the case according to the factors provided in the act. In civil law country, certainty is the foremost principle , therefore the judge will not be entitled overdue discretionary power. The

- 220/221 -

way of characteristic performance has been developed to decide the law with the closest connection, which supposes in the contract there is always one party whose obligation manifests the character of contract and in most of the situation, this party is the one whose obligation is not to pay the money. Of course, sometimes, there are some exceptions with characteristic performance, in which situation other laws will be applied.

3.7 Improvement of the conflict rules of tort

In the field of tort, Application Law modifies the original provision of general tort and at the meanwhile, adds the new articles about special tort.

As to the general tort, article 44 provides: The laws at the place of tort shall apply to liabilities for tort, but if the parties have a mutual habitual residence, the laws at the mutual habitual residence shall apply. If the parties choose the applicable laws by agreement after any tort takes place, the agreement shall prevail. While in General Principle of Civil Law, article 146 provides: The law of the place where an infringing act is committed shall apply in handling compensation claims for any damage caused by the act. If both parties are citizens of the same country or have established domicile in another country, the law of their own country or the country of domicile may be applied. An act committed outside the People's Republic of China shall not be treated as an infringing act if under the law of the People's Republic of China it is not considered an infringing act.

Compare to the previous legislation, the new changes manifested are following. The scope of conflict rule extends from compensation claims to liabilities for tort, which is more comprehensive and reasonable. Doctrine of double actionability has been annulled. The content of the new provision combines the traditional principle with new development. The main connecting factor is the place of tort, which manifests the traditional principle. While, if both of the parties have the common habitual residence, the law where the mutual habitual residence should be applied, which demonstrates two changes different with the previous article. One is the change of connecting factor from common nationality and domicile to common habitual residence, the other is the nature of the connecting factor converting from alternative to obligatory. Besides, choice of law after the occurrence of tort reflects the limited application of doctrine of party autonomy.

Arts 46 and 47 are new provisions about special torts, product liability and infringement of personal rights. The former provides: The laws at the habitual residence of the infringed shall apply to product liabilities; if the infringed choose the applicable laws at the main business place of the infringer or at the locality of the infringement, or the infringer has no relevant business operations at the habitual residence of the infringed, the laws at the main business place of the infringer or at the locality of the infringement shall apply. The latter provides: If such personal rights as the right of name, right of portrait, right of reputation, right of privacy, ect. are infringed upon via the network or by other means, the laws at the habitual residence of the infringed shall apply. It is an improvement although the two provisions of special tort are far from enough.

4. Main Defects of Application Law

4.1 Unsatisfactory system and structure

Although comparing with the previous legislation, Application Law is more systematic and comprehensive, the new act is still unsatisfactory in some aspects, especially in its system and structure. From the macro respective, one of the obvious defects is that it doesn't include commercial matters. From the micro respective, the arrangement of some provisions is illogical.

At the beginning, the legislator had planned to draft a huge, comprehensive civil code with nine parts and more than 1,200 articles including the conflict rules of foreign related civil legal relationship as one part. While after several years endeavor, the legislator abandoned the grand project because of the extremely complicated and complex process and promulgated Application Law as a separate act. Some specialists and judges criticize that as a separate act Application Law should include the existing conflict rules in the maritime law, civil aviation law and negotiation instruments law, although it is appropriate to exclude the commercial matters in the civil code. The illustration of the legislator is the scope of the commercial matters incorporated in the scope of private international law is too abroad to regulate. Besides the abovementioned three acts, there are other laws such as company law, partnership enterprise law, insurance law, security law and so on. In view of the difference in systems and supervisory requirements in different acts, the legislator argues the best way is to regulate the corresponding provisions in the individual act, although this opinion is not convincing.

Except for the exclusion of the commercial matters, the scholars also point out other illogical problems in the structure. For example, in the part of general provisions, there are no articles about scope and definition of foreign-related civil relationship. It is perplexing to provide the applicable law of arbitral agreement and trust in the chapter II with the title of civil subjects.

- 221/222 -

4.2 Unclarification of relationship between Application Law and other legal instruments

When a new act comes into force, an important issue is the conflict between the new law and the previous ones. Arts 2(1) and 51 in Application Law deal with this matter. Article 2(1) provides: The application of laws concerning foreign-related civil relations shall be determined in accordance with this Law. If there are otherwise special provisions in other laws on the application of laws concerning foreign-related civil rights, such provisions shall prevail. This provision demonstrates the principle of special law superior to the general law. But as for the scope of the other special provisions mentioned in the article and how to decide whether another provision should prevail, there are no details. In an unofficial report of the draft, the legislator explains that the special provisions in other laws refer to existing rules in commercial law, such as the maritime law, negotiation instrument law and civil aviation law,[6] while whether this scope is inclusive is on doubt.

Article 51 provides: If the provisions in Article 146 and Article 147 of the General Principles of the Civil Law of the People's Republic of China and Article 36 of the Law of Succession of the People's Republic of China do not conform with the provisions in this Law, the provisions in this Law shall prevail. Arts 146,147 and 36 in those laws mentioned above are the conflict rules of tort, marriage and legal succession, which conflict with the new provisions, therefore the provisions in Application Law will prevail. Although it is reasonable in theory, it is a bit strange and difficult to understand why article 51 only refers to these three articles, because there are other provisions conflict with Application Law, such as article 148 in General Principle of Civil Law. Obviously, from the view of jurisprudential and practical, any provision in General Principle of Civil Law conflicting with Application Law will be invalid.

Besides, there is no any article dealing with the relationship with international treaties. Therefore, from the general view, the relationship between Application Law and other legal instruments is uncertain and unclear, which will bring the chaos in practice. The best way to resolve it is to promulgate the new judicial interpretation to provide the general principle dealing with the conflicts.

5. The Future of PIL in China

For the past decades, a dream has always been in the minds of Chinese scholars to own a comprehensive code of PIL, which should include the parts of jurisdiction, recognition and enforcement of foreign judgment besides the general provisions and conflict rules. In order to realize the goal, they began to draft a model law in 1993, which took them seven years to finish and publish it.[7] However, the birth of Application Law declares the failure of the dream. The articles related with international civil procedure are provided as a part in the Civil Procedure Law in PRC, which came into force in 1997 and was modified in 2007 without any change about international civil procedure.[8] Therefore, as we can foresee, the judicial interpretations will still play an important role in the future.

Notwithstanding the defects, the formulation of Application Law still has a significant meaning. Compare to the previous state of affairs, the new act has made a lot of progress. Nowadays, there is a trend to realize the modernization of legal system in the worldwide. Like other countries and other legal systems, Application Law in China signifies that PIL in China is also on the way toward modernization, although there is a long distance before achieving the ultimate goal. ■

NOTES

* This paper is the fruit of the program of overseas visiting scholar of Nanjing Audit University.

[1] It is a very unique phenomena in China that the judicial interpretations of supreme people's court play a very important role in the practice, although it is not the formal legal resource.

[2] Article 1 in Austrian Private International Law Act.

[3] However, there is a hot debate about the change, some scholars argue that this change doesn't conform to the Chinese tradition. Guo Yujun, Che Yin: Review of Annual Meeting of Society of PIL in 2010 in PRC, Journal of Wuhan University (philosophy and social science edition), Vol. 64, No. 1, Jan. 2011

[4] Article 20 in Application Law.

[5] Xu Junke: Modes of Protecting the Consumer in Conflict Law, Jurists Review No. 5, Oct. 2011

[6] http://www.npc.gov.cn/huiyi/cwh/1116/201008/28/content_1593162.htm.

[7] The title of it is Model Law of Private International Law of the People's Republic of China.

[8] One of the main reason is the scholars leading the discussion and modification are the specialists in civil procedure, not PIL area.