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A COMPARITIVE OVERVIEW OF PRODUCT LIABILITY LAW IN THE PEOPLE’S REPUBLIC OF CHINA AND ENGLAND

 

 

 

 

 

A COMPARITIVE OVERVIEW OF PRODUCT LIABILITY LAW

IN THE PEOPLE’S REPUBLIC OF CHINA AND ENGLAND

By Simon Shang (Simon Shang & Partners – Shanghai) and

Gary Marshall (Furley Page LLP – London)

Introduction

It may come as a surprise to some, but there are similarities as well as differences between the consumer laws of our two jurisdictions. China is a vast country expanding economically and socially, even during global recessionary times, at such a rate that the law inevitably must play ‘catch up’. Whereas in England, not only are we subject to all aspects of domestic legislation and our common law system, we are also subject to EU directives and regulations. 

The purpose of this article is to provide a basic comparison in broad terms only between the consumer laws of both jurisdictions.

The current prime legislation governing product liability in China is the “Product Quality Law of the People’s Republic of China 1993 (Amended 2000)” (“Product Quality Law”). In England, the relevant legislation is “The Consumer Protection Act, 1987” (“the Act”).

The prime laws should not be considered in isolation.  For instance, on 11 January 2009 Regulation (EC) No 864/2007 came into force, which is the Law applicable to Non-Contractual Regulations [Rome II]. This Regulation is mentioned to exemplify the far reaching effects of European regulations upon our legal system which was intended to reduce the scope for forum shopping impacting upon cross border transactions of, amongst other disputes, product liability claims: the scope of this article is limited, however, and so this Regulation will not form part of this article. As stated, this is a basic comparison in broad terms, only.

 

 

Who is Liable?

 

1.    Producers

 

            In England and China, the producers/manufacturers are subject to strict liability. However, in China the producers of raw materials are not subject to the Product Quality Law, whereas in England the person who mines raw materials (“a substance which has not been manufactured, but has been won or abstracted”) is subject to the Act. 

2.    Own Branders

In China, traders who use their own marks as producers may not, as in the UK, be true manufacturers of the goods. For instance, there is a case of an original equipment manufacturer who manufactures goods for a principal where the principal’s mark is the only one identifiable on the product. In such a case, the manufacturer was not taken as the producer under the Product Quality Law. The principal was found liable.

In England, in the same way, suppliers who give the impression that they are the producers, by using their own trademark or other distinguishing mark on the product, are liable under the Act by holding themselves out to be the producer.

3.    Sellers

In China, sellers are liable under the Product Quality Law in relation to products sold to a consumer. Sellers are people who sell the products for marketing purposes, including master distributors, appointed distributors, retail traders and other dealers in the circulation networks. In addition, sellers shall be responsible if they cannot identify the producers or suppliers of the defective products when asked.

In England, wholesalers and retailers, that is ‘any person who supplied’ the product, are not liable unless they fail to identify the producer, importer or own brander when asked to do so within a reasonable time period of receiving the request. In England, however, a customer may sue a supplier without proof of negligence under the sale of goods legislation.

4.    Importers

There is no rule in China concerning the legal status of importers who import the products into the territory of China. However, if the importer is the same person as the seller, then he or she may be held liable in the same way as a seller.

In England, an importer may be liable under the Act. An importer’s liability extends to any person who has imported the product into a member EU state from a place outside the member states in order, in the course of any business of his, to supply it to another.

In China, the law does not fix liabilities based on separate function, that is either to producers or sellers. The Product Quality Law compensates consumers for any losses in as prompt a manner as possible, allowing the consumer to bring an action against either the producer or seller for full compensation. The issue of allocation of liability between the producer and seller rests with these two parties and not the claimant, such that either one of these parties have a right to recover any outlay from the other if they are able to establish liability.

In England, under the Act, liability is joint and several so that a claimant may sue two defendants (or all, if more than two defendants). 

Further, in both China and England it is not possible to exclude liability under our respective statutes by contractual terms or any other provision. 

What is Covered?

 

In China, Product Quality Law applies to production and marketing activities within the territory of China. Products are defined under the Product Quality Law as products which are processed and manufactured for marketing. Whereas in England, there is no restriction to any right of action based upon a marketing requirement, although marketing is an issue in determining what a consumer is entitled to expect from a product. Product in England means any goods or electricity and includes a product which is comprised in another product, whether by virtue of being a component part or raw material or otherwise.

In China, raw materials and natural creatures are not covered by the legislation whereas, as indicated in part earlier, the Act in England may cover consumer goods, food and raw materials (food sold in a raw state was included under the EU Directive 1999/34/EC (effective since 4 December 2000).

In China, the law does cover structural components, fittings and the equipment used in construction projects which have been processed or manufactured then marketed but, as in England, not the construction projects and buildings in themselves. In England, although similar in extent of cover, this marketing element is not a specific requirement of the Act other than as outlined above. Further, in China the Product Quality Law is not applicable to military products and nuclear establishments or products.

As in England, in China pure information is not covered by the law. In England, printed matter is not covered, except in the case of instructions or warnings for a product which make the product safe.

Product Defects

In China, defects are referred to as “irrational dangers” which exist in the products, that is ones that threaten the safety of persons or property or products that do not conform to the standards set by the State or the specific trade if there is any.

This definition is both a subjective and objective test. If a product places an ordinary consumer in a position of “irrational dangers” giving rise to injury, the producer shall be held liable. However, in China a product will not considered defective simply because of its inferior quality.

When deciding whether a product is defective, State or trade standards can be used as objective tests. The position is as follows:

a)                   If there are State standards or trade standards for insuring health and safety for the protection of the consumer and property, then such a standard shall be applied to the product.

b)                   Products shall have the properties which they are deemed to have, except cases in which there are explanations about any defects of the properties of the product.

c)                   The products shall comply with the standards prescribed or specified on the packages and with the quality specified in the instructions for use or shown in any samples provided.

In England, however, a defective product is defined as one where the safety of the product is not such as persons generally are entitled to expect. This definition provides an objective test of defectiveness and does not refer to either the injured person or to the producers. As in China, a product will not be considered defective solely because it is of poor quality. Further, a product will not be considered defective simply because a safer version is subsequently put on the market.

In England, when deciding whether a product is defective, a court will take into account all the relevant circumstances including:

a)                   the manner in which, and purposes for which,  a product is marketed;

b)                   any instructions or warnings that are given with it;

c)                   its get-up , the use of any mark in relation to the product;

d)                   what might reasonably be expected to be done with it or in relation to the product; and

e)                   the time the producers supply the product.

The issue of what might reasonably be expected to be done with the product and consequently what instructions and warnings are given, are particularly important for producers and importers whose products may well be misused.

Nature of the Damage

In both China and England, the legislation allows claims for loss and damages arising from death, personal injury and property damage.

In China, if bodily injury is caused by the defect of products, the party responsible shall pay for the damages. In this respect, please refer to the following table:

Ordinary Injuries

Disability

Death

Medical Fees

ü

ü

Nursing charges during treatment

ü

ü

Loss of incomes for absence from work

ü

ü

Expenses for acquiring aiding apparatus

ü

Living subsidies

ü

Disability compensations

ü

Living expenses of victim’s dependents

ü

ü

Funeral expenses

ü

Death compensation

ü

Further, China producers shall be responsible for compensation for damage to the person or property except for the defective product itself. In addition, in China there is neither a threshold nor limitation to the amount of compensation payable by the producers.

Similarly, in England liability to any damages under the Act arises for death or personal injury or any loss of or damage to any property (including land). As in China, there is no liability under the Act in respect of any defect in a product for the loss of or damage to the product itself.

Further, in England the minimum amount of loss or damage which may be claimed for private property is £275. However, the Act imposes no financial limit on the producers’ total liability.

Defences

In China, producers shall not be held responsible if they can prove one of the following:

a)                   the products have not been put into circulation;

b)                   the defect does not exist when a product is put into circulation; and

c)                   the defect cannot be found at the time of circulation due to scientific and technological reasons.

The Chinese are focused on what they describe as the precautions that producers and sellers should take to prevent “irrational accidents” giving rise to harm/damage to consumers.

Whereas in England, a producer or importer can avoid liability if he can prove any of six defences:

a)                   He did not supply the product to another.

b)                   The state of scientific and technical knowledge at the relevant time (normally when supplied), was not such that a producer of products of the same description as the product in question might be expected to have discovered the defect if it had existed in his products while they were under his control.

c)                   The defect was caused by complying with the law. Compliance with any enactment or EU Regulation does not necessarily discharge the producer from liabilities. A producer would have to show that the defect was the inevitable result of compliance.

d)                   The defect was in the product at the time it was supplied, that is if a product becomes defective because a retailer handles it carelessly.

e)                   The product was not supplied in the course of the business.

f)                     The producer of a component will not be liable if his able to show that the defect was due to either the design of the finished product or to the defective specifications given to the component manufacturer by the producer of the finished product.

Further, in England the extent of the defendant’s liability could be affected by any contributory negligence on the part of the claimant and that is if he contributed to his injuries by his own carelessness.

Limitation

In China, the limitation period for claiming compensation for damages due to defect of products is restricted to two years, starting from the date when the parties concerned are notified or alternatively when they should have known about the matter.

The longstop limitation period in China is the tenth anniversary after the product with the defect was first delivered to users or consumers. However, there are exceptions which are rare when the specified safe user period has been exceeded.

In England, a claimant must begin his court action within three years of the date he was injured by the defective product or, if later, the date when they knew that they had a claim against the defendant. An injured person, however, cannot sue under this part of this Act if ten years have elapsed since the defective product was supplied by the producer (see Section 11A, Limitation Act 1980).

General & Personal Issues

This article is an overview only of the relative similarities and differences between the product liability laws of the People’s Republic of China and England. Anyone requiring specific help should take legal advice relevant to the facts of their own problems. The product laws of both countries raise their own insurance indemnity and coverage issues which we can advice upon.

The legal references in this article are general and this paper has been prepared as an introduction to the law in both jurisdictions. It is clear that the legal system of China is evolving consumer protections within its territory, where without doubt the law will respond more and more to the ever increasing sophistication of consumer needs that go hand in hand with rapid growth leading to the largest consumer society in the world.

This article has been produced by Simon Shang of the Shanghai law firm, Simon Shang & Partners, and Gary Marshall of the London office of Furley Page LLP.

Both law firms have specialists handling insurance and commercial litigation and arbitrations, both within their respective territories. Should you want further information or advice centred on related insurance or legal issues, please contact us.

Details of the authors are as follows:

Gary Marshall

Simon Shang

Furley Page LLP

Simon Shang & Partners

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People’s Republic of China

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