Skip to content

European Chinese Law Research Hub

  • Home
  • About Us
  • Follow Us
European Chinese Law Research Hub

Tag: Force Majeure

Force Majeure or Change of Circumstances: An Enduring Dichotomy in Chinese Law?

5. June 2023
A forthcoming chapter by Qiao Liu

How does the Chinese system deal with supervening impediments to contract performance? In this article (draft), I address this question from the angle of the (unbalanced) interrelationship between two doctrines: the doctrine of force majeure (不可抗力) and that of change of circumstances (情势变更). The imbalance can be readily seen from the current judicial data showing that the doctrine of force majeure has been applied by Chinese courts ten times more often than the doctrine of change of circumstances. This article offers explanation to the reasons and implications of this striking situation.    

It first briefly traces the history of the two doctrines and makes three inquiries about their interrelationship. First, do they address different events? It is noted that there is a general tendency in China to categorically characterise certain events, including the COVID-19 pandemic, as force majeure. This tendency, which neglects or downplays a proper assessment of the event’s actual or potential impact on the performance of the particular contract, is rejected in this article. I discuss various elements of the two doctrines such as the tripartite ‘unforeseeable, unavoidable and insurmountable’ requirements and the ‘non-commercial risk’ requirement, as interpreted and applied in Chinese cases or judicial documents. I conclude that all these elements are intrinsically interwoven with the particular parties and contracts and must be ascertained as such. For example, ‘commercial risks’ should be understood as no more than ‘inherent’ or ‘normal’ risks and therefore depend on the particular parties and contract for ascertaining the scope of ‘inherency’ or ‘normality’. Although this requirement seems to be reserved for the doctrine of change of circumstances, the same requirement is captured by the requirements for ‘unforeseeable, unavoidable and insurmountable’ under the doctrine of force majeure. Similarly, the latter requirements should equally be applied under the doctrine of change of circumstances. In this sense, there is a relationship of homogeneity between the two doctrines.

The second inquiry moves on to explore the different ‘contract impact’ tests applied under the two doctrines. The doctrine of force majeure encompasses two such tests: whether the event results in a situation that the affected party ‘cannot perform’ its side of the contract (the ‘cannot perform’ test) or whether the event renders the purpose of the contract ‘unfulfillable’ (the ‘contract purpose’ test). The doctrine of change of circumstances, since the enactment of the Civil Code, endorses a single test: whether the event renders continuing performance of the contract ‘manifestly unfair’ to a party (the ‘manifest unfairness’ test). This is a critical point of division between the two doctrines – they are distinguished in their respective ‘contract impact’ test(s). One problem in Chinese judicial practice is that excessive use has been made of the ‘cannot perform’ test, which is further discussed in the article. More detailed discussion of the other two tests is left to future research.  

The third and final inquiry concerns the differing legal consequences attached to the two doctrines. The most notable remedial difference between the two doctrines is that contract adaptation (or modification) is available only under the doctrine of change of circumstances. This article reviews the general principles/rules for contract adaptation and its relationship with contract renegotiation. In particular, contract adaptation is distinguished from ‘exemption of liability’, which is a unique remedial consequence attached to force majeure, in that contract adaptation varies primary obligations under the contract whilst ‘exemption of liability’ affects secondary obligations only. However, there remains ambiguity as to the meaning of ‘exemption of liability’ which in practice has led to increased discretion.

The second half of the article attends to cases involving a contract affected by COVID-19, bringing the discussion above to a specific context. Cased decided and judicial documents issued by Chinese courts (especially the Supreme People’s Court) concerning SARS and COVID-19 (for a more detailed outline of Covid-19 judicial documents, see Qiao (2020)) are analyzed. I argue that a wider reception of the doctrine of change of circumstances can be observed from COVID-19 documents and should be encouraged. A categorical characterisation of COVID-19 as force majeure should be avoided. Which of the two doctrines is best to be applied in a particular case should be left to be determined through the ‘contract impact’ tests.  

It is also observed that from the SARS pandemic to the COVID-19 pandemic, both the meaning and role of the ‘cannot perform’ test have undergone some transformation. The SARS cases are dominated by a narrow understanding of the ‘cannot perform’ test by unduly excluding cases where a party ‘can’, but decides not to, perform the contract. COVID-19 cases, on the other hand, display the revival of a broad interpretation, which equates ‘cannot perform’ with a ‘failure to perform’. Unfortunately, in practice, mostly due to the undisciplined extension of ‘exemption of liability’, the ‘cannot perform’ test has been much overused and abused. This article thus calls for a more structural and coherent approach to the allocation of work between the two doctrines.   

Professor Qiao Liu’s article Force Majeure or Change of Circumstances: An Enduring Dichotomy in Chinese Law? is a chapter in The Making of the Chinese Civil Code – Promises and Persistent Problems, forthcoming with Cambridge University Press in September 2023. Find a draft here.

Qiao Liu is Professor and Deputy Director of the Centre for Chinese and Comparative Law, School of Law, City University of Hong Kong; Honorary Professor, TC Beirne School of Law, University of Queensland; Adjunct Chair Professor, School of Law, Xiamen University. The work described in this paper was fully supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. 11608821).

General Civil litigation, Contract Law, Covid-19, Force Majeure

Which rules apply? Determining China’s responsibility for the Covid-19 pandemic in public international law

6. August 2021
A new paper by Daniel Laprès
Wikimedia Commons

On December 31, 2019, the Wuhan Municipal Health Commission posted a notice on its website about an outbreak of a viral pneumonia outbreak in the city. By July 27, 2021, almost 200 million people across the world were known to have been infected and more than four million had died. The COVID-19 pandemic’s global cost, as estimated in October 2020 by the International Monetary Fund, could reach 28 trillion US dollars over the next five years.

Are there grounds in law to impute state responsibility on China for its role in the spread of the pandemic, and is there evidence for such claims? This paper (available here) focuses on the first question, namely on the framework in public international law governing state responsibility in relation with epidemics.

Under public international law, every internationally wrongful act of a state entails its international responsibility.[1] Such wrongful acts include, among others, violations of general principles of public international law and violations of obligations specifically undertaken vis-à-vis other states. A defendant state may invoke as an excuse for failures to perform any of such obligations the defense of force majeure subject to the satisfaction of certain conditions. Victim states assume responsibility for their own conduct that aggravates harm caused illegally by another state.

General principles of public international law

It has been established that states have a general obligation to ensure that activities within their jurisdiction and control respect the environment of other states.[2] However, there can be no responsibility for a pure act of nature, such as a flood caused by rainfall. An epidemic outbreak of a dangerous disease is generally recognised as such an act of nature, so that a state where one broke out would not be liable on that account alone for its propagation internationally.

On the other hand, although there can be no responsibility for a pure act of nature, as soon as human action or inaction is involved, the problem of responsibility arises. Consequently a flood caused by the breach of a dam, itself caused by heavy rainfall, begs the question to what extent the dam’s construction or operations were catalysts of its breach.[3]

creativecommons.org

China’s obligations under treaties

China might also be held liable for violations of its obligations subscribed under treaties, in this case, most relevantly the International Health Regulations (IHR) adopted under the aegis of the World Health Organization (WHO) by 196 states.[4] The currently applicable IHR, adopted in 2005, entered into effect on June 17, 2007 in the aftermath of the severe acute respiratory syndrome (SARS) outbreak.

According to its Article 2, the member states retain “the sovereign right to legislate and to implement legislation in pursuance of their health policies”, so the WHO has very little power to impose its desiderata on any recalcitrant member state. For instance, Indonesia refused to share samples of influenza A (H5N1) with the WHO. The country invoked its sovereign right to control matters connected to the outbreak of the disease on its territory as it was concerned that it might not receive a fair share of the benefits of scientific discoveries derived from the virus samples.

The Regulations further stipulate that each member state undertakes to “develop, strengthen and maintain . . . the capacity to detect, assess, notify and report events” as required and that they must notify the WHO within 24 hours of all events which may constitute a public health risk to other states through the international spread of disease and which may require a coordinated international response. When requested by the WHO, member states “should provide, to the extent possible, support to WHO-coordinated response activities”.

If a member state of the WHO were to engage its responsibility in connection with its commitments within the WHO, then it could be pursued by other member states in accordance with the WHO dispute resolution procedures. However, the WHO itself, in its report on its investigative mission to China published in February 2020, has declared that

'In the face of a previously unknown virus, China has rolled out perhaps the most ambitious, agile and aggressive disease containment effort in history. The strategy that underpinned this containment effort was initially a national approach that promoted universal temperature monitoring, masking, and hand washing. However, as the outbreak evolved, and knowledge was gained, a science and risk-based approach was taken to tailor implementation. Specific containment measures were adjusted to the provincial, county and even community context, the capacity of the setting, and the nature of novel coronavirus transmission there.'[5] 

In addition, member states retain the right to refer any dispute about the IHR to the International Court of Justice, provided that each had submitted to its jurisdiction without filing any reservations with respect to the subject matter of the dispute in question; China has not filed any such declarations.

The defense of force majeure

In the event of a claim brought against China for violations of any of its treaty obligations, it could invoke force majeure as a defense. For an event to justify the invocation of force majeure in public international law, a state must demonstrate a link of causality between the event and its failure to fulfil the obligation[6] from which the State claims to be excused[7] and additionally that the event is ”irresistible”, “unforeseeable”, and “external to the party invoking it”.

In short, a State would not be held responsible in public international for the occurrence of an epidemic as an act of nature, but its policies, acts and omissions in its prevention, and management of its propagation, in particular toward foreign countries, could engage its responsibility. If it were established that a Chinese state agency, such as the Wuhan Institute of Virology (WIV),[8] willingly or negligently introduced COVID-19 into circulation, then the defence of force majeure would not be available since its acts would be clearly within the control of the Chinese State, i.e. not “external”.

On the consequences of contributory negligence

Contributory negligence by the injured party is also held to extinguish the total or partial liability of the operator or the acting state in some multilateral conventions.[9] Contributions to the injury by willful or negligent action or omission of the injured state must be taken into account in determining any due reparations. According to the John Hopkins Corona Virus Resource Center, as of July 27, 2021, in the United States there had been about 126 times more deaths per capita due to COVID-19 than in China, and that is before considering that China’s population is four times larger.[10]

Whatever China’s liability to other countries stricken by the pandemic for its violations of its international obligations might be, the liability to repair the ensuing harm would be reduced, or even entirely offset, to the extent that other states had failed to adopt appropriate and timely measures to prevent and mitigate the harm caused by the pandemic within each of their territories.

Events surrounding the COVID-19 pandemic have demonstrated the limits of the current law to regulate international health. To carry out any missions on the territory of a member state, the WHO must obtain the latter’s consent, which can be withheld at its unqualified discretion for the protection of its sovereignty. A more constraining framework could be adopted by the member states.

Find Daniel A. Laprès’ paper ‘The framework in public international law for determining the responsibility of the People’s Republic of China in connection with the Covid-19 pandemic‘, published in the International Business Law Journal, here. He was Senior Counsel at the Kunlun Law Firm, Beijing from 2008-2019, counsel at the Court of Appeals of Paris, Barrister and Solicitor in Nova Scotia, and an arbitrator on the International List of the China International Economic and Trade Arbitration Commission (CIETAC). He authored numerous publications Chinese law, a list of which may be found on his website.


[1] Article 1 of the International Law Commission (ILC) Draft articles on Responsibility of States for Internationally Wrongful Acts, with commentaries, 2001, https://legal.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf; and the following cases: Phosphates in Morocco, Judgment, 1938, P.C.I.J., Series A/B, No. 74, p. 10, at p. 28. See also S.S. “Wimbledon”, 1923, P.C.I.J., Series A, No. 1, p. 15, at p. 30; Factory at Chorzow, Jurisdiction, Judgment No. 8, 1927, P.C.I.J., Series A, No. 9, p. 21; and Merits, Judgment No. 13, 1928, P.C.I.J., Series A, No. 17, p. 29.

[2] Certain activities carried out by Nicaragua in the Border Area (Costa Rica v Nicaragua, and Certain activities carried out by Costa Rica in the Border Area (Nicaragua v Costa Rica), December 16, 2015, https://www.icj-cij.org/files/case-related/152/152-20151216-JUD-01-00-EN.pdf; the passage cited is extracted from the ICJ’s order in this case rendered on December 123, 2013 at para. 19.

[3] P. Reuter, Droit international public, 4th ed., Paris, Presses universitaires de France, coll. Thémis, 1973, p. 115.

[4] Other commitments meriting consideration, though in the end not likely applicable, are those undertaken under articles 55 and 56 of the United Nations Charter, under article 12 of the International Covenant on Economic, Social, and Cultural Rights, as well as under the UN Convention concerning the Protection of the World Cultural and Natural Heritage of 1972 the UN Convention on Biological Diversity of 1992 and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

[5] Report of the WHO-China Joint Mission on Coronavirus Disease 2019 (COVID-19), February 16-24, 2020, p. 14, https://www.who.int/docs/default-source/coronaviruse/who-china-joint-mission-on-covid-19-final-report.pdf, p. 16. A detailed account of China’s policies and actions to combat COVID-129 may be seen at Institute of Contemporary China Studies Tsinghua University, China’s Fight against COVID-19, April 21, 2020, https://covid-19.chinadaily.com.cn/a/202004/21/WS5e9e2c62a3105d50a3d17880.html.

[6] The international obligation may arise from any “source” of public international law, such as a treaty, a custom, a general principle, a unilateral act, a decision of an international governmental organization, a judgement of the ICJ, an award of an arbitration tribunal. P. Reuter, Droit international public, 4th ed., Paris, Presses universitaires de France, coll. Thémis, 1973, p. 115.

[7] B. Cheng, General Principles of Law as Applied by International Courts and Tribunals, London, Stevens, 1953, p. 228, citing the Permanent Court of International Justice in the cases of the Serbian Loans and the Brazilian Loans (1929), and the rapporteur in the Spanish Zone of Morocco Claims (1924-1925).

[8] The Institute was founded in 1956, and put under the administration of the Hubei Commission of Science & Technology in 1970.  In June 1978, it was returned to the jurisdiction of the Chinese Academy of Sciences, and it adopted its current title

[9] International Liability for Injurious Consequences arising out of acts not prohibited by International Law, International Liability in case of loss from transboundary harm arising out of hazardous activities, (Agenda Item 4) Document 1/CN 4/543, N° 446.

[10] In the United States : 611,151 deaths among a population of 333,071,970 compared with China’s loss of 4,848 for a total population of 1,444,586,267, https://coronavirus.jhu.edu/map.html.

General Covid-19, Force Majeure, Public International Law

Recent Posts

  • The Arbitrability of Public-Private Partnership Contract Disputes in China
  • The Infrastructure of Control: Rethinking Party Discipline in China’s Political-Legal System
  • The Authoritarian Commons: Q&A with Shitong Qiao
  • The Juridification of Government Accountability in China: Addressing Mass Actions
  • Is Chinese Law Prepared for AI Songs?

Tags

Adjudication Administrative Enforcement Administrative Litigation Administrative Procedure Anti-Monopoly Law Arbitration Authoritarian Legality China International Commercial Court Chinese courts Civil Code Civil Law Civil litigation Comparative Law Constitutional Law Contract Law Covid-19 Criminal Law Criminal Procedure Data Protection Democracy Fintech Force Majeure Guiding Cases Hong Kong Human Rights International Law Judges Judicial Reform Judicial Reforms Labour Law Law and Development Lawyers Legal Culture Legal History Legal Theory Migration One Belt One Road Open Public Data Public International Law Regulation Regulation of AI Rule of Law Social Credit System State-owned companies Supreme People's Procuratorate

Subscribe to our newsletter…

...to be the first to learn about new blogposts.

Idealist by NewMediaThemes