The Normative Structure of Punitive Damages—Comments on Guiding Case No.23 Issued by the Supreme People's Court of the PRC
SHUI Bing[1]
［Abstract］ The Supreme People's Court of the PRC issued guiding case No.23 in 2014 to respond to the controversy around “knowingly buying counterfeit goods”, triggering a debate over the normative structure of punitive damages, which is to be achieved through the interaction between legal theory and practice．Through systematic thinking over the trivial “set of norms”, we can find that Paragraph 2 of Article 96 of the Food Safety Law is a norm which entitles the accumulation of claims, and establishes statutory aggravation of damages．At the level of the nature of norms, liability for punitive damages and liability for compensatory damages both can be implemented simultaneously．Each of them entitles the claimant independent claims respectively．At the level of the conflict of their norms, Paragraph 2 of Article 96 of the Food Safety Law, Article 55 of the revised Law on the Protection of the Rights and Interests of Consumers, and Article 47 of the Tort Liability Law are norms of the same rank, which means the claimants have the right to choose the basis of claims．At the level of the application of norms, through identifying the factors “ten times”, “knowingly”, and “loss”that affecting judgment, the court should exclude gross negligence out of the application of punitive damages, so as to maximize the utility of the institution.
［Key words］ Punitive Damages, Food Safety Law, “Knowingly Buying Counterfeit Goods”, Norms of the Same Rank
The issue of punitive damages has long been a hot topic in theory and in practice in China．Some scholars have pointed out that the legal term “punitive damages”derived from a combination of punishment and damages leads to being an oxymoron in itself.[2]In civil law systems which distinguish between private law and public law, the institution of punitive damages is widely questioned and even at times rejected.[3]In order to curb rampant commodity fraud and ensure food safety, China didn't follow the tradition of civil law systems, but adopted the pragmatic stance of common law．From the “double damages”in Article 49 of the Law on the Protection of Consumer Rights and Interests issued in 1993, to the “tenfold compensation”[4]in Paragraph 2 of Article 96 of the Food Safety Law issued in 1996, the institution of punitive damages was established and developed.
In January 2014, the Supreme People's Court promulgated the guiding case No.23, “SUN Yinshan v．Nanjing Auchan Hypermarket, Co., Ltd．Jiangning Store, A Sale and Purchase Contract Dispute”(hereinafter referred to as “Sun Yinshan Case”)．The contentious point of the case was the application of law concerning Paragraph 2 of Article 96 of the Food Safety Law, which also triggered a series of problems concerning the Law on the Protection of Consumer Rights and Interests, the Tort Liability Law and the Food Safety Law, e.g., the nature of norms, the conflicts of norms and the components of norms．Especially under the circumstances that the Law on the Protection of Consumer Rights and Interests has been amended and the Food Safety Law is being revised[5], there are two things which needs to be done: how to view the seemingly irrelevant “set of norms”, how to elaborate on the judicial mechanism of punitive damages.
Chinese scholars have conducted a great deal of research on the social functions and the institutional concept of punitive damages.[6]The institution of punitive damages in China is not a natural product of theoretical development, but a pragmatic approach to punish the unlawful business operations that seriously disrupt market order amid the reform and opening up period．In the author's opinion, the release of “Sun Yinshan Case”can be regarded as a watershed, which means the research on punitive damages shall not be confined to arguing the rationality of the institution, but shift to analyze the institution based on case studies．Only by doing so could the norm “tenfold compensation”avoid “the bombardment”[7]in the application, so as to become a technical “precise guidance”．Based on “Sun Yinshan Case”, focusing on the inner logic of Paragraph 2 of Article 96 of the Food Safety Law and the conflicts between norms of the same rank, this paper tries to elaborate on the civil law mechanism of punitive damages from the following three aspects: the nature of norms, the conflicts of norms and the components of norms, which can provide a theoretical support for the application of the norm in the judicial practice.
[1] SHUI Bing, associate professor of Faculty of Law, Macau University．This paper is a periodical fulfillment of a research project (Grant No.: NCET-12-0272), supported by “Program for New Century Excellent Talents in University”, funded by the Ministry of Education.
[2] See Dai Zhijie, Punitive Damages in the United States of America: A Study of Their Basic Issues, PhD dissertation, Taiwan National Chung Cheng University, 2007, p.16.
[3] The legislation of the Continental European countries commonly agreed that punitive damages derived from the notion of “private enforcement”established by common Law is a violation of principles of private law．German Federal Supreme Court in BGHZ 118, 312; Greek Supreme Court (Areios Pagos) (Full Bench) 17/1999, N．o．B.2000, pp.461-464．See Helmut Koziol, Punitive Damages: Admission into the Seventh Legal Heaven or Eternal Damnation: Comparative Report and Conclusions, in Helmut Koziol, Vanessa Wilcox (eds.), Punitive Damages: Common Law and Civil Law Perspectives, Springer Wien New York, 2009, pp.283-284.
[4] Between the two events, in 2003 the Supreme People's Court issued Interpretation of the Supreme People's Court on the Relevant Issues concerning the Application of Law in the Trial of Cases involving Disputes over Contracts for the Sale and Purchase of Commodity Houses．Article 9 stipulates, “The intentionally fraudulent seller shall not compensate the buyer for an amount exceeding two times the amount of actual damages”．A scholar stated, “The judicial interpretation takes a step forward towards the application of punitive damages in China.”See Zhang Xinbao, Li Qian, The Legislative Choice of Punitive Damages, Tsinghua China Law Review, Vol.3, 2009.
[5] Food Safety Law (Second Reviewed Draft) promulgated in December, 2014 made a slight amendment to Article 96 of the Food Safety Law, in which “Consumers can, in addition to demanding compensation for losses, demand the producer or seller to pay damages ten times the price of ［the food］”was changed to “Consumers can, in addition to demanding compensation for losses, demand the producer or seller to pay damages ten times the purchase price of ［the food］ or three times the amount of their losses”, and added a new provision “where the additional compensation amount is less than RMB 1,000, it shall be deemed RMB 1,000”．Obviously, punitive damages established by the present law had been continued, only the amount of damages was adjusted．See http://www.npc.gov.cn/npc/xinwen/lfgz/tlea/2014-12/29/content_1891935.htm, visited on Mar.2, 2015.
[6] See Wang Liming, A Study of Punitive Damage, Social Sciences in China, Vol.4, 2000; Zhu Guangxin, The Evolution and Application of the Institution of Punitive Damages, Social Sciences in China, Vol.3, 2014; Chen Chengtang, On the Role of Loss in Liability for Punitive Damages, Legal Science, Vol.9, 2014.
[7] Some criticism towards the “ten time an amount of which is paid by consumers”in Article 96 of the Food Safety Law remains, “apparently the norm is the result of impulse legislation, which is more like a bombardment without an aim, may easily harm innocents.”