Product Liability 2009 - Arnold & Porter LLP

106
Chapter 15
China
Lovells LLP
1 Liability Systems
1.1 What systems of product liability are available (i.e. liability
in respect of damage to persons or property resulting from
the supply of products found to be defective or faulty)? Is
liability fault based, or strict, or both? Does contractual
liability play any role? Can liability be imposed for breach
of statutory obligations e.g. consumer fraud statutes?
Product liability claims in China can be based on three different
legal theories or “causes of action”: (a) strict product liability; (b)
fault-based tort liability; and (c) contractual liability. Each cause of
action may independently or concurrently support a product
liability claim.
Strict Product Liability
Strict product liability is set out in the People’s Republic of China
(“PRC”) Product Quality Law (“PQL”) and is strict in the sense
that liability is determined without consideration of fault. Article
41 of the PQL provides that “if a product defect causes physical
injury or damage to property other than the product itself, the
manufacturer is liable for damages”. Thus, liability lies where a
claimant can prove: (1) a defect in the product; (2) injury to a
person, or damage to property; and (3) causation between the defect
and injury or damage.
The PQL provides two standards for product defect. PQL Article
46(1) defines a “defect” as an “unreasonable danger existing in the
product that threatens the safety of a person or property”. In
addition, Article 46(2) provides that a product is considered
defective if it is subject to state or industry quality standards
governing health, personal safety, or safety of property, and fails to
meet these standards.
Where a product does meet applicable state or industry quality
standards, however, it is extremely difficult to argue a defect
effectively, and while there is no express statement in statute,
satisfying state or industry quality standards is essentially a
presumption that the product is not defective.
Fault-based Tort Liability
According to PRC Civil Law General Principles (“Civil Law”)
Article 106, a fault-based product liability claim can be brought
against a seller if the product is defective due to the seller’s fault
and the defect contributes to physical injury or damage to property
other than the product itself. The Civil Law does not define fault,
but the term generally includes intent and negligence. Breach of
statutory obligations and failure to act in accordance with accepted
industry practices may also be deemed negligence.
Eugene Chen
Contractual Liability
The PRC Contract Law permits a claimant to claim against the
seller for product liability based on breach of contract if the
product’s quality fails to meet contractual standards. Contractual
obligations may include express contractual obligations (e.g.
arising from product specifications) as well as implied contractual
obligations (e.g. arising from statutory requirements). Only a
claimant who is party to a purchase or supply contract may sue on
a contract theory.
There are also specific statutory provisions under Chinese law that
support a breach of contract/warranty claim. PRC Protections of
Consumers’ Rights and Interests Law (“PCRIL”) Article 22(1)
provides that a seller should ensure that the products it provides have
the “quality, functions, uses, and date of expiry that they should have
during the normal use” of the products, “except where a purchaser is
already aware of the existence of flaws before it purchases” the
products. If the products do not meet the requirements, the claimants
who purchased the products can sue the seller of the products based on
a breach of contract theory of liability.
1.2 Does the state operate any schemes of compensation for
particular products?
The state does not operate any such schemes generally. In some
large scale cases, however, such as the recent melaminecontaminated
milk situation, the state will promote an
administrative scheme of compensation over judicial remedies.
1.3 Who bears responsibility for the fault/defect? The
manufacturer, the importer, the distributor, the “retail”
supplier or all of these?
Under the strict liability scheme, responsibility for defective
products rests on the producers in accordance with Article 41 of the
PQL. Sellers may also be subject to strict liability under Article 122
of the Civil Law, or under Article 42 of the PQL where the identity
of the producer of the defective product cannot be identified.
Producers include those who appear to be a producer by connecting
their names, titles, trademarks or other distinguishable marks to the
defective products.
With respect to claims brought in tort, responsibility for defective
products can rest on anyone whose fault contributed to the injury or
damage.
If a claim is brought based on the law of contract, the direct
responsibility for the defective product will rest on the party that
has a contract with the injured party. However, after paying
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