CHINA Law and Practice Contributed by: Siyuan Liu, Wei Wang and Huanhuan Yu, Jingtian & Gongcheng
adopt the established common factual findings and legal standards. In 2019, the Shanghai Financial Court applied it very effectively in the Founder Technology case. It has since become a mainstream mechanism to resolve securities and financial disputes. Special representative action mechanism With the deepening reform of the securities market, the regulatory authorities intensified enforcement against violations and strengthened civil liability. Thus, in March 2020, the Securities Law first introduced the special representative action, a mechanism with simi- larities to the US class action. Currently, this applies exclusively in securities collective actions pursuant to the Securities Law. 1.2 Basis for the Legislative Regime, Including Analogous International Laws The aforementioned mechanisms in the PRC were designed by drawing on international experience – particularly from the US, the EU and Japan – while adapting it to China’s legal tradition, social system, and practical demand. Joint Action Mechanism The joint action mechanism, currently provided in Article 55 of the Civil Procedure Law, traces its ori- gin to Article 75 of the Draft Civil Procedure Code of the Qing Dynasty. It is generally accepted that Soviet civil procedure exerted a certain influence on China’s early joint action mechanism, including the distinc- tion between “necessary joint action” and “ordinary joint action”. Meanwhile, German and Japanese civil procedure law and legal theory also affected current Chinese law, particularly in the course of action, the classification of class action, and specific provisions. Model Judgment Mechanism Model litigation is not an independent category of action under the Civil Procedure Law, but rather a judicial practice developed for mass disputes. It has been widely applied in securities, real estate sales, and property management and other mass disputes. The mechanism draws mainly on the German model case mechanism, while also referencing collective action procedures in the UK and USA. In 2005, Ger- many’s Capital Investors’ Model Proceedings Act
explicitly codified its rules of application. In China, the Chaoyang District People’s Court of Beijing first applied the mechanism in 2006 in a real estate con- tract dispute. Nonetheless, the Chinese mechanism exhibits distinctive features, such as initiation ex offi- cio by the court and the method of selecting model cases. Ordinary Representative Action Mechanism China’s ordinary representative action mechanism embodies a hybrid influence from the “appointed party” system of Japan, the representative action of the United Kingdom, and the class action of the Unit- ed States. It adopts the principle of “express opt-in”, requiring parties to expressly choose to participate, to elect a certain number of representatives, and to accept that the judgment will have a binding effect on all the represented parties. Meanwhile, the Chinese mechanism confers more ex officio judicial author- ity – for example, empowering the court to designate representatives if the parties fail to elect them. Special Representative Action Mechanism The special representative action mechanism in China draws mainly on the class action of the United States, especially the “opt-out” mechanism. Moreover, the representative must be an investor protection institu- tion (a professional organisation mandated to protect investors), emphasising judicial scrutiny and over- sight, akin to mechanisms in Germany and Taiwan. At present, it applies exclusively to securities cases preconditioned on, and transferred from, an ordinary representative action with an uncertain number of plaintiffs. Selection for special representative actions also takes into account factors such as the materiality of the misrepresentation and its social impact, reflect- ing the unique orientation of Chinese judicial practice. 1.3 Implementation of the EU Collective Redress Regime The EU collective redress regime does not apply in China.
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