CHINA Law and Practice Contributed by: Qingyou Wang, Yichen Lu, Chao Tang and Yuhe Gu, Anli Partners
• specific performance – requiring the breaching party to continue performing its contractual obliga- tions; • damages – compensating actual loss and foresee- able loss of expected profits; • liquidated damages – payment of an agreed sum, subject to judicial adjustment where it is manifestly excessive or insufficient; • injunction-type relief – orders to cease ongoing infringements or remove unlawful interferences; and • restoration and restitution – restoring the status quo ante or requiring the return of property. Depending on different subject matters of commercial disputes, Chinese law also provides for certain spe- cialised remedies: • in corporate governance matters, shareholders may exercise information rights, bring derivative actions and, in extreme cases, apply for dissolution of the company; • in the context of a contract, the non-breaching party may terminate the contract and simultane- ously claim damages; and • in the intellectual property field, right holders may seek pre-trial injunctions to prevent harm that would be difficult to remedy by damages alone. These remedies may be granted singly or in combina- tion, and the court will determine the most appropriate form of relief on the facts of the case to afford effective Compensation for damages follows the “principle of compensation,” aiming to restore the injured party to the pre-damage state and to cover both actual losses and foreseeable benefits. Simultaneously, the “princi- ple against unjust enrichment” applies, preventing the non-breaching party from profiting excessively due to the breach of contract. Punitive damages are only applicable in areas explic- itly stipulated by law, as outlined below. • Consumer fraud – claimants may seek three times the amount paid as compensation. protection to the successful party. 9.2 Rules Regarding Damages
• Intellectual property infringement – malicious infringement may result in damages ranging from one to five times the actual loss. • Product liability – compensation is available when products with known defects are manufactured or sold, resulting in severe consequences. • Environmental pollution – intentional pollution that causes serious outcomes. In general, in commercial contract disputes, courts do not award punitive damages. However, parties may achieve a similar deterrent effect by agreeing on liq- uidated damages in their contracts. Mechanisms Limiting Compensation Amounts In cases of judicial adjustment of liquidated damag- es, if the agreed liquidated damages are significantly greater than the actual loss (typically exceeding the loss by about 30%), the courts have the discretion to reduce the amount. 9.3 Pre-Judgment and Post-Judgment Interest Pre-Judgment Interest Successful parties may collect pre-judgment interest. The accrual parameters are: • contractual basis – f the contract specifies an inter- est rate, courts generally enforce it; • statutory basis – absent agreement, courts typi- cally reference the Loan Prime Rate (LPR) or former PBOC benchmark rates; and • statutory limits – consumer loan interest cannot exceed 4 times of LPR; commercial contracts face no fixed cap but are subject to judicial reduction if excessive. Post-Judgment Interest Interest continues to accrue after judgment. The rules are: • mandatory application – under Civil Procedure Law, double interest applies automatically for delayed performance; • fixed rate – the additional interest is calculated at 0.0175% daily (approximately 6.39% annually); and • no discretion – this punitive rate is statutory and not subject to judicial adjustment.
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