Home / Publications / China Extends Statute of Limitation through New General...

China Extends Statute of Limitation through New General Rules for Civil Law

China Insight - Corporate

On 15 March 2017, at the 5th session of the 12th National People's Congress of the People's Republic of China (the “PRC”), the long-expected PRC General Rules of Civil Law (中华人民共和国民法总则) (“GRCL”) have been adopted and promulgated. The GRCL will enter into effect on 1 October 2017.

The GRCL are intended to be the first section of a codified PRC civil code which, according to the National People’s Congress, shall be finalized by 2020. Similar as for codified civil codes of other jurisdiction (e.g. the German Civil Code, Bürgerliches Gesetzbuch, BGB), the GRCL contain general legal principles which shall be applicable also for the other sections of the planned PRC civil code, i.e. sections regarding contract law, property law, torts law, matrimonial and family law as well as the law of succession.

The GRCL are divided into 11 chapters, i.e.

(1)   General Provisions,

(2)   Natural Persons,

(3)   Legal Persons,

(4)   Unincorporated Organizations,

(5)   Civil Rights,

(6)   Civil Juristic Acts,

(7)   Agency,

(8)   Civil Liability,

(9)   Statute of Limitation,

(10) Calculation of Duration, and

(11) Supplementary Provisions.

Most of these topics are currently subject to the PRC General Principles of the Civil Law (中华人民共和国民法通则) (“GPCL”) which have been promulgated on 12 April 1986 and entered into effect on 1 January 1987.

Remarkably, the GRCL will not replace the GPCL when they enter into effect on 1 October 2017. The GPCL will remain effective to the extent that their stipulations do not conflict with the GRCL. In case of such a conflict, the stipulations of the newer GRCL prevail.

In the following, we summarize some of the most important stipulations of the GRCL and the differences to the GPCL having the most impact.

Statute of Limitation

  • One of the most remarkable changes compared to the GPCL likely is the extension of the general limitation of action from 2 to 3 years. This will have a major impact in practice and on all contractual claims which are governed by PRC law. The former 1-year period for claims for compensation in case of bodily injuries, the sales of substandard goods without proper notice to that effect, delays in paying rent or refusal to pay rent and the loss of or damage to property left in the care of another person as stipulated in Article 136 of GPCL has not been re-iterated in the GRCL and, in the authors’ view, this likely means that it shall be abolished. This former 1-year period was practically applied only in rare cases anyway.
  • According to Article 188 of the GRCL, such newly introduced 3-year period generally applies, unless otherwise provided by law.

         -  In this regard, it is to be emphasized that according to Article 129 of the PRC Contract Law, a 4-year period applies for disputes arising in relation to a contract for the international sale of goods and for contracts regarding the import and export of technology. We understand that the 4-year period stipulated in Article 129 of the PRC Contract Law refers tothe exemption “otherwise provided by law” in Article 188 of the GRCL and remains applicable after the entry into effect of the GRCL.

         -  According to Article 196 of the GRCL, the statute of limitation does not apply in the following cases: (i) claims for ceasing infringements, removing obstacles, or eliminating danger, (ii) claims of the creditor for returning real estate property and registered rights in rem, (iii) claims for the payment of alimonies, support money or maintenance fees and other claims for which the institute of statute of limitation is not applicable.

  • Of major practical importance in connection with the above is the question on how cases are dealt with during the transition period, i.e. for contracts which have been concluded before the entry into effect of the GRCL, i.e. before 1 October 2017, and out of which claims have been arisen before 1 October 2017 but after 1 October 2015, i.e. the current 2-year period according to the GPCL has not yet expired on 1 October 2017.

         Some practical guidance for this situation:

Type of claims

Consequences

Claims for which the current 2-year statute of limitation period will already be completed by 1 October 2017.

            Are time-barred.

Contracts concluded before 1 October 2017 out of which claims have arisen before 1 October 2017 but after 1 October 2015, i.e. the current 2-year period has not yet expired on 1 October 2017.

In the authors’ view and in accordance with the general principle of non-retroactivity, such claims should be subject to the old 2-year period.

 

However, the issue is not entirely clear and some authors stated the opinion that there would be different possibilities for interpretation.

Contracts concluded before 1 October 2017 out of which claims will arise after 1 October 2017.

Are subject to the new 3-year period.

Claims from contracts concluded after 1 October 2017.

Are subject to the new 3-year period.

 

  • It is further noteworthy that, as already now according to the respective provisions of the PRC Supreme People’s Court, the stipulations regarding a limitation of action are mandatory and not subject to an agreement between the parties. Also a prior waiver of the benefits derived from a limitation of action is invalid.

Other important stipulations of the GRCL and differences to the GPCL refer, inter alia, to the classification of legal persons and corresponding civil liability, the validity and revocation of civil juristic acts as well as agency and general civil liability. For further information, please find the attachment below.

Publication
China-Insight-Corporate_26-06-17
Download
PDF 67 kB

Authors

Lichtenstein
Dr. Falk Lichtenstein
Partner
Beijing
Michael Munzinger
Michael Munzinger, LL.M.
Counsel
Shanghai