Over 10 years ago, I traveled to China to observe the Chinese legal system. I was fascinated by the experience and I learned a great deal about their government, their education system, and the differences in their legal system. When I returned, I spent the next 10 years incorporating my findings into my curriculum as a Business Law Instructor at several universities. Because it is the 10 year anniversary of my China trip, I thought I would reflect on some of the differences that I observed.
Common Law v. Civil Law
As a preliminary matter, China, like many other Asian countries, operate under a civil law system rather than a common law system like the U.S. This civil law system is generally based on the Roman “Civil Law” or “Code Law” which refers to codified laws -an ordered grouping of legal principles enacted into law by the legislature or other governing body. In a civil law system, the only official source of law is the statutory code. Courts interpret the code and apply the rules to individual cases, but courts may not depart from the code and develop their own laws. In theory, the civil code sets forth all of the principles needed for the legal system.
Although the U.S. has codes and regulations, it abides more by a common law system, whereby the courts independently develop rules governing certain areas of law. Theses rules apply to all areas not covered by codes, regulations, or statutory laws. For example, in breach of contract cases, there may not be a statutory law that allows for recovery for unjust enrichment but judges are able to award damages to a party who lost money through a business relationship. However, in a civil law system if there is no statute or code, the injured party may have no recourse under the law for unjust enrichment.
Another main difference in common law systems are that judges are seen as more of a referee or umpire managing the litigation process for the attorneys and their clients. However, in civil law systems, judges frequently take the liberty to ask questions and examine witnesses to get to the truth.
Another notable difference in China’s legal system is that its’ history is less than 30 years. Modern China did not have any law programs in universities until the late 1970s and did not have any trained lawyers until the early 1980s. Without the protection of a functional legal system, traditionally, Chinese people relied on relationships, trust and gut instincts to protect their personal interests.
Today, China has about 110,000 lawyers, which is a significant jump from the 5,500 lawyers that China had in 1998. Moreover, according an article recently published by BusinessWeek online, in the five years between 2001 and 2004, China promulgated more than 94,000 laws and regulations, almost tripling the new laws and regulations from the previous five years. In contrast, according to the American Bar Association, there are at least 1,200,000 lawyers in the United States and many more laws and regulations.
Despite these significant improvements, compared to the U.S. legal system, China is still in a toddler stage. Many laws have not had an opportunity to be applied, interpreted and enforced. Many lack meaningful mechanisms for implementation and enforcement. Many conflict with each other. For example, after talking to a professor of law in China, he indicated that one of the biggest problems in Chinese courts deciding the meaning of words. In Hong Kong, many of the laws were adopted by the British legal systems, but some of the meanings of words were lost in translation. As a result, in a court, one attorney may argue an interpretation of a word based on the Chinese language and the other attorney would argue the interpretation of the word based on the British language. The opposing interpretations would yield opposite results.
Moreover, China’s judicial system has not caught up with the demands of the country’s rapid economic development. There are still many judges who do not have formal legal training. Relying on the legal system to protect one’s personal and business rights is still a new concept to many in China and can be a risky proposition. As a result, handshakes, trust and gut feelings continue to play a major role in forming business relationships. Understanding what a legal contract creates is different for the Chinese and for the Americans. For the Chinese, a contract creates a platform upon which a relationship will be built, rather than boundaries of the relationship. As a result, there have been many complaints from U.S. corporations that Chinese companies do not respect binding contracts.
The Rule of Man vs. the Rule of Law
It is also important to note that, by design, the Chinese legal system does not technically have an independent judiciary or a legal system that operates outside the influence of the ruling Chinese Communist Party. This is an important distinction between China and Western democracies in which the court system is a critical component of the checks and balances placed on the other branches of government. As a result, there simply is no effective recourse available to individuals whose interests are harmed by the excesses of government officials, laws, and institutions.
Also, China's legal system lacks neutrality. The government approves all court appointments, and judges are technically responsible to the Party, not to the people. From the Basic, Intermediate, Higher Level People’s Court, and Supreme People’s Court, the government hand is evident. The government has the power to intervene in deliberations, and even to overturn verdicts issued. Moreover, the government often rules on the interpretation of its own laws.
In contract, the U.S. strives to maintain the “Rule of Law”. The rule of law refers to a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws that are publicly promulgated, equally enforced, and independently adjudicated. It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in the application of the law, separation of powers, participation in decision-making, legal certainty, avoidance of arbitrariness and procedural and legal transparency." Although this seems in drastic contrast to the basis of the legal systems, many would argue that in effect the laws, regulations, and judicial systems are still subject to government influence.
I make no personal judgment about the differences of Chinese and American law because I think both systems have their strengths and weaknesses. Moreover, I believe both systems are heavily influenced by the culture, politics, and individual relationships.
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