China's New 'Common Law': Using China's Guiding Cases to Understand How to Do Business in the People's Republic of China

Abstract

Beginning in December 2011, the People’s Supreme Court (PSC) in the People’s Republic of China (hereinafter “China”) embarked on substantial changes to China’s legal system when it issued the first four “Guided Cases” under its new “Guided Case system.” While China’s courts are prohibited from making law under China’s Constitution, as China’s law is established by code rather than case law precedent, the Guiding Cases provide a framework by which to understand how to interpret China’s laws related to doing business in China. U.S. companies doing business in China now have a clearer picture of how to predict, avoid, and resolve problems with Chinese business partners. This article explains some of the significant provisions of China’s Constitution, Contract Law, and other relevant statutes, and the impact of the Guiding Cases on doing business with Chinese companies and state entities. Part I explains the underpinnings of Chinese jurisprudence and the pertinent sections of the Chinese Constitution, “the Mother Law,” as it affects U.S. businesses entering into contracts with Chinese entities, both private and governmental. Part II explains relevant portions of China’s Contract Law statute for U.S. companies doing business in China. Part III explains what Guiding Cases are, the relevant Guiding Cases released to date, and other cases which may impact U.S. companies doing business or considering doing business in China. Finally, Part IV explains strategies U.S. companies can use to successfully navigate China’s new judicial landscape.