ABSTRACT
Fifty years ago or so, at the height of the Cultural Revolution, the People’s Daily, the mouthpiece of the Chinese Communist Party, published an editorial tellingly entitled ‘In Praise of Lawlessness’, denouncing law as the protector of bourgeois social order. In that decade of political turmoil, laws were replaced by Party policies and ideologies and, sometimes, by Mao’s words. Courts were sidelined, and lawyers were outlawed. China has since emerged as a global economic power but the impression that it has hopelessly been trapped in the state of ‘lawlessness’ seems to remain with many Westerners, still influenced by what they have seen and heard in the media about the Cultural Revolution or rampant copyright piracy. This impression clearly is a myth, one among many myths about the
modern legal system in the Middle Kingdom. As Steven Dickinson rightly cautions in a November 2007 issue of Business Week, these myths can lead businesspeople to make costly mistakes when doing business in China. The hard truth is: the Chinese business and commercial law regime has been evolving and it has developed a level of sophistication and maturity. To put it bluntly, it would be naïve to assume that Western businesses can count comfortably on guanxi, alone, to navigate the, sometimes, stunningly complex web of laws and regulations that apply to them. Choosing to ignore and disregard these legal rules will cost them, dearly. This chapter casts the limelight on certain key aspects of the Chinese
legal and institutional infrastructure that distinguish it from the allfamiliar legal systems in the West. The question in mind is always how
these features might bear on business formation and operation in China. We begin by looking at law-making. National and local law-makers have ambitious legislative agendas. In a normal year, the National People’s Congress and its Standing Committee, China’s top legislative body, make and amend dozens of national statutes; local legislators produce annually local regulations and rules in the rank of hundreds. This law-making activism is transforming the Chinese legal system in favour of modernity, if not Westernisation. The downside is the conflicts between pieces of legislation, creating difficulties for Western (and Chinese) businesspeople seeking to determine which particular law applies to them. The answer is, unfortunately, that even Chinese judges do not always have a ready answer. This is a message that a highprofile court case sends, as we will highlight below. In theory, when two laws conflict, the superior law prevails. But the inferior law may remain valid and still affect investors, even though it does not, in theory, bind them. Confucianism has a strong preference for the resolution of disputes
through mediation, with litigation being the last resort. Like its East Asian neighbours (Japan and South Korea), China is not immune from an explosion of litigation in recent years. In 2015, Chinese courts accepted and handled a gigantic body of cases (close to 20 million). The court has emerged as a primary forum for resolving commercial disputes. Chinese courts are not best known, however, for their independence, impartiality and neutrality; tales of judicial bias (and corruption) are exchanged at the dinner table. Foreign investors should understand the alternatives. They can use the court system, which might seem more familiar, but it is susceptible to potential problems (for both sides, of course). Or they can go down the more traditional (in Chinese eyes) route of mediation, which may seem more unfamiliar, but probably offers the better chance of a soft landing; alternatively, they can try arbitration which itself is still on thin ice when it comes to enforcement of the arbitral awards. This chapter discusses these options. With this evolutionary process in mind, this chapter looks at the
following:
law-making and the legislative process courts and judges – who are they and how are they appointed? lawyers and the rise of the legal profession contracts and contract law arbitration and mediation as ways of resolving disputes intellectual property.
