Class Action-type Litigation in China

By Richard W. Wigley  King & Wood Mallesons’ IP Litigation Group

The framework for variants of class action-type litigation in the People’s Republic of China has been in place since the initial promulgation of the Civil Procedure Law of the P.R.C. (“CPL”) in 1991. The amended CPL provides requirements for filing a “joint litigation” for suits where “the object of the action is of the same category and a party consists of numerous persons” and where the parties may choose to elect a representative.[1] Further as to whether standing is afforded the plaintiff and the filing requirements for such litigation, the CPL provides that “[t]he plaintiff must be a citizen, legal person, or an organization having a direct interest with the case … there must be a specific defendant … [and] there must be a specific claim and a specific factual basis and grounds ….”[2] In short, the CPL provides a framework which allows for what is a variation of what is commonly referred to as a “class action lawsuit”.

It must be noted that in China such joint litigations do not contain the equivalent of, for instance, rigorous and extensive class certification guidelines including detailed “opt out” provisions, such as under U.S. Federal law. However, in China, for those joint litigations where the number of potential claimants is very large and where many “persons cannot be determined, the People’s Court may issue a Public Notice stating the particulars of the case and requesting that claimants register with the People’s Court….”[3] The court’s rulings in such joint litigations shall apply to not only the claimants in the suit, but “shall apply to claimants who have not registered with the court, but who institute actions during the limitation period.”[4] Suffice it to say that while “joint litigations” in China differ in form from class action lawsuits in other jurisdictions, such as under U.S. Federal law, there are certain common attributes.

In addition to a typical “joint litigation”, the recent amendment to the CPL added provisions for certain joint litigation in areas of public interest related to “pollution to the environment” and “damage[ to the]legitimate rights and interests of consumers at large”.^[5] In these cases of public interest litigation, however, only certain “designated institutions may institute proceedings”.^[6] It is believed that for environmental public interest litigation going forward that entity will be the All-China Environmental Federation^[7] (“ACEF”). For consumer interest litigation, the Consumer Rights Protection Law of the P.R.C. stipulates that “for acts which harm the legitimate interests of many consumers, the China Consumers’ Association (“CCA”) and consumer associations” either established on the provincial level or “centrally-administered municipalities” shall be able to bring suit before a People’s Court .^[8] Given the challenges which China faces in environmental protection, as well as in consumer rights protection, it would be reasonable to expect that the ACEF and the CCA may become major players in class action-type litigation in China going forward, but it is unclear as to what impact this will have on related large-scale public interest litigations in the future.

Of the numerous “joint litigations” brought to date in China, they have involved various types of litigation claims. The Guiding Opinions of the All China Lawyers Association on Class Action Cases, which provides guidance for attorneys involved in “class action” cases in China, notes that “[c]lass action cases are usually about land expropriation and requisition, housing demolition and relocation, immigration of reservoir area, enterprise reform, environmental pollution and the protection of the interests of the migrant workers, etc.”[9] There is, simply, not one predominant form of class action-type lawsuit in China.

One type of joint litigation which does appear to be more prevalent in recent years is joint litigation related to claims of violations of the Securities Law of the P.R.C. (“Securities Law”). From landmark joint securities litigations in the early 2000s through certain recent cases, plaintiffs are often claiming that the companies issuing the securities are guilty of making false statements and misrepresentations, where such violations are actionable in civil court under the Securities Law.[10] As the Shanghai Stock Exchange and the Shenzhen Stock Exchange are each now amongst the largest exchanges by market capitalization in the world[11], it should not be surprising to see a rise in joint securities litigations in China.

While a large-scale class action lawsuit in the U.S. may seek to have thousands (or even millions) of members in a class of claimants and may seek damages of up to billions of dollars, in China today a large joint litigation would be more likely to see claimants numbering in the hundreds. Though the monetary compensation sought in Chinese joint litigations tends to be small in comparison to, say, a typical large-scale U.S. class action suit, in China the damages compensation sought and the damages compensation awarded (or, alternatively, the settlement amounts) will likely increase over time, in line with trends in other Chinese litigation. With every passing year as the litigation bar in China becomes more sophisticated with respect to joint litigation/ “class action”-type suits and litigation in general, this will likely lead to more and larger “class action”-type suits being brought in China in the future.