A Chinese Approach: Comments and Suggestions
Though the problem of characterization has attracted the interest of Chinese private international lawyers for many years,prior to the Conflicts Act of 2010,Chinese law and judicial interpretations did not cover characterization except for the purposes of the statute of limitation.[5]In practice,when a Chinese court was seized with a foreign related dispute,it would usually employ Chinese law,namely,the lex fori,to resolve the characterization problem.If a foreign legal institution was unknown to Chinese law,the court would be in an awkward position apparently.24
Generally speaking,Chinese courts have often made inconsistent characterizations in adjudicating foreign disputes: in Yuehai Electronic Co.Ltd.v.China Merchants Warehouse & Transportation Co.Ltd,the Supreme People’s Court characterized the release of goods without presentation of the original bill of lading as breach of contract and hence applied the applicable law for contracts; in C.Melchers GmbH.& Co.v.Guangzhou Shipping Company and China Merchants Containers Freighting Co.,the People’s Courts of the first and second instances characterized the same act as tortious and therefore applied the applicable law for torts; in Wanbao Group Company Guangzhou Feida Electronic Factory v.America President Liners,while the People’s Courts of first instance and of second instance saw them as tortious,the Supreme People’s Court characterized such acts as breach of contract and reversed the classification.What is particularly worth noticing is that in TMT Trading Ltd.v.Guangdong Light Industrial Products Import-Export (Group) Co.,25 the Higher People’s Court of Guangdong Province and the Supreme People’s Court made different decisions on the characterization of the dispute.The former characterized it as contract of agency,while the latter as legal relation of trust.It merits emphasizing that Supreme People’s Court made such characterization at the time when trust was not a recognized legal relationship under Chinese law.
Obviously,the uncertainty resulting from arbitrary characterization is harmful both to the parties and to the People’s Courts.Therefore,Chinese scholars advocate that a provision on the issue of characterization is badly needed.Article 9 of the “Model Law of Private International Law of the People’s Republic of China” reflects such an advocacy,which provides as follows:26
The qualification of international civil and commercial relations shall be governed by the law of forum.In case the issue cannot be decided properly under the law of forum,the issue can be decided by reference to a law which may be chosen to apply.(https://www.daowen.com)
Under the above provision the characterization may be governed either by the lex fori or by the lex causae.Obviously,such a flexible arrangement leaves the judges much discretion in characterizing; some Chinese scholars,therefore,argue that this will undermine predictability.Most of them thus submit that the provision of Article 9 needs to be improved and a more scientific characterization approach should be adopted; some of them believe that “enlightened” lex fori approach is a preferable solution; while others suggest that characterization should be first governed according to the lex fori,unless there is no relevant provision in the lex fori,in which case other relevant laws may be considered in the process.27
Unfortunately,the Conflicts Act of 2010 does not fully accept the suggestions of scholars,as Article 8 provides that “[T]he classification of foreign-related relationships shall be governed by the law of forum.”28
As analyzed above,characterization is effected on the basis of the law of the forum.This is the accepted position under the common law and in most civil law systems.However,it is also widely accepted that the lex fori in this context should be interpreted in a liberal manner,not insisting that all its technical requirements are complied with.Moreover,the court should not be deterred by the fact that the particular foreign claim was not recognized under the lex fori.Under that circumstance,it shall characterize it in accordance with what it considered to be the closest equivalent under the lex fori.This method of characterization could be referred to as the “liberal” or “enlightened” lex fori.
In this light,the author suggests that the Supreme People’s Court of China should interpret Article 8 as soon as possible,otherwise if a foreign legal institution or a rule of foreign law is unknown to Chinese law,the Chinese court seized will be in an awkward position,which did occur in Chinese judicial practice.29