May 3, 2017

The General Provisions of Civil Law 2017 – a milestone in China’s legal history

On 15 March 2017, The PRC General Provisions of Civil Law (the General Provisions) were formally adopted at the 5th Session of the 12th National People Congress of the People's Republic of China.

The General Provisions are divided into 11 Chapters, comprising 206 Articles. They are based on, and represent a development of The PRC General Principles of Civil Law (the General Principles) enacted in 1986. The new rules will take effect on 1 October 2017.

First and foremost, for the past 30 years, The General Principles were set to regulate and to protect legitimate rights and interests of "citizens". The forthcoming General Provisions change the subject matter from "citizens" to "natural persons". The new rules widen the scope so that the law applies to any natural person conducting civil activities in China, whether that person is a Chinese citizen or a foreigner (or even a stateless person).

In addition, The General Provisions also provide new definitions for legal persons, particularly, "for-profit legal persons" and "not-for-profit legal persons". Furthermore, the term "unincorporated organisation" is created to regulate organisations without the status of legal person but which are capable of conducting civil activities in their own name.

Another significant change concerns the statute of limitation. The pre-existing 2-year limitation period under The General Principles has long been decried as too short. Recent years have witnessed substantial changes to people's ways of lives; increasingly innovative ways are devised to do business. The ever complicated matrix of rights and obligations makes a compelling case for a longer time limit. In judicial practice, it has been noted that the two-year time limit is so inadequate that losses in the billions of Chinese Renminbi have been caused to the financial sector alone. In response to this, The General Provisions moderately extend the limitation period for bringing an action to three years.

Other highlights of The General Provisions are:

  • A foetus, on condition that it survives birth, will be accorded the right of inheritance;
  • A minor, aged eight or above, will have limited civil conduct capability. Under The General Principles, the threshold age is ten. The new rules recognise that minors from the age of eight are capable of conducting civil activities, and that they can make an independent judgment. This move can be seen as, both, an effort to better protect minors' legitimate rights and interests, and increased respect towards their self-awareness.
  • The new rules provide persons with full legal capacity with the power to nominate an attorney to fulfil their duties under a power of attorney. The attorney will protect the lawful rights and interests of the principal when he / she loses his / her legal capacity;
  • Individuals will enjoy new privacy and data protection rights as regards their online activities. This is to address the issue of  protection of intellectual property;
  • Under the new rules, online "virtual assets" are now recognised and will be protected as a type of property rights;
  • The new rules also afford protections to the proverbial "Good Samaritans", in an attempt to clarify the prevailing uncertainty under the old regime where well-intentioned persons coming to the assistance of strangers could see themselves facing legal proceedings and substantial fines as a result of their selfless acts.
  • In line with China's commitment to sustainable development and a green economy, the new rules contain provisions on ecological conservation, as well as obligations imposed on citizens to protect the environment.

One issue that remains mostly unresolved is that of property rights. Although there is a provision requiring fair and reasonable indemnity in the case of certain property disputes.

China, despite being a civil law jurisdiction, does not currently have a Civil Code. The broad-brush General Principles have been the fundamental authority on civil matters for decades. Civil law rules on contract, property, succession, etc. on the other hand, are scattered in various stand-alone enactments. The adoption of The General Provisions marks a significant step towards the codification of civil law in China and definitely constitutes a milestone in the country's legal history. The rules lay down the overall framework for, and form the general part of a five-part Civil Code of the People's Republic of China. Subsequent parts will be adopted in the years to come. When the five constituent parts are all passed, which is expected in 2020, The PRC Civil Code will enter into force.