Class actions in China

14 January 2008

Darren FitzGerald, Megan Yeung

Although class actions can be used for a range of disputes in the PRC (including occupational health and safety and in shareholder and administrative matters - particularly where land has been compulsorily acquired by government), the procedure for bringing such claims remains unclear. As such, the Supreme People’s Court (SPC) intends to reform the existing procedures. Although it has been working on these reforms since 1991, no changes have, to date, been formally introduced.

Articles 54 and 55 of the Civil Procedure Law, as interpreted by the SPC, set out the current procedure for bringing class actions in the PRC.

Article 54 applies in cases where there are a fixed number of at least ten litigants. In such cases between 2 and 5 representatives are chosen to act on behalf of the litigants.

Article 55 applies where the number of litigants is unknown. In such circumstances the Court may issue a public notice to inform other potential claimants of the litigation in order to provide them with the opportunity to register as Claimants. Any subsequent ruling of the Court will bind all those who registered with the Court as Claimants, in addition to individuals who did not register but had filed litigation at that time. The procedural law prescribes that a class representative must be chosen from the pool of Claimants. If the Claimants are unable to agree on a candidate the People’s Court can intervene and select a candidate after holding a consultation process with all those Claimants who have filed a claim.

In 1991, 230 farmers from Zhejiang province brought an important class action. The farmers had been employed to dig a tunnel between a steel and a coal production plant. During the construction many of the farmers developed silicosis from inhaling particles of silicon dust while digging without protective masks. In 2001, the Wenzhou Intermediate People’s Court ordered the Defendants to pay 208 million Renminbi in damages to those farmers who were affected. It was held that those farmers who had suffered but had not initially joined the lawsuit initially were also eligible for compensation if they filed a claim within one year of their diagnosis. The ruling was upheld on appeal by the Zhejiang High People’s Court.

This case clearly demonstrates that, where the State funds – or is in support of – the Claimants’ case, class actions can be successful. Notwithstanding such cases, class actions in the PRC remain relatively rare. There are several reasons for this, including the fact that the Claimant-driven legal industry is in its infancy in the PRC in comparison to other jurisdictions, notably the United States. Lawyers do not generally seek to organise class actions and Defendants are often government-owned bodies. As such, individual Claimants are often not willing to sign up to bring a claim either in their own name or as part of a class against government interests.

Even where a class action is successful, enforcement of civil judgments can be difficult. For example, in the case outlined above, criminal charges ultimately had to be issued against the Defendants as they failed to comply with the Court’s orders. It is still not clear today whether or not the farmers have received any compensation.

Despite the difficulties discussed above it is likely that class actions in China will grow as the PRC legal system evolves, the economy matures and State-owned companies are privatised.