Reshaping business law thinking creates new opportunity for 2014

Business law is a general term for legal norms that regulate business parties in business relationships and their business activities. Compared with conventional civil law, business law has unique social functions, legal values and operating rules.

With respect to social functions, business law focuses on encouraging transactions and increasing social wealth, while civil law emphasises human livelihood and development. In terms of value orientation, business law pursues profits, with a focus on efficiency, while civil law strives for order, with a focus on fairness. The operating principles of business law are to strengthen the organisation of enterprises, strive for economic efficiency, maintain fair transactions and ensure security of transactions, while those of civil law comprise equality, autonomy of private law, fairness, good faith, public order and good morals. Business law thinking is an abstract thinking process in which legal professionals, as guided by the above business law concept, perceive, differentiate, analyse and then judge and regulate the business activities of business parties.

Abstract business law thinking is usually a hot issue in academic circles. Some scholars believe business law thinking is mainly applied in the theory, principle and system for business legislation, and cannot be used to directly guide judgment on specific business affairs. In fact, business law thinking was first proposed by courts during the trial of business cases, and has become an essential guideline for delivering judgments on business affairs.

The history

Back in the 1980s, in order to be in tune with economic reforms and cater for the characteristics and needs of various social and economic activities led or supervised by the central government, the courts deployed staff who were familiar with economic activities, open-minded, and who possessed a higher legal education, to form economic tribunals for the research and resolution of economic disputes. A huge amount of trial experience built up by these tribunals has laid a solid foundation for regulating and legislating business matters, as well as conducting legal research on business matters, so that business law thinking could be created and established.

In 2000, the Supreme People’s Court decided to adopt an “all-in civil trial structure” for unified civil litigation. It had some negative effects, because the division of jurisdiction over civil and business cases, judgment criteria and application of rules were unclear, and civil and business legal relationships were also confusing. During this period, the courts combined the economic tribunals with the civil tribunals, and adopted a convergent judicial management method. According to the rules of the Supreme People’s Court for division of jurisdiction, civil tribunals of second instance were primarily in charge of trying disputes involving companies, insurance, securities, futures, bills, bankruptcy and guarantees, as well as contract disputes among enterprises. The legal relationships involved in these cases fell within the scope regulated by conventional business law. These disputes were collectively known as business disputes.

However, under the “all-in civil structure”, some of the courts, in order to balance the workload of cases, incorporated contract-related cases involving the livelihood and consumption sectors into the scope of cases handled by the tribunals of second instance. As to the judicial criteria, the courts proposed that “the civil judicial criteria were more fundamental in that they covered the business judicial criteria to some extent”. They made it clear in their business guidance that civil judicial criteria would be integrated with business judicial criteria, and formed three major categories together with criminal judicial criteria and administrative judicial criteria, emphasising only the differences in the judicial criteria among the three.

The above problems resulted in judges often evaluating and adjudicating business disputes based on civil law concepts, thus impacting the stability of transactions and undermining business order. Some reasonable commercial transaction arrangements were easily denied by the principles of fairness under the civil law, so that results of judgments could not properly resolve business disputes.

The analysis

In recent years, scholars and judges engaged in trial practice carried out an analysis of this situation, where the results of judgment on business matters were inappropriate. They discussed the “resolution of business disputes by business law thinking”. This “business law thinking” calls for: perceiving and respecting transaction arrangements and practices automatically created by business parties during long-term business activities; establishing the fact that the profit-making purpose of a business is reasonable; and regulating business activities under the existing business law regime. It also stresses the need for accurately comprehending the original intention of the provisions for business law legislation, adjudication and judicial interpretation using this kind of thinking, and the proper application of the rules of business law to resolving business conflicts for establishing an order for healthy business transactions.

The good news

The good news is that at a forum on the hearing of business cases by courts across China, held in September 2013, Xi Xiaoming, vice president of the Supreme People’s Court, proposed a number of guiding opinions on “unifying business judicial criteria, deepening the concept of business trials and respecting objective laws for business trials”. These opinions address the problems regarding the current lack of knowledge about the characteristics and concepts of business trials, and the existence of confused concepts in civil and business trials. Xi called for business law judges to enhance their literacy of business law theories and to use the value of business law to adjudicate business disputes correctly.

An annual meeting was also held, in Changsha, Hunan province, in October 2013, at which a business law research topic – “from regulating to thinking” – was proposed, and extensive discussions were conducted on the practice of, and mentoring relationships between, business trials and business thinking. Because of the close interaction between business law practitioners and theorists, a number of assumptions on business trials have been proposed, such as re-establishment of business tribunals, reformulation of standardised tribunal rules for business affairs, business judicial criteria, rules for business evidence, etc. All of these indicate that the theory of business thinking is dynamically integrating with the practice of business judgment.

Special business law thinking is the wealth of business law that needs to be cherished by legal professionals in business law. To cherish business law thinking is to emphasise the use of it. It is definitely a new opportunity in 2014 for legal professionals to reshape business law thinking, literacy of business affairs and the spirit of business law.