CHINA Law and Practice Contributed by: Jeff Liu, Jeanette Wang, Yulong Lai and Yun Bi, Shihui Partners
economic and technical assessment made by the regulator. 9.4 Interim Relief and Suspension of Decisions The judicial review process does not affect the valid - ity of the regulator’s decision, which is usually imple - mented without suspension. 9.5 Interaction With Damages and Other Civil Actions As noted in 9.1 Judicial Challenges to Regulatory Actions , there is only one case challenging a regu - latory decision, in which the court upheld the deci - sion made by the SAMR. Therefore, there is no public precedent for follow-on damages actions or other civil claims relating to regulatory decisions so far. 10. Private Enforcement and Competition/Regulatory Claims 10.1 Follow-On and Standalone Actions In China, follow-on and standalone damages actions concerning M&A-related antitrust conduct – such as gun jumping or sensitive information exchange – remain relatively rare. Enforcement is primarily driven by the SAMR through administrative investigations and penalties. While the AML permits civil litigation, several factors limit its prevalence: • Evidentiary hurdles: Plaintiffs bear a heavy burden to prove the illegality of the conduct, quantifiable economic loss and a direct causal link. Access - ing sensitive data from private M&A processes is particularly difficult. • Reliance on regulation: Follow-on actions are scarce because they depend on a final, non- appealable administrative ruling. Standalone actions are even rarer due to significant information asymmetry. • Plaintiff composition: Most claims are initiated by sophisticated corporate competitors; individual consumer-led suits are virtually non-existent in this niche. Ultimately, while the potential for civil damages exists, the primary legal risk for parties remains regulatory
intervention, which can lead to significant fines or the forced unwinding of a transaction. 10.2 Collective and Class Actions China does not have “class actions” in the US sense but utilises a representative litigation system, which is categorised into two types: • Ordinary representative litigation (opt-in): Inves - tors with similar claims must proactively register with the court to participate. This is the standard mechanism for general M&A-related contractual or tort disputes. • Special representative litigation (opt-out): Exclu - sively applicable to securities disputes involving public companies. Initiated by state-backed inves - tor protection institutions, it follows an “opt-out” model where investors are automatically included unless they explicitly withdraw. This is a power - ful tool for addressing financial fraud or disclosure failures in public M&A. 10.3 Limitation Periods, Causation and Quantification Statute of Limitations The standard limitation period is three years, com - mencing when the claimant knows or should have known of the infringement and the identity of the liable party. In M&A, the “starting point” is often contested due to the latent nature of damages, such as delayed performance failures or long-term market distortions. Causation Plaintiffs must establish a direct causal link between the misconduct (eg, misrepresentation or illegal con - centration) and the loss. This is difficult in M&A due to the “multiple causes” problem. Courts often struggle to isolate the impact of the defendant’s conduct from external variables such as market volatility, industry downturns or the intervention of third-party interme - diaries. Quantification of Damages While actual losses are straightforward, claiming for loss of expected interests (eg, lost profits or business opportunities) faces strict judicial scrutiny. Courts adopt a “prudent determination” approach, requiring high-probity evidence such as forensic audit reports
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