Sources of law

3.1 Primacy of legislation in China

As Keller notes, â€?[a] person cannot live in China long without becoming aware of the complex, interwoven web of social rules which governs every aspect of Chinese life.’⁴⁸ And it is increasingly difficult to characterise China’s evolv­ing legal system as belonging to either the civil law family or common law family.⁴⁹ It is submitted that, although China has extensively borrowed legal concepts, principles, terminologies, institutions and procedures from Anglo- American jurisdictions (and most significantly the United States), it remains a civil jurisdiction, at least insofar as sources of law are concerned.

3.2 Legislative bodies

State organs at different levels are authorised by the Constitution and the Legis­lation Law (20 00)⁵² to enact laws, regulations or other normative documents. As this section will show, different legislative bodies have different powers, while

46 J Wang, �The Rule of Law in China: A Realistic View of the Jurisprudence, the Impact of the WTO, and the Prospect for Future Development’, Singapore Journal ofLegal Studies, 2004, p. 347.

47 ibid., pp. 360-64. Legal orientalism refers to the standard Western view that �China is timeless and static, that Chinese people lack subjectivity, and that Chinese confuse law and morality’, which �are implicitly measured against another set of assertions, namely that the West possesses those progressive qualities but does not have those confusions’.

48 P Keller, �Sources of Order in Chinese Law’, American Journal ofComparative Law, vol. 42, no. 4, 1994, p.711.

49 See generallyAH Y Chen, â€?Socialist Law, Civil Law, Common Law, and the Classification of Contemporary Chinese Law’ inJM Otto et al (eds), Law-Making in the People⅛Republic ofChina, Kluwer Law International, The Hague, 2000.

50 R David and JEC Brierley, MajorLegal Systems in the World Today, 3rd ed, Stevens & Sons, London, 1985, p. 102.

51 See generally R Peerenboom, �Courts as Legislators’, The Rule of Law in China Series: Policy Brief 1, The Foundation for Law, Justice and Society, Oxford, 2006.

52 ZhonghuaRenmin GongheguoLifafa, adopted on 29April 2000 bythe National People’s Congress. the enactments they make, generally called �laws', actually have different desig­nations and degrees of binding force. Under the Chinese constitutional rules, the following organs have power to make laws or normal documents:

• the National People's Congress (NPC) and its Standing Committee

• the State Council, also known as the Central People's Government (or Central Government)

• people's congresses at the provincial level

• ministries and commissions under the State Council

• executive branches at the provincial level

• self-regulatory organisations.

As noted by the State Council:

The modern Chinese legal system... mainly consists of seven branches of legisla­tion and three levels. The seven branches of legislation are: the Constitution and the Constitution-related laws; civil and commercial laws; administrative laws; eco­nomic laws; laws on society; criminal law; and litigation and non-litigation procedural laws. The three levels are: laws; administrative regulations; and local regulations, autonomous regulations and separate regulations. The NPC and its Standing Commit­tee have enacted 229 laws currently in effect, covering all the above seven branches; and have enacted, in each branch, most of the basic laws which are essential for forming the framework of the socialist legal system with Chinese characteristics or are demanded by the national goals of reform, development and stability.

3.3 Xianfa (the Constitution)

The current Constitution of the PRC^[62] was adopted in 1982, shortly after the end of the Cultural Revolution. It is a successor to three previous Constitutions, namely the 1954 Constitution, the 1975 Constitution and the 1982 Constitu­tion. The Constitution defines itself as the �fundamental law of the state' having �supreme legal authority' in China.^[63] Thus, �[t]he people of all ethnic groups, all state organs, the armed forces, all political parties and public organisations and all enterprises and institutions in the country must take the Constitution as their basic standard of conduct, and they have the duty to uphold the dignity of the Constitution and ensure its implementation'.^[64] In practice, most of the laws promulgated have stated, in their first provision, that they were made in accordance of the PRC Constitution.

3.4 Falii made by NPC and its Standing Committee

Under the Constitution, the NPC is the country's highest state organ and the source of power for all other state organs. According to art 7 of the Legislation Law of the PRC, the NPC and its Standing Committee, being the national leg­islature, �exercise the legislative power of the State'. As a matter of legislative principle, only the legislation enacted by the NPC or its Standing Committee maybe designated as falii (laws).

3.5 Xingzhengfagui made by the State Council

The State Council, which is the highest authority in the executive branch, is also a legislative body. Its law-making authority is immediately below that of the NPC and its Standing Committee. Indeed, only the legislative enactments of the State Council may be designated as administrative regulations (xingzheng fagui), or simply regulations. Under the LegislationLaw, the Central Government may formulate administrative regulations in the following situations: (a) when it is necessary to enact regulations to implement provisions of law; (b) when it is necessary to enact regulations to govern matters within the administrative functions and powers of the State Council as stipulated in the Constitution; and (c) when the State Council is delegated the law-making power by the NPC or its Standing Committee to enact regulations for matters originally within the national legislature's exclusive legislative jurisdiction.^[67] In fact, from 1983 to 1985, the NPC and its Standing Committee delegated their law-making power three times to the State Council, formatters mainly relating to economic affairs.^[68] In reality, the State Council and its departments form, de facto, the mostpowerful law-making body in China.

In terms of designation, enactments of the State Council may be titled tiaoli (regulations), guiding (provisions) or banfa (measure), depending on the scope of the subjectmatter. When the State Council exercises the delegated law-making powers, its enactment will be called a zanxing (provisional),^[69] implying that formal statutes will eventually be made by the NPC or its Standing Committee in due course.⁶²

3.6 Bumen guizhang made by the ministries under

the State Council

The various ministries, commissions and bureaus and the People's Bank of China (China's central bank) are allowed to promulgate bumen guizhang (departmental rules) within the limit of their respective power.

A set of departmental rules may have the generic designation of guiding (pro­visions) or banfa (measures). Apartfromguizhang, the State Council and its min­istries promulgate from time to time other forms of official documents, including mingling (orders), jueding (decisions), tongzhi (notices), tongbao (communica­tions), pifu (replies),yijian (opinions),zhiyin andzhidaoyijia (guidelines), many of which are used as documents to regulate business organisations.⁶⁴

3.7 Local enactments

Localities at the provincial level, including provinces, autonomous regions, municipalities directly under the Central Government, and large cities, are granted law-making power. According to the Legislation Law, two kinds of local law maybe enacted. The first category is difang fagui (local regulations) made by local people's congresses and their standing committees (the local legislature). They may enact local regulations â€?in light of the specific conditions and actual needs of their respective administrative areas, provided that such regulations do not contradict the Constitution, the laws and the administrative regulations.'⁶⁵ In the spirit of local law regulating local affairs, the Legislation Law empowers the local legislature to enact local regulation on any matters not yet governed by national law or administrative regulations. As Chen notes, this creates â€?room for innovation in local regulations which can pave the way for the enactment of national laws on particular subjects.'⁶⁶

A further form of local law is defang guizhang (local rules) made by the executive branch at the level of provinces, autonomous regions, municipalities,

62 The scope of matters governed by �regulations' is the widest, �measures' the narrowest, and �provisions' in between.

63 LegislationLaw,art71.

64 AHY Chen (2004), op. cit., p. 106-7, noting these documents �are authoritative to various degrees, and insofar as some of them provide for rules of general application, they may also be regarded as a source of legal norms'.

65 LegislationLaw,art63.

66 AHY Chen, (2004) op. cit., p. 109.

and large cities, for matters concerning the implementation of national laws, administrative regulations or local regulations.^[70]

3.8 Sifajieshi: case law’s equivalent?

China's legal system is officially a civil law system, which essentially means that courts are to play a passive role. Unlike their counterparts in common juris­dictions, Chinese courts theoretically do not possess the power to �make law'. Peerenboom explains that �[t]heir role is to apply law to the facts. If the laws or regulations are unclear, the courts are supposed to seek guidance and clari­fication from the entities that promulgated the laws or regulations.'^[71] In China, the power of interpreting laws is in the hands of the NPC Standing Committee; however, in addition �a rudimentary system has evolved which might be inter­preted as the functional equivalent of case law in otherjurisdictions'.^[72] This refers to the power of the Supreme People's Court (SPC) to make sifa jieshi (judicial interpretations). As Peerenboom remarks:

What is distinctive about China's legal system is that the Supreme People's Court (SPC) makes law in a much more direct and visible way. Every year the SPC issues a variety of interpretations, regulations, notices, replies, opinions and policy statements (collectively, �interpretations'). Most are binding upon the courts; others are highly persuasive and likely to be followed by the courts. Sometimes they are rather general; other times they are very specific and issued in response to an inquiry from a lower court in regard to a particular case pending before the court.^[73]

A1981 NPC Standing Committee decision first permitted the SPC to promulgate judicial interpretations.^[74] The SPC has issued a series of provisions to elaborate on its law interpretation work, the most recent being the 2007 SPC Provisions on Judicial Interpretation Work.^[75] Forjudicial interpretations to have binding force, they need to be promulgated by the SPC. They may take the forms of jieshi (interpretations), guiding (provisions), pifu (replies) and jueding (decisions). Interpretations deal with the application of law for a law or a type of case or problem; provisions are used to create norms or opinions relating to adjudication work; replies are answers to inquiries from the provincial courts regarding issues concerning concrete application of law; and decisions are used to revise or abolish judicial interpretations.^[76]

But what about decided cases? Do they also play a role in the courts' adju­dication of disputes? Although, as previously noted, China is still considered a civil law jurisdiction, it is a myth to generalise a view which excludes judicial cases as a source of law in civil law system.^[77] While there is no doubt that in China judicial cases do not constitute a formal source of law, some court deci­sions �do generate legal norms and have persuasive or even binding force in practice.'^[78] The most noticed cases are those judgments or judgment summaries selected and published by the SPC in the Gazette of the Supreme People's Court, which are considered �authoritative and an important means through which the Supreme People's Court provides guidance to lower courts with regard to their adjudicative work.'^[79] It is, however, worth noting that there is no system­atic case reporting system in China. The SPC has encouraged lower courts to publish judicial decisions and judgments on the internet, but this has not been made a compulsory requirement. As a result, courts can decide not to publish some cases if they concern state secrecy, juvenile delinquency, personal privacy, or any other matter considered by the courts as not suitable for publication.^[80] Further, the judgment is rendered as a collective opinion of all the judges on the collegiate panel, in which no individual (concurring or dissenting) voice is allowed.

3.9 Custom

As observed by David and Brierley, �[a]ccording to a sociological concept of the sources of law, custom plays a preponderant role in all legal systems; and in developing or applying the law, legislators, judges and authors are, as a matter of fact, more or less consciously guided by the opinion and custom of the community.'^[81] Custom as a source of law is recognised in China's legal system, especially with respect to civil and commercial disputes.^[82]

3.10 Legalwriting

Although not formally recognised as source of law, in certain civil law countries, works of legal scholarship can play an eminent role in civil legal systems. This is because legal writings shape legal doctrine which is of fundamental importance to the formation and application of written laws in civil law countries. The importance of legal writing in the civil law tradition is summarised by David and Brierley. The quote also sheds light on China's approach:

One may, of course, define law as only enacted rules. Nevertheless, for the person who takes a realistic approach and has a more comprehensive - and to our mind, more exact - view, doctrine is now, as in the past, a very important, living source of law. This is shown by the fact that it creates the legal vocabulary and ideas which legislators subsequently use; it is even more evident from the fact that doctrinal writing establishes the methods by which law will be understood and statutes interpreted. There is, further, the influence that legal scholarship can exercise on the legislators themselves; often the latter merely give expression and effect to tendencies that have developed doctrinally, or enact laws which have been conceived by legal writers... [Legalwriting] also plays a role in the application of enacted law.^[83]

Given that there are always different scholarly views about the same issue, scholarly writing is not a formal source of law in China. Yet the role of legal scholars in China should not be underestimated. They were heavily involved in the legislative process for major laws, including, inter alia, the Company Law and the Securities Law. To some extent, it is not incorrect to say that the schol­ars were themselves the law-makers, as the drafts made by them were largely accepted by the NPC or other legislative bodies. Furthermore, some courts, espe­cially the SPC and some provincial high courts, have developed the practice of consulting prominent scholars in their adjudication of legal disputes. One com­mentator hence suggests that this indicates that legal writing may be regarded as an indirect source of law (jianjiefayuan) in China.^[84]

3.11 Understanding the complex hierarchical structure of legal order in China

It is essential to understand the hierarchy of law in China. As demonstrated above, multiple legislative bodies make numerous laws and regulations, often on the same subject matter. Inevitably, there can be conflicts and inconsis­tencies between laws made by these different legislative bodies. For instance, with respect to company incorporation registration, there are provisions in the national CompanyLaw, a special administration regulation enacted by the State Council, as well as departmental rules released by the State Administration of Industry and Commerce. Two interrelated questions therefore arise. First, which level of law has higher legal effects; and second, which law should the court apply when there are conflicts between different laws?

Under the Constitution and the Legislation Law, the following principles regarding the legal order hierarchy should be complied with by the law enforce­ment organs:

• The Constitution should have the highest legal authority and no other laws,

administrative regulations or local regulations or rules may contradict it.^[85]

• The legal effect of laws (made by the NPC and/or its Standing Committee) is higher than that of administrative regulations, local regulations, and rules.^[86]

• The legal effect of administrative regulations is higher than that of local regulations, and rules.^[87]

• The legal effect of local regulations is higher than that of local rules made by governments of the same and lower levels.^[88]

• The legal effect of the departmental rules made by different central depart­ments is equal between those departments, and the effect of departmental rules and local rules is equal between the departments and local govern­ments; their application should be confined to their respective limits of authority.^[89]

Having identified that departmental rules and local regulations have the same legal status, the LegislationLaw fails to solve a key problem: the conflict of author­ity between the centre and the provinces. As observed by Cohen and Lange, �[t]he conflict between central and local authorities will continue to handicap the development of the Chinese legal system, and to heighten the risks for foreign investors, at least until China evolves and enforces a reasonably clear and ratio­nal allocation of authority between the central and provincial governments.'^[90] Further:

Often investors are caught in the middle, between the more investor-friendly local authorities and the more macro-oriented central authorities, each offering their own - often sharply divergent-visions of the applicable regulatory framework and the proper way to proceed. In addition, the vastness of China and the existence of entrenched local power bases often makes it difficult for the central government to enforce laws it adopts for the benefits of investors.^[91]

The Legislation Law does not address the status of judicial interpretations in the hierarchy of legal order. In theory, an interpretation should not contradict the original enactment it aims to interpret. In practice, judicial interpretations have gone far beyond that, making the SPC a de facto legislative body, a status not recognised by the Legislation Law. Given the tight control of the SPC over the lower courts, judicial interpretations, because they provide timely, practical and specific responses to concrete issues, are more faithfully enforced by courts than any other laws.

On the courts' choice of law, an SPC document released in 2004 is illustra­tive. Titled �SPC Meeting Minutes on the Application of Law Issues in the Trial of Administrative Cases',^[92] it is not itself a judicial interpretation, but would definitely guide the adjudication practice of courts at all levels. The Minutes stipulate the following principles with regard to courts' choice of law:

• In trying administrative cases, the SPC shall apply laws, administrative regulations and local regulations, and make reference to rules.

• Interpretations of laws, decisions, orders or other official normative docu­ments issued by the State Council departments and local governments are not binding upon courts; they will be applied in trial only after the court has reviewed the legality of those documents under laws or administrative regulations.

• The court will apply the law of a higher level if there is inconsistency between the law of the higher level and that of the lower level.

• In case there is inconsistency between departmental rules and local regu­lations, the court will make choices according to the following principles: (1) departmental rules authorised to implement the laws or administrative regulations should take priority; (2) departmental rules concerning mat­ters which require national actions or concerning foreign trade or foreign investment shall take priority; (3) local regulations concerning purely local matters shall take priority.

Although as a matter of law, the Minutes concern only court adjudication of administrative cases, they provide enlightening points for the trial of civil and commercial disputes. One has to bear in mind that most official normative doc­uments are administrative in nature. It is also worth noting that the Minutes establish a formal mechanism of judicial review of legality of laws. According to the Minutes, although Chinese courts do not have the power to invalidate any written laws, regulations or rules, they seem to have a great discretion to choose the law they wish to apply.

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