CIBEL lunchtime talk: Dealing with ambiguity in Chinese Corporate Law given by Dr. Colin Hawes on September 22, 2016

Wed 05 October 2016

By Dan XIE


Dr. Colin Hawes’ speech focused on the issue of the ambiguity in Chinese Corporate Law. His talk first introduced the current Chinese legal structure, then interpreted the ambiguity in Chinese Corporate Law, and last stated the problems with current guiding cases system and proposed the suggestions for the improvement of such cases system.

China: A Socialist Civil Law System and the Ambiguity in Chinese Corporate Law in Action
It is well known that China takes a civil-law approach. Specifically, the codes in China are statutes and administrative regulations while judges apply written laws rather than “make laws.” As written laws tend to be vague, the judges have much discretion, which results in potential corruption, inconsistency and unfairness in judgements. Although there is a multi-level court system in China, there is no binding case precedent system among courts.

Dealing with Ambiguity in Australian Law
Usually, the judges in Australia refer to the rules for statutory interpretation (“intention” of the legislature) and binding case precedents to address the ambiguity in the law. However, “ ‘legislative intention’ is little more than a meaningless mantra that is invoked by judges who wish to justify holdings that are reached by intuition or other ill-defined means. By chanting ‘legislative intention’, the judge calms his or her nerves and casts responsibility for a case’s outcome on the drafters of a statute.”(RN Graham, cited in Herzfeld 2013)

Chinese Solution One: “Interpretations” by the Supreme People’s Court(SPC)
The SPC has issued three interpretations of PRC Company Law so far (2006, 2008 and 2011). However, the SPC interpretations which were not issued timely often create further ambiguities and inconsistency among courts.

Attempted Chinese Solution Two: Guiding Cases Approved by the SPC
Given the “Interpretations” did not completely solve the ambiguity and inconsistency, the SPC created another system that supplements the interpretations system. The SPC has issued the “Guiding Cases” which were selected by SPC since 2010. Unlike the common law “precedent” approach, Chinese “Guiding Cases” are not the cases that are appeals to the SPC. Some of the Guiding Cases are judgments rendered by the SPC but some are lower court decisions. Furthermore, these “Guiding Cases” are just for reference, not binding. The problem of the current “Guiding Cases” is that, for certain types of legal issues, the “Guiding Cases” are not preferable. In addition, there are only 56 “Guiding Cases” published in all areas of law since 2010, which is very limited and insufficient.

Conclusion: a modified case precedent system for China
As mentioned before, the current “Guiding Cases” approach is inefficient. The SPC should modify the “Guiding Cases” system, not establishing a completely bottom-up approach given the tension between local autonomy and central control but allowing the “Provisional Guiding Cases” at provincial or local levels. In this case, each region would have their “Guiding Cases” which are persuasive and binding in the same hierarchy. In this way, “National Guiding Cases” selected by the SPC from the “Provisional Guiding Cases”and the “Provisional Guiding Cases” selected from lower courts could work to solve the ambiguity and inconsistency side by side.